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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200728006009/en/
Michael Stock Chief Financial Officer 303-515-2851
IR@libertyfrac.com
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