Executive Summary / Key Takeaways

• Liberty Energy is strategically evolving beyond its core hydraulic fracturing business, leveraging its operational expertise and technological leadership to capitalize on the burgeoning distributed power generation market via Liberty Power Innovations (LPI).
• Despite a recent market slowdown impacting pricing, Liberty's integrated service model, technological differentiators (digiTechnologies, LPI, Sentinel, LAET), and focus on efficiency have enabled resilient financial performance and a "flight to quality" among E&P customers.
• The company is actively investing in its future, allocating significant capital towards expanding its power generation capacity (targeting 150 MW by end 2025, 250 MW by end 2026) and maintaining its completions technology edge, while also returning capital to shareholders through buybacks and dividends.
• Near-term outlook anticipates sequential revenue and EBITDA growth in Q2 2025, with full-year 2025 adjusted EBITDA guided between $700 million and $750 million, reflecting pricing headwinds offset by efficiency gains and strategic growth.
• Key factors for investors to monitor include the execution and contracting success of the LPI expansion, the impact of macroeconomic volatility and tariffs on North American E&P activity and costs, and the company's ability to maintain its competitive edge through continued innovation and operational excellence.

A Foundation Forged in the Shale Revolution

Liberty Energy Inc. has established itself as a leading integrated energy services and technology company since its founding in December 2011. Starting with a single hydraulic fracturing fleet, the company has grown significantly, reaching approximately 40 active fleets by March 31, 2025. This growth has been underpinned by a foundational culture of innovation, a relentless focus on operational excellence, and a commitment to building strong relationships with onshore oil and natural gas E&P companies.

Liberty's business model extends beyond conventional hydraulic fracturing, encompassing a suite of complementary services including wireline, proppant delivery (via its PropX division), field gas processing and treating, CNG delivery (initially through Liberty Power Innovations, LPI), and advanced data analytics. This integrated approach, coupled with strategic vertical integration into areas like sand mine operations and equipment manufacturing (via LAET), is designed to enhance wellsite efficiency, reduce costs, and deliver superior value to customers.

In a competitive landscape dominated by larger, globally diversified players like Halliburton (HAL), Schlumberger (SLB), and Baker Hughes (BKR), alongside equipment specialists like NOV Inc. (NOV), Liberty has carved out a differentiated position. While lacking the sheer scale and global reach of the majors, Liberty competes effectively by focusing on technological innovation, operational agility, and a deep understanding of North American shale basin dynamics. Its strategy emphasizes being a partner of choice, leveraging technology and integrated services to lower the total cost of delivery for E&P operators, rather than competing solely on price. This approach has contributed to a "flight to quality," where customers increasingly favor top-tier providers like Liberty, particularly in uncertain market environments.

Technological Edge: The Engine of Differentiation

At the heart of Liberty's competitive strategy lies its technological differentiation, particularly in the realm of lower-emission completions and operational efficiency. The company has been at the forefront of developing and deploying natural gas-powered hydraulic fracturing solutions for over a decade.

A key differentiator is Liberty's suite of "digiTechnologies," including digiFrac (electric) and digiPrime (hybrid) pumps. These purpose-built electric and hybrid frac pumps offer significant advantages over conventional diesel fleets, notably achieving approximately 25% lower CO2e emissions compared to Tier IV Dual Fuel Gas Blending (DGB) systems. This quantifiable environmental benefit is increasingly important to E&P customers focused on reducing their emissions profile.

Beyond emissions, Liberty's technology drives tangible operational and financial benefits. The company's dual fuel DGB fleets, supported by LPI's CNG fueling services, have achieved record diesel displacement levels, optimizing fuel use and lowering costs. The recent partnership with Cummins (CMI) to develop and deploy an industry-first natural gas variable speed, large displacement engine for the digiPrime platform is expected to further enhance fuel efficiency, transient load management, and precision rate control, with deployment anticipated in the first half of 2025.

Operational efficiency is also boosted by Liberty's advanced software and data analytics platforms. The Sentinel logistics software, initially proven in the Permian and now expanded across all U.S. basins and LPI, uses real-time data and AI to optimize proppant transportation and delivery, reducing downtime and truck count. Predictive and preventative maintenance programs, partly driven by AI and machine learning, have significantly increased equipment component longevity – average life expectancy is up 27% for engines (over 3 years), 40% for fluid ends (over 3 years), and 37% for power ends (over 2 years). The launch of The Hive, a 24/7 digital intelligence hub, further supports real-time operational optimization.

The "so what" for investors is clear: these technological advancements are not merely features; they are critical enablers of Liberty's competitive moat. They contribute to higher operational efficiency, lower operating costs (e.g., reduced fuel and maintenance expenses), improved asset utilization (as demonstrated by a digiPrime fleet achieving ~96% utilization in 2024), and a stronger value proposition for customers, ultimately supporting better margins and returns on invested capital compared to competitors relying on less advanced or integrated solutions. While competitors like SLB and HAL also invest heavily in technology and digital solutions, Liberty's focused approach on the completions value chain and its integrated ecosystem provide a distinct advantage in its core market.

Financial Performance and Liquidity: Navigating Market Dynamics

Liberty's financial performance reflects the interplay of market conditions, operational execution, and strategic investments. For the full year 2024, the company reported revenue of $4.3 billion, a 9% decline from 2023, and adjusted EBITDA of $922 million, down from $1.2 billion. This performance occurred amidst softening industry activity and pricing headwinds that began in late 2022 and continued through 2024.

The first quarter of 2025 saw revenue of $977.5 million, a 9% decrease compared to the strong Q1 2024, primarily driven by lower service and materials pricing. However, revenue increased 4% sequentially from Q4 2024, partially offset by higher activity levels stemming from increased fleet efficiency. Cost of services decreased year-over-year, benefiting from lower materials and maintenance costs, though partially offset by increased personnel costs associated with higher activity. General and administrative expenses saw a notable 24% year-over-year increase in Q1 2025, largely attributable to increased stock-based compensation expense related to the former CEO's transition to US Secretary of Energy.

Profitability metrics in Q1 2025 reflected the pricing pressure and cost dynamics. Net income was $20.1 million, significantly lower than $81.9 million in Q1 2024. Adjusted EBITDA was $168.2 million, down from $244.8 million in the prior year period, but up 8% sequentially from Q4 2024. Other income/expense was positively impacted by a $19.3 million gain on investments in Q1 2025. The effective global income tax rate was 28% in Q1 2025, higher than 24.4% in Q1 2024, influenced by lower pre-tax income and other factors.

Despite the cyclical pressures, Liberty has maintained a solid liquidity position. As of March 31, 2025, the company had $24.1 million in cash and cash equivalents. Its ABL Facility provides significant flexibility, with a borrowing base of $363.9 million, $210 million outstanding, and $139.9 million in remaining availability (plus $14 million in letters of credit). The company was in compliance with all debt covenants.

Cash flow generation remains robust. Net cash provided by operating activities was $192.1 million in Q1 2025, a $32.7 million increase year-over-year, primarily driven by favorable changes in working capital. Net cash used in investing activities was $106.2 million, lower year-over-year, benefiting from proceeds from the sale of equity securities ($29.9 million from Oklo (OKLO) shares) and asset sales, partially offsetting capital expenditures ($119 million in Q1 2025). Net cash used in financing activities was $