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?

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.