Denver-based Liberty Oilfield Services Inc. is reporting a “slowly improving market” in the Lower 48 for pressure pumping services, with customer conversations becoming more constructive, CEO Chris Wright said Wednesday.

Speaking during the 1Q2021 conference call, Wright noted that the oilfield services (OFS) operator has doubled the size of its platform since the start of the year. It is now a “fully integrated completions services, engineering and diagnostics company,” and one of the leading OFS operators in the Lower 48. The growth followed the takeover of Schlumberger Ltd.’s OneStim hydraulic fracturing business, which services the Lower 48.

“The Liberty OneStim combination has been extraordinary.” Wright said. “We’ve doubled the size of our business” and “brought together a suite of leading-edge technologies and two of the top technological teams in the industry.”

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Liberty today has slightly more than 15% of the employed fracturing fleets in the market, which “are likely completing a little under 20% of North American shale wells,” he said. “After a rapid rebound of the Covid bottom, we are now in a slowly improving market. Liberty’s number of deployed fleets in the first quarter was in the low 30s, and we will be similar in the second quarter.”

‘Responsive’ Private E&Ps

In the past three quarters, North American completions/fracture activity has tilted toward supporting maintenance output by the exploration and production (E&P) customers. 

“Hence, public E&Ps have now reached roughly maintenance run-rate fracture activity for 2021. Private E&P companies, on the other hand, are more responsive to current oil and gas prices, which continue to support modestly increasing demand for fracture services, in line with their recent rise in rig activity.”

As important, E&Ps “are maintaining capital discipline and moderating long-term growth, aiming to increase commodity price stability and enhance sector attractiveness. This fundamental change in philosophy should impact positively the entire value chain, leading to a disciplined phase in North American energy development.”

As E&P economics have substantially improved with West Texas Intermediate oil prices stabilizing in the $60/bbl range, customers “are becoming more comfortable with the necessity to incorporate a phased approach to price increases,” Wright said.

Fracture industry underinvestment “has accelerated attrition of older equipment. Importantly, the market for next generation equipment has tightened, and the market for next generation equipment with industry-leading operations and technology innovation is even tighter.”

The Liberty chief said the “economic realities of the last 12 months have led E&P companies to demand higher performing fracture partners” with expertise, operational efficiency, technology, and environmental, social and governance leadership, Wright said.

Improving Pricing Dynamics

“The demand pull for next generation equipment with engineering and diagnostics is strong. Pricing dynamics are improving, technology-driven efficiency gains in automation and design are rising, and underinvestment in equipment and technology has led to a more concentrated market of service companies that can accommodate the sophisticated needs of our E&P partners.”

There’s no doubt that overall market conditions “remain challenged,” he said. Still, the outlook is improving “as the major practice services grow and more importantly, supply quality fleet shrinks…”

Activity is building off last year’s historic lows. “The industry is healing,” Wright said. “Looking forward, we see a pathway to normalize margins for Liberty at some point in 2022.”

Net losses totaled $34.2 million (minus 21 cents/share) in 1Q2021, versus year-ago profits of $1.7 million (2 cents). Revenue increased 114% sequentially to $552 million and was up from $472 million in 1Q2020.