Avi Salzman

If oil prices fall another few dollars per barrel, the industry is going to shrink, one of the country's largest fracking-services firms said this week. Liberty Energy, which was founded by U.S. Secretary of Energy Chris Wright, told investors that recent oil prices in the low-$60s are "not an exciting environment for us by any stretch of the imagination."

And if they fall into the $50s, then the industry could see a significant contraction.

"I would certainly expect a pullback in rig count," said Liberty CEO Ron Gusek on the company's earnings call Thursday.

West Texas Intermediate crude, the U.S. benchmark, has mostly been trading in the low-$60s in recent days, down from the $70s at the start of the year. On Thursday, it rose 3.5% to $64.68 per barrel.

If prices settle in the low-$60s, Gusek expects that smaller drillers will probably cut back some of their rigs, denting production growth but causing only "modest ripples" in the broader market. A sustained drop into the $50s would force a more significant reckoning. WTI briefly traded in the $50s earlier this month.

Gusek thinks that declines would not be as severe as past boom-and-bust cycles, but the company will continue to focus on strengthening its balance sheet in the months ahead in case the market takes a turn lower.

Gusek said tariffs and an OPEC policy to add more oil production to the market are the two main reasons prices have been weak. Trump's decision to pause some tariffs helped boost oil prices somewhat over the past week, but Gusek said that the industry is still on guard for further declines. Most analysts expect the industry to be oversupplied for most of the rest of the year.

Liberty's results reflect one of the tensions in Trump's energy policy: "Drill Baby Drill" only works when oil prices are high enough to justify it.

Liberty stock rose on Thursday, but the gains still left shares down 42% this year.

Wright, the energy secretary, founded Denver-based Liberty in 2011. He stepped down from his roles as chairman and CEO in February when he was confirmed to his position.

When he was confirmed, Wright owned 1.6% of Liberty's stock, according to the company's latest proxy statement. Wright told the company he would divest all his ownership in accordance with federal ethics rules, the proxy statement added. A company representative said on Friday that Wright no longer owns stock or options in Liberty.

Other major oil companies will report earnings in the weeks ahead. Liberty's competitor Halliburton is set to report on Tuesday. Exxon Mobil and Chevron will report on May 2.

Write to Avi Salzman at avi.salzman@barrons.com

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April 18, 2025 13:00 ET (17:00 GMT)

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