So buybacks are still the dominant thing, but we put for us it’s not formulaic, it’s not a percent of cash and a quarter. I don’t think you should look at cash flow or profitability or any of those things on short-term timeframes. There’s swings to them. So, we just take a longer term window on that. And I’m sure you’ve heard before in our buybacks, we have an internal view on intrinsic value versus stock price. And the wider that differential is, the more aggressive our buybacks are going to be. And if the stock price moves quickly, if it moves quickly downward, we’re going to pounce on that. If it moves quickly upward, we’re going to caution and take a breath and reflect what’s happening. Not going to stock buybacks if there’s still a large value dislocation but we’re going to be more measured in the approach.
Roger Read: Appreciate that. Thank you.
Chris Wright: Thanks.
Operator: The next question is from Derek Podhaizer with Barclays. Please go ahead.
Derek Podhaizer: Hi, I want to ask a few questions on your digiFleets. So you talked about getting the four by year end, six by end of January. How should we think about the digiFleets as far as incremental versus replacement? And then if we look into 2024 and how this [hydrates] your overall fleet? How do we think about that expanding your profitability? And then finally, just the future mix of the digiFrac versus the digiPrime? And who do you think is going to be the winner over time?
Chris Wright: Great, great questions, Derek. First of all, in the replacement versus the digiFleets that just market dependent. I think when we talked a year ago, when the market was literally short equipment, we said probably a balance between the two. Look at the marketplace now, there’s no shortage of horsepower out there. So all of these fleets were rolling in, are just replacement for our oldest equipment. You know, that’s the cost of maintenance and lowest of quality equipment. They’re just replacement fleets. The market stays like it is today, no reason to change that strategy. The fleet’s themselves and maybe we’ve communicated less than perfectly here, there’s not any different digiFrac fleet or digiPrime fleet. There’s a digiFleet.
There’s two different frac pumps that have different strengths and different weaknesses that together we built to make a system that was just compelling. And that was differential. And I’m going to have Ron expand a little bit more on the difference between those pumps and how you can figure the optimal fleet, depending upon the customer needs.
Ron Gusek: Yes, Derek. I like to think of them as complementary, not that there’s going to be a winner and a loser in these technologies. So as Chris noted in his opening remarks, digiFrac the electric pump for us. And so that consists of two components, first of all, power generation trailers, so the Rolls Royce 20-cylinder, natural gas engine driving an electric generator, and then the electric pump itself that turns that electricity back into mechanical energy. That was a five-year effort for us to build from the ground up, fit-for-purpose electric system, and that included both innovation around the power generation side to make sure we delivered the most efficient low emissions power generation we could, that was modular, that was capitally efficient, that allowed us to deploy the right amount of power generation to match needs on location to be able to adapt to incoming grid power to the extent we had that available to us.
And then to pair that with a ground up pump design that we again, think brings a whole host of benefits to the table. But in working through that design and ultimately, as we began to have conversations with our customers around the deployment of digiFrac, there was a recognition that not all of our customers are going to use grid power as part of this. And so that led us to recognize we had further opportunity. We had an opportunity to make this system more efficient yet, which is to say that we were going to remove the conversion of energy from mechanical to electrical and back to mechanical, there are losses associated with that. And so you burn a little more gas and as a result have a modest amount more emissions to accomplish the same thing.
And that’s what led to digiPrime. So digiPrime just removes that conversion mechanism, we take that same natural gas engine, incredibly efficient, lowest emissions profile you can find in the industry, and attach that directly to a transmission and a pump. Now there’s a limitation to digiPrime and that the engine is a constant speed engine, it runs at one speed and one speed only. We have the ability to change gears, so we have some amount of rate control. But if when you really want that fine-tuning in a frac, when you’re working up against the high pressure limitations that we might have, you want that ability to have some micro adjustment in rate. We don’t get that with digiPrime, we get that with digiFrac, the electric version of the pump.
And so you’ll see these two – these two different technologies work together as what we’ll call a digiFleet. And so, it’s ultimately going to be a combination of the two. And the ratio of those two different technologies on location is going to be a function of whether or not the operator – our customer, our partner in this anticipates using grid power. So to the extent we won’t have access to grid power, you should expect the digiFleet to consist of the majority digiPrime pumps and then a couple of digiFrac electric pumps on top of that for that fine-tuning. And then to the extent we have an E&P partner who’s going to have some grid power on location, we might access – have access to 5 or 10 megawatts of electricity, you’re going to see the percentage of that fleet.
That is digiFrac our electric pumps creep up a little higher, and we’ll have less digiPrime on that. So that’s how we’ll think about that going forward. It’s going to vary fleet-by-fleet, customer-by-customer, depending on the situation we find in the field. But ultimately, at the end of the day we are going to deliver to the customer, an unrivalled technology profile with the lowest emissions and lowest fuel consumption you can find in the industry.
Derek Podhaizer: Great, I appreciate that rundown very interesting and very helpful. Second question, I know you talked about the opening costs. But I agree that integration is going to define the winners in a maturing shale cycle. Can you spend some time on LPI? I know is a recent acquisition, but maybe how impactful it was for third quarter? Or how should we think about it for 2024 and it being a profitability lever as you continue to scale that out across your fleets?
Chris Wright: Yes, it’s in line with other Liberty historical vertical integration. If there’s something that’s holding us back, slowing down the delivery of our quality of service, we look at how to solve that problem and to get on time delivered natural gas. There’s not a lot of options today and the quality of that service is very spotty. Sometimes it’s fine. Sometimes it’s not enough gas. Sometimes these manifolds can hook up to some of the pumps, but not all the pumps. All of these things just hold back the substitution of natural gas into diesel. So, we just decided we’re taking that problem into our own hands. And we’re going to make sure all of our fleets have reliable robust gas delivery. As CNG is the right option that’s done via CNG.
