An uptick in North American oil and natural gas activity, brought about because of the tight global commodity markets, has “bolstered demand” for Liberty Oilfield Services Inc.’s completions services and set it up for a strong 2022, CEO Chris Wright said Wednesday.
With heightened demand to drill, more customers today also are looking for “modern, environmentally friendly” well completion solutions, Wright said during the third quarter conference call. The Denver-based company was an early mover into deploying equipment with a lower carbon footprint, including electric fracturing fleets.
“The shift toward next-generation equipment, leading-edge engineering solutions and the digitalization of the oilfield is defining the next phase of the cycle,” the CEO said. Liberty “is in a highly advantaged position…”
With some multi-year contracts in hand, the company is set to deploy more electric fracturing fleets in North America next year. The company stands ready after expanding last year with the takeover of Schlumberger Ltd.’s OneStim business, which provides fracturing services across the United States and Canada.
Liberty on Wednesday disclosed it also has added more proppant services to the company. It agreed to pay $90 million for cross-town operator Proppant Express Investments LLC (PropX). PropX provides last-mile proppant delivery solutions, such as sand, to producers across North America.
The integration of OneStim and “the opportunistic acquisition of PropX” complements additional investments in the electric fleet, Wright said.
“Our entire team is focused on improving every aspect of our business to maintain and grow our competitive edge in this upcycle. Importantly, we believe the strong momentum will continue, with incremental service price increases that likely manifest more noticeably entering 2022. We are at the early innings of the cycle. We believe our relentless focus on providing the best service to our customers sets up for a stronger 2022.”
Where Are The Supply Chain Issues?
While Liberty benefited from service price increases in 3Q2021, it was “not immune to the serious supply chain issues the world faces today as faster cost increases more than offset higher prices during the period,” the CEO said. “Increased transportation costs and driver shortages, maintenance personnel and supply chain constraints and integration costs hurt margins in the period.
“For instance, we estimate that rapidly increasing logistics costs that were not passed through to customers in the quarter were approximately $12 million, and maintenance costs were $8 million higher than normal due to integration and Covid-related disruptions. While we expect the supply chain, logistics and integration challenges to continue into the fourth quarter, we are actively working to moderate their effect on margins.”
Liberty reported a net loss in 3Q2021 of $39 million (minus 22 cents/share), versus a year-ago loss of nearly $49 million (minus 41 cents). Revenue increased to $654 million from $147 million in 3Q2021.
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