Liberty Energy Inc. reported a second-quarter 2025 adjusted net income of 12 cents per share, falling short of expectations. This figure marked a substantial decrease from the prior year’s 61 cents due to increased macroeconomic challenges and reduced customer activity. The company’s revenues reached $1 billion, surpassing predictions by $37 million. However, this was a 10% decline from the previous year’s $1.2 billion, reflecting weaker completions activity.

Ebitda and Nuclear Collaboration

The adjusted EBITDA stood at $180.8 million, lower than the previous year’s $273.3 million and below forecasts of $194.1 million. Liberty Energy announced a collaboration with Oklo for integrating distributed natural gas power and small modular nuclear reactors. As of June 30, Liberty Energy’s cash and cash equivalents were $19.6 million, with a long-term debt of $160 million. The company’s overall liquidity amounted to $276 million, and it reduced its capital spending to $134 million from projected $165.7 million. Despite market fluctuations, North America’s oil production remains stable, although activity is expected to slow in the second half of the year. Liberty Energy aims to reallocate capacity for its growing simul frac business, backed by its advanced technology and strong financials.

Industry Data and Strategy Outlook

The stated reason of weaker completions activity is confirmed by broader industry data. For instance, the Baker Hughes U.S. rig count has been trending lower, standing at 488 in late May 2024, a notable decrease from 570 a year prior. This statistic validates the headwinds mentioned and strengthens our belief that a swift rebound is unlikely. While revenues did surpass predictions, this positive point is overshadowed by the substantial drop in profitability and the lower adjusted EBITDA. We believe this indicates severe margin compression, which investors are likely to penalize more than they reward a slight revenue beat. This situation may present opportunities to sell call options at strike prices we view as a firm ceiling for the stock. Historically, energy service stocks exhibit high volatility following such mixed earnings reports. We anticipate that implied volatility will remain elevated as the market digests the negative earnings against the forward-looking technology initiatives. This environment makes strategies like a straddle, which profits from large price movement in either direction, a viable consideration if one is unsure of the immediate trend. The collaboration for small modular nuclear reactors is a long-term development with no bearing on near-term cash flow. We will disregard this news in our strategies for the next several weeks, focusing instead on the immediate weakness in customer activity. The reduced capital spending, while preserving cash, also signals a lack of profitable near-term investment opportunities, further supporting a cautious or bearish stance.

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