Liberty Energy Inc

Note 1—Organization and Basis of Presentation

Organization

Liberty Energy Inc., formerly known as Liberty Oilfield Services Inc. (the “Company”), was incorporated as a Delaware corporation on December 21, 2016, to become a holding corporation for Liberty Oilfield Services New HoldCo LLC (“Liberty LLC”) and its subsidiaries upon completion of a corporate reorganization (the “Corporate Reorganization”) and planned initial public offering of the Company (“IPO”). On April 19, 2022, the stockholders of the Company approved an amendment to the Company’s Amended and Restated Certificate of Incorporation for the purpose of changing the Company’s name from “Liberty Oilfield Services Inc.” to “Liberty Energy Inc.” and thereafter, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation to reflect the new name, effective April 25, 2022.

Effective January 31, 2023, Liberty LLC was merged into the Company, with the Company surviving the merger (the “Merger”). In connection with the Merger, all outstanding shares of the Company’s Class B Common Stock, par value $0.01 per share (the “Class B Common Stock”), were redeemed and exchanged for an equal number of shares of the Company’s Class A Common Stock, par value $0.01 per share (the “Class A Common Stock”). The Company did not make any distributions or receive any proceeds in connection with this exchange. The Merger did not have a significant impact on the Company’s consolidated financial statements.

The Company, together with its subsidiaries, is a leading integrated energy services and technology company focused on providing innovative hydraulic fracturing services and related technologies to onshore oil and natural gas exploration and production (“E&P”) companies. We offer customers hydraulic fracturing services, together with complementary services including wireline services, proppant delivery solutions, field gas processing, compressed natural gas (“CNG”) delivery, data analytics, related goods (including our sand mine operations), and technologies to facilitate lower emission completions, thereby helping our customers reduce their emissions profile.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements were prepared using generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Regulation S-X. 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 September 30, 2024 and December 31, 2023, the results of operations and equity of the Company as of and for the three and nine months ended September 30, 2024 and 2023, and cash flows for the nine months ended September 30, 2024 and 2023. 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 nine months ended September 30, 2024 are not necessarily indicative of the results of operations expected for the entire fiscal year ended December 31, 2024. 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.

All intercompany amounts have been eliminated in the presentation of the unaudited condensed consolidated financial statements of the Company. The Company’s operations are organized into a single reportable segment, which consists of hydraulic fracturing and related goods and services.

Note 2—Significant Accounting Policies

Recently Issued Accounting Standards

Segment Reporting: Improvements to Reportable Segment Disclosures

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures, which requires more detailed disclosures, on an annual and interim basis, related to the Company’s reportable segment. The guidance is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Although the Company has onlyone reportable segment, the Company is currently assessing the impact of this ASU on the Company’s financial statements.

Income Taxes: Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes: Improvements to Income Tax Disclosures, which requires disaggregation of certain components included in the Company’s effective tax rate and income taxes paid disclosures. The guidance is effective for annual periods beginning after December 15, 2024. The Company is currently assessing the impact of this ASU on the Company’s financial statements but does not expect it will have a material impact.

Siren Acquisition

On April 6, 2023, the Company completed the acquisition of a Permian focused integrated natural gas compression and compressed natural gas delivery business, Siren Energy & Logistics, LLC, for cash consideration of $75.7 million, after post-closing adjustments and net of cash received, (the “Siren Acquisition”). The Siren Acquisition was accounted for under the acquisition method of accounting for business combinations. Accordingly, the Company conducted assessments of the net assets acquired and recognized amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values, while transaction and integration costs associated with the acquisition were expensed as incurred. In connection with the Siren Acquisition, the Company recorded goodwill of $42.0 million, property and equipment of $34.9 million, net working capital of $2.5 million, deferred revenue of $5.2 million, and other assets of $1.8 million. Goodwill is recorded in other assets and deferred revenue is recorded in accrued liabilities in the accompanying unaudited condensed consolidated balance sheets. Due to the immateriality of the Siren Acquisition, the related revenue and earnings, supplemental pro forma financial information, and detailed purchase price allocation are not disclosed.

Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform to current period financial statement presentation. Amounts in the prior period financial statements have been reclassified from “Tax withheld on vesting of restricted stock units” into “Vesting of restricted stock units, net” in the accompanying unaudited condensed consolidated statements of changes in equity.

In the accompanying unaudited condensed consolidated statement of cash flows, amounts in the prior period financial statements have been reclassified from “Inventory write-down” and “Non-cash lease expense” into “Other non-cash items, net”. Additionally, amounts in the prior period financial statements have been reclassified from “Deferred revenue” into “Accounts payable and accrued liabilities”.

Additionally, in the accompanying unaudited condensed consolidated balance sheets, amounts in the prior period financial statements have been reclassified from “Other assets” into “Investment in Oklo Inc.” and “Investment in Tamboran Resources Corporation”.

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

Note 3—Inventories

Inventories consist of the following:

During the three months ended September 30, 2024, the Company didnot record any write-downs to inventory carrying values. During the nine months ended September 30, 2024, the lower of cost or net realizable value analysis resulted in the Company recording a write-down to the inventory carrying value of $1.0 million. During the year ended December 31, 2023, the lower of cost or net realizable value analysis resulted in the Company recording a write-down to the inventory carrying value of $5.8 million.

Note 4—Property and Equipment

Property and equipment consist of the following:

During the three months ended September 30, 2024 and 2023, the Company recognized depreciation expense of$111.3 million and $99.5 million, respectively. During the nine months ended September 30, 2024 and 2023, the Company recognized depreciation expense of $332.2 million and $280.9 million, respectively. Depletion expense for the three months ended September 30, 2024 and 2023 was $0.3 million. Depletion expense for the nine months ended September 30, 2024 and 2023 was $0.9 million.

As of September 30, 2024 and December 31, 2023, 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, 2024, the Company classified $1.2 million of land and $2.8 million of buildings, net of accumulated depreciation, oftwo properties that it intends to sell within the next year, and that meet 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 is equal to the fair value less the estimated costs to sell, net of write-downs taken in the prior period, and thereforeno gain or loss was recorded during the nine months ended September 30, 2024.

Additionally, as of December 31, 2023, the Company classified $0.7 million of land and $0.8 million of buildings, net of accumulated depreciation, ofone property that it intends to sell within the next year, and that meets the held for sale criteria, as assets held for sale, included in prepaid and other current assets in the accompanying unaudited condensed consolidated balance sheet.

As of September 30, 2023, the Company classified $0.7 million of land and $0.8 million of buildings, net of accumulated depreciation, ofone property as assets held for sale. The Company estimated that carrying value of the assets was equal to the fair value less the estimated costs to sell, net of write-downs taken in the prior period, and thereforeno gain or loss was recorded during the nine months ended September 30, 2023.

Note 5—Leases

The Company has operating and finance leases primarily for vehicles, equipment, railcars, office space, and facilities. The terms and conditions for these leases vary by the type of underlying asset.

Certain leases include variable lease payments for items such as property taxes, insurance, maintenance, and other operating expenses associated with leased assets. Payments that vary based on an index or rate are included in the measurement of lease assets and liabilities at the rate as of the commencement date. 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 nine months ended September 30, 2024 and 2023 were as follows:

Supplemental cash flow and other information related to leases for thethree and nine months ended September 30, 2024 and 2023 were as follows:

During the nine months ended September 30, 2024, 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 a de minimis amount of operating lease right-of-use assets and liabilities. Additionally, the Company recognized finance lease right-of-use assets of $4.4 million and liabilities of $4.3 million. There was no gain or loss recognized as a result of these amendments. During the nine months ended September 30, 2023, the Company did not reclassify any operating or finance leases.

Lease terms and discount rates as of September 30, 2024 and December 31, 2023 were as follows:

Future minimum lease commitments as of September 30, 2024 are as follows:

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 September 30, 2024 is $12.0 million; the payment is not probable and therefore has not been included in the measurement of the lease liability and right-of-use asset. For vehicle leases that are classified as finance leases, the Company includes the residual value guarantee, estimated in the lease agreement, in the financing lease liability.

Lessor Arrangements

The Company leases dry and wet sand containers, conveyor belts, and other equipment to customers through operating leases, where the lessor for tax purposes is considered to be the owner of the equipment during the term of the lease. The lease agreements do not include options for the lessee to purchase the underlying asset at the end of the lease term for either a stated fixed price or fair market value. However, some of the leases contain a termination clause in which the customer can cancel the contract. The leases can be subject to variable lease payments if the customer requests more units than what is agreed upon in the lease. 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 September 30, 2024 and December 31, 2023 were as follows:

Future payments receivable for operating leases as of September 30, 2024 are as follows:

Revenues from operating leases for the three and nine months ended September 30, 2024 were $11.1 million and $28.9 million, respectively. Revenues from operating leases for the three and nine months ended September 30, 2023 were $9.6 million and $27.8 million, respectively.

Note 6—Accrued Liabilities

Accrued liabilities consist of the following:

Note 7—Debt

Debt consists of the following:

On September 19, 2017, the Company entered intotwo credit agreements: (i) a revolving line of credit up to $250.0 million, subsequently increased to $525.0 million, see below, (the “ABL Facility”) and (ii) a $175.0 million term loan (the “Term Loan Facility”).

On January 23, 2023, the Company borrowed $106.7 million on the ABL Facility and used the proceeds to pay off and terminate the Term Loan Facility. The amount paid included the balance of the Term Loan Facility at pay off of $104.7 million, $0.9 million of accrued interest, and a $1.1 million prepayment premium.

The weighted average interest rate on all borrowings outstanding as of September 30, 2024 and December 31, 2023 was 6.9% and 7.6%, respectively.

ABL Facility

Under the terms of the ABL Facility, up to $525.0 million may be borrowed, subject to certain borrowing base limitations based on a percentage of eligible accounts receivable and inventory. As of September 30, 2024, the borrowing base was calculated to be $459.7 million, and the Company had $123.0 million outstanding in addition to letters of credit in the amount of $7.4 million, with $329.3 million of remaining availability. Borrowings under the ABL Facility bear interest at Secured Overnight Financing Rate (“SOFR”) or a base rate, plus an applicable SOFR margin of 1.5% to 2.0% or base rate margin of 0.5% to 1.0%, as described in the ABL Facility credit agreement (the “Credit Agreement”). Additionally, borrowings as of September 30, 2024 incurred interest at a weighted average rate of 6.9%. 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 SOFR loans, at the end of each interest period. The ABL Facility matures on January 23, 2028. Borrowings under the ABL Facility are collateralized by accounts receivable and inventory, and further secured by the Company as parent guarantor.

The ABL Facility includes certain non-financial covenants, including but not limited to restrictions on incurring additional debt and certain distributions. Moreover, the ability of the Company to incur additional debt and to make distributions is dependent on maintaining a maximum leverage ratio.

The ABL Facility is not subject to financial covenants unless liquidity, as defined in the Credit Agreement, drops below a specific level. The Company is required to maintain a minimum fixed charge coverage ratio, as defined in the Credit Agreement, of 1.0 to 1.0 for each period if excess availability is less than 10% of the borrowing base or $52.5 million, whichever is greater.

The Company was in compliance with these covenants as of September 30, 2024.

Maturities of debt are as follows:

Note 8—Fair Value Measurements and Financial Instruments

The fair values of the Company’s assets and liabilities represent the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an orderly transaction on the reporting date. These fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability on the measurement date, the fair value measurement reflects the Company’s own judgments about the assumptions that market participants would use in pricing the asset or liability. The Company discloses the fair values of its assets and liabilities according to the quality of valuation inputs under the following hierarchy:

•Level 1 Inputs: Quoted prices (unadjusted) in an active market for identical assets or liabilities.

•Level 2 Inputs: Inputs other than quoted prices that are directly or indirectly observable.

•Level 3 Inputs: Unobservable inputs that are significant to the fair value of assets or liabilities.

The classification of an asset or liability is based on the lowest level of input significant to its fair value. Those that are initially classified as Level 3 are subsequently reported as Level 2 when the fair value derived from unobservable inputs is inconsequential to the overall fair value, or if corroborating market data becomes available. Assets and liabilities that are initially reported as Level 2 are subsequently reported as Level 3 if corroborating market data is no longer available. Transfers occur at the end of the reporting period. There were no transfers into or out of Levels 1, 2, and 3 during the nine months ended September 30, 2024 and 2023.

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, notes receivable, investments in equity securities, 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 September 30, 2024 and December 31, 2023.

•The carrying values of cash and cash equivalents, accounts receivable, and accounts payable (including accrued liabilities) approximated fair value on September 30, 2024 and December 31, 2023, due to their short-term nature.

•The carrying value of investments in equity securities were measured at fair value on September 30, 2024 based on quoted prices in active markets.

•The carrying value of amounts outstanding under long-term debt agreements with variable rates approximated fair value on September 30, 2024 and December 31, 2023, as the effective interest rates approximated market rates.

•The carrying values of amounts outstanding under finance and operating lease obligations approximated fair value on September 30, 2024 and December 31, 2023, as the effective borrowing rates approximated market rates.

Nonrecurring Measurements

Certain assets and liabilities are measured at fair value on a nonrecurring basis. These items are not measured at fair value on an ongoing basis but may be subject to fair value adjustments in certain circumstances.

As of September 30, 2024, the Company recorded $1.2 million of land and $2.8 million of buildings, net of accumulated depreciation, oftwo properties that met the held for sale criteria, to assets held for sale at a total fair value of $3.4 million, which are included in prepaid and other current assets in the accompanying unaudited condensed consolidated balance sheets. The Company estimated the fair value of the properties based on the listed selling price for thetwo properties, which is a Level 3 input. The Company estimates that the carrying value of the assets is equal to the fair value less the estimated costs to sell, net of write-downs taken in the prior period, and thereforeno gain or loss was recorded during the nine months ended September 30, 2024.

As of December 31, 2023, the Company recorded $0.7 million of land and $0.8 million of buildings, net of accumulated depreciation, ofone property that met the held for sale criteria, to assets held for sale at a total fair value of $0.8 million, which are included in prepaid and other current assets in the accompanying unaudited condensed consolidated balance sheets. The Company estimated the fair value of the property based on a communicated selling price forone property, which is a Level 3 input.

Recurring Measurements

The fair values of the Company’s cash equivalents measured on a recurring basis pursuant to ASC 820-10 Fair Value Measurements and Disclosures are carried at estimated fair value. Cash equivalents consist of money market accounts which the Company has classified as Level 1 given the active market for these accounts. As of September 30, 2024 and December 31, 2023, the Company had cash equivalents, measured at fair value, of $0.3 million.

The Company holds an investment in Oklo Inc. (“Oklo”) made during the three months ended September 30, 2023. In May 2024, Oklo was acquired by a publicly traded special purpose acquisition company which resulted in the conversion of the Company’s investment into common shares of Oklo, which are traded on the New York Stock Exchange. The Company measures this investment in equity securities at fair value using Level 1 inputs based on quoted prices in an active market. As of September 30, 2024, the fair value of the investment was estimated at $16.6 million. The change in Oklo’s fair value resulted in an unrealized loss of $0.8 million and an unrealized gain of $6.6 million during the three and nine months ended September 30, 2024, respectively, included in unrealized loss (gain) on investments, net in the accompanying unaudited condensed consolidated statements of operations.

Additionally, during the three months ended December 31, 2023, the Company purchased depository interests representing shares of common stock in Tamboran Resources Corporation (“Tamboran”). In June 2024, Tamboran executed an Initial Public Offering (“IPO”) and listed its common stock on the New York Stock Exchange. In addition to the prior purchase of depository interests, the Company participated in Tamboran’s IPO by purchasing an additional $10.0 million of Tamboran’s common stock. The Company measures this investment in equity securities at fair value using Level 1 inputs based on quoted prices in an active market. As of September 30, 2024, the fair value of the investment was estimated at $18.2 million. The change in Tamboran’s fair value resulted in an unrealized loss of $1.9 million and $2.1 million during the three and nine months ended September 30, 2024, respectively, included in unrealized loss (gain) on investments, net in the accompanying unaudited condensed consolidated statements of operations.

Nonfinancial assets

The Company estimates fair value to perform impairment tests as required on long-lived assets. 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 accompanying unaudited condensed consolidated financial statements. No such measurements were required as of September 30, 2024 and December 31, 2023 as no triggering event was identified.

Credit Risk

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$23.0 million and $36.8 million as of September 30, 2024 and December 31, 2023, 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 September 30, 2024, customer A accounted for 13%of total consolidated accounts receivable and unbilled revenue. As of December 31, 2023, no customers accounted for more than 10% of total consolidated accounts receivable and unbilled revenue. During the three months ended September 30, 2024 and 2023, no customers accounted for more than 10% of consolidated revenues. During the nine months ended September 30, 2024, customer B accounted for 12% of consolidated revenues. During the nine months ended September 30, 2023, customer A accounted for 11% of consolidated revenues. No other customers accounted for more than 10% of revenues during the respective periods.

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

The Company applies historic loss factors to its receivable portfolio segments that are not expected to be further impacted by current economic developments, and an additional economic conditions factor to portfolio segments anticipated to experience greater losses in the current economic environment. While the Company has not experienced significant credit losses in the past and has not seen material changes to the payment patterns of its customers, the Company cannot predict with any certainty the degree to which unforeseen events may affect the ability of its customers to timely pay receivables when due. Accordingly, in future periods, the Company may revise its estimates of expected credit losses.

As of September 30, 2024 and December 31, 2023, the Company had $0.9 million in allowance for credit losses as follows:

Note 9—Equity

Restricted Stock Units

Restricted stock units (“RSUs”) granted pursuant to the Liberty Energy Inc. Amended and Restated Long Term Incentive Plan (“LTIP”), if they vest, will be settled in shares of the Company’s Class A Common Stock. RSUs were granted with vesting terms up tothree years. Changes in non-vested RSUs outstanding under the LTIP during the nine months ended September 30, 2024 were as follows:

Performance Restricted Stock Units

Performance restricted stock units (“PSUs”) granted pursuant to the LTIP, if they vest, will be settled in shares of the Company’s Class A Common Stock. PSUs were granted with athree-year cliff vesting and performance period, with the vesting percentage of the target award dependent on the satisfaction of the performance goals set forth in the applicable award agreement. The Company records compensation expense based on the Company’s best estimate of the number of PSUs that will vest at the end of the performance period. 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 nine months ended September 30, 2024 were as follows:

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$8.1 million and $22.3 million for the three and nine months ended September 30, 2024, respectively. The Company recognized stock-based compensation of $8.6 million and $23.7 million for the three and nine months ended September 30, 2023, respectively. There was approximately$46.4 million of unrecognized compensation expense relating to outstanding RSUs and PSUs as of September 30, 2024. The unrecognized compensation expense will be recognized on a straight-line basis over the weighted average remaining vesting period oftwo years.

Dividends

The Company paid cash dividends of $0.07 per share of Class A Common Stock on March 20, 2024, June 20, 2024, and September 20, 2024 to stockholders of record as of March 6, 2024, June 6, 2024, and September 6, 2024, respectively. During the three and nine months ended September 30, 2024, dividend payments totaled $11.5 million and $34.7 million, respectively.

The Company paid cash dividends of $0.05 per share of Class A Common Stock on March 20, 2023, June 20, 2023, and September 20, 2023 to stockholders of record as of March 6, 2023, June 6, 2023, and September 6, 2023, respectively. During the three and nine months ended September 30, 2023, dividend payments totaled $8.4 million and $25.8 million, respectively.

Additionally, the Company paid accrued dividend equivalents upon vesting for the RSUs and PSUs with a 2024 vesting date, which totaled $0.6 million for the nine months ended September 30, 2024. The Company paid accrued dividend equivalents upon vesting for the RSUs and PSUs with a 2023 vesting date, which totaled $0.2 million for the nine months ended September 30, 2023.

As of September 30, 2024 and December 31, 2023, the Company had $1.2 million and $1.0 million of dividend equivalents payable related to RSUs and PSUs to be paid upon vesting, respectively. Dividends are not paid on forfeited RSUs or PSUs.

On July 25, 2022, the Company’s board of directors authorized and the Company announced a share repurchase program that allowed the Company to repurchase up to $250.0 million of the Company’s Class A Common Stock beginning immediately and continuing through July 31, 2024. Additionally, on January 24, 2023 the Board authorized and the Company announced an increase of the cumulative repurchase authorization to $500.0 million. Furthermore, on January 23, 2024, the Board authorized and the Company announced an increase of the cumulative repurchase authorization to $750.0 million and extended the authorization through July 31, 2026. The shares may be repurchased from time to time in open market transactions, through block trades, in privately negotiated transactions, through derivative 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 any repurchases by using cash on hand, borrowings under the ABL Facility and expected free cash flow to be generated through the duration of the share repurchase program.

Share repurchases and retirements under the share repurchase program for the three and nine months ended September 30, 2024 and 2023 were as follows:

As of September 30, 2024, $322.9 million remained authorized for future repurchases of Class A Common Stock under the share repurchase program.

The Company accounts for the purchase price of repurchased common shares in excess of par value ($0.01 per share of Class A Common Stock) as a reduction of additional paid-in capital, and will continue to do so until additional paid-in capital is reduced to zero. Thereafter, any excess purchase price will be recorded as a reduction to retained earnings.

As enacted by the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”), the Company accrued stock repurchase excise tax of $0.7 million and $1.5 million, respectively, for the nine months ended September 30, 2024 and 2023. As of September 30, 2024 and December 31, 2023, the Company had excise tax payables of $2.5 million and $1.9 million, respectively, in accrued liabilities in the accompanying unaudited condensed consolidated balance sheets.

Note 10—Net Income per Share

Basic net income per share measures the performance of an entity over the reporting period. Diluted net income per share measures the performance of an entity over the reporting period while giving effect to all potentially dilutive common shares that were outstanding during the period. The Company uses the “if-converted” method to determine the potential dilutive effect of its Class B Common Stock and the treasury stock method to determine the potential dilutive effect of outstanding RSUs and PSUs.

The following table reflects the allocation of net income to common stockholders and net income per share computations for the periods indicated based on a weighted average number of shares of Class A Common Stock and Class B Common Stock outstanding:

Note 11—Income Taxes

The Company is a corporation and is subject to taxation in the United States, Canada, Australia and various state, local and provincial jurisdictions. Historically, Liberty LLC was treated as a partnership, and its income was passed through to its owners for income tax purposes. Liberty LLC’s members, including the Company, were liable for federal, state and local income taxes based on their share of Liberty LLC’s pass-through taxable income.

Effective January 31, 2023, the Company adopted a plan of merger, pursuant to which Liberty LLC merged into the Company, ceasing the existence of Liberty LLC with the Company remaining as the surviving entity. Liberty LLC filed a final tax return during the 2023 calendar year. The Company is still party to the TRAs; the associated liabilities are discussed below.

On October 8, 2021, the Organization for Economic Co-operation and Development (“OECD”) released a statement on the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, which agreed to a two-pillar solution to address tax challenges of the digital economy. On December 20, 2021, the OECD released Pillar Two model rules defining a 15% global minimum tax rate for large multinational corporations (the “Pillar Two Framework”). On June 20, 2024, Canada enacted the Pillar Two global minimum tax regime, which is not expected to have a material impact on the Company’s financial statements for the fiscal year ended December 31, 2024. The OECD continues to release additional guidance and countries are implementing legislation, with widespread adoption of the Pillar Two Framework expected by 2025. The Company is continuing to evaluate the Pillar Two Framework and its potential impact on future periods, including any legislation enacted in the jurisdictions in which the Company operates.

The Company may distribute cash from foreign subsidiaries to its U.S. parent as business needs arise. 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 is not expected to be significant.

The effective global income tax rate applicable to the Company for the nine months ended September 30, 2024 was 23.5%, compared to 24.6% for the period ended September 30, 2023. The Company’s effective tax rate is greater than the statutory federal income tax rate of 21.0% due to the Company’s Canadian operations, state income taxes in the states the Company operates, as well as nondeductible executive compensation. The Company recognized income tax expense of $22.2 million and $81.2 million during the three and nine months ended September 30, 2024, respectively. The Company recognized income tax expense of $49.8 million and $151.7 million during the three and nine months ended September 30, 2023, respectively.

During the three months ended September 30, 2024, the Company entered into a Tax Credit Transfer Agreement (“TCTA”) with a third-party seller, pursuant to which the Company agreed to purchase up to $40.0 million of transferable tax credits under the Inflation Reduction Act. The benefit for the federal income tax credits purchased has been recognized as part of the Company’s overall effective annual tax rate.

As of September 30, 2024 and December 31, 2023, the Company recognized a net deferred tax liability in the amount of $102.3 million. 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.

Tax Receivable Agreements

In connection with the IPO, on January 17, 2018, the Company entered intotwo Tax Receivable Agreements (the “TRAs”) with R/C Energy IV Direct Partnership, L.P. and the then existing owners that continued to own units in Liberty LLC (“Liberty LLC Units”) (each such person and any permitted transferee, a “TRA Holder” and together, the “TRA Holders”). The TRAs generally provide for the payment by the Company of 85% of the net cash savings, if any, in U.S. federal, state, and local income tax and franchise tax (computed using simplifying assumptions to address the impact of state and local taxes) that the Company actually realizes (or is deemed to realize in certain circumstances) in periods after the IPO as a result, as applicable to each TRA Holder, of (i) certain increases in tax basis that occur as a result of the Company’s acquisition (or deemed acquisition for U.S. 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.

On January 31, 2023, the last redemption of the Liberty LLC Units occurred. As such, the Company recorded an increase of $7.8 million of deferred tax assets for the impact of the adopted plan of merger of Liberty LLC into the Company. Additionally, exchanges of Liberty LLC Units and shares of Class B Common Stock resulted in a net increase of $0.7 million in deferred tax assets, and an increase of $0.6 million in amounts payable under the TRAs, all of which was recorded through equity during the nine months ended September 30, 2023.

As of September 30, 2024, the Company’s liability under the TRAs was $112.4 million of which $37.4 million is payable within the next 12 months, and $75.0 million thereafter. The Company made TRA payments of $5.2 million for the nine months ended September 30, 2024.

As of December 31, 2023, the Company’s liability under the TRAs was $117.7 million, of which $5.2 million was presented as a current liability, and $112.5 million was presented as a long-term liability. The Company didnot make any TRA payments for the nine months ended September 30, 2023.

Note 12—Defined Contribution Plan

The Company sponsors a 401(k) defined contribution retirement plan covering eligible employees. The Company makes 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 were $9.9 millionand$8.2 million for the three months ended September 30, 2024 and 2023, respectively, and $27.9 million and $24.4 million for the nine months ended September 30, 2024 and 2023, respectively.

Note 13—Related Party Transactions

Schlumberger Limited

During 2020, the Company acquired certain assets and liabilities of Schlumberger Technology Corporation (“Schlumberger”) in exchange for the issuance of shares of the Company’s Class A Common Stock amongst other consideration. During the nine months ended September 30, 2023, the Company repurchased and retired 3,000,000 shares of Class A Common Stock for $45.0 million or $15.00 average price per share from Schlumberger, under the share repurchase program. Effective January 31, 2023, after the repurchase and retirement, Schlumberger ownsno shares of Class A Common Stock of the Company and no longer qualified as a related party.

Within the normal course of business, the Company purchased chemicals, proppant, other equipment, and maintenance parts from Schlumberger and its subsidiaries. During the period from January 1, 2023 until January 31, 2023, total purchases from Schlumberger were approximately $1.7 million. Although the Company continues to do business with Schlumberger, the Company no longer presents cash flows with Schlumberger as related party in the accompanying unaudited condensed consolidated statements of cash flows.

Franklin Mountain Energy, LLC

A member of the board of directors of the Company, Audrey Robertson, serves as Executive Vice President of Finance of Franklin Mountain Energy, LLC (“Franklin Mountain”). During the three and nine months ended September 30, 2024, the Company performed hydraulic fracturing services for Franklin Mountain in the amount of $26.6 million and $79.7 million, respectively. During the three and nine months ended September 30, 2023, the Company performed hydraulic fracturing services for Franklin Mountain in the amount of $61.2 million and $128.0 million, respectively.

Amounts included in unbilled revenue from Franklin Mountain as of September 30, 2024 and December 31, 2023 were $4.0 million and $13.4 million, respectively. Receivables from Franklin Mountain as of September 30, 2024 and December 31, 2023 were $0.0 million and $12.1 million, respectively.

Liberty Resources LLC

Liberty Resources LLC, an oil and gas exploration and production company, and its successor entity (collectively, the “Affiliate”) had certain common ownership and management with the Company. Effective March 14, 2024, the Affiliate was no longer a related party, following its acquisition by an unaffiliated party. The amounts of the Company’s revenue related to hydraulic fracturing services provided to the Affiliate for the period January 1, 2024 through March 13, 2024, and the three and nine months ended September 30, 2023, were $11.1 million, $18.4 million, and $33.5 million, respectively.

On December 28, 2022 (the “Agreement Date”), the Company entered into an agreement with the Affiliate to amend payment terms for outstanding invoices due as of the Agreement Date to be due on April 1, 2024. Additionally, on August 15, 2023, the agreement was further amended in order to extend the due dates for certain invoices to January 1, 2025. Amounts outstanding from the Affiliate as of December 31, 2023 were $14.8 million, included in other assets in the accompanying unaudited condensed consolidated balance sheet. All amounts outstanding with the Affiliate under the agreement were collected in full during the three months ended March 31, 2024.

Receivables from the Affiliate as of December 31, 2023 were $5.2 million, included in accounts receivable—related party.

During the period January 1, 2024 through March 13, 2024, and the three and nine months ended September 30, 2023, interest income from the Affiliate was $0.5 million, $0.5 million, and $1.3 million, respectively.

Oklo Inc.

During the three months ended September 30, 2023, the Company invested $10.0 million in a fission power and nuclear fuel recycling company, Oklo. Effective May 10, 2024, through an acquisition by a special purpose acquisition company, the Company’s investment converted into shares traded on the New York Stock Exchange. Additionally, Chris Wright, the Company’s Chief Executive Officer and Chairman of the Board, was appointed to the Oklo board of directors. During the three and nine months ended September 30, 2024, the Company recorded an unrealized loss of $0.8 million and an unrealized gain of $6.6 million, respectively, included in unrealized loss (gain) on investments, net in the accompanying unaudited condensed consolidated statements of operations. As of September 30, 2024, the fair value of the Company’s investment using Level 1 inputs was $16.6 million. The Company was not party to any other transactions with Oklo during the three and nine months ended September 30, 2024, and 2023.

Note 14—Commitments & Contingencies

Purchase Commitments (tons are not in thousands)

The Company enters into purchase and supply agreements to secure supply and pricing of proppants, transload, and equipment. As of September 30, 2024 and December 31, 2023, the agreements provide pricing and committed supply sources for the Company to purchase 463,500 tons and 1,854,000 tons, respectively, of proppant through December 31, 2025. Amounts below also include commitments to pay for transport fees on minimum amounts of proppants. Additionally, related proppant transload service commitments run through 2024.

Future proppant, transload, and equipment commitments are as follows:

Certain supply agreements contain a clause whereby in the event that the Company fails to purchase minimum volumes, as defined in the agreement, during a specific time period, a shortfall fee may apply. 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 $2.8 million and $5.4 million for the remainder of 2024 and the year ended 2025, 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 2024 are $2.7 million of payments expected to be made in the fourth quarter of 2024 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.

Litigation

From time to time, the Company is subject to legal and administrative proceedings, settlements, investigations, claims and actions. The Company’s assessment of the likely outcome of litigation matters is based on its judgment of a number of factors including experience with similar matters, past history, precedents, relevant financial and other evidence and facts specific to the matter. Notwithstanding the uncertainty as to the final outcome, based upon the information currently available, management does not believe any matters, individually or in aggregate, will have a material adverse effect on the Company’s financial position or results of operations.

Note 15—Selected Quarterly Financial Data

The following tables summarizes consolidated changes in equity for the three months ended September 30, 2024 and 2023:

Note 16—Subsequent Events

On October 15, 2024, the Company’s board of directors approved a quarterly dividend of $0.08 per share of Class A Common Stock to be paid on December 20, 2024 to holders of record as of December 6, 2024.

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