Prepared remarks
Welcome to the Liberty Energy Earnings Conference Call. Operator instructions were provided. Please note, this event is being recorded. I would now like to turn the conference over to Anjali Voria, Vice President of Investor Relations. Please go ahead.
Thank you, Nick. Good morning, and welcome to the Liberty Energy Second Quarter 2026 Earnings Conference Call. Joining us on the call are Ron Gusek, Chief Executive Officer; and Michael Stock, Chief Financial Officer. Before we begin, I would like to remind all participants that some of our comments today may include forward-looking statements, reflecting the company's views 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 our 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, adjusted net income, adjusted net income per diluted share, adjusted pretax return on capital employed and cash return on capital invested 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, net income to adjusted net income and adjusted net income per diluted share and the calculation of adjusted pretax return on capital employed and cash return on capital invested as discussed on this call are available on our Investor Relations website. I will now turn the call over to Ron.
Good morning. The second quarter demonstrated strong operational execution as our team continued to deliver proven quality services amidst commodity price volatility and heightened geopolitical uncertainty. We delivered revenue of $1.2 billion and adjusted EBITDA of $151 million, leveraging the benefits of our strategic investments and AI-driven technology advancements as the industry modestly strengthened from early-year cyclical lows. The success of our DigiPrime platform in the United States has translated into a notable milestone with an upcoming fleet deployment in Canada alongside a key cross-border customer. We believe customers increasingly value partners that can deliver innovative technology, service quality and execution, creating deeper alignment and stronger long-term customer relationships over time. The next-generation fleet deployment in Canada demonstrates our ability to scale across North America while reinforcing how continuous technology innovation creates sustainable differentiation across our business. We also commenced commercial operations of Slurry, our proprietary last-mile sand system, redefining how sand is delivered to the well site. Across our first three deployments, the system has demonstrated meaningful benefits for customers and local communities. At a current Rockies Basin deployment, nearly eight miles of slurry pipe replace up to 200 truckloads of sand per day that would otherwise traverse 24 miles of county and lease roads. This project alone is expected to transport approximately 1.5 billion pounds of slurry sand while eliminating nearly 30,000 truck trips over a seven-month period. The result is a safer transport system that reduces logistics costs, improves delivery consistency and decreases road congestion, dust, emissions from trucking and road maintenance. We believe Slurry demonstrates how innovation can create value across the entire energy supply chain from customers and operations to landowners and the communities where we work. More broadly, our investments in AI and digital technologies continue to create value in ways that extend beyond their initial design objectives. Tools like Forge, our distributed AgentX system for fuel optimization, are increasingly identifying opportunities to enhance fleet design, asset utilization and overall operational performance while optimizing fuel consumption. The ability to uncover and act on these secondary insights highlights the power of combining Liberty's operational expertise with continuously learning digital systems, creating benefits that compound across our fleet over time. Turning to power. Our recently announced joint venture with PowerBridge, a powered infrastructure portfolio company, represents an important step in expanding Liberty's participation in digital infrastructure and large-load power markets. By combining PowerBridge's powered campus development platform with Liberty Power & Infrastructure's integrated power generation, energy management expertise and operational capabilities, we are creating a differentiated offering for hyperscale, AI and other large-load customers. The venture is designed to create a scalable framework that aligns both organizations across the full infrastructure stack, enabling a more integrated approach to delivering powered campuses for next-generation digital infrastructure. PowerBridge's planned portfolio of gigawatt-scale West Texas campuses expands our opportunities to deploy Liberty's power solutions at scale. The joint venture's current scope is focused on PowerBridge's Alpha Digital campus, a planned two-gigawatt powered campus in West Texas. The initial phase of campus development is expected to include over 300 megawatts of generation capacity with the first power anticipated in the fourth quarter of 2027 and development expected to continue through the first half of 2028. Discussions with prospective data center tenants regarding future power offtake opportunities for this client-ready platform are already underway. We are encouraged by the strong interest and look forward to advancing these discussions toward long-term commercial power offtake agreements. Last week, we announced a strategic alliance with SLB, bringing together Liberty's integrated power solutions with SLB's modular infrastructure capabilities and global market presence in a seamless solution to help address the growing need for scalable power and electrical infrastructure solutions, both inside and outside the walls of the data center with a unified interface for the customer. This collaboration enhances our ability to pursue larger and more diverse opportunities while advancing our technology roadmap and supporting the rapid build-out of infrastructure required for AI and high-performance computing. The alliance builds on a long-standing relationship between our two organizations, providing a strong foundation for execution and a streamlined customer experience. The company also plans to collaborate on future technology initiatives focused on hybrid power systems, digital energy management, advanced power architectures and waste heat recovery to support evolving data center energy requirements. Our LPI platform sets a new standard, combining power system architecture and energy market optimization. During the quarter, we secured multiple agreements to purchase power generation equipment with Bergen Engines, Wärtsilä and other global suppliers. Our technology architecture and proprietary control systems are designed to integrate multiple leading manufacturers, enabling us to leverage the favorable attributes unique to each engine type for the optimization of the generation stack. We also recently announced the formation of Liberty Wholesale Commodities, extending Liberty's CORIS offering through direct participation in ERCOT power markets. This capability allows us to combine on-site generation, retail electricity supply and market optimization within a single integrated solution, dynamically optimizing between grid power and on-site generation to improve project economics while supporting load balancing on the grid based on real-time operating conditions. We are now able to integrate on-site generation with both ERCOT and PJM market participation for large-load customers, positioning us to leverage favorable grid attributes while providing grid resilience within local communities. By managing the intersection of generation assets, grid supply and market participation, we can deliver greater flexibility, enhanced economics and a differentiated customer value proposition as power requirements continue to grow. We believe this integrated approach enables large-load development to support rather than strain the electrical grid in the communities in which it operates. The opportunities in front of Liberty today are broader and more diverse than at any point in our history. Our Completions business continues to benefit from years of disciplined investment in technology, execution and customer relationships, while our power platform continues to advance through commercial engagement, strategic relationships and the development of differentiated capabilities across the energy infrastructure value chain. We remain focused on disciplined capital allocation, operational excellence and investing in opportunities that strengthen our competitive position and create long-term value for our shareholders. The most enduring consequence of the Middle East energy disruption has been a renewed focus on energy security and supply diversification. Heightened geopolitical risk, damage to regional energy infrastructure and continued uncertainty surrounding key export corridors have reinforced the strategic importance of North American oil and natural gas resources. This shift is increasingly evident in commercial activity with international buyers pursuing longer-term agreements for U.S. petroleum products and LNG, while also seeking greater direct participation in upstream supply. Planned storage expansions across Southeast Asia and Australia, together with the need to replenish depleted strategic reserves are expected to support incremental demand for North American energy over time. As a result, U.S. and Canadian oil, natural gas and refined products are becoming increasingly important to meeting global energy needs, supporting a constructive long-term outlook for North American energy. Global oil and gas markets experienced significant volatility during the quarter. The conflict in Iran and related energy supply disruption drove oil prices to levels not seen since 2022 before moderating as softer Chinese demand tempered some of the resulting supply uncertainty. While it remains too early to fully assess the long-term impact of recent developments, including the trajectory of Chinese demand, recent events have reinforced the complexity and interconnected nature of global energy markets. Although the acute phase of the crisis moderated following the June ceasefire and partial reopening of the Strait of Hormuz, renewed U.S.-Iran tensions highlighted the fragility of the recovery. Early signs of normalization in physical oil flows, LNG exports and shipping logistics proved short-lived as transit through the strait disrupted supply chains once again. Frac markets improved modestly alongside a gradual increase in North American producer activity, providing greater transparency into the underlying availability of frac fleets impacted by years of fleet attrition and equipment cannibalization. Improved market conditions are supporting a modest recovery in service prices from cyclical lows earlier in the year. Next-generation technologies remain in high demand as current commodity prices reinforce both the economic value of the diesel-to-natural-gas fuel arbitrage and the benefits of AI-enhanced systems that reduce total fuel consumption. However, large U.S. and Canadian producers remain cautious toward increasing activity levels given continued price volatility and broader macroeconomic uncertainty, although recent developments in Canada are encouraging for the longer-term outlook. Power demand fundamentals remain strong, driven by the continued expansion of AI data center development and broader industrial power demand. As project requirements increase in scale and complexity, customers are prioritizing infrastructure partners capable of coordinating power supply, site readiness, energy management and long-term operations through a unified development approach. At the same time, hyperscalers continue to expand their internal technical and commercial capabilities, enabling a more comprehensive evaluation of long-term power and infrastructure strategies. This evolution is creating greater opportunities for power providers capable of delivering integrated solutions across the infrastructure value chain while helping hyperscale customers address a diverse range of development strategies, site characteristics, power markets and speed-to-power objectives. Liberty's DNA is rooted in solving customer challenges through innovation, technical expertise and a culture of execution, which are attributes that align closely with the needs of today's largest energy and technology companies. Our customers are becoming increasingly aware that successful power solutions require dedicated partners capable of delivering integrated solutions and long-term operational support. This dynamic is familiar to Liberty as our large oil and gas customers have long relied on trusted partners to unlock incremental value year after year. Looking ahead to the third quarter, we are encouraged by the momentum in the second quarter, while recognizing the uncertainties associated with global geopolitical developments and the potential effects on our customers' end markets. We remain focused on executing against the broader opportunities emerging across the energy ecosystem. I will now turn the call over to Michael to discuss our financial results and outlook.
Good morning, everyone. I'm pleased to share we delivered a solid second quarter marked by outstanding execution and disciplined investment. Building on the momentum exiting the first quarter, our team safely achieved record operational performance, setting new highs for pump hours, horsepower hours and proppant pumps, helping customers capitalize on the more constructive oil and natural gas environment. We also took deliberate steps to strengthen Liberty's future position, increasing our investment in critical long-lead power generation equipment while building teams to address an expanding set of power customer opportunities. Let's turn to our earnings results. In the second quarter of 2026, revenue was $1.2 billion compared to $1.0 billion in the prior quarter. The 16% sequential increase reflected record utilization and a modest pricing uplift along with higher product sales that represented the largest contribution as customers increasingly turned to Liberty's industrial-leading ability to source, move and deliver product at scale. Second quarter net income of $43 million compared to $23 million in the prior quarter. Adjusted net income of $14 million compared to $10 million in the prior quarter excludes $29 million of tax-effected gains on investments, partially offset by transaction and other costs. The fully diluted net income per share in the second quarter was $0.26 compared to $0.14 in the prior quarter, and adjusted net income per diluted share was $0.09 compared to $0.06 in the prior quarter. Second quarter adjusted EBITDA was $151 million. General and administrative expenses totaled $67 million in the second quarter compared to $60 million in the prior quarter and included noncash stock-based compensation of $6 million. Excluding stock-based compensation, G&A increased $7 million, primarily due to higher variable compensation associated with better-than-expected second quarter results and higher IT-related costs. The other income items totaled $40 million for the quarter, inclusive of $43 million of gains on investments, offset by interest expense of approximately $3 million. Unrealized gains primarily reflected the appreciation of Liberty's investment in Servo following its second-quarter IPO. The second quarter tax expense was $9 million, approximately 18% of pretax income, and we expect tax expense rate in the remainder of 2026 to be approximately 25% of pretax income and do not expect to pay material cash taxes in the year. We ended the quarter with a cash balance of $559 million and net debt of $736 million. Net debt increased by $157 million from the prior quarter. Total liquidity at the end of the quarter and including availability under the credit facility was approximately $1.0 billion. Second quarter uses of cash included capital expenditures and $15 million in cash dividends. Net capital expenditures and long-term deposits were $221 million in the second quarter, which included investments in the power generation fleets, capitalized maintenance spending and other projects, including $71 million in power generation deposits. We had approximately $2 million of proceeds from asset sales in the quarter. Entering the second half of 2026, we are encouraged by the opportunities across our business. We continue to see a constructive backdrop for our completions business supported by deep customer relationships, strong execution and technology advancements. At the same time, commercial opportunities are accelerating as customers seek reliable integrated solutions. Given the increasing depth of our commercial pipeline, we now anticipate approximately $1.5 billion in capital expenditures in 2026, primarily reflecting an increase in deposit payments to secure long-lead time power generation. This investment reflects our conviction in the opportunities ahead and our commitment to generating attractive returns over time. I will now turn it back to the operator for Q&A, after which Ron will have some closing comments at the end of the call.
Questions and answers
The first question will come from Arun Jayaram with JPMorgan.
Ron and Michael, I was wondering if you could talk about how the commercial pipeline is evolving and maybe elaborate on your commentary that power requirements are increasing in scale and complexity and how you think Liberty is positioned given the shift in market dynamics?
Thanks for the question. I'll add a few comments and then maybe Michael might jump in with a few things on top of that. We are seeing the commercial pipeline evolve in terms of the complexity and scale of opportunities. Over the last 12 to 18 months, we've seen a migration from a larger number of smaller projects to a smaller number of larger opportunities. We're seeing more and more campuses that are at gigawatt-plus scale and ultimate build-out, with multiple phases where they start at a few hundred megawatts and grow to several gigawatts over time. In some cases, these campuses are located relatively close to one another. People are recognizing that there are places in the United States that are easier to move ahead with this sort of construction, leveraging local attributes and community support. We'll see some focus in those areas and they will leverage additional scale. We're certainly seeing a larger number of campuses that discuss gigawatt-scale potential, which has made our sales pipeline larger. We continue to share that with the Board, and you've seen their confidence expressed in that through our continued addition of generation capacity in the contracts we announced this year. There's lots of excitement and we look forward to the coming months and years. Michael, do you want to add some things on top of that?
Yes. When we look at these larger campuses, they are generally stage build-outs. We think the vast majority of our campuses or power generation facilities will eventually be integrated with the grid. They'll start behind the meter, then expand with grid integration. Looking at grid integration, you've seen changing rules and clarifications in areas of the grid between PJM and especially ERCOT. Many projects in ERCOT have been in a bit of a holding pattern over the last three to four months concerning the location and timing of interconnections, particularly around the batch zero process—when projects are batched for interconnection and which projects will be in batch zero, so which may get interconnection in the next three years. There's also a lot of planning and discussion around community engagement; deep community engagement is needed as projects enter early stages, and that is happening across the board. So there's complexity in defining how generation will grow over time and what campuses will look like. There's been work across the industry to standardize aspects of the build, especially as AI training loads are being standardized in size to make campus build-outs more efficient. We are doing a lot in the background with partners like SLB, which builds modular equipment and has large-scale manufacturing capability. Standardization is coming into focus across the value chain.
Great. My follow-up is on the PowerBridge JV. This is in addition to the Vantage agreement you previously signed. Can you help investors talk about these development partnerships? How would you compare and contrast these to a traditional ESA-type agreement with an end customer?
They are not the same thing. Ultimately, even with this PowerBridge JV, we will end up with an ESA with a hyperscaler. What the JV does is offer a couple of things. First, it provides modularity and simplicity for hyperscalers, offering a single point to sign on for a power data campus. It allows them through a single entity to take care of land and associated infrastructure along with power generation capabilities. We are aligned in that message and can share opportunities together. The joint venture platform gives us an interest on the land side and our partner an interest on the power generation side, so we are aligned as we talk with potential hyperscale customers for this opportunity. It is also a platform we can scale beyond the initial Alpha Digital site. Michael, do you want to add some other thoughts there?
You can think of three major players in AI data center development: the data center (the building), the user or offtake of compute, and then the other players on the value chain. Power is necessary to build anything—bringing power is a prerequisite for data center construction. On the powered land side, we work with many powered land developers, but PowerBridge is a close partner with multi-campuses in Texas building fiber rings and creating centers for hyperscaler development. That's the first stage. For data center construction, we work with data center builders like Vantage where we provide dedicated power and they build and run the facilities for hyperscalers. There are also cases where hyperscalers may contract directly with powered land developers and ourselves for power and run compute on their own. There is also a middle area where cloud providers run compute and sell compute power. We are choosing great partners along the way and directly integrating with them. With PowerBridge, our teams get close to design, development and distribution of power, and these campuses will have large-scale power coming on behind the meter. Ultimately, it allows us to expand our technical ability and build modular solutions with greater growth possibilities.
The next question will come from Stephen Gengaro with Stifel.
Two for me. First, when we think about the power generation opportunity, can you talk a little bit about the return hurdles you're thinking about? And maybe how should we think about the 300 megawatts you referenced by the end of 2027 and when we start to see the impact rolling through the income statement? I know it's medium-term, but how should we think about the next couple of years?
Stephen, our return on invested capital view hasn't changed. We remain focused on a return profile that targets a five- to six-year cash-on-cash payback and a 17% to 18% unlevered rate of return. We still see that as reasonable in today's market. Regarding deployment, we expect some early-stage generation running as part of the first 300 megawatts by late 2027, with additional build-out over early 2028. You really don't start to feel meaningful income statement impact from the power generation business until 2028 proper, and then it scales from there.
I would add that you should expect a buildup of G&A as we build the business between now and early 2027. You'll start seeing revenue and some fall-through in late 2027, and by the end of 2029, you should see the full income statement impact of the roughly three gigawatts we've discussed.
Okay, great. The other question: on the domestic frac business, equipment is tight. We've heard pricing momentum. I know it takes time to roll through the fleet. What are you seeing in magnitude of price moves? How should we think about puts and takes in the second half of 2026?
We're seeing positive traction on pricing, but the magnitude varies case by case. Next-generation equipment that had durability did not see the same trough as traditional diesel-fired equipment, so pricing recovery varies by equipment and customer. Sales teams have positive traction, but there's some market complexity. WTI moved back under $70 after the MOU, and customers remain cautious given price volatility and macro uncertainty, which adds uncertainty to conversations. We're working closely with them and continuing to push for higher prices through Q3 and potentially into Q4, depending on commodity strength. The calendar looks quite strong and utilization appears very good for the quarter, which should support pricing, but I'm reluctant to be too firm given market volatility. On product markets like sand and chemicals, things haven't resolved meaningfully; higher volumes haven't yet resulted in improved margins on that side.
The next question will come from Scott Gruber with Citigroup.
I wanted to inquire about the purchase agreements with Bergen and Wärtsilä and others. What's the total quantity of capacity you've lined up from a construction-slot standpoint, and over what time frame do those construction slots spread? Also, there's been a thirst to secure larger capacity gas receipts—what's the size of capacity secured?
If you add what we'll execute in the near term, we've secured the three gigawatts that are part of our plan through the end of 2029. There will also be some early 2030 deliveries that support growth into 2030.
Got it. And coming back to the base business, any color on revenue growth and incrementals into 3Q? Any early indication on seasonality for Q4—could it be lighter or heavier? Any early indications from customers?
It's probably too early to tell on Q4. Macro developments will influence customers' views and activity levels, particularly among private operators, who have made up a larger share of recent activity and react quickly in either direction. For Q3, we continue conversations around price in a volatile environment. The calendar looks strong and utilization should be very good, supportive of positive pricing. But given recent volatility, I'm reluctant to be too definitive about the quarter.
Is there still some openness in the calendar for 3Q that drives the uncertainty?
Some operators continue to evaluate decisions, but our utilization looks quite strong with very modest white space in the calendar. We could accommodate a small amount of additional work, but Q3 utilization looks good at this point.
The next question will come from Joshua Silverstein with UBS.
Regarding the power generation capacity additions, with the recent Bergen and Wärtsilä signings, do you now have line of sight to the three-gigawatt target for 2029? Also, how do you see CapEx trending over the next few years relative to the $1.5 billion you're forecasting for this year?
On the three gigawatts, if you think about that scale, it's likely to be somewhere between $5 billion and $6 billion of CapEx to build that. Through this year, we'll spend about one-quarter of what will be needed to generate the earnings from that three gigawatts. You'll see the majority of CapEx incurred in the years leading up to operations, with a material portion in the last year before operations and the remainder spread between now and then.
We have line of sight to where all that power is coming from. We're very comfortable with inbound supply for the growth through late 2029 and early 2030.
Got it. In addition to the PowerBridge JV, you're also working toward something in Wyoming with a permit filed. Can you talk more about that project and timelines or your thinking in that region?
We're not going to talk specifically about those projects. Permits are filed and community engagement is underway. This is a process that is collaborative with our data center builder and the community, and these things will evolve over time.
I think Michael covered it well.
The next question will come from Marc Bianchi with TD Cowen.
I wanted to ask about the PowerBridge Alpha campus. Can you say how much of that has been leased at this point? Relatedly, when will you get to a joint venture finalization with them and firm offtake?
Discussions with clients are underway. The JV finalization will happen in the near term as we work through it. We will announce customer leases when they're signed.
So at this point, the site doesn't have any leases booked yet?
As we said in the press release, negotiations and discussions are underway.
On the SLB agreement, can you talk about the value proposition to the customer? What are you able to do with SLB on these projects that a customer wouldn't get if they procured things a la carte?
Customers could procure things a la carte, but as project scale and pace accelerate, the simpler the approach for customers, the better. A unified customer interface that checks a number of boxes versus managing many suppliers makes their lives easier. They can focus on their priorities while we take care of other elements. This unified approach—handling pieces both outside and inside the data center walls—will be viewed positively by hyperscalers because it simplifies the path from desire for compute to running compute. This capability is applicable not only in the U.S. and Canada but internationally. We're starting to hear about data center opportunities in the Middle East, Asia and Australia, and we believe we have a strong opportunity given the global reach of our organizations.
The next question will come from Joe Laetsch with Morgan Stanley.
Following up on the PowerBridge JV, I know the initial phase is over 300 megawatts. What signposts should we watch for around additional phases and how to think about incremental power being added? Is the two-gigawatt opportunity at that West Texas data center exclusive to Liberty at this time?
This will be announced in phases. The first phase will be built out as campuses expand. The campus has multiple sides—east, north and south—that will expand over time. There are multiple campuses we may jointly develop. There may be other power generation on the site that we partner in or not. As these expand, we'll see growth paths. It's a very large opportunity set for us.
Great. And on the frac side, what are the latest trends you're seeing in gas basin activity? We're back below $3 on Henry Hub and there's concern about higher associated gas given where oil prices sit and pipelines coming on in the Permian. What's your view on activity in oil versus gas basins?
Gas basin activity remains strong. We see positive forward looks from our customer base in pure gas basins. Customers are taking a long view despite volatility. Onshore North America has positive tailwinds from expected generation growth that consumes gas, and the math around gas for generation is straightforward. Global tailwinds are positive too, with demand for U.S. and Canadian supply growing given disruptions elsewhere. Associated gas from oily basins will add to supply and influence pricing over time, but gas customers are used to such fluctuations and are focused on long-term value for their assets.
The next question will come from Saurabh Pant with Bank of America.
Michael, you mentioned $1.5 billion of CapEx for this year with a little above $1.1 billion remaining in the second half. I'm trying to line that up with delivery schedule, deployment expectations and liquidity. How are you thinking about funding as progress payments and deliveries occur?
A large portion of that is deposits on long-lead equipment. Our funding approach hasn't changed: as we sign ESAs, projects are dropped into special-purpose vehicles and financed with project financing that is generally nonrecourse to the corporate balance sheet. That cash will recycle back to the corporate balance sheet and be used for further deposits. That's the typical funding cycle for these projects.
Has anything changed in the payment terms as you secure more equipment? Are you having to pay more upfront? Also, you said $5 billion to $6 billion for the three gigawatts—was that a little higher than initially thought?
Yes, earlier deposits modeled in January versus finalized contracts mean early-year deposits are a bit higher than we initially thought. Inflationary pressures and construction costs are baked into our estimate, and generation supply is in short supply, which strengthens the suppliers' position. Many OEMs are expanding capacity and seeking cash flow, so terms reflect that. Costs and inflation are included in our overarching estimate and that is an all-in cost.
One quick one on the frac side: thinking about the 2027 RFP season for larger, more stable customers—any early thoughts on timing or tone? Will it be normal timing this year?
Our outlook for 2027 remains quite positive. We see structural disruption in oil supply from recent months—more than a billion barrels removed from the market—and there will be a path to replenish and normalize. Planned storage expansions in Asia and Australia and replenishment of strategic reserves support demand for North American product over time. I expect a positive tone in the RFP season and I suspect it will occur at a normal time, reflecting stronger demand for North American product. That underpins our positive posture for the rest of this year and into 2027.
The next question will come from Derek Podhaizer with Piper Sandler.
On the PowerBridge announcement for the Alpha Digital campus, what gives you confidence in the delivery date to start in the fourth quarter of 2027? And will this initially be islanded power or is the expectation to put it on the grid? You mentioned batch dynamics earlier.
We're excited to work with the PowerBridge teams; their technical teams are closely involved. We're able to advance long-lead engineering and integration and start permitting, which in Texas is a relatively efficient process. This will start behind the meter and likely be in a batch zero interconnection area, so it should have a grid interconnection sometime in 2028. Given West Texas dynamics, it could be an export grid interconnection because spare power is limited in the region. But the early generation being behind the meter reduces timeline risk, and we expect the site to be a dedicated campus.
On the frac side, 2Q showed a big revenue step-up but a lack of flow-through with about 15% incrementals. You touched on chemicals and proppant markets. Can you give more color on that and the confidence to push pricing through? Given current strips and fleet attrition, what could incrementals look like toward the back half?
We remain positive about service-side pricing and the value proposition of our technology. You should expect price improvement through Q3 and possibly into Q4, but commodity and product side pressures—like sand and chemicals—remain a headwind to margin flow-through for product sales. We're moving more simul-frac this year and moving record levels of sand in 24-hour periods, which supports volume but hasn't yet improved product margins. We continue to work with customers and push pricing for services while navigating macro uncertainty.
The next question will come from Keith MacKey with RBC Capital Markets.
Can you provide more color on your power generation unlevered return targets? CapEx has gone up significantly, and yet you're still targeting mid- to high-teens unlevered returns. How are you able to maintain that return level while facing CapEx inflation?
While prices have gone up, we consider the complete scope and the underlying economic returns for grid-connected projects. We still see demand within economic returns for the grid and do not see pushback on pricing required for us to achieve long-term returns. Our modeling includes inflation and construction cost impacts.
On the frac market, Ron, you mentioned Canada. What are you seeing in Canada relative to the U.S., and what underpins your confidence to bring DigiPrime to Canada? Will that fleet be incremental or a replacement?
Developments in Canada over the last six months have been encouraging after a challenging period. Pipeline announcements and M&A activity have brought optimism. We're seeing larger-scale programs that can support full-year utilization of fleets, which improves efficiencies. We're shipping DigiPrime to Canada to work with a long-term cross-border customer with line of sight to a meaningful program and high utilization. It will be a replacement fleet for us, not additive, because the market today does not support additional capacity. The DigiPrime demand remains strong given diesel price levels and the diesel-to-natural-gas arbitrage.
The next question will come from Caitlin Donohue with Goldman Sachs.
I wanted to touch on Liberty Wholesale Commodities. How do you plan to leverage the business and participation in power markets? How do you see it aiding Liberty's long-term power strategy?
It offers a wide range of opportunities. One focus is leveraging low-cost grid power in markets like West Texas where renewables can depress wholesale prices on certain days. We can economically procure grid power in those times, wind down our on-site generation and support project economics while reducing fuel consumption for customers. Conversely, we can support the grid when needed to help communities, which is important given concerns about electricity prices. We expect to primarily leverage lower-cost power for economic benefit but are committed to supporting grid stability when needed. This capability lets us manage the interplay between on-site generation and grid participation to improve economics and provide resilience for communities.
Regionally, beyond West Texas, how are opportunities looking across the U.S.? Are you seeing demand in PJM and other regions?
We see interest across a diverse set of regions: Far West (Nevada, Utah), Wyoming, Texas, parts of the South including Mississippi, and up into PJM and even the Northeast in reclaimed industrial sites in Michigan. There's a lot of interest across the country.
The next question will come from Edward Kim with Barclays.
What's your confidence level that the PowerBridge Alpha project will qualify for baseload categorization in ERCOT's batch zero process? If it doesn't, could that put the Q4 2027 or 2028 timeline at risk?
We believe it will be in batch zero and that power will be short in that region. Early generation will start behind the meter, so the timeline is not at risk; early generation will be behind the meter for a dedicated campus.
The next question will come from John Daniel with Daniel Energy Partners.
Regarding the fleet going to Canada, was that new capacity you built or a transfer from the U.S.? Also, any early thoughts on further DigiPrime buildout in 2027?
That will be new capacity we're building and delivering over the back half of this year. Canadian trailer axle requirements differ from U.S. requirements, so this equipment is designed for Canadian road transport and sits on unique trailers. As for continued DigiPrime demand, diesel prices remaining elevated and the diesel-to-natural-gas arbitrage keep natural gas fuel attractive, driving inbound demand for DigiPrime. We haven't finalized the CapEx program for 2027 yet, but we'll work with the Board based on customer demand. You can likely expect us to build some DigiPrime in 2027, barring major changes.
Do you think demand could return to days of take-or-pay contracts for equipment like DigiPrime in 2027 if oil prices stay robust?
We haven't typically required take-or-pay arrangements. We expect that when we deliver DigiPrime, we want line of sight to a couple of years of work and an appropriate payback timeframe. That expectation has been consistent across recent years and will continue to be so in 2027.
I will now turn it back to Ron for closing remarks.
Our mission at Liberty is a simple one: to better human lives—the lives of those who work here, the lives of those in the communities within which we work and the lives of those around the world who rely on the abundant, affordable, reliable energy we help to produce each and every day. This year, we are proud to celebrate 15 years in service of that mission. Jim Brady, our Senior Vice President of Operations and Employee No. 1 at Liberty, started on May 2, 2011. We were a small company with one fleet operating out of a tent in Williston, North Dakota. We were built around a simple vision that Chris and Jim shared from the very beginning: to build the best completions company, period. We hired 51 people that first year. Thirty-three of them are still working here today, and we've added almost 6,000 more. The scale of what we've built together is extraordinary, but the shared culture and values that brought us together in those early days have not changed. Our success is thanks, first and foremost, to the 6,000 individuals at Liberty who come to work every day with the goal of delivering excellence in everything that we do. There is no such thing as a commoditized business when people are involved. People matter. Safety matters. Service quality matters. Relationships matter. I want to thank all of you in the Liberty family, especially the men and women who are at the tip of the spear out in the field for ensuring that everyone you work alongside—every one of our customers and every one of our supply partners—experience our values every day. You are what makes Liberty so special. There are so many highlights to celebrate from 15 years, certainly more than I can name in this short time, but there are a few that stand out. We grew from a tent in the Bakken to operations across ten basins, including Canada and Australia. We completed the transformational acquisitions of Sandl's U.S. assets and Schlumberger's North American OneStim assets, became a publicly traded company listed on the NYSE and grew to more than $4 billion in annual revenue. Along the way, we published three editions of Bettering Human Lives and launched the Bettering Human Lives Foundation. We introduced technologies like the Quiet Fleet, the entire Digi platform, novel sand handling systems and expanded through vertical integration, equipment packaging, CNG fuel supply and most recently entered into the distributed power generation business. We've accomplished a lot in our first 15 years, but we're just getting started as we continue to build the best completions and energy company, period. So to the entire Liberty family and to our partners and friends on this journey, thank you for all that you do. It is a privilege to work alongside you all. Liberty forever.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.