Liberty Energy Inc. 31st Annual EnerCom Energy Investment Conference

Thank you, Kevin. Thanks to all of you for being here, and obviously, a big thanks to Kevin and Blanca and the EnerCom team for what they put together. It is always great to feel the energy and have everybody here, and really an honor today for us to be able to introduce our keynote speaker today, Ron Gusek, President and Chief Executive Officer of Liberty Energy. Not that he needs an introduction, or Liberty at that, but they are a Denver-based energy services company, one of the largest providers of completions technologies for oil and gas and geothermal, and obviously have expanded beyond the traditional completions business into distributed power. Here to talk a little bit about Liberty, about their view on macro issues, and their goal of bettering human lives, please welcome Ron.

Thank you. Good afternoon, everyone.

Pleasure to be with you here this afternoon. I got to remember to stand by the podium. Apparently, that's where the camera is. I'm a bit of a wanderer when I talk, so this is going to be a little bit of a challenge. But it is a pleasure to spend a little bit of time with you this afternoon. I am going to talk about a few different things. This presentation is set up to be published on the web, so it's not exactly in the order I would typically do this, so I'm going to jump around a little bit. You'll forgive me as I hop through some slides and do this in the order that I think is more appropriate for our conversation today. I want to start by recognizing that it's a big year for Liberty this year.

We turn 15 years old. It was in May of 2011 that Chris hired our first employee. His name was Jim Brady. He's our Senior Vice President of Operations today. It was the two of them together that had a shared vision for what they believed could be a very, very different company, and that was ultimately the genesis of Liberty and who we are today, what we stand for today, and what we've worked so hard to execute over the last 15 years. We had a very, very simple idea at that time, which was to build the best damn frack company, period. That's simple. That's evolved a little bit now to be the best damn energy company, period. We're doing a few more things than we did then.

As part of that, though, we had a very simple mission statement, and that mission was to better human lives, to better the human lives, first of all, of the people who came to work for Liberty, to better the human lives of the people in the communities that we served, and ultimately, to better the human lives of people around the world. That mission is something that we have served proudly over the last 15 years. It's something that gets all 6,000 people who today call Liberty home out of bed every morning to go and do what they do. We're very, very proud to have evolved that into a much broader conversation, and I'm going to spend a little bit of time on that piece of our world first. So don't forget about that stuff.

I'm going to talk about some things that require that disclosure up front in a little bit. I'm not going to start with Liberty. I want to jump ahead and spend a little bit of time talking about the macro world and talking about how we need to be thinking about energy because unfortunately, even today, despite now a pretty massive disruption that's gone on for a period of six months, I still hear conversation around energy that I think is not grounded in the realities that our world faces today. So let's start with this picture here. Let's start with this picture of what has happened as a result of the interruption in flows through the Strait of Hormuz. It's been in the news for six months now. You all have some sense of the scale of that disruption.

What transited the Strait of Hormuz on a daily basis was not an insignificant amount of energy when we consider that on a global basis. 25% of the world's LNG used to pass through the Strait of Hormuz. Obviously, something that's not easily reallocated or pointed in a different direction, unlike crude flows where we've been able to mitigate some of that with some changes in pipeline flow and some additional pipeline construction. LNG flow is really stuck in the fact that we cannot get ships in and out of that world. It was also a meaningful part of crude flow. Of course, that's led to of order maybe 2.5 billion barrels of oil removed from the global market over the last 6 months. We were very, very fortunate in that we came into this year with a massive oversupply of oil in the market.

We had a lot of barrels on the water in floating storage. We had a significant supply-demand disruption. Then ultimately, maybe the biggest surprise, we had China demonstrate a significant ability to flex their demand for crude over this last 6 months. Those things together have allowed us to navigate what is arguably the world's largest single disruption of energy supply without seeing crude prices go to something astronomical. That said, there are some real challenges that have come as a result of this, and unfortunately, we do not see them in the news here. I am going to talk about those in a little bit. First of all, I do want to talk about the story right here in North America.

It is a story you are probably all very familiar with, but it is one that is a testament to what happens when you allow for innovation, ingenuity, hard work, private entrepreneurs, and private business to go out and unlock what was previously believed to maybe be an unrecoverable resource. That is the shale revolution. The story of it is right here on this graph. If you backed up 20 years ago, just to 2006, you would find that the U.S. was the largest importer of oil anywhere in the world. Now you fast-forward to today and we are the largest producer of crude oil anywhere in the world, and a meaningful reason that this disruption has not been more impactful than it has been globally. The LNG story, the natural gas story, has been a very, very important one as well.

We have seen natural gas production grow pretty significantly onshore the U.S., making us now a meaningful contributor to global LNG supply. These things are important. These things matter. While I would say that the U.S. has generally been immune to it. Yes, people complain about their gasoline prices. Certainly, I can understand the frustration when it costs significantly more to fill your tank up with gasoline today than it did maybe 6 or 8 months ago. We, for all intents and purposes, have been removed from the meaningful challenges that this has led to around the globe. I am going to talk about those in a little bit, but I do want to talk about a couple of exceptions in the U.S. that demonstrate just what happens when energy policy goes awry.

California is a state that has not been immune to the disruptions that we have seen. We have a state that has been working hard to significantly impede the production of oil and gas. They used to be one of the largest producers in the country. Of course, they have fallen far from that lofty peak. They are working hard to get rid of every refinery that exists in their state, despite requiring a very special gasoline blend there. Despite all that California says, their economy still runs meaningfully on oil and natural gas. In fact, 75% of the primary energy consumed in California on a daily basis still comes from oil and natural gas. That is higher than the United States on average, where the number is 74%. Of course, they do not produce all of that internally, and they are relatively an energy island.