Returns basically we have a single hurdle for all sort of like growth capital or any sort of any investments really here at Liberty, and then kind of other measures to some degree our 12-year history of what we’ve done, and that sort of 23%, 25% cash return on cash invested. That’s the target for everything we do. Obviously, you’re starting a new business you won’t hit that in your first year, but that’s what the long-term target for all those, all investments that Liberty does are.
Luke Lemoine: Okay, great. And then Ron, you talked about trying to figure out the right complement of digiFrac versus digiPrime, depending on the customer, but these first four fleets that are out in the next two, can you just update us on how many of these incorporate digiPrime?
Ron Gusek: So, digiPrime will be two of those fleets, four of those fleets being digiFrac, the electric technology. And then as we proceed through this year, you’re going to see that percentage of digiPrime climb pretty significantly. That will be, given where we’re deploying that additional capacity, that will be the primary focus for us, just given our partners’ expectations there.
Luke Lemoine: Okay, perfect. Thanks, so much.
Operator: Thank you. Our next question comes from Atidrip Modak with Goldman Sachs.
Atidrip Modak: Hey, guys. Good morning.
Chris Wright: Hi.
Atidrip Modak: You just touched on this a little bit, but wanted to ask this from a use of cash decision matrix perspective. So in a flat environment, how do you balance potentially accelerating digiFrac and expand margins and pre-cash for conversion faster over the next few years versus return of capital to shareholders?
Chris Wright: Well, that’s the dialogue that makes up our business and really has from the day we started this company. We came out with – our first fleet was, by a fair margin, the best frac fleet in the Bakken. So how many more do you build, how fast do you build them, what’s the right balance there? So again, I don’t know if I got any new or specific color commentary on that, but for us, it’s critical for the long run of our business is to make sure we have very strong return on capital investment opportunities. We don’t just add business lines or go into other stuff because we can do that. We only want to do things where we’re going to have a significant competitive advantage versus other providers in that area and therefore very strong returns on capital.
But I would say our philosophy is we will continue to grow our competitive advantage in our business with time. But we will develop a growing, regular, steady dividend. And when we have compelling opportunities as we’ve had for the last 18 months and probably have for the foreseeable future to buy back our shares in an accretive fashion, we’ll do that as well. Michael, am I missing anything else we should touch on?
Michael Stock: No, you’re right. I mean, it’s a balance between the two and it’s a focus. It’s a focus on long-term growth. When you look at our history, our 12-year history of returns, significantly outperforming internal returns than the S&P 500, right, those are great investments for our long-term shareholders. But we always balance that with the ability to return cash to shareholders at the same time. So we have got a remarkable – I think we’re a remarkable investment opportunity for everybody, right. You can get growth and returns of capital from the same company. You don’t get one or the other.
Chris Wright: The third leg on that, obviously, is balance sheet, right? We’re in a cyclical industry, but multiples are low and people don’t like our industry because it’s cyclical. We actually like that it’s cyclical. That has allowed us – that has been an advantage for us, is to navigate those cycles always with a balance sheet, always able to take advantage of dislocations and compelling opportunities that come about more often in our industry because we’re cyclical. And as you see, as the production base is so much larger in the U.S., that activity, just to keep production flat, is so much higher and dominates activity today that looks clear we’re going into a less cyclical world that we’ve been in. When the shale revolution started, my God, we had activity swing down by 70%.
That’s probably inconceivable today, given what it would have on U.S. and therefore global oil and natural gas production. So the future is probably meaningfully less cyclical than the past, but we didn’t view that cyclicality as some terrible thing. That was an opportunity for us. We’re still going to have it going forward, but certainly in a more muted fashion.
Atidrip Modak: Yes, that makes sense, and thanks for all that color. Thank you. I guess the second question, so you spoke a little bit about the Australia opportunity. Can you touch on the nature of the work there and maybe touch on the upside as well to help understand what the longer-term potential is there? And then are there other regions globally that are of interest to you?
Chris Wright: We get pitched a lot, but we’ve been pitched a lot internationally for six, seven, eight years. And one of the things that obviously I know you know that’s defined Liberty is these long-term committed partnerships with our customers. And so in the past, there’s just no way we’re going to find all of our fleets have been busy all of the time, except for COVID, and maybe going forward in the future. We’re at a scale now that we don’t have to infect our workforce or do anything disruptive. Today, if demand pulls back and it makes sense to idle fleets, we’re very happy to do that. But as we grew and built this business, all of our fleets were busy all of the time. So we weren’t going to tell a customer, hey, sorry, we’re shipping your trucks overseas.
Now with the Digi rollout, we’ve got a new technology that’s meaningfully upgrading our fleet, and we’re going to have fleets that come out the other end of that, that maybe are not fully at retirement age. And so we are going to – and that’s what’s going to happen with Australia. One of our legacy fleets that will come out of service because of a Digi fleet rolling in we’re going to send that over to Australia. It’s not going to be fully utilized right away. Look, this is exploratory. Let’s figure it out and see where we can go kind of play. But our capital investment is basically moving over idle equipment. We’ve got good economics for the frac work we’ll do over there. We’ve taken an ownership stake in Tamboran. So we own a not insignificant chunk of the company with a large acreage position.
