What changed in this filing

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Item 1. Business

2023-02-10 compared with 2022-02-22 · 40 added, 60 removed, 254 unchanged (28% of the section changed)

We are a leading integrated oilfield services and technology company focused on providing innovative hydraulic services and related technologies to onshore oil and natural gas exploration and production (“E&P”) companies in North America.

We are a leading integrated energy services and technology company focused on providing innovative hydraulic services and related technologies to onshore oil and natural gas exploration and production (“E&P”) companies in North America.

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.

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We also have wireline operations as a result of the acquisition of Schlumberger’s OneStim business in December 2020, whereby we obtained certain assets and liabilities of the OneStim business including OneStim’s hydraulic fracturing pressure pumping services business in onshore United States and Canada (the “OneStim Acquisition”).

Our wireline units consist of a truck equipped with a spool of wireline that is lowered into wells to convey specialized tools or equipment, such as perforating guns and charges, that are necessary to connect the wellbore with the target formation.

Our wireline units consist of a truck equipped with a spool of wireline that is lowered into wells to convey specialized tools or equipment, such as perforating guns and charges, which are necessary to connect the wellbore with the target formation.

This operation is performed between each hydraulic fracturing stage.

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In addition, we also offer our wireline service on a stand-alone basis.

As a result of the PropX Acquisition, which was completed in October 2021 (described in this Annual Report under “—Recent Developments—PropX Acquisition”), we are now a leading provider of last-mile proppant delivery solutions, including proppant handling equipment and logistics software across North America.

As a result of the PropX Acquisition, which was completed in October 2021, we are now a leading provider of last-mile proppant delivery solutions, including proppant handling equipment and logistics software across North America.

PropX offers innovative environmentally friendly technology with optimized dry and wet sand containers and wellsite proppant handling equipment that drive logistics efficiency and reduce noise and emissions.

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We have grown from one active hydraulic fracturing fleet as of December 2011 to over 40 active fleets as of December 31, 2022.

We are focused on providing “next-generation” frac fleets and technologies to assist our customers with completing their wells in an ESG-friendly manner.

We are focused on providing “next-generation” frac fleets and technologies to assist our customers with completing their wells in an environmental, social, and governance (“ESG”)-friendly manner.

Our founders and management are pioneers in the development of data-driven hydraulic fracturing technologies for application in shale plays.

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Taken together, these technologies have enabled us to be a leader in hydraulic fracture design innovation and application.

Our management team has an average of over 20 years of oilfield services experience, and the majority of our management team worked together before founding our company.

Our management team has an average of over 20 years of energy services experience, and the majority of our management team worked together before founding our company.

We believe technical innovation and strong relationships with our customer and supplier bases distinguish us from our competitors and are the foundations of our business.

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(iii) hydraulic fracturing fluid systems tailored to the specific reservoir properties in the basins in which we operate and (iv) our dual fuel dynamic gas blending fleets that allow our engines to run diesel or a combination of diesel and natural gas, to optimize fuel use, reduce emissions and lower costs;

(v) the successful test of digiFrac™, our innovative, purpose-built electric frac pump that has approximately 25% lower CO2e emission profile than the Tier IV DGB;

and (vi) our PropX wet sand handling technology which eliminates the need to dry sand, enabling the deployment of mobile mines nearer to wellsites.

In addition, our integrated supply chain includes proppant, chemicals, equipment, logistics and integrated software which we believe promotes wellsite efficiency and leads to more pumping hours and higher productivity throughout the year to better service our customers.

In order to achieve our technological objectives, we carefully manage our liquidity and debt position to promote operational flexibility and invest in the business throughout the full commodity cycle.

Recent Developments

PropX Acquisition

On October 26, 2021, the Company acquired Proppant Express Investments, LLC in exchange for $11.9 million in cash and 3,405,526 shares of Class A Common Stock and 2,441,010 shares of Class B common stock, par value $0.01 per share (“Class B Common Stock” and, together with Class A Common Stock, the “Common Stock”), and 2,441,010 units of Liberty LLC (“Liberty LLC Units”), for total consideration of $103.0 million, based on the Class A Common Stock closing price of $15.58 on October 26, 2021, subject to customary post-closing adjustments (the “PropX Acquisition”).

The Liberty LLC Units are redeemable for an equivalent number of shares of Class A Common Stock at any time, at the election of the shareholder.

See Note 3 —Acquisitions to the consolidated financial statements included in “Item 8.

Financial Statements and Supplementary Data.”

Joinder to Liberty LLC Agreement

In connection with the PropX Acquisition, each of the sellers and certain of their investors that received Liberty LLC units, entered into a joinder to the Second Amended and Restated Limited Liability Company Agreement of Liberty LLC (the “Liberty LLC Agreement”).

Under the Liberty LLC Agreement, holders, subject to certain limitations, have the right, pursuant to a redemption right, to cause Liberty LLC to acquire all or a portion of their Liberty LLC Units for, at Liberty LLC’s election, (i) shares of our Class A Common Stock at a redemption ratio of one share of Class A Common Stock for each Liberty LLC Unit redeemed, subject to conversion rate adjustments for stock splits, stock dividends and reclassification or (ii) an equivalent amount of cash.

Alternatively, upon the exercise of the redemption right, we (instead of Liberty LLC) have a call right to acquire each tendered Liberty LLC Unit directly from the holder for, at its election, (x) one share of Class A Common Stock or (y) an equivalent amount of cash.

In addition, upon a change of control, we have the right to require each holder of Liberty LLC Units (other than us) to exercise its redemption right with respect to some or all of such unitholder’s Liberty LLC Units.

As the holders redeem their Liberty LLC Units, our membership interest in Liberty LLC will be correspondingly increased, the number of shares of Class A Common Stock outstanding will be increased, and the number of shares of Class B Common Stock outstanding will be reduced.

On October 22, 2021, we entered into an amendment with respect to our ABL Facility.

Under the terms of the amendment, the maximum borrowing amount was increased to $350.0 million, subject to certain borrowing base limitations based on a percentage of eligible accounts receivable and inventory (with the ability to request an increase in the size of the ABL Facility by $75 million).

Additionally, limits under certain covenants related to allowable indebtedness and other activities were expanded.

The ABL Facility maturity was extended to 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.

All other financial provisions under the original agreement are still applicable to the ABL Facility aside from the aforementioned changes to the borrowing base.

Term Loan Facility

On October 22, 2021, we entered into a Fifth Amendment to Credit Agreement, Second Amendment to Guaranty and Security Agreement and Termination of Right of First Offer Letter (the “Term Loan Credit Agreement Amendment”).

The Term Loan Credit Agreement Amendment further amends the credit agreement and guaranty and security agreement and terminates the right of first offer letter originally entered into by the parties on September 19, 2017 (the “Right of First Offer Letter”), which governs our Term Loan Facility.

Along with other revisions, the Term Loan Credit Agreement Amendment (i) increased certain indebtedness baskets;

(ii) provided additional flexibility for a potential future internal structuring;

(iii) extended the maturity date through September 19, 2024;

and (iv) terminated a right of first offer in favor of the Term Loan Facility lenders.

While we recognize the various environmental and social impacts of hydrocarbon energy, we believe that access to life-enhancing modern energy presents the most pressing global energy challenge.

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• In 2021, we announced the successful test of digiFrac™, our innovative, purpose-built electric frac pump that has approximately a 25% lower CO2e emission profile than the Tier IV DGB.

We have entered into two multi-year arrangements with customers for digiFrac fleets and expect to deliver the first fleet into commercial service in 2022.

We have entered into two multi-year arrangements with customers for digiFrac fleets and commenced delivery of commercial pumps in the fourth quarter of 2022.

• In October 2021, we closed the acquisition of PropX.

PropX offers innovative, environmentally friendly technology with optimized dry and wet sand containers and wellsite proppant handling equipment that drive logistics efficiency and reduce noise and emissions.

• In August 2022, we released our second annual Bettering Human Lives report, highlighting the importance of energy in the modern world and Liberty’s ESG 2021 data, which was updated to cover the critical link hydrocarbons play in geopolitics, food, and their role in enabling the modern world.

We are continuously committed to engagement in our communities.

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In 2022, over 100 students received Liberty scholarships.

We have numerous other efforts targeting schools, veterans, poverty abatement, low-income housing, criminal justice reform and job opportunities for those who had a disadvantaged start in life.

In 2021, we launched Love, Liberty, our matching program that is aimed to encourage our employees to get involved in their communities.

We have numerous other efforts encompassing our three pillars of outreach:

education, military services, and alleviating poverty.

Since launching Liberty’s matching program in 2021, Love Liberty, we have supported an additional 25 organizations near and dear to our employee’s hearts across all districts.

Every year we strive to create lasting relationships and impacts throughout all our communities with the mission to better human lives through the growth of individual liberty and opportunity.

Cyclical Nature of Industry

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Global supply and demand for oil and the domestic supply and demand for natural gas are critical in assessing industry outlook.

Demand for oil and natural gas is cyclical and subject to large, rapid fluctuations, such as those experienced in 2020.

Demand for oil and natural gas is cyclical and subject to large, rapid fluctuations.

E&P companies tend to increase capital expenditures in response to increases in oil and natural gas prices, which generally results in greater revenues and profits for oilfield service companies such as ours.

Increased capital expenditures also ultimately lead to greater production, which historically has resulted in increased supplies of hydrocarbons and reduced prices which in turn tend to drive a future reduction in E&P companies capital expenditures and reduce demand for oilfield services.

For these reasons, the results of our operations may fluctuate from quarter to quarter and from year to year, and these fluctuations may distort comparisons of results across periods.

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Our emphasis on data analytics is also deployed during job execution through the use of real-time feedback on variables that maximizes customer returns by improving cost-effective hydraulic fracturing operations.

Today, we hold over 500 patents and patent licenses relating to our engineering and technology solutions.

Today, we hold approximately 500 patents and patent licenses relating to our engineering and technology solutions.

We seek patent and trademark protections for our technology when we deem it prudent, and we aggressively pursue protection of these rights when warranted.

We believe our patents, trademarks, and other protections for our proprietary technologies are adequate for the conduct of our business and that no single patent or trademark is critical to our business.

In addition, we rely, to a great extent,

on the technical expertise and know-how of our personnel to maintain our competitive position, and we take commercially reasonable measures to protect trade secrets and other confidential and/or proprietary information relating to the technologies we develop.

In addition, we rely, to a great extent, on the technical expertise and know-how of our personnel to maintain our competitive position, and we take commercially reasonable measures to protect trade secrets and other confidential and/or proprietary information relating to the technologies we develop.

Human Capital Management

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We consistently assess the current business environment and labor market to refine our compensation and benefits programs in order to attract and retain top talent in our industry.

We temporarily implemented a company-wide employee furlough plan in connection with COVID-19 due to the uncertain level of frac demand we experienced during the second and third quarters of 2020, but as of September 30, 2020, all employees were returned from furlough.

During 2021, we experienced increased turnover in field employee positions;

however that trend improved in the later part of the year and into 2022.

We strive to promote from within our existing employee base to manage new hydraulic fracturing fleets and organically grow our operating expertise.

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Our employee-centered focus and reputation for safety has enabled us to obtain projects from industry leaders with some of the most demanding safety and operational requirements.

We have implemented and continue to implement safety measures in all of our facilities to address the COVID-19 pandemic.

Programs and Benefits

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We currently own, lease, or operate numerous properties that have been used for manufacturing and other operations for many years.

These properties and the substances disposed or released on them may be subject to CERCLA and analogous state laws.

These properties and the substances disposed or released on them may be

subject to CERCLA and analogous state laws.

Under such laws, we could be required to remove previously disposed substances and wastes, remediate contaminated property, or perform remedial operations to prevent future contamination.

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While these rules may not be directly applicable to our business, they are applicable to the business of our customers.

Promulgation of stricter permitting requirements could delay or impair our or our customers’ ability to obtain air emission permits, to develop new wells and to continue to operate existing wells, and result in fewer wells being drilled or redeveloped, causing a decrease in demand for our services.

Promulgation of stricter permitting or emission control requirements could delay or impair our or our customers’ ability to obtain air emission permits, to develop new wells and to continue to operate existing wells, and result in fewer wells being drilled or redeveloped, causing a decrease in demand for our services.

Federal and state regulatory agencies can impose administrative, civil, and criminal penalties, as well as injunctive relief, for non-compliance with air permits or other requirements of the CAA and associated state laws and regulations.

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Although we are not likely to become subject to greenhouse gas emissions permitting and best available control technology requirements because none of our facilities are presently major sources of greenhouse gas emissions, such requirements could become applicable to our customers.

In addition, the EPA has used the CAA to impose additional greenhouse gas emissions control requirements upon our customers.

These additional requirements on greenhouse gas emissions from our customers could have an adverse effect on their costs of operations or financial performance, thereby adversely affecting our business, financial condition, and results of operations.

In addition, the EPA has used the CAA to impose additional greenhouse gas emissions control

requirements upon our customers.

The recently passed Inflation Reduction Act (“IRA 2022”) imposes a methane emissions charge on certain emissions from specific classes of sources that are required to report their greenhouse gas emissions.

The fee will start in calendar year 2024.

This fee as well as additional requirements on greenhouse gas emissions from our customers could have an adverse effect on their costs of operations or financial performance, thereby adversely affecting our business, financial condition, and results of operations.

Also, the U.S.

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However, federal agencies have asserted regulatory authority over certain aspects of the process.

fracturing operations and concerns about the triggering of seismic activity by the injection of produced waters into underground wells.

Specifically, there is considerable uncertainty surrounding regulation of the emissions of methane, which may be released during hydraulic fracturing, chemicals used in the hydraulic fracturing process, the discharge of wastewater from hydraulic fracturing operations and concerns about the triggering of seismic activity by the injection of produced waters into underground wells.

Certain proposed regulation could make it significantly more difficult and/or costly to drill and operate oil and gas wells.

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Fish and Wildlife Service (the “FWS”) must also designate the species’ critical habitat and suitable habitat as part of the effort to ensure survival of the species.

A critical habitat or suitable habitat designation could result in further material restrictions to land use and may materially delay or prohibit land access for oil and natural gas development.

A critical habitat or suitable habitat designation could result in further material restrictions to land use and may materially delay or prohibit land access for oil and natural gas development and development of sand mines used for hydraulic fracturing.

Similar protections are offered to migratory birds under the Migratory Bird Treaty Act (the “MBTA”), which makes it illegal to, among other things, hunt, capture, kill, possess, sell, or purchase migratory birds, nests, or eggs without a permit.

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Future implementation of the rules implementing the ESA and the MBTA are uncertain.

If our customers were to have areas within their business and operations designated as critical or suitable habitat for a protected species, it could decrease demand for our services and have a material adverse effect on our business.

If we or our customers were to have areas within our respective operations designated as critical or suitable habitat for a protected species, it could decrease demand for our services and have a material adverse effect on our business.

Canadian Laws and Regulations

Companies such as us offering oilfield services that include hydraulic fracturing, engineering, and wireline services in the Province of Alberta in Canada are regulated by both the provincial government of Alberta (“Province”) and the federal government of Canada (“Canada”).

Companies such as us offering energy services that include hydraulic fracturing, engineering, and wireline services in the Province of Alberta in Canada are regulated by both the provincial government of Alberta (“Province”) and the federal government of Canada (“Canada”).

This includes, but is not limited to, regulation related to environmental protection legislation, climate change legislation, fracking legislation, and legislation related to wildlife.

In addition to being regulated by the Province and Canada, oilfield services companies may also be subject to other international, national, and subnational laws, regulations, and policies.

In addition to being regulated by the Province and Canada, energy services companies may also be subject to other international, national, and subnational laws, regulations, and policies.

Provincial Legislation

Oilfield services companies are primarily regulated by provincial governments in Canada.

Energy services companies are primarily regulated by provincial governments in Canada.

For example, in Alberta, provincial legislation potentially applicable to our Canadian operations includes the Environmental Protection and Enhancement Act, RSA 2000, e E-12.

This Act promotes the protection, enhancement and wise use of the environment, and deals with matters such as air emissions, water discharges, and the handling of hazardous substances and waste control (for example, under the Waste Control Regulation, Alta Reg 192/1996).

Conservation Act, RSA 2000, c O-6), legislation establishing regulatory bodies overseeing oil and gas and electricity in Alberta (the Responsible Energy Development Act, SA 2012, c R-17.3 and the Alberta Utilities Commission Act, SA 2007, c A-37.2), legislation governing the removal of gas or propane from Alberta (the Gas Resources Preservation Act, RSA 2000, c G-4), legislation to effect conservation and prevent waste of the oil sands resource in Alberta (the Oil Sands Conservation Act, RSA 2000, c O-7) and legislation governing worker safety (the Occupational Health and Safety Act, SA 2017, c O-2.1).

The Alberta Energy Regulator has a number directives that are applicable to oilfield services companies, such as Directive 050 which addresses salinity ranges for soils that can receive drilling wastes, and Directive 058, which sets out regulatory requirements for the handling, treatment, and disposal of upstream oilfield waste.

Other potentially applicable provincial legislation in Alberta includes legislation directed at the transportation of dangerous goods, including oil (the Dangerous Goods Transportation and Handling Act, RSA 2000, c D-4 and associated regulations), legislation intended to provide for the responsible management of oil wells and associated sites (the Oil and Gas Conservation Act, RSA 2000, c O-6), legislation establishing regulatory bodies overseeing oil and gas and electricity in Alberta (the Responsible Energy Development Act, SA 2012, c R-17.3 and the Alberta Utilities Commission Act, SA 2007, c A-37.2), legislation governing the removal of gas or propane from Alberta (the Gas Resources Preservation Act, RSA 2000, c G-4), legislation to effect conservation and prevent waste of the oil sands resource in Alberta (the Oil Sands Conservation Act, RSA 2000, c O-7) and legislation governing worker safety (the Occupational Health and Safety Act, SA 2017, c O-2.1).

The Alberta Energy Regulator has a number of directives that are applicable to energy services companies, such as Directive 050 which addresses salinity ranges for soils that can receive drilling wastes, and Directive 058, which sets out regulatory requirements for the handling, treatment, and disposal of upstream oilfield waste.

Other provinces in Canada have their own statutory regime applicable to oilfield service companies.

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Leased (through May 31, 2031)

Gainesville, TX 170,000 sq.

Leased (through August 31, 2023)

Shreveport, LA 225,000 sq ft.

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ft on 15 acres Owned

Farmington, NM 34,000 sq.

ft on 30 acres Owned

El Reno, OK 80,000 sq.

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Further, we have a proven track record of executing our customers’ plans and delivering on time and in line with expected costs.

Our customer base includes a broad range of integrated and independent E&P companies, including some of the largest E&P companies in our areas of operation such as Occidental Petroleum Corp, ConocoPhillips Company and ExxonMobil.

We believe our customer relationships enabled us to maintain higher utilization than many of our competitors during the downturn resulting from the COVID-19 pandemic.

Our technological innovations, customer-tailored approach and track record of consistently providing high-quality, safe and reliable service has allowed us to develop long-term customer partnerships, which we believe makes us the service provider of choice for many of our customers.

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We provide services in various geographic regions across the United States and Canada, and our competitors include many large and small oilfield service providers, including some of the largest integrated service companies.

Our hydraulic fracturing services compete with large, integrated companies such as Halliburton Company as well as other companies including Calfrac Well Services Ltd., FTS International, Inc., NexTier Oilfield Solutions Inc., Universal Pressure Pumping, Inc., ProPetro Services, Inc., RPC, Inc., STEP Energy Services and U.S.

Well Services, Inc.

In addition, our industry is highly fragmented and we compete regionally with a significant number of smaller service providers.

Our hydraulic fracturing services compete with large, integrated companies such as Halliburton Company as well as other companies including Calfrac Well Services Ltd., ProFrac Holding Corp., NexTier Oilfield Solutions Inc., Universal Pressure Pumping, Inc., ProPetro Services, Inc., RPC, Inc., and STEP Energy Services.

In addition, we compete regionally with smaller service providers.

We believe that the principal competitive factors in the markets we serve are technical expertise, equipment capacity, work force competency, efficiency, safety record, reputation, experience and price.

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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-K

Item 1. Business