Good morning and welcome to the Liberty Oilfield Services First Quarter 2022 Earnings Conference Call. 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 the website. I would now like to turn the conference over to Liberty's CEO, Chris Wright. Please go ahead.

Good morning, everyone. Thank you for joining us today to discuss Liberty's first quarter 2022 operational and financial results. The world is seeing in searing fashion how critical it is to have a secure, reliable supply of affordable energy. Today's energy crisis did not begin with the Russian invasion of Ukraine. It began last year when global supplies of LNG simply could not keep up with demand. The cost of this shortage goes far beyond the soaring prices of global LNG, which extend -- extended periods above $200 per barrel on an energy equivalent basis. The world has seen rolling blackouts, countless factory shutdown, millions struggling to pay their heating and utility bills, and perhaps worse of all, we are likely at the leading edge of a global food crisis, doing significant part to curtailed nitrogen fertilizer production that is critically dependent on natural gas. Without natural gas synthesized nitrogen fertilizer, global food production would drop in half. Today's prices are not due to any shortage of energy. It is due to a shortage of energy infrastructure, which in turn is due to a shortage of reality in mainstream energy dialogue and policy. We desperately need a more thoughtful, sober dialogue on energy, or the human toll will continue to mount. Enough on this critical topic. Turning to my favorite energy company, Liberty, entered 2022 with the right people asset base and strategy to execute in a tightening frac market. And we're pleased to deliver strong first quarter results. This quarter demonstrated the benefits of our vertical integration strategy as we successfully navigated an operationally challenging environment. Last year, we expanded our services to include wireline and we became a major sand producer, obtaining 2 large mines in the Permian Basin. We enhanced our technological advantages through the acquisition of…

Good morning, everyone, we have come a long way and we are only just getting started. I'm so proud of that team for the quarter we have achieved. But more importantly, of how we were able to do so, after the last 2 years of managing through the pandemic, a rebounding economy that pivoted into global supply chain challenges and now in inflationary environment, all while they seeing that business for this submerging, multiyear up cycle. This is quarter of 2020 to review was $793, $109 with 16% increase from $694 million in the full quarter. The teams worked with their customers to deliver solid activity gains, despite the same logistics bottled leaks that plagued industry. We also sold net sale price increases as contracts repriced into the new year. Of the top, growth in top line, approximately 55% was driven by activity in mix, and the balance by net sales pricing. We saw good progression through the quarter as sand and logistics bottlenecks ease and a full effect of pricing was realized. Net loss after tax was $5 million in the first quarter can pay $250 million compared to million dollars loss in the fourth quarter. Fully diluted net loss per share was $0.03 in the first quarter compared to a city one seems loss in the fourth quarter. Results were negatively impacted by $9 million related to the loss of disposal of assets of $5 million, and a remeasurement of liability on the tax receivable agreements, the TRA of $4 million. General and administrative expenses totaled $58 million for the quarter, including non-cash stock based compensation of $6 million. G&A was up $3 million sequentially, driven primarily by $2 million of non-cash stock compensation expense as full quarter reductions and stuff compensation expense contrasted for the annual grounds…

There is much to lament about the status of world today. There are also things to celebrate. The pendulum has started to swinging back towards the energy sobriety. It is hard to overstate how important this fact is. Progress will likely be slow and surely much more human damage will be caused by politicians and regulators resistance to reality. But many positive developments are unfolding punctuated by Germany fast tracking approval up to new LNG import terminals. Economic growth and bettering human lives go hand in glove with increased energy consumption. This has been true throughout human history. It is encouraging to see improving returns moving the last sector that has yet to see them in the oil and gas industry. Energy services a healthy, robust North American energy industry is required to meet the world's growing demand for energy. We look forward to your questions. I will now turn the call back to the Operator.

We will now begin the question-and-answer session. At this time, we will pause momentarily to assemble our roster. The first question comes from Neil Mehta with Goldman Sachs. Please go ahead.

Good morning team and congratulations here on a very good quarter. Chris, in your Analyst Day you put out a mid-cycle fleet profitability target of $14 to $18 million of EBITDA per fleet. We're at $10 million as of this last quarter. How are you thinking about the path to getting there and do you think there's actually potentially upside risk to this figure? And how much higher does it need to go before you think the industry is incentivized to pursue new build activity?

Yeah, thanks Neil, I think you clearly have to get above mid-cycle economics to incentivize people, to build a new frac fleet. We are a long ways away from that. Build a new frac fleet simply for more capacity. But the road to get there, which gives you've seen a step on that road, but the road to get there is just supply and demand. A tighter market right now is driving up net service pricing. It's also making customers very co-operative around scheduling. Our industry needs high utilization, high throughput, and pricing. It's a combination of those 3 things that drive profitability. And we're on that road now.

Thanks Chris. And if fleet profitability remains elevated, even for some of the older conventional assets in your portfolio, would you consider delaying fleet upgrade CapEx, and deploying equipment as is, or is the CapEx view over the next few years from your Analyst Day still the base case.

Yeah. I don't think anything in the macro plan has changed at all. Yes, you're seeing elevating profitability across fleet types right now. But high tech, the new jet next generation fleets that we're building. Those are arraignment. Those are arrangements with customers. If we make an agreement, we've -- we always live by what we agreed to. And we're excited about that. That's bringing out a next generation of technology, there's huge customer interest in that. It's ultimately going to drive down operating costs, drive down emissions, and move fleet powering from diesel and natural gas is all positive developments.

Thanks, guys.

Thanks, Neil.

The next question comes from Arun Jayaram with JP Morgan. Please go ahead.

Yeah. Good morning, Chris and team. I wanted to delve a little bit in the one quarter beat. $92 million, the street was in the upper forties significant beat relative to expectations. Ultimately, trying to understand is how much of the beat was driven by the pressure pumping business versus some of the benefits from your vertical integration from Sand Logistics and kind of wireline. Can you give us a sense of maybe what the EBITDA per fleet was trending in Q1? And then maybe some of the tailwinds you're getting from the vertical integration.

I'll take this one to start with. The -- when you look at it, the vast majority of our business is frac. And logistics of sand is really to enable frac. The vast majority of the sand that comes from their sand mines gets delivered through our frac fleets. So that vertical integration and having to control both the pull points and the push points is the key thing we're enabled to be more efficient as we drove through the quarter with all the bottlenecks that existed, especially in the southern basins. So that was the key part. So really, it is driven by frac. And as you see, the underlying results, there are some pick up as you're looking at the difference in Q4 and Q1, obviously is the integration costs that were part of the Q4 story rolled off. But yes, it's normally driven by frac and everything that we do to enable the efficient operations in the field.

That's helpful. Maybe to you, Chris, I was wondering if you could maybe characterize the supply demand balance today in frac. You guided to 10% sequential revenue growth in 2Q. I was wondering maybe you could talk about the demand situation. Maybe what's unmet as you look at the market today. And for that 2Q guide, how much of that is the mix between activity growth versus net pricing gains?

Yeah, that's supply, demand market today is quite tight. This tightening last fall and I think as we said in our last call, is meaningfully tighter in December than it was in October and that trend has continued. And there's just not that much spare capacity left. So do you get to the very near the end of whatever can easily be deployed is already deployed. Yeah, you have a tight market and we have today a tight market. So our expectation of a 10% revenue gain, something like that Q over Q. The biggest component of that is just increasing activity. Obviously, in the first quarter there is always weather, seasonal issues that shave a few percentage points off revenue. This year, maybe that was magnified a little bit by the trucker sand struggles, particularly, very early on in the quarter. So GAAP Q2 is seasonally a better quarter as far as revenue and generally, we will drop the bottom line. So I would say, activity is the biggest piece but continued migration of pricing upwards across our fleet is a component of that as well, not unless Michael wants to comment more on that.

No, I think it's very clear as to what you will look this year. And the vast majority in Q2 is going to be activity driven. There's a slight headwind, they come out of ex-Canadian operation in Q2, the balances sort of the opposite that you'll see in the USA in Q1. So that mutes a little bit the activity growing. A small amount of the net pricing is going to be going on in Q2, as we got through. And I think we will see more guidance for the second half of the year as we .

Great. Thanks a lot.

The next question comes from Chase Mulvehill with Bank of America. Please go ahead.

Hey, good morning, everybody. I guess first thing, a lot of discussion around kind of your profitability and vertical integration. But if we kind of looked at first quarter numbers, it thinks about kind of optimization on vertical integration and think about kind of where leading edge frac pricing is. I don't know if you could kind of talk to kind of how much of that where you further optimization you have and how much kind of more leading-edge price you have to kind of flow through your results versus kind of 1Q. And then maybe kind of talk about the momentum that you're seeing on the frac pricing side.

Look, pricing will continue to migrate higher right now with where we stand. You got to realize, part of that is just inflationary. To buy parts is more expensive today. To do most everything is more expensive. So that means there's always going to be -- and that's historically been true as well. There's always dynamic pricing as all costs is passed through components change in price. Today, the additional thing is net pricing is going up. And there is starting to be a little bit of a competition for fleet. Not everyone that wants our fleet or wants an extra fleet today, frankly, is going to get one. And so for us, where we allocate capacity and how we work pricing, it's just very much a partnership dialogue. We're -- at the end of the year, we're going to have pretty much the same customer profile we have today, we had at the start of the year. But as market tightens, price will continue to drift upwards. We act as partners to our customers, so we're not -- and we may have a competitor too in this boat, but we're not in a, it's going up 25% in the next part or we're out of here. That's just not the way Liberty works. We're a business and the market is tight, and so pricing will continue gradually to migrate upwards.

Yeah, when you think about the tightness in the pricing moving higher. I don't know if you'd be able to characterize the tightness. Is it more of a function of equipment type tightness or labor tightness?

It’s both. The single biggest challenge right now is labor and everyone knows is right. This is countrywide, but certainly in our industry, after a big downturn that pushed a lot of people out of our industry. You know, there's high paying jobs in more pleasant conditions. So we've unfortunately lost some people out of our industry. We are actively today recruiting people back into our industry. But that's harder today. So labor particularly confident, qualified, trained labor, is in tight supply, but it's not just labor. There's just not that many frac fleet are frac pumps sitting around the extra capacity today again, as the very old stuff, or mostly very old stuff, that some of -- a lot of which got scrapped and some of which is still parked or is going through auction houses. If tighten in both areas, and as you know, that logistics are tight. If you theoretically you wanted to stand up ten more fleets in the Permian basin, well, where you're going to get the sand from? Where you're going to get the truck drivers? I get a staff, those fleets, and what are those fleets going to be? So, the challenges are pretty broad based.

Yup, makes sense. Just one quick follow up on Neil's question on mid-cycle margins. I mean, obviously you kind of gave us that range at the end a few years ago. I think it was split with -- Neil said $14 to $18 million of annual EBITDA per fleet. But then you've obviously -- you've got frac and prospects wireline. So it's going to be additive to that EBITDA per fleet and you stopped kind of given us fleets, which is fine. But how should we think about mid-cycle margins? Should we -- what you -- just talk to EBITDA per fleet or percentage margins. I mean, should we think about this as a 20% margin, business has mid-cycle or just kind of help us frame the new Liberty of what mid-cycle it looks like.

I will to Michael. I'll just say, look those wireline is critical to derive efficiency of operations and make things moving. You can't frac without sand and logistics. So all those are critical. What -- they're not huge pieces of the puzzle. They're more important as enablers than margin deliverers in themselves. Although they do deliver margin, like it's -- I don't know -- to give any more color, but the dominant margin we made, the large majority of the margin we make is frac operations.

That's correct, Chris. And when you look at it, Chase, we -- when we had the Investor Day, all those parts of the business were part of our business plan other than the fact that we did non-profits. And really, we did use containers and we did the logistics already for the majority of our customers. So that was just . What I think of it is like judging the developments that we were already doing in the business. So I think that's the key thing. And I think as Chris stated earlier, as we move towards mid-cycle, the reality of service company pricing is it needs to get on the way decently above mid-cycle as to move towards reinvestment. Mid-cycle is just another step on the way to where we need to go, to through-cycle. Mid-cycle margins -- at through-cycle margins, should increase about there. So that's where we're going.

Maybe where I think I'd add to that we don't foresee we don't have plans to build 10 more frac fleet because we need tech more frac fleets the market's growing. We're just not do that. What we are going to do is when we have digiFrac is truly differential in operating costs, in emissions, in quality working to build digiFrac fleet. When it makes sense in a bottom up, the negotiation in partnership with customers. But that's -- and we're going to continue to upgrade the existing fleet we have. But we don't have any oh, geez. We're going to grow our fleet capacity by 50% or 10% or 20%. We don't have any such plans. It's for us it's just about higher technology and better equipment we're bringing to location. It's not about capacity, growth in building new equipment. We grow us in that from the one stim deal, we have additional equipment. Some of them that were running not that long ago, those have been parked and not far from ready to go for months since we closed the deal a year-and-a-half ago. Our industry had a rough, a really rough last 2 or 3 years, but it hasn't been great this industry for a while and the dominant driver of that is just overbuilding in the early 2010s, massive overbuilding. But that's working its way off and we're heading towards a better-balanced market.

That all make sense. Appreciate the color Chris and Michael will talk to you guys.

Thanks.

Thanks.

Next question comes from Steven Gandara with Stifel. Please go ahead.

Thanks. Good morning, everybody. From I guess, 2 things for me. If we could start and sort of back to sort of EBITDA per fleet question. Is there as you look ahead and you look at net pricing improvements, if, if sand prices were to normalize a bit? I know they've been elevated. Is that a headwind or is that neutral for your profitability per fleet from here?

Neutral, Stephen, I mean, sand prices, long term sand prices. You'll hearing the stories of these spot market prices, etc. But you've got to be in, but we think about things like clearly. And majority just pass all of that customer, our long-term customers, the mask, the vast majority of that partnerships from ethane supplies a long-term partnership. So that's greatly so spot market prices really on the serially fixing our business as much as what you see the stuff that you're seeing on the margins.

Okay. Great. Thank you. And then my second question. It may be hard in this market because the market is obviously very tight. But we've clearly seen the industry dynamics changed, we've seen consolidation you guys have been evolved in. Are you seeing any change just in general in the behavior and how it's impacting the competitive landscape and pressure pumping?

Yes, there is. Yes. I would say that integration and the failure of a number of companies has definitely driven our industry to a better structure. You got 4 companies, probably with an order of 2/3 as the frac capacity. That's just making it a week -- that it just made better industrial decision making, I would say across the board. It's not perfect. There's always going to be incremental fleets. There's always lower costs, lower quality players so we have a -- there's a pallet of companies out there but the decision making is definitely gotten better in our industry.

Very good. Thank you.

Thank you.

The next question comes from Scott Gruber with Citigroup. Please go ahead.

Good morning. I was contemplating how quickly can incremental pricing roll through your book of business. And so if we just assume that in March you are able to secure something on the order of like 10% incremental net pricing, how much would you realize in 2Q, how much in 3Q, 4Q, and how much will you have to wait to get through budget season and realize in 1Q of next year? How would that impact your average pricing in the quarters ahead?

Once you got to look at that, the vast majority of our fleet is re-priced early in the year, like every turn of the year and the new pilot budget year, and increase incrementally from there. And then steep changes generally happen on an annual basis. So you're not going to get steep changes every quarter across the whole fleet. Then you are going to get changes incrementally in different fleets at different times. And so it sticks in as you go through in the year. That's really how pricing works.

Got you, got you. And just thinking about the macro backdrop here, obviously it's been good on the oil side and got better recently but natural gas prices obviously have spiked here in the U.S. recently. Do you think we're going to see an incremental pull in demand for frac services from the gas basins given the price action here?

There's little bit of that happening for sure right now. You're not so -- the increasing activity, which again is not crazy, but the increasing -- it just feels crazy because it a tight market, a little bit of extra pull is more impactful. But there is increasing activity in the -- particularly in the Haynesville, where the takeaways there and you're closer to ports, activity is increasing there in response to higher prices.

That was it for me. Thanks.

Thanks Scott.

The next question comes from Ian Macpherson with Piper Sandler please go ahead.

Thanks. Good morning congratulations team.

Thanks, Ian.

Another gas question. It seems to me that were given the takeaway constraints. I mean, northeast can't grow because of various reasons and we've obviously got infrastructure constraints in the Permian which puts all of the growth burden on the Haynesville, but within the Permian, I would expect that you're going to have a widening fuel for dual fuel fleet with Waqar versus Henry Hub. Then I guess that's probably a key point of contract negotiation sharing that saving with customers. Can you speak to that dynamic and how that might be a benefit or maybe more pocket upside as that dynamic probably expands in the future?

Yes. I mean, that could be incremental positive. But in the various agreements we have, they're structured different ways. Sometimes they could be a hypothetical look at the fuel savings and then the pricing is just set based on that, so the changes in the actual fuel savings may or may not flow through to us. And I think what did -- wind does takeaway capacity get very tight in the Permian and therefore, we have the Wall hop below out. Lot of opinions on that, when that may happen and how that might happen. Arp you probably saw in the Kinder announcement that yes, good possibility they're going to take a pipeline or two like add extra compression. So let's hope that the Permian takeaway capacity situation evolves more gradually and we don't have just so a below out in basis and a collapse and local gas prices not impossible. In a small number of fleet if that did happen, wouldn't benefit us a bit? Sure. Would it be material? Would you know? Would we talked about it a conference call? No. It wouldn't be meaningful.

Got it. Thanks, Chris. Michael, going into today when we had a different view of EBITDA for Liberty this year, at least my outlook was for limited free cash flow for the company this year, you had negative free cash flow in Q1 with some working capital investment, but now that we're re-framing EBITDA higher than we thought, would you refresh us on how we should think about free cash flow? And really, we know that you pledged to be going back to Liberty standard of returning cash through the cycle, but we were previously thinking that was probably more of a '23 event than a '22 event. So just wanted to check in with you on that.

Our view hasn't changed, Ian. As we said in our Investor Day basically a year ago, we're seeing the early part of a long cycle. We're investing in new technologies to support our customers ESG efforts and efficiency. And this really isn't a different year. Again, obviously EBITDA is rolling higher. Obviously, demand for that next-generation fleets is also being pushed by some of our clients. So we'll give an update on CapEx and free cash flow at the next school.

Sounds good. Thank you, guys.

The next question comes from Taylor Zurcher with Tudor Pickering and Holt. Please go ahead.

Hey, Chris and team, thanks for taking my question. First one on pricing. You're talking about mid-cycle margins, pricing levels at some point in 2022, it sounds like we're well on our way there, and so I guess my question is, why or why not do we reach peak cycle pricing by 2023? It sounds to me like the industry's super tight today knowing that in capacity. So this tightness dynamic is going to continue to move, continue to persist moving forward. So just curious your thoughts on potential peak cycle pricing by 2023. Thanks.

It's certainly a real possibility. We'll always want to be -- you here as we talk about the future, we're just thinking about supply and demand and sort of broader trends. And yes, those that continues to look pretty positive right now. But how that actual pricing dynamical unfold, I certainly will hesitate to predict, but I think your logic and idea is not unreasonable.

All right, good to hear. Follow-up is on digiFrac. I know you've got 2 fleets hitting the market here, I think over the next couple of quarters. So, just curious on the outlook for incremental fleet orders above and beyond those 2. How are discussions with customers progressing? How the economics of a potential third or fourth fleet addition sort of evolving as pricing for the base business is just skyrocketing higher. All sorts of questions on those 2 fronts, I'd love to hear.

You bet. We -- just look the interest in digiFrac as you said before, it's been huge. So we're in dialogue with multiple partners about that. Certainly we're going to build more than two. The timing of those builds I'll leave more that to Michael, but for us it's never, well, this year we're going to build X and next year we're going to build Y, it's just engaged with our partners, engage with them and if we can find the right partner that wants the fleet, we can get the right length of commitment, structure of commitment, profitability, and balance sheet wise and investment-wise it makes sense, then we'll do it. And so -- but the interest there is huge, we're excited about that. And we're particularly excited the next few months to get some pumps out there and not just the prototype ones, but commercial pumps and fleets and operation. I think when people see that and what we learn from that, the interest will grow even more. So it's really more a capital deployment -- pace of capital deployment decision more than anything else. The interest is very large.

Thanks.

Thank you.

The next question comes from John Daniel with Daniel Energy Partners. Please go ahead.

Thank you for including me. Firstly good to hear this frac interest is strong. If I was a customer of yours and I signed a contract today for a fleet when would I get it? What's the lead time look like?

Yeah. That Susan Canadian boy.

Morning, John?

Morning.

I mean, certainly if you were to sign a contract for a fleet right now, you'd be looking at delivery into 2023.

And then you guys mentioned you don't want to just grow fleets for growing fleets sake, but Ron how are you approaching -- let's just assume we're going to crack parts in it will be more, we know that, are you retiring legacy fleets? What's the process for in terms of your fleet count, you take those crews on legacy fleets, put them on at digiFrac crews? If you could walk us through that dynamic.

Yeah. John, I think with strong pull across the board today, look at the market was moderate. Our plan was parked that equipment that was running and yet the same humans that are on that crew that have those relationships, they will run the digiFrac fleet. In today's market to pull it quite strong so yes, it was first to digiFrac fleet. I would say very likely that legacy equipment that's being phased out, that'll be recruit and that fleet will be deployed elsewhere.

Okay got it and then one other one on having a brain freeze here, I'll call you guys when l remember my question I forgot my question. I apologize.

Thanks, John.

Thanks, John.

See guys. Good quarter.

The next question comes from Waqar Syed with ATB Capital Markets please go ahead.

Thank you, congratulations on a great quarter. So this fall just on some modeling questions. What was the cash consumption from working capital, we estimated on $60 million? Is that in the ballpark?

We're selling than that closer to whatever increasing need that was in the safety's workout.

Okay. All right, makes sense. And then could you talk about like what was an active fleet count in Q1 and where it's likely to be in Q2?

Basically, it's got to be flat as you notice, sort of like moves up and down in Canadian market etc., versus we'll get, as we say, the algorithm entities and that's about the general guidance we get as looting around it Those sorts of major

Okay, so in Canada is likely to go down by maybe a couple of crews. So are you picking up some crews in the U.S. to offset that if you staying flat.

I was really talking about being a utilized fleet, they move faster. I think generally using the same denominator for whatever your calculations are is probably right. But thanks.

Okay. And then in the last like sometimes back, if a crew work like 25 days a month that used to be a good number. What's the good number these days for you guys, is it 27, 28 days a month?

Generally, I would consider anywhere from -- depending on the type of crew 80% to 85% of days we can fully utilize, including rig up and rig down.

Yes.

?

Thanks.

The next question comes from Dan Cutts with Morgan Stanley. Please go ahead.

Hey, thanks. Good morning, guys and congrats on the quarter.

Hey, Dan.

I just wanted to confirm and sorry if I missed this in the prepared remarks, but you guys have kind of called out the $20 million integration cost headwind in the fourth quarter and that that would kind of roll off in 2022. Can you help us think about whether that did effect -- we fully roll off in the first quarter or if there were still some integration costs there and if there is any expected moving forward?

I'd say we were ahead of schedule and majority of just basically all rolled off as of net.

Perfect. Thanks. And maybe so appreciating that, you guys probably aren't comfortable sharing specifics, but can you just help us think through how the profitability delta between some of your highest quality assets in the field and of some of the lower quality assets in the field is trending, is that gap widening or shrinking? Maybe kind of help us think through some of the different factors that are impacting profitability there.

These things move through the year. It's interesting because obviously you're high quality fleets with the -- in the most demand during last year's, our preseason probably contracted it earlier than some of your lot of fleets. So you've probably got a little bit of a flattening event cycle at this point in time, I ultimately, as you've seen with ways that we are investing for the launching, ultimately sort of get will re-normalize as we go into next year, right? But I think it comes down to the there was a big change in the contracting cycle when you think about anything has converted from October tracing the finally contracted in February. So yeah, we were very dynamic pricing market so that's the best the background of that.

Got it that's really helpful. Thanks a lot I will turn it back.

Thanks, Dan.

The next question comes from Roger Read with Wells Fargo please go ahead.

Yes. Thanks Good morning and well done on the quarter, guys. What kind of come back, not miss some of the call so if I ask a question that's already been hit, I apologize, but I wanted to understand a little bit better. Kind of the margin performance in Q1, if I sort of normalized. Just for what I think an incremental margin ought to be quarter to quarter if things are going well, call it roughly 35 to 45%, which would imply kind of 50 to 60 million of EBITDA would've been about right, which would say there was 20 to 30 million that kind of came from something else and I was just wondering if we think about it that way. What's the right way to think about the 20 to 30, I know integration costs come out, but was there anything else? And as we think about sort of the sustainability and the starting point for future quarters, kind of that starting point would be good for what the basis and then my follow-up question is going to be in terms of the pricing dynamics and the cost that you're dealing with, the inflationary pressure. I know it's different things this time in prior cycles, but is the ability to push pricing and the ability to deal with underlying cost inflation effectively the same as prior cycles or is there anything you would call out?

I'll take the first question. Really, is you had the roll-off of integration costs and you had -- because of the steep change in pricing -- because pricing was relatively weak last year and the steep change in pricing, so you probably had higher incrementals in Q1 than you expect on your incrementals going forward. That was a key thing there. The second one, yeah, I do think the cycle is a little different this time. You got to remember, we are in -- you've got to be or Chris sometimes. Just live through inflationary environment. So a lot of -- now, I think the customers are understanding we live in a broad-based inflationary environment and that these costs are going to be dynamic and relatively moving quickly. We haven't done that through the last 10 years of the shale revolution cycle , but I think that's what was challenging. I think for the service industry versus the E&P industry, last year there wasn't that break, understanding where things were going. And I think now we've got the understands where inflation is and what's happening. And it is moving quickly and is being very dynamic.

So that means that customers are becoming more, I guess I'll, let's call it accepting of higher price environment for services.

Absolutely. They are running a business just like we are -- I think we're lucky to be a pretty good partnerships. But yes, they fully get it now. But to Michael's point, that was a process because think of this short period of the shale revolution during that short period, the shale revolution not only was inflation in the use, very low, I think averaged just below 2% when in our industry, we were in a meaningfully, meaningfully deflationary environment. The entire shale revolution makes more things be sell up right now, a lot of that efficiency and technology we cut the cost of a well almost in half and doubled well productivity, that's the story of the last 12 years. But it's different right now that that's low hanging fruit to drive down the cost of all the inputs, that's mostly been flocked. And now we have a macro inflationary environment and we have relatively tight markets for the supply of various things we need, like engine parts are sand or chemicals. So yeah, different world today but I think the customers get it.

All right. Good luck, guys. Thanks.

Thanks, Robert.

The next question comes from Keith Mackey with RBC Capital Markets. Please go ahead.

Hi, good morning and thank you l just have a question around your fleet distribution. I realize the market is tight pretty much everywhere, but just curious how content you are with where your equipment is situated. Basin-by-basin and core or do you see material opportunities to move equipment around either between basins are between customers.

We tend to move more slowly maybe than everybody, you know, because again, it's toss, it’s all around a customer partnership. So none of our customers yet have said they're moving their Permian oil all into the Bakken. So our fleet moves are relatively slow. During the softer time, to keep up fleet booked, we might have moved it from a basin that had a seasonal slowdown or not. So we do a little bit of that. But mostly we're sticking with the customers we've got. We're slowly either growing with them or maybe adding another customer, but I don't think a big shift there. As we discussed in the fourth quarter. Last year, how the invoice was, was basically taking the combination of the Liberty customers and the old Schlumberger OneStim customers. And actually repositioning athletes to way we felt like we are going to be the right place for the right customers going into this year. And we should have discussed that a relatively ahead and we were very happy about where they are. I think you'll find that at fleet distribution, other than the Northeast, is really very much like the market, the market averages, right? So I think it's very sustainable. But thanks.

Thank you. And maybe just a quick follow-up. I'm assuming that still holds true if you're thinking about moving potential underutilized fleets or older fleets from the U.S. and into Canada as well?

We don't -- wouldn't use underutilized. We have fleets are very completely utilized at this present point in time. We do not have a plane to move all the fleets to Canada or I think Canada, we will treat like any other great basin and support them with the fleets and the type of technology that we support all of our basins.

Okay. Thanks very much, appreciate it.

This concludes our question-and-answer session. I would like to turn the conference back over to Chris Wright for any closing remarks.

Thanks, everyone for joining us today and we wish you all a great, highly energized day. Take care.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.