Deon Daugherty, editor-in-chief, Oil and Gas Investor: Hi there. I'm Deon Daugherty, editor-in-chief of Oil and Gas Investor here at SUPER DUG in Fort Worth. And today we are fortunate to have Ron Gusek, the CEO of Liberty Energy here to answer a few questions after he just gave us a stellar presentation on stage. So Ron, thank you for joining us here today.
Ron Gusek, CEO, Liberty Energy: Great to be here.
DD: We want to talk a little bit about getting folks acquainted with Liberty Energy as it is today. It started out in 2011 as an oilfield services company. So kind of walk us through that evolution into Liberty Energy now.
RG: Yeah, certainly. We got started as a frac company back in 2011, and that was our focus for certainly a significant amount of our history and remains a big, big part of our world today. Certainly the largest part. But as we grew over the years in the space of fracturing, ultimately adding wire line, a few sand mines, some logistics to our business, but all focused in that core completion space, we recognized there was an opportunity for us to maybe be a little broader than that.
Our mission was a very simple one, and that was to better human lives. It was our belief that we would do that through access to energy. Energy is maybe the foundation to all that happens in the world today. Well, maybe energy isn't directly the path out of poverty—you don't get out of poverty without access to it. And so we quickly recognized that we had an opportunity to be broader than where we had started our focus, specifically completions. And so we rebranded ourselves Liberty Energy and are now embarking in a few different directions, particularly in the power space. We've made some investments in small modular nuclear, in advanced geothermal in batteries and natural gas fired power generation, with the goal of supporting energy access more broadly than we had.
DD: Well, and let's talk a little bit about power generation. Something that you said on stage resonated, I think, probably with a lot of folks about controlling what you ca. And in your case then it's having control over what we can in the field, and that's thing with things like using natural gas as a fuel source, generating your own power. I mean, kind of walk us through that thought process as well.
RG: So we had started down a path of moving to what we would call a next generation frac asset. The idea that you would power a frac pump with natural gas rather than diesel fuel as it had historically done. The default path to do that when we first started was to do so with an electric pump. So rather than drive the pump itself with a diesel motor, to drive it with electric motors and then use natural gas to generate electricity. We pride ourselves on the level of efficiency we deliver in the field. And we didn't want moving to a next generation frac asset to negatively impact that. We wanted our customers to have the same seamless experience.
And so that meant for us controlling those things that could dramatically change an outcome in the field. That included the power generation and also included the fueling of that. Diesel's ubiquitous; compressed natural gas, less so. And so we launched LPI [Liberty Power Innovations] with the goal of controlling both of those aspects of our business. And so we have since grown in our capabilities around power generation. We now run 130 megawatts of power generation to run our frack crews and supply all of the natural gas that those fleets consume in that exercise.
DD: So was there any struggle as far as having the infrastructure in place to get that compressed natural gas to the field as fuel?
RG: It certainly was a bit of a learning curve for us and required some growth. We did buy a small company to start that business. We acquired a company that was already in the compressed natural gas delivery business, and that kind of gave us a bit of a head start in that regard. But ultimately, we have expanded that infrastructure and capability beyond just the Permian to include the D-J and the Haynesville, have strengthened and maybe fortified that a little bit, and grown our expertise and capability in that.
There's been a learning curve, of course. We found out that fueling an asset with natural gas is not the same as fueling one with diesel, that there's some more complexities to it, but ultimately now have a very seamless operation there. And I think our customers experience the same efficiencies and maybe even better efficiencies with these next generation assets as they've come to expect from Liberty in the past.
DD: Well, that's fantastic. I mean, especially in the Permian, they probably could have used this technology 25 years ago and would've saved so much of flared gas, been able to do something with it instead of just lose that profit.
RG: Absolutely. It certainly makes a difference.
DD: Yeah. Yeah, it's fascinating. And then let's kind of bring it back down to where we are today. I'm not the only one saying these words, volatile, uncertain market. How is that affecting what you guys are doing now and kind of looking into 2026?
RG: Certainly not without some challenges, of course. The ability to plan a business requires the ability to understand sort of the long-term what investments are going to look like for our customers, such that we can make appropriate investments to support whatever those needs would be. That's a challenge when you get into an environment like this, when you get some volatility and that ultimately has our customers reevaluating their budgets for this year and very likely for next year as well. And so we have to prepare for a range of outcomes. We have to evaluate scenarios from the worst case to the best case, be prepared for the worst, hope for the best and likely find ourselves somewhere in the middle of that. But for us, what that's meant is, well, the first half of the year looks pretty solid. We're preparing for some reduction in activity in the second half of the year, and so up to us to understand what those possibilities are and then figure out how best to deal with that.
I always say though, that with challenge comes opportunity. We've had in the last two downturns, two great chances in the ’15, ‘16 downturn. We acquired Sanjel out of bankruptcy; the COVID downturn, we completed the Schlumberger transaction and bought their North American onshore completions business. So I don't know if there will be a similar opportunity in this environment, but those are things we always want to be ready for and on the lookout for.
DD: Yeah. Well, I was talking, I mean yesterday was finance day for me, so I was talking with some of these investor banks and private equity groups and they were all saying, there are opportunities here because just the way the price affects valuation, but then you've got the bid-ask spread conundrum that can pop up. So that's interesting. I hadn't thought about it from a services sort of perspective that there are opportunities there as well.
And so from my coverage of the first quarter earnings, I've heard different things. The numbers are kind of all over the place because I think it's early on to really predict too much, but literally every E&P that I looked at was cutting a couple rigs here and there, or a couple hundred million in some cases a little more, but still a negligible part of budget dust, basically, in these enormous multi-billion dollar capex budgets. But do you expect that to continue quarter-over-quarter? Can you tell yet or if it's going to sort of plateau to the point that I think it was TPH said 10% to 25% reduction by the end of the year. And given where things are, they're kind of biased toward the lower end, but it's early, right? From what your customers are telling you from what you're looking at on strip, what are you thinking as far as reductions this year?
RG: So first of all, I do think it's too early to know the full impact. I think we still have E&Ps weighing the range of potential outcomes. While we have some more certainty on the trade situation and the potential impacts of that on the global economic growth, we still have maybe a bit of an unknown around the supply side on exactly how that plays out.
We're going to have a supply demand imbalance. We are going to be long barrels of oil. I think that is a certainty, but I expect we're going to have to wait and see what global storage inventory numbers grow to be. That probably provides some direction for WTI and ultimately some clarity around where budgets will land for our customers. So I do think there probably is a little more downside potential to come from based on what we have heard today.
The counter to that, of course, is the gas side of things. We have seen some dollars flowing into gas basins. We've seen announcements around incremental rig count and completions activity there, and so we have some puts and takes. I don't think the gas side's going to completely offset the oil side of things, but it is nice to have a little positivity in our world as well.
DD: Well, and something else that I heard yesterday, I forgot it was one of the panelists was saying that while you're seeing public companies cutting a rig or two; private companies are adding a rig or two. Is that something that you're observing as well?
RG: I'd say some of both. For the private companies, it probably depends a little on the size that you are. Some of the smaller ones, I think looking to protect the balance sheet and so maybe being a little bit more cautious. Some of those who are in a strong financial position and maybe have the opportunity to take advantage of arguably very low drilling and completion costs right now may be in a situation where they're going to drill some incremental wells.
DD: So that's an opportunity for them?
RG: Yes.
DD: Okay.
RG: Yeah, certainly they would think about the cashflow dynamics a little differently than a public company would, and so it may make sense to deploy some capital now and potentially be in a situation to have those wells drilled and completed at very low cost but then wait for a strong price signal to actually start the production. That would probably be more difficult for a public company to take that path.
DD: Ron, awesome information today. Thank you so much. Thank you for coming back and talking with us. I really appreciate it.
RG: Really enjoyed it.
DD: And thank you guys for checking in with what we're doing here at SUPER DUG. I'm Deon Daugherty with Oil and Gas Investor, with Ron Gusek, CEO of Liberty Energy. Thank you so much.
