Liberty Oilfield Services LLC gained a suite of completion services, customers and employees when it snapped up a proppant operator and Schlumberger Ltd.’s North American business, but integrating the moving parts has proven to be a challenge.

Liberty

The operator’s focus for a big chunk of last year was integrating OneStim and its customers into Liberty, CEO Chris Wright said during the fourth quarter conference call. In early 2021 Liberty completed the takeover of Schlumberger’s Lower 48 and Canadian fracturing (fracking) unit. Last fall Liberty added more services with the takeover of Proppant Express Investments LLC (PropX), which provides last-mile delivery solutions, including sand, to producers across North America. 

Making deals as Covid-related problems were plaguing the oilfield may seem counterintuitive, but Wright said the business is focused on the future, not necessarily what was happening on the ground at the time.

The transactions were done “to strengthen our platform and technology portfolio during a downturn to position us for today’s rising tide and all future cycles.” The combination added to the workforce, expanded the customer base and increased services. The merger came, though, at a high cost as Covid-related issues caused supply chain and labor challenges.

“However, the prize was large, and our team worked in overdrive” to bring aboard almost 2,000 new employees, Wright said. “We were simply not willing to sacrifice customer service, employee satisfaction and safety, each of which is critical to long-term financial success, even though there was a financial cost to our 2021 financial results. 

“Integration-related costs are still with us today, impacting our bottom-line results. However, January was a significant turning point in moving these cost pressures behind us.”

Is An Oil And Gas Upcycle Underway?

The energy industry is beginning a multi-year upcycle, Wright said, “driven by rapidly tightening markets for oil and gas.” That’s not easy either, as “seven years of subdued global investment in upstream oil and gas production is now colliding with record global demand for natural gas and natural gas liquids today, and likely, record global demand for oil later this year.”

Central to the global economy’s recovery is oil and gas, he told investors. “The severe energy crisis that has wracked Europe over the last several months demonstrates the danger of underinvestment in our industry.”

Today, the exploration and production (E&P) sector is responding to the price signals, but the response is not even across the board. The public E&Ps are keeping their power dry, and likely “will show only modest production growth this year.” Meanwhile, the “private operators are reacting more robustly to strong commodity prices.”

Meanwhile, the fracking market is undergoing other kinds of stresses that are not easily solved. Wright pointed to “supply attrition and cannibalization, plus constraints from labor shortages, and a secular shift toward next-generation frack fleet technologies.” 

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With that in mind, Liberty is remaining “very disciplined in holding our active frack fleet count steady until returns are strong,” Wright said. 

“In the first quarter, we expect high single-digit sequential revenue growth and strong improvement in our margins as integration costs start to fade away. We are benefiting from increased pricing in 2022, driven by a pass-through of inflationary costs and higher net service pricing. 

“We expect continued modest rises in frack pricing in subsequent quarters. We also expect margin growth as our new strategic efforts begin to pay dividends in lowering our cost of operations and increasing efficiency.”

The plan is to invest “to build truly differential competitive advantages in frack fleet technology, digital systems and logistics optimization, which have been bolstered by the PropX acquisition. We expect that our investments today will lead to strong returns in the coming years.”

In part because of integration costs, net losses in 4Q2021 were $55,589 (minus 31 cents/share), versus year-ago losses of $37,030 (minus 41 cents). Net losses for 2021 totaled $179,244 (minus $1.03/share) from 2020 losses of $115,583 (minus $1.36).

Revenue in 4Q2021 climbed to $683,735 from year-ago revenue of $257,586. For 2021, revenue jumped from 2020 to $2.47 million from $966,000.