Liberty Oilfield Services Inc. Announces Second Quarter 2020 Financial and Operational Results

Liberty Oilfield Services Inc. (NYSE: LBRT; “Liberty” or the “Company”) announced today second quarter 2020 financial and operational results.

Summary Results and Highlights

  • Cash and cash equivalents increased by $68 million to $125 million for the quarter ended June 30, 2020
  • Total liquidity was $207 million at the end of the second quarter 2020
  • Revenue of $88 million, net loss1 of $66 million, or $0.55 fully diluted loss per share, and Adjusted EBITDA2 of $(13) million including non-cash items of over $4 million for the quarter ended June 30, 2020
  • Reacted swiftly to unprecedented industry conditions by moving to a highly flexible variable operating cost structure aligned with frac activity, achieving over 40% sequential reduction in general and administrative expenses excluding share-based compensation, and reducing 2020 capital expenditures target by approximately 50%
  • Pumped 97% of minutes in a day (1,399 minutes) on a plug and perf pad, a new Company record

“During the second quarter, Liberty continued to safely deliver exceptional service while taking steps to manage through an abrupt drop in completions activity across the industry due to global oil supply and demand shocks. In response to an unprecedented level of commodity price volatility during the second quarter, our top tier customers appropriately chose to curtail oil production and cease completions activity. We worked closely with our customers to evaluate forward business activity and implemented a clear plan to conserve cash, maintain liquidity and position the Company for strong performance in an eventual recovery. As earlier announced, we elected to reduce staffed frac fleets by approximately 50% to align with our customers’ activity plans towards year-end 2020. We also reduced our capital expenditures target, suspended our dividend, and continued to improve our cost structure to position the Company favorably for the long-term by exercising near term flexibility aimed at maintaining our balance sheet strength. Our Liberty family members have made unprecedented sacrifices given the challenges presented by the current market, and we thank all past and current Liberty employees for their contributions,” commented Chris Wright, Chief Executive Officer.

Mr. Wright continued, “These actions, coupled with outstanding operational performance, allowed us to deliver on our long-term strategic goals that recognize the importance of cash generation, disciplined capital allocation and a strong balance sheet. While our revenues declined to $88 million in the second quarter, and net loss1 was $66 million, or $0.55 per fully diluted share, we were able to generate significant free cash flow during the second quarter. Adjusted EBITDA2, excluding non-cash items, was approximately $(8) million for the quarter. We ended the quarter with total liquidity of $207 million. Despite these extraordinary circumstances that our industry faces today, we remain focused on building long-term partnerships with the industry’s leading players and investing in technology to grow our competitive advantage, all with laser focus on safe and efficient operations. This was illustrated by setting new efficiency records in the quarter such as pumping 97% of the minutes in a day on a plug and perf pad, enabled by our onsite and logistics prowess and proprietary technologies.”

Outlook

The collapse of worldwide demand for oil during the second quarter resulted in an abrupt reset of operators’ drilling and completion activity plans for the year. We believe the second quarter likely marks the bottom in completions activity. In the third quarter, rig count declines have slowed and West Texas Intermediate crude oil prices have seen signs of stability after a highly volatile second quarter. In response to higher and more stable oil prices North American exploration and production companies are bringing back curtailed production volumes and beginning a modest uptick in completions activity, albeit off a very low base. Our customer dialogues center around optimizing their development plans for the second half of 2020 and looking into 2021.

As operators look to the “other side,” a side where many operators and service providers will no longer exist, there is a heightened interest in best-in-class service quality, efficiency, safety and technology solutions that enable a better and more respected industry. Liberty is becoming a larger part of our top-tier customers’ anticipated business activity during the second half of 2020, as the innovative engineering Liberty brings to completions strategies and our environmental, social and governance (“ESG”) conscious approach to hydraulic fracturing have simply become more important. Using our proprietary database and analysis tools, our team is partnering with major Permian operators to evaluate completion practices and well-productivity to help drive economic improvements across the basin. We are also working together on rigorous design, analysis and implementation plans for our next generation frac fleets to continue raising the industry ESG bar.

Commenting on the outlook, Wright added, “Prior downturns in the oil and gas industry have tested and proved the resilience of Liberty’s strategy, and we believe this time is no different. Liberty developed a plan to navigate the downturn, with an eye toward our strategic principles, and we executed swiftly and decisively to position the Company well for the long-term.”

Wright continued, “Entering the second half of 2020, the foundation of a strong culture, coupled with technology and efficiency-centered competitive advantages, will allow us to continue a path towards expanding our deep-rooted customer relationships that we have cultivated over the years. We now expect a modest acceleration in activity during the third quarter, and we expect to have 10 to 12 frac fleets working in the fourth quarter of 2020 as customers look to utilize superior services in the current climate. We believe that we are significantly advantaged with a strong balance sheet, a high-quality service offering, low capital outlay and flexible cost structure that allow us to serve our customers through an impending recovery. As Sun-Tzu said over two millennia ago ‘In the midst of chaos, there is also opportunity’.”

Second Quarter Results

For the second quarter of 2020, revenue decreased 81% to $88 million from $472 million in the first quarter of 2020.

Net loss before income taxes totaled $77 million for the second quarter of 2020 compared to net income before income taxes of $3 million for the first quarter of 2020.

Net loss1 (after taxes) totaled $66 million for the second quarter of 2020 compared to net income1 of $2 million in the first quarter of 2020.

Adjusted EBITDA2, which includes non-cash stock compensation expense, decreased 123% to $(13) million from $54 million in the first quarter. Please refer to the reconciliation of Adjusted EBITDA (a non-GAAP measure) to net income (a GAAP measure) in this earnings release.

Fully diluted loss per share was $0.55 for the second quarter of 2020 compared to earnings of $0.02 for the first quarter of 2020.

Modest net-debt position at the end of the first quarter of 2020 swung to a $19 million net-cash position at the end of the second quarter.

1

Net income/loss attributable to controlling and noncontrolling interests.

2

“Adjusted EBITDA” is not presented in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). Please see the supplemental financial information in the table under “Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA” at the end of this earnings release for a reconciliation of the non-GAAP financial measure of Adjusted EBITDA to its most directly comparable GAAP financial measure.

Balance Sheet and Liquidity

As of June 30, 2020, Liberty had cash on hand of $125 million, a significant increase from first quarter levels as working capital decreased, and total debt of $106 million, net of deferred financing costs and original issue discount. The term loan requires only a 1% annual amortization of principal, paid quarterly, with no substantial payment due until maturity in September 2022, subject to mandatory prepayments from excess cash flow. There were no borrowings drawn on the ABL credit facility, and total liquidity, including availability under the credit facility, was $207 million.

Conference Call

Liberty will host a conference call to discuss the results at 8:00 a.m. Mountain Time (10:00 a.m. Eastern Time) on Wednesday, July 29, 2020. Presenting Liberty’s results will be Chris Wright, Chief Executive Officer, Ron Gusek, President, and Michael Stock, Chief Financial Officer.

Individuals wishing to participate in the conference call should dial (833) 255-2827, or for international callers (412) 902-6704. Participants should ask to join Liberty's call. A live webcast will be available at http://investors.libertyfrac.com. The webcast can be accessed for 90 days following the call. A telephone replay will be available shortly after the call and can be accessed by dialing (877) 344-7529, or for international callers (412) 317-0088. The passcode for the replay is 10137970. The replay will be available until August 5, 2020.

About Liberty

Liberty is an independent provider of hydraulic fracturing services to onshore oil and natural gas exploration and production companies in North America. Liberty was founded in 2011 with a relentless focus on improving tight-oil completions, and an emphasis on customer partnerships and technology to find innovative answers to frac optimization. Liberty is headquartered in Denver, Colorado. For more information about Liberty, please contact Investor Relations at IR@libertyfrac.com.

Non-GAAP Financial Measures

This earnings release includes unaudited non-GAAP financial and operational measures, including EBITDA, Adjusted EBITDA and Pre-Tax Return on Capital Employed. We believe that the presentation of these non-GAAP financial and operational measures provides useful information about our financial performance and results of operations. Non-GAAP financial and operational measures do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. The presentation of non-GAAP financial and operational measures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance with U.S. GAAP. See the tables entitled Reconciliation and Calculation of Non-GAAP Financial and Operational Measures for a reconciliation or calculation of the non-GAAP financial or operational measures to the most directly comparable GAAP measure.

Forward-Looking and Cautionary Statements

The information above includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included herein concerning, among other things, the deployment of fleets in the future, planned capital expenditures, future cash flows and borrowings, pursuit of potential acquisition opportunities, our financial position, return of capital to stockholders, business strategy and objectives for future operations, are forward-looking statements. These forward-looking statements are identified by their use of terms and phrases such as “may,” “expect,” “estimate,” “project,” “plan,” “believe,” “intend,” “achievable,” “anticipate,” “will,” “continue,” “potential,” “likely,” “should,” “could,” and similar terms and phrases. Although we believe that the expectations reflected in these forward-looking statements are reasonable, they do involve certain assumptions, risks and uncertainties. These forward-looking statements represent our expectations or beliefs concerning future events, and it is possible that the results described in this earnings release will not be achieved. These forward-looking statements are subject to certain risks, uncertainties and assumptions identified above or as disclosed from time to time in Liberty's filings with the Securities and Exchange Commission. As a result of these factors, actual results may differ materially from those indicated or implied by such forward-looking statements.

Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, we do not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for us to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in “Item 1A. Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC on February 27, 2020 and in our other public filings with the SEC. These and other factors could cause our actual results to differ materially from those contained in any forward-looking statements.

Liberty Oilfield Services Inc.

Selected Financial Data

(unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

 

2020

 

2020

 

2019

 

2020

 

2019

Statement of Operations Data:

 

(amounts in thousands, except for per share and fleet data)

Revenue

 

$

88,362

 

 

$

472,344

 

 

$

542,147

 

 

$

560,706

 

 

$

1,077,295

 

Costs of services, excluding depreciation and amortization shown separately

 

89,518

 

 

392,716

 

 

426,444

 

 

482,234

 

 

855,743

 

General and administrative

 

18,064

 

 

28,613

 

 

23,989

 

 

46,677

 

 

46,077

 

Severance and related costs

 

9,057

 

 

 

 

 

 

9,057

 

 

 

Depreciation and amortization

 

44,931

 

 

44,831

 

 

40,368

 

 

89,762

 

 

78,755

 

Loss (gain) on disposal of assets

 

334

 

 

(102)

 

 

143

 

 

232

 

 

1,366

 

Total operating expenses

 

161,904

 

 

466,058

 

 

490,944

 

 

627,962

 

 

981,941

 

Operating (loss) income

 

(73,542)

 

 

6,286

 

 

51,203

 

 

(67,256)

 

 

95,354

 

Interest expense, net

 

3,656

 

 

3,608

 

 

3,597

 

 

7,264

 

 

7,779

 

Net (loss) income before taxes

 

(77,198)

 

 

2,678

 

 

47,606

 

 

(74,520)

 

 

87,575

 

Income tax (benefit) expense

 

(11,363)

 

 

261

 

 

7,083

 

 

(11,102)

 

 

13,143

 

Net (loss) income

 

(65,835)

 

 

2,417

 

 

40,523

 

 

(63,418)

 

 

74,432

 

Less: Net (loss) income attributable to noncontrolling interests

 

(20,064)

 

 

697

 

 

18,491

 

 

(19,367)

 

 

34,279

 

Net (loss) income attributable to Liberty Oilfield Services Inc. stockholders

 

$

(45,771)

 

 

$

1,720

 

 

$

22,032

 

 

$

(44,051)

 

 

$

40,153

 

Net (loss) income attributable to Liberty Oilfield Services Inc. stockholders per common share:

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.55)

 

 

$

0.02

 

 

$

0.32

 

 

$

(0.53)

 

 

$

0.59

 

Diluted

 

$

(0.55)

 

 

$

0.02

 

 

$

0.32

 

 

$

(0.53)

 

 

$

0.58

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

Basic

 

83,292

 

 

81,651

 

 

68,404

 

 

82,472

 

 

67,918

 

Diluted (1)

 

83,292

 

 

114,952

 

 

114,338

 

 

82,472

 

 

114,277

 

Other Financial and Operational Data

 

 

 

 

 

 

 

 

 

Capital expenditures (2)

 

$

13,284

 

 

$

32,888

 

 

$

43,950

 

 

$

46,172

 

 

$

95,058

 

Adjusted EBITDA (3)

 

$

(12,566)

 

 

$

53,538

 

 

$

92,120

 

 

$

40,972

 

 

$

176,935

 

 

Average Active Fleets (4)

 

4.6

 

 

22.8

 

 

23.0

 

 

13.7

 

 

22.6

 

Annualized Adjusted EBITDA per Average Active Fleet (5)

 

$

(10,957)

 

 

$

9,418

 

 

$

16,065

 

 

$

5,998

 

 

$

15,788

 

 

______________________

(1)

In accordance with U.S. GAAP, diluted weighted average common shares outstanding for the three and six months ended June 30, 2020, exclude weighted average shares of Class B common stock (29,392 and 30,015, respectively), restricted shares (246 and 257, respectively) and restricted stock units (1,914 and 2,124, respectively) outstanding during the period.

(2)

Capital expenditures presented above are shown on an as incurred basis, including capital expenditures in accounts payable and accrued liabilities.

(3)

Adjusted EBITDA is a non-GAAP financial measure. See the tables entitled “Reconciliation and Calculation of Non-GAAP Financial and Operational Measures” below.

(4)

Average Active Fleets is calculated as the daily average of the number of active fleets for the period presented.

(5)

Annualized Adjusted EBITDA per Average Active Fleet is calculated as Adjusted EBITDA for the respective quarter, or six month period, annualized, divided by the Average Active Fleets, as defined above.

Liberty Oilfield Services Inc.

Condensed Consolidated Balance Sheets

(unaudited, amounts in thousands)

 

June 30,

 

December 31,

 

2020

 

2019

Assets

 

Current assets:

 

 

 

Cash and cash equivalents

$

124,504

 

 

$

112,690

 

Accounts receivable and unbilled revenue

68,519

 

 

252,910

 

Inventories

81,167

 

 

88,547

 

Prepaids and other current assets

25,500

 

 

34,827

 

Total current assets

299,690

 

 

488,974

 

Property and equipment, net

613,136

 

 

651,703

 

Operating and finance lease right-of-use assets

107,590

 

 

108,413

 

Other assets

30,704

 

 

34,339

 

Total assets

$

1,051,120

 

 

$

1,283,429

 

Liabilities and Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

27,381

 

 

$

117,613

 

Accrued liabilities

36,858

 

 

108,954

 

Current portion of operating and finance lease liabilities

36,360

 

 

39,519

 

Current portion of long-term debt, net of discount

353

 

 

409

 

Total current liabilities

100,952

 

 

266,495

 

Long-term debt, net of discount

105,596

 

 

105,731

 

Long-term operating and finance lease liabilities

64,050

 

 

61,571

 

Deferred tax liability

14,887

 

 

19,659

 

Payable pursuant to tax receivable agreement

45,678

 

 

48,481

 

Total liabilities

331,163

 

 

501,937

 

 

 

 

 

Stockholders' equity:

 

 

 

Common Stock

1,129

 

 

1,126

 

Additional paid in capital

435,885

 

 

410,596

 

Retained earnings

94,817

 

 

143,105

 

Total stockholders’ equity

531,831

 

 

554,827

 

Noncontrolling interest

188,126

 

 

226,665

 

Total equity

719,957

 

 

781,492

 

Total liabilities and equity

$

1,051,120

 

 

$

1,283,429

 

Liberty Oilfield Services Inc.

Reconciliation and Calculation of Non-GAAP Financial and Operational Measures

(unaudited, amounts in thousands)

Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

2020

 

2020

 

2019

 

2020

 

2019

Net (loss) income

$

(65,835)

 

 

$

2,417

 

 

$

40,523

 

 

$

(63,418)

 

 

$

74,432

 

Depreciation and amortization

44,931

 

 

44,831

 

 

40,368

 

 

89,762

 

 

78,755

 

Interest expense, net

3,656

 

 

3,608

 

 

3,597

 

 

7,264

 

 

7,779

 

Income tax (benefit) expense

(11,363)

 

 

261

 

 

7,083

 

 

(11,102)

 

 

13,143

 

EBITDA

$

(28,611)

 

 

$

51,117

 

 

$

91,571

 

 

$

22,506

 

 

$

174,109

 

Fleet start-up and lay-down costs

4,499

 

 

 

 

406

 

 

4,499

 

 

1,460

 

Loss (gain) on disposal of assets

334

 

 

(102)

 

 

143

 

 

232

 

 

1,366

 

Provision for credit losses

2,155

 

 

2,523

 

 

 

 

4,678

 

 

 

Severance and related costs

9,057

 

 

 

 

 

 

9,057

 

 

 

Adjusted EBITDA

$

(12,566)

 

 

$

53,538

 

 

$

92,120

 

 

$

40,972

 

 

$

176,935

 

 

 

 

 

 

 

 

 

 

 

Calculation of Pre-Tax Return on Capital Employed

 

Twelve Months Ended

 

June 30, 2020

 

2020

 

2019

Net loss

$

(62,986)

 

 

 

Add back: Income tax benefit

(10,193)

 

 

 

Pre-tax net loss

$

(73,179)

 

 

 

Capital Employed

 

 

 

Total debt, net of discount

$

105,949

 

 

$

106,772

 

Total equity

719,957

 

 

792,446

 

Total Capital Employed

$

825,906

 

 

$

899,218

 

 

 

 

 

Average Capital Employed (1)

$

862,562

 

 

 

Pre-Tax Return on Capital Employed (2)

(8)

%

 

 

(1)

Average Capital Employed is the simple average of Total Capital Employed as of June 30, 2020 and 2019.

(2)

Pre-tax Return on Capital Employed is the ratio of pre-tax net (loss) income for the twelve months ended June 30, 2020 to Average Capital Employed.