Liberty Energy Sees Demand for Services Continuing — Commodity Comment

By Stephen Nakrosis

Oilfield services firm Liberty Energy Inc. said it continues to see demand for its services in the coming year. Chris Wright, the company’s chief executive, said, “a strong frac market and specific conversations with our customers gives us confidence in the demand for Liberty services into the coming year.”

Mr. Wright also said “in the third quarter, we expect approximately 10% sequential revenue growth, primarily driven by fleet reactivations and modest net pricing increases.”

Supply and Demand

Liberty Energy said “eight years of underinvestment in upstream oil and gas production, exacerbated by inept global policy initiatives aimed at incentivizing an energy transition, has created a mismatch of supply and demand.”

The company also said historically low inventories of oil and gas, limited OPEC spare production capacity and a scarcity of refining capacity are “colliding with increased energy demand.”

Demand growth is coming from “the post-pandemic recovery in travel, China’s emergence from its enforced Covid lockdowns, plus seasonal demand.” The conflict in Ukraine along with potential sanctions on Russian oil exports and that country’s decision to constrain natural gas pipeline exports to Europe magnify the situation, Liberty Energy said.

Oil and Gas Markets

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

Liberty Energy also said “the greatest risk to our marketplace is a severe recession that leads to a drop in global demand for oil and natural gas. A moderate recession typically leads to a slowing in the rate of demand growth for oil and natural gas, which would likely not be overlyive to our customers’ activity given today’s low inventory disruptive levels and tight supply and demand balances. The recovery in oil supply appears to be under greater threat than oil demand.”

Frac Market

The tight frac market is restricting supply, Liberty Energy said, adding, “equipment, supply chain and labor constraints limit frac fleet availability and service quality available to our customers.”

North America is positioned to be the largest provider of incremental oil and gas supply, the company said, adding “the fundamental demand call on North American oil and gas supply is strong.”

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