8-K
Magnolia Oil & Gas Corp (MGY)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): February 14, 2023
| Magnolia Oil & Gas Corporation | ||
|---|---|---|
| (Exact name of registrant as specified in its charter) | ||
| Delaware | 001-38083 | 81-5365682 |
| (State or other jurisdiction <br>of incorporation) | (Commission <br>File Number) | (I.R.S. Employer <br>Identification Number) |
| Nine Greenway Plaza, Suite 1300<br><br>Houston, Texas 77046 | ||
| (Address of principal executive offices, including zip code) | ||
| (713) 842-9050 | ||
| Registrant’s telephone number, including area code |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Securities registered pursuant to section 12(b) of the Act: | ||
|---|---|---|
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Class A Common Stock, par value $0.0001 Per Share | MGY | New York Stock Exchange |
Item 2.02 Results of Operations and Financial Condition.
On February 14, 2023, Magnolia Oil & Gas Corporation (the “Company”) issued a press release, a copy of which is attached hereto as Exhibit 99.1 and incorporated by reference herein, announcing its financial and operational results for the fourth quarter and full-year ended December 31, 2022.
The information furnished pursuant to this Item 2.02 (including Exhibit 99.1) shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise be subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.
Item 7.01 Regulation FD Disclosure
On February 14, 2023, the Company provided information in an earnings presentation on its website, www.magnoliaoilgas.com, regarding its financial and operational results for the fourth quarter and full-year ended December 31, 2022.
The earnings presentation, which is attached hereto as Exhibit 99.2, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise be subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit | |
|---|---|
| Number | Description |
| 99.1 | Press Release |
| 99.2 | Earnings Presentation |
| 104 | Cover Page Interactive Data File (formatted as inline XBRL) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| MAGNOLIA OIL & GAS CORPORATION | |
|---|---|
| Date: February 14, 2023 | By: /s/ Timothy D. Yang |
| Name: Timothy D. Yang | |
| Title: Executive Vice President,<br> General Counsel, Corporate Secretary and Land |
2
Document
Exhibit 99.1
Magnolia Oil & Gas Corporation Announces 2022 Fourth Quarter and Year-End Results
HOUSTON, TX, February 14, 2023 - Magnolia Oil & Gas Corporation (“Magnolia,” “we,” “our,” or the “Company”) (NYSE: MGY) today announced its financial and operational results for the fourth quarter and full year 2022.
Fourth Quarter 2022 Summary Financial Results:
| (In millions, except per share data) | For the<br><br>Quarter Ended<br><br>December 31, 2022 | For the<br><br>Quarter Ended<br><br>December 31, 2021 | Percentage increase (decrease) | |||
|---|---|---|---|---|---|---|
| Average daily production (Mboe/d) | 73.8 | 69.4 | 6 | % | ||
| Net income | $ | 254.8 | $ | 192.1 | 33 | % |
| Earnings per share - diluted | 1.20 | 0.82 | 46 | % | ||
| Adjusted EBITDAX(1) | 267.5 | 260.6 | 3 | % | ||
| Capital expenditures - D&C | 140.0 | 72.1 | 94 | % | ||
| Cash balance | $ | 675.4 | $ | 367.0 | 84 | % |
| Diluted weighted average total shares outstanding(2) | 215.4 | 231.0 | (7) | % |
Full Year 2022 Summary Financial Results:
| (In millions, except per share data) | For the<br><br>Year Ended<br><br>December 31, 2022 | For the<br><br>Year Ended<br><br>December 31, 2021 | Percentage increase (decrease) | |||
|---|---|---|---|---|---|---|
| Average daily production (Mboe/d) | 75.4 | 66.0 | 14 | % | ||
| Net income | $ | 1,050.2 | $ | 559.7 | 88 | % |
| Earnings per share - diluted | 4.71 | 2.36 | 100 | % | ||
| Adjusted EBITDAX(1) | 1,345.3 | 828.9 | 62 | % | ||
| Capital expenditures - D&C | 459.8 | 231.9 | 98 | % | ||
| Cash balance | $ | 675.4 | $ | 367.0 | 84 | % |
| Diluted weighted average total shares outstanding(2) | 220.7 | 239.3 | (8) | % |
Fourth Quarter and Full Year 2022 Highlights:
•Magnolia reported fourth quarter and full-year 2022 net income attributable to Class A Common Stock of $231.7 million, or $1.20 per diluted share, and $893.8 million or $4.71 per diluted share, respectively. Fourth quarter and full-year 2022 total net income was $254.8 million and $1,050.2 million, respectively. Total net income adjusted(1) for the non-cash deferred income tax benefit was $189.0 million and $978.2 million, respectively.
•Adjusted EBITDAX(1) was $267.5 million during the fourth quarter of 2022, with drilling and completions (“D&C”) capital of $140.0 million, representing 52% of quarterly adjusted EBITDAX. Adjusted EBITDAX for the full-year 2022 was $1,345.3 million with total D&C capital of $459.8 million, representing 34% of adjusted EBITDAX.
•Net cash provided by operating activities was $268.0 million during the fourth quarter 2022 and $1,296.7 million during full-year 2022. The Company generated free cash flow(1) of $141.0 million during the fourth quarter 2022 and $823.5 million during full-year 2022.
•Total production in the fourth quarter of 2022 grew 6% from the fourth quarter of 2021 to 73.8 thousand barrels of oil equivalent per day (“Mboe/d”). Production for full-year 2022 averaged 75.4 Mboe/d representing year-over-year volume growth of more than 14%.
(1) Adjusted EBITDAX, adjusted net income, and free cash flow are non-GAAP financial measures. For reconciliations to the most comparable GAAP measures, please see “Non-GAAP Financial Measures” at the end of this press release.
(2) Weighted average total shares outstanding include diluted weighted average shares of Class A Common Stock outstanding during the period and shares of Class B Common Stock, which are anti-dilutive in the calculation of weighted average number of common shares outstanding.
•Production at Giddings and Other in the fourth quarter of 2022 grew 20% compared to the prior year fourth quarter to 43.1 Mboe/d including oil production growth of 26%. Production here represented nearly 60% of overall Magnolia volumes in 2022, a significant increase compared to 2019 levels of 33%. Last year’s growth at Giddings was supported by operating efficiency gains such as fewer drilling days per well, an improvement in stimulation stages per day, and longer laterals.
•Magnolia repurchased 2.4 million shares during the fourth quarter for $57.8 million. Total share repurchases during 2022 amounted to 15.5 million shares, driving the reduction in the Company’s diluted weighted average share count(3) by 8% compared to the prior year. Magnolia has 8.9 million Class A Common shares remaining as part of the current share repurchase authorization. This authorization is specifically allocated toward open market share repurchases.
•Magnolia returned 58%(4) and 54%(5) of the free cash flow generated during the fourth quarter and the full year 2022, respectively, to its shareholders through a combination of share repurchases and dividends. Along with the significant return of cash to shareholders, Magnolia ended the year with $675.4 million of cash on its balance sheet. The Company remains undrawn on its $450.0 million revolving credit facility, with no debt maturities until 2026 and does not plan to increase bonded indebtedness.
•As previously announced, the Board of Directors declared a cash dividend of $0.115 per share of Class A common stock, and a cash distribution of $0.115 per Class B unit, payable on March 1, 2023 to shareholders of record as of February 10, 2023. Our ongoing efforts toward reducing our outstanding shares and delivering moderate annual production growth are expected to support annual dividend growth of approximately 10 percent over time.
“I want to commend our teams for their efforts and recognize their strong contributions which helped support the exceptional financial and operational results for Magnolia in 2022,” said President and CEO Chris Stavros. “We achieved new company records in most financial and operational categories including production, operating income margins and earnings per share, while continuing to gain efficiencies at Giddings without sacrificing productivity. We achieved this by executing on our strategy of disciplined capital spending, moderate production growth, generating high pre-tax margins, and improving our per share metrics while maintaining a strong balance sheet. During 2022 we grew our total production volumes by more than 14 percent while spending just 34 percent of our EBITDAX drilling and completing wells.
“Our teams continued focus on managing costs and generating efficiencies in an inflationary service cost environment further enhanced our margins in Giddings and provided significant free cash flow. During the year, we returned 54 percent of our free cash flow to our shareholders in the form of share repurchases and our cash dividend. We repurchased more than 15 million shares in 2022, reducing our diluted share count by 8 percent. In addition, we were able to acquire some acreage, minerals and additional working interests in our Giddings area, primarily outside of our core development area. This further builds on our strong position in the play and is in line with our strategy of incrementally improving our opportunity set and the value of the business. After all our activities, including capital expenditures, bolt-on acquisitions and the significant return of cash to shareholders, we ended the year with a considerable cash balance of $675 million.
“While Magnolia’s unhedged business captured the benefit of much higher product prices last year, this year’s plan will focus on improved execution and generating further efficiencies in order to offset the impact of higher oil field service costs. Operationally, we expect our 2023 plan to be similar to last year. We expect to continue to operate a two-rig drilling program, which we estimate will generate full-year production growth of approximately 10 percent. We will remain disciplined on our D&C capital, continuing to limit our spending to approximately 55 percent of EBITDAX, allowing for significant free cash flow. Our efforts will continue to focus on improving the overall business while taking actions to increase our dividend per share payout capacity. These activities include moderate growth in our total production, repurchasing at least 1 percent of our outstanding shares per quarter, and the pursuit of small, accretive bolt-on oil and gas property acquisitions. These efforts are expected to support annual dividend growth of approximately 10 percent over time, which is an important component of Magnolia’s total shareholder return proposition.”
(3) Weighted average total shares outstanding include diluted weighted average shares of Class A Common Stock outstanding during the period and shares of Class B Common Stock, which are anti-dilutive in the calculation of weighted average number of common shares outstanding.
(4) Fourth quarter 2022 return to shareholders includes $60.3 million of share repurchases, $19.0 million of dividends to Class A shareholders, and $2.9 million of distributions to Class B shareholders, divided by the quarterly free cash flow (reconciled on page 12).
(5) Full year 2022 return to shareholders includes $352.2 million of share repurchases, $75.2 million of dividends to Class A shareholders, and $14.3 million of distributions to Class B shareholders, divided by the annual free cash flow (reconciled on page 12).
Operational Update
Fourth quarter 2022 total company production averaged 73.8 Mboe/d, representing a 6% increase over the prior year period. Giddings and Other production increased 20% and oil production increased 26% over the prior year’s fourth quarter. As we previously communicated, fourth quarter 2022 production volumes were negatively affected by freezing temperatures, which impacted both our Karnes and Giddings assets during late December and a single large pad that was brought online later than expected. Operations have fully resumed to expected levels and performance at the large 8-well pad is better than expected. We added a mix of acreage, mineral and working interests to the Giddings area during the fourth quarter, most of which was outside of our core development area. These targeted acreage acquisitions were partly a result of our ongoing appraisal work with a goal of identifying new and promising areas throughout the Giddings field. Our appraisal efforts should enhance our development opportunities over time. Magnolia plans to continue to pursue small bolt-on oil and gas property opportunities in and around our operated assets that we expect will add future value to the enterprise.
Magnolia continues to operate two drilling rigs and one completion crew and expects to maintain this level of activity throughout the year. One rig will continue to drill multi-well development pads in our Giddings area. The second rig will drill a mix of wells in both the Karnes and Giddings areas, including some appraisal wells at Giddings. For 2023 in Giddings, we currently expect to average approximately 4 wells per pad with average lateral lengths of approximately 8,000 feet.
2022 Oil and Gas Reserves
Total 2022 proved reserves increased 16% to 157.0 MMboe from 135.4 MMboe at year end 2021 and replaced 179%(6) of 2022 production. Magnolia books only one year of proved undeveloped reserves and as a result 80% of its 2022 proved reserves were developed. The proved undeveloped reserves represent what we plan to convert to proved developed during 2023.
Additional Guidance
Based on our operated activity of a 2-rig drilling plan for full-year 2023, we estimate our total D&C capital to be between $490 to $520 million, which includes an estimate of non-operated capital that we currently expect to be similar to 2022 levels. With this level of activity, we expect to deliver full-year 2023 production growth of 10 percent, with most of the growth expected to come from our development program at our Giddings field asset.
We expect the first quarter of 2023 to be our heaviest period of D&C capital expenditures during the year, and in the range of $140 to $150 million. Total production for the first quarter is estimated to be approximately 80 to 82 Mboe/d. Oil price differentials are anticipated to be approximately a $3 per barrel discount to Magellan East Houston and Magnolia remains completely unhedged for all its oil and natural gas production. The fully diluted share count for the first quarter of 2023 is expected to be approximately 214 million shares, which is 6 percent lower than first quarter 2022 levels.
Annual Report on Form 10-K
Magnolia's financial statements and related footnotes will be available in its Annual Report on Form 10-K for the year ended December 31, 2022, which is expected to be filed with the U.S. Securities and Exchange Commission (“SEC”) on February 16, 2023.
(6) Calculated as the sum of the 2022 change in total proved reserves of 21.6 MMboe and 2022 production of 27.5 MMboe divided by 2022 production.
Conference Call and Webcast
Magnolia will host an investor conference call on Wednesday, February 15, 2023 at 10:00 a.m. Central (11:00 a.m. Eastern) to discuss these operating and financial results. Interested parties may join the webcast by visiting Magnolia's website at www.magnoliaoilgas.com/investors/events-and-presentations and clicking on the webcast link or by dialing 1-844-701-1059. A replay of the webcast will be posted on Magnolia's website following completion of the call.
About Magnolia Oil & Gas Corporation
Magnolia (MGY) is a publicly traded oil and gas exploration and production company with operations primarily in South Texas in the core of the Eagle Ford Shale and Austin Chalk formations. Magnolia focuses on generating value for shareholders through steady production growth, strong pre-tax margins, and free cash flow. For more information, visit www.magnoliaoilgas.com.
Cautionary Note Regarding Forward-Looking Statements
The information in this press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of present or historical fact included in this press release, regarding Magnolia’s strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward looking statements. When used in this press release, the words could, should, will, may, believe, anticipate, intend, estimate, expect, project, the negative of such terms and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events. Except as otherwise required by applicable law, Magnolia disclaims any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this press release. Magnolia cautions you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of Magnolia, incident to the development, production, gathering and sale of oil, natural gas and natural gas liquids. In addition, Magnolia cautions you that the forward looking statements contained in this press release are subject to the following factors: (i) the economic effects of the COVID-19 pandemic and actions taken by federal, state and local governments and other third parties in response to the pandemic; (ii) the outcome of any legal proceedings that may be instituted against Magnolia; (iii) Magnolia’s ability to realize the anticipated benefits of its acquisitions, which may be affected by, among other things, competition and the ability of Magnolia to grow and manage growth profitably; (iv) changes in applicable laws or regulations; (v) geopolitical and business conditions in key regions of the world; and (vi) the possibility that Magnolia may be adversely affected by other economic, business, and/or competitive factors, including inflation. Should one or more of the risks or uncertainties described in this press release occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. Additional information concerning these and other factors that may impact the operations and projections discussed herein can be found in Magnolia’s filings with the SEC, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which is expected to be filed with the SEC on February 16, 2023. Magnolia’s SEC filings are available publicly on the SEC’s website at www.sec.gov.
Contacts for Magnolia Oil & Gas Corporation
Investors
Brian Corales
(713) 842-9036
bcorales@mgyoil.com
Jim Johnson
(713) 842-9033
jjohnson@mgyoil.com
Media
Art Pike
(713) 842-9057
apike@mgyoil.com
Magnolia Oil & Gas Corporation
Operating Highlights
| For the Quarters Ended | For the Years Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2022 | December 31, 2021 | December 31, 2022 | December 31, 2021 | |||||||||
| Production: | ||||||||||||
| Oil (MBbls) | 2,972 | 2,844 | 12,189 | 11,190 | ||||||||
| Natural gas (MMcf) | 12,455 | 11,820 | 50,660 | 43,436 | ||||||||
| Natural gas liquids (MBbls) | 1,740 | 1,572 | 6,874 | 5,669 | ||||||||
| Total (Mboe) | 6,788 | 6,386 | 27,506 | 24,099 | ||||||||
| Average daily production: | ||||||||||||
| Oil (Bbls/d) | 32,307 | 30,913 | 33,394 | 30,659 | ||||||||
| Natural gas (Mcf/d) | 135,380 | 128,475 | 138,796 | 119,003 | ||||||||
| Natural gas liquids (Bbls/d) | 18,914 | 17,085 | 18,833 | 15,532 | ||||||||
| Total (boe/d) | 73,785 | 69,411 | 75,360 | 66,025 | ||||||||
| Revenues (in thousands): | ||||||||||||
| Oil revenues | $ | 245,305 | $ | 216,596 | $ | 1,158,006 | $ | 747,896 | ||||
| Natural gas revenues | 59,445 | 59,890 | 301,494 | 172,648 | ||||||||
| Natural gas liquids revenues | 44,292 | 55,667 | 234,993 | 157,807 | ||||||||
| Total revenues | $ | 349,042 | $ | 332,153 | $ | 1,694,493 | $ | 1,078,351 | ||||
| Average sales price: | ||||||||||||
| Oil (per Bbl) | $ | 82.53 | $ | 76.16 | $ | 95.01 | $ | 66.83 | ||||
| Natural gas (per Mcf) | 4.77 | 5.07 | 5.95 | 3.97 | ||||||||
| Natural gas liquids (per Bbl) | 25.45 | 35.41 | 34.18 | 27.84 | ||||||||
| Total (per boe) | $ | 51.42 | $ | 52.01 | $ | 61.60 | $ | 44.75 | ||||
| NYMEX WTI (per Bbl) | $ | 82.63 | $ | 77.17 | $ | 94.23 | $ | 67.96 | ||||
| NYMEX Henry Hub (per Mcf) | $ | 6.27 | $ | 5.84 | $ | 6.65 | $ | 3.86 | ||||
| Realization to benchmark: | ||||||||||||
| Oil (% of WTI) | 100 | % | 99 | % | 101 | % | 98 | % | ||||
| Natural gas (% of Henry Hub) | 76 | % | 87 | % | 89 | % | 103 | % | ||||
| Operating expenses (in thousands): | ||||||||||||
| Lease operating expenses | $ | 35,457 | $ | 28,064 | $ | 131,513 | $ | 93,021 | ||||
| Gathering, transportation, and processing | 13,236 | 13,466 | 64,754 | 45,535 | ||||||||
| Taxes other than income | 19,114 | 17,177 | 94,031 | 55,834 | ||||||||
| Depreciation, depletion and amortization | 63,820 | 53,420 | 243,152 | 187,688 | ||||||||
| Operating costs per boe: | ||||||||||||
| Lease operating expenses | $ | 5.22 | $ | 4.39 | $ | 4.78 | $ | 3.86 | ||||
| Gathering, transportation, and processing | 1.95 | 2.11 | 2.35 | 1.89 | ||||||||
| Taxes other than income | 2.82 | 2.69 | 3.42 | 2.32 | ||||||||
| Depreciation, depletion and amortization | 9.40 | 8.37 | 8.84 | 7.79 |
Magnolia Oil & Gas Corporation
Consolidated Statements of Operations
(In thousands, except per share data)
| For the Quarters Ended | For the Years Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 31, 2022 | December 31, 2021 | December 31, 2022 | December 31, 2021 | |||||
| REVENUES | ||||||||
| Oil revenues | $ | 245,305 | $ | 216,596 | $ | 1,158,006 | $ | 747,896 |
| Natural gas revenues | 59,445 | 59,890 | 301,494 | 172,648 | ||||
| Natural gas liquids revenues | 44,292 | 55,667 | 234,993 | 157,807 | ||||
| Total revenues | 349,042 | 332,153 | 1,694,493 | 1,078,351 | ||||
| OPERATING EXPENSES | ||||||||
| Lease operating expenses | 35,457 | 28,064 | 131,513 | 93,021 | ||||
| Gathering, transportation and processing | 13,236 | 13,466 | 64,754 | 45,535 | ||||
| Taxes other than income | 19,114 | 17,177 | 94,031 | 55,834 | ||||
| Exploration expenses | 1,467 | 1,685 | 11,586 | 4,125 | ||||
| Asset retirement obligations accretion | 841 | 864 | 3,245 | 4,929 | ||||
| Depreciation, depletion and amortization | 63,820 | 53,420 | 243,152 | 187,688 | ||||
| Amortization of intangible assets | — | — | — | 9,346 | ||||
| General and administrative expenses | 17,200 | 15,463 | 72,426 | 75,279 | ||||
| Total operating costs and expenses | 151,135 | 130,139 | 620,707 | 475,757 | ||||
| OPERATING INCOME (LOSS) | 197,907 | 202,014 | 1,073,786 | 602,594 | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Interest expense, net | (1,805) | (7,483) | (23,442) | (31,002) | ||||
| Loss on derivatives, net | — | — | — | (3,110) | ||||
| Other income (expense), net | (35) | 37 | 6,543 | 85 | ||||
| Total other expense, net | (1,840) | (7,446) | (16,899) | (34,027) | ||||
| INCOME BEFORE INCOME TAXES | 196,067 | 194,568 | 1,056,887 | 568,567 | ||||
| INCOME TAX EXPENSE (BENEFIT) | ||||||||
| Current income tax expense | 7,025 | 2,423 | 72,358 | 8,851 | ||||
| Deferred income tax benefit | (65,720) | — | (65,720) | — | ||||
| Total income tax expense (benefit) | (58,695) | 2,423 | 6,638 | 8,851 | ||||
| NET INCOME | 254,762 | 192,145 | 1,050,249 | 559,716 | ||||
| LESS: Net income attributable to noncontrolling interest | 23,023 | 41,916 | 156,412 | 142,434 | ||||
| NET INCOME ATTRIBUTABLE TO CLASS A COMMON STOCK | $ | 231,739 | $ | 150,229 | $ | 893,837 | $ | 417,282 |
| NET INCOME PER SHARE OF CLASS A COMMON STOCK | ||||||||
| Basic | $ | 1.21 | $ | 0.83 | $ | 4.73 | $ | 2.38 |
| Diluted | $ | 1.20 | $ | 0.82 | $ | 4.71 | $ | 2.36 |
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||
| Basic | 190,274 | 180,655 | 187,433 | 174,364 | ||||
| Diluted | 190,659 | 181,411 | 187,901 | 175,360 | ||||
| WEIGHTED AVERAGE NUMBER OF CLASS B SHARES OUTSTANDING(1) | 24,745 | 49,568 | 32,810 | 63,973 |
(1) Shares of Class B Common Stock, and corresponding Magnolia LLC Units, are anti-dilutive in the calculation of weighted average number of common shares outstanding.
Magnolia Oil & Gas Corporation
Summary Cash Flow Data
(In thousands)
| For the Quarters Ended | For the Years Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 31, 2022 | December 31, 2021 | December 31, 2022 | December 31, 2021 | |||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| NET INCOME | $ | 254,762 | $ | 192,145 | $ | 1,050,249 | $ | 559,716 |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Depreciation, depletion and amortization | 63,820 | 53,420 | 243,152 | 187,688 | ||||
| Amortization of intangible assets | — | — | — | 9,346 | ||||
| Exploration expenses, non-cash | 554 | 888 | 554 | 888 | ||||
| Asset retirement obligations accretion | 841 | 864 | 3,245 | 4,929 | ||||
| Amortization of deferred financing costs | 1,042 | 1,140 | 5,854 | 4,290 | ||||
| Unrealized loss on derivatives, net | — | — | — | 277 | ||||
| Deferred income tax benefit | (65,720) | — | (65,720) | — | ||||
| Stock based compensation | 3,450 | 2,593 | 13,314 | 11,736 | ||||
| Other | — | — | — | (84) | ||||
| Net change in operating assets and liabilities | 9,253 | 9,492 | 46,039 | 9,691 | ||||
| Net cash provided by operating activities | 268,002 | 260,542 | 1,296,687 | 788,477 | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Acquisitions | (78,377) | (7,529) | (90,126) | (18,345) | ||||
| Additions to oil and natural gas properties | (141,629) | (73,682) | (465,139) | (236,426) | ||||
| Changes in working capital associated with additions to oil and natural gas properties | 23,835 | 1,133 | 37,987 | 13,568 | ||||
| Other investing | (422) | 78 | (1,609) | (2,239) | ||||
| Net cash used in investing activities | (196,593) | (80,000) | (518,887) | (243,442) | ||||
| CASH FLOW FROM FINANCING ACTIVITIES | ||||||||
| Class A Common Stock repurchases | (11,776) | (55,325) | (164,913) | (125,641) | ||||
| Class B Common Stock purchases and cancellations | (48,520) | — | (187,273) | (171,671) | ||||
| Non-compete settlement | — | — | — | (42,073) | ||||
| Dividends paid | (18,978) | (27) | (75,198) | (14,131) | ||||
| Distributions to noncontrolling interest owners | (5,510) | (1,501) | (29,362) | (7,207) | ||||
| Cash paid for debt modification | — | — | (5,494) | (4,976) | ||||
| Other financing activities | (723) | (1,730) | (7,101) | (4,915) | ||||
| Net cash used in financing activities | (85,507) | (58,583) | (469,341) | (370,614) | ||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | (14,098) | 121,959 | 308,459 | 174,421 | ||||
| Cash and cash equivalents – Beginning of period | 689,539 | 245,023 | 366,982 | 192,561 | ||||
| Cash and cash equivalents – End of period | $ | 675,441 | $ | 366,982 | $ | 675,441 | $ | 366,982 |
Magnolia Oil & Gas Corporation
Summary Balance Sheet Data
(In thousands)
| December 31, 2022 | December 31, 2021 | |||
|---|---|---|---|---|
| Cash and cash equivalents | $ | 675,441 | $ | 366,982 |
| Other current assets | 175,306 | 150,936 | ||
| Property, plant and equipment, net | 1,533,029 | 1,216,087 | ||
| Other assets | 188,809 | 12,737 | ||
| Total assets | $ | 2,572,585 | $ | 1,746,742 |
| Current liabilities | $ | 340,273 | $ | 218,545 |
| Long-term debt, net | 390,383 | 388,087 | ||
| Other long-term liabilities | 101,738 | 94,861 | ||
| Common stock | 23 | 24 | ||
| Additional paid in capital | 1,719,875 | 1,689,500 | ||
| Treasury stock | (329,512) | (164,599) | ||
| Retained earnings (accumulated deficit) | 185,669 | (708,168) | ||
| Noncontrolling interest | 164,136 | 228,492 | ||
| Total liabilities and equity | $ | 2,572,585 | $ | 1,746,742 |
Magnolia Oil & Gas Corporation
Non-GAAP Financial Measures
Reconciliation of net income to adjusted EBITDAX
In this press release, we refer to adjusted EBITDAX, a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders, and rating agencies. We define adjusted EBITDAX as net income before interest expense, income taxes, depreciation, depletion and amortization, amortization of intangible assets, exploration expenses, and accretion of asset retirement obligations, adjusted to exclude the effect of certain items included in net income. Adjusted EBITDAX is not a measure of net income in accordance with GAAP.
Our management believes that adjusted EBITDAX is useful because it allows them to more effectively evaluate our operating performance and compare the results of our operations from period to period and against our peers without regard to our financing methods or capital structure. We also believe that securities analysts, investors, and other interested parties may use adjusted EBITDAX in the evaluation of our Company. We exclude the items listed above from net income in arriving at adjusted EBITDAX because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDAX should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of our operating performance or liquidity. Certain items excluded from adjusted EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of adjusted EBITDAX. Our presentation of adjusted EBITDAX should not be construed as an inference that our results will be unaffected by unusual or non-recurring items. Our computations of adjusted EBITDAX may not be comparable to other similarly titled measures of other companies.
The following table presents a reconciliation of net income to adjusted EBITDAX, our most directly comparable financial measure, calculated and presented in accordance with GAAP:
| For the Quarters Ended | For the Years Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| (In thousands) | December 31, 2022 | December 31, 2021 | December 31, 2022 | December 31, 2021 | ||||
| NET INCOME | $ | 254,762 | $ | 192,145 | $ | 1,050,249 | $ | 559,716 |
| Exploration expenses | 1,467 | 1,685 | 11,586 | 4,125 | ||||
| Asset retirement obligations accretion | 841 | 864 | 3,245 | 4,929 | ||||
| Depreciation, depletion and amortization | 63,820 | 53,420 | 243,152 | 187,688 | ||||
| Amortization of intangible assets | — | — | — | 9,346 | ||||
| Interest expense, net | 1,805 | 7,483 | 23,442 | 31,002 | ||||
| Income tax expense (benefit) | (58,695) | 2,423 | 6,638 | 8,851 | ||||
| EBITDAX | 264,000 | 258,020 | 1,338,312 | 805,657 | ||||
| Service agreement transition costs(1) | — | — | — | 11,189 | ||||
| Other income adjustment | — | — | (6,333) | — | ||||
| Non-cash stock based compensation expense | 3,450 | 2,593 | 13,314 | 11,736 | ||||
| Unrealized loss on derivatives, net | — | — | — | 277 | ||||
| Adjusted EBITDAX | $ | 267,450 | $ | 260,613 | $ | 1,345,293 | $ | 828,859 |
(1) Costs incurred during the transition period related to the termination of the Services Agreement with EnerVest Operating L.L.C. included within “General and administrative expenses” on the Company's consolidated statements of operations.
Magnolia Oil & Gas Corporation
Non-GAAP Financial Measures
Reconciliation of net income to adjusted net income
Our presentation of adjusted net income is a non-GAAP measures because it excludes the effect of certain items included in net income. Management uses adjusted net income to evaluate our operating and financial performance because it eliminates the impact of certain items that management does not consider to be representative of the Company’s on-going business operations. As a performance measure, adjusted net income may be useful to investors in facilitating comparisons to others in the Company’s industry because certain items can vary substantially in the oil and gas industry from company to company depending upon accounting methods, book value of assets, and capital structure, among other factors. Management believes adjusting these items facilitates investors and analysts in evaluating and comparing the underlying operating and financial performance of our business from period to period by eliminating differences caused by the existence and timing of certain expense and income items that would not otherwise be apparent on a GAAP basis. However, our presentation of adjusted net income may not be comparable to similar measures of other companies in our industry.
| For the Quarters Ended | For the Years Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| (In thousands) | December 31, 2022 | December 31, 2021 | December 31, 2022 | December 31, 2021 | ||||
| NET INCOME | $ | 254,762 | $ | 192,145 | $ | 1,050,249 | $ | 559,716 |
| Adjustments: | ||||||||
| Deferred income tax benefit | (65,720) | — | (65,720) | — | ||||
| Other income adjustment | — | — | (6,333) | — | ||||
| Service agreement transition costs(1) | — | — | — | 11,189 | ||||
| Accelerated amortization of intangible | — | — | — | 5,877 | ||||
| Unrealized loss on derivatives, net | — | — | — | 277 | ||||
| Interest expense costs related to debt modification | — | — | — | 1,147 | ||||
| Seismic purchases | — | — | — | 1,841 | ||||
| Change in estimated income tax(2) | — | — | — | (192) | ||||
| ADJUSTED NET INCOME | $ | 189,042 | $ | 192,145 | $ | 978,196 | $ | 579,855 |
| Diluted weighted average shares of Class A Common Stock outstanding during the period | 190,659 | 181,411 | 187,901 | 175,360 | ||||
| Weighted average shares of Class B Common Stock outstanding during the period(3) | 24,745 | 49,568 | 32,810 | 63,973 | ||||
| Total weighted average shares of Class A and B Common Stock, including dilutive impact of other securities(3) | 215,404 | 230,979 | 220,711 | 239,333 |
(1) Costs incurred during the transition period related to the termination of the Services Agreement with EnerVest Operating L.L.C. included within “General and administrative expenses” on the Company's consolidated statements of operations.
(2) Represents corporate income taxes at an assumed effective tax rate of 2% for the year ended December 31, 2021.
(3) Shares of Class B Common Stock, and corresponding Magnolia LLC Units, are anti-dilutive in the calculation of weighted average number of common shares outstanding.
Magnolia Oil & Gas Corporation
Non-GAAP Financial Measures
Reconciliation of revenue to adjusted cash operating margin and to operating income margin
Our presentation of adjusted cash operating margin and total adjusted cash operating costs are supplemental non-GAAP financial measures that are used by management. Total adjusted cash operating costs exclude the impact of non-cash activity. We define adjusted cash operating margin per boe as total revenues per boe less operating expenses per boe. Management believes that total adjusted cash operating costs per boe and adjusted cash operating margin per boe provide relevant and useful information, which is used by our management in assessing the Company’s profitability and comparability of results to our peers.
As a performance measure, total adjusted cash operating costs and adjusted cash operating margin may be useful to investors in facilitating comparisons to others in the Company’s industry because certain items can vary substantially in the oil and gas industry from company to company depending upon accounting methods, book value of assets, and capital structure, among other factors. Management believes excluding these items facilitates investors and analysts in evaluating and comparing the underlying operating and financial performance of our business from period to period by eliminating differences caused by the existence and timing of certain expense and income items that would not otherwise be apparent on a GAAP basis. However, our presentation of adjusted cash operating margin may not be comparable to similar measures of other companies in our industry.
| For the Quarters Ended | For the Years Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (In $/boe) | December 31, 2022 | December 31, 2021 | December 31, 2022 | December 31, 2021 | ||||||||
| Revenue | $ | 51.42 | $ | 52.01 | $ | 61.60 | $ | 44.75 | ||||
| Total cash operating costs: | ||||||||||||
| Lease operating expenses (1) | (5.17) | (4.37) | (4.74) | (3.84) | ||||||||
| Gathering, transportation and processing | (1.95) | (2.11) | (2.35) | (1.89) | ||||||||
| Taxes other than income | (2.82) | (2.69) | (3.42) | (2.32) | ||||||||
| Exploration expenses (2) | (0.14) | (0.12) | (0.40) | (0.13) | ||||||||
| General and administrative expenses (3) | (2.07) | (2.03) | (2.18) | (2.66) | ||||||||
| Total adjusted cash operating costs | (12.15) | (11.32) | (13.09) | (10.84) | ||||||||
| Adjusted cash operating margin | $ | 39.27 | $ | 40.69 | $ | 48.51 | $ | 33.91 | ||||
| Margin (%) | 76 | % | 78 | % | 79 | % | 76 | % | ||||
| Non-cash costs: | ||||||||||||
| Depreciation, depletion and amortization | $ | (9.40) | $ | (8.37) | $ | (8.84) | $ | (7.79) | ||||
| Asset retirement obligations accretion | (0.12) | (0.14) | (0.12) | (0.20) | ||||||||
| Amortization of intangible assets | — | — | — | (0.39) | ||||||||
| Non-cash stock based compensation | (0.51) | (0.41) | (0.49) | (0.48) | ||||||||
| Exploration expenses, non-cash | (0.08) | (0.14) | (0.02) | (0.04) | ||||||||
| Total non-cash costs | (10.11) | (9.06) | (9.47) | (8.90) | ||||||||
| Operating income margin | $ | 29.16 | $ | 31.63 | $ | 39.04 | $ | 25.01 | ||||
| Margin (%) | 57 | % | 61 | % | 63 | % | 56 | % |
(1) Lease operating expenses exclude non-cash stock based compensation of $0.3 million, or $0.05 per boe, and $0.2 million, or $0.02 per boe, for the quarters ended December 31, 2022 and 2021, respectively, and $1.2 million, or $0.04 per boe, and $0.5 million, or $0.02 per boe for the years ended December 31, 2022 and 2021, respectively.
(2) Exploration expenses exclude non-cash exploration activity of $0.6 million, or $0.08 per boe, and $0.9 million, or $0.14 per boe, for the quarters ended December 31, 2022 and 2021, respectively, and $0.6 million, or $0.02 per boe, and $0.9 million, or $0.04 per boe, for the years ended December 31, 2022 and 2021, respectively.
(3) General and administrative expenses exclude non-cash stock based compensation of $3.1 million, or $0.46 per boe, and $2.4 million, or $0.39 per boe, for the quarters ended December 31, 2022 and 2021, respectively, and $12.1 million, or $0.45 per boe, and $11.2 million, or $0.46 per boe, for the years ended December 31, 2022 and 2021, respectively.
Magnolia Oil & Gas Corporation
Non-GAAP Financial Measures
Reconciliation of net cash provided by operating activities to free cash flow
Free cash flow is a non-GAAP financial measure. Free cash flow is defined as cash flows from operations before net change in operating assets and liabilities less additions to oil and natural gas properties and changes in working capital associated with additions to oil and natural gas properties. Management believes free cash flow is useful for investors and widely accepted by those following the oil and gas industry as financial indicators of a company’s ability to generate cash to internally fund drilling and completion activities, fund acquisitions, and service debt. It is also used by research analysts to value and compare oil and gas exploration and production companies and is frequently included in published research when providing investment recommendations. Free cash flow is used by management as an additional measure of liquidity. Free cash flow is not a measure of financial performance under GAAP and should not be considered an alternative to cash flows from operating, investing, or financing activities.
| For the Quarters Ended | For the Years Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| (In thousands) | December 31, 2022 | December 31, 2021 | December 31, 2022 | December 31, 2021 | ||||
| Net cash provided by operating activities | $ | 268,002 | $ | 260,542 | $ | 1,296,687 | $ | 788,477 |
| Add back: net change in operating assets and liabilities | (9,253) | (9,492) | (46,039) | (9,691) | ||||
| Cash flows from operations before net change in operating assets and liabilities | 258,749 | 251,050 | 1,250,648 | 778,786 | ||||
| Additions to oil and natural gas properties | (141,629) | (73,682) | (465,139) | (236,426) | ||||
| Changes in working capital associated with additions to oil and natural gas properties | 23,835 | 1,133 | 37,987 | 13,568 | ||||
| Free cash flow | $ | 140,955 | $ | 178,501 | $ | 823,496 | $ | 555,928 |
12
mgy_4q22xearningspresent
Magnolia Oil & Gas Fourth Quarter 2022 Earnings Presentation February 15, 2023 Christopher Stavros – President & CEO Brian Corales – Senior Vice President & CFO Jim Johnson – Vice President, Finance, IR & Treasurer Exhibit 99.2
Disclaimer 2 FORWARD LOOKING STATEMENTS The information in this presentation and the oral statements made in connection therewith include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of present or historical fact included in this presentation, regarding Magnolia Oil & Gas Corporation’s (“Magnolia,” “we,” “us,” “our” or the “Company”) financial and production guidance, strategy, future operations, financial position, estimated revenues, and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this presentation, including any oral statements made in connection therewith, the words could, should, will, may, believe, anticipate, intend, estimate, expect, project, the negative of such terms and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events. Except as otherwise required by applicable law, Magnolia disclaims any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this presentation. Magnolia cautions you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of Magnolia, incident to the development, production, gathering and sale of oil, natural gas and natural gas liquids. In addition, Magnolia cautions you that the forward looking statements contained in this press release are subject to the following factors: (i) the economic effects of the COVID-19 pandemic and actions taken by federal, state and local governments and other third parties in response to the pandemic; (ii) the outcome of any legal proceedings that may be instituted against Magnolia; (iii) Magnolia’s ability to realize the anticipated benefits of its acquisitions, which may be affected by, among other things, competition and the ability of Magnolia to grow and manage growth profitably; (iv) changes in applicable laws or regulations; (v) geopolitical and business conditions in key regions of the world; and (vi) the possibility that Magnolia may be adversely affected by other economic, business, and/or competitive factors, including inflation. Should one or more of the risks or uncertainties described in this press release occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. Additional information concerning these and other factors that may impact Magnolia's operations and projections can be found in its filings with the Securities and Exchange Commission (the "SEC"), including its Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which is expected to be filed with the SEC on February 16, 2023. Magnolia’s SEC filings are available publicly on the SEC’s website at www.sec.gov. NON-GAAP FINANCIAL MEASURES This presentation includes non-GAAP financial measures, including adjusted net income, free cash flow, EBITDAX, adjusted EBITDAX, adjusted cash operating costs and adjusted cash operating margin. Magnolia believes these metrics are useful because they allow Magnolia to more effectively evaluate its operating performance and compare the results of its operations from period to period and against its peers without regard to accounting methods or capital structure. Magnolia does not consider these non-GAAP measures in isolation or as an alternative to similar financial measures determined in accordance with GAAP. The computations of these non-GAAP measures may not be comparable to other similarly titled measures of other companies. Adjusted EBITDAX should not be considered an alternative to, or more meaningful than, net income as determined in accordance with GAAP. Certain items excluded from free cash flow, adjusted EBITDAX, adjusted cash operating costs and adjusted cash operating margin are significant components in understanding and assessing a company’s financial performance, and should not be construed as an inference that its results will be unaffected by unusual or non-recurring terms. As performance measures, adjusted net income, adjusted EBITDAX, adjusted cash operating costs and adjusted cash operating margin may be useful to investors in facilitating comparisons to others in the Company’s industry because certain items can vary substantially in the oil and gas industry from company to company depending upon accounting methods, book value of assets, and capital structure, among other factors. Management believes excluding these items facilitates investors and analysts in evaluating and comparing the underlying operating and financial performance of our business from period to period by eliminating differences caused by the existence and timing of certain expense and income items that would not otherwise be apparent on a GAAP basis. As a liquidity measure, management believes free cash flow is useful for investors and widely accepted by those following the oil and gas industry as financial indicators of a company’s ability to generate cash to internally fund drilling and completion activities, fund acquisitions, and service debt. Our presentation of adjusted net income, adjusted EBITDAX, free cash flow, adjusted cash operating costs and adjusted cash operating margin may not be comparable to similar measures of other companies in our industry. A free cash flow reconciliation is shown on page 13, adjusted EBITDAX reconciliation is shown on page 14 of the presentation, adjusted net income is shown on page 15, and adjusted cash operating costs and adjusted cash operating margin reconciliations are shown on page 9. INDUSTRY AND MARKET DATA This presentation has been prepared by Magnolia and includes market data and other statistical information from sources believed by Magnolia to be reliable, including independent industry publications, governmental publications or other published independent sources. Some data is also based on the good faith estimates of Magnolia, which are derived from its review of internal sources as well as the independent sources described above. Although Magnolia believes these sources are reliable, it has not independently verified the information and cannot guarantee its accuracy and completeness.
Fourth Quarter and Full Year 2022 Key Financial Metrics 3 • Strong organic production combined with improved product pricing resulted in substantially improved financial metrics across the board • Giddings weighted activity program continues to benefit steady production growth, full cycle margins and free cash flow • The significant free cash flow supported our share buyback and dividend program and resulted in almost doubling our cash balance • During 4Q22, we repurchased a total of 2.4 million shares; repurchased 15.5 million shares FY 2022 Item 2022 YoY % Change 4Q22 YoY % Change Total Production (Mboe/d) 75.4 14% 73.8 6% Giddings and Other Production as a % of total 59% 5% 58% 6% Revenue ($ MM) $1,694 57% $349 5% Adjusted EBITDAX ($ MM) (1) $1,345 62% $267 3% Adjusted Net Income ($ MM) (1) $978 69% $189 (2%) D&C Capex ($ MM) $460 98% $140 94% Free Cash Flow ($ MM) (1) $823 48% $141 (21%) Cash Balance ($ MM) $675 84% $675 84% Weighted average diluted shares outstanding (MM) (2) 220.7 (8%) 215.4 (7%) (1) Adjusted EBITDAX, Adjusted Net Income, and Free Cash Flow are non-GAAP measures. For a reconciliation of the most comparable GAAP measure see pages 14, 15 and 13. (2) Weighted average total shares outstanding include diluted weighted average shares of Class A Common Stock outstanding during the period and shares of Class B Common Stock, which are anti-dilutive in the calculation of weighted average number of common shares outstanding.
2022 Cash Flow Summary 367 1,251 54 90 90 352 465 675 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 Cash 12/31/21 Cash Flow from Operations Changes in Working Capital and Other Acquisitions Dividends Common Stock Repurchases D&C and Facilities Capital Cash 12/31/22 (1) (4)(3)(2) (In millions) (1) Cash flow from operations before changes in working capital. (2) Comprised of $84 MM change in working capital including capital accruals, offset by $15 million of non-dividend-related distributions to noncontrolling interest holders, and $15 million of other investing and financing activity. (3) Includes $75 MM of dividends paid to Class A shareholders and $15 MM of distributions to noncontrolling interest holders. (4) Comprised of $165 MM Class A Common Stock and $187 MM Class B Common Stock. 4
Share Repurchase Summary Through 4Q 2022 5 Share Reduction Summary (Million Shares) • Since the initial repurchase authorization in 3Q19, Magnolia has reduced its dilutive share count by 25.4(1) million shares of Class A common stock as well as 26.9 million shares of Class B common stock, for a total reduction of 52.3 million shares, or approximately 20% of the diluted shares outstanding as of the authorization date. ‒ Repurchased 2.4 million shares during 4Q22. • Magnolia plans to continue to opportunistically repurchase at least 1% of the total shares outstanding each quarter. • There are 8.9 million shares remaining under the current share repurchase authorization. (1) Class A share reduction includes 3.6 million non-compete shares that were paid in cash in lieu of stock in 2021. (1)
Magnolia Oil & Gas – Differentiated Dividend Framework 6 • The quarterly dividend rate of $0.115 per share is a 15% increase from 2022. • Differentiated dividend framework is aligned with the principles of our business model and reinforces our plan and demonstrates the quality of our assets. • Our approach is meant to appeal to long-term investors who seek dividend safety, moderate and regular dividend growth, and a dividend that is paid out of actual earnings. • We intend to use this dividend framework to demonstrate the underlying results of our business in a stable product price environment ($55 oil and $3.50 natural gas), and within our current cost structure. • Our objective is to provide a superior total shareholder return by improving the per share value of the enterprise while providing a secure and growing dividend. Dividend Principles Secure & Sustainable – Dividend is safe, and supported by our strong balance sheet, prudent spending and consistent free cash flow Paid out of Earnings – Dividend is paid out of earnings generated by the business, and will not exceed 50% of the prior year’s reported net income Dividend Growth – We expect each of these regular dividend payments to grow annually based on execution of our plan, which includes moderate production growth and share reduction $0.28/share $0.40/share $0.46/share 2021 2022 2023 43% Increase 15% Increase Note: Dividend of $0.28 per share represents annual run rate relating to 2021 results under initial semi-annual dividend framework.
Magnolia Oil & Gas – Summary Balance Sheets 7 (in thousands) December 31, 2022 December 31, 2021 Cash $675,441 $366,982 Current assets 175,306 150,936 Property, plant and equipment, net 1,533,029 1,216,087 Other assets 188,809 12,737 Total assets $2,572,585 $1,746,742 Current liabilities $340,273 $218,545 Long-term debt, net 390,383 388,087 Other long-term liabilities 101,738 94,861 Total equity 1,740,191 1,045,249 Total liabilities and equity $2,572,585 $1,746,742
$400 $450 2022 2023 2024 2025 2026 4Q 2022 Capital Structure and Liquidity Overview 8 Capital Structure Overview • Maintaining low financial leverage profile ‒ Currently have a net cash position of $275 MM ‒ Net Debt / Q4 Annualized adjusted EBITDAX of -0.3x • Current Liquidity of $1.1 billion, including fully undrawn credit facility (1) • No debt maturities until senior unsecured notes mature in 2026 Debt Maturity Schedule ($MM) (1) Liquidity defined as cash plus availability under revolving credit facility. (2) Total Equity includes noncontrolling interest. Capitalization & Liquidity ($MM) Borrowing BaseCredit Facility Borrowings (as of 12/31/22) $0 6.00% Senior Unsecured Notes Capitalization Summary As of 12/31/2022 Cash and Cash Equivalents $675 Revolving Credit Facility $0 6.00% Senior Notes Due 2026 $400 Total Principal Debt Outstanding $400 Total Equity (2) $1,740 Net Debt / Q4 Annualized Adjusted EBITDAX -0.3x Net Debt / Total Book Capitalization -13% Liquidity Summary As of 12/31/2022 Cash and Cash Equivalents $675 Credit Facility Availability $450 Liquidity (1) $1,125
$ / Boe, unless otherwise noted For the Quarters Ended For the Years Ended December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Revenue $51.42 $52.01 $61.60 $44.75 Total cash operating costs: Lease operating expenses (1) (5.17) (4.36) (4.74) (3.84) Gathering, transportation & processing (1.95) (2.11) (2.35) (1.89) Taxes other than income (2.82) (2.69) (3.42) (2.32) Exploration expenses (2) (0.14) (0.12) (0.40) (0.13) General & administrative expenses (3) (2.07) (2.03) (2.18) (2.66) Total adjusted cash operating costs (4) (12.15) (11.32) (13.09) (10.84) Adjusted cash operating margin (4) $39.27 $40.69 $48.51 $33.91 Margin % 76% 78% 79% 76% Non-cash costs: Depreciation, depletion, and amortization (9.40) (8.37) (8.84) (7.79) Asset retirement obligations accretion (0.12) (0.14) (0.12) (0.20) Amortization of intangible assets − − − (0.39) Non-cash stock based compensation (0.51) (0.41) (0.49) (0.48) Exploration expenses, non-cash (0.08) (0.14) (0.02) (0.04) Total non-cash expenses (10.11) (9.06) (9.47) (8.90) Operating income margin $29.16 $31.63 $39.04 $25.01 Margin % 57% 61% 63% 56% Magnolia Oil & Gas – Margin and Cost Structure 9 (1) LOE excludes non-cash stock comp of $0.3MM, or $0.05 per boe, and $0.2MM, or $0.02 per boe, for 4Q22 and 4Q21, respectively, and $1.2MM, or $0.04 per boe, and $0.5 MM, or $0.02 per boe for 2022 and 2021, respectively. (2) Exploration excludes non-cash activity of $0.6MM, or $0.08 per boe, and $0.9MM, or $0.14 per boe, for 4Q22 and 4Q21, respectively, and $0.6MM, or $0.02 per boe, and $0.9MM, or $0.04 per boe, for 2022 and 2021, respectively. (3) G&A excludes non-cash stock comp of $3.1MM, or $0.46 per boe, and $2.4MM, or $0.39 per boe, for 4Q22 and 4Q21, respectively, and $12.1MM, or $0.45 per boe, and $11.2MM, or $0.46 per boe for 2022 and 2021, respectively. (4) Adjusted cash operating costs and Adjusted cash operating margin are non-GAAP measures. For further details, refer to slide 2 “Non-GAAP Financial Measures.”
Commitment to Sustainability 10 ENVIRONMENTAL SOCIAL GOVERNANCE Air Emissions Reduced our 2021 GHG intensity rate by 9.5% compared to 2020, following an 8.2% reduction in 2019 Flaring Do not conduct routine flaring; reduced our 2021 gas flared as a percent of total production by 72% compared to 2019 Fugitive Emissions Integrate vapor recovery towers and units into storage tanks to minimize fugitive emissions Surface Impacts Use pad drilling to significantly reduce surface acreage needed for operations Groundwater Routinely install 7 alternating layers of steel and cement as a barrier between wellbores and groundwater Workforce Health & Safety Have not recorded a fatal accident in connection with our operations since the company’s inception Training In 2021, full-time field employees each received an average of 37 hours of safety training Diversity As of December 31, 2021, 26% of our employees were women (38% in our Houston corporate office) and 31% identified as a member of a minority group, as defined by the U.S. EEOC(1) Compensation In 2021, every Magnolia employee received a minimum of 1,000 shares under our long-term incentive program Workplace Flexibility We offer a workplace flexibility program to eligible employees who can work from home effectively Board Independence 71% of board members are independent Board Diversity 29% of board members are women; 14% identify as a member of a minority group Executive Compensation Ratio of 2021 Chief Executive Officer’s compensation to median employee’s compensation was 2.14 to 1 Say-on-Pay More than 92% of stockholders approved say-on-pay at 2022 Annual Meeting of Stockholders Oversight Expanded the duties of our Nominating and Corporate Governance Committee to include formal oversight of ESG policies and practices Magnolia 2022 Sustainability Report is Available on Our Website Under the Sustainability Tab (1) U.S. Equal Employment Opportunity Commission
Appendix
Magnolia Oil & Gas – Overview • High-quality, low-risk pure-play South Texas operator with a core Eagle Ford and Austin Chalk position acquired at an attractive entry multiple • Significant scale and PDP base generates material free cash flow, reduces development risk, and increases optionality • Asset Overview: – ~23,300 net acres in a well-delineated, low-risk position in the core of Karnes County, representing some of the most prolific acreage in the United States with industry leading break-evens – ~460,000 net acres in the Giddings area, a re-emerging oil play with significant upside and what we believe to be substantial inventory – Both assets expected to remain self funding and within cash flow 12 ~482,000 Net Acre Position Targeting Two of the Top Oil Plays in the U.S. Market Statistics Trading Symbol (NYSE) MGY Share Price as of 2/13/2023 $23.07 Common Shares Outstanding (1) 214 million Market Capitalization $5.1 billion Long-term Debt – Principal $400 million Cash as of 12/31/2022 $675 million Total Enterprise Value $4.7 billion Operating Statistics Karnes Giddings Total Net Acreage 23,259 458,756 482,015 4Q22 Net Production (Mboe/d) (2) 30.7 43.1 73.8 (1) Common Stock outstanding includes Class A and Class B Stock. (2) Giddings includes other production not located in the Giddings Field. Karnes County Giddings Field Dewitt Gonzales
Free Cash Flow Reconciliations 13 (1) Free cash flow is a non-GAAP measure. For reasons management believes this is useful to investors, refer to slide 2 “Non-GAAP Financial Measures.” (in thousands) For the Quarters Ended For the Years Ended Free Cash Flow Reconciliation December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Net cash provided by operating activities $268,002 $260,542 $1,296,687 $788,477 Add back: Net change in operating assets and liabilities (9,253) (9,492) (46,039) (9,691) Cash flows from operations before net change in operating assets and liabilities $258,749 $251,050 $1,250,648 $778,786 Additions to oil and natural gas properties (141,629) (73,682) (465,139) (236,426) Changes in working capital associated with additions to oil & gas properties 23,835 1,133 37,987 13,568 Free cash flow(1) $140,955 $178,501 $823,496 $555,928
Adjusted EBITDAX Reconciliations 14 (1) EBITDAX and Adjusted EBITDAX are non-GAAP measures. For reasons management believes these are useful to Investors, refer to slide 2 “Non-GAAP Financial Measures.” (2) Costs incurred during the transition period related to the termination of the Services Agreement with EnerVest Operating L.L.C. included within “General and administrative expenses” on the Company's consolidated statements of operations. (in thousands) For the Quarters Ended For the Years Ended Adjusted EBITDAX reconciliation to net income: December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Net income $254,762 $192,145 $1,050,249 $559,716 Exploration expenses 1,467 1,685 11,586 4,125 Asset retirement obligations accretion 841 864 3,245 4,929 Depreciation, depletion and amortization 63,820 53,420 243,152 187,688 Amortization of intangible assets − − − 9,346 Interest expense, net 1,805 7,483 23,442 31,002 Income tax expense (benefit) (58,695) 2,423 6,638 8,851 EBITDAX (1) $264,000 $258,020 $1,338,312 $805,657 Service agreement transition costs (2) − − − 11,189 Other income adjustment − − (6,333) − Non-cash stock based compensation expense 3,450 2,593 13,314 11,736 Unrealized loss on derivatives, net − − − 277 Adjusted EBITDAX (1) $267,450 $260,613 $1,345,293 $828,859
Adjusted Net Income Reconciliation 15 (1) Costs incurred during the transition period related to the termination of the Services Agreement with EnerVest Operating L.L.C. included within “General and administrative expenses” on the Company's consolidated statements of operations. (2) Represents corporate income taxes at an assumed effective tax rate of 2% for the year ended December 31, 2021. (3) Adjusted Net Income is a non-GAAP measure. For reasons management believes this is useful to investors, refer to slide 2 “Non-GAAP Financial Measure.” (4) Shares of Class B Common Stock, and corresponding Magnolia LLC Units, are anti-dilutive in the calculation of weighted average number of common shares outstanding. (in thousands) For the Quarters Ended For the Years Ended Adjusted Net Income December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Net income $254,762 $192,145 $1,050,249 $559,716 Adjustments: Deferred income tax benefit (65,720) − (65,720) − Other income adjustment − − (6,333) − Service agreement transition costs (1) − − − 11,189 Accelerated amortization of intangible − − − 5,877 Unrealized loss on derivatives, net − − − 277 Interest expense costs related to debt modification − − − 1,147 Seismic purchases − − − 1,841 Change in estimated income tax (2) − − − (192) Adjusted Net Income (3) $189,042 $192,145 $978,196 $579,855 (in thousands) For the Quarters Ended For the Years Ended Total Share Count December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Diluted weighted average of Class A Common Stock outstanding during the period 190,659 181,411 187,901 175,360 Weighted average shares of Class B Common Stock outstanding during the period (4) 24,745 49,568 32,810 63,973 Total weighted average shares of Class A and B Common Stock, including dilutive impact of other securities (4) 215,404 230,979 220,711 239,333
Magnolia Oil & Gas – Operating Highlights 16 (1) Benchmarks are the NYMEX WTI and NYMEX HH average prices for oil and natural gas, respectively. For the Quarters Ended For the Years Ended December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Production: Oil (MBbls) 2,972 2,844 12,189 11,190 Natural gas (MMcf) 12,455 11,820 50,660 43,436 Natural gas liquids (MBbls) 1,740 1,572 6,874 5,669 Total (Mboe) 6,788 6,386 27,506 24,099 Average daily production: Oil (Bbls/d) 32,307 30,913 33,394 30,659 Natural gas (Mcf/d) 135,380 128,475 138,796 119,003 Natural gas liquids (Bbls/d) 18,914 17,085 18,833 15,532 Total (boe/d) 73,785 69,411 75,360 66,025 Revenues (in thousands): Oil revenues $245,305 $216,596 $1,158,006 $747,896 Natural gas revenues 59,445 59,890 301,494 172,648 Natural gas liquids revenues 44,292 55,667 234,993 157,807 Total Revenues $349,042 $332,153 $1,694,493 $1,078,351 Average Sales Price: Oil (per Bbl) $82.53 $76.16 $95.01 $66.83 Natural gas (per Mcf) 4.77 5.07 5.95 3.97 Natural gas liquids (per Bbl) 25.45 35.41 34.18 27.84 Total (per Boe) $51.42 $52.01 $61.60 $44.75 NYMEX WTI (per Bbl) $82.63 $77.17 $94.23 $67.96 NYMEX Henry Hub (per Mcf) $6.27 $5.84 $6.65 $3.86 Realization to benchmark: (1) Oil (% of WTI) 100% 99% 101% 98% Natural gas (% of Henry Hub) 76% 87% 89% 103%
Magnolia Oil & Gas – Production Results 17 Combined Karnes Giddings & Other Combined Karnes Giddings & Other For the Quarter Ended December 31, 2022 For the Quarter Ended December 31, 2021 Production: Oil (MBbls) 2,972 1,585 1,387 2,844 1,740 1,104 Natural gas (MMcf) 12,455 3,824 8,631 11,820 4,148 7,672 Natural gas liquids (MBbls) 1,740 602 1,138 1,572 645 927 Total (Mboe) 6,788 2,824 3,964 6,386 3,076 3,310 Average Daily Production Volume: Oil (MBbls/d) 32.3 17.2 15.1 30.9 18.9 12.0 Natural gas (MMcf/d) 135.4 41.6 93.8 128.5 45.1 83.4 Natural gas liquids (MBbls/d) 18.9 6.5 12.4 17.1 7.0 10.1 Total (MBoe/d) 73.8 30.7 43.1 69.4 33.4 36.0