Liberty Oilfield Services Inc. (LBRT) Q1 2021 Earnings Call Transcript

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Liberty Oilfield Services Inc. (LBRT 1.10%)
Q1 2021 Earnings Call
Apr 28, 2021, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the Liberty Oilfield Services First Quarter 2021 Earnings Conference Call. [Operator Instructions] Some of our comments today may include forward-looking statements reflecting the company's view about future prospects, revenues, expenses or profits. These matters involve risks and uncertainties that could cause actual results to differ materially from our forward-looking statements. These statements reflect the company's beliefs based on current conditions that are subject to certain risks and uncertainties that are detailed in the company's earnings release and other public filings. Our comments today also include non-GAAP financial and operational measures. These non-GAAP measures, including EBITDA, adjusted EBITDA and pre-tax return on capital employed are not a substitute for GAAP measures and may not be comparable to similar measures of other companies. A reconciliation of net income to EBITDA and adjusted EBITDA and the calculation of pre-tax return on capital employed, as discussed on this call, are presented in the company's earnings release, which is available on its website.

I would now like to turn the conference over to Liberty's CEO, Chris Wright. Please go ahead.

Chris Wright -- Chief Executive Officer & Chairman of the Board

Thank you, Ian. Good morning, everyone, and thank you for joining us to discuss our first quarter 2021 operational and financial results. We're excited to embark on a new era for Liberty. Completing our first quarter with an expanded platform as a fully integrated completion services, engineering and diagnostics company. We're pleased to report $552 million in revenue and $32 million in adjusted EBITDA in the first quarter. The Liberty OneStim combination has been extraordinary. We've doubled the size of our business, while only growing G&A by approximately 15% and depreciation and amortization by less than 40% from pre-pandemic levels in exchange for a 37% equity interest. In addition, the enormous growth in our technological expertise has been inspiring. We brought together a suite of leading-edge technologies and two of the top technological teams in the industry. We are excited to bolster our frac technology leadership in many areas, and I will highlight just a few later in the call. We have come a long way since the founding of our company a decade ago. Our focus, however, remains the same, delivering superior returns across cycles to build a differential company with long-lasting competitive advantages. Accomplishing this requires great people and a culture that aligns them to passionately pursue the Liberty mission. We estimate that we currently have a little over 15% of the deployed fleets in the market and are likely completing a little under 20% of North American shale wells. After a rapid rebound off of the COVID bottom, we are now in a slowly improving market.

Liberty's number of deployed fleets in the first quarter was in the low 30s and will be similar in the second quarter. We will remain disciplined in deploying additional capacity. Fleets are only deployed to customers with strategic value and that will deliver good returns on capital invested. Overall, market conditions today remain challenged. They are improving as demand for frac services grows and more importantly, supply quality fleet shrinks. Interest in Liberty fleets and partnership continues to grow. Our dialogues with customers are becoming even more constructive as both parties seek mutually beneficial long-term partnerships. The demand call for next-generation equipment with engineering and diagnostics is quite strong. Pricing dynamics continue to improve across all basins. While current pricing levels remain well below Q1 2020, customer conversations have continued to gain momentum since we last reported as WTI oil prices have been relatively stable in the $60 range and customer economics have substantially improved. Our customers are becoming more comfortable within necessity for a phased approach to price increases. This is a testament to the deep customer relationships our team has developed over the years. The ongoing attrition among frac fleets will likely further this discussion as we move through the year. The industry is healing. The market for next-gen equipment has tightened. And the market for next-gen equipment with industry-leading operations and technology innovation is even tighter. Looking forward, we see a pathway to normalized margins for Liberty at some point in 2022.

We've already achieved three sequential quarters of margin improvement as activity had built off historic lows in the second quarter of last year. While the rate of growth is slowing sequentially, the trend still looks modestly upward as private E&P companies are reacting to strong commodity prices. Public E&Ps, however, are remaining steadfast in their commitment to capital discipline regardless of commodity prices. We fully support this discipline in investing across the whole energy sector as it is required to bring our industry fast to full health after the giant upheaval brought by the shale revolution. A year on from the onset of the global pandemic and severe crash in oil markets, I'm pleased that the fundamentals for our industry and business are on an upward trajectory. North American and global economies are decidedly stronger, and the world needs more energy. Where will this energy come from? While there are a lot of new and exciting technologies in the market at the heart of dependable, cost-effective energy access is oil, gas, and natural gas liquids. Hydrocarbons play the anchor role in fulfilling our global energy needs and will continue to do so in the coming decades. Hydrocarbon supplied just over 80% of world energy when we founded Liberty 10 years ago, and they still supply just over 80% of global energy today. The biggest shift in hydrocarbon demand has been natural gas displacing coal market share in electric power generation. In fact, oil and gas are currently at their record market share ever in the United States at just under 70% of total primary energy supply. Yes, I know that we hear a lot of talk about the energy transition that assumed to make us all obsolete.

That is simply not so. Let me put things in perspective. Wind and solar today supply roughly 2% of global energy, concentrated in the electric power sector, which collectively supplies less than 20% of global energy. In absolute terms, the trillions invested in wind and solar do produce a great deal of energy. But in relative terms, they are still quite modest, even compared simply to the growth in energy demand the world will see in the next decade alone. The only way out of poverty is increased energy consumption. Hydrogen is rightfully full of buzz these days, but it is not an energy source. Hydrogen is an alternate method of energy storage. It takes more energy to produce hydrogen that is released when it is consumed. It has great potential to create 0 carbon liquid fuels, but hydrogen adoption will grow, not shrink, we'll need for energy. Climate change concerns are the driver behind the energy transition dialogue. Climate change is a serious, sizable, and global challenge. To date, natural gas displacing coal in the power sector has been the largest factor, bringing U.S. per capita greenhouse gas emissions to their lowest levels since the 1950s. Continued progress will require significant contributions from many areas across the energy space, including continued contributions from our industry, and likely large-scale carbon capture in utilization and storage. Liberty will both continue and expand our efforts in lowering greenhouse gas emissions. The oil and gas industry is not shrinking but rather is maturing into a steadier, slower growth and cleaner business.

We believe the U.S. and Canada will continue to play leading roles as both major energy producers and drivers of improved technology and practices globally. The world faces a second and, frankly, more urgent global energy challenge, energy poverty. 1/3 of humanity still lacks access to modern energy that enables a healthier opportunity rich lives that we all treasure. Millions die every year simply for lack of clean cooking fuels and reliable access to electricity. Sadly, this global crisis gets very little political attention because it only affects people in low-income countries and the lowest income folks in wealthy nations. Surging U.S. exports of propane and other natural gas liquids are helping hundreds of millions gain their first access to clean cooking fuels. U.S. LNG exports are also helping bring electricity access to the one billion people who currently lack any electricity access and another one billion with only unreliable, intermittent, low wattage electricity. Electricity in lower income countries comes predominantly from hydrocarbons or hydropower. While the shale revolution has helped accelerate the rise for so many at poverty, more than two billion people remain in these dire circumstances. Unfortunately, policy decisions to restrict capital access for hydrocarbon energy development in low-income countries is a growing headwind. You could read much more about these two global energy challenges and Liberty's wide-ranging efforts in our sustainability report that will be released on June 1. two weeks after that, on June 17, Liberty will host an Investor Day in Denver to provide deep insights in the Liberty people, technology development, business processes, fracked operations, strategic efforts, and new energy avenues. We hope that you can join us in Denver or via video conference.

In the first quarter, our operations teams executed at the highest level, navigating weather disruptions across the southern regions and Canada, working quickly to minimize weather impacts on our customers. Our sales teams drove new business above expectations, successfully embracing the strength of both our legacy Red and Blue sales organizations. It goes without saying that we achieved a record quarter for total proppant pumps, topping our previous mark set in Q1 2020. What is notable is that our fleet efficiency levels were collectively strong with both Red and Blue fleets near the top of our efficiency leaderboard. Of course, we have work ahead of us to raise efficiencies of many acquired fleets to Liberty standards, but it is notable that we have strong results across the combined fleets. Overall, the integration has been an incredibly positive experience. Our teamwork -- our team worked in overdrive, handling the challenges of integration to deliver a seamless transition for our customers, with no disruption to operations. What is testament to the hard work of folks across supply chain, IT, HR, finance, and importantly, our crews in the field. Again, our crew efficiency has been commendable, given the naturally disruptive nature of a large-scale integration and the hard work continues. We are moving toward the collective best practices which are coming both from legacy Liberty and our new Liberty Blue fleets. This effort will drive continuous improvement that uses Liberty DNA. We've combined our maintenance operations for both frac and wireline, but the immigration isn't over yet. We continue to work on personnel integration, finalize the transition of our ERP and internal systems and manage the challenges associated with the closed Canadian border. Technology initiatives are an exciting part of the progress. The rich history of both Red and Blue legacy businesses is positioning us attractively to push forward opportunities for automation.

In the near-term, we've already identified ways to streamline the number of people we have on location. We are deploying a new version of SonicStrap chemical management automation on Liberty developed electronic system of sensors to track chemicals with high accuracy and precision. Automation of equipment control systems will also allow us to streamline operations and reduce costs. We are launching a new direct frac diagnostic measurement FracSense. This grows our portfolio of frac design and monitoring technologies that help optimize well spacing, cube development, and Taylor frac designs and perforating strategy. This is a highly complementary technology to our WellWatch diagnostic and our extensive suite of proprietary software tools and engineering expertise that power our efforts to help customers lower the cost to produce hydrocarbons. Our focus on empirical data, real measurements expand significantly with FracSense. This fiber optic based direct measurement of fracture geometry allows calibration of our frac models and better optimization tools for our customers. FracSense measurements provide information about fracture [Indecipherable] stage spacing coverage, perforation cluster design, and its impact on cost or efficiency, fracture length, and fracture height calibrations through volume to first response. That isn't helpful. It also produces a direct way to measure frac hits in a complementary fashion with Liberty's WellWatch. DigiFrac has also gained significant momentum in recent weeks. We hosted numerous customer tours at our ST9 facility in Magnolia, and the enthusiasm is electrifying. With digiFrac, we can drive a reduction in greenhouse gas emissions of at least 20% compared to all other existing frac fleet designs and customers are taking notice. This has been the number one draw for customer engagement as E&P priorities are shifting to minimizing emissions output while maintaining operational efficiency and safety. To date, we've completed over 250 hours of high-pressure durability testing on our pump and have plans for field testing next month.

We also have a team in place for commercialization's as customer interest has exceeded our expectations. This is truly the next wave of technology in frac fleet design, and we're excited to lead the industry in this endeavor. The rate of digiFrac fleet deployment is highly dependent on economics and the same prudent capital deployment strategy that we have always followed. As we look at the year ahead, our view in oil markets have become more constructive buoyed by vaccinations, massive fiscal and monetary policy actions and strong fundamental leading economic indicators, global demand for oil is expected to continue to rise through the year. In the U.S., five states have already recovered from the pandemic recession on a GDP basis, with others soon to follow this. Surging COVID cases in certain countries, such as India, Brazil, and some EU nations are raising concerns for oil demand in those areas. On a steady drop of global oil inventory stock suggests the measured increases in OPEC+ oil production output is being absorbed by higher global demand, resulting in a tightening of the oil supply and demand balance. Over the last three quarters, North American frac activity has rapidly increased toward supporting maintenance production levels. Hence, public E&Ps are now at roughly maintenance run rate frac activity. Private E&Ps, on the other hand, are more responsive to current oil and gas prices, which continue to support modestly increasing demand for frac services in line with their recent rise in rig activity. Importantly, E&P companies are maintaining capital discipline and moderating long-term growth, aiming to increase commodity price stability and enhance sector attractiveness. We believe that this approach is a positive for the industry going forward. North America is a critical energy supplier of the globe, and we need a healthy industry.

With that, I'd like to pass the call over to Michael to discuss our detailed financial performance.

Michael Stock -- Chief Financial Officer and Treasurer

Good morning. We are pleased with our first quarter results. I'd like to take a moment to thank our entire team for going above and beyond expectations. They came together to deliver solid results while encountering operational challenges arising from unusual winter weather and added responsibilities through the sizable integration of our OneStim acquisition. We're off to a great start executing on our strategy, and we expect to drive the next phase of financial growth and superior returns. We are already seeing early stage benefits from our teams, leveraging a full suite of completion services, including frac, wireline and sand, along with engineering and diagnostic tools unique in the industry to drive increased engagement with new and existing customers. As Chris reviewed, we are also working very hard on integrating our technology development efforts to improve efficiencies throughout the supply chain and drive the next phase of innovation in the frac business. For the first quarter of 2021, revenue increased 114% to $552 million from $258 million in the fourth quarter, reflecting the inclusion of OneStim and new customer wins that exceeded expectations. Revenue gains were partially offset by weather disruptions during February in the south and in Canada, we estimate a net reduction of first quarter revenue of approximately $25 million of weather impacts, as 1/3 of the activity disruption was partially resorted by March the remainder of the revenues are expected to be completed in the second quarter. Net loss after tax decreased to $39 million in the first quarter compared to $48 million in the fourth quarter. Fully diluted net loss per share was $0.21 in the first quarter compared to $0.41 in the fourth quarter. Results for the quarter included $7.6 million of nonrecurring transaction-related costs and with no reported fleet start-up costs during the quarter. The first quarter adjusted EBITDA, which excludes noncash stock compensation expense increased to $32 million from $7 million during the fourth quarter.

The improvement in adjusted EBITDA primarily reflected the higher absorption of fixed costs with the inclusion of OneStim. General and administrative expense totaled $26.4 million for the quarter and included noncash stock-based compensation expense of $4.3 million. G&A is approximately 31% higher relative to the fourth quarter on a 114% sequential increase in revenue. G&A costs essentially flat with Q1 2020 levels, the last pre-pandemic quarterly benchmark despite the doubling of our business with the OneStim acquisition and the addition of new service lines basins and our entry into the Canadian market. We doubled our available frac equipment added wireline in the Permian sand mines, and depreciation and amortization was $62 million in the quarter, only 35% higher than the fourth quarter of $46 million. Net interest expense and associated fees totaled $3.8 million, in line with prior quarters. We ended the quarter with a cash balance of $70 million, approximately flat with fourth quarter levels and a total debt of $106 million net of deferred financing costs and OID. There were no borrowings drawn on the ABL credit facility and total liquidity, including availability under the credit facility, was $258 million based on the financial statement as of March 31, 2021. Capital expenditures were $42 million for the quarter. We reiterate that our capital expenditure for the year expected to be in the $145 million to $175 million range, including maintenance, net of synergies, technology investments, amortization outlined in the last quarter. Importantly, we plan to be free cash flow positive in 2021, while continuing to invest for the future. Integration is proceeding as planned as we cut over the OneStim fleet to deliver the internal systems at the end of February with no disruption of customer operations. Schlumberger provided transition administration services in the first quarter, which made up the bulk of the $7.6 million transaction services and other cost line. We expect there will be some trailing transition costs of $53 million in the second quarter related to the cutover.

The integration was a significant logistical challenge for the Liberty team, both legacy and new, planned for and executed incredibly well, bringing together a team with approximately 3,000 dedicated individuals across 15 locations, two countries during a pandemic with remote working requirements. Social distancing was something we did not undertake lightly. The women and men of Liberty rose to the challenge, and we are now operating one living, breathing organization, with a single goal to build and grow best damn service company period. The management team and I are humbled by the hard work, innovation, and character, and strive to move up to the example they have set. We'll see the fruits of our labor as we exit the challenging market background last 12 months. Our increased scale provides significant financial leverage as the market improves. We should see increased absorption of fixed costs for both basin and copper bill. Prior to the COVID downturn, G&A costs were approximately $100 million per year. We have doubled the scale of the company and expected G&A to increase by approximately 15% over pre-pandemic levels. Pull through net income will be held by the fact that depreciation and amortization only increased by approximately 35%. We will leverage our new broad technology platform to bring to market tools with increased efficiency and reduced cost of operations. The enhanced supply chain [Technical Issues] by the North American wide operations and increased scale will drive economies and deeper partnerships with our vendors to lower cost of operations. We're excited to talk more about these opportunities at our Investor Day on June 17 and see the results over the next few years. In a highly cyclical business, we believe it's imperative that long-term returns need to provide shareholders with reward that is commensurate with risk. At Liberty, our approach is simple, strike the right balance between sustainable growth opportunities, balance sheet strength, and returns to shareholders.

Looking forward, we are now navigating a significantly larger business in a rising market with fundamentally stronger market participants. We have a distinct advantage with our best-in-class technology and completion services, driving deeper customer partnerships. We are already seeing pricing increases secured with more customers in the coming quarters, driven by the long-term value added by our industry-leading technical knowledge and services that help customers lower their overall cost per barrel of oil or MCF for gas. Our leading-edge equipment technology, mostly digiFrac has garnered significant interest from customers who want to improve their ESG profile by achieving greater operational efficiency and lower emission effort. Fleet economics have not improved to a point where it makes sense to our crew [Indecipherable] but our customers have seen meaningful improvement in their economics. This reiteration and accelerating customer interest in our leading-edge services will allow us to reach that level earlier than others in our space. Importantly, we have the balance sheet flexibility to exclusively attritions prove meaningfully. Liberty is committed to creating long-term stockholder value via our balanced strategy compounding shareholder value by reinvesting cash flow at high rates of return and returning cash to shareholders as appropriate. While market remains challenging, this does not change the fundamental principles upon which we manage the company.

With that, I will hand the call back to you, Chris, for closing comments before we open for Q&A.

Chris Wright -- Chief Executive Officer & Chairman of the Board

Thanks, Michael. I just want to extend a broad and heartfelt thanks to everyone in the Liberty family that's worked through so hard through these tough times and through this tremendous transformation of our company, to all our customers and partners as well. And with that, we'll open it up for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Blake Gendron of Wolfe Research. Blake, please proceed.

Blake Gendron -- Wolfe Research -- Analyst

Yes, thanks. Good morning. Chris, I always appreciate your perspective on the macro and the energy outlook at the top of the call here. I wanted to circle back on the path to normalized margins. It seems like things are still pretty competitive pricing-wise, perhaps an upside bias activity with private potentially adding in the back half here. That said, it seems like we really need to see either number one, accelerated attrition or number two, bifurcation of next-gen frac equipment in terms of pricing. Curious more so on the latter, how you think this manifests in terms of your relationship with customers, is there any sort of pricing mechanism by which you can take down some economic rent created by GHG emission reduction?

Chris Wright -- Chief Executive Officer & Chairman of the Board

Yes. Look, you're right in that the market today is tough. Look, we've come off an incredibly low downturn, but every quarter, these supply and demand is sequentially getting better, and yes, people want next-generation frac equipment. They want to lower. Of course, it's not just greenhouse gas emissions, but it's NOx and carbon monoxide and other pollutants that are reduced with modern fleets. So there's a hunger for that. There's also an understanding that our whole industry, the service industry doesn't have the good returns today, and E&Ps have recently come back to. So yes, it's a dialogue. Everybody buying wants a low price, everybody selling wants a high price. But absolutely, next-generation fleet and higher performance and higher opportunities to bring technology to continue to drive performance better. There's -- that tremendous price premium. And so it takes time. I think that the last downturn if things were just brutal at the start of the summer in 2016 and two years later, the market was dramatically different -- dramatically. Now that one was driven more by a surging increase in demand. This rebound, we've seen a surge of increase in demand, probably more modest going forward, but the rate of investment in new equipment over the last few years has just been very low. In 2017 to 2018, people were building frac fleets at a feverish pace. Nothing like that has happened in the last 2-plus years. So I think it's mostly supply attrition and a desire for better equipment. That continue to pull the economics of frac in the right direction.

Blake Gendron -- Wolfe Research -- Analyst

Totally fair. I want to switch to wireline bundling. We've seen some companies try to do this in the past with fairly mixed success at various points in the cycle. Wondering what Liberty is seeing in terms of early MPT reductions in the like? I know it's still very early days. And also in this current activity environment, what the receptivity of value-added wireline technology is looking like? Is there anything specifically you'd call out on that front?

Chris Wright -- Chief Executive Officer & Chairman of the Board

Look, obviously, integration between frac and wireline at the new Liberty we're early on in that. But yes, there are opportunities to make those two teams and systems work together better to drive efficiency and lower downtime? Absolutely. Clearly, Schlumberger has a number of those paired fleets working together. For us, if you do bundling sort of a price like a price discount, revenue is at about fast. It's about how do we deliver the safest, fastest, best, most suppression completion service. And that really is advance on the [Indecipherable] floor between frac and wireline. So we're proud of the teams we have in both sides and very excited about the opportunities about how to make those into one team, not two different teams.

Blake Gendron -- Wolfe Research -- Analyst

Thanks a lot for the time.

Chris Wright -- Chief Executive Officer & Chairman of the Board

Thank you.

Operator

Our next question comes from Scott Gruber of Citigroup. Scott, please proceed.

Scott Gruber -- Citigroup -- Analyst

Yes. Good morning.

Chris Wright -- Chief Executive Officer & Chairman of the Board

Good morning, Scott.

Scott Gruber -- Citigroup -- Analyst

Great to hear that your normalized margins are possible next year. And certainly, we saw the quick snapback last cycle, like you commented on, Chris. Where would you peg the normalized margins at given the new combined fleet and the different portfolio composition that you're going to have this next cycle?

Chris Wright -- Chief Executive Officer & Chairman of the Board

Well, Scott, the peg sounds way too specific for us and particularly talking about the future, but look, clearly, our cost basis across our fleet by average fleet is lower now. What we ultimately focus, what we ultimately care about is return on capital employed or measured another way, cash return on cash invested. In our 10-year history, not exactly in the stellar years in the industry, we've been above the S&P 500 in that metric, and that's our goal is to continue to deploy cash in a disciplined fashion and generate a solid return on that. And so that's the ultimate yardstick for us. From an EBITDA per fleet thing, I mean, yes, that's sort of a wide band. It really depends on a number of factors. But something in the mid-teens there is probably a broad brush estimate of that. But again, it's about developing strong returns on capital and a strong balance sheet and we're resonant to for whatever comes.

Scott Gruber -- Citigroup -- Analyst

Got you. Got you. And just thinking through the pathway to get to something in the mid-teens ballpark. Is it primarily operationally driven through your fixed cost absorption and efficiency improvement initiatives? How much pricing is required to get there? If you can kind of split apart the pricing driver from the other drivers, that would be great.

Chris Wright -- Chief Executive Officer & Chairman of the Board

It's a mix of the 2. It is the mix of the 2. And I don't think we'll go any more specific than that. But you need both. Clearly, we have greater efficiencies now. Clearly, we have efforts under way to continue to drive down our cost to deliver the service, but we just saw a significant and large pricing compression to work with customers and as oil prices compressed, it was across the whole sector, right? Yes, we'll need to see some pricing come back. It is. I think our customers are aware of that. Good news for customers into the industry is pricing doesn't need to come back even near where it was to bring returns back. That's just a continual progress of efficiency across our industry. The cost to drill a well and deliver a barrel of oil just continue to go down on a secular basis. Cyclically, is that going to bounce up a little bit in the next 12 to 24 months? Sure. But relatively modest amount, relatively modest amount.

Scott Gruber -- Citigroup -- Analyst

Got you. Would you be willing to offer if it's more operationally driven or more pricing driven to get there?

Chris Wright -- Chief Executive Officer & Chairman of the Board

Michael is swinging a baseball bat at me. So -- so it's hard to make predictions about the future, it's those two things working in concert. Yeah.

Scott Gruber -- Citigroup -- Analyst

I understood, I understood. I appreciate it [Indecipherable].

Chris Wright -- Chief Executive Officer & Chairman of the Board

Thanks, Scott.

Operator

Our next question comes from George O'Leary of TPH & Company. George, please proceed.

George O'Leary -- TPH & Company -- Analyst

Well, great. Good morning, guys.

Chris Wright -- Chief Executive Officer & Chairman of the Board

Good morning, George.

George O'Leary -- TPH & Company -- Analyst

You talked a good bit about attrition and kind of marketed supply not being what it may seem on the surface. Curious if you could peel back the onion a little bit there and frame what you guys view as the actual marketed supply versus what our perception of that market and supply might be.

Chris Wright -- Chief Executive Officer & Chairman of the Board

Yes. If you look at it again. It's hard to put specific numbers on that because look, our guess and I think it's in consensus. We've probably got an order 200 frac fleets running today. Is there a lot of parked equipment? Absolutely. I think very little, maybe almost none of that parked equipment is actually staffed. A lot of it, those customers get choice when the market loosens, and people want to keep getting better. So there's just a stronger demand for the next-generation fleet. There is a fair amount of legacy equipment around, but it's not being reinvested in. It's starting to perform more poorly. So you see a fleet that used to have x number of pumps and now they're bringing out 1.25, that number of pumps just because of maintenance problems and pumps going down, repairs. So it's not like there's an aircraft carrier, full of shiny fleets just ready to drive off somebody's yard, it's going to work. And -- but I think it's too sticky and don't have good enough data that want to buy that. But the rate of equipment being retired and worn out is dramatically larger than the rate of new equipment being built.

George O'Leary -- TPH & Company -- Analyst

Great. That's very helpful, Chris. And then on the -- just with respect to the e-frac offering, it does seem like there's strong demand for more ESG-ish type offerings that truly add efficiencies in the field out there in the market, you can just see that in the utilization numbers of the different technology types. Just at a high level, what do you think differentiates or will differentiate your e-frac offering from the competitors? Is it largely that ST9 pump? Or are there other kind of bells and whistles and not looking for specific color? I know you don't want to give away any kind of competitive edge. But just any high-level color on what you think makes your offering unique versus the competition.

Ron Gusek -- President

Yes, George, this is Ron. I'll maybe give you just a couple of points that we would maybe highlight in that regard. You certainly hit on one of them. We think from the ST9 pump standpoint, we have taken a very, very novel approach to the design there and ultimately believe that that asset is going to be a better performing asset out in the field relative to other approaches that have been taken around squeezing more horsepower through the same size of pump. So we're pretty excited about the innovations there. But I think the other side that we looked at very, very carefully was the power generation side. There had been, we'll call it, one very typical approach to powering an electric frac fleet out in the field. And our look at that suggested that that was not the optimal way to be running a frac fleet unless your frac fleet specifically, that there was a better solution to deliver not only improve fuel savings and better economics on location, but very specifically, a reduced emissions footprint. And so we'll be taking a very different approach to powering our frac fleet. We talked quite publicly about that already that we'll be using natural gas recent engines rather than a gas turbine on location. And I think we're convinced that delivers better capital efficiency, better redundancy on location, better efficiency as a result of that. And maybe most importantly, for some of our customers, a significantly improved footprint relative to the existing solutions.

George O'Leary -- TPH & Company -- Analyst

Awesome. Thanks for the [Indecipherable], Ron.

Operator

Our next question comes from Stephen Gengaro with Stifel. Stephen, please proceed.

Stephen Gengaro -- Stifel -- Analyst

Thanks. Good morning, everybody. Two things. First, you mentioned your fleet count in the low 30s deployed. Are you willing to give us a sense for how many fleets you have, which are sort of readily available to go back to work? And how many would require material capex to reenter the active fleet?

Michael Stock -- Chief Financial Officer and Treasurer

You know, as we pointed out, I think when we called out the OneStim deal, on the deal was we had 20 green days as described by Schlumberger, Blue fleet really goes, and there's no capital required for those plus we were running more older 23, 24 fleets of legacy rate. So yes, those two basically outlined. It doesn't need really any particular capex.

Stephen Gengaro -- Stifel -- Analyst

Okay. Great. Thanks. And then second, as you've sort of gone through the process and integrated some of the Schlumberger assets, the OneStim assets. Has anything surprised you about sort of the relative profitability or the relative efficiencies? And have you seen anything which sort of increased your confidence level or changed your views on integration savings and how they unfold over the next year or two? And how so you libertize their assets?

Chris Wright -- Chief Executive Officer & Chairman of the Board

No, I think we've been very, very nicely surprised by the efficiency. I think that's one of the things when you get under the hood. So just incredible amount of pride in those teams, and they're incredibly good. And so I think they love the fact that sort of working with that team in sort of being literate and you have been given sort of that responsibility to the best that they can be. So I'd say we are more optimistic about that particularly. I mean I think -- and when we get to the Investor Day on June 17, we'll add some sort of more looks at integration. But I really think Ron and the technology team have done a great job. I'm really looking at what's going to be the next-generation of integrated frac, as you know we make investments for the long-term. So I think it's going to be really coming together best practices and I think it's going to be exciting.

Stephen Gengaro -- Stifel -- Analyst

Okay, great. Thank you.

Operator

Our next question comes from Chris Vole of Wells Fargo. Chris, please proceed.

Chris Voie -- Wells Fargo -- Analyst

Thanks. Good morning. I was hoping to touch a little bit more on pricing. I know you don't want to get too detailed, but just compared to, I guess, in February, when you described the fact that you had some pricing increases baked into contracts already that would be showing up in the second and third quarter. Just curious if leading edge has improved at all compared to that? And then whether you expect any pricing uplift from including digiFrac or FracSense if they're going to be additive or how to think about what that might bring as you get into the second half of this year or 2022?

Michael Stock -- Chief Financial Officer and Treasurer

Chris, I think as Chris has pointed out -- Chris Wright pointed out. We continue those discussions with customers that have probably have more price increases baked in as we go through the year into next year. Of course, digiFrac won't affect margins until we come into next year. And we will have an increasing amount of Tier four DGB fleets, which are also sort of great demand by customers as we get through the back end of this year. So that will help.

Chris Voie -- Wells Fargo -- Analyst

Okay. Thanks. That's helpful. And then maybe on the capex front, so maintenance -- or sorry, not maintenance, but capex guidance, $145 million to $175 million. And how much -- how do we evaluate the upside risk of that in the case of, let's say, E&Ps get even more hungry for ESG quality fleets, and you have to potentially upgrade to four DGB or I guess, frac -- sorry, digiFrac is not in the near future, but how much upside risk would there be if that becomes even more important to your customers?

Michael Stock -- Chief Financial Officer and Treasurer

There'll be upside risk and upside returns, Chris. Obviously, we won't be making those investments without a very, very strong path to sorts of returns. And in fact, when that comes about, we'll let you all know. But I think that's the key. They will be managed. So I mean that will be a better pricing environment, better returns, and that's what drives our investments. They're looking toward that path of long-term presents.

Chris Voie -- Wells Fargo -- Analyst

Okay, thank you.

Operator

Our next question comes from Ian McPherson with Simmons. McPherson, please proceed.

Ian McPherson -- Simmons -- Analyst

Thanks. Good morning. Chris, Michael, thank you for all the color. When we look out -- make the walk from where you are in Q1 toward normalized margins by next year, starting in Q2, you will have the abatement of the weather impact. I assume that the $25 million of revenue impact that you called out in Q1 would have extremely high EBITDA decrementals associated with it. So there would be a substantial building block there in addition to the reduced transaction costs and presumably the iterative pricing increases coming in. So are all of those factors correct as we start the March from Q1 toward normalized margins next year?

Michael Stock -- Chief Financial Officer and Treasurer

So one clarification, I think the additional revenue that will roll into Q2, we just had normal increased decremental. So there's nothing specific about that revenue that will drive -- you still got to have [Indecipherable] delivered, that you're going to have sands, you've got to have chemicals is good to drive period maintenance cost. So there's nothing particularly different other than sort of revenue growth and activity growth curve for those decrementals. But other that, yes, you're right. I think as Chris said, this is a move toward normalized margin to some point in 2020, right? Yes. So making sure that you're not expecting it to come out of the gate on the 1st of January.

Ian McPherson -- Simmons -- Analyst

Understood. And we're certainly not there, and we're looking and hoping for some upside to substantially below your prior cycle margins next year in our model. Okay. I wanted to get your thoughts, Chris, with regard to competitive structure going forward. You've obviously been leading protagonist on consolidation. And there is more that could be done, we think there might be. But do you expect more transformational consolidation of some of your -- smaller than you, but some of the larger independent pressure pumpers to help improve the market structure over the next several quarters?

Chris Wright -- Chief Executive Officer & Chairman of the Board

Yes. I don't have any particular insight into that. There's certainly always dialogue. It certainly makes sense, so I think there's certainly a real possibility that that stuff happens. But ultimately, it comes down to human beings that make decisions. And so yes, we hope so but not hard to predict.

Ian McPherson -- Simmons -- Analyst

Okay. Understood. Well, looking forward to the event in mid-June. Thanks.

Chris Wright -- Chief Executive Officer & Chairman of the Board

Thank you. We look forward to seeing you then.

Operator

Next question comes from Mike Sabella of Bank of America. Please proceed.

Mike Sabella -- Bank of America -- Analyst

Hey. Good morning, everyone. So you all gave some color on 2Q activity. If we sort of think -- look out a little bit in the back half of the year, think about where -- just broadly, you think the industry goes from here through year-end. Is there upside? And then is anybody having conversations around kind of 4Q budget exhaustion? Is it something we need to start thinking about yet or still too early to tell?

Chris Wright -- Chief Executive Officer & Chairman of the Board

I would say it's too early to tell. Certainly, for the public, they lay out a budget plan, and they're going to stick to them. And so as it typically happened, if efficiency of operations run faster and better than you budgeted for, the possibility of budget exhaustion, fourth quarter is still there, absolutely. Now some of them are still ramping up. So it's not different to another year. I don't think the Q1 expenditures were ahead of 25%, maybe a little below. But that's a very real possibility. Publics are not going to overspend their budgets. So that work gets done before December 31. And in a number of cases, that's certainly going to be the case. I think there's some roll down there. And then the potential offset is what are oil prices then? Or what are oil prices in the fall when privates are making decisions about their magnitude of continuing or picking up activity. So -- but yes, I wish I had a better answer.

Mike Sabella -- Bank of America -- Analyst

Got it. Yes, that's fine. I mean if we could just kind of step back and think higher level about Liberty strategy. I think you mentioned you all had completed 20% of the shale wells in the U.S., and we're kind of around this 200 frac fleet number that is kind of commonly thrown out there as what's maintenance for the industry. When you're thinking about planning for market share with an industry fleet level kind of on either side of what you think is normal. Like what is normal for the industry? And then how do you approach market share when the industry is running either hotter or colder than you think it's going to be?

Chris Wright -- Chief Executive Officer & Chairman of the Board

Market share for us is always an output, not an input. The decision to work a fleet is always bottom up. It's always -- we don't say we're going to put five more fleets to work here or whatever. We don't even talk like that. So for us, it's always about who are our existing partners, how is that relationship, we have pretty low customer turnover. So we tend to keep working with our existing partners and try to deepen those relationships. So they win for both sides. Then we have dialogues with lots of other partners that we could add a new partner, or we could grow our market share with existing partners, if they're bigger players and want to have a larger percent of their work done by Liberty. So it's really more bottom-up dialogue than top-down dialogues. We've said in the past certainly, at the bottom of -- when the market is really high, right, returns are awesome and all that. That's certainly the worst possible time to shape after, oh, we can put three more fleets out because the EBITDAs are awesome today when the market is really hot. But one thing that's telling you is it's not going to be hot before too long. So in that sort of thinking longer term, we've got a -- yes. So -- but again, it's all bottom up. I mean, look, our history, our 10-year history has been sort of a slow growth in market share is the right customers and partnerships have pulled us through, but it's all bottom up.

Mike Sabella -- Bank of America -- Analyst

Okay. Thanks, Chris.

Chris Wright -- Chief Executive Officer & Chairman of the Board

Thank you, thank you.

Operator

Next question comes from Waqar Syed of AltaCorp Capital. Please proceed.

Waqar Syed -- AltaCorp Capital -- Analyst

Thank you for taking my question, and congrats on a great quarter, and thank you, Chris, for your comments on the macro, always appreciated. I may have missed this -- I may have missed some of your earlier comments. I was a little late in joining. But on Canada, how many active fleets did you have in the first quarter? And how would seasonality impact second quarter results, the seasonality in Canada?

Michael Stock -- Chief Financial Officer and Treasurer

No, we don't give details about where athletes are running. In generally, we're running a low sales fleets across the whole complex of North America. Obviously, there's breakup in Canada, that we'll produce Canada down, and we said that we had relatively flat fleet count in Q2. So we've got a little bit of other work elsewhere. So it's going to be relatively flat across the complex. Canada itself will have the normal seasonality. There'll be break up, and it will pick up again in the summer and then it will drop. Generally, Canada has the tendency to drop off again in the fourth quarter, sort of the general rotation there.

Chris Wright -- Chief Executive Officer & Chairman of the Board

We're thrilled to be in Canada, Waqar. So thanks for asking that. Yes, you would have tremendous American partner in energy in a broader picture. So we're very happy to be in Canada and look forward to building and bettering that business going forward.

Waqar Syed -- AltaCorp Capital -- Analyst

Oh, yeah. Absolutely. Canada is attractive market now. Now in terms of profitability in Canada in the first quarter, how would that compare to the average for what you reported in the first quarter?

Chris Wright -- Chief Executive Officer & Chairman of the Board

You know, obviously, we don't break out geographies. But again, one can think. We have a very, very disciplined approach to how we run our business. And again, across all of our basins, as we've said many times before, really, we look at them as a whole and sort of really every -- so every decision of putting a fleet to work and having people working is a decision that's very unique. And so therefore, they have to be effective. It's got to be the look at long-term reserves. And we think Canada is a very long-term market for us.

Waqar Syed -- AltaCorp Capital -- Analyst

Absolutely. And then just a final question. What's your current public versus private mix in terms of number of fleets allocated?

Chris Wright -- Chief Executive Officer & Chairman of the Board

As we've said before. With the OneStim acquisition, as we talked about last quarter, our public-private mix is fairly close to about where the industry is, right? I think what you've seen is you've seen a bit of a pickup in the private for the beginning part of this year. So again, we may be a little heavier to the public very slightly. Because actually we were going into the beginning of this year. But generally, we now decide where we really mirror the market. If you look at the general market data, that is actually very analogous to us.

Waqar Syed -- AltaCorp Capital -- Analyst

Okay, great. Thank you very much. Please, Indecipherable].

Chris Wright -- Chief Executive Officer & Chairman of the Board

Thank you, Waqar.

Operator

Next question comes from John Daniel of Daniel Energy. Please proceed.

John Daniel -- Daniel Energy -- Analyst

Hey there, thanks, guys. Congrats on good interest on digiFrac. Just have a question on that. Really wanting to understand the rollout process because I would assume you guys would seek some contractual support before any type of large-scale build-out. But I'd also assume an E&P company needs to test the system before they would want to sign a contract. So it kind of creates a little bit of a chicken in the egg, if you will. I'm just curious how you think you're going to handle that.

Chris Wright -- Chief Executive Officer & Chairman of the Board

John, it's a balance between those two things. In our dialogue with customers, one of the things certainly is, we don't want our customers to take technology risk. They've done that. And in many cases, it's not worked that well. It's up to Liberty to deliver digiFrac to work to the performance specs, we believe it will. So if we will get contractual commitments. But if our fleet doesn't work, that's not on them, that's on us.

John Daniel -- Daniel Energy -- Analyst

Okay. So I assume it'd be performance-based contracts then today to have an out or give you the ability to build?

Chris Wright -- Chief Executive Officer & Chairman of the Board

All frac contracts are that way. Well, all are so. There's been some that were done not that way, and I think that's from a state for both parties.

John Daniel -- Daniel Energy -- Analyst

Okay. And then one comment, I think you made, Chris, was the 20% lower emissions on digiFrac. Is that relative to the -- like the legacy turbine solution? Or is that relative to even like the Tier four DGB solution? Any color would be helpful.

Chris Wright -- Chief Executive Officer & Chairman of the Board

That's relative to the data we have for all existing frac lease.

John Daniel -- Daniel Energy -- Analyst

Got it. Okay. Fair enough. And then I guess last one for me. You mentioned low 30s fleet count in Q1 and Q2, just knowing there is some lead time to reactivate fleets. Are you making any plans now to sort of reactivate fleets taking in the mid-30s in the back half of the year? Or understand if you don't want to say. But just curious.

Chris Wright -- Chief Executive Officer & Chairman of the Board

Yes, John, I mean, of course, we're in all sorts of dialogues with existing partners, potential new partners. So no, there's no macro play of what our fleet level is going to be. But again, relationships drive it all, drive it all. For sure, as you well know, for sure, we will be disciplined. If they're strong demand pull from customers and partners that could creep up. It's not going to scream up, it could stay flat. So yes, truly, we don't know, but we continue the same partnership mentality we've always had.

John Daniel -- Daniel Energy -- Analyst

Fair enough. Thank you for putting in.

Chris Wright -- Chief Executive Officer & Chairman of the Board

John, we look forward to seeing you out on the road. Appreciate all your questions.

Operator

Our next question comes from Chris Voie of Wells Fargo. Chris, please proceed.

Chris Voie -- Wells Fargo -- Analyst

Just one more follow-up here. Curious if you could maybe just give some color around the contribution from the sand mine. So obviously, different setup now compared to previously. Just curious if you can break out if that was a meaningful contribution to profitability or a percentage of revenues? Any color around that, so you can think about the contribution going forward?

Michael Stock -- Chief Financial Officer and Treasurer

We think if there's one integrated delivery to our customers. So we really aren't breaking those out at the moment. I think that is probably the key thing because it's not sizable enough to be broken out of segment. So I think it's a due level of the complex as a whole.

Chris Voie -- Wells Fargo -- Analyst

Okay, thank you.

Operator

Our last question comes from Frank Reppenhagen of Concentric Equity Partner. Please proceed.

Frank Reppenhagen -- Concentric Equity Partner -- Analyst

Hey, guys. Great job improving the business in a very tough market. I -- as we remember the Sanjel acquisition, transforming the company in 2016, I know that we're going to look back on OneStim is just a transformational event for both this business as well as for the entire market. And as demand comes back, we're going to capture more than our fair share of quality customers. Question for Chris or Ron, on that is fleet deployment increases. Can you guys comment a little bit on the labor market. I know a lot of CEOs that we talk to are reporting a hard time recruiting and retaining field workers and enhance unemployment benefits, creating a lot of friction, bringing people back into the workforce. How does Liberty see scaling up the workforce over the course of 2021?

Chris Wright -- Chief Executive Officer & Chairman of the Board

Yes. Great comment, Frank. And that is indeed the case. It's the case for Liberty. It's the case for the industry. And in fact, as you've seen, it's the case for the broader economy. I've been in a lot of dialogues with business leaders outside of oil and gas on this issue. But look, we have these two -- we have right now about six million people out of the labor force that were in the labor force, but they don't currently intend to return to the labor force right now. So -- and then you have fiscal and monetary stimulus that, of course, pertaining to the fiscal part, that's going to drive growth in economic activity. So we have sort of an accelerator on supply and an incentive and self-reporting of a reduction, I mean, in demand for labor, we have an acceleration, and we have some constraints on the supply of labor. That hopefully end in September, but we'll see what the -- what Washington does on these employee benefits. So yes, that's for hotels or restaurants or whatever, that problem is dramatically worse. But yes, it is an issue -- it's an issue we are facing as well. Fortunately, we have a good sell and a good culture, but hiring today is much harder than you would think from the outside and you're well aware of that.

Michael Stock -- Chief Financial Officer and Treasurer

Just want to put a little color on it, Frank. I mean I think that's one of the things that's underappreciated as a limit on supply of frac services in general. That's one thing that will held a little bit on the fracking side. It is actually very, very difficult. We get people into the marketplace. So really a key amount of the people we -- that the labor force we pull from. We can really also work in two industries that are booming at the moment. One is construction, and the other one is trucking with Amazon. Exactly, right? So when people do always think about our industry think overly in fact of sort of like the higher equipment, the real, real [Indecipherable] in supply frac services is the ability to get good, qualified people. So that will help us sort of like sitting back with some of the other questions of earlier. That is actually one of the things that's driving the pricing dynamic of customers.

Frank Reppenhagen -- Concentric Equity Partner -- Analyst

Thanks for your comments, guys. Look forward to seeing you in June.

Chris Wright -- Chief Executive Officer & Chairman of the Board

It seems a thoughtful comment, Frank.

Operator

This concludes the question-and-answer session. At this time, I would like to turn the call back to Chris Wright for any closing remarks.

Chris Wright -- Chief Executive Officer & Chairman of the Board

We thank everyone for their time and interest in Liberty, and we'll get back to work, the whole Liberty family. Thanks for joining us today.

Operator

[Operator Closing Remarks]

Duration: 62 minutes

Call participants:

Chris Wright -- Chief Executive Officer & Chairman of the Board

Michael Stock -- Chief Financial Officer and Treasurer

Ron Gusek -- President

Blake Gendron -- Wolfe Research -- Analyst

Scott Gruber -- Citigroup -- Analyst

George O'Leary -- TPH & Company -- Analyst

Stephen Gengaro -- Stifel -- Analyst

Chris Voie -- Wells Fargo -- Analyst

Ian McPherson -- Simmons -- Analyst

Mike Sabella -- Bank of America -- Analyst

Waqar Syed -- AltaCorp Capital -- Analyst

John Daniel -- Daniel Energy -- Analyst

Frank Reppenhagen -- Concentric Equity Partner -- Analyst

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