# LETTER FROM THE CEO

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-equipment-services/NYSE_LBRT_2019/NYSE_LBRT_2019.mmd` · pages 3-9_

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LETTER FROM THE CEO

## LIBERTY MADE GREAT STRIDES IN 2019.

Liberty was again viewed as the premier provider of hydraulic fracturing services and technology, as shown in Kimberlite's extensive customer survey below. We grew our throughput as measured by pounds of proppant pumped by 30% with only a 7% increase in average frac fleets deployed. We expanded our use of natural gas to power our frac fleets, displacing even more diesel fuel. Our passionate company culture, industry-leading technology, and shareholder-aligned incentives enable Liberty, together with our customers, to get BETTER, FASTER, and CLEANER.

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We are proud of Liberty's performance in 2019, despite the significant headwinds in the marketplace. The American Shale Revolution is a story of technology enabling large efficiency gains in U.S. oil and gas production that upended world energy markets. U.S. oil production more than doubled over the last decade. This surge in production resulted in lower oil prices, which have benefitted consumers across the globe, while challenging our customers.

In 2019, the oil-directed rig count dropped 25%, which combined with an increase in fleet efficiency, led to an oversupply of available frac fleets, putting downward pressure on the pricing of our services. Liberty's 2019 revenue was \(2 billion, an 8% drop from 2018. Pre-tax net income was \)89 million in 2019 and Adjusted EBITDA* was $277 million, both down significantly from 2018. Our Return on Capital Employed (ROCE*) dropped from 39% in 2018 to 10% in 2019. The oil and gas industry always has and always will be cyclical, and Liberty was built to withstand these cycles. We ended 2019 with more cash on hand than we have debt outstanding, while also investing in technology and returning cash to shareholders. As in the previous downturn, we are growing our market share and building our competitive advantage by playing prudent offense.

The technology update in this year's report highlights interactions between new (child) wells and existing (parent) producing wells within a field. Parent/child oil and gas well relationships are complicated and critically important, just as they are in human families. Building partnerships with our customers and communities is what sets Liberty apart. We win when they win. There is a growing focus among our customers and investors on the Environment, Social and Governance (ESG) impacts of our business. We welcome the increased scrutiny.

VALUE MAP - U.S. LAND - HYDRAULIC FRACTURING
Supplier Performance vs. Price

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Liberty has focused on ESG issues since the company was founded.

On the environmental front, we built our first dual-fuel (burns natural gas to displace diesel) frac fleet during our second year of operations. In our third year, we began developing novel sound suppression technologies to make a safer onsite work environment and have frac fleet noise fade to background at 500 feet away. Liberty led the way in transporting all our frac sand in sealed containers to mitigate dust and noise. We continue our efforts to minimize environmental impacts with innovation in frac equipment, fluid chemistry, and further efficiency improvements.

Our social efforts are reflected in who we are as a company. We chose our name, Liberty, because we believe in human liberty: everyone should have the freedom and opportunity to pursue their dreams. Liberty provides nearly 100 K-12 scholarships to low-income kids through ACE Scholarships. This year, we launched The Liberty Scholars program with Montana Tech to provide assistance to first-generation college students. Liberty's

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efforts support schools and youth programs, poverty abatement programs, criminal justice reform, and our veterans and military. Our efforts are targeted to BETTER human lives, to grow individual liberty and opportunity.

Corporate Governance should recognize that incentives drive human behavior. We strive to align our financial incentives with our shareholders and align our social and cultural incentives with our communities. Executive compensation is largely variable based on profitability and returns on capital.

We celebrate the tremendous advancements in the human condition enabled by an oil and gas-energized world. Over the last 150 years, human life expectancy doubled and the percentage of humanity living in extreme poverty plunged from 90% to less than 10%. A modern energized society can make enormous environmental progress together with economic advancement, as shown in the graph below. However, there is still much to be done. Roughly a billion people still lack access to electricity and another billion only have intermittent access. A third of humanity still cooks with wood, dung, or agricultural waste, which creates deadly indoor air pollution resulting in three million preventable deaths per year. Reducing energy poverty is the crux to solving the scourges of humanity: malnutrition, lack of access to clean water, indoor air pollution, and malaria.

Liberty is honored to be a part of an industry that plays a pivotal role in alleviating energy poverty. The key to Liberty's industry-leading performance is our people and the culture that binds us together in a cohesive, competitive team. We come to work every day searching for ways to get BETTER, and to complete our tasks FASTER and CLEANER. We look forward to an exciting year ahead.

SINCERELY,

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CHRIS WRIGHT
CHAIRMAN AND CEO, LIBERTY OILFIELD SERVICES