# LETTER FROM THE CEO

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-equipment-services/NYSE_LBRT_2018/NYSE_LBRT_2018.mmd` · pages 5-11_

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LETTER FROM THE CEO

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## WELCOME TO OUR LIBERTY FAMILY.

FROM DAY ONE, OUR MISSION AT LIBERTY HAS BEEN SINGULAR: BUILD THE BEST DAMN FRAC COMPANY, PERIOD. THAT IS IT. I CAN ASSURE YOU THAT WE WILL NEVER WAVER FROM THIS SIMPLE GOAL. WE ARE CONSTANTLY STRIVING TO GET BETTER. A HUNGER TO IMPROVE IS IN OUR DNA.

## OUR BUSINESS

We founded Liberty in 2011 with the mission to build a different frac company. A better frac company. One that partners with leading exploration and production companies to apply technology innovations and superior operations to reduce our customers' cost of producing a barrel of oil. We do this by designing better fracs that yield BETTER wells that are brought on line FASTER. Liberty founders bring over 20 years of technology thought leadership and operations excellence that have been powering the shale revolution from its beginnings in the late 1990s. Our technology leadership, low employee turnover, aligned incentives and culture of excellence deliver an industry-leading Return on Capital Employed. Consistently reinvesting our cash flow at superior rates of return has allowed us to rapidly become a top four frac company in the U.S. onshore market (as measured by wells completed in 2018) entirely through organic growth. In the eyes of our customers, Liberty's value is consistently viewed as superior to our competitors as shown in the graph below provided by Kimberlite.

2018 was an exciting year at Liberty. A successful January 2018 IPO brought us public on the NYSE. In our first year as a public company, our revenues grew 45% to $2.16 billion, net income before taxes grew 72% to $289 million and our Adjusted EBITDA* grew 56% to $438 million. In addition to strong growth in our business, Liberty also returned $95 million of cash to shareholders through dividends, distributions and repurchasing roughly 4% of our total post-IPO share count. Perhaps more importantly, we did all of this while reducing net debt to nearly zero and with a full year pre-tax Return on Capital Employed (ROCE*) of 39%. Our industry leading ROCE positions us strongly to continue to grow and return capital to shareholders in the cyclical U.S. oil and gas industry.

Liberty has remained disciplined in our organic growth. Throughout the cycles in our industry, we are committed to reinvesting our own cash flow at high rates of return and returning capital to our shareholders. Liberty has prioritized a strong balance sheet with low leverage and ample liquidity to keep Liberty STRONGER and able to move FASTER.

 \( ^{*} \) Adjusted EBITDA and ROCE are non-GAAP financial and operational

measures. Please see endnotes 1 and 2, respectively, following this annual report for important additional information, including a reconciliation to the most comparable GAAP measure.

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

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Building partnerships with our customers and understanding what drives our customers' success is what sets Liberty apart—when they succeed, we succeed. Our partnerships do not stop with our customers. We have also developed long-term relationships with our key suppliers as well as our team members (employees). Liberty's strong long-term partnerships are key to navigating the cycles inherent in the U.S. frac business.

We take safety and environmental impacts seriously. Our business, like all businesses, impacts those near our operations as well as the broader environment, and can pose safety risks to our employees. The U.S. Bureau of Labor Statistics reflects the sterling safety record of the oil and gas industry, which ranks as the ninth safest industry out of the 90 industries that they track. Liberty's Total Recordable Incident Rate (TRIR) was roughly half of the industry average – a clear reflection of our culture and the pride our crews take in getting the job done safely.

Liberty was first in the market to develop a Quiet Fleet that leads the industry in noise reduction, dramatically lowering the impact of oil and gas development on neighboring communities. Our fleets are equipped with dual-fuel technology, allowing engines to seamlessly transition from diesel to natural gas, providing a cost-effective solution to reduce our emissions. In fact, the oil and gas industry has been a leader in driving the dramatic improvement of U.S. air quality. The EPA estimates over 70% decline in the top pollutants listed in the U.S. Clean Air Act since 1970! U.S. greenhouse gas emissions on a per capita basis hit a 50-year low in 2017. The shale revolution has been the largest driver of that reduction, providing low-cost natural gas to displace coal as the largest source of U.S. electricity.

Liberty is widely recognized as a technology leader. Our tech team has developed Fraconomics™, an innovative tool that allows us to conduct multi-variate analysis with our proprietary database of unconventional wells to help our customers enhance their fracture designs and lower the cost of producing a barrel of oil. Fraconomics is one example of Liberty's dedication to making our customers STRONGER by making BETTER wells FASTER.

## THE LIBERTY DIFFERENCE

The key to Liberty's industry leading performance is our people and the culture that binds them together as a cohesive and competitive team. I work in Liberty's Denver headquarters where we focus everyday on supporting our customers and our operations teams that work together to perform safe and efficient services in the field 24/7, 365 days of the year, whether it is -20°F in North Dakota or 110°F in West Texas. I am very proud of Liberty's performance in 2018, only our seventh full year of commercial operations. We have made great progress in our mission to build the best damn frac company, period, and we will continue to work hard every day to improve. I look to the future with unbridled enthusiasm for the journey ahead.

## AGAIN, WELCOME TO THE FAMILY.

SINCERELY,

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CHRIS WRIGHT
CHAIRMAN AND CEO, LIBERTY OILFIELD SERVICES