Energy Security and Energy Dominance Matter Ron Gusek, CEO, Liberty Energy stops by

I'm doing very well, thanks Steu. How are you doing today? I'll tell you what, I had a lot of fun getting ready for this podcast because the earnings released. You announced a 1 gigawatt power development agreement with Vantage Data Centers anchored by a 400 megawatt firm reservation for 2027 delivery. This is huge.

It is a big deal for us. Of course, energy demand is continuing to grow and particularly on the electricity side now as we see data centers really looking to accelerate deployment. We're seeing AI play a bigger and bigger role. Of course, we've had a lot of challenges in the US building infrastructure that includes both pipelines but also large transmission lines. As a result, we've had a relatively stagnant grid for a number of years and this massive growth in power demand we're challenged to meet with just supply off the grid today. That's meant for us a real opportunity to take the power generation expertise we've built in the oil and gas side of the business and leverage that to help support the growth of data centers onshore North America through deployment of collocated behind-the-meter power to help provide them the electrons that they're going to need.

Yeah. Of course, we love our oil field services business. And with all that's going on in the world today, looks like we're going to have some tailwinds onshore North America for that particular side of our world. But yes, on the power side, the world looks a little bit different. Rather than the maybe year-to-year volatility that we experience in oil and gas, setting up a power plant and ultimately delivering power to a hyperscaler is a very, very stable cash flow stream. You might be looking at an energy services agreement that is 15 years in length and that payment for that energy stream comes month after month, year after year, consistently for 15 years. And so I do expect that it will provide a very stable foundation of cash flow for the company. A lot of synergies between the two businesses that we'll continue to leverage. But together I think we're going to have just a fantastic business with the two combined sides, both oil field services and power generation.

You know, look, I think if we all want this to end quickly there could be some real global challenges as a result of this. But if there is one thing that it truly does demonstrate, it is the importance of having access to abundant, affordable, reliable energy day in and day out. And we're very blessed in most of the United States to be in that position to have a situation where over the last couple of decades, we have gone from the largest importer of oil to now one of the largest exporters of oil in the world. We're in a tremendous position of being effectively independent. California is in a bit more of a challenged position by virtue of some of the policy decisions they have made. Of course, they sit on a huge oil resource there, but policy in the state has generally discouraged continued development of that. They've continued to move away from that despite the fact that the economy still relies immensely on oil and gas to move it forward. And so to your point, yes, they import some amount of the hydrocarbons that they consume. And of course, some of that comes from places that are a little more stable, but some amount of that comes from the Middle East. And them, like others who rely on that supply chain, are about to find out that conveyor belt is about to show up empty. You know, we've had this 30 or 40-day buffer of oil on water that has at least to this point in time dampened the impact of the shutdown. But that conveyor belt now has been empty long enough that that interruption is about to show up in real time. California fortunately is still a part of the United States and we have that abundant energy supply here. But there are other places in the world that are in a little more challenged position. If you take a look at New Zealand or Australia, of course both produce some amount of natural gas. Neither of them produces any meaningful amount of liquids and they rely on a supply of that from refineries in Asia. New Zealand's got a countdown clock. You can look it up online. They count down the amount of diesel fuel, the amount of gasoline, the amount of jet fuel that they have on the island at this point in time. It's down to less than two weeks of supply in the case of diesel fuel. And of course, those refineries in Asia that relied on Middle East crude as their feedstock to generate those refined products are getting to a place now where they don't have inputs, meaning no outputs. No outputs means countries like New Zealand, a very, very wealthy country, could find themselves in a spot where people can't get in a car and drive anymore, where jets can't take off. That's a tough situation to be in. Really a terrible situation to be in. California somewhat insulated from that of course just given proximity to the wonderful resource we have in the US. But there are others globally who are going to be in a real challenge because of the situation we see ourselves in.

No question. Of course, Chris for his entire career has been one of those folks who's talked loudly and proudly about energy security and the importance that access to energy plays globally. We're mostly insulated from that in the US, but of course there are a lot of places around the world that just are not energy independent. You mentioned Japan. They rely heavily on imported forms of energy to help supply the needs of the country. They've been investing heavily in resources here in the United States. You've seen investment dollars from Japan flow into the Haynesville as an example with the goal of securing that molecule of LNG right from the wellhead through liquefaction onto a boat and over to Japan. The energy security conversation is going to be one that is front and center now. And to your point, countries are looking for means to ensure that security whatever it might look like going forward. And in some cases, that's going to mean going back to a resource like coal. The wonderful thing about coal is you can stockpile that easily. You can put a giant pile of that outside on the ground. You could put a year or two's worth of coal out there and have that available to ride through challenging situations like this. Of course, on the oil side, the strategic petroleum reserves around the world certainly help with that and they're being drawn on to help mitigate some of the challenges that are present given the 20% of global supply that is effectively offline right now. LNG, that's a little bit tougher. Storing meaningful quantities of gas requires the right geological infrastructure. And so there are places that have that capability, but that's a little less present around the world today. That LNG supply chain tightens up very rapidly as we saw both with the Russian interruption to Europe and now ultimately with the interruption of gas out of Qatar particularly to the rest of the globe. So, I suspect that has leaders around the world starting to think about what their energy stack is going to look like and certainly where those barrels of oil and MCFs of gas are going to come from. I would like to think that the North American barrel gets a little more valuable going forward.

It certainly is. You know, of course, it's great to produce crude oil or natural gas, but ultimately it's the products that are derived from those that are incredibly valuable both here and around the world, the power industry. Those things are irreplaceable. You know, there are some things of course that can be electrified and you have other means of achieving that energy, but there's an incredible amount of our world relies solely on oil and natural gas and the particular capabilities that they bring to the table. So, great to see that happening. We haven't built a refinery in the US in a long, long time. So nice to see that project get funded.

It's going very, very well. We've been at it now just a little more than two years, working hard to transition families in sub-Saharan Africa from cooking over a fire fueled by wood, dung, sticks, crop waste, whatever they can find to a clean burning LPG stove. We're doing that through providing micro-financing, low-interest loans to entrepreneurs on the ground in countries like Kenya and Ghana and we're finding great traction there. We've been doing a lot of work to help innovate around the technology that's available to enable that. So low-cost cook stoves and access to far more cylinders of propane. But we've made tremendous inroads thus far and excited about the years ahead. We have a goal to transition a million homes in a thousand schools by 2030 to a clean burning cook stove and excited about the effort there. In fact, I'm down in Houston this week. I was at a small event we had in association with CERAWeek. We brought together 120 great folks to celebrate the Bettering Human Lives Foundation and the work going on there, talk about the opportunities ahead. And certainly with all that's going on around the world today, that conversation around access to energy couldn't have been more timely.

That's an important question and I think you said it exactly right. You look, access to energy makes a huge, huge difference in people's lives. For those people in sub-Saharan Africa it probably frees up five or six hours of their day that they would have spent gathering fuel for a fire to instead allow them to take on a job or do something that adds to their economic well-being over time. So it really is a life-changer. I think unfortunately a lot of people who have access to energy today take that for granted. They don't think about it at all when they flip a light switch or turn on their gas stove or have their furnace or air conditioning come on. But we have to do a better job from an education standpoint. That starts in school. We have to have an honest conversation around what the energy stack looks like, around what it is that makes your life possible on a daily basis. And then to talk honestly about what that's going to look like going forward. And quite frankly, you know, in a lot of cases, there's just not replacements for oil and natural gas today. We're layering on additional technologies that are helping to meet the ever-growing global demand for energy. Some of that in the form of electricity, but not all of it, of course. And so we need, to your point, all of the above. Oil and natural gas being a critical part of that energy supply stack for years and years and years to come. But we have to have people understand that. And that means it's got to be part of the education system. It's got to be part of the day-to-day conversation. If we do that, then people will have pragmatic conversations around energy, the development of it. And I think we'll see recognition that North America should be playing a critical role in ensuring that many of our friends and allies around the world have access to the energy that they need.

I mean AI, excuse me. Yeah, it's playing a huge role in our world. It's deployed across a number of parts of our business already today. We started with logistics as an example. We move about a million truckloads of sand on an annual basis. It is an AI platform that oversees that operation. Now, we saw through deployment of AI probably a 35% reduction in the number of trucks we needed to supply that sand just given the efficiencies that came out of having AI take over much of that, overseen by people of course still but the fact that AI can look at that large logistics problem in a far more holistic way than we can as humans moves the needle immensely. We run an immense amount of equipment out in the field, a huge amount of mechanical equipment. We stream about two billion data points a day into our tech center in Denver, Colorado. We have an AI model overseeing all of that data, looking for minor deviations in operating performance in a piece of equipment. When it finds that, it's able to send a note to the operations team to say, 'This is what I think is about to happen. If you take care of this maintenance issue now we get to deal with a small maintenance issue instead of a much larger catastrophic issue.' And we've seen the cost of maintenance come down significantly as a result. We've seen the lifespan of large components, think engines, transmissions, and power ends for our pumps, climb by as much as 75 to 100% in just the last 12 months. So AI is really moving the needle there. We're rapidly moving to a place where it will actually execute a frac job on location. Our platform there will actually, given the targets for completions downhole, make the best decision about how to run the equipment on surface to achieve that desired outcome. And it's a learning model. It's an agentic AI model. So every time it makes a decision, it looks back at that decision and decides if it was the best decision it could have made or if it would make a different one next time to achieve a better outcome. That's just a few examples of how it's showing up in our world, but given the change it's made at Liberty, I'm a firm believer in the role it's going to play and the difference it's going to make for not only our industry, but for many other industries out there.

Absolutely. Those things are all true. I would look forward to sharing a podcast with you. That sounds like it'd be quite a fascinating conversation.

Oh gosh, lots of great things going on, but I'd say the big focus this year, of course, is the growth of the power business. You can't open a newspaper without reading about AI, about data centers, and really about the need for power. And so we have a great oil field services business. Glad to have that platform stable and now with maybe a bit of a tailwind behind it, but this power generation new and growing. And so we have an immense focus inside the organization on seeing that accelerate through this year and into the coming years. But certainly if somebody wants to reach out, happy to hear from you. You can always find me on LinkedIn. I have an active profile there. I'm on there quite a bit. Don't hesitate to connect and shoot me a message and would look forward to engaging in conversation.

Thanks very much. Do appreciate it and certainly appreciate all the great work you do spreading the energy message. Thanks. Thanks a lot.

All right.