Q4 2023 Liberty Energy Inc Earnings Call

Participants

Ron Gusek; President; Liberty Energy Inc

Presentation

Operator

Welcome to the Liberty Energy earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.
I would now like to turn the conference over to Angela Victoria, Strategic Finance and Investor Relations lead. Please go ahead.

Thank you, and good morning, and welcome to the Liberty Energy Fourth Quarter and Full Year 2023 earnings call. Joining us on the call are Chris Wright, Chief Executive Officer, Dan Feehan, President, and Michael Stock, Chief Financial Officer.
Before we begin, I would like to remind all participants that some of our comments today may include forward-looking statements reflecting the company's views about future prospects, revenues, expenses, or profits. It matters involve risks and uncertainties that could cause actual results to differ materially from our forward-looking statements and statements reflect the company's beliefs based on current conditions that are subject to certain risks and uncertainties that are being felt in the earnings release and other public filings. Our comments today also include non-GAAP financial and operational measures. Non-gaap measures, including EBITDA, adjusted EBITDA and adjusted pretax return on capital employed and cash return on capital invested are not a substitute for GAAP measures and may not be comparable to similar measures of other companies, a reconciliation of net income to EBITDA and adjusted EBITDA from the calculations of adjusted pretax return on capital employed and cash return on capital invested as discussed on this call are included in the press release available on our Investor Relations website.
I would now like to turn the call over to Chris.

Good morning, everyone, and thank you for joining us to discuss our full year and fourth quarter 2023 operational and financial results. We delivered a second consecutive year of record earnings per share. Our portfolio of advanced technology and vertical integration, enhanced our superior service quality and drove record-breaking operational efficiency. We delivered full year adjusted pretax return on capital employed of 14% and cash return on capital employed of 34%, both exceeding the prior year revenue was $4.7 billion in 2023, net income of $556 million increased 39% year-over-year, and our fully diluted earnings per share rose by 49% year over year to $3.15. Our EPS grew faster than net income due to reduced share count showcasing the power of our buyback program. We concluded the year with adjusted EBITDA of $1.2 billion at the high end of our midyear guidance range. And we significantly increased our cash flow. We went public six years ago after a record year in 2017. Since then we have tripled our revenue, quadrupled our EBITDA and more than quadrupled our pretax net income. These financial records were made possible by the simply outstanding operational performance of team, Liberty every quarter in 2023, set a new quarterly pumping efficiency record. I couldn't be more proud to be on this team. Strong free cash flow generation supported our leading return of capital program, six program reinstatement. In July 2022, we have distributed $375 million to shareholders through buybacks and cash dividends. We have already retired 12% of the shares outstanding when we announced the program in July 2022, equivalent to 33% of the shares issued for the acquisition of slumber J's OneStim business three years ago. We also upsized our share repurchase authorization by 50% to $750 million and increased our quarterly dividend by 40% beginning in Q4 2023.
Liberty brings together leading pump technology, mobile power generation and CNG fuel supply unique value proposition to maximize efficiency, reduce emissions and lower fuel costs by the end of 2024, we expect 90% of our fleets will be primarily powered by natural gas. So the success of our technology transition is buttressed by dependable natural gas fuel supply through Liberty Power innovations, we plan to double LPI.'s capacity in 2024 to meet rising demand. Liberty is unique in the industry to own the technology and assets for the complete value chain in the move to natural gas and grid powered frac. Our strong belief is that controlling everything from fuel and logistics to power production and pump technology will drive our competitive advantage further and deliver industry-leading returns. This is a distinctly different approach compared to some frac companies who lease technology and contract power generation and gas supply from other providers. The reason Liberty has been the most successful frac company of the last decade is our ability to innovate faster than the rest of the industry and drive strong returns for both our customers and shareholders. Natural gas is by far the fastest growing energy source in the world. Consistent with this rising demand to power frac fleets with natural gas, 11 years ago, we deployed our first dual fuel fleet, recognizing the growing importance of natural gas has a lower emission, lower cost, reliable fuel source. We then set out to design and build our 100% natural gas powered DG. fleets fit for the rigors of the oilfield. This required a novel approach has some operators desire solutions to match their ambitions of developing a microgrid to augment their oilfield operations while others simply to lower emissions and fuel costs. Our efforts culminated in two complementary pump technologies that comprise our digital fleets and satisfy these multifaceted demands with the most innovative and capital efficient solutions mobility requirements, coupled with varying power demand based on job design, led to our development of digital power mobile generators that can be scaled up or down, providing the highest thermal efficiency and lowest emissions modular solutions in the industry today, there's a lack of natural gas, transportation and logistics infrastructure to meet the just-in-time needs of the frac side, we launched in a rapidly growing LPI. to solve this challenge and provide a virtual pipeline of natural gas to our fleets and other customer needs, while innovation from pumps to power generation to gas logistics are independently compelling investments. Together, these comprise a complete infrastructure to deliver a service unmatched in the industry. The success of our digital technologies and LPI. in 2023 marked a turning point for Liberty. The demand pull for our DG fleet continues to gain steam. We now have four DGB fleets deployed across two basins with two more being rolled out as we speak by the end of the year. The combination of DG fleets and dual-fuel fleets will make up 90% of our total fleet composition dramatically shifting our diesel to gas consumption and driving demand for LPI. services entering 2024.
The fundamental outlook for the frac industry is stable. Service prices remain relatively steady as the supply of marketed fleets was rightsized in response to lower completion activity. Many fleets exited the market both from accelerated attrition of older equipment and the deliberate idling of underutilized fleets to match customer demand as operators continue to demand technologies that provide significant emissions reductions and fuel savings.
Liberty's digital technologies LPI. business integrated service offering and scale position us as the provider of choice. Against this backdrop, demand for Liberty services in position to rise, albeit slowly from current levels engineering and innovation have led to improved shale wells via completion design optimization, faster completion and longer laterals, all helping to offset the gradual decline in average reservoir quality being drilled.
The trend toward higher intensity fracs raises demand for horsepower serving to keep frac assets utilized and drive service company returns. Range-bound oil prices have not meaningfully changed. E&p operator plans to deliver flat or most modest production growth as North American oil production reaches record levels, more frac activity will be required simply to offset production declines. Near term natural gas markets are under pressure, but domestic power demand growth and increased LNG exports are expected to lead to a more robust 2025. Long-term demand for reliable, affordable energy continues to rise with increasing global living standards. North American operators have been and are likely to continue to be the largest provider of incremental oil and gas supply globally. These trends should support a durable multiyear cycle ahead for services.
Looking to the first quarter, we anticipate flattish sequential revenue and adjusted EBITDA driven by seasonal trends and a cautious start for E&P activity. This is expected to be followed by a modest increase in our activity in subsequent quarters. For the full year, we expect strong free cash flow generation and continued investment in digital technologies and our LPI. business. We are confident that our technology transition better positions us to deliver superior services to our customers and durable returns over cycles.
Global energy demand continues to rise as the world's 7 billion less energized aspire to attain the energy rich lifestyles of the lucky 1 billion. Liberty's growing technical and service quality prowess brings us growing business opportunities to help expand the supply of reliable, affordable energy to meet these demands.
Our investment in and partnership with Turbo and enhanced geothermal energy company has been going very well. Pioneering the shale revolution ultimately came down to engineering and creating a complex underground plumbing network of hydraulic fractures, dense enough to harvest natural gas and oil from ultra low permeability rocks. Several of us at Liberty were lucky to be involved at the beginning and solving this technical challenge that unleashed the shale revolution. The result has been a transformation of the global energy and geopolitical landscape in ways previously on Emageon shale technology made natural gas fastest growing global source of energy. Over the last 12 years, the shale revolution also made oil a second fastest growing source of energy over the same time period. More on this in my closing remarks, our partnership with Turbo, which began in formally several years ago, involve the same technical and implementation challenges to harvest vast quantities of heat from underground. Lots also requires a precisely engineered underground network of fractures. Conduction through rocks is very slow analogous to ultra low permeability when in fact, if he transferred from Praxair bases can be scaled up to high rates. And this solution is a dense network of underground fractures, which connect cold water injector wells with hot water and steam producer wells. Another new large-scale energy resource is becoming accessible via the innovations from the shale revolution. We are excited about our fervent partnership and how far this next generation of geothermal will travel in the years ahead.
Another application of Liberty shale technology expertise is our partnership with Tambar and to crack the code in Australia of Beetaloo shale gas basin. The geology and geography are different, of course, but the fundamental challenge is the same. We are excited about the upside if our partnership can succeed in bringing huge new gas resources to Australia and the nearby Asian LNG markets. Liberty history has been all about innovation and partnership. Our future will be too. Earlier this month, we launched the bettering human lives foundation to address the most urgent challenges of energy access. The foundation strives to increase access to clean cooking fuels by supporting technology development and entrepreneurs in Africa. We are excited by the prospect of uplifting women, children and communities by improving health and safety and quality of life.
With that, I'd like to turn the call over to Michael stock, our CFO, to discuss our financial results and outlook.

Good morning. Everyone. Liberty delivered outstanding financial results in 2023. We expanded our adjusted EBITDA by 41%, increased our ROE to 40% and returned $241 million in capital to shareholders while reinvesting in our business for the long term.
Over the last 12 years of our company history Liberty has operated in a series of cycles, including from 2012 to 2015 period 2017 to 2019 and 2022 to date, interrupted by two exogenous and unusual downturns, the opaque war on shale and COVID. In the first four years, our average annual adjusted EBITDA was approximately $40 million by 2017, 2019 period. We have grown our average annual average adjusted EBITDA eightfold all into our forward thinking investments in dual fuel quality technology and the opportunistic acquisition of central assets in 2016. Since then, our annual average adjusted EBITDA in the last two years is now over $1 billion over three times the prior 2017 to 2019 cycle, driven by the transformative OneStim acquisition, vertical integration software development and the scale that bolsters our efficiencies. As we look forward, our strategy is to invest in Liberty design, next generation fleet technology and all the infrastructure to control critical areas that drive high efficiencies over the next decade, particularly in areas that are not very well developed like natural gas fuel supply, versatility of LPI. business provides potential to diversify our revenue base outside the industry. These investments reinforce sustainable long-term advantages and expand our ability to drive strong free cash flow. The demand for low-emission, highly efficient solutions is on the rise. And there are very few companies that are truly investing in differentiated technologies. And there is only one that owns the entire value chain and can shop their own destiny and that is Liberty. For the full year, revenue increased 14% to $4.7 billion from $4.1 billion in 2022. Net income totaled $556 million or $3.15 per fully diluted share. Adjusted EBITDA was $1.2 billion highest in Company history and 41% above 2022 levels at full year results demonstrate the earnings power we've built over the last three years. In the fourth quarter of 2023, revenue was $1.1 billion, a decrease of 12% over the prior year, driven by market headwinds, no budget exhaustion and a full quarter impact of one fewer fleet deployed. On a positive note, we achieved new consecutive quarterly pumping efficiency records safely pumping more hours per fleet than ever before.
The quarter fourth quarter net income after tax was nine of $92 million compared to $153 million in the prior year. Fully diluted net income per share was $0.54 compared to $0.82 in the fourth quarter of 2022. So fourth quarter adjusted EBITDA was $253 million compared to $295 million in the prior year. G&A expenses totaled $55 million in the fourth quarter and included non-cash stock-based compensation of $9 million. G&A was $5 million above the fourth quarter of 2022, but flat on a sequential basis. Net interest expense and associated fees totaled $6 million for the quarter. Fourth quarter tax expense was $27 million or approximately 23% of pretax income. We expect tax expense in 2024 to be approximately 24% of pretax income. Cash taxes were $10 million in the fourth quarter, and we expect 2024 cash taxes to be approximately 80% of our effective book tax rate for the year. We ended the year with a cash balance of $37 million and a net debt of $103 million. Net debt decreased by $72 million from the prior year and 2023 cash flows were used to fund capital expenditures, $103 million of share buybacks and $38 million of cash dividends. Total liquidity at the end of the year, including availability under the credit facility was $314 million. Net capital expenditures were $134 million in the fourth quarter and $576 million for the full year, which included investments in digitally LPI. gas delivery with SAN technology, capitalized maintenance spending and other projects. Our 2023 results showcase our ability to deliver a robust return of capital program while investing in high-return internal projects to expand our competitive advantage since the pandemic, we have meaningfully transformed our business to deliver strong free, strong cash flow generation through cycles. We reinstated a return of capital program a year and a half ago. Since that time, we've now distributed a cumulative $375 million to shareholders through share buybacks and cash dividends. We continue to strengthen our program last quarter, we increased our dividend by 40% to $0.07 this year. And earlier this week, we increased and extended our share repurchase authorization by 50% to $750 million through July 2026. We have $422 million left on this authorization. We continue to differentiate ourselves with an industry industry-leading return of capital program while investing in high return opportunities. As Chris shared earlier, we expect a steady start to the year, flattish first quarter revenue and adjusted EBITDA. Let me say it and show remarkable resilience in the face of reducing rig count in 2023. The last few months of commodity cost volatility has led to a more cautious start from E&P operators as we look forward, we expect a modest pickup at Liberty specific activity in subsequent quarters. For the full year, we are targeting flattish adjusted EBIT and EBITDA year over year. Our frac service pricing will be relatively flat from the end of the year into the start of 2024. For like-for-like technology, we are targeting cash from cash capital expenditures of approximately $500 million to $550 million or approximately 45% of adjusted EBITDA, inclusive of digital technologies. Dual Fuel upgrades at LPI. expansion, including this number some delayed CapEx spend, though it's timing of late 2023 equipment deliveries and capital expenditures will take our fleet makeup to 90% natural gas fuel technologies by year end the dominant fuel used by athletes will be natural gas supported by LPI.
I will now turn it back to the operator for Q&A, after which Chris will have some closing comments at the end of the call.

Question and Answer Session

Operator

Thank you. We will open up the line for questions to ask a question, press star then one on your phone. If at any time. Your question has been addressed and you would like to withdraw your question, please press star then two this time. We'll pause momentarily to assemble our roster. And the first question today comes from Scott Gruber with Citigroup. Please go ahead.

Yes, good morning.

Good morning,

I'm curious about the flat year on year EBITDA, which is great to hear you guys reiterate that from. I guess what I'm wondering about is how to think about your investments translating into incremental EBITDA versus that under trend underlying activity growth? Maybe if you can dimension that a bit for us to get to flat EBITDA year on year? And what type of activity growth you need in the second half versus the first half or maybe some dimension on incremental EBITDA from LPR and other investments?

Yes, Scott, I would also take that one. Chris can join in as well. Yes, we say flattish EBITDA is what we're targeting for the year. There's a lot of puts and takes is a slow start to the year from the E&P operators, as you can see. And we think that's going to increase for Liberty specific and demand as we go through the years. We feel we know that from our customers as it relates to some specific basins. If you think of things like the Balkan, which is was a strong base in last year, slowed down to the end of the year, as you've seen, is going to kind of kick back up again in Q2 there is sort of some drags on earnings that will come from things like reduction in the same price out of our minds, made up by increased numbers out of LPI. So I think you've got a generally softer market for us on average for like-for-like technology on average year over year. If you think about diesel price, average diesel prices were down year over year for diesel fleet. But we have also been investing in a technology transition, which is offsetting that there's other puts and takes. And then Chris might want to give some color on where the macro may go up or down from where we at Delta?

Scott, I think Michael gave a good summary. Look, we kid ourselves a little bit that we know what's going to happen at the end of Q3 or Q4 of this year. That's that that's yet to be determined. But as Michael said, at an overall a little bit softer macro this year, your last year started really strong and then sort of declined throughout the year, about 50 less practically, we're operating at the end of last year. That were 15 months before that. So the industry shrunk a little bit a little bit of downward pressure on pricing. But I would say the behavior of the industry was outstanding and that people have idled capacity, they couldn't get good pricing. And the work was there, people idle frac spreads and that data that kept pricing again down a hair, but pretty flat and I think we would expect pricing to be flat this year as well. If you know, macro changes in oil prices bumped up $10 bucks or so, you might see a little stronger mix strengthening or firming, but we don't have a crystal ball. So we just kind of look at what is the what you can expect Liberty to outperform the macro market conditions, as Michael said, because of that superior technology and even more important, just better service quality.

I appreciate all that color. And then thinking about the digital frac rollout, you said two more. We are, you know, underway in terms of entering a service. Is it going to be for total DigiFab additions this year within the budget? And then maybe if you could also provide some color just on the demand pull for those units, demand still seems pretty strong, but just wanted to see what you're hearing from customers and how far in advance? Are those units you're getting a given contract?

Yes, the interest in DG. is just huge imbalances. The hands in the air to get a digitally. It's just massively more than the amount of fleets we're going to fill the rate at which we're going to build fleet, right? That's constrained somewhat by our what we think is the prudent rate of capital deployment into that. But yes, so those dialogues go on for a long time. They're ultimately long-term agreements. When those go into place, it's about timing of rolling out those fleets, there's two different pump technologies. What's the right mix that's different for different customers, but there is interest, there is tremendous. Yes, the specifics are always bottom up more top down. So you know, I think your numbers for what we're budgeting are probably about. We ended the year last year with four. And at the end of this year, we'll probably have of order a quarter of our fleet will be digital. But again, we don't that's not a top-down thing. That's a bottom up thing and dialogues with customers. What I don't know if you want to give any color on technology, how that's rolling out and where we're going.

Ron Gusek

But but if we can the more, we see that the more excited we are not I wouldn't add too much to that on only to say that, you know, as Chris alluded to, we had four out we were we were hoping to have six by the end of this month. We're working on those next to right now. We continue to work closely with our third-party packagers to keep that schedule on track to meet our customers' expectations around that. But we're full speed ahead on putting that technology in the hands of the customers who are who have been long-time partners with us in in first of all developing that and ultimately getting it deployed to the field. So we're excited to see that continue this year.

Appreciate the color. I'll turn it back. Thank you. Thank you.

Operator

Our next question comes from Luke Lemoine, Piper Sandler

Good morning, Chris and Ron, I know you're not ready to quantify OPI size yet, but can you walk us through what kind of investments you're making in LPI this year? Is this more on the CNG distribution side? Are you adding a fair amount of digital power mobile generators for non-fried uses as well.
And then how should we think about this from a return standpoint.

But let's say you had this this year's focus is really about supporting our DG. and add to fuel rollout, right? So we are very definitely the compression capacity of LP. I focused mainly on two basins there. You have the two main basins where you have a job it should have a lot of gas from the Permian and the DJ will do on some fuel gas, a decent amount of fuel gas we have over in the Haynesville and we'll look at other basins as we go forward from there. And then it's going to be the CNG trailers and fuel distribution units that really back that up.
Yes, there's nothing going to be spent regarding at the moment in the plan on both mobile power generation outside of the industry for outside of the industry. That's something that we're looking at with the Board. And that's going to be we are going to be working on that sort of expansion plan as we go through the year. And that probably becomes more of a mixed year for process as far as the investment side of that goes, yes, returns, basically we have a single hurdle for all sort of like growth capital or any sort of any investments really here at Liberty and kind of go it matches to some degree our 12 year and history of what we've done in that scenario, 23%, 25% cash return on cash invested. That's the target for everything we do. Obviously, you starting a new business, you won't hit that 1st year, but that's what the long-term target for all of us are all investments that Liberty doesn't.

Okay, great. And then, Ron, you talked about on trying to figure out the right complement of DG frac versus digital prime depending on the customer, but these first four fleets that are out in the next two, can you just update us on how many of these incorporate Digipass?

Ron Gusek

So where did you find will be a part will be two of those fleets for those fleets being did you frac the electric technology? And then as we proceed through this year, you're going to see that percentage of Digi prime climb pretty significantly. That will be a given given where we're deploying that additional capacity. That will be the primary focus for us just given our partners' expectations there.

Okay, perfect. Thanks a bunch.

Operator

Your next question comes from Atidrip Modak with Goldman Sachs.

You guys the mining, you guys touched on this a little bit, but wanted to ask this from a use of cash decision matrix perspective. So in a flat environment, how do you balance potentially accelerating digital frac and expand margins and free cash flow conversion faster over the next few years versus return of capital to shareholders?

Well, that's the that's the dialogue that makes up our business and really has from the day we started this company. We came out with it with our first fleet was why a fair margin, the best frac fleet in the bucket? So how many more you build? How fast do you build them what's the right balance there. So again, I don't know if I get any new or specific color commentary on that. But for us, it's critical for the long run of our business is to make sure we have very strong return on capital investment opportunities. We don't just add business lines or go into other stuff because we can do that. We only want to do things where we're going to have a significant competitive advantage versus other providers in that area and therefore, very strong returns on capital. But it's our I would say our philosophy is we will continue to grow our competitive advantage in our business with time, but we will we will develop a growing regular, steady dividend. And when we have compelling opportunities as we've had for the last 18 months and probably have for the foreseeable future to buy back our shares in an accretive fashion. We'll do that as well.
If Michael if I miss anything else we should touch on.

Now. You're right. I mean that it's a balance between the two and it's a focus. He has a focus on long-term growth when you look at our history, our 12-year history of returns significantly outperforming our internal returns than the S&P 500, right? I mean, those have been those are great investments for our long-term shareholders, but we always balance that with the ability to return cash to shareholders at the same time. So we have got a remarkable investment opportunity for everybody right you can get growth and returns of capital from the same company, you don't get one or the other.

The third leg on that obviously is balance sheet, right? We are in a cyclical industry, what multiples are low and people don't like our industry because it's cyclical. We actually like that. It's cyclical that has allowed us that has been an advantage for us is to navigate those cycles, always with a balance sheet, always able to take advantage of dislocations and compelling opportunities that come about more often in our industry because we're cyclical and as you see as the production base is so much larger in the U.S. of that activity, just to keep production flat is so much higher and dominates activity today that were project. That's clear. We're going into a less cyclical of the world that we've been in the shale revolution started my God, I mean, we had activity swing down by 70%. And that's that that's probably inconceivable today given what it would have on U.S. and therefore global oil and natural gas production. So the future is probably meaningfully less cyclical than in the past, but we didn't view that cyclicality as some terrible thing. That was an opportunity for us. We're still going to have it going forward, but certainly in a more muted fashion.

Yes, that makes sense. And thanks. Thanks for. Thanks for all that color. I guess the second question, so you spoke a little bit about the Australia opportunity. Can you touch on the nature of the work there and maybe touch on the upside as well to help understand what the longer-term potential is there? And then are there other regions globally that are of interest to you.

We get pitched a lot, but we've been pitched a lot internationally for, you know, six, seven, eight years, and one of the things that I would argue that I think I know you know, define Liberty is a long term committed partnerships with our customers. And so in the past, there's just no way we're going to find all of our fleets have been busy all of the time of except for COVID and maybe going forward in the future relative scale now that we don't have to applaud. We don't have to affect our workforce or do anything disruptive today. If demand pulls back and it makes sense to idle fleets, we're very happy to do that.
But as we grew and built this business, all of our fleets were busy all of the time. So we weren't going to tell a customer Hey, sorry, we're shipping your trucks overseas. Now with the DG. rollout, we've got a new technology that's meaningfully upgrading our fleet, and we're going to have fleets that come out. The other end of that, that maybe are not fully at retirement age. And so we are going to that's what's going to happen with Australia, one of our legacy fleets that will come out of service because of a digitally rolling in. We're going to send that over to Australia. It's not going to be fully utilized right away, but this is a exploratory, let's figure it out and see where we can go kind of play what our capital investment is basically moving over idle equipment. We've got good economics for the frac we'll do over there. We've taken an ownership stake in Sanborn. So we own a not insignificant chunk of the company with a large acreage position. So if we can make it work, I think we get value through that business, our partner in that, and there's been shy of basin similar gas-in-place to the Marcellus. So if it works, could there be a significant amount of frac work in Australia Absolutely. But that will take time. It will take time. So broadly, we like it because it's asymmetrical. The downside for us is very small. Again, the upside could be significant. If that makes sense to me.

Thank you so much for taking the questions and thanks for the questions.

Operator

Our next question comes from Stephen Gengaro. Steve.

Thanks. Good morning, everybody for and two for me. I wanted to start with you talked about the bigger fracs quite a bit. And the strong demand you're seeing when you're in conversations with customers, is there are they differentiating between your electric frac fleets and the peers? And maybe and maybe also just as your answer now, as you can win when you don't have the availability right now, are they using your DGB.s? Are they going elsewhere for electric further?

For the most part of where our fleets are going are existing customers and I would take a top thing. They are committed to the quality of Liberty service and just the way we do business with partners for years through good times through bad times of book that fee gets sticky is Glu is Liberty. Our people our way of doing business, the quality of service. We deliver the extra upside or the evolution customers want with time it, hey, can we go to fleets that have lower fuel costs and lower emissions on ultimately even smaller footprint with the higher power density. So the interest in those technologies are there, but people choose partners and then work together with those partners to find a path to upgrade technology. It's very rarely, hey, I don't care who it is. I just want an electric, frankly, I'm sure there is a customer like that, but that that's not a Liberty customer.

Okay, great. Thank you, Chris. And then real quickly, Michael, you mentioned I might have missed it the 24 CapEx range. Could you just restate that and maybe give some up some breakdown of how it how it falls out between that the different pieces?

Is it 500 to 550 in cash, probably around that 200 and capitalized maintenance program. They are the largest portion of the rest of that's going to be in the G. and LPI. expansions, and we are doing a decent number of dual fuel upgrades, right? We've got in our number about 100 Tier four pumps that are going to get upgraded, which are the NGU.s and a number of our Tier twos that are younger Tier two is going to get upgraded to dual fuel, but that is either a smaller number because those because those upgrade kits and cheaper by they're not moving from Tier three to Tier four, but we're upgrading Tier twos to dual fuel. That's the basic breakdown Okay.

Great. Thank you, gentlemen. So thank you.

Operator

Our next question comes from Derek potash, Barclays.

Hey, good morning, guys. You mentioned every quarter and this year or last year was to set quarterly pumping records. So this clearly supports the production efficiencies that we've seen from the E & P's over the course of the year. Could you expand on the different parts that are driving those pumping records. And if these are structural in nature, should we expect to see these continue going forward?

I mean, look, there's there's there's a limit in that there's 24 hours in a day. We had a fleet. I think we announced this. I'm not sure, but yes, we had a fleet that pumped 672 hours in a month. So for that fleet and that performance, there are not a lot a whole lot more hours remaining on to rise to. But yes, look, these are a combination of supply chain. You've got to bring sand chemicals, everything on location, and you don't hear about it so much, but disruptions in those a baseload, our frac operation, it's one of the reasons Liberty really developed this integrated delivery of stuff that arrives there. It's people, it's equipment. It's our partners, a lot of them. Yes, efficiency, we have we couldn't have with different partners, forming partnerships with Liberty. It's a lot about how can we work together to get better. We'd turn it over to Ron to give a little more color but voice from software is from humans, it's equipment maintenance, but run.

Ron Gusek

Yes. The only other thing I was going to add on there was the development around the software side of things we've done and made a pretty significant investment over the last year or two years on artificial intelligence, our ability to understand our equipment to predict failure in advance of it happening and to be far more proactive about the maintenance of the equipment. And so I think if you look at that in terms of how it translates to performance of the assets out in the field. We have come a long, long ways on that. You'll continue to see some improvement on that on the DG side, I think. But as Chris alluded to, we just don't have a lot of room left to move there. But but as our equipment continues to get more sophisticated, more advanced and we continue to drive uptime between them, major maintenance intervals and an even longer uptime for things like pump components, we continue to eke out those incremental Mint minutes on location.

I'll add I'll add one other thing. So we looked we took over a wireline business three years ago. We changed human there. We changed procedures that took us time. We got into the wireline business and if you looked at the kimberlite surveys every year, kimberlite had done the survey. Liberty is ranked as the top frac companies since they began to survey. We worked at the start the top wireline company. In fact, we may have been more skewed the other way, but down more recently. And today we are the number one ranked wireline company. So one of the things we look at is when we have a Liberty wireline truck with a Liberty frac fleet, you have less downtime. So you know it, of course, and that's the majority of our fleet now those repaired, but not all of them. So there's you know, there's still room for improvement for us. But yes, obviously, the low hanging fruit gets picked first and now it's about continued optimization, but less upside there.

And that's all for my follow-up. So you talked about the accelerated attrition to the equipment from the market over the past years, we get a sense like what's occurred, market equipment mix is I mean, I think this is probably underappreciated by the Street. Would you say those 50 to 60 frac spread their move are all Tier two diesel. It appears the market was high-graded rather quickly over the past year to me, this provides structural support to profitability. I mean, just can you just expand on your thoughts around that? And just how should we think about the overall equipment mix of the market today?

Yes. So I think as we talked about a little bit there. Is this sort of a bulge at the moment you think that 10% attrition every year, right? You know, sort of sort of an annual 10-year life cycle inflation I mean that's a rough number, but it's volume equipment that was built in that sort of in 2013, 2014, nothing much was done. It was built in 2015 2016, some stuff was built 2017, 2018, you're not sort of, but getting back to 2019, nothing was built through COVID. But as you look upon that and you think about the distribution, right? There is a bit of a bulge of equipment in that sort of eight to12 year old age group, and that's all Tier two diesel. But I think what we're going to see is you can see some accelerated sort of a number of fleets leaving the market over time and because of that fact, right?
So I think that's what's happening. And then you say we put a high grading of fleets as we go through the data.

I mean just a quick follow-up to that 50 to 60. How much you think could come back or how much they get sidelined permanently?

We're not sure, but at roughly half, maybe Got it.

Great.
Thank you, sir.

Operator

Thanks again, if you have a question, press star then one. Our next question comes from Marc Bianchi of Cowen.

Thank you. And just first off to clarify, Michael, you mentioned the maintenance CapEx number that was included in the 500 to 550. Just just wanted to clarify that if that's all right?

That is correct.

Great. Thank you. In terms of the flat EBITDA for the year. So you guys mentioned 50 fleets have come off out of the market. It's over 100 rigs that come off. How much of that needs to come back for you to achieve the flat EBITDA that you're talking about?

We're not baking in a meaningful amount of that to come back. I suspect a little we'll have we have our own sort of Liberty frac fleet count across all basins, all players. You know, look, there's going to be a little bit. There's going to be more active frac fleets in Q2 than there was in Q1 and it gets harder when you look out further that Q2 level most likely continues on. But I think that depends what commodity prices did, who is running the fleet, you know what kind of acreage is getting drilled. So we're not baking in a big macro rebound in all. We don't see we don't foresee that. We don't bet on that we're basically saying it's more self improvement. We're making our own business more efficient, more desirable to our partners on it. So yes, we're not we're not baking in a macro the macro to go back, we can make we can make more money in a weaker environment yet each successive year, yes.

Okay. And if we take the first quarter implied, if you're going to be flat, call it to $250 million of EBITDA. You need to be averaging like $321 million per quarter in the remaining three quarters of probably not how you guys see that playing out. It would grow throughout the year, but is the right way to think about it at this point that it's just a have straight line of growth or is it really fourth quarter weighted or any way you can just describe what the shape of that looks like a little more.

In general, you know, sort of like most years, you're going to have a forecast for Q4 comparative to the third quarter that it's always relative, I guess, with the ramp into COVID that didn't happen. But in general, in a flattish in a more sort of like steady environment like we're in now, fourth quarter were generally lower than food doesn't necessarily mean it will be as low on general market activity as this possible whilst continuing to fill that? Yes, there's always that kind of drop off. So yes, that's generally the shape of the U.S. So to speak. And so yes, as we see it, flat sheets going to be growing as we go through the year, you can probably have a little bit of roll off in Q4 unless macro changes, right? I mean, there's a lot of changes, but there's not a we have a potential macro puts and takes as we go through. So there will be a that will become clear as we go through the right.

Okay, super. Thanks so much. I'll turn it back.

Operator

Your next question comes from Waqar Syed with ATB Capital.

Thank you, for taking my question. Chris, I have one for you and one for Mike. Could you talk about OpCo investment? What's the rationale there and what's the size of the investment in that venture. And then, Mike, in terms of moving the crude to Australia, what's the what's the cost involved in a mobilization? And when will those costs fee incurred are reflected in the numbers.

Yes, of what is what is Liberty passionate about. And we have some skills in energy, how to how to develop and take New Energies and commercialize them. Obviously, our focus. And with Turbo, it's barely a move at all from our core business. Focus was definitely more of an outreach opening with a $10 million investment. So it was less than 2% of our CapEx. So smaller investment in that. But we look at what could be changing in the future of energy, what technologies could play a growing role that Liberty could be helpful in of and think of LPI., what's the LTI.'s long term business? It did deliver gas and electricity where it's needed. And today that's in the oil field that's running our frac fleets for the start. And then I'm going to go to other oilfield applications. What we're doing, things on a policy front from it's making electricity more expensive and a little bit less stable grid. If we had LPI. in Europe, we did make a mid just keeping the lights on on it. Having high thermal efficiency, mobile addressable power needs, so that will expand LPI. will ultimately provide the fee providing power solutions in the oil and gas industry outside the oil and gas industry. What else could play a role in that sort of shorter term?
Operate smaller grids. Overflow is small modular reactors. Our the interest in the technology is tremendous. We held an event in Midland, Texas oil and gas companies, Liberty at outflow on interest, absolutely tremendous for everyone that's looking the larger companies, building their own grids, maintain, you know, building grids of what are you going to run those on natural gas, maybe natural gas and nuclear?

So on the camera and the Australia basically is one fleets worth of work for about two months in the later half of this year, late Q3, early Q4, and the cost of sort of mobilizing is basically covered. So yes, it's really not going to change the numbers, particularly if we can be running one extra fleet and one extra free-to-air the profitability for about two months, that's going to be the effect on the income statement.

Thanks.

Thanks Wagar.

Operator

Our next question comes from Keith MacKey with RBC Capital Markets.

Hi, good morning. I just wanted to start out with LPI. And Chris, I know you just mentioned there broader and more longer-term ambitions for that business as the delivery of natural gas and power generation. But if this year plays out, as you expect with you doubling LPI.'s capacity and you get to 90% of your fleets on next-gen technology, what approximately will be the coverage or the how many how many LPI. fleets or how many LPIM. kits, or however you want to call it will service or your Liberty fleets. So just trying to get a sense of the opportunity going forward is it going to be like half of your fleets will be will be served by LPI. or more or less than that?

Ron Gusek

I'll take that one case. So it will probably be about half of the gas usage will be the focus very specifically on the places where you've got 100% downtime, right? So that digitally is the difference you need when you don't get gas, you don't have the oh, you have steady gas. Those fleets on work rides are the number one focus is making sure we support the 100% gas fleets and then moving to our more of our high usage Tier four fleets. So I'd say about 50% of our gas users will probably become a Biopure by the end of the year from PROS.

that's a good number.

Ron Gusek

So as you could see, even with a lot of growth this year with LPI., there's still a lot of Liberty fleets and gas consumption still not covered by that. I mean, that's just within that original application. So you have a lot of room.

Got it. Got it. No, that makes sense. And I'm just going to the did you frac versus did you prime? Can you maybe just discuss a little bit more of the factors that are leading you and customers to choose one versus the other? Is it upfront capital? Is that efficiency? Is it where the where the where the equipment ultimately goes in the field just a little bit more color on your and your thinking would be helpful on that.

Yes, Keith. So for both of those, they offer the advantage of that transition to natural gas so whether we choose to do we choose to use it for power generation and then electric pump or in DigiTimes case directly for running a pump. They both offer customers that important transition where you really start to think about where we might apply one versus the other comes down to whether or not the customer believes they would have access to grid power, for example. So did you frac we have the ability to take power from work from any source. It's agnostic as to where that electricity comes from. Primarily that would be generated on location by us, but we have a number of scenarios where customers have asked about the opportunity to use some amount of grid power or potentially even ultimately all grid power to run a frankly. And so in that case, that's going to be 100% digital frac solution in a scenario where we don't have that environment where the primary driver is just the consumption of natural gas. You're probably going to see DG. prime as the as the as the first choice that we would put out on one of those locations, we get a little bit better thermal efficiency and just modestly lower emissions footprint as a result of removing that conversion from mechanical to electrical and back to mechanical again, you'll see did you frac on top of that or Tier four DGB?
One of those two as the I will call it the peaker plant on top of that to absorb just the ebbs and flows of frac two to ride the line on pressure, whatever the case might be. But did you Brian being a workhorse in that sort of environment?

Okay. Thanks very much. It could be.

Operator

And the next question from Dan Kutz with Morgan Stanley.

Hey, thanks. Good morning. On the maybe, Michael, on just thinking about free cash conversion on for this year since you gave us the CapEx guide and that kind of represents 45% of that adjusted EBITDA guide, you gave us on some figures around cash taxes which I scratch math kind of says, might be 10% of adjusted EBITDA. And then you can have some cash interest and maybe stock comp offsetting each other. So it's working capital, I do think 40% to 50% free cash conversion. Is that in the right ballpark? And then secondarily on, do you have any thoughts on whether working capital might be neutral positive or negative on this year. Thanks.

And I'm giving you some scratch, Matt, you're running that and have those numbers in front of me as a percentage of EBITDA, but working capital I think is going to be basically flat or are we talking revenues based, M&A, working capital kind of moves with revenue?
So working capital is going to be basically flat. We're talking about in cash taxes as we see it in the time, certainly for about a 20% range. As you say, interest and EBITDA are offsetting each other. You got depreciation. And yes, you don't want to get back to you. I don't do the math or not. I don't want to throw it out on the call.

Fair enough. And then maybe, Chris, you'd mentioned earlier on a comment about kind of needing more activity just to offset production declines. I was wondering if you if you've done any work or could unpack that, Mike, do you think that and we're kind of below where we need to be for both oil and gas activity to offset production declines? Do you think publics and privates are kind of below where where they would need to be from an activity perspective to hold production flat or maybe grow a little bit. I'm just wondering if you could unpack that comment about activity as it relates to the production?

Yes, I wish I had a more confident comment because we do do some bottom-up analysis of productivity and where we're going. But But honestly, we were also probably a bit surprised by the rate of growth last year, given that activity. And I think the most likely reason is a larger percent of that activity, what's from the sizable publics that have the best acreage so that the quality of locations drilled, which is generally trending downward, people drill their best stuff first and move out. But as you saw a shrinkage of private activity last year and a growth actually among the activity among the publics that have the very best drilling locations that that probably was the biggest factor a bit in the surprise for how fast oil and gas production grew, but we've got to go through our data. So I don't have any great competent proclamations there, my guess is current. Certainly on a granular level, we're working for players that are at activity levels now that are definitely declining production. Others that are modest growth in others that are flat. But my but my bet is where we are today in total activity, you won't see that until summer production data, we're probably at best flat in some of oil and gas production. So yes, I don't think activity drops much from where it is here. It's more likely to move up a little bit as the year goes on to stay around modest growth, which I think is the target. And now that's all. That's all super helpful. Appreciate the color, and I'll turn it back.

Thanks, Christian.

Operator

Our next question from Sara Park, Bank of America.

Hi, good morning, teams. I had a question. I think, Derek, as I said, early on on efficiency, if I want to take that forward and just sort of big picture, we always talk about the ratio between rig count and frac fleets. Any thoughts on how much room there is to keep improving efficiencies? And if that can have a potentially meaningful impact in terms of where that ratio goes. And the reason I ask that for context is one big E&C.
I had an event in the Midlands, I think last week and they were talking along those lines. So curious to get your thoughts on that.

Yes, we saw that noted there's going to be a whole new ratio now euro. And so look, I think it's important that you step back and put those in context when you're doing simul-frac or tribal frac, that's not one frac fleet. It's pumping, right? That says that a triangle Frank might be three frac fleets. It might be 2.4 frac fleets or something, but that's for a horsepower for equipment to go do you have more equipment on location when you go to those larger operations?
So in frac fleet size that are doing things like that, we don't view that as one frac fleet. If we're doing something like that, that's more capital equipment and we look at returns not on fleets, but on capital invest. So there are efficiencies in which you've got a perfect supply chain, large pads and you're willing to put capital out a long time. There is activity like that going on, but it's in that rose up. I don't think you're going to see wild change in the deployment of that going forward. It will continue to grow, but it's not going to it's not going to massively move the rigs or frac count ratio on part of it just rate of efficiency improvement. Both rigs and frac spreads have had great rates of efficiency improvement. Some other factors you don't hear talked about. So much is frac intensity is used to move depending on fair price. Fair prices are high frac intensity or pull back a little bit share. Prices are low frac intensity. You'll grow but there's another factor which is reservoir and rock quality as we're gradually drilling lower rock quality. What's the offset to that? Do you want to accept these production declines?
Nobody does so what happens is frac intensity grows to offset. So in the next few years, you'll see a growth in frac intensity that is trying to offset the balance of slightly lower drilling locations that are being drilled. I'll give one example. We have a great private customer in the Haynesville used to work for one of the big players in the Haynesville drilling the core acreage. And here they are, you know, four or five years later today, their IPs and the EURs of the wells they're drilling today are almost the same as they are pretty much the same as the core locations they were drilling five years ago at a different operator. But what they do, you know, the pounds per foot of sand, the pumping rate in the clusters. They basically increased frac intensity in this case by factor of three, but that increase in frac intensity offset the degradation of reservoir quality. This is a faster degradation because it's somebody who own the core acreage to someone acquiring not core acreage, but the biggest offset to acreage degradation is frac intensity. So I guess I'm not I'm not worried, but also we're going to go to five to one frac fleets to react that that's not happening.

No, no, that's fantastic color, Chris, really appreciate that. And then one quick follow up. I think you made a comment to somebody's question. I think you were talking about the Bakken specifically. I think you said you expect the Bakken to pick back up in the second quarter. Any more color on that because that typically we think of Boston legal for some of these are relatively older basins as the growth, no growth, whatever you want to call it a little bit more color on the back end because you have a unique position with.

Yes, just a little more specific around it is the bottom generally there's a number of operators that slow down in Q. one or you don't do business in specific operators of doing that in Q1, but that's going to change again. I think they were very busy basins from Q3 slowed down a bit in Q4 and then kind of a kind of win offer some winter weather breaks in Q1 and is coming back in Q2 as it's good, it kind of also a little bit of the opposite seasonality you did in Canada.

So yes. Okay.

Okay. But motorcycling and seasonality more than anything else?
Yes, bucket is really one of the bases and has a little bit more of a seasonal character to it than the Permian or Haynesville or any other basins would be right, right, right.

Got it. Okay. Thank you. Thanks for the thanks for the answers. I'll turn it back. Thanks.

Operator

Thank you. And our last question today comes from Tom Curran with fourth Research Partners.

Morning, guys. Thanks for squeezing me in. We've already covered the states you've taken in furlough and offload, and you've shared some helpful context around each of those so I guess we should now cover that the $5 million investment you've made in the trona and would love to hear a similar framing for that, Chris and Ron and then know between the three There clearly is this growing portfolio of minority equity stakes in early stage on clean energy tech companies that Liberty is building. Chris, you've already touched on how you think of Liberty as it as an energy solutions company, not just oil and gas one, but there would seem to be a clear broader strategy here, not just you know, opportunistic one-offs. So could any of these positions expand into something beyond just a financial asset such as a new technology offering or some sort of JV or alliance for Liberty?

Certainly possible certainly possible what we what we look at as we get pitched everything. But if there are things that really look like they have a reasonable chance of great success and there are some synergy. We can either help them on the road to success or Turbo. It's obvious, it's services and engineering we're doing they're different ones are they drawn is a huge amount of investment in lithium-ion batteries, right? Because they have the highest energy density, but they have a they have some fundamental problems and the worse for us, we use batteries think of both DG. frac and Digi prime employed batteries in the field as temporary storage powered mechanisms on the prime is a hybrid thing. So it's moving energy back and forth between batteries are storing it and giving power out.
Sorry, I'm mumbling brigade. What's neat about Neutron was the it's a sodium ion, which I think you're going to see a lot more of that going forward. It's just an eye on that fits well in the matrix. You can discharge faster, it can recharge faster, it can live longer. It does not have the fire hazard. It has lower power density. So why if you're sending someone to the moon, you have a lower power density significantly, not everything, but a wins on the things that matter for us that discharge easy to charge low fire risk like that. That's a that's a technology that done well. It's going to play a role and probably going to play a role in the Liberty world. I know Brian wants to add anything to it.

But I think that and Chris covered it well, you're certainly not alone in your excitement and optimism about that. The technical advantages of sodium ion, among the, you know, LIB alternative battery chemistry often out there so far, I understand where you're coming from there and then just with LPI. when it comes to the visible demand, underpinning your plans to double capacity by year end, or are you already starting to see non-oil and gas interest emerge from third parties for LPL.

We've had dialogues about that while a ways away from ready to deploy and do that. And you know, we're going to we're not going to do it just to do it right. It's got to be we've got to find the against the opportunities that are compelling economically and that fit our skill set and expertise we're still building that skill set and expertise as we're building those for power plants. But we have we engaged in dialogues with other parties. Absolutely is their interest in having more power on grids or for industrial facilities.

Absolutely. Great. Thanks for taking my questions, guys. I'll turn it back again and thanks so much.

Operator

Thank you. This concludes our question and answer session. I'll turn it back, Chris for closing remarks.

On February fifth, Liberty will release our 2024 bettering human lives report. It is significantly expanded from previous versions with more case studies and more topics covered all in the same centered around data style writing. This report took up a lot of my holiday vacation, but increasing energy literacy literacy or energy sobriety is critical to our future.
Let me give you a taste of just one section called Energy addition. This section looked carefully at trends in energy production over the last 12 years are we in the midst of an energy transition that we hear so much about the data says that the answer is no. This is not an opinion for our preference and I've worked in other areas of energy and began my career in nuclear and solar, which is simply an honest reading of the data in 2010, the world consumed a little more than 500 extra joules of energy, 12 years later in 2022, the world consumed a little less than 600 extra joules of energy. Great progress was made in growing the energy resources available to expand opportunities and better the lives of the world's 8 billion people.
What energy sources provided this additional energy beyond the 500 exit fuels that we consumed in 2010. The waterway fastest-growing energy source in the world over the last 12 years is natural gas, which supplied roughly 40% of the additional energy over that time period, fully half of the additional natural gas supply came from the American shale revolution. What was the second fastest growing source of energy during these 12 years?
Oil provided 24% of the growth in global energy with the large majority of that coming from the American shale revolution. The third fastest growing energy source was coal, which supplied 14% of additional energy to empower our planet. Wind came in fourth at 9%, solar at 7% and hydro at 4% of the growth in global energy supply these numbers are not percentages of total energy supply. Today, they are only percent of the growth in energy supply new energy over the last 12 years, oil and gas supplied 63% of the growth in energy, which represented increasing market share of global energy. Over that 12 year period. Hydrocarbons as a whole had flat market share. It caused market share slightly shrunk. How can we call this a transition where global demand for natural gas, oil and coal continues to grow without even a dimunition of market share. Don't get me wrong I'm not celebrating this fact. I am just calling out others for pretending. It isn't. So I am very keen to see the world far better energized so that the 7 billion people living far left energized lies can enjoy the lifestyles of the lucky 1 billion. To achieve that goal. It would be very helpful if neutral or Woodside zero growth over the last 12 year period. Geothermal and any other affordable, reliable energy source could contribute much, much more to satisfying the world's demand for more energy. We need more energy, better energy, if you want to read more about the global energy system, climate change, poverty and prosperity. Look for the release of Liberty's bettering human lives, 2022 for report on February fifth, thanks for joining us today.

Operator

The conference has concluded. Thank you for attending today's presentation.