How Liberty Energy Plans to Power AI Data Centers and Dominate U.S. Energy with Gas + Nuclear

Great to be here, Stu. Appreciate you having me on.

Yeah, just over at Intercom. You know, of course, always exciting to have an event in Denver. More often than not, we're traveling elsewhere to do those things, but still have a great energy presence in Denver, and so love to have a home event here. It was, I think, huge turnout for them. So great to see everybody there and share a bit of the Liberty story.

That is great that you mentioned that. Of course, the bettering human lives story has been an important one for us now since 2021, I guess, was when we first launched that initiative. And we carry on that legacy today. We'll continue to publish that book that supports all of that work. And I'm excited to continue to carry on that message. And even more excited that we now have Chris in the Secretary of Energy's role and being able to share that message from a much much bigger pulpit.

Yes. I think great things are happening up there and fantastic to watch from afar and look forward to seeing what the next couple of years holds with them together.

Well, thanks. That is a great story and I really appreciate hearing that. You know, certainly if you know the Liberty history, the whole foundation of the company was around creating that culture where we would attract and retain great individuals and have those individuals all feel like they were contributing to a very important mission together and we were all aligned in that. And so it's awesome to hear that you see that out in the field firsthand. That's pretty cool.

Yeah, lots of exciting stuff. Of course, we're now 14 going on 15 years old, I guess. We've been through a couple of pretty good downturns in a bit of a soft patch again right now. But, you know, I think one of the great things about where we find Liberty today is we've worked awfully hard to figure out a way to make the company more resilient through these ups and downs. And if you think back 15, 16, we had the opportunity to acquire Sanel, the COVID downturn, we completed the Schlumberger transaction. Those things along with a number of other things have built for us a more resilient company. We've got some vertical integration, a little more breadth in our business with wireline services and things like that. And that ultimately means that each time we go through one of these more challenging stretches, the company's just a bit more resilient and better prepared to weather it. And so even today when pricing is not ideally where it would be, there's a bit more white space on the calendar. Our financial position is really quite strong. And so that's a testament to the hard work of everybody at Liberty and the work the team's done to put the company in a different spot from an oil field services standpoint. We're embarking on some other exciting chapters too. Of course, we're never a company that wants to stand still. We've done a huge amount of work on the technology side on the frack side of our business. Taking some of the learnings from that specifically around power generation for electric fleets and leveraging that expertise, that supply chain, that capability to start a power generation business for non-oil services applications. Primarily, it's going to be data centers and things like that. Of course, you read about that in the news today, all the gigawatts of incremental power we are going to need and we see ourselves as naturally positioned to play a role in that. So, that's going to be a big new chapter for us. This is exciting because the great Department of Energy speaking of Chris Wright as we were talking just they put out a really eye-opening report just a little while ago where we've got 22 gigawatts of nuclear and natural gas power coming online but we need 200 gigawatts. So there's a delta. And you know, I'm sitting here, I went to Oklahoma State and so I'm actually in Texas but the math was not mathing up. I'm like, we need a lot more power.

You absolutely did. So we launched Liberty Power Innovations a few years ago. The first part of that just to support ourselves of course as you transition to primarily natural gas fueled frack fleet and in some cases electric pumps, the power generation and the fuel to supply those are critical inputs and we viewed those as so important that we felt we should control them. So we've spent a few years now, four or five years really building up that expertise. And now you take that and you extend it beyond our core world of oil field services and apply that to data centers, commercial and industrial opportunities, remote mining as we think about reshoring critical minerals mining. All of those things are opportunities that require massive amounts of power. And we have a I would argue maybe a different approach to building the grid up than has historically been the case. We've traditionally thought about big large power plants and using wires to get electrons where they're needed and now to your point we have this idea of behind the meter maybe more modular more nimble approach. The construction time frames are not as long. And so rather than 3 or 4 years to see a power plant get built and come online, 12 to 18 months and we can have a data center up and running with a few hundred megawatts of power to supply it and ultimately when the grid gets there provide not only support for the data center but also some additional support to the grid. So it's a pretty exciting story that the oil and gas industry I think is going to play a big role in.

Yeah, I think that's absolutely right. And I think now you're seeing some of those big companies recognize that even the commercial proposition in terms of their long-term cost of energy looks pretty attractive if you control the power supply yourselves. Of course, when you're on the grid, you're subject to whatever decisions get made there, whether or not they make your life better or not. Everybody shares the cost of a big transmission line being built or whatever additional infrastructure is coming online. When you make a decision to put power behind the meter, once that power plant is built, really your only variable is the cost of fuel. And certainly there are opportunities to lock that in as well. And so I think if you think about the idea from the prospect or from the position of the data center holder, you really have an opportunity to ensure you know your power price for the next 5, 10, maybe even 15 or 20 years. That looks pretty compelling, I think, versus, I'd argue power prices on the grid certainly climbing faster than the rate of inflation today. And so I see it as a real growing opportunity and something that's going to be a big piece of power generation in the United States going forward.

Well, there's a pretty big range there. I'm learning quickly, too, how just how big this data center market is and how variable it is. You have opportunities that are small, very modular data centers where somebody has packaged maybe a half a megawatt or a megawatt of compute power in effectively a container and they can bring those wherever you need them and maybe layer up three or four or five of those. And so in that case you have a very small application 5 or 10 megawatts or something like that. And then at the opposite end of that scale, of course, what you often read about in the news in these gigawatt scale many thousand acre campuses and then you have everything in between. And so our customers, the people we're having conversations with range from those very small more modular applications to much larger permanent installations of large data center campuses. And of course all over the place, Texas is a hot spot for these conversations. The Northeast also a popular target. I think the end users are recognizing we don't need to go where the power is, we need to go where the natural gas is. And with access to natural gas comes access to electricity. And so of course those two areas attracting a lot of attention. But gosh, Utah, Nevada, North and South Dakota, I mean all over the place there are interesting conversations going on around getting data centers built. So it's exciting.

Yeah, I could get you connected with Jake for sure.

Yeah. Yeah, it really is an exciting looking future. So I, you know, I don't, of course, you don't know what 2035 looks like, but I would love to be saying at that point in time that Liberty operates a nuclear reactor. I just think that'd be the coolest thing in the world.

Yeah. We're not going to build one, of course. That's for people way smarter than me to navigate, but I think it'd be pretty awesome to have that in our power generation portfolio.

Yeah, these are very solvable problems. We should not have expensive electricity in the United States. And it really is unfortunate. We have states now where people are being put in a position where their energy bill is that high. You know, California is the perfect example. I think highest adjusted poverty rate in the United States in a state that's blessed with abundant resources.

So, we are LBRT and that's the ticker you'll find us under. And yeah, I you know, of course, I try not to look at the stock price too regularly, but it reflects the current environment we are in in oil field services, which is a bit of a challenged one.

Well, tale of two different stories really there. We've got the oil field services side and of course with WTI where it is and even natural gas pretty soft right now, we're back under $3. You know, that has the back half of the year with a little more white space on the calendar. And that's okay. When you have a supply demand imbalance, the quickest way to fix low oil prices is low oil prices. That reins in activity. We see the supply demand imbalance get corrected and then we get prices back to where they need to be and activities start to climb again. So, we'll live through a little bit of a correction here while those things sort themselves out. But, you know, I think we're very well positioned to weather through that. Of course, we always keep the company very lightly levered and so a bit of a downturn generally for us represents opportunity. We're going to go looking for things to make the company even stronger headed out the other side of this. And then the other piece of the puzzle is power. We've ordered our first 400 megawatts of power generation. The team's working hard at making sure we've got great homes for that and excited about what that's going to look like over the coming quarters and years.

Yeah, I think you've described it exactly right. Of course, oil field services highly cyclical. We live through big peaks and deep valleys in some cases, but if you set your business up well, you can navigate those things. The power generation business absolutely looks a little different. The contracts are longer in duration. The cash flow is far more stable. The returns are probably a little lower. You know, of course, we aim for a three-year cash on cash payback on an asset in oil field services in frack just given the volatility of the market there. You know, in power generation, that probably stretches out to fiveish years or something like that. So, a slightly lower return, but far more stability to it. And you think about the synergies that those two things bring together. Yeah, I think that's going to put the business on an even stronger platform than it is today and really sets us up for I think a really tremendous future.

I appreciate that, Stu. Thanks so much.

All right, sounds good. Thanks so much. Take care.