Liberty Energy Inc. 2026 Q3 Earnings Call

Please go ahead. Thank you, Nick.

Good morning and welcome to the Liberty Energy Third Quarter 2026 Earnings Conference Call. Joining us on the call are Ron Gusek, Chief Executive Officer, and Michael Stock, Chief Financial Officer. Before we begin, I would like to remind all participants that some of our comments today may include forward-looking statements reflecting the company's view about future prospects, revenues, expenses, or profits. These matters involve risks and uncertainties that could cause actual results to differ materially from our forward-looking statements. These statements reflect the company's beliefs based on current conditions that are subject to certain risks and uncertainties that are detailed in our earnings release and other public filings. Our comments today also include non-GAAP financial and operational measures.

These non-GAAP measures, including EBITDA, adjusted EBITDA, adjusted net income, adjusted net income per diluted share, adjusted pre-tax return on capital employed, and cash return on capital invested, are not a substitute for GAAP measures and may not be comparable to similar measures of other companies. A reconciliation of net income to EBITDA and adjusted EBITDA, net income to adjusted net income and adjusted net income per diluted share, and the calculation of adjusted pre-tax return on capital employed and cash return on capital invested as discussed on the call are available on our investor relations website.

Good morning and thank you for joining us for our third quarter earnings call. Liberty's completions trajectory has improved meaningfully from early year cyclical lows. Third quarter revenue of $1.2 billion and adjusted EBITDA of $142 million reflected strong operational execution and modest price increases, partially offset by drilling-related delays and cost inflation headwinds. During the quarter, we delivered significantly lower fuel costs for our customers. Record natural gas substitution of over 60% of the total fuel consumed by our fleets provided annualized fuel savings equating to over $1 billion for our customers. This achievement reflects continued investment in natural gas-fueled equipment and a concerted focus on the digital intelligence layer that drives meaningful operational optimization of equipment and widens the performance gap amongst industry frac fleets.

In power, we are excited to share that LPI entered into a strategic development agreement earlier this week with a leading Frontier AI lab and a dedicated infrastructure platform for 1.2 gigawatts of integrated power services at data center campuses. The agreement includes a significant prepayment of capacity fees and targeted execution of the first energy service agreement contract for approximately 500 megawatts by December 2026. The agreement also establishes a phased energization schedule from Q4 2027 through Q1 2029 and includes the substantive commercial terms for the additional long-term ESAs. The agreement marks the culmination of months of work on engineering and design between our teams, defining the integrated power architecture tailored to the generation, power quality, reliability, and dynamic AI load requirements. We are expanding this relationship and are already working together to advance additional projects across other sites, including gas supply, interconnection, permitting, and construction planning.

We continue to advance the capabilities of our integrated power platform for increasingly sophisticated on-site power systems. Reliable power at this scale requires more than generation alone. It requires seamless coordination across generation, controls, customer load, and the broader electric grid. Building on the extensive modeling, Hardware-in-the-Loop, and integrated system validation conducted within our own facilities, we recently completed advanced grid integration testing with the National Laboratory of the Rockies' Controllable Grid Interface, connecting LPI's physical generation assets and Tempo controls to a synthetic grid modeled on a specific real-world electric system in the Southern U.S., replicating its relevant characteristics and operating behaviors.

While traditional grid studies can rely on modeled representations of both the grid and generation assets, this testing went a step further by pairing the representative grid model with LPI's actual generation hardware and controls, allowing us to evaluate how our physical system responds under realistic grid conditions. The testing demonstrated grid operability and expected changes over the life of an islanded to grid participating project. It also validated our control methodology and compliance with applicable IEEE standards while defining the performance characteristics of our generation assets to further inform system modeling and optimization. Together, these results advance our ability to reliably coordinate on-site generation with the broader grid, including capabilities such as peak shaving. This work builds on our trusted relationship with NLR and provides another important step in translating our integrated power architecture into the flexible, reliable solutions required to serve increasingly complex, large-scale customer loads.

We are building a durable portfolio across completions and power, anchored by the principles that have long defined Liberty, a relentless focus on our customers, continuous technology innovation and disciplined execution. In completions, these capabilities have helped our customers improve performance and economics year after year, and we are applying that same approach in power as we develop differentiated solutions to meet the increasingly complex objectives of technology customers. These dual investments are strengthening our competitive advantage and expanding our market opportunities, positioning us to generate strong returns through cycles. Earlier this week, we announced an 11% increase in our quarterly cash dividend, reflecting confidence in our strategy and a continued commitment to delivering long-term shareholder value. Global oil and refined product prices strengthened during the third quarter as the ongoing conflicts in the Middle East and Ukraine continue to impact markets.

While flows through the Strait of Hormuz partially recovered, Gulf exports remain vulnerable to operational disruption, sustaining a risk premium in crude oil prices. Renewed attacks on energy infrastructure have exacerbated refined products shortages, with low diesel inventories emerging as a critical constraint. Elevated maritime freight costs and longer trade routes have further compounded these pressures, increasing delivered crude and product costs. Expectations for a prolonged supply disruption and an eventual replenishment of strategic petroleum reserves have sustained the oil risk premium and lifted forward prices. North American natural gas fundamentals remain more balanced as strong summer power demand was outpaced by record production and ample inventories. Disruptions to Qatari gas supply have also increased reliance on U.S. LNG, including replacement cargoes required to fulfill existing customer commitments. Longer-term, LNG exports and growing power consumption from AI and data center developments are expected to drive significant demand growth.

Against this backdrop, producer well economics have strengthened meaningfully with a more constructive forward curve, providing attractive 2027 oil hedging opportunities and enhancing E&P revenue visibility. These improving fundamentals further reinforce already tight frac market dynamics, where modestly higher completions activity has absorbed much of the industry's available capacity. Ongoing fleet attrition, equipment cannibalization, and industry underinvestment have constrained supply, particularly in next-generation equipment with compelling gas arbitrage economics. Increasing completion intensity and complexity also favors scaled providers with integrated services and advanced digital technologies. Together, these dynamics are supporting more durable frac markets and continued improvement in service pricing. As AI accelerates demand for compute capacity, infrastructure developers are increasingly leveraging co-located integrated power solutions for data center campuses and other large load sites to address growing community considerations around power costs, availability, and other concerns.

Beyond accelerating energization timelines and enabling tailored energy configurations, co-location can reduce pressure on existing grid infrastructure and limit the need for costly transmission investment, helping mitigate impacts on local ratepayers and communities. Liberty's partnerships broaden the capabilities we can bring to these projects, combining our power services with complementary technologies and infrastructure solutions, including hybrid power systems, advanced energy management, and waste heat recovery. Over time, this integrated approach creates opportunities to address overall energy efficiency while providing customers greater flexibility to address environmental and community priorities specific to each site. Today's announcement with the Frontier AI lab underscores the strength of our integrated power platform and its ability to advance our customers' broader strategic objectives. Our relationship has been built on trust, collaboration, and a shared commitment to advancing AI infrastructure at scale.

Over the past year, we have built a strong foundation spanning power design and architecture, power quality and load management, testing and validation, and long-term operations needed to support this project and others like it. We are excited to support a growing base of customers seeking reliable, high-performance power infrastructure for data centers and other industrial applications. As global energy consumers place greater emphasis on secure, reliable North American energy supplies, our disciplined investment in leading-edge digital and equipment technologies through cycles expands our competitive advantage and increases our market opportunities over the coming years. Strong customer engagement and strengthening market fundamentals provide a more constructive outlook as we close out the year and look ahead to 2027. Looking forward, we expect fourth quarter weather and holiday seasonality to be partially offset by continued strength in demand, including activity deferred from the third quarter.

We are proud of the Liberty team's continued focus on ingenuity, innovation, and execution. We are well-positioned today to serve the demand for energy services in the years ahead. I will now turn the call over to Michael to discuss our financial results and outlook.