Liberty Energy Inc. (LBRT) Earnings Call Transcript & Summary

I'm Anjali Voria, the Investor Relations and Strategic Finance Lead at Liberty. It is my pleasure to welcome you all here today, both in person and on the webcast. For those of you in the room, we are so excited to have you with us in person for the events of the week. Many of you joined us for a frac site tour yesterday, and we're so delighted that you were able to meet members of our team. And for the rest of you, rest assured you'll have a chance to meet some of our amazing folks with the events planned for the rest of the week. From an engaging dialogue of presentations today, to a tour of the digiFrac's equipment out in front of our offices and a happy hour reception to follow to meet our customers, and a chance to meet leadership in the Denver oil and gas community. I've been at Liberty for nearly 2 years, and it's been an incredible journey. Having had the opportunity to work on our transformative acquisition with OneStim, working on the ESG report and changing that narrative. And spending time on the road, meeting our folks in the field and touring our facilities, I've seen the dedication, commitment and passion from our employees firsthand. I'm lucky to work at a company so committed, deeply committed to our people, whether it's our customers, our employees, our families. And you'll hear more about that today. So today, we'll get a glimpse of that from the following. First off, we'll kick off with Chris Wright. He's going to talk a little bit about how we view our role in the energy sector and how we create, bringing together the best of the best, giving folks the resources to do what they do best and allowing them to create. Then we'll have Dr. Leen Weijers following up with how we build value for our customers in the technology downhole edition. Next, we'll have Ron Gusek laying the foundation for how we create operational efficiency and the evolution towards next-generation equipment. Lastly, we'll close with our finance and outlook with Michael Stock, generating superior returns. We are also so lucky to have Dr. Steve Koonin with us today. Dr. Koonin was Chief Scientist in the Obama Energy Department. During our fireside chat, Chris and Dr. Koonin will help set the stage of why our industry is so critical, truly putting into context the 3 global energy challenges that you'll hear more about from Chris. And before we begin, I want to share today that today's presentations are unscripted. It's a very personal view from each of our speakers' area of passion. So you'll really get a chance to see the Liberty team in action. We'll have a lot of time for Q&A following both of our technology sections as well as with our fireside chat with Dr. Koonin and certainly after our finance and outlook section. [Operator Instructions] A reminder that today's presentation contains estimates, projections and other forward-looking statements, along with certain non-GAAP disclosures. These statements are subject to certain risks, uncertainties and other factors that may be -- that may cause actual results to differ. Please take a moment to review the safe harbor statement that is on the screen and available online, along with other important information in these disclaimers. And thank you for being with us today. I'd like to now introduce our fearless leader, our CEO, Chris Wright.

Thanks, Anj. Yes. Thanks, everyone, for coming and making the trip. It's great to see people in person again. And look, I think as everyone in this room probably knows, Liberty for us, it's more than a company, it's a passion, it's a mission. We set out 10 years ago to say, "What's the most important thing going on in the energy, in the world? The shale revolution. What's the heart of the shale revolution? It's hydraulic fracturing." So we set out to try to create something special. We're humans, we're 1 million miles from perfect, but we love what we do, and we're driving it hard. And as indicative of that, we put together a report over the last few months that, if you've seen it, it's a little different than the typical ESG report. But it's straight from the heart. It's based on facts. It overviews some topics that I think just don't get talked about enough. But the bottom line, in our report, in our company and our mission: Bettering human lives. We feel honored to work in the most important industry in the history of the world. And I say that because our industry is what enables everything else. Every other industry, everything that happens in our lives, energy is the infrastructure of human race and human civilization. We highly recommend reading the report. Couple -- I'll hit 2 points on this in an image. The left, people have seen that photo a lot, right? That's the Korean peninsula. You can see the border between North and South Korea. And the difference is -- and if I just show a show of hands, you want to live south or north of that line, I kind of know how the vote would skew. With the young today, I might not get 100%. But -- and the image is that light at night, right? That means better human life, better quality. And of course, it's 2 things here, our name and our passion, that in the north, why does the north not have any lights? Because it doesn't have human liberty. Doesn't have bottom-up social organization that allows wealth generation and people to pursue their dreams. And without wealth generation, without freedom, you don't have an energized society and you live a very less desirable life. On the right is another part of energy that's not talked nearly enough. This is a national border you can see during the day. And it shows energy access, the modern fuels we produce is green. On the right is the Dominican Republic. Economy doing quite well in the Caribbean. This is the island of Hispaniola. You see the beautiful rainforest. It's got a huge tourist economy, rising quality of life. On the left, on the other side of that border, is Haiti. Now Haiti, like the Dominican Republic, gets the vast majority of its energy from fossil fuels, but it still has a meaningful percent of its population that lives like our ancestors live, which means they're still using traditional fuels to cook their meals and to heat homes and huts at night, which means burning wood. And they've -- as you can see here, Haiti has enormous deforestation problems. So more energy, more wealth doesn't mean worse environment. In fact, it almost always means better environment. So people in Haiti, and again, the 1/3 of humanity around the world that still cook their meals and heat their houses the same way all of our ancestors did only several generations ago. This transition to a modern world is quite recent. Wood, dung agricultural biomass, 2.5 billion people, that's their primary fuel. What's the next step? How does someone get out of energy poverty? Well, for almost 90% of them, there's 1 next step, and that's the move to a single-burner LPG, think propane, burning stove. Something we might use for a camp stove or a climbing stove. But it's enormously impactful in the lives of human beings. A, it doesn't have indoor smoke. About 3 million people die every year from that indoor air pollution. You fix that problem. Women in traditional societies spend a little over an hour every day gathering fuel wood. Your propane canister, you fill it up, maybe it lasts a week. You go down to the local gas station or a distributor. I was in Tanzania recently. There are 6 companies competing to bring LPG to lift people out of energy poverty. But 85% of Tanzanians still cook with traditional fuel. So liquid petroleum gas made out of NGLs, dominantly propane, is just, to me, is the critical fuel to get out, to lift yourself out of energy poverty. So this plot is 8 countries that export propane or liquid petroleum gases, we call them NGLs, over the last 10 years. So each bar in those little things, that's 10 years of trends. You can see, besides the United States, about half of those countries have slightly shrunk their exports over the last 10 years, and about half have grown them by a hair, not by much. What's changed the game in access for LPG is the surging exports from the United States. What happens when supply goes up massively? Price comes down, availability goes up. So the United States shale revolution, that produces a lot of natural gas liquids. In fact, that's sort of a sweet spot of shale, right? It's balancing between gas and oil, light oil, natural gas, liquids. I think one of the things to be proudest of in the shale revolution is we are really accelerating people getting out of energy poverty. Energy. Energy. Look, if you read the reports today, you think our industry is going to be gone in 10 years. Maybe we're going to hang on with our claws for another 20 years. That's the narrative out there. It's simply not sensical. Here's a couple of projections. And projections are about the future. We don't know the future, so take them for what they're worth. The left is an OPEC projection on total oil demand globally. It's got 2019. You see that huge drop into 2020, largest drop ever in oil demand. That wasn't a recession or something, right? That's COVID and shutting down economies and ceasing transportation. Demand for oil dropped 9% last year. Bouncing back, we'll have the fastest year-over-year demand growth for oil ever this year. And then they go out to 2025 and then out through 2045. In the OPEC projections, oil demand sort of peaks 15 years out, and then it sort of plateaus for the next several years. The other projections, if you look at them, they may peak a few years earlier, they may peak a few years later. And then someone say it peaks, and it goes down. But if you look at all those projections, it goes down very gradually. We don't know the future. There's been predictions of peak oil demand for 100 years. On the right is United States. Where does the U.S. get energy from? And where might that go? This is from the U.S. Energy Information Administration. So red is oil, yellow is natural gas, renewables next, coal next, nuclear on top. And as you can see in that -- and again, look at the past, look at what's actually happened, look at the future. Energy systems, the mix in energy systems changes slowly. The last 2 years, we've seen the highest percent, highest market share of U.S. energy coming from oil and natural gas ever. That doesn't sound to me like a dying industry. And the reason for that is coal's market share has shrunk. It's mostly been picked up by natural gas and a little bit from renewables as well. And in these projections out to the year 2050, today, our record-ever market share from oil and natural gas is 69%. And these projections in the year 2050, U.S. demand for energy has grown and the predicted market share of oil and gas has risen to 70%. We're not going away. Here's -- to look at energy markets. Okay, demand for oil and gas is not likely to go away. In fact, it's -- and my guess, it's likely to sort of grow slowly for the next several decades. But do we need any of it here? Can we just shut down production in the United States? We're not really liked here. Maybe we'll just shut it down, it will just come from somewhere else. A, that would raise prices up. That would hurt people's quality of lives. But it's even practical? So on the bottom, in these bars, is OPEC's spare production capacity. And global demand is neat for percentages. Look, it's right around 100 million barrels a day. And so OPEC's spare production capacity got up over 8 million barrels a day a year ago with the cutbacks from COVID. That production is rapidly coming back online. There's probably 4 or 5 million barrels a day of OPEC spare capacity at the end of this year, not far from what's normal. And at the top, there's a little dotted line. 25% of global liquid fuel production comes from the United States and Canada, the regions that Liberty operates, right? This is 2019 data. U.S., 12.5 million barrels a day of oil, nearly 6.5 million barrels a day of natural gas liquids, another 1 million barrels in there from ethanol, and you add it up. So the North American production is critical for world supply. Not just for supply, 1/4 of world supply, but it's critical also for where does technology innovation go? Where do environmental impacts get minimized? Where -- who drove down the cost of oil over the last 10 years? I'm the weird oil and gas guy that celebrates that. Oil and natural gas have gotten dramatically cheaper. Those 2 factors are enormously important to people's quality of life. Here's a plot, 100 years of U.S. oil production data, right, going back to 1920. You see that march up from 1920 to 1970. Think of the United States in the 1920s. Automobiles are brand new, just really the start of industrialization. Most of Americans at the turn of the century still worked on farms, relatively low income. Now we have this huge economic growth -- growing population, improving lifestyle, U.S. oil production fires up with it. And that famous Shell geologist, King Hubbert. Hey, oil is going to peak at 1970 or 1971, and then it's going to roll over. Because we know how much resource it is, and by just simple logical assumptions, here's the production profile. Well, King Hubbert forgot one thing, that humans are not stagnant, technology and innovation. So oil did indeed roll over production at that time. Then the North Slope of Alaska, deepwater Gulf of Mexico arrested that decline, actually a modest growth for a little bit. But those fields had been -- in Alaska had been fully developed. Production was at its plateau and then started to decline. Gulf of Mexico, very strong early on. And then we go into this 25 years of declining U.S. oil production. That sort of defines my career right there. I came in just to get the start of that slide and ride it all the way down. And then, of course, humans innovated again, right? A shale revolution that began in the late '90s with some technical innovations in natural gas originally, we're going to talk about that in the tech section, and then moved to oil maybe in 2009. And when that moves -- that technology moves to U.S. oil production 2009, less than a decade, U.S. production doubles. You could see the blip down there in 2015, 2016. OPEC fought a war against shale and shale won. But we did have a lot of bankruptcies. It forced improvements and lowering our production costs, efficiencies and innovations in our industry. Stress drives innovation. We may have had some stress the last year as well. Then you see U.S. production continue up. The downside of this incredible success of shale was enormously beneficial for the planet. Over $1 trillion on an annual basis of savings in energy costs. $200 for every man, woman and child on the planet in reduced energy cost because of the shale revolution. But the companies driving it didn't do very well, right? It's like the dot-com boom at the start. The Internet was awesome, but so much money went in, so much mal-investment, that returns were poor. I think the last few years of investor pressure has got, particularly the producers in our industry, but the industry as a whole, to be more disciplined in how they invest. I think we probably have a better decade going forward with better returns across our industry, and just a little more sobriety in how much oil and gas we bring to the marketplace. This is rig count over the last -- this is just last 7 years. Red is the public companies gray is the privates. Never underestimate how important and how significant private companies are to U.S. activity and the U.S. production. So we peaked at, in oil, 1,800 rigs, 2,000 if you threw in the gas rigs. Then again, the OPEC war against U.S. shale, this tremendous drop in the rig count. It bounced back up, only got to a little more than half of where it was before. But U.S. production growth was even faster, just driven by efficiency improvements. And you can see the dramatic drop in rig count. And at the end of that plateau, in '18, '19, '20, it looked like more activity was going to be concentrated in the publics. Capital, disciplined capital starvation of our industry was growing the bigger, stronger balance sheet publics for more and more of activity. That was a trend that was going slowly, but that was a trend. Now we have an investor strike that the publics are, "This is what we're going to do and they're not going to move it." I think it's fantastic. It's what we need to make the industry stronger. But of course, private companies are saying, "Wow, the drilling economics today in shale are the best they've ever been." So what do you think the privates are doing right now? They're increasing their activity. Fortunately, their access to capital is not tremendous. I don't think we're going to flood the marketplace with oil and gas. But we are seeing increased activity. The rig count keeps going up, the frac fleet count keeps to trickle up, that's driven by the privates. The story you'll hear today is sort of across these things. Superior returns. That's essential. You can't have a successful business, you can't innovate, you can't make changes if you don't get strong returns on the cash, on the invested capital. You'll hear a lot about that from Liberty today. Technology is the biggest focus you'll hear today. You're going to hear 2 different sections about technology across our platform. Who is driving it? Why are they doing it? What are the impacts on our customers? Culture and principles, of course, maybe should be at the top. That's everything, right? You only get technology, you only get returns, you only get all that if you have motivated, competent, principled people working hard together. For us, we always say, "What really is the biggest Liberty competitive advantage? By far and away, it is culture." Because to succeed, you need great people who love to work together, who are not afraid to criticize and challenge what's going on and figure out ways to do it better, and critically, have fun doing it. You will go to happy hour today, and you'll see the bar in Liberty's office. That's just not because we're big boozers, it's because if you have a company and you want to have fun, make it fun. ESG, raising the bar. That's huge buzz these last few years in our industry. For Liberty, like technology and digital, that's been the plan from the start. So it's not different for us today versus 10 years ago. Except today, we're public and more people are talking about it, so we wrote a report. Quick snapshot of the company. By revenues, we're the third-largest oilfield service company in North America. That's hard for me to accept. Wow, we were just scrappy private company entrepreneurs 10 years ago, but things have grown. Punchline: 9-year, every year we've been in business, our average cash return on cash invested, 24%. Revenue, EBIT, I think everyone knows that in the frac space, we're the second-largest frac company in North America. We are technology nerds. And with our acquisition of Schlumberger, we took on a bunch of great technical professionals and a bunch of legacy IP. So now we have a patent portfolio either issued or in progress of about 500 patents. And at the bottom left, the cash return on cash invested for Liberty over our history of a decade long is 50% higher than the average for the S&P 500. And we -- then in an industry sector that's really struggled the last decade, that delta is much larger to peers in our industry space. And to do that, you've got to have a strong balance sheet because this industry is crazy cyclical. So we've always had a very strong balance sheet so we're ready for whatever comes. Here's the details on that cash return on cash invested. And you can see, well, 24% wasn't flat and boring, this industry is wildly cyclical. We started the company, our first year of commercial operations 2012. Oh my God, if you had a heartbeat and a truck, you were minting money in 2012. The saddest thing was 2011 was even better, probably the best economic time in the modern frac industry, but we weren't there yet. We were waiting for our trucks, we were hiring people, we were chomping at the bit. 2011 was just tremendous economics, 2012, tremendous economics. Shale activity is flying up. Now supply started to catch up, things softened meaningfully in '13. Demand kept going ahead, supply additions slowed down a bit, and Liberty got a little better. 2014, our bump up may be a little bit Liberty getting better, a little bit the industry a little bit better. 2015 was a measurable year. I think 100 bankruptcies across our industry. It was a tough time. Everybody pulled in their horns. Activity levels dropped dramatically Liberty didn't pull in our horns, we actually added an extra frac fleet because we'd already ordered it and committed it to a customer in 2014. We added that fleet, we kept it fully busy. And we had 14% cash return on cash invested in a pretty tough year in our industry. We thought it was a really tough year until 2016 arrived, right? And then we were only in the Rocky Mountains, maybe that was certainly a problem. Shale activity dropped by 2/3 in the Rocky Mountains, 2/3. Across the nation, dropped by about 40%, dropped 66% in the place we did. So that pond got small quickly. We went from 5% market share, fracs in the Rockies, to 25% market share in the summer of 2016. And in that tough time, that's when opportunity strikes and you've got to be ready for it. Sanjel was one of many companies going bankrupt. And as they went bankrupt, in essentially an auction in a tough time, we bought their assets. We own 6 frac fleets, they owned 9. We added 9 frac fleets at the bottom of that market. We hired a couple of hundred people from Sanjel, tons of them still with us today in the Liberty family. And that prepared us for, as the industry rebounded and we had that market share, as our customer activity grew, we could bring on that capacity to keep the great customers we had. And you can see the returns that followed from that decision. Well, okay. Things were -- I think we were in a slow grind down to get capacity out of the marketplace over the last couple of years because of efficiencies. Rigs can drill faster, frac fleets can frac faster. And then COVID and added the insult to injury. Another crisis. And we have the Schlumberger acquisition that we'll talk more about later. And again, a key thing, most important thing in Schlumberger acquisition, a bunch of great, talented humans joined our team. Culture, I mentioned. Culture is everything. It's what enables everything else. Just find great humans, make it a great place to work, treat them right, motivate them and empower them to make decisions. But to talk about culture, I'm going to introduce to you the guy who's run Liberty operations from day 1. When we started with Liberty, there was Jim. And after Jim, we built Liberty. So meet my friend and fantastic partner, Jim Brady.

Thanks, Chris. Good morning, and thank you for coming. My name is Jim Ready. Like Chris said, I'm VP of Ops for Liberty. I am employee #1, so that's kind of a unique fact about me. I grew up in Colorado on a farm. And I kind of always expected to stay on that farm. But I was newly married, not much money, and I needed to make a change. And so I migrated to the oil field. And I still remember my first day. I loved it, I still love it, and I wouldn't change a thing. I've been in this business for 31 years on the operations side, dealing with frac crews. I spent 17 years of that with a major service company and then 4 years of that time with a smaller service company. I started at the bottom. And at the time, my only desire was to improve my situation year-over-year. And what kept me going and what motivated me to do well and what made me proud to work and to do what I was doing was the culture. I believe that -- I strongly believe that culture is just as important as our Tier IV DGB fleet or our new e-fleet that will be coming to the market soon. I love both companies, but both companies changed and people just became a number. And I wanted to change that. I met Chris in a pickup truck 10 years ago on a location in North Dakota. And we didn't talk about equipment, we didn't talk about how to rig up. Chris knew nothing about either one. But what we did talk about was what we did talk about was people and culture and what that should look like. I strongly believe -- well, I want people to believe in what we're doing. I want them to want to work at Liberty. I want to be -- them to be proud of this company and to make this a career. Tracee and Audrey, who are sitting behind me, are going to talk a little bit about the culture and some of those things we do as far as our RSUs, competency programs, bonus programs, different volunteer things we do. But I want to give you a quick example of something I think is unique to our culture and a different way that we think about culture. Every year, we have holiday parties at our local districts. And at those parties, we have a dodgeball tournament. And we have 15 to 20 teams. The guys come up with some crazy names. We have a bracket. It's double elimination. And the cool thing about it is -- the winners get bragging rights for the rest of the year. But the cool thing about it is we always take a corporate team to these events, and our goal there is always to win that event. But the unique thing is the field guys get to throw a ball at the executive team, and they love it. They love it. And what I think about it that's cool is you get a new guy that's never met the CEO, and he gets to go home to his family and say, "Hey, I got to throw a ball at Chris Wright, the CEO and hit him in the face. And I didn't get fired and Chris loved it, and Chris loved it." And I think that's what's unique about us. I think culture is just connection. It's how do we connect the bottom guy, the new guy on location to the CEO, and everybody in between. And to me, that's culture. So that's our culture. We are one team. We want to be the best at whatever we do, whether that's on the dodgeball court or that's on location performing a frac job. At Liberty, we're a family with the last name Liberty, and we will always protect that. And so with that, I'm going to end. And I appreciate you -- appreciate everybody coming, and I thank you for that. And I'll turn it back over to Chris. Thank you.

Thanks, Jim. Customers, right? You don't have a business without customers. I mentioned before, look, there's -- we work with the supermajors, the biggest oil companies in the world; and the small, scrappy private entrepreneurs. To all of them, the most important thing about Liberty is our operational progress. Not just efficiency and throughput in the field, but the way we handle every challenge that's thrown at us. Whether it's weather, supply chain problem, customer well issues or whatever, we work all-in to be partners with our customers. Bigger companies are hugely interested in ESG and better technologies. That's been awesome for Liberty. That's very high in their priority list. It matters to the little guys, too. Not quite as much yet, it's moving that way. Our subsurface technology group, and you're going to hear about that next, helping people optimize frac designs and well spacing. That for the SMID caps and the privates, hugely important. Even for the biggest players, that's a key thing. They may have their own big team in that area, but there will always be some interaction between our team and their team. And to talk a tiny bit about our customers, I'm going to introduce a guy I met a long time ago. We've been partners for a long time. He runs Liberty's business development efforts, Mike Machovoe. And he's a football fan, too.

Hi, how you all doing? Thank you for coming out. Like Chris said, I'm Mike Machovoe, I run business development here at Liberty. And a little background of myself. I grew up in Buffalo, New York. I know there's some New Yorkers out here, but not Western New Yorkers. We're definitely a different breed out there. But I'm an avid, avid Buffalo Bills fan, maybe the most passionate football fan at Liberty. Just a little background on myself, though. I went to University of Buffalo and I studied environmental science. Like most people who studied environmental science at the University of Buffalo, I was managing a record store about 20 years ago. And one fateful day, I got a phone call from my brother and he said, "I know that the record industry, in selling CDs, there's a lucrative future in that for you back in the year 2000, but" -- little did I know. But he said, "I got an opportunity for you." My brother is a geophysicist, he was working for this company called Pinnacle Technologies. And he said, "It's a great culture over there. There's great people. And we have a great leader. And he may not be as passionate about the Broncos as we are about the Bills, but we'll overlook that. He's passionate about oil and gas." So I packed up all my stuff, moved out to Bakersfield, California. I flew my wife out at night. So -- and then took her immediately to the Sierra Nevada mountains. So -- because then the day after she moved there, she was like, "Where are all the trees? I thought there's trees here." So worked there for 13 years. But -- and Jim spoke so great about culture, and you'll hear from Tracee and Audrey here. The culture was fantastic at Pinnacle, but we were bought by a large service company and we started -- became a number over the years, and the culture and the passion just sort of went away. So in 2013, I gave a call to some of my Liberty friends. And they said, "Just like when you started at Pinnacle, you're going to start at the bottom. You're going to be a field hand and you got to work your way up," or work your way down to sales, as Jim would like to say. But I didn't start in operations at Liberty, I did start at Pinnacle. But I did start -- I was the first account rep that Liberty had. We had some sales managers. And the culture is truly special. I can't understate that. It's just fantastic at Liberty. And it's not just internal, the culture. We apply the same culture to our customers as well: Being honest, doing the right thing when no one's looking, having these transparent dialogues with our customers. It really is the foundation of how we build these relationships with our customers. And we have very few ex customers. They're partners for life because we come to the table with honesty and integrity. So I mean that's Liberty culture right there. Thanks.

Thanks, Mike. Awesome. So Mike and I are pretty shy. But Shane Smith in the back-right of the room, you want to meet him today. He led sales at Schlumberger's OneStim, and he's not shy. And we have a little bit of a trashtalk and tease people culture at Liberty, and Shane did not need to be indoctrinated. He took it to a new level. So make sure you meet Shane, Mike's partner in crime in business development. As I said, technology, you're going to hear about a lot today. You're going to hear about our subsurface engineering, how we help our customers optimize reservoir development, how we build better equipment, safer, cleaner, more efficient operations. How that helps the ESG goals of our customers and of Liberty ourselves. And then technology for business systems. You're going to hear a lot about computer and IT, all this packed in a short time frame. But to talk about that. So there's sort of the oilfield technology, and then there's to run our business systems, access big data, run artificial intelligence. Now I'm going to introduce a guy I've known for a long time. He's been the go-to guy in my world for IT because he's so smart and so knowledgeable about these stuff, but so damn fun to be around. So please meet Rhett Rowan, who's going to tell you a little bit about Liberty and tech.

Thank you. Good morning, everyone. And as Chris says, I'm Rhett Rowan. And I've been living and breathing data most of my life. I'm born and bred Silicon Valley, and as a result, I consider it my responsibility to deliver the best information systems that oil and gas has ever seen. And to that end, I want to talk to you for a moment about big data. Anybody can make a claim that they use big data or have a big data approach. But I'm here to tell you that Liberty was born with a big data mindset. We started collecting our data and cataloging our data from day 0, and that's just one component that makes up our digital backbone. And we have many modules and components of this. There's logistics, there's ERP, HR, real-time data, GIS, the list goes on. And all of these are the building blocks that form that foundation. And we not only collect that data, but as you'll hear as the day goes by, we know how to use it. I'm sorry. There -- I apologize. I looked down it again. So we know how to use that data. There is a concept of being able to see these building blocks and do something with them. And you might see many things that seem common today as the day goes by, but we are able to yield uncommon results out of them. And there is a baseball analogy I like to use when I'm talking about data and uncommon results. And that is in 1988, after years of collecting statistics manually, the MLB began to catalog and database, all statistics, players, games, teams, for the primary purpose of making broadcast more interesting. Then in 2002, Billy Beane, in the Oakland days, hired a gentleman out of Harvard who's looking at that data differently. They were able to make use of that data to create more on-field efficiency because they knew that efficiency was a key, important factor when you're the underdog. And it turns out they were right. So they changed the way people view the game and they won games using a big data mindset. And you might ask, how does this relate to Liberty? And it does because, like the 2002 Oakland Days and Billy Beane, we have leaders and visionaries who were able to look at the data, find new efficiencies and help us win more games. So thank you.

Thank you, Billy Beane. So Leen and his technical team is going to talk right after this section, after a break, about how we use data. The right is the Permian, the colors or reservoir quality, those bubbles or wells, big is better than small, that's how much oil it produces, the colors or the operators, is to take all this disparate data and put it in a format that we can achieve what you see on the left. Which is, to find out, under these commodity prices, these service prices, these geologic conditions, what's the optimal design for you to maximize your return? And we call that happy valley. You can do all sorts of things that will bring a lot of oil to the surface, but what's the best? How do you minimize your cost to produce a barrel of oil or an Mcf of gas? That continually changes versus time, but Liberty is relentless in pursuit of that. You're going to hear next -- after lunch, you're going to hear about downhole -- I mean, surface technologies and equipment. Same philosophy. You've got to collect good data. A lot of people collect a lot of data, but then you got to see things in that data that you want to address, and you got to use that data to engineer a solution to fix a problem or engineer an improvement or engineer lower emissions. Then you got to build it. We used to build everything external. We might design and engineer and build everything external, we're building more and more things and components and custom stuff inside of Liberty. ESG. As I said, it's not new to us. Our first frac fleet drove up on location with a satellite dish on it for the first frac job. We did send to our customers with -- and we already had a database of every producing well in the Bakken and a different idea about frac design. So more efficient extraction of oil. The very next year, like our third frac fleet was dual-fuel. We knew the industry should go that way. We built a bunch of dual-fuel fleets. It took us a while to get customers actually interested in them. They're very interested in them now. We went immediately to containerized sand dust, sand -- I mean, dust, noise, truck traffic, big issue in our industry, let's attack it head-on. We built a quiet fleet you're going to hear about. We've been a test partner with Caterpillar for the -- first, the pump electronic manufacturing system, then Tier IV DGB, which are great engines. You're going to hear about the next generation of that, which is digiFrac. And you're going to hear a lot about technologies we added from Schlumberger. Technologies that we have piece A and they had B, and we put A and B together and then we get to develop C and then we get to D. But you'll hear about that. But ESG, worrying about our impact and efficiency and having a great social environment to work, not just in Liberty, but in the communities, that's not new at Liberty. Every dot on this map is a location of where a Liberty employee works. And you're probably thinking, "Wow, is there 40-some states where there's oil and gas production?" No. But there are 40-some states where there are Liberty employees that live. We want the greatest humans wherever they come from. And a huge amount of oilfield workers come from rural America. That's a place economically has had a rough few decades. As everything, money, opportunity, health care migrates to cities, rural communities have struggled a little bit. We are very proud employers of thousands of rural folks from across the country. So great humans, great culture. I'm going to introduce a great human and a driver of great culture who's been absolutely instrumental in building and supporting the team we have. And she's just awesome and been here from the very beginning. Meet Tracee Quinnell.

Thanks, Chris. Good morning. Like Chris said, my name is Tracee Quinnell. I am originally from Western Pennsylvania. I worked for a competitor for 10 years prior to coming to this breath of fresh air known as Liberty. I came here as the Director of Human Resources. So human resources. People, right? Let's talk about people. We are innately wired as humans to want to feel valued. So let me ask you something. Has anyone ever sent you flowers or balloons on your birthday, yes? Or have you received a little picture from your toddler saying, "Daddy is the best." Or a friend just puts their hand on your shoulder and says, "Good job today." That feels good. We want that for our employees. We want our employees to feel good and we want them to know that they're valued. So there's a couple of statistics on the screen that I want to walk you through. On the left, where we say we have employee owners. What does that mean? We have employees who get annual restricted stock grants. So that is a tangible piece of ownership in the company. Part of that number is also employees who take some of their 401(k) contributions and defer part of that into Liberty stock. Again, tangible ownership in the company. We want them all to say, "This is my company." Each person. "This is my company." Talking about 401(k), super important for the future. So we take the time to make sure our employees understand that. These are meetings at 4 A.M., weeks on end, in the man camps, working around 24-hour schedules, sitting down with these employees explaining why should you take advantage of this? This is your future. This is the future of your spouse. Maybe the future of your kids. And my tagline with 401(k) is there's an employer match. This is free money. You'd be crazy not to take advantage of this. Okay. Left side, bottom -- right -- I'm sorry. Left side, bottom red block, my favorite. Diversity and inclusion. Those are buzzwords. I'm sure you've heard of them. They're really in the news right now. They're in all the magazines. What does it mean? Diversity. Having people of different genders, ethnicities, nationalities, whatever that may be. We employ them. That's the easy part. Inclusion, that's where it gets more challenging. Do these people have a voice? So this is just a snippet of ours. I chose it because I am in this category. Typically, women are very underrepresented in oil and gas, and we try to be different. Almost half of the people at our corporate office are female. We fight to change that. On the right side, we're going to talk about benefits. I get excited about benefits. I want you to be excited about benefits. You have a regular -- a medical plan, a dental plan, a vision plan, great. How do we make things different? How do we make that better for our employees? We added some neat things, and I didn't think of these. These came because employees came to us saying, "Hey, I have a need. My family has a need. Can you help us?" The one at the top, we added IVF coverage, in vitro fertilization. One single round of this costs anywhere from $20,000 to $38,000. That is a lot of money. We do not employ a population that has that kind of money just sitting around. So we are changing their lives. We are enabling them to have a family. Next one down, similar. Adoption, very expensive. Whether it's within U.S. borders or not, very expensive. Again, enabling them to have a family where likely that wasn't an option before. So what does all of this mean? Why am I telling you this? We want our employees to be happy. We want their families to feel supported. And collectively, we want them to have a voice in Liberty. I want them to know they have a voice. And why? Because happy employees who are supported are long-term employees. Long-term employees create high service quality and high service quality creates happy customers. It's a win-win. My favorite part of all of this is -- okay, I'm the HR lady, right? So I want to make everybody happy, I want to make our benefits better. But I have an executive team sitting behind me that fully supports this. It makes my job easy and it, truthfully, makes all the difference in this company. So thanks for your time this morning.

Thanks, Tracee. All right. So community is not just inside Liberty, but it's in all the communities where we operate. Look, we chose our name, Liberty, because we want people to have freedom to pursue whatever their dreams are. And we don't want barriers in the way of that. I'll say one thing. I don't know if you -- I just noticed my socks. I wear these socks a lot, ACE, Alliance for Choice in Education. We have over 100 low-income kids, which means they run free in reduced lunch in that school system in Colorado on scholarship to go to the school of their choice. It's absolutely game-changing in the trajectory for these kids' lives. The statistics are compelling. Grab me over lunch, and I will regale you with them, but to talk about culture and our interaction with the communities around us. I'm going to introduce another -- Ben here from the beginning, makes me look shy, full of passion and actually an awesome dodgeball player, Audrey Barrios.

Thanks, guys. Yesterday, when we were practicing, Chris called me Audrey Carlson, which I've been married for 2 years, he's still catching up a little bit. But I'm so happy that I'm going to be here and talk to you guys about my passion at Liberty, which is community and culture. And those 2 things go hand-in-hand. So our ESG report really does a good job of summing up what our community efforts are, bettering human lives. So that is translated in what Tracee does, what Jim does, what everyone does at Liberty. We're trying to make our employees' lives better. We're trying to make our communities' lives better. And in doing that, we concentrate on 3 major corporate buckets, we call them. So veteran military services. We have a ton of vets that work at Liberty, which is an awesome stat. Education and alleviating poverty. And at Liberty, we realize that these passions, our employees' passion might not necessarily fall into these buckets. So we're about to launch our Love Liberty matching program. And this is going to target the diverse communities that our employees live in, and they're going to be able to follow their passions, and Liberty will support that. So it's not only a monetary match, but we're also going to do a match on service hours. So for example, if I go and volunteer at a soup kitchen, the Denver Rescue Mission, 0I can turn in my hours and then Liberty will pay $20 per hour that I work to the Denver Rescue Mission. So we're trying to encourage our employees to get out into their communities to continue to make that difference. We talk a lot about that culture and community and how we create that. And we truly feel like if we're building that community inside our organization, that's going to translate to stronger communities where our employees live and work. So the idea of Liberty family, Jim touched about it. We're really, really passionate about creating a family. I think Jim said that all of our last name is Liberty, that's weird, but whatever. I'm pretty sure everyone saw Mike, [ Ret ] and I drink out of the same water bottle, that could be COVID, no-no, but it also is a family. But at the same time, our Liberty family, we do stuff different. So one thing that we do is right when our employees turn in new baby is born, they e-mail Tracee to add them to insurance policy. We send them a onesie. So they get this onesie in the mail. Some of them look like this, with that Best in Frac company on the back, some of them say New to the Crew. But they get a onesie from Liberty. So right away, we're looping them into that Liberty family from when they're first born. We also have a really unique spouse network. So we've developed this spouse network because like what Jim says, it's -- Liberty family is not just our employees. It's our kids. It's our wives, it's our husbands. So on Facebook, we have a closed spouse group. And on that group, you'll see threads about how to get wireline grease out of coveralls if, obviously, they're not using the Liberty greaseless wireline. It's -- we are collecting recipes from all across our districts, and our team is going to compile them into a Liberty spouses cookbook. There's community efforts that our spouses lead. So for example, in Midland, we have spouse heads of districts in each of our districts, and they view an event every quarter. So whether that's a community engagement event or they meet at a trampoline park and everyone brings their kids, we're just trying to create that community around our Liberty family. So one example in Midlands, on the fundraising, they noticed that the local elementary school had a large sum of lunch debt. So a wife decided to take the initiative and she raised money and Liberty spouses paid off all the lunch at that Midland elementary school. And then when you're in trouble, like where do you go first? You go to your family, and we want people to be able to come to Liberty family. So I'm going to leave you with one last story that recently happened. We had an employee's wife got diagnosed with breast cancer. And during this time, these individuals have their husbands or wives gone for maybe 2 weeks at a time, and she was going to be recovering, while her husband was on hitch. And another wife noticed that she was going to be in a little bit of hardship. So she started a meal train. And within 48 hours, our Liberty spouse network provided a whole month worth of meals for Shannon and her family to not have to worry about. Now that is something that makes us different. That is something that plays into our retention, and that is something that is unique to Liberty in our family. So I'm going to leave you with that. Thanks for being here. I look forward to talking with you the rest of the day.

Thank you, Audrey. So key thing there was the individual effort. These are not just things that the company does. These are things that people in the company do. I mentioned 104 kids just in Colorado on scholarship from Liberty, less than half of those scholarships are paid by the company. The rest of those scholarships are paid by the people who work at Liberty out of their own money who believe in that. Look, governance is critical. There's a number of our directors here. I highly encourage you to meet them. Our Director of our Audit Committee, Bill Kimble, is a star. He ran KPMG's. He's a managing partner for there. He's also the audit lead for DCP, a large midstream company here in Denver. Bill is our lead independent Director on the Board. Gale Norton is sitting over here. She runs nominating and governance. You don't want to mess with Gale, right? Gale was Secretary of the Interior, I think, for 6 years, two-term Attorney General for Colorado. Strong, thoughtful principled leader. And sitting at the same table with her is Peter Dea, who's the Chairman of our compensation committee. Peter is also Chairman of Ovintiv in a career long executive and entrepreneur in the oil and gas business. And sitting between them is our newest Director, Audrey Robertson, who joined us, I think it's been coming up on 36 hours or something. So she's a Liberty veteran. She has been in the Liberty family literally from when we started the company. So she's in the community. She's involved in all these same efforts. A real leader in her own right. And up at the front is Simon Ayat, who was long time CFO of Schlumberger and new to the team. I don't know if he got his onesie yet, but Simon is new to the team at just, again, tremendously thoughtful leader and loves to engage in dialogue. So please, meet and talk to everyone here. And that's going to wrap up the morning session. The last thing I'll say about the ESG report is if you read it, and if you read it completely, then you just send us a note and you get another free copy for your spouse or your friends. And you -- if someone reads that one, we'll send you another free copy. We want to get that dialogue and that word out there, and send feedback back. Positive, critical, negative. You should have said this, this wasn't clear. We want feedback. We want to make it better next year. Thanks so much. I think we're going to take about a 10-minute break. And I'm just going to point that out. We'll take a 10 minute break, and then we're going to dive deep into technology. But thank you for being here, and thanks to these awesome partners I have on the stage behind me and a bunch of new awesome partners you'll see up here later today.

Okay. Just very quickly. Thanks a lot, Chris. Yes, now that we've had a taste of our business. Let's take that quick break. We're going to regroup here at 10:00 a.m. on the dot, Mountain time. For those of you in the room, spent some one-on-one time with our team in the back. We've got several showcases set up here, and you can learn a bit more about our technology and tools as we lead into the next session. All right. We'll see you at 10. [Presentation]

All right, folks, if you could take your seats, we're ready to begin our next session. Great. Welcome back, everyone. Now let's get into the technical details. Liberty's downhole technologies are second to none. In fact, they are really a true differentiator for our company. And with us here to talk about our unique capabilities is Dr. Leen Weijers with technology below ground.

Thank you so much, Anjali. Thank you, everybody, for being here today, and I'm honored to be in your presence. My name is Leen Weijers. I'm Dutch, as you can hear from my Heineken accent. I've known Chris Wright for about 27 years. I didn't meet him in a pickup truck, but I met him at a Dutch rock conference. And we talked for quite a while, and Chris offered me a job about within a week or so of that time. And I knew at that time I wanted to spend my career with a person like himself and with all the persons, including people on the podium here today that I'm honored to work with and who seem to be want to spend time with me as well. So it's great to be in their presence. Brief introduction, and they'll do their own introduction themselves in a little bit. We have on the podium, Mike Mayerhofer. Dr. Mike Mayerhofer is probably the single most important person in the start of the shale revolution when, in a baseball stadium, he talked to a customer in the Barnett Shale and thought he -- this customer should try a specific design he had in mind. Mike is very thoughtful about those kind of things and a force to be reckoned with on the side of frac design and evolution and the start of why we're all here as part of the shale revolution. On the other side of the podium is Ben Poppel. Ben is this engineer who passionate engineer who knows how to frac in very high permeability rock, low permeability rock. Ben knows step screen out design. And as an engineer, he has also an incredible knack for operations, something that I'm completely missing. So really honored to have Ben on the podium as well. And then Ray Ellis on the middle of the podium, 40-plus years of oil field experience, fracker down to the heart and very passionate about what he does, helping our engineering team in the field with real-time analysis and things like that, helping customers get their jobs away. I want to talk about this graph here, a little complicated graph. But these graphs -- all these graphs have colored lines on them. They are -- that's a specific basin in which we work. These are all the liquid-rich basins where Liberty works. And I want to start on the top left. It has a big dollar sign on it, but you see the cost to drill and complete the well over the last decade, that's the time period on all these graphs. That well cost has been reduced by almost 50%. So that's millions and millions of dollars saved by our customers in trying to drill a well. And at the same time, and this is where our technology team comes in with the leaders that you see up on the stage. The bottom left picture, I'm very proud of. Because I think at Liberty, we've been a leader in helping our industry, increasing oil production per well. So BO is barrels of oil. You can see all the colored lines are moving up. And in general, over the last decade, we've been able to make wells in shale 100% better. Incredible improvement in well productivity from things that you'll hear about today. So we look at ratio -- the ratio of these two, and that is what Chris coined as Happy Valley. We want to lower the dollar spend on bringing in a barrel of oil to the surface. This $1 per BOE metric that you see up here, 50% reduction in well cost, 100% improvement in production response. That's 75% reduction over 10 years in dollars per BO that we've helped our industry with, right? So we've helped our industry get more competitive. And then in return, what Liberty gets is utilization. Now you can see on the right-hand side, the big graph shows how that Happy Valley in different basins has changed over time. You see that 4x or sometimes more of reduction in the shape of these curves. And again, it has helped our customers become competitive. Now this is not only due to, of course, what we do on the tech team, it's also the operational team under Jim Brady, making jobs more efficient, pumping more a larger percent of the time. And it's also in our tech development efforts, trying to make every minute count in our Project 1440 effort that Ron will talk about with his team later on today. Repeat of the previous graph I'm showing you here. Colored lines indicate how much more barrels of oil we're producing in different basins. So colors indicate basins on a time scale of about a decade. You can see what I mentioned before about doubling of well production in every individual basin in the U.S., something that we've been a leader in, in achieving going with slick water designs in the Bakken early on when nobody did it, when it was tough on equipment, and we adopted operationally to do so. We've proposed lighter frac fluid designs through Ben's team's efforts. Ben will talk about that. And for instance, the DJ Basin, but it's an industry-wide effort to go lighter and lighter on the fluids that we're using to get sand down in the well, in the fracture to be a productive conduit for oil and gas production. We've led efforts in cluster design changes, staging design changes and things like that. Things you'll hear about over the course of this morning from our experts in the back. One thing I wanted to point out is the graph on the lower end is also production. And you can see the colored lines again indicate basins. But this now is production per lateral foot of well that has been drilled right? So production per foot, you can see initially in our industry, incredible increase there as well, but we're stagnating somewhat on that metric as we're fighting infill well drilling and lower well quality associated with that with the technology that we offer today. Chris talked about Happy Valley. If you're on the left-hand side of Happy Valley in the graph here, you didn't spend too much money on your well. Your focus was maybe on well cost. We may have customers that think that way. But then you're ultimately going to pay the price in fewer barrels of oil produced. So your dollar per barrel is high. If you're on the right-hand side of this curve, you may have overspent, you overstimulated the reservoir, you spent too much money. While you have maybe a good well, you've spent too much money doing it. You want to be in the middle of this valley. The middle of this valley is different in different places. It depends on the customer, it depends on the rock. It depends on the area. It depends on the timing, depends on cost of services and many, many other things, availability of capital and things like that. But our laser focus that doesn't change is that we want to get our customers to the bottom of this valley. And we have the technologies to get us there. Now this is probably the ugliest slide you'll see today. I'll take full responsibility as an engineering nerd to get there. What you see here is our spiral up strategy with the technologies that we have to get our customers to Happy Valley. Now we use legacy data, legacy knowledge from our customer, data from our -- for our own purposes and frac trends. Chris talked about the early data availability, for instance, in the Bakken. We had Bakken data with the help of our sister company, Liberty Resources, before we were a company and extended that to every major basin in the U.S. and Canada where we work today. So we start with data. Data by itself is -- maybe pretty dumb. You need to do an analysis of that data, multi-variant analysis, et cetera, to turn that data into knowledge, into actionable items that we can change on location and then create value for our customers and us doing so. Now there's a bunch of different fields here that -- we typically start on the lower right, with customers may be asking, a new customer maybe, what's our neighbor doing and what's working. We can instantly pull out our frac trends data and answer those questions. And then we can move to knowledge, run fracture models to see how physically, but the sensitivities are our frac models to certain -- to achieve certain goals. And then move through the value chain by selecting criteria for materials that we need, real-time evaluation to get jobs away and also then evaluate production and economics. So these gentlemen on the stage will help answer some of the questions that our customers may have. For instance, what are the best materials for the selection that I need to do. Ben, can you and your team help us with that, and he will talk about that today. I want to talk now just briefly about the value chain in data, data analytics and getting to Happy Valley with just the data portion of it. And answering a question associated with maybe what a customer may ask, what's our neighbor doing and what's working? That's this talk. All right. On this graph here, all the dots represent oil production by different oil and gas operators in the Williston Basin in North Dakota. This is from a couple of years ago, but it's where Liberty got started. On the upper side, high production is our points high up in the graph. And you can see the red line and the red dots, those represent Liberty wells, Liberty designs that are 50% higher production overall in the first year than any of the other average -- the average production of any of the other operators in that particular area. 50% uplift, you may say, okay, well, big deal. That is 75,000 barrels of oil in the first year that our customers can monetize in the period of that year. The frac design was maybe a little bit more expensive, but 75,000 extra barrels in the first year. That's hard to ignore. And of course, significantly higher due to frac design changes that we suggested associated with going to slick water, high rate, high volume and a change in plug and perf design to cater fractures better into the reservoir where we need them. Significantly different from the gel, low rate, lower volumes and sliding sleeve type designs that are -- that some other operators practice at that time. Now we've extended that approach, just looking at data. We've extended that approach to all the major shale oil and gas basins in North America and can pull this up in a matter of seconds for customers to look at what works, what doesn't work. But it's only data. So then we need to go through data analytics to determine -- if you look at the graph, there's many different things that change in the frac design that may have resulted in the graph that I'm showing you here. Now we need to understand what are the independent drivers for production response. In this particular case, you see a diagram here, which are the most important parameters that change production response in the Haynesville. Stage spacing is right on top in blue. That's a parameter we can change. That's a big driver of production response in the Haynesville today. You can see proppant masses, maybe another one. There are some other rock quality parameters that also matter. But what we can change instantly is going into the Haynesville and work with customers to see if we can help them with a change like that, stage spacing. Now that's statistics and that's production. So that's a model to determine what the production response is for a specific well. What we now need to know, and we talked about it before in Happy Valley, is the economic optimum for getting the oil out of the ground from that particular example. So we have our frac trends database. We do our Liberty multi-variant analysis to find out what the independent drivers are for production response in a big picture sense. Then we combine that with our sales team's efforts to come up with a proposal for frac design and the cost associated with that and the variable cost of going to more stages or going to more proppant or other things like cluster spacing changes. We look at the economics of that and combine that into a platform we call fraconomics. And it's to chase this dollar per BO reduction. Where can we go to the bottom of this Happy Valley? How can we reduce the cost it takes to bring a barrel of oil to the surface? And that's only the statistical side of things. So there's great data availability in the public domain. We partner with customers to improve that data. I'll tell you more about that in a little case study. But we also need to check how physically, how fractures grow and how sensitivities to, for instance, perforation changes, stage changes, et cetera, physically makes sense in fracture models and reservoir models. And to talk more about that is Dr. Mike Mayerhofer. Cheers, Mike.

Thank you, Leen. Good morning, everyone. I'm Mike Mayerhofer, Director of Technology at Liberty, kind of more specifically the subsurface technologies. I'm originally from Austria, and I came over here. I worked for about 30 years ago, I started my career in oil and gas, worked for an oil and gas operator on water frac technologies. Then I joined Chris Wright at Pinnacle Technologies. So that was really exciting. We did some really cool and nerdy stuff together. We actually measured hub fractures grow underground. And then about 6 years ago, I joined Liberty here. It's been really exciting to be part of this growth story and working with such talented engineers and individuals. So jumping right into our discussion here. Why do we use models and how do we use models to help our customers make better wells and get faster to the Happy Valley? Best explained with a picture that you see here on the left. This is on a geologic outcrop of the Eagle Ford formation. Something you may have seen driving on the highway and not realized, this is actually an oil and gas formation that's -- that we usually frac 2 miles underground and we can't really see what's going on. We actually have these outcrops. This is pretty much representative of what we have subsurface of 150 to 250-foot tall section of the Eagle Ford Shale. Imagine now we put a horizontal well that you see here in black. Into this, put the steel pipe with cement around it. Now there is no connection with the rock yet at that point. So we have to put what we call perforations. We have to shoot holes into that pipe so we can actually pump our fluids and proppant through those, what we call perf cluster, so you'll hear that term a lot in the presentations, these perf clusters, and we create our fracs. The fracs are these kind of squiggly red lines that you see here coming in and out of the picture, typically 200 to 2,000-feet long on each side of the wellbore. We also try to optimize the coverage of this vertical section of our shales or reservoirs, right? We're trying to make sure the frac height covers everything. We also try to ensure that the hydraulic fractures don't grow too much above the target zone or below the target zone. For example, in the Eagle Ford Shale, if you grow below into this Buda limestone, you can produce undesirable H2S, for example. So those are the key questions we are trying to answer with our frac models. How do I optimize the spacing between those perf clusters, those orange stars there, right? If they're too close together, it's going to create some problems in our treatment. If they're too far apart, we're not going to be able to drain all the oil and gas in between. When we're sequencing, the frac order of the wells has an impact on how we create that surface area in these unconventional rocks. And then the billion-dollar question for our clients is the well spacing and placement, which I'll get into later in more detail. At Liberty, we have a lot of frac models, and we're really fortunate now to add to this portfolio with the OneStim acquisition, really world-class, complex hydraulic frac model, where we can really do very interesting modeling sensitivities to deliver kind of optimum frac designs for our clients. On the left, you see kind of a day-to-day kind of design exercise we do. We look at treatment size sensitivities, how much fluid volume, how much proppant do you need to pump to create a certain length of the fracture, a certain height of the fracture. We also try to answer, if we put our horizontal wells in different parts of this vertical rock section, remember that Eagle Ford picture. How does that change the length and the height of these hydraulic fractures. These are the important things we're trying to answer for our customers. Well spacing in the middle here, this picture affects frac design. You see the 2 outside wells pretty close together and the hydraulic fractures are overlapping with each other. That may be waste. The treatment designs may be too large or the wells are too close together. The 2 wells in the middle that you see here may be too far apart. The hydraulic fractures are leaving oil and gas potentially in the middle behind that gray area, right? We know our rocks are complex, especially the unconventional shales. They have what we call natural fractures. Our fracture designs are affected by that. The growth of the hydraulic fractures are affected by that. So these 2 pictures on top of each other, you can see the top picture is very complex rock, lots of natural fractures. The picture below is less natural fractures, only in one direction. This is exactly the same treatment design, the same completion design. But on the top, you can see the fractures are shorter they're denser around the wellbore. So you're going to drain oil and gas only from that limited area. Whereas in the picture below, the fractures are much longer penetrate more. Of course, one negative of that effect of that could be, you can hit the other horizontal well, which you see right here next to the well that we're fracking. You could create a frac hit, which is a big discussion in our industry, and you can create well interference. Here's an example of optimizing these perf clusters or how many fracs we put in a given segment of the horizontal well, which we call a stage. So in this particular case, we were looking at what if I do 10 fracs per stage versus doing only 5 fracs per stage. On the right-hand side, you see the frac modeling results of that. So what you're looking at is normal to the hydraulic fracture plane kind of along the horizontal well. You can see that if you create 10 fracs at the bottom, your fracs are shorter and less tall than if you do only 5 fracs. However, since you're doing 10 fracs, what you see in the bar chart on the left, you're actually creating 70% more frac surface area with the 10 fracs than you are with the 5 frac at a fairly minimal increase in cost. So these are the kind of sensitivities we do for our customers. The other positive thing here is there's actually less risk of frac hits because the fracs are shorter now and well interference between the wells. Well sequencing, this is kind of the order how we frac wells, a really low-hanging fruit, how we can affect the frac surface area and the contact with the rock. On the left, you see what we call sequence 1 is we're -- this is, by the way, in the Delaware Basin, 3 wells on top of each other in the Wolfcamp. The top well frac first, followed by the middle well, followed by the bottom well. Sequence 2 is we actually start with the lower well then frac the upper most well and then frac the middle well. With the sequence 2 based on the frac modeling, which includes the stress interaction between the fractures as they grow towards each other, we actually create 6% more frac surface area. Doesn't seem like a whole lot, but 6% more surface area means 6% more production, especially in the early time, first half year to a year. So this is a big impact by just simply changing the order how we frac. So not a lot of costs involved but a production increase. Another important decision in frac designs is the material selection, specifically the selection of proppants or sand that we pump to keep these fracs open, to keep them producing. One important question in our industry over the last years has been the use of lower-cost regional sand. Is it sufficient? It's economically a lot more attractive, and we've done a lot of study on this topic. And we found from all our studies looking at actual production data, lab data, at our modeling that this regional sand is perfectly sufficient in most of our basins. And this has really affected Liberty's strategic sand sourcing decisions. We talk a lot -- we talk -- when we talk about selection of proppants, we talk about a term called conductivity. Conductivity is the ability of the fracs to deliver oil and gas to the well. Think of it as a highway with a certain amount of lanes and a certain amount -- a quality of a road. So you can see on the bottom left, you have a bicyclist, which is kind of the analog to our unconventional oil reservoirs where the oil is just slowly seeping in. You don't need a 5-, 6-lane highway to have for a bicyclist, right? Here in the Gulf of Mexico, high oil and gas producing wells, you need a large highway to accommodate all that traffic, right? And our lab data in the middle is kind of verifying all that. Yes, the white sand is better. No question, 2x better conductivity. But do you really need a 2-lane highway for one bicyclist? Or is a simple little third path sufficient, which is what the regional sand provides at a much lower cost. And the production data on the upper right kind of proves that we don't see any negative impact of running regional sand when you compare well performance in this cume frequency plot of the Eagle Ford oil wells. The billion-dollar question for our clients is well spacing. As I mentioned earlier, how many wells do I need to drill to effectively drain the rock and not spend too much money? If the wells are too far apart, right, then I'm going to leave some oil and gas behind. So we have done -- this is an example from a gas play in Western Colorado where we did some frac modeling, we calibrated it with microseismic mapping. We imported those results into reservoir models. In this particular case, the customer is trying to get up the learning curve faster. For drilling hundreds of wells and learning by trial and error, can the modeling help us pin down which well spacing scenario we want to go with. So they started with 6 wells at 1,400-foot well spacing, which provides really great recovery but the recovery per well wasn't sufficient to be economic. So we did some sensitivities by taking wells out. And the results of that you see on the right-hand side is the economic optimization, the final result where you see rate of return at the top, PV-10 per well versus well spacing. And it turns out in this particular area, in this gas play where you're creating very long hydraulic fractures 2,000 to 2,700 foot well spacing is kind of the sweet spot. In the oil plays, typically, that optimum well spacing is much smaller than that. So this was kind of to give you a quick flavor of what we can do with some of our modeling technologies. I'm available in the breaks in the booth for any more detailed questions and discussions. And with that, I'll pass it on to Ray Ellis and Chris Wright, who are going to talk about real-time technologies, how we measure these fracs and then how we optimize how, we measure if these fracs that we're generating or designing are actually happening the way we designed it.

All right. So as Mike said, I'm Ray Ellis. I'm our regional technology manager in Houston. You can call me Ray. I'm going to talk about some diagnostics. But first, I want to talk about me. I'm the fourth generation of my family to make my career in the oil and gas business. So I've been doing this for a while, and it's really crept into my DNA in a way that's created a very unique blood type. I have blood type C. The doctors just call it crude. So I have -- I'm an engineer. I'm an engineer's engineer. I love solving problems. And that's why they picked me, I think, for this is because here, I'm going to give you kind of where we were and where we are. So what you're looking at is just the dark red box is the reservoir, the light shaded areas are the fractures. On the far left is where we were. That was where we didn't have a way to isolate and control where fractures developed along the lateral. And what that caused is we just went out there and pumped a big old job and just hope that it went where we wanted it to go. We called them Hail Marys or in some cases, we called them pump and pray, because we pumped a big job and prayed it went where we wanted it to go. But that didn't work. Fast forward to the far right, and that's where we are today. And you can see coverage. You can see how we're covering now the reservoir. Though everything is contributing like it should, which means that our ROI, which I call return on injection, has just improved. Now how did we get there? We got there through diagnostics. We got there through technology and the integration of both of those in our go-forward plans. So what kind of diagnostics? Well, we have a whole toolbox. And it's not everyone -- they're very specific to what we want to discover. So if we want to discover reservoir properties, of permeability, maybe, and pressure, which are very, very integral to how a well is going to perform, we'll run something like the DFIT or the diagnostic fracturing injection test. This is a pretreatment test that can be done. If we want to understand unexpected pressures that may occur during a treatment, we'd run something like a rate step-down test, which will help us solve those problems. If we're looking for how to determine the dimensions of a fracture to make sure wells are spaced the way they should, to make sure that the fracture dimensions aren't growing where they shouldn't be growing. We'll run something like our well watch technology or even microseismic mapping, which gives us dimensions of length and height. And all of these are very specific. They can -- most of these can actually be done on-site by our tip-of-the-spear engineering teams that are all capable of doing most of these analysis. But sometimes, it gets a little bit -- maybe they haven't experienced it, and they need another level of expertise. Well, that's where the real-time data interaction comes in, because we're streaming every 1 of our jobs live. So now we can tap into remote subject matter experts that can actually assist those guys on location so that we can get results that are timely and that are made to optimize those treatments. So some of this technology is old. Some of it is 25 years old. But all doesn't mean obsolete, Isn't that right, Chris? So I'm going to have Chris help me explain this slide here.

Thanks, Ray. I appreciate calling me old. But if 25 years is old, I'm embracing it. So at the start of my career was developing fracture models and a fracture modeling system called FRACPRO. We used it across Liberty and it's used widely in the industry today. And then my screw up was the second thing in my career was developing technologies to measure how fractures grow. So if you've been modeling and you predict stuff, you can feel proud unless you get measured reality and then you get humbled repeatedly. We may talk about that over lunch a little bit today, about models don't necessarily equate to reality unless you have measurements. But one of the things we wanted to do in analyzing these models was understand the pressure in a fracture. You only can measure the pressure at the surface. So there's friction in the fracture. There's a near wellbore region, there's the perf, there's the wellbore. How do you sort those out? And when pressures change at the surface, which is changing? So I developed -- or Leen and I developed a test a while ago. We realized these different pressures have different rate variability. So if you cut the injection rate in half, perf pressure goes down by 75%. If you cut the injection rate at half, this near wellbore torturous region, it only goes down by about 25%. So dramatically different rate dependence. And so if you're fracking a well and everything is going well and then all of a sudden you're struggling, maybe your perf -- the rock is different, your perf guns aren't working. Maybe it's the near wellbore tortuosity. You need to know which one it is because they have different solutions. So the step-down test that Leen and I developed and published is widely used across the industry 25 years ago. It helps our engineers on location and raised tech team to decide things are going wrong. No, it's not that, it's this.

Thank you, Chris. So I want to go into a little more detail about a specific technology called FracSense. This is one of our newest technologies because it came about as an integration of our newly acquired wireline group through the OneStim acquisition where we've taken a fiber optic cable, put it inside a wireline and then we've partnered with a company called OptaSense, which they do the interrogation of the fiber as well as the interpretation of it. And it's called cross-well strain, but don't let that scare you because it's real simple. In the diagram in the lower left, you can see strain is nothing more than an effective deformation or deforming something through stress. So the guy blowing into the horn there, that's stress. He's putting pressure on that. And as he does that, the balloon gets bigger, that's strain. It's changing in its dimensions, right? Well, the same thing happens in the fracture. Stress is all that fluid and proppant that we're putting in there, and that's causing a strain to happen. The rock is deforming as it approaches another well. Where we're monitoring that well with this frac sense cable. It detects those minute little changes in the deformation. So what that means is that it helps us understand whether we're rightsizing jobs. It looks for that Happy Valley, if you will. So we've got Goldilocks over here, and she's trying to find just the right size treatment. So in the upper part of it, if we see a response that happens too quickly, that means we're too close together. Our jobs are just too big. That's -- she doesn't like that one. So then the one at the lower part of that is if we don't see any response at all. That means that either our jobs are undersized or we're too far away. She doesn't like that one. She's looking at that one right in the middle. She's just right. This technology helps us understand that. So we talked a lot about clusters. We talked about the importance of clusters, and we want to make sure that every one of these is not only being able to be injected into for the fracture, but we wanted to be producing during production, right? So can we control that? Do we have any control over that? Obviously, we have a toolkit with diverters. Diverters are very simple. I would imagine everybody in here has experienced the diversion at one point in time. You take your favorite insulated tumbler, you fill it with that nice crescent-shaped ice that comes out of your icemaker and you fill it up with your favorite beverage. You snap the top on it, and you try to take a sip. That one piece of ice that always seems to manage to stick sideways right in that hole and you can't get any out, that's diverter. That's the same thing. Only we're not using ice. We're using solid particles that go in there. And they block up some of the perforations that are taking too much fluid that we want to divert it away from them into other ones, right? So we have standard diverters. We have unique proprietary diverters called sequence that add fiber that actually hold them together better so that they're more efficient. We have diverting through pressure, which we call limited entry or extreme limited entry. What that does, instead of using the solid material, it just uses pressure, differential pressure. So we size the size of our perforations and the number of them to take advantage of that. And then -- but what that brings into account is that we need to understand what the size of the perforations really are. If we're going to design for that, that's where in the bottom right quadrant comes in because we now have software tools to help us understand what was published when it was tested in the lab may not be the same as what we get in actuality. And so in this particular case, if we designed our job thinking that the perforation size was 0.49 inches. But in actuality, it was 0.38. That's a 25% difference, which now means that we're going to need more holes than we really are going to have in the first place. So we don't want to make those mistakes. Understanding this before helps us do a better job of optimizing which now make sure that our efficiency goes up, which helps us get better coverage, better distribution so that we can find Happy Valley. So I thank you very much. You'll have an opportunity to see me around. I'll be at one of the booths back here, the displays. And I'm going to turn it over to Ben Poppel, who is going to talk about material selection. So Ben?

Good morning. My name is Ben Poppel. I'm the Director of Field Engineering here at Liberty. I grew up in Western Massachusetts in a small town called Wilbraham, and ended up studying mechanical engineering down at the University of Miami in Florida. Worked my way out here to Denver and stumbled into oil and gas. I had no idea anything about it until I got into the field and fell in love with what we do. 15 years later, now I'm standing on a stage with some legends of the industry, and it's a lot of fun for me. Liberty has been a tremendous home for me, and I got to know a few of you guys out in the field yesterday. If you can't tell, I'm excited about what we do and I love this company. Part of my job since we started, I've been here since we had one crew. Part of my job has been helping select the chemistry that we use to go down hole. And by that, we're going to talk about frac fluids and the components within them. If you do get a chance, by the way, please, during one of the breaks go back and you'll see our grocery store frac fluid. What we've done there is found the chemistry we need to create a cross-link fluid system at Whole Foods. ESG has been a big component of this for a long time. And from the beginning of our company, we have focused on cleaner, greener chemicals, not just because the government says we need to because we need to because our people are out there, my people are out there, and we're concerned for their safety. So GreenSelect is a program we use to use the global harmonized system, the GHS, to pick some of the safest products out there. And we can compare those products one to another. We're also constantly striving to get more chemistry involved that will allow us to pump more and more and nastier produced water. Another factor we're looking at in all of our basins, but specifically in basins like here in the DJ is our compact chemistry and dry ad systems. Compact chemistry is just that. It's generally 5x concentrated, so we can save 4 truckloads to get the same amount of chemical to location. That helps us by not having as many trucks going through neighborhoods and disturbing the local population. My team, the engineering team, works very closely with supply chain and our vendors to constantly go after advantaged pricing for the commodity side of things. But what's actually more interesting to me is trying to find that rare orchid. And by that, I mean a product that truly is special. Something that's a little bit different. Maybe not everybody is using it, but it actually does what it says it's going to do because there's a lot of snake oil out there, if you will. And the snake oil is not necessarily a bad product, but a product that doesn't live up to its cost. We're also looking for area specific products where we'll need them. I love analogies. And if you guys were on location with me yesterday, maybe you heard me talk about sort of the golf analogy for this. Well, I tell them my young field engineers, if you boil fracking down to its essence, really what you're trying to do is take those chemicals in that water and get all that sand down the hole. Kind of like golf. Really simple in concept, take this little ball, get it a couple of hundred yards down that field into a little cup. We have a whole selection of clubs when we do that. And part of our selection of these materials is exactly that. We're looking for the right clubs to have in our package in our toolbox, if you will. We have streamlined our process to do this rapidly, and that's been a great thing to bring product to market in days rather than weeks or months. In that toolbox, we're looking to always have reliability, redundancy and consistency. Our supply chain team helps us with that tremendously, and you'll actually hear from Greg McKee later on today. I'm very excited for that presentation. We don't just pick products based on the cost or what the vendors said they're going to provide us. We have research grade equipment in our labs throughout the country to test these products. I'm not going to bore you with all the details right now. But if you have more interest in this, I'm happy to discuss it with you in the future. Different regional concerns. This is what we call our FracRx program. Once we have those best products, how do we apply them? How do we apply them correctly? If you look on frac focus, you're going to see that 95% or more of that frac fluid is water. We don't provide the water. Our customers provide the water, and they provide us with a very wide range in water. Even the cleanest water can have fluctuations daily, tremendously in pH or TDS, total dissolved solids. And that really will affect, for example, a friction reducer. Our [ polyacrylifriction ] reducers that we used to help transport our proppant and increase our velocity. The little salt in that water will degrade that product very, very quickly. If we have very clean and consistent water, we can pump a cheaper product. If we have a more marginal water, we need to use a more premium product that will actually save money in the long term. Pardon me, we are always looking for product availability to make sure that we can get enough of it to location. This is a very important stuff because we don't want our customers waiting on our suppliers for our frac chemistry. The [ fact of biosilictrol ], we can go into all these different things. It's not really the point right now, but all these different parts of our FracRx prescription system make up that fluid system and help us get the proppant down the hole. So for example, here is our FR arsenal, our friction reducer arsenal. We have a lot of different products that we keep stocked in line to come through. And we're picking the best products. We're trying to get the best price for them. We're trying to use them correctly so we can get the most advantage from them. And this is where having knowledge about the products is important, but having wisdom on when to use them is even more important. I love the Miles Kington quote of: "Knowledge is knowing that a tomato is a fruit. Wisdom is not putting it in a fruit salad." So we're hoping to avoid that and help our customers make the best well as they possibly can. And with that, I'd like to thank you for your attention. Thank you. And I think Leen is up now, correct?

Thank you, Ben. We want to finish up with one last case history to bring it all together kind of in a summary-type format. This case history is in the Delaware Basin, West Texas. And I'll do this together with Mike Mayerhofer. Just quickly, you've seen this before. This is our Liberty MVA, our Liberty multivariate analysis results. The graph on the left, you see what parameters independently drive production response, right, that we take from our frac trends database, we subjected to statistically evaluation. We come up with a list of drivers of what drives the success of this frac job in terms of how much oil can we produce in a specific period of time. You see here, proppant mass is a blue parameter that affects that affect that significantly. That's the main driver in this particular area. But one thing you have to realize is when we're looking at our data, when we're evaluating data from the public domain, from the Texas Railroad Commission, for example, in the case of the Permian Basin, the data there is not very good in general. Some key parameters about frac jobs are often missing, especially staging. How much lateral length was put in within a stage or how many stages were done within a well to complete it. What is the average rate that we're pumping has great implications for how many fractures we're creating if we're properly catering fluid and proppant to individual clusters, increasing the complexity that we need. So a lot of important parameters are often missing in that public domain database. And the further south in the country, you go the worst it gets typically. So what we have done is to address that shortcoming, we work with partners in our industry with our operators. We basically exchange -- or we basically tell them we would work for data right in our tech team sense, that is really what we do. We get data to fill in the gaps of what stage count is, cluster count in a well, what was the average rate at which this job is pumped. We get it for hundreds and hundreds of wells maybe within an area that a customer wants to evaluate, and we get the best database with respect to completion parameters that there is around in the United States. And these partnerships, we get the data, we give back the results of a multivariate analysis like you see right here. And it can have a significant impact. Same analysis, now done with additional data provided by some customers in this particular area and, of course, also augmented by the data that we have for ourselves by the frac jobs we have done and that have been done on the OneStim side maybe in the past. So we have metadata for all these jobs, but still, of course, missing stage information, et cetera, can be -- significant hamper the results of your production data analysis. Here, you see that with this extra data, we now see not just proppant mass as being an important parameter with stage spacing, cluster spacing and proppant mass is now actually the #3 parameter effect design choices. So very important to do the statistics to get a big picture evaluation as a scoping tool of what is important and what drives production. Then we need to take that and subject it to frac modeling and see what the real physical sensitivities are of some of these parameters that we want to optimize for our customers to get to a Happy Valley. And Mike will talk more about that.

Thank you, Leen. So as using Leen's MVA model, that quantitative prediction of oil production versus treatment size or cluster spacing. We take it now a step further. So we do -- And you have to realize, this is big data. So the predictions we're doing here are for hundreds or 1,000 wells, right? So this is not one specific area or pad. It is a lot of wells, and we're doing an average prediction here. So our customer here was doing 320-foot stage spacing, so a segment of the lateral. And what's interesting to know, should I do 13 clusters or fracs in that space? Or should I do 20 clusters or fracs in that space? How would that potentially impact my production, right? And that's what you see predicted here. We see a 9% increase in production when going to more fracs per stage. And that cost of doing that is pretty low. So it's definitely well worth doing that to get 9% extra production. If you look at it historically, in the basin, a lot of the frac spacing was in the order of 50 feet apart from each other. So if you go from the 50 feet to the proposed 16-foot stage spacing, you can increase -- the production increase is 20%. So a substantial production increase by putting more fracs and more clusters. And that's where our industry has been headed doing that to improve well performance. The next step then to is with the statistical quantitative oil prediction model is we can couple it with a cost model, and that's what we termed Fraconomics. So we include proppant costs, fluid, chemical cost, stage costs, water disposal costs, even, other fixed costs such as drill costs that are not tied to the frac. And we couple it together an optimizer to predict what is that Happy Valley, that optimum dollar per BO, if you want to call it, like a 1 year -- what oil price do I need to pay out the well in 1 year? That's really what the dollar per BO is. And so what you see on the left here is we were looking at proppant mass or treatment size to optimize that parameter. And you can see the well cost of top, the curve for that, of course, it gets more expensive as it pump bigger and bigger jobs. We get more oil production. And then we couple that cost model, that cost prediction or the cost assessment with the production to get that dollar per BO at the bottom, the green curve. And the Happy Valley in this particular example happens to be at about 2,700 pounds per foot of treatment size with 16-foot cluster of frac spacing. Going then a little more detail. So that's kind of the big data. These are scoping studies we can turn around very quickly within a day or 2, we can do these types of studies. But then we are also -- our customers want to dive into a little more detail in a specific area looking at a specific pad and see how do changes in completion parameters impact for production. So here again, we run a combination of the frac models and the reservoir models to do production predictions. An example you see here, our customer is interested to know if I increase my stage length or spacing from 200 feet to a little over 300 feet, so basically a 50% increase in stage length, meaning I can pump 50% less stages, substantial cost savings there. Is that going to affect my production negatively? That was the question. And this modeling here shows that when doing that, basically, all the production curves overlay each other which means no impact on production when doing that. So that would be a logical choice. The customer's next question was, can I save even more money? Can I increase the cluster spacing to do less fracs per stage and save a little money on the perforating that way and also get the same kind of production. Our modeling shows, no, that is not the case. That would not be a good idea here because you would potentially lose 10% of your production in 1 year in this particular case, 18,000 barrels of oil for just a little amount of cost savings. So definitely not worth it. And then we do the same thing here in the more detailed frac and reservoir modeling for treatment size, like I showed you earlier with the big data statistic predictions. This is now the more detailed model for a very specific area. In this particular case, we predicted that when you increase that treatment size from 1,500 pounds of proppant per foot to 2,500 pounds per foot, we can increase production by 50,000 barrels of oil. That's very substantial. It's a cost reduction or $1 per BO, reduction of 12%. So this would definitely be the way to go to optimize the frac jobs here. So this was kind of to give you a flavor how we can combine big data statistics from very quick scoping studies with a more detailed modeling as well and help our customers make economic completion decisions. And with that, I'll pass it back to Leen for some concluding remarks.

I'm stepping into the good doctor.

Okay.

And I would end just where Leen began, which is the 10 years of the shale revolution that it's been in oil. What we've seen is just enormous increases in efficiency. We've driven down well costs. We've driven up well productivity. We've made the U.S. again, a major strategic supplier for oil, natural gas liquids and natural gas. Now -- and in the afternoon, today, we talked about really optimizing oil production. In the afternoon, you're going to hear from Ron Gusek and the team about operations, how do we make those better, more efficient, cleaner, that helps drive down well costs shrinks impacts. But before that, before we break, we're going to have Q&A. And normally, if you get up and you talk about physics constrained, big data analytics, multivariate analysis and diagnostic injection test, you get an audience just pumping with enthusiasm. And usually there's a race and people get hurt to the microphones to ask the question first. So today, we've got everyone staying calm. We have a microphone. And we have, I think, about 25 minutes, until 11:15, to take questions. We're going to get questions online. We're going to get questions in the room. But yes, the team behind you, and of course, there's many behind them that work on this stuff, it's hard to overstate the impact they've had in the development of the shale revolution 10 years ago. And as you heard from Leen and Mike and some others, really helped launch the shale revolution 20-plus years ago. So fire away with your questions. No question's too technical. No question's too untechnical. Anything that's on your mind. And I see George's hand up in the air. I think a microphone is coming to you.

Where's George?

Over there. Keep going.

So right here.

Got it. Just what's the receptivity of -- like if you think about certain E&P operators like to design wells their own way, but clearly, you guys can help operators design better wells. So what's that onboarding process like as you take a new E&P that may have a history of doing it their own way and wanting to be in full control, and you guys kind of pushing the MVA model, the Fraconomics model of getting them to consider some of these factors. Just what's that education process like or that dialogue like with the E&Ps? And where do you run into resistance from them in terms of as you try to change their well designs?

So I'll start and let others chime in. Look for the smaller guys, they know about Liberty. They know about what we're doing their enthusiastic. And here's all of my data. Here's my plans. How can you guys help? For bigger guys, we know about you guys, but we've got our own team and let us go. But after a while, they do, well, maybe you could take a look at that. And here's our database of wells in the area, but here's what's different. So sometimes it's slower. You know it can be involved in different areas. And of course, think about it, it's rarely talked about publicly, right? Somebody's got the new generation frac design, they're changing the world, that's our customers. It's their decision. We're the support team behind the scenes. We never want to take credit. We never talk about, in a specific thing, what we do for any of our customers. Their wells, their money. We're just the support team behind. But I would say it's the -- I would say we do a lot that you don't hear about.

I can maybe add a little color to that. Maybe the easiest step-in point for a customer in a new relationship is the database, right? So it's very accessible. -- we can -- in a meeting evaluation in this area for this formation, what does the production response? What does it look like? What seems to be drivers? Or how is that production response dependent on a variety of different parameters by just selecting and filtering. We have hundreds and hundreds of plots available that we can look at of maybe how that seems to be working. And then for some customers that may be the very end of it, just kind of get a second opinion of what does the data tell you? But then for a lot of customers may also be, okay, let's dive into the statistics. Can you do a multivariate analysis with that? This is something that Mike and his team take maybe a few days instead of just a few minutes and sitting in the meeting room as opposed to just looking at data. And from that, it makes snowball into, okay, well, let's run these model sensitivities. And Mike can maybe tell you more about that. But the database is a very low step-in threshold to engage a customer.

I'll add a tad bit more color. So very early on in the Bakken, we had every well in the Bakken, and it's productivity. If you look at IPs or 30 days, the data is distorted by [indiscernible], you got to do a 90-day or 180 or something a little bit longer. When we built the database of every operator, every operator in the basin average well quality than the same graph, but corrected for reservoir quality, and it was shocking to us. Most people have no idea. At least we're the top 5 or holy s***, we're really over there. Our industry was a little bit slow in diving into data. And then what people did, if you just download the public data, there's so many different things that just the raw data is often relatively corrupted. So it's a fair effort to get a database that you have the key parameters that reasonably represents what's going on. But I know at the beginning, there's a lot of low-hanging fruit. As you get further along, it's harder. I knew we were getting accepted. I mean one of the things we did in the Bakken analysis, I did say my Bakken was the first one, right? There's reservoir thickness and pressure and processing and all those parameters. But if you looked at well performance, one parameter, water cut, the percent of the production after the first 90 days, that was water versus oil captured like 80% of rock variability downhole. So it is like, wow, there's a huge metric. And I remember, I walked into a few customers' office and there were giant maps of the Bakken and their acreage on water cut. Thanks a lot. Yes, we're looking at things this way. So it's -- yes, it's different. It's behind the scenes. I think it's important.

And then I think recently, one of the things I've observed, too, is that we have customers in certain basins. And some of those are actually fairly larger operators that are moving into new basins where they haven't worked before. They bought some new acreage. They actually turned to us first knowing we have this database to help them get up the learning curve there. Hey, can we look quickly at your database? What do you guys see there? Kind of as a starting point of the conversation. And then that actually leads to often more work that, hey, okay, you're doing this? Can you do also a quick frac model for us, do some sensitivities. So it's kind of a lead-in to start the conversation to dialogue with -- not necessarily a new customer, but a new base, and we're working with that customer in.

I see Waqar was next, a couple more at the front and Anjali, I'm sure has got them coming online.

Yes. Yes, we do. Yes.

Waqar Syed, ATB Capital Markets. You mentioned that the optimal well spacing in gas basin was about 2,027 feet. Is that for Haynesville or Marcellus? The same? Both areas? And then if you could talk about optimal well spacing for the Midland and Delaware basins...

So yes, this was one particular area, this [ Mankono ] area in Western Colorado, where the fractures are very long. The rock is very easy to frac there. So I didn't mention it in detail in the presentation, but these fracs are growing. We measured with microseismic, 2,000 feet away from the wellbore, extremely long. We don't see that a lot in many other areas, right? We have done -- I mean I have done in my past study life, Marcellus Shale wells have well written some SB papers on that. And in the Marcellus, we were studying a well spacing of about 1,000 feet, then we definitely could see there was some well communication at that distance. And we did some studies with that operator. That was probably 10 years ago, way back, probably to relax that to 1,200, 1,300 feet. I don't know where this is right now. We have not done any specific studies recently in the Marcellus Shale. But that is something we are going to work in here pretty soon. And I think we're going to do some of those studies as well. So it's going to be different for every basin and the type of treatments you're doing, it's going to be different, what kind of well spacing you want to target.

It's Ian MacPherson with Simmons. There was a slide here where you've illustrated the journey from very incomplete well coverage yesteryear to nearly perfect well coverage today. What proportion of 2021 wells are actually that perfect? Or is that -- is it -- are you highlighting just the best where -- or is there still a lot of runway to bring the entire drilling program across the resource base into that level?

Okay. So the focus has been so concentrated on clustering and cluster efficiency and trying to optimize that. But when I did a search on publications in the last 5 years, there's been over 300 publications specific to cluster efficiency. So that means that as an industry, everyone is focused on that. Now can I say what percentage of the wells specifically are achieving that? I couldn't put a number on that. But I can tell you that, that is, by and far, the largest focus right now of operators has turned from that -- from like what is the best design necessarily when they're getting into a full development plan to how do we optimize that cluster efficiency to make sure we're getting the best coverage possible. So I mean I would say it's the majority. I mean other than a certain percentage, I couldn't tell you.

But it's still more a gray scale, of course, it was bad and now it's perfect. I remember, I think Liberty was one of the first papers on clusters. I think Liberty and EOG where the early people maybe 4 years ago pushing this idea. And at that time, we looked at a typical well and maybe even just coverage within the clusters you shot, maybe 60% was typical. And with some improvements we made, you could get to 85% or 90%, so it's not 100%, and there's probably a lot today that's still 60% or 70%. There's still -- the average has drifted up quite a bit. But it's a long way from all, it's perfect and done now. Watch just aren't that cooperative.

I think we have a few more in the room. Let's stick with those for now.

Trisha Curtis with PetroNerds. And I'm compelled to sort of bring the macro into this because you did an amazing job. I mean it's 70 WTI today, not quite 72, but being side, things are really exciting. All these private operators, which are disproportionately growing in your rig count chart. I think we can agree with that. And you guys do an amazing job explaining the tech side of really, I think, really getting to the minutia of clusters for stage and all those efficiencies. And my question is, how do you move the needle with all those private guys into penetrating with that because the 50,000 barrel uplift, that first year is great, but with all the other pressure pumpers, and we know there's a lot of competition in the space and pressure on margins, and you've talked about it in your earnings call, Chris, how do you compete with that? And how do you get those private companies to see we have this amazing value and we can bring you up 50,000 barrels in that first year. And are they listening?

Trisha, absolutely. They're small companies, they're not public, but they're run by smart, sharp operators. So privates have always been great customers and long-term partners of Liberty. So we look now we're a big company. We must be better matched with the big guys, not at all. Our business base today is pretty representative of -- percentage-wise, it's pretty representative of the actual activity. So I met Trisha years ago, and I wanted to meet her, listen to the name of that company, PetroNerds. I was like, I got to meet that gal. What a great name. And she has been diving into data. Not so much micro data at the frac level, but what is well productivity, what's going on in these basins, what's going on around the world. So a fellow follower of the data.

Great. Do we have more questions in the room because we certainly have some on the webcast. Okay, one in the back there.

Dan Kutz from Morgan Stanley. So just kind of a broad question from me kind of concerning all of the work that you discussed here and all the technology. Where do you see the most runway for efficiency improvements moving forward. What do you think is kind of more reaching a plateau? And maybe it's certain basins that you guys can do some more work or better customer adoption? Take it any direction you want, where is the most opportunity and what has you guys excited.

Well, Dan, I'll start, and then I'll open it up -- But even way back in my Pinnacle days 27 years ago, sort of this outsider view, oh, well, once you get a few data sets there, all right, we understand the Marcellus, let's get a few data points here. And it really isn't like that because, a, these rocks are just way more complicated. The reservoir thickness is the same, while there's faults. There's different clay content, there's different reservoir pressures. And once you start to produce a rock, right, the big issues now in all the reservoirs where people are producing is when you go drill these Permian wells, that offset wells, even if they're a drilling spacing unit away, right, they've been producing a lot of oil and gas out of the poor space that changes the effective stress on the rocks, it changes the rock properties. So it's sort of a continual evolution. If you just have -- this is our design and we're going to stamp it out for the next 5 years, that never turns out to be the right answer. And I'll open it up for anyone else for the biggest holes we found for opportunities.

So I'm one of the few that had an opportunity to spend a lot of my career in vertical wells, where you only focus on typically one target. And so all your efforts were on designs and you were trying to optimize those designs. Now that we've turned those wells horizontal, we have multiple targets that we're trying to make sure that we're bringing in. We still haven't optimized. What's the best way to configure wells? What's the best way to space those wells? What's the best way to sequence? As we talked about earlier, our fracture treatments take advantage of getting the most fracture area within that pad that our operators are working on. And we still haven't figured all that out. And so I think there's still some room to grow in some of those areas of how many wells, how should they be spaced -- wine racked as we call it, some in this layer, some in this layer. What sequence should we pump those jobs? There's still some optimization that can be done there.

I can maybe second that. I think as an industry with our technology development, we've done I think, quite a good job in understanding what we need to do at the well level to create this diversion and create at the well level, proper coverage of the reservoir. But maybe not far away from the well, we don't know exactly what, of course, happens. So I'm very excited about maybe more diagnostic technologies that can be used on a larger scale to see what happens between the well, and we know we've done a pretty good job at perforating intervals and clusters and making them all contribute. But what happens hundreds of feet away from that well. Can we say more with diagnostics, more with other types of tracer or D&A-type technology to understand how wells communicate with each other after we're done and then learn from that in the process.

I'll throw out another area, maybe open it up to Ben. In that Ben hit quickly on water is not water. All the water we found is very different, very different. And there's pushes, like there's a new basin development we were involved in where there's no freshwater used at all. All of the water that's used for frac comes from an underground aquifer. It's used, and then when they produce it all back, it goes back into that aquifer. Now it's got brine water with some increasing oil contaminants or oil stuff in it. It's a great way to dispose this stuff deep underground. But just today, recycled water, some smaller percent, that's likely going to grow. So we're going to be fracking with very different cheaper waters, not touching freshwater, but all different things. And then Ben wants to make certain fluids with certain properties. But he's had variabilities of different qualities of fresh is water. He's going to be fracking more and more with water that isn't even close to fresh.

Yes. Some of the waters we see out there are -- you wouldn't even identify it as water, black. I mean you can't see through it. It's black water. We can do things to treat some of that, and we can select different chemicals to actually use the water as it is. Yes, there's a lot of things we can advance in that world.

Well, I want to take a few questions from the webcast. So let's start with that quickly. Keith Mackey at RBC asked, can you talk about how you monetize your best sets of data and analytical tools?

So great. So -- and there's a thing -- now I'm thinking of the tech companies and all that argument. How do you monetize your data, right? If you have data on credit card transactions and what people buy that data is by the big data companies, it's sold so they get the right ad for you to appear at the right time. We -- our model is very different. We do not do that. We have a database -- I should say we don't -- what we do, maybe you could say is analogous. We have this large database. I would say, by far the largest and most robust, meaning accurate database, of all the unconventional wells in the country. So we get it from public data sources. But lots of people scrape on the public data. That's just a thin layer to start to build our database. But then we know the producers, we know the operators. We know how many stages they use and what the cluster spacing was. And we can put that in. Then there's proprietary things that they don't want shared with anyone else. And so we're very careful. They will give that data to us because if we have that data from them and from their neighbors, we don't tell their neighbors what they're doing or what they're doing to their neighbors. We keep that data proprietary in the bowels of our database. But yet everyone gets the benefit of the insights, the analytics that come out of that data. But we don't sell that database to other people. We don't release all the details we have about all those wells to anyone. But we do release the analytics or the results that come out of it. And we do release pieces of it. Like Leen said, if people say, hey, what's the production data of all the wells and reservoir thickness. There's a lot of this data that is no problem to share publicly. We just have in an easily -- more easily accessible format. We share that. These -- you view data, viewers, so people can look at production and performance and all that. So I would say, Anj, we never directly sell the data or even really the data services. For us, it's just part of this broader Liberty ecosystem package. If you're our customer, we're your partner, and we're going to do everything we can to figure out how to improve your production economics and help you understand why are things going weird, what's going on wrong there. So it's all just package. It's not an individual business line and we have no intent of doing that. Too much proprietary nature about it.

Perfect. Perfect. Let me take another question here from Chase Mulvehill at Bank of America. Ultimately, the industry is now focused on maximizing free cash flow. Do you have quantitative models that actually predict the optimal well and shale design that would result in the highest free cash flow and/or NPV? And are you seeing accelerated adoption from private E&Ps for your subsurface diagnostic technologies?

So they're -- maximizing free cash flow is really about maximizing how much you spend to drill wells today and you want to maximize free cash flow, drill a small number of wells and drill all your best locations right now. So I'm not sure if that one parameter -- that anyone is focused on maximizing just that one parameter. Certainly, that parameter is higher and higher in investor focuses. It's an important one. But we generally bring the guts of well cost, production profiles, production performance and then we'll work with the customer. Do you want to maximize the return -- the rate of return on that well? Do you want to maximize the net present value of your whole field development? So we'll work with people on what is it that they're looking to maximize. But it is -- to my knowledge, it has never been, here's a 5-year time period, can you figure out how to maximize because my problem that always has been is a time period. I want to maximize free cash flow to time infinity, discounted back to today at some changing discount rate.

So does that drive customer stickiness?

I would say the ability to say we have the data, we have the analysts and we have the tools to figure out you -- what you want to optimize. Absolutely. Absolutely.

Absolutely. That's great. Do we have any more in the room? Otherwise, I do, Waqar.

One in the back -- And Waqar, we'll go to somebody else just because you've got one so far. Far enough with the blinding lights I can't tell who it is.

It's John Morrissey, Shea Ventures. It's not clear to me how you get rewarded at Happy Valley. Is it just customer stickiness is the reward? Are you able to charge more? And how do you quantify whether you're getting a return for your shareholders based on the technology and data you're collecting?

So John, the short answer is it is customer stickiness and customer desire. We get a Liberty pricing premium because if you were an operator, I think candidly, it's better to have Liberty and partner than to have someone else as a partner. And those 2 things are really valuable. If you have excess demand for your particular service, it helps us keep a more efficient calendar. It helps us -- there are 2 customers, they can be the same size and they'll pay you the same pricing, but one of them is going to be efficient and run faster and tell you their schedule way in advance. That's a much more valuable customer. So we want to -- so it's a differential thing that make people want to work for us more and help them increase their profitability. We don't get direct value in the way you were inferring. I'll tell a story very early on when we showed this database in the Bakken, and we showed a very large, well-known operator to everyone, hey, if you made this change, you can increase your well productivity by 50%, and it will increase your well cost by 10% or 12%. If that's true, that's going to be awesome, you're going to be our frac company. But how do I know it's true, I got to spend that 12% and then maybe it isn't. And we actually went back to them and said, we'll give you a money back guarantee, if we increase your well cost by 12%, and we don't increase your productivity by more than 12%, we'll give you about that extra frac cost. But if we increase it by 30% or 40% or 50%, we get a piece of that. And of course, all that communicated with the customer as well, they really believe in what they're doing. Nevermind, don't want the insurance. We'll go ahead and do it. And that has been our experience. There are people with low quality acreage. They're trying to figure out. We get offers there all the time. Hey, if you bring your frac, we'll give you x percent or whatever. But would people have a high-value asset, they know the returns are good, we would love nothing more than to partner with them to have some risk capital and share some of the upside. But those deals that sound so logical, they're very rare. Very rare in the really good rock. I wish that wasn't so. They're not never, but they're pretty rare.

Well, that's great. We're running a little bit out of time here. So we're going to take a quick break regroup at 11:30, Mountain Time. For those of you on the webcast that have asked lots of great questions, I want to make sure that you know we are -- we do have a live stream here, and we will get to those questions in the open forum as well later this afternoon. So definitely keep them coming. We haven't forgotten you're out there and we'll continue back here at 11:30. Please do grab your lunches if you're here in the room from the back. Thanks. [Break]

Welcome back. So what is climate science? How does the science shape our view towards energy? Towards energy access. The 2 men on stage here need no introduction. But let me just share a little bit about our guest today, Dr. Steven Koonin. So Dr. Koonin is a leader in science policy in the U.S. He served as a second Under Secretary for Science at the U.S. Department of Energy in the Obama administration. Prior to that, Dr. Koonin spent 5 years as Chief Scientist at BP, where he played a central role in establishing Energy Biosciences Institute. Dr. Koonin was Professor of theoretical physics at the California Institute of Technology, and served as the Institute’s Provost during his tenure. He is currently a university professor at NYU, and he holds a BS in Physics in Caltech and a PhD in Theoretical Physics from MIT. So with that, I will turn it over to Chris.

Thanks, Anj. And look, the idea for this is truly just a dialogue. There's no rehearsal. There's no scripts. Steve doesn't know what is going to be asked, and heck, he might be shooting arrows at me as well. But I want to start out -- the one thing I do want to do is I want to start out and I have Steve tell us his story. We -- I think he's a tech nerd like me. Where did you grow up? How did your career unfold?

Sure. So I grew up the eldest child of 3, a family, middle class or perhaps even lower middle class, in Brooklyn, New York. From a very early age, I was fascinated with science and how the world worked, measuring things. And I had the benefit of one of the extraordinary public schools in New York, Stuyvesant High School, which focuses on science and math. I had a great time there. And because it was the late '60s, it was the time to go to California. And so I went to Caltech not only because it was in California but also because it had a reputation as the hardest science and math school. I know we share an MIT heritage, but I'd like to think about Caltech as the best fief of MIT. And I know both institutions very well. And 4 wonderful years at Caltech, graduate school at MIT, did a PhD in theoretical physics, nuclear physics, then back at Caltech on the faculty, teaching graduate students and doing research. In the course of my time there, I supervised about 30 or 40 PhD students who wrote lots of papers. And about in the late '80s, I started to get a taste for the input of science to practical matters. And as you may know, this is what physicists do. So one of my mentors once said, a license -- a degree in theoretical physics is our license to poke your nose into anybody's business. And physicists have done this for a decade -- I'm sorry, centuries or so. And so I got interested and exposed to national security matters. Both DoD and the intelligence community did a lot of consulting with a group called JASON, which is a group I'm still involved with, and saw how you provide technical input into nonexpert decision-makers. They -- you tell the story transparently, completely, "These are the options. These are the risks," and so on. About that same time, I was asked to be a provost at Caltech and learned about running large organizations, roughly $0.5 billion budget, leading the part, JPL, which is a NASA lab that Caltech also runs. And I think after about 9 years of provosting, I got kind of bored with that. It was a lot of fun, but you've been there, you've done that, trying to move on. John Browne asked me to come be Chief Scientist at BP. I said, "I don't know anything about energy except that it's conserved." And he said, "Don't worry. You'll learn." And I like to joke that I was, for a couple of years, the highest-paid graduate student on the planet as I learned the energy business. And that was just great. They didn't need me for oil and gas, but I did, I think, helped them learn how to think about the bigger energy picture and moved them into some interesting alternatives and renewables, particularly bioenergy, as was mentioned in the introduction. After 5 years of that, my wife says, "We got to get back to the U.S. London is just a little bit too much for me to take anymore." Steve Chu, my friend, became Secretary of Energy, and he said, "Come help out." I did that for 2.5 years, which is our longest time for a Senate-confirmed appointment. I helped guide the government in its investments in energy technologies and also pushed back within the department against Secretary Chu, a Nobel Prize winner, has a lot of confidence and a lot of knowledge, but Steve needed somebody in the department to challenge him a bit on the technical issues, a lot of fun doing that. And then I went to NYU to start a center on big data for big cities. So it was very interesting to see how big data is being applied in your organization, did that for 6 years. There's a famous physicist in the early 20th century, Leo Szilard, who is famous for having drafted or written the letter that Einstein sent to Roosevelt to get the Manhattan Project kicked off. And Szilard was quite a character, if you read the biographies. He had his own 10 commandments, and the ninth one is something like, "Reinvent yourself every 6 years unless you become captive to the environment that you're in." And so I've taken that to heart. After 6 years of starting the Center for Urban Science and Progress at NYU, I stepped down. And I'm now just a professor, teaching alternatively climate and energy courses at the master's level to MBAs and engineers. So that's a little bit about me. Personal life, I've been married to the same woman for 45 years. We have 3 grown kids. And apart from my professional life, my real dream job would be playing lounge piano somewhere in a bar.

All right. Maybe the Liberty bar.

I'd be happy.

Okay. So Steve, in my case, in that company, Pinnacle Technologies, as I mentioned, we had some technologies for mapping the motion of fluid underground. So the National Labs came to us 20-plus years ago, said, "We're going to do these demonstrations, sequester CO2 underground. Can you measure that? We need to see if it stays underground." So it's a potential new business line. I -- just starting a shale gas company and wow, cold shale, this is like a golden opportunity to lower greenhouse gas emissions. So for business reasons, I almost drove into the study of climate change 20-plus years ago, think, "Hey, this is going to be a big deal. It's going to be awesome for 2 of the businesses I'm in, but I want to understand it." And pretty shocking, my road along that path and my interactions but way more important -- mine didn't result in a book. Yours resulted in a book. But talk us through that. You're a rational, technical guy. This is sort of a technical issue with a lot of trade-offs. Tell me your view on climate change and why is it not aligned with the general view? Or is there even a general view?

So increasingly and particularly in the last year or 2, you'll hear many politicians, increasingly people in the industry, finance and certainly NGOs talking about the existential climate threat. And in fact, a couple of weeks ago or a month ago, the Secretary of Defense said, "This is biggest threat that the country faces." And when I listen to those people -- and they, of course, use the science to justify what they're saying. "The science is absolutely certain," said Ambassador Kerry. President says, "We're going to follow the science." I listened to all of that and I'm thinking about the movie, The Princess Bride, where one character, Vizzini, keeps using the word inconceivable. And the main character, Inigo Montoya says, "You keep using that word. I do not think it means what you think it means." And I'm thinking the science does not say what these people think it says. And I can guarantee you that essentially, none of them have read the government or UN assessment reports. Maybe they've read the summaries for policymakers. Otherwise, they're getting it from the media. And when you really read those reports, the picture you get is very different than the popular and political dialogue both in terms of what's happened with the weather and climate over the last century and also our ability to project what might be happening in the future. Let me give you just some surprises that you'll find when you read those reports. Over the last century, heat waves are no more common today than they were in 1900 across the U.S. And the warmest temperatures, despite the heat wave we're having now across the Southwest, the warmest temperatures across the country have not gone up in more than 60 years. There's a lot of a year-to-year variability, of course, but climate is a 30-year average of things. Another is that there is no detectable influence on hurricanes from human forces over almost a century. Think about that every time you hear the coverage of hurricanes on CNN, for example. Another is that the projected impact of warming of, let's say, 6 degrees Celsius -- that's 4x the Paris goal. If the globe warms 6 degrees by the end of the century, the economic impact on the U.S. would be a few percent of the GDP, and the same is true for the world. Those statements are not my science. They're not my spin on the science. They are what's there in the report although sometimes buried in the report, and you've got to read them carefully. And my goal in writing the book was to kind of pull back the curtain a little bit and circumvent this long chain of information that goes from the research literature and the data to the assessment reports, to the summaries, to the media, and let people see, of course with references, exactly what those reports are saying.

And why don't the scientists that are behind these reports -- I visit them and speak with them at universities. Why don't they speak out more? If -- say we're in another area. Say we're working in theoretical physics and we have a certain model of how a particle behaved and then everyone said something dramatically different about it, wouldn't you speak up and say, "Hey, that's not what I said. That's not it." And in theoretical physics, as you know, people do that.

Yes. And that's part of the sport, is to both challenge and rebut the challenges. The problem here is that the subject of climate is, first of all, not as clear as theoretical physics. And so it's much more difficult to establish truth enforcing, in part because we have poor observations, complicated modeling, limited data. But also because it flanks at the heart of human existence, the changing climate, degradation originally of our environment. If we responded to it, as some people would like, it would entail massive changes in society and we can get on to those, I hope, in a while. But there's a lot of peer pressure to think -- look, I wrote this book, all right, published among...

Everyone's going to get a copy of the book signed by Steven. They're -- we held them until after lunch. They're on the back.

I tried to stick to exactly what's in the reports and just tell people, "Here's what the real science says." And I've already gotten trashed in ways you would not believe by some reputable scientists, some of whom used to be friends actually, in the media because I think there is a narrative that people are trying to enforce in order to stimulate action. And any deviation from that narrative is punished. And I'm far enough along in my career and I've got enough experience giving advice and portraying science to nonexperts. I really don't care. I'm just trying to get the truth out there because I think it will result in better societal decisions.

Absolutely. Now you worked for 5 years in London at BP when that was Beyond Petroleum. So 5 years, world top scientists, where is the beyond-petroleum future? I read the analysts in our own industry telling me, "The energy transition is happening faster than we thought. And oh my God, we're going to be out of business in 10 years." I can't believe the stuff is written by analysts in our own industry. But what's your view on that? I mean is it hard to redo the world energy...

So what you really -- let's talk about the goal first, okay? If you really want to reduce human influences on the climate, we need to zero out greenhouse gas emissions by 2050 to stay below 1.5 degrees of warming -- we've already seen 1 degree of warming, all by 2075 to stay below 2 degrees. And when you look at the growing demand for energy due to the development of most of humanity, as you nicely outlined this morning, and you look at the fact that fossil fuels, particularly coal and gas are the most convenient way and reliable way of satisfying that demand and right now we have no alternative to oil for mobility that's viable -- we can talk about electric cars in a little bit. And given the time scales that you have to do this transition with -- I have said in the book it's practically impossible. We are not going to do this, right, given all those competing tendencies. Now the administration has put forward some bold plans for decarbonizing the U.S., and we can talk about those in a bit as well, but even if the U.S. went to 0, the U.S. is only 15% of global emissions. And so whatever reduction we manage to make would be wiped out by a decade's worth of growth in the rest of the world. So I don't see how this is going to happen, right? And we're going to be using fossil fuels at least till mid-century and I would say very likely until the end of this century in significant ways.

What -- when you're looking at energy technologies, what was the most promising thing that could grow market share in world -- in the world energy system?

Are we talking from a technical perspective or from an economic perspective or from a psychological perspective? Because as you know, people's perceptions about energy technologies are really important as well.

Right. Well, that leads to government subsidies and investments. But ultimately, I don't think that's enough to drive meaningful additional energy. So I guess the balance between it's got economic prospects that may attract some capital, and 30 or 40 years from now, it may have many percent more market share in global energy.

If the world places a lower priority on reducing greenhouse gas emissions, and we know that more than half the world is still just trying to get energy, never mind where it's coming from, I think it's going to be gas. Coal has got its own downsides, but gas, gas, gas -- particularly here in the U.S. for reasons you all know much better than I, gas is wonderful. We can talk about its climate impact in a minute. That's an interesting side note. But if we care, you've got to electrify the transportation system, can't produce enough biofuels, I think, to satisfy the demand. And you're going to have to make that electricity emissions-free. And yes, wind and solar are wonderful, but for every megawatt of wind or solar you put in, you got to provide backup in some way because the electricity grid has to be extraordinarily reliable. And the only way right now to provide that backup is through fission or eventually if other storage technologies get to be economic and scalable. We're not there yet with those at all. So we've got to build nuclear, right?

Yes.

And we haven't built a nuclear plant in this country in 20 years. We've got a couple, trying to build big ones. But when I was in the department -- and I think many people had a lot of optimism that small modular nuclear reactors will be beneficial both from an economic point of view and, of course, reduce greenhouse gases. And the Nuclear Regulatory Commission is currently considering licenses or at least looking at designs for, I think, 2 small modular reactors.

I'm a huge fan of nuclear. And so you've worked inside the government and you advised the government. Do you think the political climate can change that we can see nuclear get some growth in the next 10 or 20 years?

I do. And here's why. And this is maybe a more general comment about the climate energy seen in the U.S. and in Europe. The policies that are being proposed in regulations -- and you can look at the Biden administration's plan, would entail rapid and large-scale transformations of our energy system. And by nature, I think you said it, energy changes slowly. It takes decades. And there are good reasons for that. The facilities last a long time. We need reliability in the systems. You know it's not just a windmill but you need the whole system that integrates that windmill together with the other sources of power. Similarly, you can't have automobiles without having the right kind of fuel and so on. So these are systems that have to change, and they have to be extraordinarily reliable. If you start monkeying with them too much, too rapidly, you're going to lose reliability. Costs are going to go up. You're going to reduce consumer choice because I won't be able to buy an internal combustion engine in this country after 2035 if the regulations come in, and you're going to degrade U.S. geopolitical stature because we will be more dependent on imported oil and perhaps even imported gas again than we were before the fracking revolution. And so I think as this starts to bite for ordinary consumers, there's going to be pushback. And we've already seen it, the Yellow Vests in France, the backing off of the U.K. government for mandatory installation of heat pumps and other protests about electricity and fuel costs around the world. And so people are going to ask -- I predict within about 3 or 4 years, "Tell me again why we're doing this." And there's going to be a much greater scrutiny of the science, which as I write in the book I think is sorely needed, and a much greater look at the efficacy of the policies that are being proposed. So just give it a couple of years, and we'll be back to injecting some rationality in both the climate and energy discussions.

Fantastic. Yes, I saw Switzerland just voted down a carbon tax in Switzerland. So yes, that -- my perspective has been as energy gets more expensive and less reliable, that will be the start of swing back. So Steve, does that go further? Do people -- do we ever get a public discourse about honestly, what we know or even project about climate science? That's why I wrote that section in our ESG report. I talk to politicians. I talk to climate activists. They never engage in even understanding the basics. And you've got a point in your book. When is the public going to -- some meaningful percent of the public be aware of the fact that if we met Biden's goal of a 30% that -- no chance of that happening, but say we get 30% drop in greenhouse gas emissions by 2030, net zero by 2050, net zero for the rest of the century at presumably enormous cost, the benefit, right, is 0.07 of a degree cooler, immeasurably small change at the end of this century.

Yes.

Like the benefit doesn't -- the cost we see is high and people may push back about that, but is everyone going to be discouraged about the benefit?

Yes. I -- well, the numbers are what they are and I'm pleased. And I think you were unusual in the oil and gas business of laying out as you did in the ESG report. I could sense you mentioned Smil in there. I could see Smil's thinking in there. As I think if people read my book, they will see it as well. That's factual, logical. Don't try to extrapolate too much. These are the numbers. These are what they imply. And now let's talk about what we should do, all right?

Yes.

And I think there are a lot of people who are receptive to that. As I've gotten feedback from the book from many scientists who are not -- or engineers who have not looked deeply into climate or people who've been responsible for running some of the large named universities -- we shall not talk about names. The response has been, "Thanks for writing this book. I had not realized many of these things, and I've now got the basis on which to ask smarter questions for the people who are pushing us to go in this particular direction." So I think that's what we need to do. We're not going to win over everybody. But we've got to stand up for a factual, logical discussion. And frankly, I think the oil and gas industry, particularly the big ones, have been remiss in some of the legal proceedings I've been following and so on in standing up and challenging the science with, "Here's what actually the data says. And so why are you so concerned about sea-level rise, but it's been only going up in less than a foot of century for the last 100 years. And the projections that you're making are just so widely discordant with experience. So please explain." And I think we need more of that kind of discussion.

Yes, yes. I agree with you, very disappointing to see our industry not do that. Everyone accepts the narrative and then shows how they're part of the solution. So we -- in the -- again, the book -- and again, in line with Vaclav Smil, this probably the best energy thinker in the world and writes a ton of books, very nerdy, but they're just so very, very smart and they're very good. But he doesn't have a wide audience. Your book is going to outsell probably all his combined. But with your book and your background and credentials are just so perfect to speak to this, are you getting invitations to speak at the National Labs, at universities? Who wants to engage with you? And who doesn't want you talking out loud?

So I'll just back on Smil for 1 second and then I'll answer that. I wanted to do for climate what Smil did for energy, okay? And maybe make it a little bit less than nerdy, as you said. So there are some anecdotes in there about my experiences and so on. Yes. So I'm hoping to do a large number of talks at universities, think tanks and public forums over the next year. I've got -- I did -- just a couple of weeks ago, I talked at Lawrence Livermore National Lab. By the way, the National Labs, which are a wonderful complex of research institutions with both nondefense or non-national security but also national security research, they need to get smarter about climate because the Secretary of Defense and the ODNI, the -- or the Director of National Intelligence said this is a major threat. So let's apply the same rigor to analyzing climate and energy that we do to other national security threats. So National Labs, I did one at Livermore about a month ago, great reception, wonderful questions. I'm not sure I won many people over, but the book is there. I've got -- let me not name the particular universities yet since they haven't been announced, but universities in the top tier of this country's higher education operation. And I hope to get on the stage and tell the story a bit. But then I ask some of the experts who -- these universities, "How come it says minimal economic impact that -- but you're still either saying yourself or tolerating others to say that there's a climate crisis and we've only got 10 years left and so on? Where is the scientific establishment pushing back against the inaccuracies in the public dialogue?"

Yes. So disappointing. So Steve, let's talk about that. I think in our original dialogue, we shared the same view. One of my problems with the sort of climate mania is it's pushing kids in school away from science because it is authoritarian, enforcement of orthodoxy. That's not what science is. So talk to us about the science versus science.

Science. I mean the assessment reports -- for those of you who don't know, the UN puts out, every 6 or 7 years, a big report assessing the state of the science and making recommendations to policymakers. The next one is due out this summer in the end of July, early August. The U.S. government is mandated to put out a report every 4 years. The next one will come out in 2023. And activists and people who want to move the country and the world in a certain direction -- and they had perhaps legitimate reasons for wanting to do that, use these reports and particularly the more inflammatory statements in them as a vehicle for saying, "The science is settled. It's been peer-reviewed, et cetera, et cetera, and there's no reason to challenge it." And of course, that's a wonderful stepping stone then to teaching or convincing nonexperts and young people that, "Hey, the world is going to end in a decade and we had better do something." I think that's really immoral, and it's immoral in several ways, of course discouraging young people absolutely. But also, it tarnishes science. And we can talk a little bit about the COVID examples where this kind of thing has also happened or happening. But it also usurps from the public. We are a democracy. The public really needs to know what the science actually says. And if organizations obscure that or hype it, then you're usurping from the public the right to make fully informed decisions about how much risk to tolerate, how much economic growth you want to balance against environment, north-south equity, geographical equity, all of those values, things that you have to weigh with the science. And then finally, we've got so many other problems in this country right now. And placing this one, which is, frankly, a vague, distant and uncertain threat at the priority -- at the top of the priority list really incur so much opportunity cost that I think it incurred -- as I said, it's just immoral to be representing the science as more certain than it is.

Yes. And so do you hear -- like when you spoke at Livermore -- again, no details, right? Did they engage in this dialogue of the science versus science, like...

No, because the audience was all scientists and engineers and they understood exactly what I was saying. I gave them the references and the reports if they didn't know it. Page 327 in the IPCC report says no detectable human influences on tropical cyclones, hurricanes.

And were they not aware of that?

Most people are not.

Even at those National Labs?

Yes. Because most of them are not involved in climate science. Some of them are. One of the premier -- to give you an example of how much the dialogue has degraded -- and I'll use names this time. Ben Santer is a senior climate modeler at Livermore. And he is, I would say, in his public phase, a foremost defender of the faith. And when one part of the lab invited me, the Center for Global Security Research, because this is a national security issue, and it was announced, then immediately wrote an article, I think, in the Bulletin for Atomic Scientists. He said, "When I retire in September," so that's a few months away, "I will have nothing more to do with the lab because they chose to give a platform to this." I don't know if he used the word denier, but it's probably that he did. Yes. And I'm just quoting what's in the reports, all right? It's unbelievable. It's unbelievable.

Unbelievable.

All right. And I think the way to fix that is by educating fellow scientists and engineers who have not looked at this. They will then have the ammunition to ask the right kinds of questions. And also, we'll see how the information flow has been corrupted by the media and the public dialogue.

Yes, yes. I think -- and the way you've done it in the book, if you present logically the facts and not -- there's -- as I say, you never want to be the anti-Al Gore. We just -- like I spoke at universities a number of times on climate change. And actually, the reaction is incredibly positive. There's a small number of activists that you...

Did you have demonstrations for your talks that would show up?

I had for my testimony in front of the Climate Crisis Committee. Extinction Rebellion held a funeral for the Earth when I showed up. And I think about all these college kids in these black suits. I mean, they -- all the girls dressed in black and faces painted white and the lipstick, and they were holding roses for a funeral for the Earth as I walked in. But for climate change talks, maybe the news doesn't get at them, I find the reaction pretty positive because I think -- 10% or 20% of people, they don't care about the facts. But most people just -- they never heard anything, but it's really a giant problem we have to act. If they see the data and then they realize, "Yes. No one actually showed me the data on the other side and you showed me the data." Most of them, I think they're very open to getting a more realistic perspective. I think the public, as a whole, probably is, but we just don't have the avenue to engagement.

Yes. The politicians have taken about half of the public -- maybe more than half, have taken this up as a cause célèbre. And I think that's another part of the problem. I quote in the book and I think it's a very powerful quote from H.L. Mencken, who was a journalist in the early 20th century, very pithy remarks. And one of his quotes is that the purpose of practical politics is to keep the public alarmed by a series of mostly imaginary threats so that they can be clamoring to be led to safety. And whether it is climate; whether it is immigration on the other side; or whether it is COVID and that's an evolving and somewhat complicated story, I mean you see that playing out, all right? And somebody has got to stand up and say, "Stop that nonsense because here are what the facts say."

I would -- just as you said, we saw it with COVID, too, right? Remember, the 2 doctors in Bakersfield talking about it and their video was taken down.

Yes.

I get a bunch of panelists, business panelists here, some with our governor here in Colorado. And I'll just talk about the numbers, but it was the same thing that everything in life, to me, has a cost and a benefit. And we want to find things where the benefits are much greater than the...

The happy valley.

Yes.

The happy valley, okay.

But on climate, the -- we sometimes talk about making the cost smaller. We never mentioned the benefits, of course, because there isn't much there. But in COVID, it was the same way. There was the fear of people dying, which, of course, is very real. That's a big cost. But there was a cost of what we were doing, too, that also involves human health and economic well-being and all that. And I was this weird guy and polite company talking about stuff that -- was the world always that way? When we were kids, was it that way?

No. I think the media have heightened this. I think the Internet, because so much information is now available, a lot of it bad information, that I think it has heightened it. And again, I think people are -- well, no, let me just go back to this trade-off for a minute. We saw that in COVID in almost real time. You have the governors and many other people clamoring to open up the economy, acknowledging that there were risks. And you have the public health people saying, "Here, if you do that, people are going to die." Well, yes, some people are going to die anyway, and you have to set that balance. And I would fault the Trump administration for not promoting that kind of dialogue and making those choices kind of evident. They were very confused in what they said to the public. But you did have Fauci on one side and then you had economists and the businesspeople on the other side. Eventually, we sorted it out. I think things are better now because we've got the vaccines and cases are going down. But it is a great analogue to the climate discussion where there are costs to reducing emissions, not only internal costs, but as you again mentioned this morning, the 3 billion people in the world who don't have adequate energy and the detriment of conventional wood and dung being burned. So there are costs. I think part of it also is that the young people are looking for a greater cause. And they've taken this on, the protection of the environment and local environment, obviously, pollution, plastics, et cetera, but also they've taken on the global climate as a great challenge. And I wonder if we couldn't redirect them somehow to improving the lives of the 3 billion or 4 billion people of whatever cut you want to use that don't have adequate energy.

Yes, I've been a Board member of an environmental group for a good chunk of my life. I'm an outdoor wilderness guy. We're a wealthy society so we can do these great things. But I think the interest in what would have been environmentalism when you and I were young is so different today. Like kids today -- I see the protests went out, they have no idea the Earth -- the air in Denver is just monstrously cleaner than it was 30 or 40 years ago. So it's mostly global. It's mostly climate change. And so to me, yes, I think it's less tangible. But I do think most of it is -- it gives a meaning in life. The planet is going to die and I'm on a fate to save it, and then there's these demons that are -- I'm fighting against. But that -- I mean yes, it seems they have a very strong emotional appeal with no data or facts. People don't even bother to learn them. I think it just sort of fits, right? And so society is running with it.

It's like -- one of my friends who is both a physicist but a great historian also, a student of history. It's like the Crusades. If you look back in Medieval Europe, the king mounted great army of people to go off to the Holy Land at great cost but also with uncertain and distant and probably unachievable goals.

Yes.

I think the cure to a lot of this -- and you've certainly been involved with that and I have as well, is both climate literacy and energy literacy and things that are accessible to people not only at a technical level where we talk numbers but also at a more visceral level. And I'll put in a plug. You probably know Scott Tinker. And Scott's films, both Switch and Switch On, Switch about the energy system and Switch On about energy poverty, I think are really good for people who aren't quite as numerate or quantitatively thinking as we are.

Scott has great [ science ] and he's all around speaking. He's such a kind, generous -- yes, he's very credible. I'm a huge fan and supporter of what Scott is doing. And so yes, maybe just other ways to spread it. Again, as we both said, a little disappointed in our own industry engagement of that. And then I think of reporters, right? Energy reporters tend to write about energy and they tend to write about climate, right? So there was some interest in this report that we released. I've done 3 interviews with major print publications. And what was shocking to me, 2 things. One, all 3 of them were like, "Why did you write this?" It's...

Why?

Everyone is saying that, "Why did you write this?" And then I got that right upfront from all 3. And then the most disappointing thing I've learned pretty quickly was none of them had read it. "Well, I read the summary upfront then I glanced through it." I'm like -- so one of the takeaways, to me, it wasn't like 5 bullet points, right, and your book should be more in depth. It's right -- if you're going to credibly make a case, we try -- we've got to put some data out there. We try to make it as digestible as possible. But if the press that writes on these things won't read that, I don't know -- when you were interviewed for your book, did they -- did people read your book?

Some have. Most not. And certainly, the people who criticized me have not read the book. I know that because I asked one of them, "Did you read the book?" And he said, "No." But what they do instead is to criticize what was written in a review of the book, which, of course, is necessarily a less precise and nuanced than what's in the book itself. It's crazy. It's just completely crazy. Did you -- when you put out the ESG report, how many people said, "Oh, it's just your own self-interest. You're in the business. And clearly, you have an interest in perpetuating fossil fuels?"

So I haven't got that feedback yet because I'm betting those people haven't read it. Obviously, the first [ win ] in our industry. It has spread. I mean I've heard from some politicians and some people and cultural things. Feedback to date has been -- the feedback to date has all been positive, but it's just because -- I think there's got to be negative feedback. I'm just not hearing it. I'm dying to get some or hear that. I did write it partially for the general public. My wife's sister, who's got an issue -- I was trying to be digestible enough but full of enough data and pointing to enough references that hopefully would make you scratch your head.

Yes, yes. I think -- again, I come back to trying to educate our fellow scientists and engineers because they will understand. I'll tell you one anecdote which is in the book. I was invited to give a talk now about 6 or 7 years ago. It was shortly after I had written a Wall Street Journal op-ed, which is the first time I came out with my skepticism in 2014. And it got 2,000-plus online comments, all positive. Basically, I was saying our understanding is not what you think it is. And so I gave a talk on the basis of that at some top 10 university with a premier earth sciences department that shall remain nameless. And as I'm getting ready to go give the talk, the Chairman of the department says to me privately, "I agree with just about everything you wrote in that report, but I dare not say it in public," all right? And so we've got to crack through that. I think if the energy transition starts to impact people directly in the way that it will, then more people will be encouraged to speak up. Also, we've got to break -- so I'm deeply involved in the National Academies' report-writing process. For those of you who don't know, the National Academies of Sciences, Engineering and Medicine are an objective adviser to the government, and they do studies on all kinds of things, tobacco use, COVID -- they've been very instrumental in advising the government, but also, of course, on energy. And they recently put out a report on pathways to decarbonization, written by 20 people who understand energy. But almost all of them -- and I'm going to say all but I haven't checked 1 or 2, of the people who wrote this report have no experience in the real energy business. They've never had to provide electricity 24/7 or fuels at a low cost or extract gas out of the ground. And so it's all an academic exercise to them and I don't think have any sense of what the disruption will be if we go down too rapidly this pathway of decarbonization. I have friends in another part of my life who ran big utility companies in metropolitan areas, names you would know in the East Coast, West Coast. And every bit is responsible as everybody else, but they look at the plans and they say that just isn't going to happen for both technical and economic reasons. So I think we're going to eventually get real about this stuff.

And my last question with that, I look at the United Kingdom -- and you lived there 5 years, right? I -- there was -- they harmed a lot of people. They've made energy expensive, but they've almost completely deindustrialized the nation. And where are they today? Both of the major parties are on the climate crusade. So my worry there is well-off people, the cost of energy is not as important. They've always got reliable energy, "Hey, it feels good," and that the people that are not so politically powerful or even visible in the politicians' eyes are getting crushed. And in the U.S., I think that's a more vocal population. I hope we get a pushback sooner, but it's very disheartening to me to see to the extent to which the birthplace of the industrial revolution has deindustrialized its country, impoverished the bottom half of the population, and they're still charging on.

Yes. It's crazy. And maybe you've heard about the deindustrialization that's worth a remark also. A theme, when I was in the Obama administration and now again in the Biden administration, is innovation. The invention of new technologies will improve the economic prospects of the country. What people forget is that there's a difference between where a technology is invented versus where it gets manufactured, where it gets deployed. And yes, the U.S. is great at inventing and demonstrating things that I'm all for, us doing that with low-emissions technologies. But unless this country becomes a premier manufacturing venue and that's cost of labor, regulation, cost of energy, unless we do that, we're not going to reap the full economic benefit of any of this.

Yes, yes. Why don't we open it up? I could have this dialogue until happy hour. But why don't we maybe turn the lights a bit? Why don't we open it up? And we've got another 15 minutes or so with Steve, and I'd love to hear questions from anyone in the room and online, but we've got to reward the people that made the trek here first. So anybody have a question for Steve? I see one right there. This guy to your left or your -- the mic, over here to the left. Microphone is coming. I think that's [ Frank ] under that hat.

Thank you for being here. I think you made a good point about the politicians' payoff and how they can create some drama and leave people out of it, good point about younger people and how they just want something to rally around. What's the payoff for the guy that wrote that said you're a denier? What's the payoff for the scientists that should know better? What do they get out of this climate activism?

I think it's several things. When you're an academic, you become fully invested in your work. And if you have made a 20-year career on trying to quantify and mitigate the dangers of greenhouse gas emissions, it's pretty hard to turn around. But that's true in all fields of science. As somebody said, paradigms change only by one funeral at a time, when people drop out of the field, the older people. But second is there are a good number of young people in the field who've gone into it with the expectation that they're saving the planet. And the third is that there is a cost funding and fame and prominence associated with it. So I think all those are at play with the academics.

We have a couple of questions out here.

Great. Okay. Thank you. Roger Read, Wells Fargo. A question I had for you. You mentioned when this starts to bite, I guess as one of the ways to phrase it, people may start to push back or people who could, should know better, will start to speak out. I mean we are starting to see issues with the electric grid in California and Texas. I mean are those the first signs? And I mean how bad does it have to get before people actually change their tune on it, I guess?

I think -- beyond Texas, I would add the Colonial Pipeline hacking not because it's got anything to do with the energy transition, but it makes people realize how important reliable energy is to the functioning of society. We can go into the causes of why California is having so much trouble or why Texas had the trouble that it did. It's not only renewables, but it's failure of regulation to build a capacity market, for example, in Texas. But I think as more energy incidents happen, people will become, as I said, more sensitive to the importance of energy and will be less willing to tolerate a rapid large-scale transformation. I think a real turning point also will be when you won't be able to buy an internal combustion engine [Audio Gap] flatulence or more generally enteric flatulence, right. The methane comes out from cattle as they digest cellulose.

Wetlands.

Sorry?

Yes. Decomposition in wetlands.

Wetlands, right, just generally, dams when you flood and dry out -- tremendous sources of methane. So if you really want to reduce greenhouse gas emissions, you've got to deal with those non-energy things as well. And the world hasn't really talked much about that.

Last couple of questions here. We've got 3 minutes left. One up front, [ Peter ], and then your second, [ who picks up ].

I don't know how much about this, but I talked to these experts who say that the cost of electric car, when you look at the oil and gas that goes into the pieces of the electric car, what are the real economic consequences of building an electric car?

So there have been extensive studies on this. You can talk about what the situation is now versus what it might be in 5 years with better battery technology and so on. But the total cost of ownership, which is what is being measured, lifetime, fuel, maintenance and so on, it works out just about the same for electric. So another story. So I'm in the Department of Energy and trying to help formulate the technology strategy, and we ran a workshop for the public on vehicle fuels. And at one point in the workshop, I had proponents of vehicle efficiency and internal combustion engines, biofuels, advanced biofuels, hydrogen, electricity and CNG. And they're all up there saying, "Government, if you just provide the fueling infrastructure, we will be able to make the vehicles of the future." And I reminded them that we can only support maybe 2 fueling infrastructures in the country as a whole just from practical economics. And an interesting squabble ensued between those 5 different parties, all right? So the [indiscernible] of the costs are the same if you include the uncertainties and the projections. There are advantages though. An electric car runs on electricity. The price is pretty stable because we have multiple sources of them. And so you reduce that variability in gasoline price. The maintenance cost for an electric vehicle are very small. You don't have the lube changes and tuning and so on that you have to do. It's pretty quiet. On the other hand, you have all these sort of customer experience downsides of the vehicle. So I think it's eventually going to happen but it's going to be a lot longer than 30 years for that to kick in at least in the U.S.

So there's trade-offs?

Of course, always, happy valley. We're in the happy valley. I learned that phase. It's good.

Very good.

That's great. We are right on time. Do we have one more question? Maybe -- we'll sneak one in, and we'll close it up.

Thank you. My name is [ Joe Brooker ]. First and foremost, thank you for this book. It's fantastic. I've referred it to 100 friends now. And a guy with your stature, your experience, your bona fides, we need a guy like you. And thank you for writing this book. And Chris, thank you for bringing Dr. Koonin here. This is something all of us have to read and understand. And I've read it, full disclosure. And I wanted to tie in on the methane factoids you provided, not to be too geeky here, but I was wondering if you could just take a minute because I've tried to synthesize what you've written and share with folks that I talked to. I'm one of the few oil and gas professionals that live in Boulder County, Colorado. So I have a challenge ahead of me. But as Chris said, people are thirsty to know more. I've given more lectures on hydraulic fracturing on my back porch from folks from all over the country who appreciate it to the point where -- when I'm asked the question, my wife says, "Oh, god. Here he goes again." But my -- but what I hoped you could spend a little bit of time and share with us and help me as I go out and spread the word is your chapter 2 is something like humble human influencers or something like that. It was very impactful to me to see data because we live in a world where facts matter. We are on oil and gas well sites, pumping fluids at high rates and high pressures. And if facts get messed up, people can die. What I appreciate about your book is it gives us facts to go out and speak to people about. So if you could take a minute and help me synthesize my messages as well and hopefully others in this topic of humble human impacts or influences, that would be very helpful. Thank you.

So human influence the climate in several different ways. But the 2 that are most relevant here are the emission of greenhouse gases, mostly CO2, but also methane and nitrous oxide and some more exotic stuff that's not so important, and aerosols. And the greenhouse gases enhance the ability of the atmosphere to intercept the heat that's coming off the planet. The planet really runs by absorbing sunlight and then radiating almost an equal amount of heat back into space. That has to be balanced to within better than 1%. And the atmosphere helps warm the planet by intercepting some of that heat and reradiating it before it finally gets out of here. We add greenhouse gas to the atmosphere and it improves the heat-intercepting ability a little bit, only 1%, what we've done to date. And you might ask how can a 1% thing make a difference? It does because the temperature rises. We're talking about of a few degrees or 1% of the temperature of the Earth if you measure it in Kelvin, which is the right way to measure it for physicists. But there are many other influences on the planet beyond the aerosols and the greenhouse gases. Our variations in solar output, long-term cycles in the climate system. El Niño was the most famous example, every couple of years, but there are longer ones at 70 or 80 years. And untangling all of that to understand what the responses of the planet to rising greenhouse gases is the challenge. And it's really tough because it's a chaotic system. It's got long-term cycles. We have poor data both in time and space. The ocean is where climate really happens because it's the long-term memory of the system. We have terrible ocean data at depth. It's starting to get better with floats. So it's really a challenge. And anybody who says, "I know what's going to go on," is just -- to quote one number which is in the book, there's a number called the equilibrium climate sensitivity, which is how sensitive is the climate to doubling CO2. And that number is uncertain. In the last IPCC report 7 years ago, it was uncertain, from 1.5 degrees to 4.5 degrees. And the current generation of models, it's like from 1.5 up to 6 degrees. So the models have gotten even less certain as they've gotten more sophisticated. So this is a tough job. It's a great scientific problem, but I would not want to be making trillion-dollar decisions on the basis of this.

All right.

Thank you. Thank you. That's -- a round of applause for our wonderful guest.

Thank you.

Thank you so much, guys. We'll take a quick 5-minute break and be back at 12:40. Thanks a lot. [Break]

Thanks, guys. Thank you. What a great session behind us. Tough act to follow, but we've got the right man here. Up ahead is our technology above the surface, how do we spend every single minute of every day talking about how we do things better, operational efficiency, best-in-class technologies. And I'm going to let Ron take it away.

Thanks, Anjali. Good afternoon, everyone. I hope you enjoyed that lunchtime conversation. Certainly, a tough act to follow, but I really appreciate Dr. Koonin being here with us. But there's a reason they put us after lunch. We got some pretty exciting stuff to share with you. If you like big trucks, large engines and things that go boom, that's what we're going to talk about today, so lots of exciting topics that we're going to touch on, of course, all at a very high level. We just don't have the time to dive into the details, but certainly, the team that we have here will be available, first of all, for questions afterwards but, of course, for the rest of the day if you want to really delve into the details about any one of the topics we are going to touch on. My name is Ron Gusek. I'm the President of Liberty Oilfield Services and pleased to be here with you this afternoon. A little bit about myself. I'm a transplant and Canadian who found my way into the oil industry a little bit by accident as well. I'm a mechanical engineer by training. I grew up with a dad who was a carpenter, a grandfather who is a farmer and loved all things mechanical. So it was kind of natural I ended up in the engineering world, originally in heating, ventilation and air conditioning, but then a little bit by accident found my way into oil and gas about 25 years ago. And I've spent my career in that space since then. Had the opportunity to travel much of the world, Russia, the Middle East and Asia and see operations there, but very, very excited to be back with a team that I've known for a long time. Chris and I have been partners for, I guess, almost 20 years now. And so thrilled to be with the Liberty family. I have a great team up here today with me. Of course, in an organization where you play volleyball or dodgeball competitively, you got to bring a big bench to the table. And so if we're going to take on those subsurface guys, I brought a bigger squad with me. And so they're all going to introduce themselves, but just quickly, I'll run down the line here so that you know who's coming. So starting way over here on your left, my right-hand side, [ Chris Buckley ], [ Roy Oni ], Marshall Thurston, Zack Thornton. Moving over here, Robert Henderson, [ Karen Sketch ], Kirstie Ross and Greg McKee. And together, this team is going to tell you a lot about the work we're doing in the surface technology space and also in the supply chain that helps to support that. I want to set the stage for you a little bit before we delve into that though. For those of you who are familiar with the Liberty story since back in the IPO, this is a slide you will have seen 4 years ago when we started down that road. It was a slide we used to describe how it was that an oilfield services company arrived at a profitable bottom line. You can see there are 4 variables up there that really sum up the picture for us. And I've highlighted 3 of those in red because really, those are the variables that fit into the story we are going to talk about this morning -- or this afternoon. Utilization, first of all, the number of days that we have an asset out on location doing what it's supposed to be doing. And so that's contingent on a number of things, of course. First and foremost, demand for Liberty services. We want to set the standard such that an E&P company that we work with wants us out there not only for this job but for the next job and for each and every job after that. And that requires that we deliver a very high level of service with the best available technology to support that. Throughput, what we accomplish every day that we are on location. And I'm going to talk a little bit about Project 1440. 1,440 minutes in a 24-hour day, our goal, of course, to pump each and every one of those. That's what we get paid for. And so to the extent we can be perforating wells or pumping a fracture treatment and doing so, minute after minute, after minute, that ultimately drives our top line revenue. And so we continue to work on ways to squeeze more minutes out of the day to find a way to avoid that nonproductive time and instead be doing what it is that we're out there to do every day. We're going to talk a little bit about how technology plays into that. Price, we don't have a lot of control over. The market is what the market is. As Chris has said, ideally, we obtain a little bit of a Liberty premium for being who we are. But the market generally sets that. And so we're not going to spend time on that today. We are going to spend some time on cost of service. One of the great things about this incredible transition we've seen in the oil and gas world is the ability to drive down the cost of achieving what we used to achieve decades ago for much, much higher numbers. And as a result, you've seen the economics for wells in these unconventional reservoirs get better and better and better or maybe more successful with a lower price of oil. And ultimately, that determines our profitability as an organization. We've tracked every minute of every day since we started this company. Since the day we rolled our first frac fleet out, we have measured every minute of every day that we have been on a location. And we do the same thing in our wireline services world as well now. And the reason for that is it's impossible to fix a problem if you don't truly understand what the problem is. If we're not out there measuring what it is that we're doing every day, understanding the reasons why it is that we're not pumping, that could be a Liberty issue. It could be an issue with an asset that we put out there that's causing us downtime. That could be a third-party issue in the form of water transfer or wellheads or something like that. If we don't understand those issues, if we don't measure them, if we don't understand the opportunity that we have there or the opportunity cost that comes with not dealing with that issue, then we're not tackling the right problems. And so we've been a data-focused company in all kinds of regards. You heard that this morning from the subsurface team. It's no different from a surface standpoint. We have to collect that data, we have to understand that data to develop the strategies we have that ultimately lead to the technology developments you are going to hear about this afternoon. And then one last piece to the puzzle, and really a great example of that is the team represented by Chris sitting at the end of the line here, ST9. And so for us, one of the frustrations that we ran into and have run into in the past in the industries that we are always very fast to get a problem fixed. We recognize there's a problem, and we know what the problem is, but it sometimes takes a long time to get all the way around this circle to collect the data to do the engineering and to ultimately get that implemented in the field. And so we have worked very, very hard as an organization to change the speed of that cycle. You heard that from Ben, when he was talking about chemistry this morning, we think no different than -- about that when we're talking about the surface side of things. This idea that if we find a problem, if we find a way to -- an issue with a valve or a seat or a fluid end or a power end or any other asset that we have out there on location, that we need to move quickly on getting that fixed and getting that solution out in the field because we reap rewards immediately on that. And the whole idea behind the ST9 vertical integration, the addition of that tremendous team to the Liberty platform was to do exactly this. It was to achieve that rapid innovation cycle that allows us to identify correct and ultimately implement a solution to a problem very, very quickly. Now I said I'm a mechanical engineer by training. I spent maybe less and less time every year doing engineering, but the team that sits here on the stage is kind enough to let me stick my nose into these things, because it's something that I love to do. It's a -- it's truly a passion of mine is to understand all things mechanical. And so I'm going to start things off this morning talking a little bit about one particular piece of our world. I'm going to call that from water tank to wellhead. For those of you who've been out on our frac location or certainly familiar with the science and as we talked about this morning, we really have one goal, and I thought Ben summed that up very, very simply, which was to take that sand over there, that chemical over there, that water over there, blend those into a mixture and pump them downhole. And while that all seems very straightforward, there are, of course, a huge number of intricacies in that. You heard about the downhole ones this morning. We're going to talk a lot about the challenges that come with doing that from a surface standpoint this afternoon and some of the things that we're doing to make that better. One of the single largest problems comes with just the material that we pump. Sand, by its nature, is incredibly abrasive. There's a reason we use it for taking paint off of stuff. There's a reason we use it for cleaning metal. It is a very, very good material for eroding metal. And it does exactly that when we are pumping it out on location. When you move granular material like sand, especially very, very hard material like sand at high velocities through a piece of pipe and particularly introduce corners to that 90-degree bins, it is going to wash away some of that metal. And so that comes with, of course, some challenges for us in that we require that metal to contain the fluid, sand and chemical at very, very high pressures in that transit from the pumps where we elevated to that pressure all the way to the wellhead where we start to pump it downhole. Now if you look at the picture on the left-hand side of the screen there, what you see is the way that we have traditionally moved fluid. You see 3 wellheads there, one red, one white, one blue. And going up to those are what we call the candy canes, you'll see maybe 5 sticks of iron going up to each of those wellheads. Because the job design that we pump today has evolved to this world, where we pump huge amounts of fluid at very, very high rates, we need a lot of pipes to move that through. And I liken that to moving traffic down a series of city streets. So this is before the days of freeways now. And because we move so much fluid and because we move it at such high velocities, we had to put a lot of city streets between the pump and the wellhead itself. Now we have to check all of that iron. We have to make sure that it's not wearing out. We have to make sure that it's safe for use out there, that it's able to contain the huge amounts of pressure that we are using to inject fluid down the hole. And so you can imagine with that picture on the left, all of that iron that you can see there, of course, those lines continue down on to the ground and then back towards where our pumps are. And you can appreciate that if those wellheads are spread out, that's a huge amount of iron that we have to rig in. I don't know if you can see them there, but each of those sticks of iron is connected together by a hammer union, effectively a threaded connection that we have to put together. They happen about every 8 or 10 feet or so. So that's a lot of connections on there. And we have to inspect all of that iron every 3 months. That's a huge amount of iron that we have to take away and get inspected regularly. There has to be a better way to do that. And so what you can see in those other pictures is where we are migrating to, certainly as Liberty and maybe more so as an industry, and that's to something called monoline. This is effectively the freeway for moving frac fluid. And so we have these very large diameter pipes now. That stuff is about 7 inches in diameter versus that smaller iron, you see there might be 3 or 4 inches in diameter. And what you can see is that we only run one line now all the way from the pumps to the wellhead. And then it's divided up by a series of valves there. You can appreciate that dramatically reduces the number of connections that we have on location, that dramatically reduces the amount of iron that we have to inspect on an ongoing basis. The velocities through that are a lot lower. And as a result, the erosion rate is much lower. We expect a dramatic reduction in the cost of maintaining the iron that we have on each and every one of our fleets. And certainly, if you do the quick math, we're running 30-some-odd fleets out there today. That's a lot of pieces of pipe we had to inspect. And so this has been a huge step forward. The other step forward that we're making, our goal, of course, is to get rid of, we call them [ chicksands ], but they're basically the 90-degree corners that are out there on location. We'd like to get rid of those. When fluid has to go around that corner sand, runs into the far end of it, and that's the most likely place to wear out a piece of iron. So to the extent we can get rid of those, we are doing that. And so on the bottom picture, you can see there, that hose you can see with the red doughnuts around it, that is actually a high-pressure flexible hose. So that's a hose that's capable of withstanding 15,000 psi of pressure. That replaces what used to be a rigid line between the pump and the manifold, the pipe that collects all of the fluid together and ultimately directs it to the wellhead. And so what you'll see across the Liberty fleets is a transition over -- we've been underway on this transition for a little while, but certainly ongoing now across all of our fleets to monoline, that big, large diameter line and these high-pressure flexible hoses with the goal of making things much, much safer and much more cost-effective for the team out there. That high-pressure hose there, when we want to inspect that, it's as simple as looking on the inside of it. The hose changes color as you begin to wear away the inside. And so with a quick look inside, if you can see a certain color, it's time to take that hose out of service. That's much, much easier than inspecting wall thickness on a piece of metal. Pumping sand through a pump. We go through valve seats and fluid ends like there is no tomorrow. That's a regular story in the oil and gas industry, of course, fluid ends maybe twice a year per pump. And so if you think 30-some-odd fleets times 20 pumps a fleet times 2 fluid ends per pump per year, you come to a really large number of fluid ends very, very quickly, primarily worn out as a result of the abrasive fluid we pump. We change the valves and seats in a pump probably every 2 or 3 days. And so at 10,000 seats per pump times 20 pumps times 30-some-odd fleets every 3 days, you get to a really, really big number of valves and seats. The ideal scenario for us is we do not pump sand through a pump anymore. And we've been working hard on that problem, I would say, personally, been struggling to get over this challenge for about 15 years now. At Liberty, we've been in a partnership for about 7 years trying to address this very challenge. We've had a partnership with a company called Energy Recovery over that time to do so. This piece of technology is out in the field today. It's been pumping on our -- one of our fleets in West Texas for a number of jobs now. We've overcome all of the technical hurdles to achieve this result, to actually not pump fluid through a pump anymore. This device, I liken to the revolver in a six-shooter chamber. It's basically just a cylinder that goes around and around and around with a series of ports through it. We inject high-pressure water in one side, low-pressure sand and fluid in the other side, and the energy is transferred from the clean fluid stream to the dirty fluid stream over and over and over again as this device rotates at a little north of 1,000 revolutions a minute. Because it is not as complicated as a pump, we can make it out of much harder materials manufactured out of tungsten carbide. And so the wear rate for it, we believe, will be dramatically lower than it is in the stainless steel we make a pump out of. And so it's our hope that if we can make this technology economically viable, that it will be a solution to the wear and tear we see on our pumps. And that is truly what the question comes down to today is the economics. Of course, we've not stood still on the pump side over that last 7 years. We've gotten dramatically better at making valve seats and fluid ends as well. And so the economic proposition has changed over the time we've been developing VorTeq. But that is truly where we are today. And I guess by sometime this summer, we will know the economic trade-off of one versus the other, whether it makes sense to continue to wear out valve seats and fluid ends or it makes sense to implement VorTeq on location and ultimately change that point of wear from one place to another. The last thing I want to talk about very briefly is a partnership on the wellhead side. And this goes back to this whole Project 1440 idea. We have a dance on 99.9% of the locations we work on today between frac and wireline. We go back and forth between those 2 services as we go from perforating -- setting a plug and perforating a well to actually fracking that well. And we do that back and forth between each of the wells. That comes with some operations that have to take place between those things. That operation takes maybe 5 minutes today for a very efficient crew out there to switch from going -- from a wireline operation to a frac operation and then vice versa. Now you can imagine if we could eliminate that 5 minutes of well swap time, if we could go from a situation where we could go directly from wireline directly to frac and directly back again with no time lost in there, that's time available to us to do what we get paid to do every day, which is either perforate or frac a well. This technology here is a partnership with a wellhead company that allows us to do exactly that, to eliminate that time between swaps. And in a place like the DJ Basin, where we might pump 20 stages a day, if you can get rid of 5 minutes a stage, that's an available 100 minutes of time for us to be doing something else with something that is revenue generating. The graph that you're looking at on the bottom right-hand side there actually shows 2 -- the operations on 2 wells, the red well and the yellow well. And you can see at the start of that graph, there's actually a little bit of a delta in time between the start of pumping on the red well and then the start of pumping on the yellow well. But you can see as we move to the right-hand side there, those 2 lines are actually butted right up against each other. We go from a situation where we're pumping that pressure on the red well to pumping -- to right away pumping at pressure on the yellow well. And that's a solution that this wellhead partnership brings to the table for us, but one that opens up opportunities for squeezing more minutes out of each and every day. So I'm going to take a seat now. I'm going to turn things over to Zack and Marshall. We have a huge amount of equipment out there. We need to do a huge amount of maintenance to keep that equipment up and running, and Zack and Marshall are going to spend a little bit of time talking to you about our maintenance program and what we're doing there.

Thank you, Ron. Good afternoon, everyone. Like Ron said, I'm Zack Thornton, Director of Maintenance. I've been at Liberty nearly 2 years now. I've been familiar with Liberty for quite a while before that. So in my prior life, I built frac service equipment, worked for an OEM, they're in Oklahoma, and you all may know who I'm talking about. But through that, I had the opportunity to see a lot of different of our competitors now, and my customers at that time, sit down, talk with them, see their maintenance program, see how they spec out equipment and really be intimate in that first 6, 12 months of that equipment's life. Through that, I was really able to see the differentiator for Liberty. Liberty cared about it a little bit different. They didn't look at a downmarket as, hey, we're going to change our spec. They stood by their disciplines. They continue to work towards that in go and get to a standardized product and continue to take care of that maintenance day in, day out. So for me, that's why I got over here, been able to continue that road, I believe. There was a really good pavement in front of me already for it. But it's been an awesome journey for me to see that. So hopefully, I can give you a little bit of insight into our maintenance group today, kind of what we face on a day-to-day basis, but we've got to make it quick. So if you got questions, hit me up, be glad to talk about it in more depth. Here, we've got a basic frac pump. This is one of our frac pumps, 2,500 horsepower unit, very standard. Blue box is around the radiator. Green box, the engine; red box, transmission; and then the orange box, that's the pump. That's where the majority of our money is. Ron described the 10 valves of 5 plungers in a pump, lots of moving parts. That's what all these items have in common. They all have moving parts, movement often equals maintenance. So this is what we're looking at. Any time, we'll have 15 to 30 of these on location in today's time frame. We've got about 1,200 of them in our fleet. So how do we get through that quickly? We use a combination of equipment, people and then data. So a few of the things that really set us apart, I believe, on the equipment side. So we've got a couple of pictures here. They're on the right -- upper right corner, we've got a service truck. If you go out to a frac location, I'll challenge you to find a service truck nicer and more equipped than ours. We're always looking to increase that time between when the shop leaves -- when the unit leaves the shop and comes back to the shop. One way to do that is to be able to perform better and more maintenance on location. That truck allows us to do a lot of that. We've got a welder there. We've got a crane. We've also got employees that can use those. They're not just there for looks, and we use them day in and day out. In the bottom there, you see a test stand. This is something we've just -- we've got nearly at all of our locations now. In fact, we're finishing up the last location this next month. This test stand enables us to give a full test on a unit before it goes out. We don't have to worry about well, we were only able to run that unit at 8,000 psi. Therefore, we weren't at full load and there was a problem on that unit when it gets up to full load. So we can do -- that test stand will do about 160 barrels a minute or 15,000 psi and it gives us the ability to do it in a scenario just like they'll face in the field. The people side, so we've got a number of mechanics, as you can imagine, field and shop and getting those to all work together as a team, and giving them the right tools to do that. That equipment I just shared is some of that, but we also have an incredible training group, and that's getting enhanced. We do a lot of in-house hands-on training. Most of our training programs are tailored to be 80% hands on, 20% more of the school work books, that side of it. That really gives our guys the hands up, and they don't necessarily have to call back in, find a vendor, really go through those details. The last piece of it, the data piece, and that's really what Marshall is going to tell you more about his team looks over the data piece and pretty much the most exciting piece of maintenance right now, to be honest. Here you go, Marshall.

Thanks, Zack. I'm Marshall Thurston. I grew up with an interest in engines, mechanical things and pretty much how the way things work. And I went to engineering school and soon after, I found a home at Liberty, where I was able to pursue my interest in combining a lot of these things, and it's been great. Since I've been here, we've greatly expanded our overall data collection, data points that we collect on equipment, different things. And a lot of that is through the development of custom applications for collecting data in the field, on the conditions that our equipment is going through or failures they experience, also with integrations across our different platforms, data integrations with third parties, different things like that, that helped us really build the portfolio around our data that we gather on our equipment. Furthermore, we've also expanded our equipment telemetry that we're receiving. So receiving second by second data from our equipment that we can use to add to that digital portfolio and really generate some value through targeted maintenance models. You'll see an example of that in the bottom right here of the screen where we look at engine oil pressure over an extended period of time. The value of that, you've got sensors on an engine, great. You see when it gets to low oil pressure. But at that point in time, it might be too late. You might already be on your way to a catastrophic failure and significant damage could have occurred versus the way that we model this, we can see these things, signature events in this oil pressure before the failure actually happens, which allows us to coordinate with our operations and maintenance group to take a look at this piece of equipment, pull out of line before there's a catastrophic failure. Obviously, that helps a lot with our job placement and helping that crew to perform the best without having something that stops them in the middle of what they were doing. So huge benefit there. In addition, it's got a huge benefit to Liberty and that it saves us a lot of money, replacing a brand new engine very, very expensive. But if you can pull it out, it might still cost you $30,000 to fix it. But it's a lot less expensive than replacing that component from the start. This particular model has been in use and has shown great opportunity for us and ultimately can save us up to 1% of our operating expenditures through this engine model alone. Taking that a step further, we can take this model, this digital portfolio we've developed and kind of work it together into what we would like to call digital twin or a virtual equipment health representation. And ultimately, what that is, is that's a series of these maintenance details combined with these targeted component models that can predict these failures, you expand it not just engines, you look at transmissions, power ends, the cooling system, different things like that, and you build up this portfolio that really represents the health of that equipment. So obviously, there's great application, like I mentioned, real-time alerts to our maintenance team that can pull units out, coordinate the job, keep customers happy with that and the flow of things. But even further, we can deploy these models to our equipment firmware. And the benefit of that is say, we're seeing, hey, this component is not healthy. It's getting close to failure. We're working to coordinate with the job to pull that out of line, take a look at it in the shop. But say our model saying, "Listen, this is going to happen sooner than we're going to have an opportunity to do that." We can, through the firmware deployment, place operational limitations on this equipment. So that transmission can't handle speed above a certain level. We won't allow it to do that so that we don't cause a catastrophic failure that would actually cause issues with job placement quality. So overall, really exciting thing that we've been doing and working on and has a lot of growth potential. That's the end of my slide there. I think we're going to turn it over to Kirstie here for another discussion.

Thank you all. Appreciate's it.

Hi, everybody. My name is Kirstie Ross, and I'm the gun shop manager here at Liberty. My background started in engineering, and I've spent the last 10 years working in the wireline business. And I know you've had a lot of opportunities to hear from engineers speak today, but I'm the one that gets to talk about guns and explosives. So if you're not aware, our gun shop is where we assemble most of our explosives and our guns that we send the location. If you've never seen a perforating gun, please feel free to join me in the back after the presentation. I brought some guns back there to play with if you're interested. So the first thing I want to talk about in our wireline business is in line with the recently released ESG report. And in that ESG report, Liberty talks about the goal of environmental excellence. And we have 2 key factors in our business that strive to meet that goal. And the first one that I want to talk about are our electric wireline units. So our electric wireline units provide us long-term sustainability, improved market share and profit for both our customers and our business by using a minimum of 480 volts of electricity to power our hydraulic winch and our air supply. Now this not only reduces noise pollution and eliminates the diesel emissions, but it dramatically reduces the amount of maintenance needed. And with less maintenance cost and less overall downtime related to that maintenance, it decreases our cost and improves our profitability on each time we utilize the units. Now the second factor towards that goal is our StreamLINE cable. This is our coated StreamLINE cable that works in tandem with our easy-load pack-off to hold back pressure against the well as we're using that cable to run in and out of the hole with our perforating runs. So as you can see, before and after pictures, the pictures to the left and the pictures to the right, this pack-off, combined with this coated cable, eliminates the need for any sort of a grease injection to hold back pressure against the well as we're operating. The picture on the left is what you might see in a piece of equipment look like if there was a grease injection being used to control the pressure of the well. The picture on the right is what every single one of our locations look like today. All of our trucks have been outfitted with the StreamLINE cable. Now the next topic I want to talk about is FracSense. And as you may have heard from Ray's previous presentation in the subsurface portion, FracSense is wireline's recent partnership with OptaSense, and this partnership allows us to use unique fiber optic technology to get acoustic sensing and temperature sensing that allows us to not only optimize fracturing, but it allows us to get microseismic monitoring services as well as a production flow profile for our customers. Now what is a production flow profile? That means that later on, after a well is already flowing, we're able to use this technology to answer the question, how much of what is coming from where. Ray also talked about perforating clusters. After a well has been perforated, we definitely want to help our customers understand which clusters are providing the most oil or the most gas or the most water. And with that information, our customers are able to make better informed decisions about their flowing wells. Now the next slide I want to talk about is our additional cased hole wireline capabilities on top of perforating. So I want to direct your attention to the top left. This is a normal cement bond log. It's a way that we are allowed to evaluate casing and the cement behind the casing to confirm zonal isolation. Now the way that I like to explain how these types of logs work is think of ringing a bell. And then think of taking that same bell and putting your hand next to it and trying to ring it again, and you're going to hear a thud, right? That thud essentially represents what cement would do to the behind -- like behind the section of casing to confirm that it's sincerely sealed off, right? The next log down towards the bottom left is another service that we can provide. It's a casing inspection log. And what we do is we use a multi finger caliber tool. And what these tools do is we can extend fingers and then drive those fingers up through the well, and that allows us to determine any sort of deformity inside of the casing to provide our clients with the feedback that they may need on any issues they may be having with their wells. We also offer leak detection and fluid dynamics information. This may be needed for any regulatory reasons before you plug and abandon a well or before you shoot a [ top rep ], before you shoot in a well for the very first time. Now I want to get into the bread and butter of what we do. What we do is perforate, and I want to talk a little bit about the market trends that we see for our customers. Increasing the number of guns per stage. Over the last 10 years, the number of guns we shoot per stage has dramatically increased as well as the number of stages we shoot per well. We see a reduction in the number of shots per gun. We see the limited entry perforating design that Ray also talked about in the subsurface section, and we see oriented perforating. So all of these trends offer unique challenges that we need to be able to combat. So some of those challenges are longer gun strings, more guns in a string, more avenues for failures who are arming those guns, optimized shaped charge gun cluster configuration in a variety of clustered configurations, longer gun streams also are difficult to orient. So the solutions that we have, our modular gun systems that come factory prewired or factory preloaded, they reduce the need for a difficult interaction on location. We can optimize our gun lengths by the required number of shots. For example, if we have a six shotgun and we only need 3 shots, we're going to use the length of the 3 shotgun. We're not going to add any extra length to the tool string that doesn't need to be there. We also have capabilities for orientation up to and including internal gravity orientation. This means that we can deploy a gun. Based on gravity, it's going to orient those charges inside of that gun to allow us to shoot in the direction we want to shoot. So now that we've talked a little bit about the market and what we see from our customers, I want to talk a little bit about our reliability and our efficiency and our performance in that market. So as you can see from the picture on the right, the number of guns we shoot before we see something happening dramatically increases. And the number of failures we see are decreasing, right? And we can attribute that trend to new technology, knowledge sharing between our family of gun shops and field crews, best practices and standardization and also close failure investigation with our customers and our suppliers. Now if you look at the pictures on the bottom, the picture on the bottom left is what you might see of an old conventional gun system. You can see a lot of wires, a lot of scotch locks. It takes a lot of human intervention just to arm that gun. And when I say arm, I mean, take the detonator, put it in the gun so that it's ready to run in hole and you're ready to shoot it. Now the 2 pictures on the right are some of our newer technology guns. Some of the new technology we get from our suppliers that may be pull and play or plug and play. I like to look at the middle picture because it always reminds me, I have a 4-year-old son. And every time I buy him a toy, and it comes with batteries pre-installed, everybody realizes that to get the batteries to work, you have to pull out the tab, right? And it's almost the exact same thing with this gun system. All the engineer has to do on location is pull out this tab. It disrupts the interruption between the detonator and the gun and it's ready to go. All they have to do is screw it together and put it in the hole. Similar scenario, with the picture on the right, instead of pulling, this is just plugging the detonator in, and again, it's ready to go. This improved technology, as you can see, is dramatically decreasing the amount of failures that can't happen when we're arming. I have to switch. Okay. There you go. Thank you. Okay. So I have 2 more slides. The last 2 that I want to talk about are related to the digital arena -- wireline's digital arena. And this relates back to what Ron had mentioned previously about Project 1440, tracking every minute of every day and wireline is no different from that project. So what we do is we have live data tracking and business systems for all of our field locations and all of their operations. We also have it in the gun shop. All of our guns that are assembled and shipped to location are also tracked, and we're able to understand what's happening in real time. So some crucial metrics that we use in wireline to understand what is happening and to measure efficiency are things like, what is an average amount of stages that a crew in the Permian Basin can shoot? If we know what an average amount of stages we can shoot is, we understand the characteristics of the basin. We can better project what jobs we can price out in the future to make sure that we stay profitable. Other information that we've taken that we use is information on gun systems. If we know that a gun system is failing at a certain rate, and we know that we pay a certain price for that gun system, we want to make sure that we're optimizing the data that we're using to be using systems that are failing less and are also cost effective. Okay. So this is the last slide that I have. It continues in the digital arena. And this is a unique combined real-time data operation visibility with frac. What this means is that today, we're able to project frac statistics and wireline statistics that are happening downhole real time to our customers. This means that real time without having to pick up the phone or call anybody, our customers are able to see what the downhole depth is, what the downhole tension is, what the pressures are, what speeds are we running at, and they're able to see it in front of them real time so that they can make decisions quickly. And we, as a business as well, can utilize this data, see this visibility as well and make decisions for our own operations. Now Liberty has had a metric that they've calculated over the last 10 years, and that's about 6 minutes per frac stage. It can be attributed to downtime as an industry standard or as an industry measurement over the last 10 years. It's our job in wireline to make sure that we're keeping frac running and that we're reducing that 6-minute average against that stage. And I think that, that, combined with these real-time operational tools, gives us that unique edge to capture extra market share and be the preferred client -- sorry, be the preferred operator moving forward. That's about all that I have. I'm going to pass it on to Robert Henderson, talk about digitization.

Thanks, Kirstie. Good afternoon. My name is Robert Henderson, I'm a chemical engineer by training. One of the couple of threads you'll hear today, kind of repeat it throughout, is frac uses a lot of chemicals. We use a lot of sand and boy, do we got a lot of equipment. And so Terence and I are going to talk about some tools, some systems and some softwares that we use to increase efficiency on location and to treat our equipment better every day. How do we get better? So the first system that we'll talk about is SonicStrap and that deals with chemicals and the measuring of chemicals. And to do that, I want to tell my Liberty story. And so -- we got to go back about 8.5 years. I was pestering Ben Poppel there in the back. You've seen them up here on stage or earlier. I was like, "Yes, I really do want a job here. I do want to work in Williston. What is negative 20 degrees outside? Yes, just give me a chance. Put me in coach, I'm ready." And so the first thing he tells me when I got hired on is, if you want to do this job well, you have to understand how to be a frac hand. You have to respect the operators, you have to respect their job, and you have to understand that and be able to do your job well later. I said, "Okay, sounds good." So you get out to location, there's different stations. We'll call that, that as you kind of go through your learning curve to figure out how to do certain things. So we've got the big 3. We've got water. We've got sand. We've got chemicals. We've got each one for a different piece of equipment. So I'm going to focus on chemicals. So I get to this chemical trailer and I get -- I was talking to this guy and he's like, "Okay, can you see these chemical totes here? Your job is every time you hear somebody call over the radio, give me a strap here, give me a measurement. Your job is to go stick a ruler in this, look at it, look it up in this chart, convert that to gallons, write it down on a piece of paper. And then once you get done with this line, we'll repeat it over the radio. And tell the guy in the van so he can make sure our chemical pumps are going appropriately." I was like, "All right, I want to be a good frac hand and I'm going to do this." And so for 2 weeks straight, I heard this, did this, it takes a while to get good at, get it efficient. Halfway through the hitch, I was like, is there a better way to do this? Like there has to be, right? And so I'm telling the story because I think it feeds into the innovation at the edge, which is something that differentiates Liberty and focus on continuous innovation on projects like that. So I looked up online and I ordered a sensor online, I went to RadioShack, when RadioShack used to be a thing. I brushed up on some old coding skills that I hadn't pulled out in a while. I went to our fab shop who, mechanical geniuses, awesome guys. And we put together this prototype. And so the next time I showed up on hitch, they're like, what's that? And I was like, it's something so that we don't have to do this anymore. And so that was a prototype. We tried it out, and it was able to measure faster, more accurately than any human could. Basically pitched that to the execs and they're like yes, we should definitely do this and basically bootstrap that and send it all throughout the company. And so that made us that much more efficient. And what this is, is the extension of that, but to our larger vessels. And the big point of this is we don't want to put somebody back there with a stick, climbing up ladders when there's a better way to do it, and it's coming out very soon, very excited about it. The second thing is, in 2014, we shifted to containerized sand. Great, a lot of benefits reaped from that. I think dust, noise, truck traffic, all those things, very true. But we start asking ourselves the questions of, "Is there a better way to do this?" I like asking that question, what can we do to improve here, and that's something that's fostered within Liberty. And so we started asking the question, what would the ideal proppant system be, if it was based on PropX's prop beast that's a highly reliable containerized sand solution? So we're like, does it need people? Does somebody need to open the vessels themselves? Or can I automatically open it, applying some sort of higher-level, clever automation? And so do we need people to manipulate it on the fly? Or can we have the equipment do it itself? And so the Mantis proppant system is the answer to those questions. It's the next generation of a higher intelligence for our high-throughput proppant system, and it's a partnership we have and are working through with PropX and are hoping to test that later this year. And I'll turn it over to Terence to talk about some other parts here.

Thank you, everyone. So my name is Terence Goettsch. I grew up in Iowa, not knowing anything about oil and gas. And when I studied chemical engineering, fellow chemi at Iowa State, I, for fun, don't know why, thought it would be cool to learn computer coding. So I embraced the computer nerd that my family and everybody else that knew me as a thing that I love. So well site automation or the software that I'm going to show you, Uber for sand, the PumpIRIS and as well as the StimCommander pumps are very near and dear to my heart. So Uber for sand sounds exactly what it is. So in the world of these thousands of trucks of sand delivery and the fact that the overall logistics is very scarce, what helps your suppliers or that Greg will talk to, what helps them do their job better? Well, what helps them is visibility. They can see, as you can see on the screen, on the right, where they're at, what we have coming next. We're not just going to order a bunch of trucks and have them sit there and wait just in case. And the reason why we do that is that allows the suppliers that we work with to get more runs, get more money earned in a day. And that really means a lot to these owner operators that own their own trucks. So it helps us reduce our overall detention as well as it's a win-win for our suppliers. So that's Uber for sand. Then PumpIRIS. To kind of stick with, we've been talking a bit about like a car analogy, right? So what is PumpIRIS? So I don't know if you guys remember about 3 -- or probably actually 5 to 7 years ago, they came out with this thing on cars where when you stepped on the break and came to a stop, that engine shut off and everybody panicked the first 3 times, especially they rented a car. And they didn't know why. They didn't know why that was happening. Well, it was a fuel enhancement, right? This is very similar to that, right? However, if you just kill the engine that you're running, you're probably going to boil the turbos and you're going to have a lot of other issues that Zack won't be happy with me about. So we need to let them idle for a little bit, but we don't want to have them idle for an unnecessary long time. So this prescribed where it will shut down and then turn back off. And then on the flip side, back to Williston, where Robert originally started where he's saying, "Put me in coach at negative 40 degrees," not real good for the equipment if it just stays shut off. So the technology has the ability to say, "Oh, wait, getting too cold, let me turn myself back on." And then that's okay idling because what you don't want to have is all the equipment froze and shut down. So this reduces idling by 29% and reduces fuel cost by about $101,000 using about $2.50 diesel cost. The last one, StimCommander Pumps. So what is StimCommander Pumps? Well, to liken it to my car analogy again, just think you're trying to control or run these big, massive pumps, right? So if you're driving a car or you see a car driving down the road, 25 miles an hour in first gear, what happens? It's extremely loud. It's using way too much fuel. And number three, it's probably most likely not very efficient, right? So you need to make sure that all the equipment are going to run as they need to. So how do we fix that? Well, we create this program that's very much like an automatic transmission, except for it's shifting all 20 pumps at once. So what this system is going to do is it's going to take the shifting out of the operator's hands so that they're not trying to control 20 pumps at once. So what does that allow us to do? Well, that allows us to pump the stage generally a little bit faster. So like 15% faster on stages. What does that do? That allows us to come back to more stages in a given day to the 1440 project that we're trying to get to. And then the last piece, I guess, I failed to mention is while you are driving the car incredibly in fuel efficient, the software has the ability to modulate to the proper fuel economy. So it's going to adjust the equipment so that it runs at the best -- fuel best bang for your buck. And I'll hand it back to Robert for the last, FracCAT X.

Cool. Now, I appreciate that, Terence. So finishing up here. FracCAT X, the control system. It's one of the things that we're excited about. It's partially through the acquisition of OneStim and partially through our continued technology alliance with Schlumberger that we're acquiring this. It's basically the operating system of the frac fan. And it's brand new. It's sleek. It's very efficient. And so -- and it's ready for field testing. And that's pretty much everything you'd want is that one is new with modern technologies. It's proven. It's sturdy. It's ready for field trials. It's efficient with data, and it's ready to go. So thank you.

Thank you, everyone, for your time.

Greg McKee, Director of Supply Chain. I've been doing this supply chain gig now for 10 years in oilfield servicing. 5 years, I've been privileged to be at Liberty. 5 years before that, like Ron, I came from behind the maple curtain, from Canada originally. Then I heard about this freedom thing and thought I'd give it a try and come on down to the U.S. But the first 5 years of my career, I got called the annoying purchasing guy a lot. And it was always, "Purchasing guy, get me this, purchasing guy get me that." And then I came down here and started working with Liberty and I started being -- hearing this thing supply chain, the thing I've been talking about for a long time. And why is that different? Why is that important? Well, when you look at a supply chain like this, when you look at the things that we need to do to make ourselves efficient, looking at proppant, last mile logistics, rail logistics, chemicals, fuel, maintenance parts, you name it. It's more than just purchasing. Purchasing, being a purchase order desk is just taking a need and going ahead and executing it. But we need to figure out a way to be truly efficient from end to end to be the best supply chain we can be and to support our customers. So in a nutshell, I went from being the annoying purchasing guy to the knowing supply chain guy. But how do we truly do this? Integration. Integration is key. And that's internal integration and that's external integration. When I talk about internal integration, I'm talking about our operations team, our sales team and our engineering team. First off, operations. We need to understand what happens out boots on the ground, understand what really makes us successful as a company. We can't just call it in. We can't just think we're centralized that we've got it all figured out. The boots on the ground is what makes us tick. The next is sales. Having strategic conversations with the sales team, not just looking at a calendar or a design or a piece of information we're getting and saying, let's go. It's talking to them about what does the customer really need, what's the short-term and long-term strategic vision here of that customer and go ahead and build our plan. The next piece is engineering. You heard Ben Poppel talk about it quite a bit how our teams are really integrated together to make sure we're finding the best products for our customers. What's important there is supply chain team, we need to understand what we're buying, not just go ahead and buy it. All these things come together for us to plan for fracking and not for a flat procurement. We've got a plan to be able to be nimble and tailor our supply chain to this flexible nature that we're in. Everything is changing every day and we have to make sure we're integrated with our internal teams to do that. Next thing is our vertical integration. We've got some great partners that we brought on in the Liberty family, ST9 being one of them, Freedom Proppant, our newly acquired sand mines down in West Texas. So with ST9, 95% of our pump-based assets we're getting from them, and roughly 50% of our local sand now in West Texas is being provided by Freedom. Why is this important? This allows us to have stable costing in all markets and also assurance of supply in ups and downs. We can work with them, we're integrating teams together to make sure that Liberty is successful for our customers. The last thing with ST9 is having direct access to their technology advancements first, first and quickly. We can be first to market with these new age products and get them to our customers right away. The last piece, external integration, our supply partnerships. This is something that I'm extremely passionate about, and I think kind of sets us apart from other companies is our partnerships with our partners, with our suppliers. Lots of times, there's the old school way of the partnership game. It's the -- I'm the customer, you're the supplier. You do what the customer says, today, I've got the sticks, so I'm going to go to swing. You got to reduce prices, then they got to stick. They're going to come beat us up and bring prices back up. That doesn't help us be efficient and successful long term. That's a short-term way of doing things. So we find partners that we can streamline our supply chains with mutual efficiencies. So a good example of that is, let's take sand. Sand will look at what is that grade split that makes that mine efficient, whether it's they need this much 24, this much 3050 this much 100 mess, whatever it might be. And we plan our forecasting and our order frequencies to help them be efficient. We do things like 90-day weekly rolling forecast. We try to get those with an 80% accuracy. Now it's a changing market. It's tough to do that, but it takes great people and great information to do that. Next thing is our 30 to 45 days, and we get closer like within 95% accuracy. This allows our suppliers to stabilize their operation, to reduce their costs and in turn, give us consistent costing and reliable supply. We've seen through that stabilization. We're getting somewhere between 10% to 15% lower than market rates on average. For a little bit of strategic automation, some things that we're doing on the logistics front. My view is it would be a bad supply chain, if you weren't looking at ways to get better, get more automated, get more efficient. I'll briefly touch on, from a logistics standpoint, some automation standpoint what we're looking at. I would just say, we're developing artificial intelligence to support human intelligence. This idea of no touch, complete automation in a logistics model for proppant and chemicals today, I think, is unrealistic. We're not in a stagnant long-haul type, type model. We've got things that change every single day. So we got to find automation that we can utilize to enhance what people are doing. So it's utilizing origin, destination, carrier information, all this information we already have, putting it together in a system and providing it to the smart people to make decisions and to execute on. So we're still relying on the people out in the field to give us the information needed so that we can actually react to what's happening out there and then use that information to adjust the plan to be proactive. So ensuring reliability and costs in an inflationary market. We all know the trucking market's a little crazy right now. It's going -- it keeps getting tighter and tighter and going up and these type of things allow us to get better control of that. The last thing is our procure-to-pay process we're looking at, that's utilizing this data from things like this logistic software to drive automation in areas that we're doing way too many touches, people are touching way too many times, things like purchase orders, receipt, invoice matching. Utilizing the data we have, bring it together and how to automate those things, automate the 80%, so we can have smart people focused on 20%. So supply chain to me, I like to say is like 1 big puzzle. Every single day, we've got all these different pieces, whether it's they're trying to balance whether it's quality, cost, technology, got to be flexible, but you better be stable, all these things that don't really come together easily. So how do we make that happen when one day, we don't have all the pieces we're trying to put together. Another day, we don't have the picture. Day after that, we've got the picture, but then sales comes kicking into the office and takes that picture and give us a brand new one and now we've got to start over again. I was going to kick, but I was afraid to pull something up here. But -- so we -- so to me, the only way that you can do these things, the only way that we can truly solve the puzzle is the people. You've heard that all day today, the people, the team, it's the most important thing. Too many times in large growing supply chains, people try to get siloed. They try to put all these segmented teams together to handle supply chain. So you've got 1 team that's doing purchase orders. You got another team that does short-term forecasting. And these guys maybe do some execution and these ones do invoice and then wait, I got to get these guys back into it. It's -- two, you lose all the communication. You lose the things that let you be nimble, work with this environment. So what we do is we find the right people, we give them the right tools, we give them the support and give -- put them in a goal-driven environment. So they might add gold driven, we have a goal together that we need to set, we get wide parameters. We're not confining them to a stringent process. We have a goal, be you and get to accomplish that. We empower them to have ownership of cradle to grave. So somebody will have their own area, they'll become the expert in. They'll see everything from net talking to sales, working with the supplier to get pricing in line. Doing the short-term planning, the long-term planning and seeing that all the way through and monitoring every single day of the success of the job and updating our suppliers, operations, whatever it needs to be, to make sure that our plan's successful. They become true experts in this. And I find when I've looked at some of the models of people doing that siloed approach, we can have 1 person do it, 4 people are doing that siloed approach, because they are owning it. They are the one-stop shop for any issues out in the field, any issues with sales, we can get that to them quickly. Obviously, that creates a lean headcount and allows us to scale with the market, which is very important in supply chain. We should always be lean and mean and find ways to be better. So I know, extremely high level. I can talk supply chain all day long. I'm almost at my time already, but be around, I'll be at the happy hour and any questions or anything you need, happy to answer some more because I truly believe we've got the best damn supply chain team in the industry, and I'd love to talk about it. Thank you.

Thanks, Greg. I'm Roy Aune. I'm the Director of Research and Development here and mining as well. We picked up a couple of mines. With the OneStim acquisition, we got 2 sand mines. And so I'm happy to be looking over those as well. So I'm one of those displaced rural people that Chris was talking about earlier, came from a farm in Montana. Like Jim Brady, realized that the farm really wasn't going to support me and I had to make a better plan. So in high school, I went to see my guidance counselor, Dan Sims, saw Dan, and Dan, we had a small school. My graduating class was 11. And so Dan was our football coach, our librarian, bus driver and guidance counselor. So I said, Dan, I got to make a plan here, and so he took out a chart and he said, okay, good at math, no social skills, Roy, you're an engineer. So I went to engineering school and graduated, got out and got a job with Boeing. I was pretty excited. It was all very exciting, stealth bomber, I was going to be a hydraulics engineer. I was one, actually. And so I got over there. I got my queue clearance, but I'm not queuing on. I want to make that clear. I went on to underground mining. It's a long story, kind of, I don't know, fell off the airplane and landed underground, and then went to Africa and was doing some mining in Africa and wanted to get out and Chris reached down into Africa and pulled me into the oilfield and I've never been so grateful. So I'm going to talk to you about a few of the things that we're working on in R&D. This was -- this is our Quiet Fleet. This is a massive success story for us. We launched this project in 2014, commercialized it and launched the first fleet in 2016. And it was a massive engineering effort, with some pretty notable failures. Our first prototype turned out to be the world's biggest sub-woofer, actually made it worse, which -- I didn't tell Chris or anyone. I just said, hey, it's going really well. But the thing that -- what happened was we launched this in 2016 and -- oops, go back up, there's another. Launched in 2016, and it was a massive success. We had the first Quiet Fleet and some 3 years later, we had in this space, 8 fleet operating, and our competitors copied us and put a couple to work as well. So that basically, in this part of Colorado, virtually every fleet operating today is a Quiet Fleet. And it did a couple of things. It helped our customers out, but it also helped us out as well. These fleets are so quiet that hearing protection isn't required. It makes communication better, it's less stressful to be out there working. So very proud of that. But why did we do this? Why did a farmer turned engineer and an upstart fracking company develop this technology and the big companies didn't? And it's kind of what Robert was talking about, because we have a bias for action and we're problem solvers. And we have a management team that really supports us. I remember going to talk to Chris and everybody in the management meeting, I said, I think we can make this quieter and he said, let's do it. And we made the prototype, and I said, you know what, I think we can put fire suppression on this, and make sure that our fleets are safer and he said, let's do it. And so we did it. And that's one of the hallmarks of Liberty, is we're doers. So I never really -- when I went to work for Boeing, I really wanted to be a thermodynamics guy, right? And I got there. And I took the job in with the Stealth Bomber, but I felt in my heart, I was a thermo guy. And so I said, is there any way I can transfer into the thermo department. And he said, yes, all you have to do is get a PhD from MIT. And so they were actually looking, I guess, more Chris Wrights, not the Roy Aunes in Boeing. But in the oilfield, what's the same, even a crow is an eagle among sparrows. So in the oilfield, I'm a thermo guy. And I really relish what we've done with emissions and everything else. This is what they've done, the reductions in NOx and PM. You can see at 2000, Tier 1's the big block and that little tiny block is what we emit today. With engine efficiencies, basically, what we do is we take hydrocarbons and we oxidize them, and we get carbon dioxide and water. And there's a lot of talk about emissions and how to reduce them. And that's all thermodynamics. So I'm excited about that, too. But what we -- when we saw this electrical, these first fleets come out as turbines, I was asked time and again by our management team, should we be chasing these turbine-driven electric fleets. And I said, they're too big. They're too inefficient and they don't make us better. And that's what Jim Brady, our VP of Ops, constantly asked, will this make us better? And we really didn't see a technology that would make us better until we acquired ST9, Chris' company, and he had a meaningfully better electric pump. And just -- we started -- we developed that, we got a prototype out. And then, just on cue, gas reciprocating engines came along. And gas reciprocating engines don't have the methane emissions. They're meaningfully more efficient. And now we're getting ready to marry these 2 technologies together and come out with an electric fleet that makes Liberty better. And so very proud of that. Chris is going to tell you a little bit more about the pump side.

That's right. Okay. So my name's Chris Buckley. And you can tell by my accent, I'm not from around here. I actually live in Houston. And everybody says, I've come from East Texas, Far East, all the way in the U.K. And when I left school, I had a different upbringing than everybody else. I came from a place called Stoke-on-Trent in the middle, in a relatively poor area. Not many people had much ambition. And so when I left school, I was a machinist. I was a machinist for 10 years. And then eventually, I went back to night school and got all the way through to my masters and that's kind of how I got into the system. A bit late, but I really appreciate my upbringing and my grounding and my knowledge that I learned from machining. Actually ended up working for a couple of larger companies looking after some of the divisions. And then -- but eventually realized, as big companies has lots of politics and didn't really like politics, didn't like how fast they develop technology, didn't like the cost structure. And so I left the company. I was there in -- 5 years this October, and we set up ST9 with a plan to develop technology faster, make a difference, and that's what we did. So ST9, as Roy pointed out, is a solely-owned entity of Liberty now. And then you might say, hey Chris, you don't like big company politics, why do you now work for the second largest well service company in the industry, right? It's because Liberty doesn't have politics, right? We just get stuff done. And that's why I really relish. And so I'm going to talk to you about digiFrac. digiFrac is the first purpose-built electric frac pump. Our competition will tell you, hey, we've got electric frac pumps. No, you don't. You have a mechanical pump that you just got a big-a*s electric motor, and that's how you're driving it. That isn't purpose-built. It's not driven efficiently. So our engineers came up with this idea, and you can see the motors, the gears, the drivetrain, everything is integrated into the pump. And what you do is, you have a higher power density than anything on in the industry. You have the technology, you can control it better. And it also has seven throws. We -- Zack talked around early on about Quintuplex's five throws. Our competition will badge upon. So you say you have Chinese horsepower, you have badged horsepower and you have real horsepower, what a pump will actually do, right? And then this pump has 40% more capacity than anything else on the market, so. But when you actually run it, we can place or the target is to replace 2 pumps with 1 of these. And we've been on trial. We've done it in R&D. She's gone through a suite of tests. She's been out in the field. Just last week, we tried it up a test out in the Permian. We did a 3-well pad. We had no issues. And we had great feedback from the super major we pumped for. And so it was pretty cool. One thing that Roy talked on about is emissions. When we talk about emissions on this unit, we're going to power it with gas reciprocating to start off with, 25% less emissions on the pump. So you've got controllability, you've got the size and then you got the emissions reduction. This thing is the whole package. It is just the best in the industry, okay? So when we talk about power, how else can be power it? People talk about powering from the grid. The Liberty engineers all got together, and we've made a system now that can run off batteries. It can run off grid power and it can of gas reciprocating or a combination of those, right? So it really is the best in the industry. And then I have 1 more slide. So how does this fit in into full electrification? We've talked about electric wireline. And 1 thing that came actually from the Schlumberger acquisition was an electrified back end. Chris and Ron and Roy knew that we were developing the front end. And so when you look for synergies when you make acquisitions, this is one of the sweeteners that we could take the back end that was already developed. We take the front end that we're developing. So now we have full electrification, all the way from wireline to pumping down the hole. So the pump at the bottom actually is downtown. So when we walk back up to the Liberty offices, she's outside, and she is absolutely gorgeous, she is just a beautiful thing. First fleet, [indiscernible] says, hey, when are we going to go to market, everybody else is saying they're going to market. Our first fleet will be ready for Q2 next year. So we're doing really well. So I can answer questions later on. I'll be around the digiFrac, then we'll also be doing -- having beer upstairs on the 23rd floor. Okay. Thank you.

Well, you've heard from so many of our folks, and we have so much to talk about. There's amount and passion in the room, and we're running low on time. So I'm going to open it up for 1 question. And what I will say is let's hold all of our questions after this 1 question, until our open forum after our outlook. So if anyone has a question in the room, happy to take it. I have a few online as well, but we'll take the questions from the room first.

What will be the cost of ST9 crew?

I missed that one.

So the question was, what is the cost of digiFrac?

[Indiscernible]

Thank you for that one. I actually missed that one. [indiscernible], I'm sorry?

I was going to say, we'll come back to that after our outlook, if you don't mind. Is there anything else in the room?

Well, I'll sit back down, then.

Is that okay?

I could have answered it by the time you said that. It is cost neutral with Tier 4 final. That's the target that Ron set us, and we're basing much on target, where everybody else is typically about 30% more expensive than Tier 4 final.

We'll take 1 more in the room, if that's okay.

So Ron, within the spirit of 1440, what's your average hours per fleet now? And what would -- how would that have compared a couple of years ago? And how close can you get to 24 hours as an enterprise going forward?

That's a great question. I -- 1,440, obviously, an aspirational goal. There have been a few times in our history where we have done that. We've had a fleet pump for 38 hours in a row, I think, continuously. So it has happened. Today, I didn't talk about that graph, but I did show a graph that showed maybe the last 4 years. We're up about 10% as a total average over the course of the day. Of course, we have days where we hit 1,300 plus minutes, north of 22 hours a day, but average across our fleet. You're still talking about something in the 60% of a day range. And so there's a massive opportunity there, for us to get to closer and closer and closer to that 1,440. It's -- but that's up probably 15% in the last 5 or 6 years.

All right, guys, we'll close up right here, and we'll be back at 2:00 p.m. Mountain Time. Thank you, guys.

[Presentation] Welcome back. This is our last session of the day. We'll follow up with some Q&A. But very quickly, we've got Chris Wright and Michael Stock to give you a brief overview of our integration, where we are in the market and our outlook. Go ahead, Michael..

So just going with the story, I'm another one of those transplanted country kids that somehow ended up in Denver I'm from a small island, just off South Texas, as you can tell by the accent. How I got here was via Silicon Valley. I was working for a small company down in Silicon Valley, running sort of object-oriented operating systems. I was doing finances, so I didn't know how to program, run by another guy who was relatively inspirational, Steve Jobs. It was the place he started up after he left Apple, and then he went back. So I know a little bit about working for inspirational people. I will say, I'm not sure which one is smarter. I know which one is nicer. And that would be Chris. But he's a great guy. But another person you would walk through walls for, and that is the difference. That's what happens at our company. A little bit, just to wrap up for the 2 sessions. Thanks very much to our team, a wonderful overview of technology. As Ron pointed out, the Liberty Way, how understanding the economics of the service business is simple, but complex to execute on. And I think the team have done a pretty good job of showing you how we do that. On the subsurface technology, why do we invest in technology? It's not just because it's cool. It's cool, but it's not because it's cool. It's because it adds to our bottom line, right? It drives higher demand for our services, higher utilization of our fleet, integrating, understanding the subsurface with operations, improves our throughput and integrating engineering with supply chain, reduce their costs. The same thing on the surface as Ron so eloquently put, it really is Project 1440, affecting the biggest thing that affects our profitability, which is our throughput. But service excellence from Jim, high-quality fleets that drives demand for Liberty Services, which keeps us highly utilized. And obviously, reducing cost is a major part of being profitable. So it's a key thing for us. So I just wanted to say, we love technology. As Chris would say, we take nerds, but we do it for a reason. A little bit on acquisition. I know you want to hear an update on the OneStim acquisition. It's going very well. We've made a great start. There is a lot more to do. It's a wonderful thing. But it starts with people. We -- about 1,300 new members of the family joined us on January 1. And really, the key thing was, as soon as we announced this deal, we focused on the people. Chris, Jim, Leen, the day after we closed the deal, they flew down to the Permian, they worked shift changes. They were in warehouses. They went to South Texas. They met a fleet somewhere in the middle of the Mid-Continent. They went to the Haynesville. Then they went to the Bakken, see our fleet. They talked to all of the Liberty people, all of the Schlumberger people who are now going to become Liberty people, to tell them about the company. Now these are people in the field where you're talking to the service operators, the guys that run the blenders, the guy that works in the field at minus 40 at 2:00 a.m. And here's the CEO of the company going, you are the most important person. It's for you that I work. They've never heard that before. So it starts with that. It starts with the Liberty mission, evangelism about what we are, the culture and then keep going. We are 1 team. And we've got -- now we're going to maximize the efficiency. So that's an ongoing project. It won't change 5 years from now. But regarding the integration, it started well. We've integrated the maintenance teams to support wireline, red fleets, blue fleets, everything under the sun. They're all central, central warehousing, central management operations, the central G&A. Technology. I will touch on this very, very briefly because you've heard about 2 hours about this. But the key thing is we started with integrating our digital backbone across everything, evaluating the technology we received, looking at the best of breed, looking at the best way to implement all the technologies going forward. And over the next 18 months, we will continue that technology rollout. Operations, obviously key. This is Jim, this is Ron. This is Project 1440. This is about the people. But really it is focusing on fleet automation, which a lot of the work that have been done by the OneStim, by Terence and his team before he came over, bringing that over to our -- brining that over to Liberty, looking at what we want to implement, integrating that with the people and making it efficient. Again, we've started -- again, it's about making sure you understand what you've got, making a clear plan, communicating it clearly and then executing. As I think people said, the 1 thing Chris so eloquently said, Liberty is about doing. We're not a lot about talking. This is probably the most talking any of us are going to do this year. Operate, so equipment obviously, yes, we talked about that. We've since deployed the ST9 pump parts across the whole fleet now. That's a key, capturing that margin, reducing that cost, getting that sort of sustainability, introducing, completing their training programs, the same. We have an enhanced asset base as we start moving more of their Tier 2 dual fuel upgrades, Tier 4 upgrades and now coming with digiFrac. That -- a key part of that, and I think Robert, who is one of the most humble and greatest engineers I know, undersold, is what those guys are doing on FracCAT X. This operating system brings it all together, whether it's a digiFrac pump or a backside or a traditional piece of equipment. It's all but 1 unified control system that can work everything in our organization. That's a key thing. That it's a key thing, when you talk about Libertization, that's how very differently a little bit to say Joe, we're going to be able to do the Libertization of our operational fleet, make it plug and play for a lot less money than we did when we did those last 9 fleets. And that's a key part of the fact that we've got better as an engineering company. And that focus, that focus on innovation. A couple of small ones here, facilities. As you know, we required a lot of facilities in the deal. We have about 17 facilities, about 1.4 million square foot of warehouse space, 700 acres of land. That's not including the sand mines. We've evaluated the overlap. We've looked at different facilities, how we're going to use them, identified a number of them, and I think we're going to probably get, reap somewhere between $25 million and $35 million of asset sales over the next 2 years. That will depend on some rebounds in certain markets. We will not sell nor wait if some of the certain markets have to rebound. Overhead, annualized G&A. We've really doubled the size of the company and added approximately 20% to our 2019 G&A load. That was key. Now we achieved the majority of that right at the beginning, because a lot of the G&A support, corporate G&A support for OneStim was centralized at Schlumberger. So that did not come over. But we're still focused on getting better. We're automating. We're spending a lot of time the next 18 months, automating a lot of the places, as Greg told you. We're double touching a lot of things where we can kind of continue to grow without adding people and being -- having people spend time on that 20% that adds value and get rid of the time they spend on the 80% that doesn't. And over the next 18 months, I think we're going to -- we actually are going to be working on some of the our -- sort of fixed overhead in our districts, to be able to make that more efficient as we grow. Capital equipment monetization, Zach and his team have done an amazing job, but they acquired a lot of equipment, a lot of it still under evaluation. But up until now, we've actually identified about $70 million to $100 million of reduction in maintenance expense and offset for capital expenditure, things like dry add units and sort of dry chemical handling that Greg alluded to? And that will be reaped between now and the end of 2023. Small amount of asset sales, which I all assure you that anything we sell that came across, we will sell internationally, it won't be staying in North America. And with that, I'm going to turn it back over to Chris for the moment for an update on the customer integration.

Thank you, Michael. Look, one of the -- first thing we did when we announced this deal was head to our own facility here in Colorado. We had jumped -- we all jumped on a plane to Midland, as Michael said, then we toured around all the facilities. But the very next morning, as we're driving from Midland from the Permian to the Eagle Ford, my phone rings, it's a guy I haven't talked to in 15 years. And he said, you're not going to take my frac fleet away, are you? And I sort of recognize the voice. I'm like, why would I do that? So he was a long-time Schlumberger customer. He had the same fleet for 3 years. We're super proud of and it keeps getting bigger. So I said of course not. We're not going to mess up what you got, but we are going to try to make it even better. He said, awesome. We're going to bring some new Liberty technologies, and we're going to add stuff. And on all the legacy Liberty customers, it isn't like, oh, we're going to stamp them all red now. There are things that Schlumberger did better than us. And there's things we did better than them. So what we're doing is slowly figuring out, hey, the best things the blue team did, put them on the red fleet. The best thing the red fleets do, put them on the blue fleet. So it's very much a team effort. And I will say the most important thing we got from this deal is a bunch of high-end, passionate, committed people. And as you can see, joined right into the Liberty family. Someone asked me in the restroom, you haven't said who's from Schlumberger and who's from Liberty. We haven't even thought about that. But yes, there are people here that 2 years ago were dressed in blue and today are dressed in red. But today, it's just all Liberty, 1 team, 1 family. Pricing opportunities. If we can bring something extra, a little extra technical sizzle or whatever, that can add value to customers, we can move pricing on that. Of course, we have pricing opportunities across all of our fleets, right? We're coming out of a tough background market. Pricing today was set when oil was $20 or $30 lower than it is today. So that's moving up. We added new basins. Look significantly, 2 very significant ones. The Haynesville, the second of the 2 awesome shale gas basins we have in the United States and the one that's right near the Gulf Coast markets and export markets. So Haynesville's been just a tremendous addition. Western Canada, Western Canadian Sedimentary Basin, fantastic basin, different settings, different technology. Liberty's thrilled to be a significant presence in both of those. We're also in Mid-Con now, and we've got a toehold in the Northeast in water line, but we've been in extensive dialogues about frac and, of course, frac will arrive in the Northeast when it makes commercial and partnership sense for us to do that, but that's coming. Huge additions. Vertical integration, Chris. English Chris, I call him smart, there's Chris and smart Chris. Smart Chris, with ST9, they joined us maybe 3 years ago as a team. And what it was, was a step-up in technology. How are we going to make power ends and fluid ends better? How are we going to make frac fleets better? And we're going to vertically integrate our supply chain so we can get higher quality, taking competitive advantages and control over our cost. Wireline and sand mines are exactly the same thing. The critical dance partner to frac and complete a well on location, is wireline. And now we have a Liberty right out of the gun, super strong wireline business, thrilled with that. Sand integration, you heard the tech team talk about Mayerhofer, and I think Lane made the comment like it's arguable, would we have a shale revolution today if not for Mike Mayerhofer. So when you're the Austrian guy, when you're at a happy hour today, buy that guy a beer. So we realized that for almost all unconventional development, that low permeability sand works and it makes economic sense. So now we've got a very large presence, vertical integration of sand mines, 2 of the biggest and best sand mines in West Texas are now Liberty mines. Market conditions, no surprises here, right? Imagine how bad things were a year ago, right? We went from 325 frac fleets to like 40 frac fleets in 6 or 8 weeks, just a dramatic collapse in the industry. But Liberty is a partnership company. We talk to all of our customers. I talked to the CEO of every one of our customers. And I'll tell you, every one of them was incredibly sincere and kind and told us exactly what were their thinking, apologizing about shutting down a frac fleet. Look, we get it. Storage is filling up, prices are collapsing, and differentials blew up. In fact, a major company called and said, we're going to run through it and called me back 2 days later, they get their own transportation, they sell their own crude, shipborne. He said, we're going to net $3 at the wellhead for next month. It just makes no sense. Sorry, Chris, but we're going to shut in our wells so we can't keep fracking wells, but we will again and here's what we're saying, publicly to the marketplace, here's what we'll probably do. People were open, candid, partnership mentality. We value that. The question was, how do we monetize Happy Valley? I'll tell you, a huge part of that is trust. We gain this trusted partnership with our customers. When we push them to do something, they know it's not because, well, this product has a higher margin than that product, so we want to sell it more. They know when we push something, it's because we believe it will be better for them. That trust allows us to roll out new technologies faster, to have people embrace Liberty ideas because they know we're doing it with their best interest at heart. So -- and remember, the frac market in Q1 of last year, it was tough then, 320 frac fleets running in Q1 of last year. We were the only frac company that reported a net profit in Q1. Everyone had positive EBITDA, but below depreciation expense, except for Liberty. So we've been -- again, the market peaked in summer 2018 and was sort of sliding downhill, I thought a necessary downhill. Too much oil, too much gas, too much service capacity. We've been too good for our own good. So we were pushing that stuff down to grind supply and demand into line. COVID has just sped that up, sped that up. So we had 175 frac fleets running in Q4 last year, probably a little over 200 now. Heck, we'll probably be mid-200s. And again, it's not that the publics are breaking their capital discipline pledge, it's just that the privates are saying drilling economics are awesome. And hey, we're going to do a little more activity where you work with us. One thing that's happening as well, is we're sort of getting 2 frac markets, right? The sort of legacy equipment frac market and then there's next-generation frac fleets. They're not only lower emission, better for ESG profile, but if you can run your frac fleet off natural gas instead of diesel, it's a lot cheaper. So we're really getting, increasing swing to next-generation frac fleets. The supply-demand market is tighter there, pricing is better there and legacy frac fleets in a different situation. That market is also getting better, but it's a different market, it's not as good of a market. Michael's going to talk about the difference between these frac fleets and the road back to better profitability.

As we talked about in our last earnings call. Is the mic working? Hello? As we talked about in the last earnings call, sorry about that, we see a pathway back to mid-cycle EBITDA margins. On the right, you'll see sort of a bit of a framework where we think the market has to be just sort of like support that cycle. But as we walk through from the left, really, one of the key things that's going to have to happen is obviously, price has to go up, right? Severe discounts we've given during the COVID times. As Chris pointed out earlier, service pricing generally lags commodity price by a couple of quarters. Net service pricing is going up, but we're also driving utilization and throughput. As things ramp up, as we did from the low of COVID, there's some natural sort of like probably sort of utilization that's a little choppy, some choppiness in the Q1, you used to have some choppiness in Q2. And then throughput goes up as things sort of settle down and go through the market. Plus, it's very much where we're going through at integration, got 2 great frac fleets, 2 great systems, we're bringing those together. So there's a lot of increased utilization and throughput that we'll be pushing through as we go through the year and especially into next year. The other key part about that is some of the stuff that, in Ron's section was talked about, logistics, materials handling, automation, dry chemicals, et cetera. We see a path to sort of reduced cost and efficiency, to actually increasing profitability. So therefore, the price doesn't need to go up to where it was in Q1 to get us back to that mid-cycle margin profitability. And we're also going to get some fixed cost leverage. As we see, we've got a large portion of it when we first started. We've got a significant amount of fixed cost leverage we'll be working on as we go through the year. But there's a lot of parts to moving back to that mid-cycle EBITDA margins, but we see there is a path. And with the market where we are at the moment, it's very supportive, and we're working our way back there as we go through this year into next year and through the end of next year. We have a little -- one thing here, this slide can be read in conjunction with Roy's emission slides. This is just a little bit about the movement from upgrading some fleets from 1 sort of emissions profile or drivetrain to another. Tier 2, it's a Tier 2 dual fuel, Tier 2 diesel to Tier 4, Tier 4 to Tier 4 DGB and then finally, the digiFrac -- and a little bit of the capital cost that's involved in those, and I won't go through these in detail. These are more of a leave behind. But just let you thinking about this, there is a capital involved and an investment needed, as we move up that value chain, which is partially supported by fuel savings, but partially, as you move out to building new equipment in the current market has to be supported by price. And that's 1 of the key takeaways from there. And we see that the market is really starting to sort of understand that and moving forwards towards that. Here, I'm going to hand over to Chris to talk a little bit of history about our investment philosophy and how we do things.

Yes. So you'd probably recognize that volatility of our business, and that's the cash return on cash invested. And maybe a tiny bit of a story format, right? I met Jim in that pickup truck. A lot of the other executives here were partners of mine at Pinnacle. This is a band that's known each other and been together for a while. And the dream, the vision then was to go -- we saw -- the shale revolution is real. It's a big deal. It's going to go for a long time. Frac is the heart of it. And there's a lot of competitors, but technology and culture didn't seem overly strong. It's actually after our lunch, I was like I want to compete in that business. And so we decided to start a frac company. And we always said our business plan was super simple. We were going to set out to build the best damn frac company, period. Whatever that was, people, humans, culture, equipment, schedule, we're going to go out and bring something differential. There's like 40 frac companies, then I think it peaked at like 65 frac companies and -- but that doesn't mean it's a commodity business. They're not all the same, right? So we jumped into that business. And Pinnacle, the original company that I started again with a lot of the same partners here in this room, that was 29 years ago, $100,000 of paid-in capital upfront. We grew at 35% compound annual growth rate for 14 years. And the key is, when you start a business make it so people want your service, do a good job and bring more money in than you spend going out. And you can use that money that comes in to reinvest, to grow your business through equipment or technology. As you get higher in cycles, you send special dividends back to shareholders. That's what we did at Pinnacle. We funded our growth. And at high markets that we're about to roll over, we sent money back to shareholders. That was the original plan in Liberty as well. We're just going to run a great private business, navigate the cycles and, at appropriate time, send big checks back to shareholders but continue to make a better business and grow our competitive advantage. So -- and one of the things we're proud of. So in 10 years, we've gone from this -- I talked to Jim originally about the $100,000. And he said, "Chris, for $100,000, it will be an underpowered frac fleet, and we won't be the best." So we brought in equity investors, a number of them sitting in this room, but a relatively small amount of equity at that time for the business we are today. But then right off the bat, we generated positive cash from operations, and over 50% of all the equipment technologies, everything you've seen talked about and developed, was paid for by cash flow from operations. We did bring on additional equity. Obviously, we did an IPO. We've used debt capital in modest amounts, but our belief is generate cash from operations, reinvest it at high rates of return. And if you don't have good high rates of return investments, send it back to ownership. That's the Liberty goal from the start. We thought we'd do it private. Now we're going to do it public. All right. So things go and, as I mentioned, you hit downturns. When you hit downturns, you can either pull in and hunker in your shell, lay everyone off so next quarter doesn't look as bad. Maybe that's the standard playbook. That's never been our playbook. So I mentioned in that first downturn we hit, we didn't lay anyone off. We just grew market share, and we were ready for an incredible opportunity to buy Sanjel. That happened. And when we did that -- so we put capital at risk when no one wanted to. That's why you can buy things at a better price at that time. And then we had that equipment ready to roll just as a cycle is coming up. When a cycle is coming up, that's the best time to invest. You don't know when that cycle is going to end, but you're at the start of it. So all the maximum amount of profit opportunity in that cycle is in front of you. Be ready for that. Be ready to jump on that. And we did that last time. We went into this downturn again, very unexpected again, but we had strong balance sheet strength. We had this fantastic transaction with Schlumberger. And I should say I think it's truly a win for both sides. We are ongoing technology cooperation partners with Schlumberger. We are not competitors. A lot of their great alumni now have a Liberty shirt on. Some of their current employees wore a Liberty shirt in the boardroom or the alumni wore a Liberty shirt in the boardroom. But we're at a similar inflection point. We do not know the future, but we're very -- this quarter is much better than last and vice versa going back. Things are going to get meaningfully better in the future. That's how we're looking at investments. Investment is not just a piece of equipment at today's pricing. It's for the long run. If you buy a piece of equipment, you've got to staff that with a bunch of people. We don't hire people for a cycle or till a peak and then we lay them off. We hire them to be part of our team. The marketplace. I talked about this earlier, so super quick here. And again, we hear these, whatever, crazy, gloom and doom or whatever of our industry. It's always important to step back. This is probably the sixth or seventh time we've declared the end of the oil and gas business. This one is going to be about as accurate as the last ones. We don't know what's going to happen going forward, but demand for oil and gas enable people to have wonderful lives. In fact, you can't build a wind farm, a solar farm, a nuclear plant, a dam or a biofuel facility -- none of those are possible without copious amounts of oil and gas. So we're reasonably confident that demand for our products will be good going forward. The underinvestment that's happening globally -- you always want to be in a business that the outlook is pretty good, but everyone thinks it's worse than it is. If your outlook is good but everyone thinks it's fantastic, that's a scary time. The time to invest, the time to believe in something is where the real outlook is better than the consensus outlook. I suspect we're in one of those times. I'll take -- turn it over to Michael again on -- and look, we don't know the future. We're making it very simple assumptions that they could be too pessimistic, they could be too optimistic. We don't know, sort of a mid-case, hey, if things rebound this way, what might we do in that scenario?

So yes, so we're often asked for projections, right? So -- but every decision at Liberty, every capital decision is an individual capital decision. We don't make a capital plan and then blindly execute on it. We make those -- and everyone's reviewed before every step. So what we decided to do here for you today is put together a view -- Chris talked about our investment philosophy. And I'm giving you a couple of illustrative models, 2 ends of a spectrum -- not 2 ends of a spectrum because it always can go lower, COVID, right? We could be $100 oil. There's a lot of differences. But here, 2 illustrative models, a lower case and a higher case. A lower case is sort of a 6-year-ish transition of the whole fleet to next generation, the lower case model. The high case model is about a 3-year transition to -- all to next-generation fleet. So next generation, I mean Tier 2 dual fuel, Tier 4 dual fuel, Tier 4 and electric and various versions in between, right? So just -- now just to say, all growth CapEx at any given time in Liberty is discretionary, right? As we've showed, we're very, very good at managing cycles because we're very conservative. So -- but it's going to be dependent on market pricing, market demand, customer commitments and operational cash flow. So if you look here, you've got a maintenance capital that runs in the $300 million to $350 million range for a 3-year period. They're relatively steady, as we know, like runs on the number of fleets. Growth CapEx. Electric fleets, digiFrac rollout is going to be very much dependent on sort of customer demand because, again, to build a new generation piece of equipment, pricing has got to be right, commitment has got to be right. Diesel to dual fuel upgrades really moving to Tier 4, the next generation, still not 100% supported by the fuel savings. Again, pricing has got to be where it's got to be. Tier 2 upgrades, a shorter cycle. And then other equipment upgrades, here, we're going to dry out units, et cetera, and some synergies. But as you see -- you'll see on the right-hand side kind of what our fleet composition might look like under these 2 very illustrative models and situations. As we know, with all predictions, we know they're wrong. And these are only illustrative. So this gives you some idea of what could potentially happen and what could drive the market. And the thing about that one is what does it mean. What does it mean? I think Liberty is uniquely positioned post this acquisition to lead a generational fleet change. As we talked before, there's really 2 markets at the moment, and the winds are blowing behind the move to next-generation fleets, fuel savings, using natural gas, a better ESG profile, right? There's a reason to move to that. One of the things we get -- I get asked about all the time is about the overhang of some of the older equipment. We used to have $20 million of equipment of old -- of equipment sort of in the space, and we're using maybe 12 to 15 at the moment. And what's happening with all that older equipment? Really, this is sort of about a generational change away and how that shifts out of the marketplace. I think over this time period -- now we don't know what this time period is going to be, but have a look on the left. This would be at a relatively mid-cycle EBITDA case, somewhere between $14 million and $18 million of fleet. What happens with the cash return on cash invested? As you see, starts relatively similar, moving up in the high case, and they start to change, right? That's because of what we're modeling in here is really this idea that there's going to be a -- on top of the fuel cost savings, there is also an additional small premium for the ESG profile of these fleets, right? And that's a change in earning profile from some of the older Tier 2 diesel to the brand-new digiFrac or Tier 4 DGB. And I think really the one on the right kind of illustrates that really, what you're doing is you're spending a little more upfront to drive greater cash flow. So you're delaying a little of that cash that's coming in that you're reaping from good operations, but investing to drive much higher future cash flow. That's the way we look at the business. This business is here for the long term. We look at that, and that's how we've sort of managed our returns through the years. As you see, early cycle investment, it maximizes long-term free cash generation. Strong operational cash flow, this is what Liberty is completely focused on. It enables growth and enables optionality, right? We're not spending everything we earn. We're not borrowing. We're not betting on the [indiscernible] this is something -- it's still a very conservative way we run the business. We won't change from the way we've always run businesses. The next-generation fleets are really changing that market dynamic. So this is just 2 illustrative cases, as I said, but I wanted to give you a flavor of where we think the market is potentially going. And as I think my investment adviser would like to tell me, past performance is no guarantee of future performance. But I always like to say, if I want to look at your projections of what might happen, I sure as hell want to look at what you've done before, right? And I think, coming back to this, it really -- when you look at the way we manage the business, yes, we're not changing that philosophy, we're not suddenly becoming aggressive. This is about the way we've run the business from the beginning. And we've been relatively successful at managing the cycles. And again, I think one of the things we're most proud of there is, I would say, to attract your capital, to attract people to invest in us. We're in a volatile industry. It's cyclical. So we have to outperform the less cyclical industries. Otherwise, we're not attractive, and we want to be attractive to attract your capital, and that's a key thing for us. And this is the last slide, and I'll leave you with, and this is just our takeaways as we always do, just to think about who we are, the second largest North American completions company. Significant free cash flow generation potential, as you've seen. I think we do -- you can do the math on the back of the envelope. This acquisition was a movement in scale that I think was just done at the right time and for the -- with the right people, the right technology. We're always focusing on growth with a strong balance sheet. And I think today, as you've seen, we wanted to focus the team that's driving our technological leadership. We're focused on value creation, as Chris says, that's how we've always run businesses. And we've provided industry ESG leadership from the beginning, really executing on what makes -- really makes a difference. I mean, we wrote an ESG report that I think is wonderful, and Chris is incredibly eloquent with it. But really, that's been the focus of Liberty's from the beginning. And that's all about sustainable competitive advantages. And so that is the end of the slide show as it stands. So thank you. Thank you. With that, I would like to invite Leen Weijers and Ron Gusek up on the stage because I'm sure there's going to be some technical questions that neither Chris or I are going to be able to answer.

Well, thank you again. And I also want to thank, I'm sure everybody's doing it already. To me, the most important thing today is you saw a whole bunch of members of the Liberty family. They're what make this company great. It's -- we're a few humans. We're not the people doing everything that happens, that you saw insight into the great humans and their attitudes and their passion that have made Liberty special. I just get the luck to talk about what they're doing. I get to do the bragging, they do the delivering. So I thank everyone in this room from Liberty and everyone on location today working every day to make Liberty special. I am humbled and proud to be on your team. Thank you.

With that, I'd love to open it up to questions. We'll start with live questions here in the audience. So.

I see Tricia's hand up.

Me again, Tricia Curtis. So two, I think, kind of hard questions, and I'm hoping you can answer. You didn't really talk about -- maybe you did and you just have a different term for it, but the simul-frac thing. I would love to understand, NexTier does talk about a lot in their earnings call, what is the implications to your business? Are you doing it now? And maybe you sort of explained that with the way you called it something pumping and maybe it's just a different terminology. And really also the sand thing is like you guys own some sand now, which is -- I love frac sand, love completions. But we are -- I think the industry is probably going to go toward local sand mining, and is. I mean, we have a couple of test sites going on in the Permian. You know Nomad Proppant and some others who are thinking about doing it. And I'm guessing by year-end, we're going to see folks actually mining on site. And I would love to know, those seem like 2 pretty big things that could, I don't think are bad for your business, just a part of the business, and I would love to know what -- how you think about them? And what you're doing with them?

I'll take the first one, and I'll give Ron the second one. He's the sand man. So simul-frac, I don't know if we were first, but we might have. And in fact, the guy whose wells we simul-frac, was in the room earlier today, I think he's left. But the idea is you got a whole bunch of frac equipment lined up right there. And if you can frac 2 wells at once, you can drive things faster. We had another interest in it, which is that if you frac offset wells at once, you'll impact how fractures grow. I used it when I was a frac modeler, I said fracs are like frac modelers, they don't like each other. So they grow away, which is what you want. They don't go to drain the same rock, they push away from each other. So we began where you -- where 1 frac fleet, maybe an upsized frac fleet, frac 2 wells at once, and we relied on downhole diversion to achieve it. So simul-frac has grown more recently. One of the reasons it's grown a lot recently is there's a whole bunch of horsepower sitting around, sort of tell a company, "Hey, bring out twice as many pumps. Hell, yes, we'll bring out twice." And it's more of, Tricia, that a lot of simul-frac today is really just 2 frac fleets on 1 location at the same time, which we've also done for years. But they run at the same time and you frac 2 wells, so it is a good idea. If you have a large well inventory, you can supply the water and logistics to manage it. It's a good thing. And you'll see more of it going forward. Will everyone do it? No, of course not, because you need a number of conditions that it really is a win. But if you've got a bunch of offset wells you're shutting down and a big pad and you get it done half as fast, that's a real plus. So we'll...

The implications were that you -- if you're reading that headline frac number, like 325 frac fleets to 200 frac fleets, could you maybe not have to incrementally -- would we -- incrementally, could we see that eat into that total number?

Well, yes and no. So when you're simul-fracking, that's not a frac fleet. That's -- sometimes it's 2 frac fleets. Sometimes it's 1.7 frac fleets. So yes, when you count a frac fleet for activities, if every location has 2 frac fleets on it, well, 100 isn't 100, it's 200, so yes. And again, all frac fleets, because there's so much idle equipment, have been sort of super sized, so there's a little bit of that going on right now. Simul-frac is maybe 10%, so the 210 fleets out there really is more accurately maybe 230 frac fleets. I think that's about right. So yes, there's an impact to it. One of the dynamics of it has been starting in a super bad market and a bunch of desperate people with a lot of idle horsepower, the benefits of it have dominantly and in fact, in some cases, more than 100% of the benefits have gone to the operators and not to the frac companies. So some of the business handling of simul-frac hasn't been done beautifully yet. We're in business. So we do simul-frac, but we'll do simul-frac, when we share in those benefits. So we do, do it. We do expect to see more of it. It's an innovation, but it's not this game-changing, you'll need half as many frac fleets, it's basically just consolidating operations. I don't want to undersell it, but a lot of what you hear is a bit of hyperbole. And I'll let Ron talk about these mobile sand mines you're talking about. Just to clarify, local sand mines to us are the Permian sand mines, the Eagle Haynesville sand mines. What Tricia is asking about is mobile sand mines. Here's the well, let's make a mini mine right here.

Yes. So to your point, of course, there are a couple of them out there. Now we've got a few of them out running in pilot projects. I think there are a few things you have to keep in mind that ultimately decide how pervasive this is. Number one, you have to own the surface to be able to do that, right? You have to go to a location where you own the right to dig up that whatever material you're going to consume there. B, you have to be in a position to consume wet sand, which, of course, a large portion of the fleet is not today. You're typically not going to drive that sand out there. And so I think what you're going to see is those situations where you're comfortable using wet sand, where you have the equipment to do that and then where you have the surface, it's not a small amount of capital. It's $15 million to deploy a mobile sand mine, give or take a little bit. I don't know the exact numbers, but that's the rough numbers I've heard. So I don't expect to see us with a mobile sand mine attached to every frac fleet. They're only good for about maybe the numbers I've heard, 600,000, 700,000 tons a year. That's basically 2 frac fleets. If a mobile sand mine is going to make sense, you probably need to have a couple of frac fleets operating in close proximity to that and then be far enough away from the major sand mines that exist today, that you can justify the cost of moving it there, setting it up and obtaining the surface rights and producing sand. So I think there are applications where it's going to make sense. I'd take the Northern Midland Basin as a great example. Hauling distances are 75, 80, 90 miles. So we've got a long round trip distance there for trucking, makes a ton of sense in my mind to put a mobile sand mine there. In the Delaware, close by existing sand facilities, I don't see that happening. So I think we're going to see some of them appear, but a meaningful amount of capital in what I would argue is still a pretty tight business from a margin standpoint means that it probably is a fit for purpose thing and not a pervasive deployment thing.

All right. Great. Right up front.

Ron, there's one way back there.

Sorry.

Guys, we heard a lot of great things about the company today that you've advanced in the last 4 years, whether it's the technology or the integration. I'm curious, what do you think is the greatest differentiator you have versus your competitors out there? And what do you think happens to the competitive landscape going forward?

People and culture is the obvious answer. I think that's been our biggest advantage from the start, and it's certainly the biggest advantage today. It enables a number of other advantages, some of which we talked about today, some of which we haven't. I'd also say, John, that partnership mentality, we have a trust factor with our customers that we're their partner. If somebody is a commodity, I had a very large company talk to me recently, I don't know why we don't do more business with you. And I said politely, but my answer was you're a buyer of a commodity and we don't sell a commodity. So do we want to work for everybody out there? Absolutely not. But it's really people and culture, the way we look at the business. But what's going to happen in the marketplace today, we're still in an overcapacity situation, right? So legacy players that are not reinvesting and don't have something differential, that business is slowly going to shrink. And in 3 or 4 years, it will be gone. So I think we'll see some continued consolidation. I think we'll see continued consolidation among our customers and continued consolidation in the frac space. But there'll still be plenty of frac companies around for the long run. It's always going to be a competitive business and our hope or our goal is that we can -- and everybody is getting better. Our industry is getting better. I think that's good for the world, but our goal is that we're going to get better at a faster pace than the others.

Chris, it sounds like there's a subtle difference in the outlook, maybe a melt-up in the outlook if you project mid-200s fleets exiting this year. If you're holding share, you're probably getting closer to 40 than 30 fleets in Liberty. Do you have line of sight on more reactivations? And if so, how are you getting the pricing signal today to stimulate that?

So for us, market share is always an output, not an input, right? So just because the market is growing the number of fleets operating, doesn't at all mean that we're growing the amount of fleets we're operating. Ours is always, as Michael said, these investment decisions, deployments is they're always bottom-up decisions. So no for us. For us to deploy a new fleet today, it's got to make sense strategically for our business and economically makes sense. So I do think we'll see 10% or 15% more fleets at the end of the year than we had run in 2 or 3 months ago. It does not mean Liberty's fleet counts up 10% or 15%. Our fleet count could be exactly flat. Our fleet count could be up that, it could be up more than that, probably not up more than that, but it could be totally flat. So no, it was not meant in any way of guidance of our activity levels. It's just sort of demand. We are working with our customers and partners to kind of bring our returns up. Theirs have already come up. It's always a lag, that's fine, but I think things are following a pretty rational pathway these days.

Two questions to hit you on, one kind of forward-looking, one very forward-looking. But the first one, the time to upgrade your fleet from the kind of legacy and obviously maintaining pace ahead of the industry, just a rough time line that you would aspire to? And then the second question, you mentioned special dividend a couple of times as a way to return cash to shareholders. How do you evaluate or how have you evaluated special dividend versus other methods? In other words, would you do a share repo? Would you ever consider a regular dividend? Probably not given the volatility in the space, but I'm just curious how you've worked through those various options.

I'll start and hand it over to Michael. So the fleet upgrading, first of all, a lot of our fleet today is already next-generation frac fleets. And that's another one of those things. It's very much a bottom up. If we've got a customer-specific thing that wants something and the economics and stuff makes sense, we'll do it. And we are doing it. But there's no like, in this time frame, we're going to do x amount of these or x amount of those, it's always granular, always granular, which is why Michael's were not projections. It's just kind of like, here's a doing it really slowly scenario. This is what this does for cash return on cash invested and free cash flow. And if that bottom-up decisions make sense to do it faster, hey, the free cash flow will be lower at first, but it will ultimately be higher. It will get to a high level faster. So it's all bottom up. So that literally, it will be 1 fleet at a time discussion, which is both the economics of the upgrades and of course, making sure it's never a balance sheet issue at all. And we did pay a regular dividend before. I mean, that is at a small level through this industry. We only stopped it because of COVID. And so return of capital, buying shares just depends on what's the investment return of that versus equipment versus to the balance sheet versus special dividend. So that's always what makes sense, but I'll turn it over to Michael.

I actually think Chris just answered it, to tell you the truth. But obviously, this is something that we discuss with our Board and a large number of the members are sitting over here sort of all the time. But as Chris said, when we went out in the IPO road, one of the first things we said is we're historically -- this is how we've run businesses as private people, and we are -- this is how we're going to run businesses going forward, right? So we've always been about sort of investing low end of the cycle, reaping cash, returning cash to shareholders. Now I think as you see, it was 3 quarters after our first -- after our IPO roadshow, we started a regular dividend. We like that because it sends a message. We are a return of cash to shareholders. Now we stopped that during COVID, that was a very sensible thing to do. So that's a key thing, but that's a message that we want to. That is the type of company we are. And I think the market is -- when we look at it, again, it will depend on share price, on buybacks, will depend on special dividends. And I think the market itself and we talked about long-term investors about the receptivity. And I think what we're coming into a different long-term growth cycle and that that's a key way to look at the business. .

Just kind of sticking with the theme of the last 2 questions, but maybe tacking on to it. As you think about these investment decisions from adding incremental fleets, adding a full digiFrac fleet out into the field, how is the dialogue going with customers with respect to securing some longer-term contracts that might undercurve that investment decision? Are they receptive to it? Are we still in such an overcapacity situation that those discussions -- are they're tense, they're not really going anywhere? Just kind of where do we sit? And how do you think about securing a contract before you build? Are we going to see any contracts anytime soon in the industry? I think the last real frac contracts that were signed were back in 2011 apart from 1 or 2 smaller ones recently, but just...

So we're in those discussions, in fact, that was an in depth one yesterday. So no, those dialogues are around. If you're going to deploy new capital into a weak market right? You've got to have some assurances. But you talked about the take-or-pay contracts in 2011, 2012 when we started, they were terrible. They were terrible because, of course, oil prices went down or frac prices went down. And in fact, there was 1 public company that was so proud of all their take-or-pay contracts. And in the short run, they need a lot of money because people were forced to overpay for services, every company they did business with said we're never going to do business with you again and that company went bankrupt. They bragged a lot and went bankrupt. And that's just not the Liberty mentality. It is not the Liberty mentality. We are our customers' partners. We have customers we've never had a contract with who have never had nothing more than a handshake that we've fracked with for 7 years straight. Now if we're going to build a whole new fancy fleet and as she, as Chris calls her, and we'll walk down the street and see her, when we have commitments for that, we will, we will. But we want to balance commitment. For us, a 10-year commitment at some fixed price, we don't want that. That doesn't actually make sense. We want a commitment that makes the investment safe and strong for us. And then we want to -- people are leery, like people also signed early electric frac fleet contracts. They took the risk of how it was going to work. They're pissed too actually. We don't want to piss our customers off. We want to make money together with them. So we want to deliver on the technology we're bringing. We want a commitment and great economics to launch it. And then we want the long run of that fleet and that relationship to take care of itself as it has in the last 10 years, as it will in the next 10 years. But yes, there will be some contracts even in this soft market and good economics.

I would maybe add to that. And I think there's an acceptance of that. I'm probably in Houston, 2 or 3 times a month right now with Chris Buckley and the ST9 team, giving digiFrac tours. The level of interest is incredibly high. But I think there's a recognition among the folks who are coming to visit and see that technology that there has to be some sort of trade-off there. There has to be a partnership approach that allows us to continue to develop and ultimately deploy that technology and that they need to share in that. And obviously, everybody is going to get there at a different pace. But certainly, I never hear pushback from the customers around a recognition that there has to be some line of sight to some amount of work in partnership with us to be able to bring that technology to the table.

I'm going to jump in with a webcast question. We have Derek Podhaizer from Barclays. Digital and technological advancements inherently create a deflationary environment for services. How do you balance lowering the cost per barrel of oil for your customers but also be able to benefit from the value you create?

Yes. All right. So technology, and to the question, technology has definitely been deflationary in our industry. I think that's -- as a force itself, I think it's neutral. It's a great thing. It makes our industry better. It lowers the price of oil and natural gas. You saw 2 of our greatest years of cash return, just below 50% cash return on cash invested. We're at pricing that was 50%, probably more than 50% lower than it was 5 years beforehand. So lower pricing doesn't mean worse profitability, right? It's only -- it's pricing and total cost relative to our cost structure. So if you drive your cost structure down 40% and your pricing go down 30%, you're making tons of money. If the pricing goes down 40%, you drive your cost down 25%, you're in trouble. So it's -- and it's the market supplying -- they're almost separate things. One is efficiency, one is a marketplace of supply and demand and how good are you compared to competitive offering -- competitive offers. So really, ultimately, profitability is not driven by technology and all that. Pricing -- I mean, profitability is driven by competitive advantage.

Great. Do we have one in the room or I can start? We'll take a room question.

Okay. So look, thinking about kind of the split between your fleet, Tier 2 diesel, Tier 2 DGB, the Tier 4 counterparts. Can you talk about kind of the different factors that would go into the profitability differentiation, whether on the cost side, the ESG pricing premium, et cetera? What you're seeing currently? And then what you would see in sort of a mid-cycle environment?

Yes. I mean, I think if you look at it, we're still -- just over the majority of our fleet is already next generation. And north of -- over 1/4 is sort of Tier 4 emissions or better. And I think when you look at it, a lot of it's driven by -- there's a cost differential per lateral foot, right, with fuel savings. So if you're using field gas, you're using CNG as a driver, that's a cost differential per lateral foot. So that's -- it can run -- we can actually run at the same price, and we can say they're fuel savings. They're more in demand compared to higher pricing. So you get a little bit better pricing on that, a little bit better pricing, same sort of fuel differential on the Tier 4 DGB, that's always a key one. It depends on your clients. Some clients have a more sort of focus on ESG profile. And if they're sitting there thinking about sort of their NOCs, and they kind of like their emissions, they may put a value on that. So it really comes down to the value your client places on the solution you're bringing them, less the cost that it costs basically to complete that well. And that's a key thing that drives that differential in profitability.

Chris, just a clarification. The 250 fleets you expect to be active in the industry by the end of this year. And if that's the case, what do you think pricing could be for pumping? And what's -- are you hitting those numbers based on your conversation with customers? Or what the basis of that forecast?

Great. Look, thanks, Waqar. First, clarification. I didn't say 250, I said mid-200s. So you could say the mid-range of mid-200s might be 250. I mean, it could be 235, it could be well above 250, so that's conversations with customers. That's just seeing people's activity levels. Again, publics are not really, not meaningfully changing their plans at all. Foya was $50, their oil is $80. This year, publics are doing the same thing. But as you saw, like half of rigs today are private, and they've just got a different calculus, a faster response to price. So well costs are down. Oil prices are up, drilling economics are excellent. So yes, privates are continuing to increase their activity levels. And that's why we think that's -- from everything we hear, the total amount of fleets running is likely to continue drifting up go into late in the year. So 2 factors on the supply and demand side. We've got a sort of a gentle growth in demand right now. That's helpful. That's a positive, maybe even the bigger force as we've got a pretty meaningful drop in supply going on right now. Frankly, last, I don't know, 6, 7, 8 years, and for people to take care of them horribly, maybe it's 5 years. So 10%, 15% of the frac fleet, if you don't invest the frac fleet's shrinking at 10% or 15% annually. So this year, there's a very small number of fleets being built. There's probably less than 10 frac fleets being built and there's 30 or 40 frac fleets going out the other end. So even if demand was flat, every month, the market is getting a little bit tighter. So yes, by the end of the year, which if fleet count stays flat or fleet count migrates up 20 or 30 fleets, supply and demand will be better at the end of the year. And Michael briefly mentioned earlier, another issue, which is personnel. I'm on the Board of the Federal Reserve Bank, and it is the biggest economic issue in the country right now. We have millions of people out of the labor force that were in the labor force a year or so ago and are going to return to the labor force, but they're not in the labor force today, and that has a ripple effect throughout the economy. And so even though you've got a fleet that's not worn out, staffing it with competent, qualified people, that is increasingly challenging. That's an additional force pushing down supply of frac fleets.

What do you think how much -- based on your numbers, what kind of pricing leverage you see by the end of the year?

Oh, I think it's 8.74% higher. Waqar, I don't know. But it's migrating. It's been migrating in a positive direction, and it's going to continue to migrate in a positive direction.

From the web?

Yes, sure. We have a buy-side question. Let's just take a step back for a second and say, could there be an acceleration versus history in the pace of decline of petroleum as a percent of energy mix due to the emerging and near religious espousal climate change initiative?

So again, just an opinion, my guess is no. And the reason is just there's sentiment, there's opinion, and then there's government spending. All of those are blowing strongly in 1 direction. And the government spending, of course, will have impacts on what's going on. But again, as a numbers nerd, renewable energy as a percent of the total energy mix was near 100% throughout all of human history, right? And then fossil fuels arrived and the consumption of traditional biofuels actually didn't shrink. Fossil fuels were just additive energy on top, group per capita energy consumption, so the market share of traditional biofuels shrunk dramatically. So renewable energy as a percent of the total global fuel mix bottomed in the 1970s at about 13%. And today, it screamed up from 13% to almost 15%. So in 50 years, we've seen about a 2% swing in market share from fossil fuels. It may be several percent in the next few decades. But yes, is there a scenario with a rapid drop-off in the demand for oil? I'm not aware of no matter what the spending is, I'm not aware of the math and physics that makes a meaningful drop in the consumption of oil or natural gas in the next few decades. I don't know the future, but extrapolating that would be my guess.

That's great. We have another question. So just to go back to the nerdy numbers. What is digiFrac maintenance per year, if you could expand a little bit on that?

Less. I don't know that we'll go beyond that. As Chris mentioned, it's just a different simpler system. You're using electromagnetic induction to transfer energy, and it's just as far as moving parts, it's just a simpler process.

Yes. I would say the same thing. I don't think we know those numbers quantifiably yet. But if you think about the fundamentals, we have a natural gas recip engine that's going to run at probably far more steady state than we run a frac pump at today. And so that's good for the longevity of an engine and the maintenance cycle for that. We've removed the transmission from the equation entirely, which is something that requires some amount of maintenance and has a regular rebuild cycle to it. We have a far more stable input to the power and the actual mechanical end of the pump, not the fluid end of the pump versus having to shift gears. So today, if you were to go out to one of our frac locations for those of you who had the chance to visit yesterday, what you would have seen out there as an engine connected to maybe a 7-speed transmission connected to a pump. And so those guys are changing gears, sometimes under load. And that introduces some mechanical shock to the system that is hard on the power end. If you've ever run an electric motor with a real stat, you know that the wind up in power is very, very smooth. And so that takes some harshness out of the system that we anticipate translates into longevity of components. So yes, I think, at the end of the day, an electric frac fleet from a maintenance standpoint is going to be less or more cost effective to run less costly to run. But we don't know those numbers exactly yet. But in a couple of years' time when we've got a few of them out in the field working away, we'll know.

And for the finance modelers out there, that will actually be split between your operating expense and your capital rebuild expense, possibly -- probably a larger -- a smaller -- larger portion of the capital rebuild expense that will save the operating expense.

Great well...

Oh, please.

You have a critical question, Anj or should we wrap it up?

We've -- we're hitting 3:00, so I think we have to wrap up today with our questions. But so if that's all right with everyone, we're going to wrap up for today with the webcast. It's truly been a privilege to be able to host this for you. You've really heard a lot about our culture and safety and efficiency and ESG that weaves through every aspect of our business. So let's continue the conversation. We've got the sharpest team in the business, great sense of humor, great sense of family. Everyone is going to be out here for the rest of the day. Join us to visit our digiFrac, take -- come on down with us for the happy hour. And for those of you on the webcast, we thank you very much for joining us. And we thank the full team here for being a part of us and we're so happy to have you.

Thanks, everybody.

Thank you.