What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-10-21 compared with 2022-07-27 · 303 added, 253 removed, 674 unchanged (45% of the section changed)

3 unchanged sentences

(Dollars in thousands, except share data)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Current assets:

2 unchanged sentences

480,714 298,531

Accounts receivable—related party 10,307 —

Unbilled revenue (including amounts from related parties of $ 26,119 and $ 0 , respectively)

31 unchanged sentences

Common Stock:

Class A, $ 0.01 par value, 400,000,000 shares authorized and 186,859,269 issued and outstanding as of June 30, 2022 and 183,385,111 issued and outstanding as of December 31, 2021

Class B, $ 0.01 par value, 400,000,000 shares authorized and 325,902 issued and outstanding as of June 30, 2022 and 2,632,347 issued and outstanding as of December 31, 2021

Class A, $ 0.01 par value, 400,000,000 shares authorized and 182,158,820 issued and outstanding as of September 30, 2022 and 183,385,111 issued and outstanding as of December 31, 2021

Class B, $ 0.01 par value, 400,000,000 shares authorized and 325,902 issued and outstanding as of September 30, 2022 and 2,632,347 issued and outstanding as of December 31, 2021

Additional paid in capital 1,320,731 1,367,642

Accumulated deficit ( 56,174 ) ( 155,954 )

Retained earnings (accumulated deficit) 90,779 ( 155,954 )

Accumulated other comprehensive loss ( 8,595 ) ( 306 )

8 unchanged sentences

(In thousands, except per share data)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

7 unchanged sentences

Depreciation, depletion, and amortization 82,848 65,852 234,815 191,122

(Gain) loss on disposal of assets ( 3,436 ) ( 277 ) 1,236 ( 997 )

Gain on disposal of assets ( 4,277 ) ( 79 ) ( 3,041 ) ( 1,076 )

Total operating costs and expenses 1,005,264 693,293 2,626,210 1,904,836

Operating income (loss) 182,983 ( 39,566 ) 297,426 ( 117,789 )

Other expense:

Other expense (income):

Loss (gain) on remeasurement of liability under tax receivable agreements 28,900 ( 4,947 ) 33,233 ( 8,252 )

Gain on investments ( 2,525 ) — ( 2,525 ) —

Interest expense, net 6,773 4,007 15,959 11,528

Total other expense 5,030 462 13,519 4,216

Total other expense (income) 33,148 ( 940 ) 46,667 3,276

Net income (loss) before income taxes 149,835 ( 38,626 ) 250,759 ( 121,065 )

15 unchanged sentences

(In thousands)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

10 unchanged sentences

(In thousands, except per unit and per share data)

Shares of Class A Common Stock Shares of Class B Common Stock Class A Common Stock, Par Value Class B Common Stock, Par Value Additional Paid in Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Stockholders ’ Equity

Shares of Class A Common Stock Shares of Class B Common Stock Class A Common Stock, Par Value Class B Common Stock, Par Value Additional Paid in Capital (Accumulated Deficit) Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders ’ Equity

Non-controlling Interest Total Equity

3 unchanged sentences

Other distributions and advance payments to non-controlling interest unitholders — — — — — — — — 924 924

Share repurchases ( 4,702 ) — ( 47 ) — ( 69,987 ) — ( 70,034 ) ( 60 ) ( 70,094 )

Stock-based compensation expense — — — — 17,031 — — 17,031 95 17,126

3 unchanged sentences

Net income — — — — — 246,733 — 246,733 389 247,122

Balance—June 30, 2022 186,859 326 $ 1,869 $ 3 $ 1,384,134 $ ( 56,174 ) $ ( 2,263 ) $ 1,327,569 $ 2,447 $ 1,330,016

Balance—September 30, 2022 182,159 326 $ 1,822 $ 3 $ 1,320,731 $ 90,779 $ ( 8,595 ) $ 1,404,740 $ 2,698 $ 1,407,438

Shares of Class A Common Stock Shares of Class B Common Stock Class A Common Stock, Par Value Class B Common Stock, Par Value Additional Paid in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income Total Stockholders ’ Equity

9 unchanged sentences

Net loss — — — — — ( 123,655 ) — ( 123,655 ) ( 6,812 ) ( 130,467 )

Balance—June 30, 2021 178,310 1,860 $ 1,783 $ 19 $ 1,274,031 $ ( 61,475 ) $ 2,454 $ 1,216,812 $ 12,622 $ 1,229,434

Balance—September 30, 2021 178,310 1,860 $ 1,783 $ 19 $ 1,278,073 $ ( 100,365 ) $ 191 $ 1,179,701 $ 12,153 $ 1,191,854

See Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(Dollars in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

2 unchanged sentences

Depreciation, depletion, and amortization 234,815 191,122

Loss (gain) on disposal of assets 1,236 ( 997 )

Gain on disposal of assets ( 3,041 ) ( 1,076 )

Inventory write-down 1,724 —

Non-cash lease expense 3,085 2,834

2 unchanged sentences

Loss (gain) on remeasurement of liability under tax receivable agreements 33,233 ( 8,252 )

Other non-cash expense 826 1,882

Other non-cash (income) expense, net ( 1,007 ) 2,449

Changes in operating assets and liabilities:

8 unchanged sentences

Net cash provided by operating activities

292,610 80,142

Cash flows from investing activities:

1 unchanged sentence

Investment in sand logistics ( 6,721 ) —

Investment in Fervo Energy Company ( 10,000 ) —

Investment in Fervo Energy Company and Natron Energy, Inc.

Proceeds from sale of assets 14,806 3,689

Net cash used in investing activities

( 333,875 ) ( 119,319 )

Cash flows from financing activities:

5 unchanged sentences

Other distributions and advance payments to non-controlling interest unitholders 924 1,372

Share repurchases ( 70,094 ) —

Tax withholding on restricted stock unit vesting ( 9,701 ) ( 3,585 )

Payments of equity offering costs ( 523 ) ( 854 )

Payments of equity issuance costs ( 557 ) ( 1,013 )

Payments of debt issuance costs ( 678 ) —

Net cash provided by (used in) financing activities 118,758 ( 8,175 )

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents before translation effect 4,377 ( 34,028 )

5 unchanged sentences

(Dollars in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Supplemental disclosure of cash flow information:

18 unchanged sentences

Accordingly, these financial statements do not include all information or notes required by GAAP for annual financial statements and should be read together with the annual financial statements and notes thereto included in the Annual Report.

The accompanying unaudited condensed consolidated financial statements and related notes present the condensed consolidated financial position of the Company as of June 30, 2022 and December 31, 2021, and the results of operations, cash flows, and equity of the Company as of and for the three and six months ended June 30, 2022 and 2021.

The accompanying unaudited condensed consolidated financial statements and related notes present the condensed consolidated financial position of the Company as of September 30, 2022 and December 31, 2021, and the results of operations, cash flows, and changes in equity of the Company as of and for the three and nine months ended September 30, 2022 and 2021.

The interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim period.

The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results of operations expected for the entire fiscal year ended December 31, 2022.

The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results of operations expected for the entire fiscal year ended December 31, 2022.

Further, these estimates and other factors, including those outside the Company’s control, such as the impact of sustained lower commodity prices, could have a significant adverse impact to the Company’s financial condition, results of operations and cash flows.

4 unchanged sentences

Certain amounts in the prior period financial statements have been reclassified from interest income to interest expense, net in the accompanying unaudited condensed consolidated statements of operation to conform to the presentation of the current period financial statements.

Additionally, amounts in the prior period financial statements have been reclassified from provision for credit losses to other non-cash (income) expense, net in the accompanying unaudited condensed consolidated statement of cash flows to conform to the presentation of the current period financial statements.

These reclassifications had no effect on the previously reported net income or loss.

2 unchanged sentences

Note 3— The PropX Acquisition

On October 26, 2021, the Company entered into the certain Master Transaction Agreement (the “Transaction Agreement”) with Proppant Express Investments, LLC to acquire the assets and liabilities of Proppant Express Solutions, LLC (“PropX”), which provides last-mile proppant delivery solutions, including proppant handling equipment and logistics software across North America (the “PropX Acquisition”).

On October 26, 2021, the Company entered into the certain Unit Purchase Agreement (the “Transaction Agreement”) with Proppant Express Investments, LLC to acquire the assets and liabilities of Proppant Express Solutions, LLC (“PropX”), which provides last-mile proppant delivery solutions, including proppant handling equipment and logistics software across North America (the “PropX Acquisition”).

PropX was acquired in exchange for $ 11.9 million in cash and 3,405,526 shares of the Company’s Class A Common Stock, par value $ 0.01 per share (the “Class A Common Stock”) and 2,441,010 shares of the Company’s Class B Common Stock, par value $ 0.01 per share (the “Class B Common Stock”, and together with the Class A Common Stock, the “Common Stock”), for total consideration of $ 103.0 million based on the October 26, 2021 closing price of Class A Common Stock of $ 15.58 .

7 unchanged sentences

Such measurement period ends at the earliest date that the acquirer a) receives the information necessary or b) determines that it cannot obtain further information, and such period may not exceed one year.

As the PropX Acquisition closed on October 26, 2021 the Company is in the process of completing the initial purchase price allocation, particularly as it relates to current assets and current liabilities.

The following table summarizes the fair value of the consideration transferred in the PropX Acquisition and the preliminary allocation of the purchase price to the fair value of the assets acquired and liabilities assumed as of October 26, 2021, the date of the closing of the PropX Acquisition:

As the PropX Acquisition closed on October 26, 2021 the Company completed the purchase price allocation, particularly as it relates to current assets and current liabilities, during the nine months ended September 30, 2022.

The following table summarizes the fair value of the consideration transferred in the PropX Acquisition and the allocation of the purchase price to the fair value of the assets acquired and liabilities assumed as of October 26, 2021, the date of the closing of the PropX Acquisition:

($ in thousands)

19 unchanged sentences

Notes to Condensed Consolidated Financial Statements

The Company’s condensed consolidated statements of operations for the three and six months ended June 30, 2021 does not include any results from PropX operations as the PropX Acquisition closed on October 26, 2021.

The Company does not present pro forma financial information for the periods prior to the PropX Acquisition as such information, after elimination of PropX’s historical transactions with the Company, is not materially different than the results presented in the accompanying condensed consolidated statements of operations for three and six months ended June 30, 2021.

The Company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2021 do not include any results from PropX operations as the PropX Acquisition closed on October 26, 2021.

Note 4— Inventories

Inventories consist of the following:

June 30, December 31,

September 30, December 31,

($ in thousands) 2022 2021

3 unchanged sentences

$ 185,647 $ 134,593

The Company did no t record any write-down to the inventory carrying value during the three and six months ended June 30, 2022 or the year ended December 31, 2021.

During the three and nine months ended September 30, 2022, the lower of cost or net realizable value analysis resulted in the Company recording a write-down to the inventory carrying value of $ 1.7 million.

The Company did not record any write-down to the inventory carrying value during the year ended December 31, 2021.

Note 5— Property and Equipment

Property and equipment consist of the following:

(in years) June 30, December 31,

(in years) September 30, December 31,

($ in thousands) 2022 2021

15 unchanged sentences

$ 1,295,189 $ 1,199,287

Depreciation expense for the three months ended June 30, 2022 and 2021 was $ 72.4 million and $ 58.1 million, respectively.

During the six months ended June 30, 2022 and 2021, the Company recognized depreciation expense of $ 142.3 million and $ 114.8 million, respectively.

Depletion expense for the three months ended June 30, 2022 and 2021was $ 0.3 million and $ 0.3 million, respectively.

Depletion expense for the six months ended June 30, 2022 and 2021 was $ 0.6 million and $ 0.6 million, respectively.

As of June 30, 2022 and December 31, 2021, the Company concluded that no triggering events that could indicate possible impairment of property and equipment had occurred, other than related to the assets held for sale discussed below.

As of June 30, 2022, the Company classified $ 2.0 million of land and $ 6.0 million of buildings, net of accumulated depreciation, of one property that it intends to sell within the next year, and that meets the held for sale criteria, to assets held for sale, included in prepaid and other current assets in the accompanying unaudited condensed consolidated balance sheet.

The Company estimates that the carrying value of the assets were greater than the fair value less the estimated costs to sell, and therefore recorded a $ 2.3 million loss during the six months ended June 30, 2022, included as a component of (gain) loss on disposal of assets in the accompanying unaudited condensed consolidated statements of operations.

Depreciation expense for the three months ended September 30, 2022 and 2021 was $ 77.5 million and $ 61.1 million, respectively.

During the nine months ended September 30, 2022 and 2021, the Company recognized depreciation expense of $ 219.9 million and $ 175.9 million, respectively.

Depletion expense for the three months ended September 30, 2022 and 2021was $ 0.3 million and $ 0.3 million, respectively.

Depletion expense for the nine months ended September 30, 2022 and 2021 was $ 0.9 million and $ 1.0 million, respectively.

As of September 30, 2022 and December 31, 2021, the Company concluded that no triggering events that could indicate possible impairment of property and equipment had occurred, other than related to the assets held for sale discussed below.

As of September 30, 2022, the Company classified $ 2.5 million of land and $ 11.4 million of buildings, net of accumulated depreciation, of two properties that it intends to sell within the next year, and that meets the held for sale criteria, to assets held for sale, included in prepaid and other current assets in the accompanying unaudited condensed consolidated balance sheet.

The Company estimates that the carrying value of the assets were greater than the fair value less the estimated costs to sell, and therefore recorded a $ 2.7 million loss during the nine months ended September 30, 2022, included as a component of gain on disposal of assets in the accompanying unaudited condensed consolidated statements of operations.

LIBERTY ENERGY INC.

6 unchanged sentences

All other variable lease payments are excluded from the measurement of lease assets and liabilities, and are recognized in the period in which the obligation for those payments is incurred.

The components of lease expense for the three and six months ended June 30, 2022 and 2021 were as follows:

Three Months Ended June 30, Six Months Ended June 30,

The components of lease expense for the three and nine months ended September 30, 2022 and 2021 were as follows:

Three Months Ended September 30, Nine Months Ended September 30,

($ in thousands) 2022 2021 2022 2021

6 unchanged sentences

Total lease cost $ 16,176 $ 17,181 $ 46,257 $ 42,184

Sup plemental cash flow and other information related to leases for the three and six months ended June 30, 2022 and 2021 were as follows:

Three Months Ended June 30, Six Months Ended June 30,

Sup plemental cash flow and other information related to leases for the three and nine months ended September 30, 2022 and 2021 were as follows:

Three Months Ended September 30, Nine Months Ended September 30,

($ in thousands) 2022 2021 2022 2021

5 unchanged sentences

Finance leases 8,409 — 14,742 —

During the six months ended June 30, 2022, the Company amended certain operating leases, the change in terms of which caused the leases to be reclassified as finance leases.

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

During the nine months ended September 30, 2022, the Company amended certain operating leases, the change in terms of which caused the leases to be reclassified as finance leases.

In connection with the amendments, the Company wrote-off operating lease right-of-use assets of $ 0.2 million and liabilities of $ 0.1 million.

Additionally, the Company recognized finance lease right-of-use assets of $ 2.7 million and liabilities of $ 2.7 million.

During the six months ended June 30, 2021, the Company amended certain finance leases, the change in terms of which caused the leases to be reclassified to operating leases.

During the nine months ended September 30, 2021, the Company amended certain finance leases, the change in terms of which caused the leases to be reclassified to operating leases.

In connection with the amendments the Company wrote-off finance lease right-of-use assets of $ 13.7 million and liabilities of $ 10.6 million.

1 unchanged sentence

There was no gain or loss recognized as a result of these amendments.

Lease terms and discount rates as of June 30, 2022 and December 31, 2021 were as follows:

June 30, 2022 December 31, 2021

Lease terms and discount rates as of September 30, 2022 and December 31, 2021 were as follows:

September 30, 2022 December 31, 2021

Weighted-average remaining lease term:

4 unchanged sentences

Finance leases 8.0 % 8.6 %

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

Future minimum lease commitments as of June 30, 2022 are as follows:

Future minimum lease commitments as of September 30, 2022 are as follows:

($ in thousands) Finance Operating

9 unchanged sentences

The Company’s vehicle leases typically include a residual value guarantee.

For the Company’s vehicle leases classified as operating leases, the total residual value guaranteed as of June 30, 2022 is $ 13.1 million;

For the Company’s vehicle leases classified as operating leases, the total residual value guaranteed as of September 30, 2022 is $ 12.9 million;

the payment is not probable and therefore has not been included in the measurement of the lease liability and right-of-use asset.

7 unchanged sentences

The Company does not record any lease assets or liabilities related to these variable items.

The carrying amount of equipment leased to others, included in property, plant and equipment, under operating leases as of June 30, 2022 and December 31, 2021 were as follows:

($ in thousands) June 30, 2022 December 31, 2021

The carrying amount of equipment leased to others, included in property, plant and equipment, under operating leases as of September 30, 2022 and December 31, 2021 were as follows:

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

($ in thousands) September 30, 2022 December 31, 2021

Equipment leased to others - at original cost $ 90,897 $ 64,770

1 unchanged sentence

Equipment leased to others - net $ 82,609 $ 63,393

Future payments receivable for operating leases commenced and committed but not delivered as of June 30, 2022 are as follows:

Future payments receivable for operating leases commenced and committed but not delivered as of September 30, 2022 are as follows:

($ in thousands)

1 unchanged sentence

Total $ 31,099

Revenues from operating leases for the three and six months ended June 30, 2022 were $ 5.9 million and $ 11.8 million, respectively.

There was no revenue from operating leases for the three and six months ended June 30, 2021.

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

Revenues from operating leases for the three and nine months ended September 30, 2022 were $ 6.7 million and $ 18.4 million, respectively.

There was no revenue from operating leases for the three and nine months ended September 30, 2021.

Note 7— Accrued Liabilities

Accrued liabilities consist of the following:

($ in thousands) June 30, 2022 December 31, 2021

($ in thousands) September 30, 2022 December 31, 2021

Accrued vendor invoices $ 116,859 $ 109,903

3 unchanged sentences

Debt consists of the following:

June 30, December 31,

September 30, December 31,

($ in thousands) 2022 2021

7 unchanged sentences

On September 19, 2017, the Company entered into two credit agreements, a revolving line of credit up to $ 250.0 million, subsequently increased to $ 425.0 million, see below, (the “ABL Facility”) and a $ 175.0 million term loan (the “Term Loan Facility”, and together with the ABL Facility the “Credit Facilities”).

Effective July 18, 2022, the Company executed an amendment to the ABL Facility (the “Revolving Credit Agreement Amendment”) to exercise the option to increase the ABL Facility by $ 75.0 million, to $ 425.0 million, refer to Note 17—Subsequent Events for more information.

The weighted average interest rate on all borrowings outstanding as of June 30, 2022 and December 31, 2021 was 5.3 % and 7.9 %, respectively.

On July 18, 2022, the Company entered into an amendment to the ABL Facility (the “Seventh ABL Amendment”).

The Seventh ABL Amendment amended certain terms, provisions and covenants of the ABL Facility, including among other things:

(i) increasing the maximum borrowing amount by $ 75.0 million to $ 425.0 million, subject to certain borrowing base limitations

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

based on percentage of eligible accounts receivable and inventory, (ii) modifying certain covenant and reporting-related baskets, and (iii) replacing LIBOR with the secured overnight financing rate (“SOFR”) as the interest rate benchmark.

On August 12, 2022, the Company entered into an amendment to the Term Loan Facility (the “Sixth Term Loan Amendment”).

The Sixth Term Loan Amendment amended certain terms, provisions and covenants of the Term Loan Facility, including among other things:

(i) a waiver of the fixed charge coverage ratio requirements for up to $ 100.0 million of restricted payments made in connection with the Company’s 2022 stock repurchase program for its common stock;

(ii) the addition of a minimum liquidity requirement of $ 150.0 million in order to make selected restricted payments, including those made under the 2022 stock repurchase program;

(iii) the modification of certain covenant and reporting-related terms, including an increase in the allowance for permitted purchase money indebtedness from $ 50.0 million to $ 70.0 million;

(iv) the addition of a prepayment premium of 1.0 % through the first anniversary of the Sixth Term Loan Amendment effective date;

and (v) the addition and modification of several provisions to replace LIBOR with SOFR as the interest rate benchmark.

The weighted average interest rate on all borrowings outstanding as of September 30, 2022 and December 31, 2021 was 7.0 % and 7.9 %, respectively.

Under the terms of the ABL Facility, up to $ 425.0 million may be borrowed, subject to certain borrowing base limitations based on a percentage of eligible accounts receivable and inventory.

As of June 30, 2022, the borrowing base was calculated to be $ 350.0 million, and the Company had $ 150.0 million outstanding in addition to a letter of credit in the amount of $ 1.4 million, with $ 198.6 million of remaining availability.

Borrowings under the ABL Facility bear interest at LIBOR or a base rate, plus an applicable LIBOR margin of 1.5 % to 2 % or base rate margin of 0.5 % to 1 %, as defined in the ABL Facility credit agreement.

Additionally, borrowings as of June 30, 2022 incurred interest at a rate of 2.9 %.

As of September 30, 2022, the borrowing base was calculated to be $ 425.0 million, and the Company had $ 150.0 million outstanding in addition to a letter of credit in the amount of $ 1.4 million, with $ 273.6 million of remaining availability.

Borrowings under the ABL Facility bear interest at SOFR or a base rate, plus an applicable SOFR margin of 1.5 % to 2 % or base rate margin of 0.5 % to 1 %, as defined in the ABL Facility credit agreement.

Additionally, borrowings as of September 30, 2022 incurred interest at a weighted average rate of 4.8 %.

The average monthly unused commitment is subject to an unused commitment fee of 0.25 % to 0.375 %.

Interest and fees are payable in arrears at the end of each month, or, in the case of LIBOR loans, at the end of each interest period.

Interest and fees are payable in arrears at the end of each month, or, in the case of SOFR loans, at the end of each interest period.

The ABL Facility matures on the earlier of (i) October 22, 2026 and (ii) to the extent the debt under the Term Loan Facility remains outstanding, 90 days prior to the final maturity of the Term Loan Facility, which matures on September 19, 2024.

2 unchanged sentences

Term Loan Facility

The Term Loan Facility provides for a $ 175.0 million term loan, of which $ 105.6 million remained outstanding as of June 30, 2022.

Amounts outstanding bear interest at LIBOR or a base rate, plus an applicable margin of 7.625 % or 6.625 %, respectively, and borrowings as of June 30, 2022 incurred interest at a rate of 8.687 %.

The Term Loan Facility provides for a $ 175.0 million term loan, of which $ 105.2 million remained outstanding as of September 30, 2022.

Amounts outstanding bear interest at SOFR or a base rate, plus an applicable margin of 7.625 % or 6.625 %, respectively, and borrowings as of September 30, 2022 incurred interest at a rate of 10.18 %.

The Company is required to make quarterly principal payments of 1 % per annum of the outstanding principal balance, commencing on December 31, 2017, with final payment due at maturity on September 19, 2024.

The Term Loan Facility is collateralized by the fixed assets of LOS and

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

its subsidiaries, and is further secured by the Company, Liberty LLC, and R/C IV Non-U.S.

The Term Loan Facility is collateralized by the fixed assets of LOS and its subsidiaries, and is further secured by the Company, Liberty LLC, and R/C IV Non-U.S.

LOS Corp., a Delaware corporation and a subsidiary of the Company, as parent guarantors.

2 unchanged sentences

The Term Loan Facility requires mandatory prepayments upon certain dispositions of property or issuance of other indebtedness, as defined, and annually a percentage of excess cash flow ( 25 % to 50 %, depending on leverage ratio, of consolidated net income less capital expenditures and other permitted payments, commencing with the year ending December 31, 2018).

Certain mandatory prepayments and optional prepayments are subject to a prepayment premium of 3% of the prepaid principal declining annually to 1% during the first three years of the term of the Term Loan Facility.

Certain mandatory prepayments and optional prepayments are subject to a prepayment premium of 1 % of the prepaid principal declining to 0 % after the first anniversary of the Sixth Term Loan Amendment effective date.

The Credit Facilities are not subject to financial covenants unless liquidity, as defined in the respective credit agreements, drops below a specific level.

1 unchanged sentence

Under the Term Loan Facility, the Company is required to maintain a minimum fixed charge coverage ratio, as defined, of 1.2 to 1.0 for each trailing twelve-month period if the Company’s liquidity, as defined, is less than $ 25.0 million for at least five consecutive business days.

The Company was in compliance with these covenants as of June 30, 2022.

The Company was in compliance with these covenants as of September 30, 2022.

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

Maturities of debt are as follows:

17 unchanged sentences

Transfers occur at the end of the reporting period.

There were no transfers into or out of Levels 1, 2, and 3 during the six months ended June 30, 2022 and 2021.

There were no transfers into or out of Levels 1, 2, and 3 during the nine months ended September 30, 2022 and 2021.

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, notes receivable, accounts payable, accrued liabilities, long-term debt, and finance and operating lease obligations.

These financial instruments do not require disclosure by level.

The carrying values of all of the Company’s financial instruments included in the accompanying unaudited condensed consolidated balance sheets approximated or equaled their fair values on June 30, 2022 and December 31, 2021.

• The carrying values of cash and cash equivalents, accounts receivable and accounts payable (including accrued liabilities) approximated fair value on June 30, 2022 and December 31, 2021, due to their short-term nature.

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

• The carrying value of amounts outstanding under long-term debt agreements with variable rates approximated fair value on June 30, 2022 and December 31, 2021, as the effective interest rates approximated market rates.

• The carrying values of cash and cash equivalents, accounts receivable and accounts payable (including accrued liabilities) approximated fair value on September 30, 2022 and December 31, 2021, due to their short-term nature.

• The carrying value of amounts outstanding under long-term debt agreements with variable rates approximated fair value on September 30, 2022 and December 31, 2021, as the effective interest rates approximated market rates.

Nonrecurring Measurements

3 unchanged sentences

See Note 3—The PropX Acquisition.

As of June 30, 2022, the Company recorded $ 2.0 million of land and $ 6.0 million of buildings of one property that met the held for sale criteria, to assets held for sale at a total fair value of $ 5.7 million, which are included in prepaid and other current assets in the accompanying unaudited condensed consolidated balance sheet.

The Company estimated the fair value of the property based on a purchase and sale agreement for one property, which is a Level 3 input.

As of September 30, 2022, the Company recorded $ 2.5 million of land and $ 11.4 million of buildings of two properties that met the held for sale criteria, to assets held for sale at a total fair value of $ 11.2 million, which are included in prepaid and other current assets in the accompanying unaudited condensed consolidated balance sheet.

The Company estimated the fair value of the properties based on a purchase and sale agreement and a communicated selling price, which are Level 3 inputs.

Recurring Measurements

1 unchanged sentence

Cash equivalents consist of money market accounts which the Company has classified as Level 1 given the active market for these accounts.

As of June 30, 2022 and December 31, 2021, the Company had cash equivalents, measured at fair value, of $ 0.3 million and $ 0.3 million, respectively.

As of September 30, 2022 and December 31, 2021, the Company had cash equivalents, measured at fair value, of $ 0.3 million and $ 0.3 million, respectively.

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

Nonfinancial assets

1 unchanged sentence

The inputs used to determine such fair value are primarily based upon internally developed cash flow models and would generally be classified within Level 3 in the event that such assets were required to be measured and recorded at fair value within the unaudited condensed consolidated financial statements.

No such measurements were required as of June 30, 2022 and December 31, 2021 as no triggering event was identified.

No such measurements were required as of September 30, 2022 and December 31, 2021 as no triggering event was identified.

The Company’s financial instruments exposed to concentrations of credit risk consist primarily of cash and cash equivalents and trade receivables.

The Company’s cash and cash equivalent balances on deposit with financial institutions total $ 41.5 million and $ 20.0 million as of June 30, 2022 and December 31, 2021, respectively, which exceeded FDIC insured limits.

The Company’s cash and cash equivalent balances on deposit with financial institutions total $ 24.0 million and $ 20.0 million as of September 30, 2022 and December 31, 2021, respectively, which exceeded FDIC insured limits.

The Company regularly monitors these institutions’ financial condition.

The majority of the Company’s customers have payment terms of 45 days or less.

As of June 30, 2022 no c ustomers accounted for more than 10% o f total consolidated accounts receivable and unbilled revenue.

As of December 31, 2021, customer A accounted for 12 % of total consolidated accounts receivable and unbilled revenue.

During the three and six months ended June 30, 2022, customer A accounted for 10 % of consolidated revenues.

During the three and six months ended June 30, 2021, no cust omers accounted for more than 10% o f consolidated revenues.

As of September 30, 2022 and December 31, 2021, customer A accounted for 10.5 % and 11.8 %, respectively, of total consolidated accounts receivable and unbilled revenue.

During the three and nine months ended September 30, 2022 and 2021, no customers accounted for 10% of consolidated revenues.

The Company mitigates the associated credit risk by performing credit evaluations and monitoring the payment patterns of its customers.

As of June 30, 2022 and December 31, 2021, the Company had $ 0.9 million in allowance for credit losses as follows:

As of September 30, 2022 and December 31, 2021, the Company had $ 0.9 million in allowance for credit losses as follows:

($ in thousands)

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Amounts written off —

Allowance for credit losses at June 30, 2022 $ 884

Allowance for credit losses at September 30, 2022 $ 884

LIBERTY ENERGY INC.

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RSUs were granted with vesting terms up to five years .

Changes in non-vested RSUs outstanding under the LTIP during the six months ended June 30, 2022 were as follows:

Changes in non-vested RSUs outstanding under the LTIP during the nine months ended September 30, 2022 were as follows:

Number of Units Weighted Average Grant Date Fair Value per Unit

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Forfeited ( 103,539 ) 10.23

Outstanding at June 30, 2022 2,009,215 $ 11.60

Outstanding at September 30, 2022 3,014,235 $ 12.15

Performance Restricted Stock Units

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If such performance targets are not met, or are not expected to be met, no compensation expense is recognized and any recognized compensation expense is reversed.

Changes in non-vested PSUs outstanding under the LTIP during the six months ended June 30, 2022 were as follows:

Changes in non-vested PSUs outstanding under the LTIP during the nine months ended September 30, 2022 were as follows:

Number of Units Weighted Average Grant Date Fair Value per Unit

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Forfeited — —

Outstanding at June 30, 2022 1,390,588 $ 11.87

Outstanding at September 30, 2022 1,390,588 $ 11.87

Stock-based compensation is included in cost of services and general and administrative expenses in the Company’s unaudited condensed consolidated statements of operations.

The Company recognized stock based compensation expense of $ 4.2 million and $ 11.0 million for the three and six months ended June 30, 2022, respectively.

The Company recognized stock based compensation of $ 5.9 million and $ 10.8 million for the three and six months ended June 30, 2021, respectively.

There was approximately $ 27.7 million of unrecognized compensation expense relating to outstanding RSUs and PSUs as of June 30, 2022.

The Company recognized stock-based compensation expense of $ 6.1 million and $ 17.1 million for the three and nine months ended September 30, 2022, respectively.

The Company recognized stock-based compensation of $ 4.2 million and $ 15.1 million for the three and nine months ended September 30, 2021, respectively.

There was approximately $ 36.2 million of unrecognized compensation expense relating to outstanding RSUs and PSUs as of September 30, 2022.

The unrecognized compensation expense will be recognized on a straight-line basis over the weighted average remaining vesting period of two years .

On April 2, 2020, the Company suspended future quarterly dividends until business conditions warrant reinstatement.

As of June 30, 2022 dividends have not been reinstated by the Company.

As of June 30, 2022 and December 31, 2021, the Company had $ 0.1 million and $ 0.2 million of dividends payable related to RSUs to be paid upon vesting, respectively.

As of September 30, 2022 dividends had not been reinstated by the Company.

Subsequent to quarter end, the Company reinstated a quarterly dividend of $ 0.05 per share of Class A Common Stock, refer to Note 17—Subsequent Events for more information.

As of September 30, 2022 and December 31, 2021, the Company had $ 0.1 million and $ 0.2 million of dividends payable related to RSUs to be paid upon vesting, respectively.

Dividends related to forfeited RSUs will be forfeited.

Share Repurchase Program

On July 25, 2022, the Company’s Board of Directors authorized and the Company announced a share repurchase program that allows the Company to repurchase up to $ 250.0 million of the Company’s Class A Common Stock beginning immediately and continuing through and including July 31, 2024.

The shares may be repurchased from time to time in open market or

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

privately negotiated transactions or by other means in accordance with applicable state and federal securities laws.

The timing, as well as the number and value of shares repurchased under the program, will be determined by the Company at its discretion and will depend on a variety of factors, including management’s assessment of the intrinsic value of the Company’s Class A Common Stock, the market price of the Company’s Class A Common Stock, general market and economic conditions, available liquidity, compliance with the Company’s debt and other agreements, applicable legal requirements, and other considerations.

The exact number of shares to be repurchased by the Company is not guaranteed, and the program may be suspended, modified, or discontinued at any time without prior notice.

The Company expects to fund the repurchases by using cash on hand, borrowings under its revolving credit facility and expected free cash flow to be generated through July 2024.

During the nine months ended September 30, 2022, Liberty LLC purchased and retired 4,702,166 LLC Units from the Company for $ 70.1 million, and the Company repurchased and retired 4,702,166 shares of Class A Common Stock for $ 70.1 million or $ 14.91 average price per share including commissions, under the share repurchase program.

As of September 30, 2022, $ 180.0 million remained authorized for future repurchases of Class A Common Stock under the share repurchase program.

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

Note 11— Net Income (Loss) per Share

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The following table reflects the allocation of net income (loss) to common stockholders and net loss per share computations for the periods indicated based on a weighted average number of common stock outstanding:

Three Months Ended Six Months Ended

(In thousands) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Three Months Ended Nine Months Ended

(In thousands) September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Basic Net Income (Loss) Per Share

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In accordance with GAAP, diluted weighted average common shares presented above do not include certain weighted average shares of Class B Common Stock and restricted stock units, because to do so would have had an antidilutive effect, as follows:

Three Months Ended Six Months Ended

(In thousands) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Three Months Ended Nine Months Ended

(In thousands) September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Weighted average shares of Class B Common Stock — 1,860 — 8,558

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parent as business needs arise.

The Company has not provided for deferred income taxes on the undistributed earnings from certain foreign subsidiaries earnings, as such are considered to be indefinitely reinvested.

The Company has not provided for deferred income taxes on the undistributed earnings from certain foreign subsidiaries, as such earnings are considered to be indefinitely reinvested.

If such earnings were to be distributed, any income and/or withholding tax would not be significant.

The effective global income tax rate applicable to the Company for the six months ended June 30, 2022 was 1.1 %, compared to ( 10.5 )%, for the period ended June 30, 2021.

The effective global income tax rate applicable to the Company for the nine months ended September 30, 2022 was 1.5 %, compared to ( 7.8 )%, for the period ended September 30, 2021.

The Company’s effective tax rate is less than the statutory federal income tax rate of 21.0% due to the Company’s full valuation allowance on its U.S.

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The Company’s effective tax rate is also less than the statutory rate because of the non-controlling interest’s share of Liberty LLC’s pass-through results for federal, state and local income tax reporting, upon which no taxes are payable by the Company.

The Company recognized an income tax expense of $ 0.2 million and $ 1.1 million during the three and six months ended June 30, 2022, respectively.

The Company recognized an income tax expense of $ 16.0 million and $ 8.6 million during the three and six months ended June 30, 2021, respectively, which included the impact of the initial recording of a valuation allowance on a portion of the Company’s deferred tax assets.

The Company recognized an income tax expense of $ 2.6 million and $ 3.6 million during the three and nine months ended September 30, 2022, respectively.

The Company recognized an income tax expense of $ 0.8 million and $ 9.4 million during the three and nine months ended September 30, 2021, respectively, which included the impact of recording a valuation allowance on a portion of the Company’s net deferred tax assets.

Per the Coronavirus Aid, Relief and Economic Security (“CARES”) Act enacted on March 27, 2020, net operating losses (“NOL”) incurred in 2019 and 2020 may be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes.

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The remaining deferred tax asset for net operating losses available for carryforward are presented net of the Company’s valuation allowance.

The Company recognized a deferred tax liability in the amount of $ 0.6 million as of June 30, 2022 and December 31, 2021.

The Company also recognized a deferred tax asset related to foreign jurisdictions in the amount of $ 0.3 million and $ 0.6 million as of June 30, 2022 and December 31, 2021, respectively.

The Company recognized a deferred tax liability in the amount of $ 0.6 million as of September 30, 2022 and December 31, 2021.

The Company also recognized a deferred tax asset related to foreign jurisdictions in the amount of $ 0.3 million and $ 0.6 million as of September 30, 2022 and December 31, 2021, respectively.

Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial reporting and tax bases of assets and liabilities, and are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

The Company evaluated its deferred tax assets as of June 30, 2022 and considered both positive and negative evidence in applying the guidance of ASC 740 Income Taxes (“ASC 740”) related to the realizability of its deferred tax assets.

The Company evaluated its deferred tax assets as of September 30, 2022 and considered both positive and negative evidence in applying the guidance of ASC 740 Income Taxes (“ASC 740”) related to the realizability of its deferred tax assets.

Consistent with the prior quarter, in accordance with ASC 740, the objective negative evidence of remaining in a three year cumulative pre-tax book loss position, primarily due to COVID-19 related losses, outweighed the consideration of the Company’s subjective positive evidence of expected future profitability in evaluating the realizability of its deferred tax assets.

The CHIPS and Science Act of 2022 (“CHIPS”) and the Inflation Reduction Act (“IRA”) of 2022 were recently signed into law by President Biden on August 9, 2022 and August 16, 2022, respectively.

The legislation introduces new options for monetizing certain credits, a corporate alternative minimum tax, and a stock repurchase excise tax.

The Company is currently evaluating the impact of both CHIPS and IRA, but at present does not expect that any of the provisions included would result in a material impact to the Company’s deferred tax assets, liabilities, or income taxes payable.

Tax Receivable Agreements

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federal income tax purposes) of all or a portion of such TRA Holder’s Liberty LLC Units in connection with the IPO or pursuant to the exercise of redemption or call rights, (ii) any net operating losses available to the Company as a result of the Corporate Reorganization, and (iii) imputed interest deemed to be paid by the Company as a result of, and additional tax basis arising from, any payments the Company makes under the TRAs.

During the six months ended June 30, 2022, exchanges of Liberty LLC Units and shares of Class B Common Stock initially resulted in a net increase of $ 6.5 million in deferred tax assets, and an increase of $ 5.5 million in amounts payable under the TRAs, all of which are subject to the valuation allowance and remeasurement of TRA liability discussed below, and which are recorded through equity.

The Company did not make any TRA payments for the six months ended June 30, 2022.

At June 30, 2022 and December 31, 2021, the Company ’ s liability under the TRAs was $ 41.9 million and $ 37.6 million, respectively, all of which is presented as a component of long-term liabilities, and the related deferred tax asset totaled $ 97.8 million and $ 91.3 million, respectively, of which a valuation allowance on the net deferred tax asset has been recorded.

The Company also remeasured the liability under the TRAs as of June 30, 2022 and recorded a loss on remeasurement of liabilities subject to the TRAs for the six months ended June 30, 2022 of $ 4.3 million recorded as part of continuing operations.

During the nine months ended September 30, 2022, exchanges of Liberty LLC Units and shares of Class B Common Stock initially resulted in a net increase of $ 6.5 million in deferred tax assets, and an increase of $ 5.5 million, in amounts payable under the TRAs, all of which are subject to the valuation allowance and remeasurement of TRA liability discussed below, and which are recorded through equity.

There were no redemptions of Liberty LLC units for the three months ended

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

increase in the liability under the TRA is primarily driven by current additions of property and equipment and amortization of expected tax benefits that are subject to the valuation allowance, which are expected to be realized in the foreseeable future.

September 30, 2022.

In addition, the Company did not make any TRA payments for the nine months ended September 30, 2022.

At September 30, 2022 and December 31, 2021, the Company ’ s liability under the TRAs was $ 70.8 million and $ 37.6 million, respectively, all of which is presented as a component of long-term liabilities, and the related deferred tax asset totaled $ 97.8 million and $ 91.3 million, respectively, of which a valuation allowance on the net deferred tax asset has been recorded.

The Company also remeasured the liability under the TRAs as of September 30, 2022 and recorded a loss on remeasurement of liabilities subject to the TRAs for the nine months ended September 30, 2022 of $ 33.2 million recorded as part of continuing operations.

The increase in the liability under the TRA is primarily driven by increased pre-tax book earnings, current additions of property and equipment and amortization of expected tax benefits that are subject to the valuation allowance, which are expected to be realized in the foreseeable future.

Note 13— Defined Contribution Plan

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The Company has historically made matching contributions at a rate of $ 1.00 for each $1.00 of employee contribution, subject to a cap of 6 % of the employee’s salary and federal limits.

Contributions made by the Company wer e $ 6.0 million and $ 4.1 million for the three months ended June 30, 2022 and 2021, respectively, and $ 12.1 million and $ 7.9 million for the six months ended June 30, 2022 and 2021, respectively.

Contributions made by the Company wer e $ 6.8 million and $ 5.4 million for the three months ended September 30, 2022 and 2021, respectively, and $ 18.8 million and $ 13.3 million for the nine months ended September 30, 2022 and 2021, respectively.

Note 14— Related Party Transactions

OneStim Acquisition and Related Transaction

On August 31, 2020 the Company acquired certain assets and liabilities of Schlumberger Technology Corporation (“Schlumberger”) and Schlumberger Canada Limited OneStim® business (“OneStim”), which provides hydraulic fracturing pressure pumping services in onshore United States and Canada (the “OneStim Acquisition”).

As of June 30, 2022 Schlumberger owned 23,069,461 shares of Class A Common Stock of the Company, or approximately 12.3 % of the issued and outstanding shares of Common Stock.

On December 31, 2020 the Company acquired certain assets and liabilities of Schlumberger Technology Corporation (“Schlumberger”) and Schlumberger Canada Limited OneStim® business (“OneStim”), which provides hydraulic fracturing pressure pumping services in onshore United States and Canada (the “OneStim Acquisition”).

As of September 30, 2022 Schlumberger owned 23,069,461 shares of Class A Common Stock of the Company, or approximately 12.6 % of the issued and outstanding shares of Common Stock.

In conjunction with closing the OneStim Acquisition, the Company entered into a transition services agreement with Schlumberger under which Schlumberger provides certain administrative transition services until the Company fully integrates the acquired business.

The Company incurred $ 0.5 million and $ 5.7 million, of fees payable to Schlumberger for such transaction services during the three and six months ended June 30, 2021.

No fees were incurred during the three and six months ended June 30, 2022.

The Company incurred $ 0.0 million and $ 5.7 million of fees payable to Schlumberger for such transaction services during the three and nine months ended September 30, 2021.

No fees were incurred during the three and nine months ended September 30, 2022.

During 2021, a subsidiary of the Company and Schlumberger entered into a property swap agreement under which the Company exchanged with Schlumberger a property acquired in the OneStim Acquisition and $ 4.9 million in cash for a separate property that the Company will utilize with its existing operations.

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Following the OneStim Acquisition, in the normal course of business, the Company purchases chemicals, proppant and other equipment and maintenance parts from Schlumberger and its subsidiaries.

During the three and six months ended June 30, 2022, total purchases from Schlumberger were approximately $ 4.5 million and $ 8.1 million, respectively.

During the three and six months ended June 30, 2021, total purchases from Schlumberger were approximately $ 8.8 million and $ 19.9 million, respectively.

As of June 30, 2022 amounts due to Schlumberger were $ 1.8 million and $ 0.4 million included in accounts payable and accrued liabilities, respectively.

During the three and nine months ended September 30, 2022, total purchases from Schlumberger were approximately $ 7.4 million and $ 15.5 million, respectively.

During the three and nine months ended September 30, 2021, total purchases from Schlumberger were approximately $ 6.5 million and $ 26.4 million, respectively.

As of September 30, 2022 amounts due to Schlumberger were $ 3.8 million and $ 1.1 million included in accounts payable and accrued liabilities, respectively.

As of December 31, 2021 amounts due to Schlumberger were $ 2.7 million and $ 1.1 million, included in accounts payable and accrued liabilities, respectively, in the unaudited condensed consolidated balance sheet.

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Robertson serves as the Chief Financial Officer of Franklin Mountain Energy, LLC (“Franklin Mountain”).

During the three and six months ended June 30, 2022 the Company performed hydraulic fracturing services for Franklin Mountain in the amount of $ 1.2 million or 0.1 % and $ 23.5 million or 1.4 % of the Company’s revenues for such periods, respectively.

Amounts included in unbilled revenue from Franklin Mountain as of June 30, 2022 and December 31, 2021 were $ 1.2 million and $ 0.0 million , respectively.

Receivables from Franklin Mountain as of June 30, 2022 and December 31, 2021 were $ 0.0 million .

During the three and nine months ended September 30, 2022 the Company performed hydraulic fracturing services for Franklin Mountain in the amount of $ 55.5 million or 4.7 % and $ 79.0 million or 2.7 % of the Company’s revenues for such periods, respectively.

During the three and nine months ended September 30, 2021 the Company performed hydraulic fracturing services for Franklin Mountain in the amount of $ 7.0 million or 1.1 % and $ 7.0 million or 0.4 % of the Company’s revenues for such periods, respectively.

Amounts included in unbilled revenue from Franklin Mountain as of September 30, 2022 and December 31, 2021 were $ 26.1 million and $ 0.0 million , respectively.

Receivables from Franklin Mountain as of September 30, 2022 and December 31, 2021 were $ 0.0 million .

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

Liberty Resources LLC

Liberty Resources LLC, an oil and gas exploration and production company, and its successor entity (collectively, the “Affiliate”) has certain common ownership and management with the Company.

The amounts of the Company’s revenue related to hydraulic fracturing services provided to the Affiliate for the three months ended June 30, 2022 and 2021 was $ 0.0 million and $ 0.0 million , respectively, and $ 0.0 million and $ 1.2 million for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022 and December 31, 2021, there were no outstanding accounts receivable with the Affiliate.

The amounts of the Company’s revenue related to hydraulic fracturing services provided to the Affiliate for the three months ended September 30, 2022 and 2021 was $ 10.3 million and $ 0.0 million , respectively, and $ 10.3 million and $ 1.2 million for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022 and December 31, 2021, there were $ 10.3 million outstanding accounts receivable with the Affiliate.

PropX Acquisition

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Effective October 26, 2021, the Company completed the purchase of all membership interest in PropX, refer to Note 3—PropX Acquisition for further discussion of the transaction.

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

Prior to the PropX Acquisition the Company leased equipment from PropX, during the three and six months ended June 30, 2021, the Company leased proppant logistics equipment for $ 2.1 million and $ 4.1 million, respectively.

During the three and nine months ended September 30, 2021, prior to the PropX Acquisition, the Company leased proppant logistics equipment from PropX for $ 3.2 million and $ 7.3 million, respectively.

R/C IV Liberty Big Box Holdings, L.P., a Riverstone Holdings LLC (“Riverstone”) fund and a former significant stockholder of the Company, held a greater than 10 % equity interest in PropX.

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Purchase Commitments (tons and gallons are not in thousands)

The Company enters into purchase and supply agreements to secure supply and pricing of proppants and chemicals.

As of June 30, 2022 and December 31, 2021, the agreements commit the Company to purchas e 1,212,478 and 89,317 tons, respectively, of proppant through March 31, 2024.

The Company enters into purchase and supply agreements to secure supply and pricing of proppants, chemicals, and equipment.

As of September 30, 2022 and December 31, 2021, the agreements commit the Company to purchas e 1,664,421 and 89,317 tons, respectively, of proppant through March 31, 2024.

Amounts below also include commitments to pay for transport fees on minimum amounts of proppants.

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In circumstances where the Company does not make the minimum purchase required under the contract, the Company and its suppliers have a history of amending such minimum purchase contractual terms and in rare cases does the Company incur shortfall fees.

If the Company were unable to make any of the minimum purchases and the Company and its suppliers cannot come to an agreement to avoid such fees, the Company could incur shortfall fees in the amounts of $ 6.8 million, $ 5.8 million, and $ 0.7 million for the remainder of 2022 and the years ended 2023 and 2024, respectively.

Based on forecasted levels of activity, the Company does not currently expect to incur significant shortfall fees.

Included in the commitments for the remainder of 2022 are $ 8.5 million of payments expected to be made to Schlumberger, in conjunction with a permissive use agreement provided by Schlumberger, in the third quarter of 2022 for the use of certain light duty trucks, heavy tractors and field equipment used to various degrees in OneStim’s frac and wireline operations.

The Company is in negotiations with the third party owner of such equipment to lease or purchase some or all of

If the Company were unable to make any of the minimum purchases and the Company and its suppliers cannot come to an agreement to avoid such fees, the Company could incur shortfall fees in the amounts of $ 17.0 million, $ 9.8 million, and $ 0.7 million for the remainder of 2022

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

such aforementioned vehicles and equipment, subject to agreement on terms and conditions.

and the years ended 2023 and 2024, respectively.

Based on forecasted levels of activity, the Company does not currently expect to incur significant shortfall fees.

Included in the commitments for the remainder of 2022 are $ 8.5 million of payments expected to be made to Schlumberger, in conjunction with a permissive use agreement provided by Schlumberger, in the fourth quarter of 2022 for the use of certain light duty trucks, heavy tractors and field equipment used to various degrees in frac and wireline operations.

The Company is in negotiations with the third-party owner of such equipment to lease or purchase some or all of such aforementioned vehicles and equipment, subject to agreement on terms and conditions.

No gain or loss is expected upon consummation of any such agreement.

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Note 16— Selected Quarterly Financial Data

The following tables summarizes consolidated changes in equity for the three months ended June 30, 2022 and 2021:

The following tables summarizes consolidated changes in equity for the three months ended September 30, 2022 and 2021:

Noncontrolling Interest Total Equity

Balance—March 31, 2022 185,761 340 $ 1,858 $ 3 $ 1,389,987 $ ( 161,330 ) $ 743 $ 1,231,261 $ 2,405 $ 1,233,666

Exchanges of Class B Common Stock for Class A Common Stock 14 ( 14 ) — — 130 — — 130 ( 130 ) —

Balance—June 30, 2022 186,859 326 $ 1,869 $ 3 $ 1,384,134 $ ( 56,174 ) $ ( 2,263 ) $ 1,327,569 $ 2,447 $ 1,330,016

Offering Costs — — — — 485 — — 485 — 485

Other distributions and advance payments to non-controlling interest unitholders — — — — — — — — — —

Share repurchases ( 4,702 ) ( 47 ) ( 69,987 ) — ( 70,034 ) ( 60 ) ( 70,094 )

Stock-based compensation expense 6,100 — — 6,100 12 6,112

Tax withheld on vesting of restricted stock units — — — — ( 9,676 ) — — ( 9,676 ) ( 9,676 )

Vesting of restricted stock units 2 — — — — — — — —

Tax withheld on vesting of restricted stock units — — — — ( 1 ) — — ( 1 ) ( 1 )

Currency translation adjustment — — — — — — ( 6,332 ) ( 6,332 ) ( 11 ) ( 6,343 )

Net income — — — — — 146,953 — 146,953 310 147,263

Balance—June 30, 2022 186,859 326 $ 1,869 $ 3 $ 1,384,134 $ ( 56,174 ) $ ( 2,263 ) $ 1,327,569 $ 2,447 $ 1,330,016

Balance—September 30, 2022 182,159 326 $ 1,822 $ 3 $ 1,320,731 $ 90,779 $ ( 8,595 ) $ 1,404,740 $ 2,698 $ 1,407,438

Noncontrolling Interest Total Equity

Balance—March 31, 2021 169,259 $ 10,281 $ 1,692 $ 103 $ 1,212,354 $ ( 10,915 ) $ 1,318 $ 1,204,552 $ 73,183 $ 1,277,735

Exchange of Class B Common Stock for Class A Common Stock 8,421 ( 8,421 ) 84 ( 84 ) 59,451 — — 59,451 ( 59,451 ) —

Balance—June 30, 2021 178,310 $ 1,860 $ 1,783 $ 19 $ 1,274,031 $ ( 61,475 ) $ 2,454 $ 1,216,812 $ 12,622 $ 1,229,434

Offering Costs — — — — ( 159 ) — — ( 159 ) — ( 159 )

Recognition of valuation allowance on deferred tax asset, net of liability under tax receivable agreements — — — — ( 435 ) — — ( 435 ) — ( 435 )

Other distributions and advance payments to non-controlling interest unitholders — — — — — — — — 824 824

Stock-based compensation expense — — — — 4,201 — — 4,201 44 4,245

Vesting of restricted stock units 630 — 7 — ( 2,952 ) — — ( 2,945 ) ( 454 ) ( 3,399 )

Currency translation adjustment — — — — — — ( 2,263 ) ( 2,263 ) ( 24 ) ( 2,287 )

Net loss — — — — — ( 38,890 ) — ( 38,890 ) ( 489 ) ( 39,379 )

Balance—June 30, 2021 178,310 1,860 1,783 19 1,274,031 ( 61,475 ) 2,454 1,216,812 12,622 $ 1,229,434

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

Balance—September 30, 2021 178,310 1,860 1,783 19 1,278,073 ( 100,365 ) 191 1,179,701 12,153 $ 1,191,854

Note 17— Subsequent Events

On July 18, 2022, the Company entered into an amendment to the ABL Facility.

The amendment amended certain terms, provisions and covenants of the ABL Facility, including among other things;

(i) increasing the maximum borrowing amount by $ 75.0 million to $ 425.0 million, subject to certain borrowing base limitations based on percentage of eligible accounts receivable and inventory, (ii) modified certain covenant and reporting-related baskets, and (iii) replacing LIBOR with the second overnight financing rate (SOFR) as the interest rate benchmark.

On July 25, 2022, the Company’s Board of Directors authorized a share repurchase program that allows the Company to repurchase up to $ 250.0 million of the Company’s Class A Common Stock beginning immediately and continuing through and including July 31, 2024.

The shares may be repurchased from time to time in open market or privately negotiated transactions or by other means in accordance with applicable state and federal securities laws.

The exact number of shares to be repurchased by the Company is not guaranteed, and the program may be suspended, modified, or discontinued at any time without prior notice.

The Company expects to fund the repurchases by using cash on hand, borrowings under its revolving credit facility and expected free cash flow to be generated over the next two years.

On October 18, 2022, the Company’s board of directors approved a quarterly dividend of $ 0.05 per share of Class A Common Stock, and a distribution of $ 0.05 per Liberty LLC Unit, to be paid on December 20, 2022 to holders of record as of December 6, 2022.

The Company will use the proceeds from the Liberty LLC distribution to pay the dividend.

No other significant subsequent events have occurred that would require recognition or disclosure in the unaudited condensed consolidated financial statements.

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We offer customers hydraulic fracturing services, together with complementary services including wireline services, proppant delivery solutions, data analytics, related goods (including our sand mine operations), and technologies that will facilitate lower emission completions, thereby helping our customers reduce their emissions profile.

We have grown from one active hydraulic fracturing fleet in December 2011 to over 30 active fleets as of June 30, 2022.

We have grown from one active hydraulic fracturing fleet in December 2011 to over 40 active fleets as of September 30, 2022.

We provide our services primarily in the Permian Basin, the Eagle Ford Shale, the DJ Basin, the Williston Basin, the San Juan Basin, the Powder River Basin, the Haynesville Shale, the SCOOP/STACK, the Marcellus Shale, Utica Shale, and the Western Canadian Sedimentary Basin.

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On December 31, 2020, the Company acquired certain assets and liabilities of Schlumberger’s OneStim business, which provides hydraulic fracturing pressure pumping services in onshore United States and Canada, including its pressure pumping, pumpdown perforating and Permian frac sand business, in exchange for consideration resulting in a total of 66,326,134 shares of the Class A Common Stock being issued in connection with the OneStim Acquisition.

As of July 22, 2022, Schlumberger owned 12.3% of the issued and outstanding shares of our Common Stock.

As of October 18, 2022, Schlumberger owned 12.6% of the issued and outstanding shares of our Common Stock.

The combined company delivers best-in-class completion services for the sustainable development of unconventional resource plays in the United States and Canada onshore markets.

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Recent Trends and Outlook

While the global economic recovery outlook has softened on reverberating impacts from higher inflation, rising interest rates and the Russian invasion of Ukraine, oil and gas markets remain constructive.

Today, low global oil and gas inventories, limited OPEC spare production capacity and a lack of refining capacity are concurrently being met with increased energy demand.

Oil and natural gas demand growth is coming in part from the post-pandemic recovery in travel, China’s emergence from its enforced Covid lockdowns, plus seasonal demand.

These are all further exacerbated by the Russia/Ukraine conflict and the potential for sanctions imposed on Russian oil exports, coupled with Russia’s decision to constrain natural gas pipeline exports to Europe.

North America is positioned to be a large provider of incremental oil and gas supply.

Today, E&P operators are evaluating the opportunity to deploy incremental capital in North America to modestly grow production while remaining focused on shareholder priorities.

Supply is restricted by a tight frac market, where equipment, supply chain and labor constraints limit frac fleet availability and service quality.

Moreover, many operators desire modern, ESG-friendly frac fleet technologies that provide the opportunity for both emissions reductions and fuel savings.

The frac market is near full utilization and we expect the supply of available frac fleets to remain tight through the remainder of 2022.

We were disciplined in restraining fleet reactivations in the post-Covid era but pricing has now recovered to where we, in support of our customers’ long-term development needs, are reactivating several of our recently acquired, available fleets.

Importantly, these long-term, dedicated customers seek additional next generation fleets that are not readily available today, and we are providing an avenue to serve those customers and simultaneously driving free cash flow from these existing fleets to reinvest in our fleet modernization program.

During the second quarter of 2022, the posted WTI price traded at an average of $108.83 per barrel (“Bbl”), as compared to the second quarter of 2021 average of $66.19 per Bbl, and first quarter of 2022 average of $95.18 per Bbl.

In addition, the average domestic onshore rig count for the United States and Canada was 810 rigs reported in the second quarter of 2022, up from the second quarter of 2021 of 508 and slightly decreased from the first quarter of 2022 of 816, according to a report from Baker Hughes.

Current global macroeconomic concerns include rising interest rates, elevated inflation levels, and Chinese Covid lockdowns.

Despite these headwinds, oil and gas markets remained tight in the third quarter.

As we look ahead, risks to the delicate balance in oil and gas markets appear to come from both demand and supply.

With regards to demand, while a mild recession may modestly impact the global demand for energy, and may already be reflected in prices, a global economic downturn could result in increased demand destruction, further pressuring commodity prices.

At the same time, global supply risks are also present.

OPEC+ preemptive cuts to production quotas may result in a decline in production from key producers including Saudi Arabia and the United Arab Emirates.

Currently, Russian oil exports have been modestly curbed since the Ukraine invasion, however, impending sanctions on Russian seaborne crude could further lower global oil supplies.

Low levels of spare production capacity, worldwide oil and gas commercial inventories, and global strategic petroleum reserves further exacerbate supply concerns.

Together, these factors may strengthen the demand for secure North American energy.

Today’s commodity prices continue to offer returns for E&P operators, even after the decline in oil and gas prices in recent months.

The combination of capital discipline among many public operators and tight supply chains, particularly in the frac services market, have constrained activity levels to deliver only modest U.S.

oil production growth.

The limited capital being deployed is expected to be primarily directed towards the buildout of next generation frac fleet capacity at levels roughly sufficient to offset aging equipment with next generation fleets in demand.

We believe that the current frac market is relatively tight with near full utilization of available capacity.

Tight service supply has made service quality and reliability important for customers.

Given that we pride ourselves on both our service quality and fleet modernization program, these two factors may further strengthen Liberty’s competitive position.

During the third quarter of 2022, the posted WTI price traded at an average of $93.06 per barrel (“Bbl”), as compared to the third quarter of 2021 average of $70.58 per Bbl, and second quarter of 2022 average of $108.83 per Bbl.

In addition, the average domestic onshore rig count for the United States and Canada was 942 rigs reported in the third quarter of 2022, up from the third quarter of 2021 of 634 and an increase from the second quarter of 2022 of 810, according to a report from Baker Hughes.

Results of Operations

Three months ended June 30, 2022 compared to three months ended June 30, 2021

Three months ended June 30,

Three months ended September 30, 2022 compared to three months ended September 30, 2021

Three months ended September 30,

Description 2022 2021 Change

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Operating income (loss) 182,983 (39,566) 222,549

Other expense, net 5,030 462 4,568

Other expense (income), net 33,148 (940) 34,088

Net income (loss) before income taxes 149,835 (38,626) 188,461

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stockholders $ 146,953 $ (38,890) $ 185,843

Our revenue increased $361.3 million , or 62.2% , to $942.6 million for the three months ended June 30, 2022 compared to $581.3 million for the three months ended June 30, 2021.

Our revenue increased $534.5 million , or 81.8% , to $1.2 billion for the three months ended September 30, 2022 compared to $653.7 million for the three months ended September 30, 2021.

The increase in revenue is attributable to higher service pricing and an activity-driven increase in fleet utilization and efficiency commensurate with increased demand for hydraulic fracturing services.

Cost of Services

Cost of services (excluding depreciation, depletion and amortization) increased $191.8 million , or 36.7% , to $713.7 million for the three months ended June 30, 2022 compared to $522.0 million for the three months ended June 30, 2021.

The higher expense was primarily related to increases in materials and parts consumption and higher labor costs related to higher fleet utilization as well as ongoing inflationary increases impacting costs for materials, labor, and maintenance parts.

Cost of services (excluding depreciation, depletion, and amortization) increased $280.8 million , or 47.3% , to $874.5 million for the three months ended September 30, 2022 compared to $593.7 million for the three months ended September 30, 2021.

The increase in expense was primarily related to increases in materials and parts consumption and higher labor costs related to higher fleet utilization as well as ongoing inflationary increases impacting costs for materials, labor, and maintenance parts.

General and Administrative

General and administrative expenses increased $12.8 million , or 43.4% , to $42.2 million for the three months ended June 30, 2022 compared to $29.4 million for the three months ended June 30, 2021 primarily related to increases in performance-based variable compensation, labor cost inflation, and corporate costs related to increased activity.

General and administrative expenses increased $18.2 million , or 56.4% , to $50.5 million for the three months ended September 30, 2022 compared to $32.3 million for the three months ended September 30, 2021 primarily related to increases in performance-based variable compensation, labor cost inflation, and corporate costs related to increased activity.

Transaction, Severance and Other Costs

Transaction, severance and other costs decreased $0.8 million, or 26.8%, to $2.2 million for the three months ended June 30, 2022 compared to $3.0 million for the three months ended June 30, 2021.

The costs incurred in the three months ended June 30, 2021 primarily related to integration cost, investment banking, legal, accounting, and other professional services provided in connection with the OneStim Acquisition.

Such costs were lower during the three months ended June 30, 2022 as the integration efforts move towards completion.

Transaction, severance and other costs of $1.8 million and $1.6 million for the three months ended September 30, 2022 and 2021, respectively, consist of integration cost, investment banking, legal, accounting, and other professional services provided in connection with the OneStim Acquisition and PropX Acquisition.

Depreciation, Depletion, and Amortization

Depreciation, depletion and amortization expense increased $14.2 million , or 22.4% , to $77.4 million for the three months ended June 30, 2022 compared to $63.2 million for the three months ended June 30, 2021.

Depreciation, depletion, and amortization expense increased $17.0 million , or 25.8% , to $82.8 million for the three months ended September 30, 2022 compared to $65.9 million for the three months ended September 30, 2021.

The increase in 2022 was due to additional equipment placed in service since the prior year period and additional depreciation from property acquired in the PropX Acquisition.

Gain on Disposal of Assets

The Company recognized a gain on disposal of assets of $3.4 million for the three months ended June 30, 2022 primarily as a result of the sale of used field equipment and light duty trucks in a strong used vehicle and equipment market compared to a gain of $0.3 million for the three months ended June 30, 2021 due to miscellaneous equipment disposals.

All disposals recorded during the three months ended June 30, 2022 and 2021 were in the normal course of business.

The Company recognized a gain on disposal of assets of $4.3 million for the three months ended September 30, 2022 primarily as a result of the sale of used field equipment and light duty trucks in a strong used vehicle and equipment market compared to a gain of $0.1 million for the three months ended September 30, 2021 due to miscellaneous equipment disposals.

All disposals recorded during the three months ended September 30, 2022 and 2021 were in the normal course of business.

Operating Income (Loss)

The Company recorded operating income of $110.6 million for the three months ended June 30, 2022 compared to operating loss of $36.0 million for the three months ended June 30, 2021, an increase in operating results of $146.6 million, or 407.2%.

The Company recorded operating income of $183.0 million for the three months ended September 30, 2022 compared to operating loss of $39.6 million for the three months ended September 30, 2021, an increase in operating results of $222.5 million, or 562.5%.

The increase in operating income is primarily due to the $534.5 million, or 81.8%, increase in total revenue only partially offset by a $312.0 million increase in total operating expenses, the significant components of which are discussed above.

Other Expense, net

Other expense, net increased $4.6 million, or 988.7%, to $5.0 million for the three months ended June 30, 2022 compared to $0.5 million for the three months ended June 30, 2021.

Other expense, net is comprised of loss (gain) on remeasurement of liability under the TRAs and interest expense, net.

The Company remeasured the liability under the TRAs resulting in a loss of $0.2 million for the three months ended June 30, 2022, compared to a gain of $3.3 million for the three months ended June 30, 2021.

Additionally, interest expense, net increased $1.1 million as a result of increased borrowings under the credit facility.

Other Expense (Income), net

The Company recognized other expense of $33.1 million for the three months ended September 30, 2022 compared to other income of $0.9 million for the three months ended September 30, 2021.

Other expense (income), net is comprised of loss (gain) on remeasurement of liability under the TRAs, gain on investments, and interest expense, net.

The Company remeasured the liability under the TRAs resulting in a loss of $28.9 million for the three months ended September 30, 2022, compared to a gain of $4.9 million for the three months ended September 30, 2021.

A $2.5 million gain on investments was recorded during the three months ended September 30, 2022, compared to no gain for the three months ended September 30, 2021.

Additionally, interest expense, net increased $2.8 million as a result of increased borrowings under the credit facility along with higher interest rates.

Net Income (loss) before Income Taxes

The Company realized net income before income taxes of $105.6 million for the three months ended June 30, 2022 compared to net loss before income taxes of $36.5 million for the three months ended June 30, 2021.

The Company realized net income before income taxes of $149.8 million for the three months ended September 30, 2022 compared to net loss before income taxes of $38.6 million for the three months ended September 30, 2021.

The increase in income is primarily attributable to an increase in revenue, as discussed above, related to the increase in activity and service pricing.

Income Tax Expense

We recognized a tax expense of $0.2 million for the three months ended June 30, 2022, at an effective rate of 0.2%, compared to a tax expense of $16.0 million, at an effective rate of (43.9)%, recognized during the three months ended June 30, 2021.

The decrease in income tax expense is primarily attributable to the Company recording a valuation allowance on its U.S.

net deferred tax assets, beginning in the second quarter of 2021, resulting in income tax expense for that period, while in subsequent periods no tax expense or benefit is recognized on U.S.

state and federal income or loss.

Six months ended June 30, 2022 compared to six months ended June 30, 2021

Six months ended June 30,

Income tax expense increased $1.8 million to $2.6 million for the three months ended September 30, 2022, at an effective rate of 1.7%, compared to a tax expense of $0.8 million, at an effective rate of (1.9)%, recognized during the three months ended September 30, 2021.

The increase in income tax expense is primarily attributable to the increase in Company’s foreign operations as a valuation allowance was recorded on the Company’s U.S.

net deferred tax assets, beginning in the second quarter of 2021.

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021

Nine months ended September 30,

Description 2022 2021 Change

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Depreciation, depletion, and amortization 234,815 191,122 43,693

Loss (gain) on disposal of assets 1,236 (997) 2,233

Gain on disposal of assets (3,041) (1,076) (1,965)

Operating income (loss) 297,426 (117,789) 415,215

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stockholders $ 246,733 $ (123,655) $ 370,388

Our revenue increased $602.1 million, or 53.1%, to $1.7 billion for the six months ended June 30, 2022 compared to $1.1 billion for the six months ended June 30, 2021.

Our revenue increased $1.1 billion, or 63.6%, to $2.9 billion for the nine months ended September 30, 2022 compared to $1.8 billion for the nine months ended September 30, 2021.

Cost of Services

Cost of services (excluding depreciation, depletion and amortization) increased $362.8 million, or 35.5%, to $1.4 billion for the six months ended June 30, 2022 compared to $1.0 billion for the six months ended June 30, 2021.

Cost of services (excluding depreciation, depletion, and amortization) increased $643.6 million, or 39.9%, to $2.3 billion for the nine months ended September 30, 2022 compared to $1.6 billion for the nine months ended September 30, 2021.

The higher expense was primarily related to increases in materials and parts consumption and higher labor costs related to higher fleet utilization as well as inflationary increases impacting costs for materials, labor, and maintenance parts.

General and Administrative

General and administrative expenses increased $24.7 million, or 44.3%, to $80.5 million for the six months ended June 30, 2022 compared to $55.8 million for the six months ended June 30, 2021 primarily related to increases from reinstated bonus programs which had been temporarily suspended during the first quarter of 2021 as a result of the COVID-19 pandemic, labor cost inflation, and corporate costs related to increased levels of activity.

General and administrative expenses increased $42.9 million, or 48.7%, to $131.0 million for the nine months ended September 30, 2022 compared to $88.0 million for the nine months ended September 30, 2021 primarily related to increases from reinstated bonus programs which had been temporarily suspended during the first quarter of 2020 as a result of the COVID-19 pandemic, labor cost inflation, and corporate costs related to increased levels of activity.

Transaction, Severance and Other Costs

Transaction, severance and other costs decreased $7.1 million, or 66.8%, to $3.5 million for the six months ended June 30, 2022 compared to $10.6 million for the six months ended June 30, 2021.

The costs incurred in the six months ended June 30, 2021 primarily related to integration costs, investment banking, legal, accounting, and other professional services provided in connection with the OneStim Acquisition.

Such costs were lower during the six months ended June 30, 2022 as the integration efforts move towards completion.

Transaction, severance and other costs decreased $6.9 million, or 56.5%, to $5.3 million for the nine months ended September 30, 2022 compared to $12.2 million for the nine months ended September 30, 2021.

The costs incurred in the nine months ended September 30, 2021 primarily related to integration costs, investment banking, legal, accounting, and other professional services provided in connection with the OneStim Acquisition and PropX Acquisition.

Such costs were lower during the nine months ended September 30, 2022 as the integration efforts move towards completion.

Depreciation, Depletion, and Amortization

Depreciation, depletion and amortization expense increased $26.7 million, or 21.3%, to $152.0 million for the six months ended June 30, 2022 compared to $125.3 million for the six months ended June 30, 2021.

Depreciation, depletion, and amortization expense increased $43.7 million, or 22.9%, to $234.8 million for the nine months ended September 30, 2022 compared to $191.1 million for the nine months ended September 30, 2021.

The increase in 2022 was due to additional equipment placed in service since the prior year period and additional depreciation from property acquired in the PropX Acquisition.

Loss (gain) on disposal of assets

The Company recognized a loss on disposal of assets of $1.2 million for the six months ended June 30, 2022 primarily as a result of the sale of one and plan of sale for another non-strategic facility acquired in the OneStim Acquisition compared to a gain of $1.0 million for the six months ended June 30, 2021 due to miscellaneous equipment disposals in the normal course of business.

Gain on disposal of assets

Gain on disposal of assets increased $2.0 million, or 182.6%, to $3.0 million for the nine months ended September 30, 2022, compared to $1.1 million for the nine months ended September 30, 2021 due to miscellaneous equipment disposals in the normal course of business.

The increase was a result of the sale of used field equipment and light duty trucks in a strong used vehicle and equipment market offset by the loss on sale of one and plan of sale for two other non-strategic facilities acquired in the OneStim Acquisition

Operating Income (Loss)

The Company recorded operating income of $114.4 million for the six months ended June 30, 2022 compared to operating loss of $78.2 million for the six months ended June 30, 2021, The operating income is primarily due to the $602.1 million, or 53.1%, increase in total revenue partially offset by a $409.4 million increase in total operating expenses, the significant components of which are discussed above.

The Company recorded operating income of $297.4 million for the nine months ended September 30, 2022 compared to operating loss of $117.8 million for the nine months ended September 30, 2021, the operating income is primarily due to the $1.1 billion, or 63.6%, increase in total revenue partially offset by a $721.4 million increase in total operating expenses, the significant components of which are discussed above.

Other Expense, net

Other expense, net increased $9.3 million to $13.5 million for the six months ended June 30, 2022 compared to $4.2 million for the six months ended June 30, 2021.

Other expense, net is comprised of loss on remeasurement of liability under the TRAs and interest expense, net.

The Company remeasured the liability under the TRAs resulting in a loss of $4.3 million for the six months ended June 30, 2022, compared to a gain of $3.3 million for the six months ended June 30, 2021.

Additionally, interest expense increased $1.7 million as a result of increased borrowings under the credit facility.

Other expense, net increased $43.4 million to $46.7 million for the nine months ended September 30, 2022 compared to $3.3 million for the nine months ended September 30, 2021.

Other expense, net is comprised of loss on remeasurement of liability under the TRAs, gain on investments, and interest expense, net.

The Company remeasured the liability under the TRAs resulting in a loss of $33.2 million for the nine months ended September 30, 2022, compared to a gain of $8.3 million for the nine months ended September 30, 2021.

A $2.5 million gain on investments was recorded during the nine months ended September 30, 2022, compared to no gain for the nine months ended September 30, 2021.

Additionally, interest expense increased $4.4 million as a result of increased borrowings under the credit facility along with higher interest rates.

Net Income (Loss) before Income Taxes

The Company realized net income before income taxes of $100.9 million for the six months ended June 30, 2022 compared to net loss before income taxes of $82.4 million for the six months ended June 30, 2021.

The Company realized net income before income taxes of $250.8 million for the nine months ended September 30, 2022 compared to net loss before income taxes of $121.1 million for the nine months ended September 30, 2021.

The increase in results is primarily attributable to an increase in revenue, as discussed above, related to the increase in activity and service pricing.

Income Tax Expense

Income tax expense decreased $7.6 million to $1.1 million for the six months ended June 30, 2022, at an effective rate of 1.1%, compared to $8.6 million, at an effective rate of (10.5)%, recognized during the six months ended June 30, 2021.

Income tax expense decreased $5.8 million to $3.6 million for the nine months ended September 30, 2022, at an effective rate of 1.5%, compared to $9.4 million, at an effective rate of (7.8)%, recognized during the nine months ended September 30, 2021.

This decrease in income tax expense is primarily attributable to the Company recording a valuation allowance on its U.S.

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We define EBITDA as net income before interest, income taxes, and depreciation, depletion, and amortization.

We define Adjusted EBITDA as EBITDA adjusted to eliminate the effects of items such as non-cash stock based compensation, new fleet or new basin start-up costs, fleet lay-down costs, costs of asset acquisitions, gain or loss on the disposal of assets, bad debt reserves, transaction, severance, and other costs, the loss or gain on remeasurement of liability under our tax receivable agreements and other non-recurring expenses that management does not consider in assessing ongoing performance.

We define Adjusted EBITDA as EBITDA adjusted to eliminate the effects of items such as non-cash stock-based compensation, new fleet or new basin start-up costs, fleet lay-down costs, costs of asset acquisitions, gain or loss on the disposal of assets, bad debt reserves, transaction, severance, and other costs, the loss or gain on remeasurement of liability under our tax receivable agreements, the gain or loss on investments and other non-recurring expenses that management does not consider in assessing ongoing performance.

Our board of directors, management, investors, and lenders use EBITDA and Adjusted EBITDA to assess our financial performance because it allows them to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense), asset base (such as depreciation, depletion, and amortization) and other items that impact the comparability of financial results from period to period.

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The following tables present a reconciliation of EBITDA and Adjusted EBITDA to our net loss, which is the most directly comparable GAAP measure for the periods presented:

Three and six months ended June 30, 2022 compared to three and six months ended June 30, 2021:

Three and nine months ended September 30, 2022 compared to three and nine months ended September 30, 2021:

EBITDA and Adjusted EBITDA

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

Description 2022 2021 Change 2022 2021 Change

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Depreciation, depletion, and amortization 82,848 65,852 16,996 234,815 191,122 43,693

Interest expense 4,862 3,767 1,095 9,186 7,521 1,665

Interest expense, net 6,773 4,007 2,766 15,959 11,528 4,431

Income tax expense 2,572 753 1,819 3,637 9,402 (5,765)

3 unchanged sentences

Transaction, severance and other costs 1,767 1,556 211 5,293 12,173 (6,880)

(Gain) loss on disposal of assets (3,436) (277) (3,159) 1,236 (997) 2,233

Gain on disposal of assets (4,277) (79) (4,198) (3,041) (1,076) (1,965)

Provision for credit losses — — — — 745 (745)

Loss (gain) on remeasurement of liability under tax receivable agreements 28,900 (4,947) 33,847 33,233 (8,252) 41,485

Gain on investments $ (2,525) $ — $ (2,525) $ (2,525) $ — $ (2,525)

Adjusted EBITDA $ 276,853 $ 32,008 $ 244,845 $ 564,793 $ 100,266 $ 464,527

EBITDA was $187.8 million for the three months ended June 30, 2022 compared to $30.5 million for the three months ended June 30, 2021.

Adjusted EBITDA was $196.1 million for the three months ended June 30, 2022 compared to $36.6 million for the three months ended June 30, 2021.

The increases in EBITDA and Adjusted EBITDA primarily resulted from improved market conditions and activity levels as described above under the captions Revenue , Cost of Services , and General and Administrative Expenses for the Three Months Ended June 30, 2022 compared to the Three Months Ended June 30, 2021 .

EBITDA was $262.1 million for the six months ended June 30, 2022 compared to $50.4 million for the six months ended June 30, 2021.

Adjusted EBITDA was $287.9 million for the six months ended June 30, 2022 compared to $68.3 million for the six months ended June 30, 2021.

The increases in EBITDA and Adjusted EBITDA primarily resulted from improved market conditions and activity levels as described above under the captions Revenue , Cost of Services , and General and Administrative Expenses for the Six Months Ended June 30, 2022 compared to the Six Months Ended June 30, 2021 .

EBITDA was $239.5 million for the three months ended September 30, 2022 compared to $31.2 million for the three months ended September 30, 2021.

Adjusted EBITDA was $276.9 million for the three months ended September 30, 2022 compared to $32.0 million for the three months ended September 30, 2021.

The increases in EBITDA and Adjusted EBITDA primarily resulted from improved market conditions and activity levels as described above under the captions Revenue , Cost of Services , and General and Administrative Expenses for the Three Months Ended September 30, 2022 compared to the Three Months Ended September 30, 2021 .

EBITDA was $501.5 million for the nine months ended September 30, 2022 compared to $81.6 million for the nine months ended September 30, 2021.

Adjusted EBITDA was $564.8 million for the nine months ended September 30, 2022 compared to $100.3 million for the nine months ended September 30, 2021.

The increases in EBITDA and Adjusted EBITDA primarily resulted from improved market conditions and activity levels as described above under the captions Revenue , Cost of Services , and General and Administrative Expenses for the Nine months ended September 30, 2022 compared to the Nine months ended September 30, 2021 .

Liquidity and Capital Resources

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Our primary uses of capital have been capital expenditures to support organic growth and funding ongoing operations, including maintenance and fleet upgrades.

Cash and cash equivalents increased by $21.5 million to $41.5 million as of June 30, 2022 compared to $20.0 million as of December 31, 2021, while working capital excluding cash and current liabilities under debt and lease arrangements increased $134.9 million.

We have $350.0 million committed under the ABL Facility, increased to $425 million subsequent to June 30, 2022, see Note 17—Subsequent Events to the consolidated financial statements included in “Item 1.

Financial Statements (unaudited)” for further details, subject to certain borrowing base limitations based on a percentage of eligible accounts receivable and inventory available to finance working capital needs.

As of June 30, 2022, the borrowing base was calculated to be $350.0 million, and the Company had $150.0 million outstanding, in addition to a letter of credit in the amount of $1.4 million, with $198.6 million of remaining availability.

Cash and cash equivalents increased by $4.0 million to $24.0 million as of September 30, 2022 compared to $20.0 million as of December 31, 2021, while working capital excluding cash and current liabilities under debt and lease arrangements increased $224.1 million.

We have $425.0 million committed under the ABL Facility subject to certain borrowing base limitations based on a percentage of eligible accounts receivable and inventory available to finance working capital needs.

As of September 30, 2022, the borrowing base was calculated to be $425.0 million, and the Company had $150.0 million outstanding, in addition to a letter of credit in the amount of $1.4 million, with $273.6 million of remaining availability.

Additionally, we have $105.2 million borrowings remaining on the Term Loan Facility, which was originally $175.0 million.

The ABL Facility has a maturity date of the earlier of (a) October 22, 2026 and (b) to the extent the debt under the Term Loan Facility remains outstanding 90 days prior to the final maturity of the Term Loan Facility, which matures on September 19, 2024.

On July 18, 2022, the Company entered into an amendment to the ABL Facility (the “Seventh ABL Amendment”).

The Seventh ABL Amendment amended certain terms, provisions, and covenants of the ABL Facility, including among other things:

(i) increasing the maximum borrowing amount by $75.0 million to $425.0 million, subject to certain borrowing base limitations based on percentage of eligible accounts receivable and inventory, (ii) modifying certain covenant and reporting-related baskets, and (iii) replacing LIBOR with the secured overnight financing rate (“SOFR”) as the interest rate benchmark.

On August 12, 2022, the Company entered into an amendment to the Term Loan Facility (the “Sixth Term Loan Amendment”).

The Sixth Term Loan Amendment amended certain terms, provisions and covenants of the Term Loan Facility, including among other things:

(i) a waiver of the fixed charge coverage ratio requirements for up to $100.0 million of restricted payments made in connection with the Company’s 2022 stock repurchase program for its common stock;

(ii) the addition of a minimum liquidity requirement of $150.0 million in order to make selected restricted payments, including those made under the 2022 stock repurchase program;

(iii) the modification of certain covenant and reporting-related terms, including an increase in the allowance for permitted purchase money indebtedness from $50.0 million to $70.0 million;

(iv) the addition of a prepayment premium of 1.0% through the first anniversary of the Sixth Term Loan Amendment effective date;

and (v) the addition and modification of several provisions to replace LIBOR with SOFR as the interest rate benchmark.

The Credit Facilities contain covenants that restrict our ability to take certain actions.

At June 30, 2022, the Company was in compliance with all debt covenants.

At September 30, 2022, the Company was in compliance with all debt covenants.

See Note 8 —Debt to the consolidated financial statements included in “Item 1.

Financial Statements (unaudited)” for further details.

We have no material off balance sheet arrangements as of June 30, 2022, except for purchase commitments under supply agreements as disclosed above under “Item 1.

We have no material off balance sheet arrangements as of September 30, 2022, except for purchase commitments under supply agreements as disclosed above under “Item 1.

Financial Statements—Note 15—Commitments & Contingencies.” As such, we are not materially exposed to any other financing, liquidity, market, or credit risk that could arise if we had engaged in such financing arrangements.

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Shares may be repurchased from time to time for cash in the open market transactions, through block trades, in privately negotiated transactions, through derivative transactions or by other means in accordance with applicable federal securities laws.

The timing and the amount of repurchases, if any, will be determined by the Company at its discretion based on an evaluation of market conditions, capital allocation alternatives and other factors.

The timing and the amount of repurchases will be determined by the Company at its discretion based on an evaluation of market conditions, capital allocation alternatives and other factors.

The share repurchase program does not require us to purchase any dollar amount or number of shares of our Class A Common Stock and may be modified, suspended, extended or terminated at any time without prior notice.

1 unchanged sentence

The following table summarizes our cash flows for the periods indicated:

Six Months Ended June 30,

Nine Months Ended September 30,

Description 2022 2021 Change

1 unchanged sentence

Net cash provided by operating activities

$ 292,610 $ 80,142 $ 212,468

Net cash used in investing activities

Net cash provided by (used in) financing activities 118,758 (8,175) 126,933

Analysis of Cash Flow Changes Between the Six Months Ended June 30, 2022 and 2021

(333,875) (119,319) (214,556)

Net cash provided by financing activities

45,642 5,149 40,493

Analysis of Cash Flow Changes Between the Nine Months Ended September 30, 2022 and 2021

Operating Activities .

Net cash provided by operating activities was $135.6 million for the six month s ended June 30, 2022, compared to $35.6 million for the six months ended June 30, 2021.

The $100.1 million increase in cash from operating activities is primarily attributable to a $602.1 million increase in revenues, offset by a $380.5 million increase in cash operating expenses and a $134.3 million decrease in cash from changes in working capital for the six months ended June 30, 2022, compared to a $14.4 million decrease in cash from changes in working capital for the six months ended June 30, 2021.

Net cash provided by operating activities was $292.6 million for the nine month s ended September 30, 2022, compared to $80.1 million for the nine months ended September 30, 2021.

The $212.5 million increase in cash from operating activities is primarily attributable to a $1.1 billion increase in revenues, offset by a $679.6 million increase in cash operating expenses and a $238.5 million decrease in cash from changes in working capital for the nine months ended September 30, 2022, compared to a $2.8 million increase in cash from changes in working capital for the nine months ended September 30, 2021.

Investing Activities .

Net cash used in investing activities was $232.8 million for the six months ended June 30, 2022, compared to $65.9 million for the six months ended June 30, 2021.

Cash used in investing activities was higher during the six months ended June 30, 2022, compared to the six months ended June 30, 2021 as the Company continued to invest in equipment, including building new digiFrac™ fleets, to support increased customer demand in next generation equipment and technology.

Net cash used in investing activities was $333.9 million for the nine months ended September 30, 2022, compared to $119.3 million for the nine months ended September 30, 2021.

Cash used in investing activities was higher during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021 as the Company continued to invest in equipment, including building new digiFrac™ fleets and deploying additional fleets, to support increased customer demand in next generation equipment and technology.

Financing Activities .

Net cash provided by financing activities was $118.8 million for the six months ended June 30, 2022, compared to net cash used in financing activities of $8.2 million for the six months ended June 30, 2021.

The $126.9 million increase in cash provided by financing activities was primarily due to net borrowings of $132.0 million on the ABL

Facility during the six months ended June 30, 2022, compared to no net borrowings on the ABL Facility for the six months ended June 30, 2021.

Additionally, there was a $1.4 million decrease in payments on finance lease liabilities as the number of finance leases active for the full period has decreased since June 30, 2021.

Net cash provided by financing activities was $45.6 million for the nine months ended September 30, 2022, compared to net cash provided by financing activities of $5.1 million for the nine months ended September 30, 2021.

The $40.5 million increase in cash provided by financing activities was primarily due to net borrowings of $132.0 million on the ABL Facility during the nine months ended September 30, 2022, compared to $16.0 million net borrowings on the ABL Facility for the nine months ended September 30, 2021.

Additionally, there was a $1.4 million decrease in payments on finance lease liabilities as the asset value of finance leases active for the full period has decreased since September 30, 2021.

These changes were offset by a $70.1 million increase in cash payments made in connection with share repurchases for the nine months ended September 30, 2022, compared to cash payments of $0.0 million for the nine months ended September 30, 2021.

Cash Requirements

Our material cash commitments consist primarily of obligations under long-term debt, TRAs, finance and operating leases for property and equipment, and purchase obligations as part of normal operations.

We have no material off balance sheet arrangements as of June 30, 2022, except for obligations of $27.4 million payable within 2022, $18.2 million in 2023, and $4.2 million payable thereafter.

Our material cash commitments consist primarily of obligations under long-term debt, TRAs, finance and operating leases for property and equipment, cash used to pay for repurchases of shares of our Class A Common Stock, and purchase obligations as part of normal operations.

We have no material off balance sheet arrangements as of September 30, 2022, except for obligations of $44.5 million payable within 2022, $47.3 million in 2023, and $4.2 million payable thereafter.

See Note 15 —Commitments & Contingencies to the unaudited condensed consolidated financial statements included in “Item 1.

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The Company is also subject to Canada federal and provincial income tax on its foreign operations.

The combined effective tax rate applicable to the Company for the six months ended June 30, 2022 and 2021 was 1.1% and (10.5)%, respectively.

The combined effective tax rate applicable to the Company for the nine months ended September 30, 2022 and 2021 was 1.5% and (7.8)%, respectively.

The Company’s effective tax rate is significantly less than the federal statutory income tax rate of 21.0% due to the Company recording a valuation allowance on its U.S.

net deferred tax assets as of June 30, 2022, due to entering into a three year cumulative pre-tax book loss position, primarily as a result of COVID-19 related losses in 2021.

The Company’s effective tax rate is also less than the statutory rate because of foreign operations for 2021, and the non-controlling interest’s share of Liberty LLC’s pass-through results for federal, state and local income tax reporting, upon which no taxes are payable by the Company for the six months ended June 30, 2022 and 2021.

The Company recognized income tax expense of $0.2 million and $1.1 million for the three and six months ended June 30, 2022, respectively, and $16.0 million and $8.6 million for the three and six months ended June 30, 2021, respectively, which included the impact of the initial recording of a valuation allowance on a portion of the Company’s deferred tax assets.

Per the Coronavirus Aid, Relief and Economic Security (“CARES”) Act enacted on March 27, 2020, net operating losses (“NOL”) incurred in 2019, and 2020 may be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes.

net deferred tax assets as of September 30, 2022, due to entering into a three year cumulative pre-tax book loss position, primarily as a result of COVID-19 related losses in 2021.

The Company recognized income tax expense of $2.6 million and $3.6 million for the three and nine months ended September 30, 2022, respectively, and $0.8 million and $9.4 million for the three and nine months ended September 30, 2021, respectively, which included the impact of recording a valuation allowance on a portion of the Company’s net deferred tax assets.

previously paid income taxes.

The Company has previously applied for and expects to receive a NOL carryback refund to recover $5.5 million of cash taxes paid by the Company in 2018.

This amount has been reflected as a receivable in the prepaids and other current assets line item in the accompanying audited consolidated balance sheets.

We recorded a valuation allowance in the second quarter of 2021, against all of our deferred tax assets as of December 31, 2020 and continue to record a valuation allowance for the quarter ended September 30, 2022.

We intend to continue to maintain a full valuation allowance on our net deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.

However, given our current earnings and anticipated future earnings, we believe that there is a reasonable possibility that within the next few quarters, including as soon as the fourth quarter of 2022, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion or all of the valuation allowance will no longer be needed.

Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to the income tax expense for the period the release is recorded.

In addition, release of the valuation allowance would result in an increase in the tax receivable agreement liability and an increase in the tax receivable agreement loss for the period the release is recorded.

For the quarter ended September 30, 2022, the unrecognized TRA liability is approximately $50 million.

The valuation allowance as of December 31, 2021 was $91.3 million and no additional income tax benefit or expense has been recorded as a result of the valuation allowance through the quarter ended September 30, 2022.

Refer to Note 12— Income Taxes to the consolidated financial statements for additional information related to income tax expense.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements