Good morning, and welcome to Liberty's Conference Call to discuss the transaction announced today by Liberty and Schlumberger. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. Some of our comments today may include forward looking statements, reflecting the company's view about future prospects, revenues, expenses or profits.
These matters involve risks and uncertainties that could cause actual results to differ materially from our forward looking statements. These statements reflect the company's beliefs based on current conditions that are subject to certain risks and uncertainties that are detailed in the company's earnings release and other public filings. Our comments today also include non GAAP financial and operational measures. These non GAAP measures, including EBITDA, adjusted EBITDA and pre tax return on capital employed are not a substitute for GAAP measures and may not be comparable to similar measures of other companies. A reconciliation of net income to EBITDA and adjusted EBITDA and the calculation of pre tax return on capital employed as discussed on this call are presented in the company's earnings release, which is available on its website.
I would now like to turn the conference over to Liberty's CEO, Chris Wright. Please go ahead. Good morning.
This is a landmark day for Liberty and our industry. Liberty is acquiring via an all stock transaction, Schlumberger's One Stim, their U. S. And Canada Onshore Pressure Pumping Business. This transaction more than doubled Liberty's horsepower, marks our entree into Key Gassy Basin, increases our vertical integration with 2 state of the art Permian sand mines totaling 8,000,000 tons per annum of combined capacity, adds a top notch plug and perf wireline business, world class technology and know how together with a talented team of individuals.
The COVID pandemic has thrown the world for a loop, bringing serious stress to our industry, but these dark hours are most fertile for opportunity. I want to again thank everyone in the Liberty family for your commitment, courage and sacrifice through the most disruptive times I have ever seen for our industry. These times shall pass. Technology has always been central to Liberty and we are thrilled to now add an extensive intellectual property portfolio with over 400 patents, together with a new technology alliance agreement between Liberty and Schlumberger for future technical collaboration and access to technology portfolios. All of this in the interest of making our company and industry better, stronger and cleaner.
We are supercharging Liberty on our mission, our dream to build the best damn frac company period. This transaction is a win for all our stakeholders, not only our shareholders, but importantly our customers, our partners and the Liberty family, a big win for Schlumberger as well. We have always said that our primary focus is organic growth to build from the ground up a different company with true competitive advantages. Any acquisition would have to be truly compelling and consistent with Liberty culture and vision. These opportunities are rare.
This is one of those rare opportunities. We are very excited about the value that this deal will create. Not only does this deal increase our scale, technical prowess, geographic diversity and vertical integration, it is also significantly accretive on all key metrics, EBITDA, free cash flow and earnings power per share. Integrating these 2 proud teams presents a significant challenge. However, it is one that we have successfully faced before.
We learned a lot of lessons from our acquisition of Sanjell's assets in the depths of the last downturn when we tripled the size of our company in 18 months. The key is getting everyone rowing in the same direction in pursuit of a clearly defined and truly worthwhile goal, building something special. Our timely and successful Sanjell acquisition was rewarded by outsized Liberty returns on capital in the years that followed. Our world industry and customers are today facing significant challenges. Liberty is all in working with our customers to navigate and thrive during these challenging times.
This transaction will not only strengthen Liberty, it will also bring sizable benefits to our customers via more rapid technology advancement and deployment, greater scale and basin diversity and improved service quality. Moving beyond our opinions, I want to share data from Kimberlite, an independent industry research firm that extensively pulls E and P frac customers across North America. Their 2020 frac industry report was recently released and again showed Liberty ranked number 1 in quality in the eyes of North American E and Ps. Among the operators who viewed technology as critical to their decisions, Liberty's technology was viewed as number 1 and Schlumberger was ranked a close 3rd with 4th place miles behind. Bringing our strong technology portfolios together matters a lot because both Liberty and Schlumberger have customer profiles weighted towards technology embracing leading players who demand top tier service providers.
Yet surprisingly, we have relatively little customer overlap, another real plus for this transaction. I will take this time to announce one other small, but exciting technology acquisition that Liberty made nearly 2 years ago, FT9. We saw in FT9 a dynamic team with exceptional talent in equipment design and a great cultural fit. Our goal is to incubate technology via many avenues within Liberty, in partnership with our customers, in partnership with our suppliers, and sometimes with small startups. FT9 was a small startup in which we saw tremendous potential.
Together, we have been driving rapid innovation in fluid ends, power ends, valves and seats and with next generation frac fleets, Tier 4 DGB and electric. We believe that Digifrac will be a true game changer in electric frac fleet performance, cost, reliability and delivering lower emissions. We are excited to couple Schlumberger's robust field proven electric backside, meaning blender and hydration unit together with Digifrac pumps to bring a real step change to eFleets. Most operators are signaling a maintenance CapEx or flat production profile in 2021 versus year end 2020 exit production rate. This implies significant growth in frac activity from today's depressed levels to reaching around 200 active frac fleets sometime in 2021.
Even modest production growth in 2022 or 2023 would require more than 200 active frac fleets. We expect to have strong free cash flow and investment returns in the years ahead, even though active fleets likely remain far below the peak of over 400 fleets running in 2018. I'm now going to turn the call over to Ron to elaborate a bit more on the deal and our forward plans.
Thank you, Chris. The addition of the Schlumberger One Stim organization represents a more than doubling in scale for Liberty. Included in the acquisition are the entire North American frac asset base, together with associated technology, several complementary businesses and the associated owned real estate. I will provide some detail on each of these various components. As you can see from the map included in our IR deck released this morning, the operations of Liberty and One Stim share some common basins, including the Bakken, the Permian and the Eagle Ford.
We will also add some new basins, the Haynesville, the Mid Con and Canada and pump down perforating wireline operations in the Marcellus Utica. The transaction includes the owned real estate associated with these operations, consisting of 20 facilities and 2 Permian sand mines. Liberty will serve a broader range of customers, including most of the majors and large independents as well as a long list of small and midsized players. Since our early days, Liberty has been recognized as a technology leader in hydraulic fracturing. One Stim adds significant depth and breadth to those capabilities.
The combined company offers an unrivaled technology platform with a portfolio of almost 500 patents, industry leading expertise in big data analytics, frac and reservoir simulation and real time analysis, combined with advanced equipment monitoring and automation. These enhanced capabilities will deliver immediate benefit to our customers and form the foundation for continued advancements to deliver operational efficiency improvements, reduced emissions and further optimization of completions design. Liberty and Schlumberger will have an ongoing technology development partnership in the form of an alliance agreement. This agreement will provide for future collaboration and access to the company's technology portfolios. We are excited about this partnership and the opportunities it provides, such as access to the Schlumberger's digital platform and their many other areas of surface and subsurface expertise.
The Schlumberger One Stim fleet consists of 3,500,000 horsepower, of which 2,500,000 has run-in the last year. 1,000,000 horsepower, effectively the previous Weatherford equipment, is to be permanently retired. Of the remaining $2,500,000 we will maintain 1,250,000 horsepower ready to run, including 4 fleets of Tier 4 equipment with the remainder being Tier 2. The other 1,250,000 horsepower will provide optionality in the form of redundancy or capitalized maintenance savings. The Schlumberger team has done significant work in on-site automation that will be very complementary to the work we at Liberty have been doing.
Automated pressure testing, pump control, process trailer operation, sand handling and pump down operations deliver improved accuracy, efficiency and utilization of personnel, while reducing maintenance costs through optimized equipment operation. A focus on reducing the environmental impact of frac operations has been a core tenant of Liberty since our inception. We have been at the forefront in the deployment of next generation technology, including dual fuel fleets, containerized sand, the Liberty Quiet Fleet and most recently Tier 4 DGB fleets. In parallel to this journey is electric frac fleets. Through our ST-nine platform, we have been developing Digifrac, an e fleet option that is as capital efficient and operationally efficient as our current fleets and an industry leading emissions profile.
We expect to launch Digifrac in 2021. The One Stim acquisition adds proven electric backside and controls through their fully electric process trailer, a single unit combining the capabilities of a traditional blender and hydration unit. Powered by generators driven by natural gas reciprocating engines, we expect to offer the widest range of clean emissions fleets to the market. Liberty is 1st and foremost a frac company. However, we have always believed that select business verticals key to the frac supply chain or complementary to the execution of frac services would be beneficial additions to the Liberty platform.
Our first step down this road was the addition of ST9. This innovative team of individuals brought unrivaled expertise in pump design and manufacturing to the Liberty family, ensuring access to leading technology at an extremely competitive price. Schlumberger 1 stim takes us further down this road with the addition of 8,000,000 tonnes of Permian sand capacity consisting of both fortyseventy and 100 mesh to our portfolio. Together, these mines represent approximately 10% of nameplate capacity in the basin. This addition provides flexibility in our sourcing strategy for our frac fleets and an opportunity to develop relationships with E and P companies for whom we don't currently provide frac services.
We will also add 60 pump down perforating wireline units, which naturally integrate into the daily operations of frac services. Wireline is a leading cause of downtime on a frac location and we view this as a strong opportunity to drive further efficiency improvement on frac locations. We are excited to welcome the OneStim team, approximately 1,000 people strong to the Liberty family. We believe that together we will offer a platform delivering industry leading technology and service. We will be embarking on a road trip starting this afternoon to visit each of the Schlumberger OneStim field camps over the next 2 weeks.
This will give us a chance to meet the team and share a little about Liberty and who we are. The integration of the OneStim assets into the Liberty portfolio will be a significant undertaking, but one we will work through methodically, leaning on our experience from the Sangel integration. Both companies are recognized for their capabilities and our goal is to take the best from both worlds and bring them together. The end goal is clear, a complete fleet of plug and play equipment that ensures any asset can be deployed to any district and any employee can run that asset. I will now turn the call over to Michael to discuss some of the transaction details and the roadmap through closing.
Thanks, Ron. Good morning, everyone. This is an exciting day in Liberty's journey. Schlumberger is contributing its 1st in North American pressure pumping business to Liberty in exchange for a 37% equity interest in Liberty. As Chris and Ron have described in detail, our acquisition of the One Stim assets will include the frac, Bubtown Perforating Wireline and Permian sand mining business units, as well as an extensive technology portfolio and a significant owned real estate footprint with approximately 1,500,000 square foot of facilities and 600 acres of land.
This is an all stock transaction which assumes a cash free debt free balance sheet for the target dropdown company at closing and minimum working capital requirements. No cash or debt will be used to fund this transaction. As a result of the transaction, Liberty will become the 3rd largest oilfield services company in North America by revenue. On the pro form a basis in 2019, our combined revenues would have been $5,200,000,000 and adjusted EBITDA would have been $664,000,000 including day 1 synergies of approximately $125,000,000 which improved primarily the elimination of Schlumberger One Stim corporate G and A expenses. Our already strong balance sheet will be improved by this transaction with no net debt and a substantially larger asset base.
The transaction is accretive on all of the relevant 2019 pro form a metrics, revenue per share, adjusted EBITDA per share and free cash flow per share. All these metrics would have shown over 50% accretion in 2019. This does not include any of the future synergies that are significant. These include the revenue synergies driven by both geographic expansion and a complementary customer base. The uplift in frac deficiency that is part of Liberty's DNA and the future integration of the pump down perforating wireline business.
The cost savings driven by the expansion of Liberty's capital light manufacturing technology across the OneStim fleet. Supply chain cost reductions from scale and the integration of the Permian sand mines and much more. Our historical commitment to delivering superior returns is evidenced by an average cash return on capital invested of 27% over our 8 year entire history, which is significantly above the average return for the S and P 500. We have achieved these returns while maintaining a strong balance sheet. This has enabled us to execute on this exciting opportunity and consolidate a sizable technology savvy frac company into Liberty.
Liberty is known for disciplined organic growth, but part of our history of delivering strong shareholder returns is our ability to make key strategic acquisitions at times of market dislocations. We make investments based on the lens of increasing shareholder returns and it is tough to look at the short term earnings in the market of today, which is so drastically affected by the COVID-nineteen pandemic. Looking forward, the question is, what does the mid cycle look like? 2019 was already a challenging year in the energy industry and the pro form a metrics are very attractive when you look at the combined company. So let's look at the future conservatively.
Our combined pro form a market share for the 2 companies has averaged 20% for the past 3 years. A very modest oil and gas production growth from the depressed position exiting 2020 would require 200 to 250 freight fleets in North America. When you look at that level of demand, coupled with our historical market share and profitability levels, it would suggest a considerable level of earnings power. In summary, we believe this is a value creating transaction that delivers strong returns, builds a competitively advantaged world class company in the energy sector and is highly investable across all industries. The quality and breadth of service, economies of scale, profitability potential and cash flow generation are front and center in the next phase of the shale revolution.
And with that, I will turn the call back to Chris.
Look, Schlumberger is a world class company. We are thrilled to bring together these portfolios. I will now turn the call back to the operator for questions.
Thank you. We will now begin the question and answer session. Today's first question comes from James West at Evercore. Please go ahead.
Hey, good morning guys and congratulations.
Thanks, James. Good morning, James.
So given that, Christopher Schlumberger has been restructuring 1 Stem in the North American business for a good period of time now. Does this allow you to, as you close this transaction, to essentially integrate the business faster than, say a normal M and A transaction would be?
Absolutely. Load time in a market businesses are smaller what you said Schlumberger has actively been working on making the company lean and ready for whatever its next venture is. But yes, I would say it's a mainly easier deal than a wholly independent business.
Okay, great. And then a follow-up for me on the return side, you guys have always had intangility returns. With Schlumberger, we know a little bit about the North American margins and they were lower than their global margins suggesting the returns were lower over the last couple of years. Is this given that we don't have all the numbers here, we're going to have some more today, of course, but is this return is this consolidation returns accretive initially or does it have to involve a lot of the integration process?
No, I think our belief that this will be accretive right away, right away. Okay, good. Look, their reputation among customers and performance has been well. So I think combining what's been a strong performing team with the focus on frac and the focus on efficiency, I think that together, yes, I think you'll see accretion right away.
Okay. Congrats again.
Thanks, James.
And our next question today comes from Sean Meakim with JPMorgan. Please go ahead.
Thank you. Hey, good morning.
Good morning, Sean.
So congrats on the transaction. Chris, Liberty has one of the youngest fleets in the industry. And so of course, you're going to keep the best equipment running from Schlumberger, you'll retire the worst. What's in the middle will help you lower maintenance capital? Could you maybe quantify to some degree the useful life of the horsepower of those different buckets?
And then on the one hand, how much upfront capital it will take to libertize the active fleet versus how much you think you can extract from the balance in terms of maintenance cost savings?
You bet, Sean. First of all, there's 4 fleets that are Tier 4 engines. So those are very new and in high demand today. And then yes, look, it's a wide portfolio. So there's a range of age and life expectancy left and I'll allow Michael to elaborate on that a little bit.
Right. Yes. So possibly the early providence of some of that equipment may be a little older Sean, but Sung Jiay spent a good amount of money and a good amount of time post the last downturn on an upgrade cycle. So I've got some very, very good equipment that they whereas the tires and the trailers may be reasonably old, everything above that has completely refurbished. So some good equipment there.
Yes, limitization, yes, I think this is something we Ron and the team will be working through in detail. But that of order that will be sort of less than $10,000,000 a fleet, but it will depend on what changes we exactly made. So we'll have some more details of that probably look for that maybe sort of like at the end of the year at our call. And then you've got
a reasonable amount of we think of the
1,250,000 horsepower that we use as backup and to make sure that we can service all the clients that we need to during this period of time while we're rolling fleets in to be limited and make sure it's standard. And then, yes, as you say, there's an offset to capitalized maintenance that is somewhere in the north of $50,000,000 and probably less than $100,000,000 over that sort of a 3 year period.
Got it. Yes, that's a helpful framework. I appreciate that. And then maybe could we just talk about some of the ancillary pieces that come along with this transaction and they're not insignificant. So just thinking about how you all thought about valuation of the pump down assets, the sand mine, as well as just the technology partnership.
Can we just talk about how that fits into the framework of ultimately how the deal got constructed?
Yes, Sean, the technology aspect is huge. Look, we're not frequent acquirers obviously, but it doesn't mean we're not frequently looking at opportunities and what's out there. This technology portfolio is just truly exceptional. So I'd say that's a huge part of the interest. We do pump down at Liberty already, but not the wireline, not the plug and perf part of that operation.
So look, that's a legacy expertise since Lumberger Wireline Operations. These are cutting edge, greaseless wireline units that have performed well. I mean, obviously, of downtime in frac operations is just issues with waterline. So, to bring that in house, we think is upside and room to drive efficiencies. Sand Mines, obviously the sand business right now is in a very bad place, but supply and demand works.
So capacity is shrinking there. We don't know what timeframe the dynamics of the sand market change. And in fact, they weren't key to any decisions or evaluation here. These are 2 truly world class mines that have been that are new, that are fantastic. And I think that capacity from those mines, the optionality for our own supply chain for selling directly to customers, we're quite excited about.
All right, great. Thank you.
Thanks, John. Thanks, Sean.
And our next question today comes from John Daniel with Daniel Energy Partners. Please go ahead.
Hi, guys. Great to see a deal get done. Just sort of two questions here. On the vertical integration, Chris, what portion of your spend would you expect to go towards the vertically owned businesses versus other third party vendors?
Yes, that's really if I can walk it on that one, It's really a little too early to say and probably a little some of the sand will depend on the optionality and how the dislocations of the current sand market turn out as we go forward. And again, I think one of the things we look forward to is that we're again moving our capital light manufacturing and taking some cost out of the maintenance costs across the whole fleet I think will be a good addition to returns.
We buy sand all over the country. I think the sand companies will still like Liberty. Again, we'll still be a large customer for this broader sand business.
Fair enough. And then the Digifrac, can you guys just speak to, I don't know if you haven't even have a number yet, but just sort of what your frame for us, what you think the scale of that might be in 2021?
Yes, too early to say that, John. We're in dialogues with customers. We have been for a while. We're still obviously in the development or late development effort of the technology. So, yes, I'd say too early to say.
But the system as a whole that we're quite excited about it. I should just say that. We're quite excited about it and there's significant interest in it, But the speed at which it deploys depends on a lot of things. And I would say too early to say anything on that. I would
say just one point. As we everything we do, when we look at investing capital, it always depends on the return profile. And that's a significant portion. We'll see where the market or the return profile market for new investments is. Okay.
And then
I guess just one final one from me, a numbers question here on the $125,000,000 in savings that you're getting, is that all G and A related or that would seem pretty high given that your G and A is $90,000,000 a year as a company?
John, I think what you got to look at it, you're going to have to look at it when it comes forward to the proxy statement. You've got to realize that this is a very a company that has sort of a wide portfolio and a wide platform. So really what we're doing is relating back to the numbers that are going to be in the proxy there for that one. It doesn't relate necessarily to the cost and overhead cost of running Liberty. I will say one of the things we're excited about is we're expanding the business significantly and it doesn't have to be the same level of G and A expansion to support that.
Yes. Just feels like they're a bit bloated, that's not my personal opinion. Okay. Good luck, guys. Good job.
Thanks, John. Take care.
And our next question today comes from Dave Anderson of Barclays. Please go ahead.
Hi, good morning. Just a question on the status of the Schlumberger fleet as of now. So as of end of 2019 on that 1.25 that's operational Schlumberger said they went down to 10 to 12 fleets that are operating. Just curious if you can update us as to the status of that today? And the 10 to 12 fleets that they had basically staffed up, do all of those employees come over to Liberty?
Is that kind of how this typically works or will you be staffing up that all on your own?
No, I think we look, the active fleets that are running with customers, which means they're doing a good job and customers like them, those will come over, absolutely. Look at the activity decline and the market got very rough at the end of Q4 and I think Schlumberger widely pulled back capacity. Market got better in Q1 and then fell off a cliff. So their profile has been similar to ours. If you were a disciplined player in the business of frac, not the activity of frac, you were very quiet in May June.
And, but we see a rebound going on now and it's slow and steady, but both their activity and our activity are rebounding.
So Chris, if I look back at it, say, a year ago, your EBITDA per fleet numbers were among the best in the industry, which obviously makes sense concerning your operations. Schlumberger, while of course they never really gave us the numbers, we had at least a decent sense that they were doing more kind of EBITDA, probably more around the Tier 2 players. So obviously that delta and bringing them up to where you guys are, that's a big driver of this deal I'm sure in your mind. And you did this already once with San Jo. So from what you can tell, how long do you think that takes to get up there?
And is there there's not really a secret sauce. I mean, I know we're talking about liberalizing, but what does it really take to get it up there and how long do you think it takes?
It takes time. It's a process, right, because it's both equipment standardization, there's an equipment liberalization. And I would say even bigger than that is people and procedures and it's a process. I would say that I shouldn't give a timeframe, but that takes many months.
It's not overnight anyways. I'm sorry. Just one last one if it's okay to squeeze 1 in. The one point
Can I ask a little color on that one?
Please, thanks.
One of the things when you look at the independent third party data, if you look at the sort of the efficiency of the Schlumberger that Schlumberger operating teams, it is above the average operating sort of efficiency in the industry. So they are a well performing team that do well and I think together I think we can bring that up the channel.
Thank you, Michael. And then just one last question, if you don't mind. On the one point 25,000,000 horsepower that you have set aside for maintenance, that in relation to your 3,000,000 per fleet and maintenance going forward, I know you've talked about that on your existing fleet that that might be trending up over time. Does this additional 1.2 5, does that help offset that? Does that go down over time now because of this?
Because you don't have to be replacing, say, different pumps or different components? I'm just thinking about over the next couple of years.
Yes. I think you're looking at that correctly. We will most likely use that to offset some of the capitalized maintenance and bring that cost down slightly over the next over a period of 2 or 3 years.
Okay. Thank you.
Thanks, Dave.
And our next question today comes from Scott Gruber with Citigroup. Please go ahead.
Hey, gentlemen. Good deal.
Good morning, Scott.
Good morning. Just a couple of cleanup questions here. Just following Dave's question on Schlumberger's fleet, Can you provide some color on where you expect their fleet count to be in 4Q on top of your 10 to 12?
Yes, we probably should refrain from doing that. We should probably refrain from doing that.
Okay. And then you offered some color on the sand business. It sounds like you're going to hold on to it. What about the Canadian business? I know it's a small portion of the Schlumberger fleet, but is that core?
Are you intending to maintain an operation in Canada? Or is that potentially a divestiture post close?
Look, you never know, but our current attention absolutely is to maintain that. Look, Canada has tremendous assets and tremendous companies. The challenge of Canada has just been takeaway capacity, right? That's what's limited how much activity can happen in Canada. They've got obviously you see it in the news all the time, but there's some meaningful pipeline development projects that will happen.
So great assets, great companies and ultimately larger access to market. So the Canada market is modest in size currently and probably will be in that near term, but I think there's good prospects there going forward.
Okay. That was it for me. Thank you.
Thanks, Scott.
And our next question today comes from Chris Voie with Wells Fargo. Please go ahead. Thanks. Good morning. Good morning, Chris.
So we touched on synergies and SG and A a little bit, but I'm wondering, can you give what you think SG and A would kind of settle out at post any obviously deal related kind of extra costs once this is all settled? And then also maybe describe what kind of transaction costs or restructuring costs you might be incurring on a cash basis over the next couple of quarters?
Right.
So no, so on the G and A cost as we're going to sit like Chris, you're so dependent at the moment on the sort of the external market and just how many fleets we're running, right? We're still sort of probably not too far out of the bottom of the COVID-nineteen pandemic decline. So again, I think really as you can see, you can probably see that we've been pretty efficient on the G and A side. But as you would know, right, we could double the size the company. We're not adding that significant amount of G and A, right.
I mean, this is a we're not stepping out to multiple different types of business lines etcetera. This is really just a natural extension of where we were in Q1, which is about where we'll sort of kind of start next year when you combine the companies. But and then we're going to grow out from there. So we've got a lot of efficiency that we can mine at that point. On your second question, yes, we've got of order probably less than $15,000,000 worth of transaction costs related to this deal in cash.
Okay, that's helpful. Thanks. And then this is maybe for 6 months or more down the line, but just curious originally you guys were very focused on frac, didn't even want to combine with other operating entities. Now obviously the world is changing, we opened up the deal this happened. Just curious, do you think this kind of is the limit of where you go in terms of product lines or did this kind of set the stage for potentially further growth into other areas with Lower 48?
Chris, the one difference I would have is you say originally we were very focused on frac. I don't that doesn't change at all. Sand is the biggest supply input to frac. Power ends, fluid ends, they're the biggest steel, they're the 2nd largest expenditure to perform frac operations. So, pump down the wireline part of the business we're in is plug and perf, right.
That has one purpose only and that's to enable multistage frac of horizontal wells. So I it's really just deepening our involvement in capturing a slightly a larger piece of the value chain in frac. So, this is a continuation of the original vision to be focused on frac.
Okay. That's fair. And sorry, if I could just tack another one on here. On that point, do you expect to be bundling primarily the wireline and plug and perf and everything like that or potentially go into an integrated direction similar to what Halliburton has done? Are there any plans on that front yet?
Yes. For us, it's whatever works best for the customers. Our goal is to help our customers lower their dollar per BOE. You want the best frac company, you want the best waterline company, you want the best technology you can deploy. And so our mantra and goal there is actually no different, no
different. Okay.
Thanks for
taking my questions.
You bet, Chris. Thanks.
And our next question today comes from Chase Mulvehill of Bank of America. Please go ahead.
Hey, good morning and congrats on the nice deal. I guess first I kind of wanted to come back and talk to the efficiencies and think about where Liberty sits today or maybe you want to benchmark it versus kind of 2019. And when you looked at Schlumberger's fleets and looked at their frac efficiencies, maybe you could kind of compare your fleet versus kind of where Schlumberger sat last year. I know in the presentation you gave some numbers, 212 stages per fleet per month for Liberty and you gave a peer average of 141. I don't know if you could compare Schlumberger to that 141 or compared to yours, like are they closer to you or close to peers?
So just kind of some color there would be helpful.
Well, there's 3rd party data on that. I'll say they're above the average and below Liberty. So they're in that gap. And that's the thing working together and the liberalization. Look, they're going to have some things they're better at than us and we're going to adopt those.
And we have some things that are better than what they do. So look, the competitive drive to get better will maintain. They the goal is to lift operations up across all of our fleets. But that was last year. Yes, if you look at fleet activity today, I think we mentioned this in our last earnings call, with a smaller their performance on current Liberty frac fleets is pretty eye popping.
But for us, it's a look into what we could get to across all of our fleets down the road with our continued efforts.
Okay. All right. And then maybe you could just quickly hit on the Alliance agreement. I mean, you mentioned it obviously in the prepared remarks a little bit, but is there an exclusivity agreement with all the different services that you listed here? And then also maybe talk about you talked about plug and perf, is Schlumberger keeping the dissolvables and things like that or does that come along with it as well?
No, the manufactured products, they stay with Schlumberger. Obviously, they do that across all their product lines. So no, that stays. But what we're taking on is the service end of that business. And the alliance agreement still has we've got time to flesh it out.
But really it's just trying to say, look, there's 2 players in this industry that have just been dominated by technology and have been pioneers in technology from our existence. So, hey, maybe we can do things better together. We can leverage off a number of the work they've done in other areas that feeds into frac, basic digital platforms, downhole reservoir understanding. We have leading technologies in the execution of frac and the equipment associated with frac and that lead we think will only grow they're going to continue to perform frac operations in the rest of the world. So I think we both companies view it as a thing that makes both of us better in what we do.
But yes, I can't say any more of any details right now. But I appreciate the question. We are quite excited about that idea.
Okay. One quick easy follow-up, sorry, I'm going to squeeze this in, if you don't mind. Customer mix, could you talk about the customer base and if they're complementary or not?
They are complementary. Again, given the size of both of our businesses in frac, we have relatively little, quite little actually customer over that, even though we both sort of bring a tech savvy sell to customers, but it's a big world out there and look, this is only Liberty's 9th year in business. So quite small over that, much less than you or we would have guessed.
Yes, good to hear.
Yes, I thought that there would
be a lot given the size of the 2 companies. All right. Well, thanks, Chris. I'll turn it back over.
Appreciate it, Chase. Take care.
And our next question today comes from Stephen Gengaro with Stifel. Please go ahead.
Thanks. Good morning. So two things, if you don't mind. The first, and it goes back a little bit to Chase's question on customer mix. You
talked about
in the presentation sort of your average EBITDA per fleet historically and your relationships with key customers, I think, has been important to that. As you get bigger and as you get sort of and you sort of mentioned 20% of a larger market maybe, but as you get to that size, can you continue to achieve that level of efficiency, customer relationships, etcetera, and you think or do you think that is at all dilutive to your fleet
profitability? So great question. And for sure that is a challenge. We I remember very early on, 12 months after we were in operations, we had 2 pretty awesome frac fleets. And we got a lot of compliments, but people said, look, those are special, but you guys can never do that when you get to 10 frac fleets.
It's just you're not going to be able to pull it off. And I would agree, it is a significant challenge. I always say our greatest business risk is complacency. But we're not complacent humans. And each frac fleet, it's like a company in the Army.
It has service leadership that sets the culture and sets the drive of that fleet. And so one of the things we do at Liberty, as people we hire a lot of people that bring up within Liberty organizations and the people who are hard drivers, they get it culturally, they have good communication skills, they become crew leaders and they move on and we form a new company with veteran leaders. So it's not easy. It takes time. It takes effort.
We were incredibly thrilled as we met internally last year. Our 23 fleets that were running at the end of last year, the average of them massively outperformed the 2 fleets we were told were like Rockstar fleets a few years ago. So is it a challenge? Yes. Will it take time?
Yes. Are we human that we're going to make mistakes? Yes. But that's what drives Liberty every day.
Great. That's great color, Chris. Thank you. And then as a follow-up, when we think about sort of downhole perforations and now what you're doing on the wireline side, How
do you feel about sort
of those technologies? And is there anything that you might or possibly could add or how you're looking at sort of the integrated perforating market and how that sort of impacts Liberty's efficiency going forward?
So operationally, we're going to be more learners there than adders there for their operations, but we're going to take our same mindset, our same data focus to figure out what are the causes of downtime, structures and wireline, how do we address those, whether it's technology or process or humans. So I think we will work hard on looking at that to see where we can improve it. On the technology of preparations itself, funny enough, I mean that's been something I've worked on my entire career. Lane and I, our VP of Engineering wrote a paper on perforation and how to diagnose perforation issues probably 20 years ago. It's still used widely.
So we are a long time technology guys. We've just never been in the business. So we look forward to getting into that. But again, it's we're interested in preparations for how do they impact fracture initiation and how do they impact efficiency of frac operation. Sir, I could ramble too long.
Appreciate the question.
Great. Thanks for your answers.
Thanks, David.
And our next question today comes from Ian Macpherson with Simmons. Please go ahead.
Thanks. Good morning. Congratulations. Good day Liberty shareholders today for sure. We've asked a little bit already about the margin differential between OneStim standalone and you guys historically or last year anyway.
Just unpacking the revenue and EBITDA that you gave us on Slide 6 and taking out the 125 day 1 synergies. There's 5 or 5.5 points of margin delta there. Michael, do you have the number? How much of that you would attribute to just the integration of consumables, sand, wireline, things like that, that aren't necessarily subject to a liberalization uplift, but structural lower margin revenue that we should compartmentalize when we think about earnings power?
Ian, it's an interesting question. I think this is something that over the next 6 months we're going to probably delve very deeply into it and think hard, long and hard about. But I think one of the things you've got to look at here is this has been an interesting industry for the 8 years that Liberty has been in business, right? We built this company and started it in a declining market, right? So we built this company sort of with a very, very lean, efficient and very focused operation.
One of the struggles for some of the larger companies that came out of the sort of like the boom growth of the shale side of it, you've got sort of some overhang there. So I really think when you sort of like peel back the onions, when you look at the actual efficiency of the fleets and the fact that you're really a technology driven company, I think sort of some underlying just really great underlying operations there. So yes, that's something obviously we'll be looking at as we go forward next year once we get to integrating the companies together. I think there's a lot of great potential there. But again, as you know, we're early on.
We've got a lot of work to do. And but I don't think there's nothing structural, right? This is about being focused and having the right cost asset base, the right equipment and the right people focus on the right things.
Understand. Thanks, Michael. Can you tell us now or what we get it in the proxy what OneStim's average working fleet was for last year? We obviously see that you have you had you and One Sim had similar EBITDA, but they had about 60% higher revenue. And I think getting that number would help answer the question a little bit differently that I just asked.
Yes.
I mean, we'll have to work through the proxy statement and see where that is with the 1st and team. They were running more fleets than we would. Again, that comes from the differential efficiency. But we're not at the point to release that as something that we'll be discussing as we put the proxy together.
Understood. Thanks very much.
No problem. Thanks, Ian.
And our next question today comes from wokhar Syed with ACV Capital Markets.
Thanks for taking the call. Again, congrats, Chris and team. Looks like a great deal and the stock reaction certainly reflects that. My question relates to the compatibility of the Liberty fleet in terms of the manufacturer's design versus that of Schlumberger fleet and how would that kind of as you put the 2 fleets together, the inventory situation and all that, how would that change? Would it get better, more efficient, less efficient?
Any comments on that?
Makar, this is Ron. Yes, fortunately, they thought about fleet design very, very similar to us. They were big, big customers of CAT and so a large portion of the equipment that we are going to see is a CAT CAD combination. And so when you think about it from that standpoint, from a warehousing scenario, from a supply chain standpoint, a lot of synergies there, a lot of similarities that are going to have well aligned going forward. Obviously, we use different control systems.
They had a proprietary control system different from the one we use. We'll be looking at the benefits of each of those and thinking about what that's going to look like going forward. But that's when you think about differences really the primary difference when we look at the horsepower out there.
Okay. And Michael, my understanding is that the $277,000,000 of EBITDA that Schlumberger generated included $110,000,000 of G and A and some gains. Do you know what the clean number was?
I think the only numbers that were basically the ones that are approved are out there.
I think it actually goes
the opposite direction. There was sort of about 125 of G and A
and some gains, so which brings it down to 110.
But yes, that's I think that's there'll be some more detail when the proxy comes out.
But again, I think you really
I think for everybody, really the idea is really to look at this. This is a great set of human beings, a great set of assets, a really interested integrated sort of additional platform for us. I think the question there is, what do we think the Liberty leadership team and the OneStim team are going to do together to outperform.
Great. Thank you very much. That's all I had. Thank you.
Take care, Makar. Thanks, Makar.
And our next question today comes from Vebs Mayshnaub with Howard Weil. Please go ahead.
Hey, guys. Congratulations on the deal.
Hey, Vibes. Thank you.
So I want to have I have few questions on the synergies. So 125 $1,000,000 that's the run rate that Schlumberger had in 2Q, is that the implication?
No. Okay.
No, we
just talked about 2019 numbers, Vebs. This is just giving you guys some I mean, one of the things we put some of those numbers in was because there was a lot of opacity around sort of like the breakout of this business. We want to give you just a few numbers around that. I think for any details on that, I would wait until you see the proxy. I think that's probably the right way to look at it.
Number 2, on the facilities. So I believe Liberty on the legacy side has about 5 facilities. Now we are talking Schlumberger has 20 owned facilities. Obviously, you are getting access to now Haynesville and Mid Con in Canada. But like how should we think about pro form a facilities?
And then like what is the plan like in theory you can actually sell maybe 10 or so facilities and that actually reduces your purchase price? What I'm actually thinking about is in a correct way?
Yes, we have more facilities than that. And again, what we'll do is post integration, we'll look at sort of where we overlap. I mean, there's a number of basins where the Great Onestone team are in different places, those facilities are there to support those areas. We have some overlap in different in other basins. There's not that many there's a few overlapped owned facilities and we'll take a look at those.
This is something that we'll get next year.
And maybe last question if I may. If I look at Slide 21 where you guys talk about historical combined market share and like 20 2 percent 2019, it seems like that would maybe imply around 40, 45 fleets on which it was working, but maybe that's it sounds too high. So just I don't know if it is a way you can help. I know we have tried to address that question a couple of different ways.
Regarding the 2019 fleets for the 1st 15 team?
Yes.
Yes. I mean, I think that implies you're right around 12% on sand volumes. This is on sand volumes pumped and you have the general overview of what's being pumped last year. So again, I do not want to really specifically talk about any of the function data that really is for their team to discuss. But I think you can back into some numbers that will give you some ideas if you want to model them.
All right. That's all for me. Thank you.
Thanks, Vince.
Ladies and gentlemen, this concludes the question and answer session. I'd like to turn the conference back over to Chris Wright for any final remarks.
I thank everyone for their time and interest in this deal today joining the call. I thank the Liberty family for your efforts to get us where we are and surviving through this and the same thing to the OneStim family. Boy, it's been a rough 6 months for all of us, but I appreciate everyone's hard work and dedication and we look forward to bringing the whole family together around the end of the year. Thank you all.
And thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.