8-K
Magnolia Oil & Gas Corp (MGY)
UNITED STATESSECURITIES 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): November 5, 2020
| | | |
|---|---|---|
| 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 2.02Results of Operations and Financial Condition.
****On November 5, 2020, 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 quarter ended September 30, 2020.
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 November 5, 2020, the Company provided information in an earnings presentation on its website, www.magnoliaoilgas.com, regarding its financial and operational results for the quarter ended September 30, 2020.
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 dated November 5, 2020 |
| | |
| 99.2 | Earnings Presentation dated November 5, 2020 |
| | |
| 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.
| <br><br><br><br> | |
|---|---|
| | MAGNOLIA OIL & GAS CORPORATION |
| | |
| | |
| Date: November 5, 2020 | By: /s/ Timothy D. Yang |
| | Name: Timothy D. Yang |
| | Title: Executive Vice President,<br> General Counsel and Corporate Secretary |
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Q3 2020 Press Release
Magnolia Oil & Gas Corporation Announces Third Quarter 2020 Results
HOUSTON, TX, November 5, 2020 - Magnolia Oil & Gas Corporation (“Magnolia,” “we,” “our,” or the “Company”) (NYSE: MGY) today announced its financial and operational results for the third quarter of 2020.
Third Quarter 2020 Highlights:
| • | Magnolia reported third quarter 2020 net income attributable to Class A Common Stock of $9.1 million, or $0.05 per share. Third quarter 2020 total net income was $13.7 million and adjusted net income was $15.6 million, or $0.06 per share. |
|---|
| • | Third quarter 2020 production averaged 54.3 thousand barrels of oil equivalent per day (“Mboe/d”). As expected, Magnolia did not complete any operated wells during the third quarter. Quarterly volumes were negatively impacted by 2 Mboe/d due to the delays of non-operated wells in Karnes until the fourth quarter and some unplanned downtime at a Karnes processing facility. |
|---|
| • | Adjusted EBITDAX during the third quarter of 2020 was $76.4 million. Drilling and completion costs (“D&C”) for the quarter were $27.4 million or just 36% of adjusted EBITDAX, and better than our earlier guidance. We continue to target D&C spending during 2020 of approximately 60 percent of adjusted EBITDAX, and inline with our strategy and business plan. |
|---|
| • | We began completing wells in Giddings at the end of the third quarter with several wells coming online during October. Progress continues in reducing our well costs in Giddings, with current total well costs averaging $6.5 million (including costs for drilling, completion, and facilities), representing a 45 percent improvement in total costs per lateral foot compared to 2019 levels. |
|---|
| • | We purchased 1.2 million shares of Class A Common Stock for $7 million during the third quarter as part of our active share repurchase program. Year-to-date, we have repurchased 2.2 million shares and currently have 6.8 million shares remaining under our current authorization.^(1)^ |
|---|
| • | Magnolia ended the quarter with approximately $148.5 million of cash on its balance sheet and remains undrawn on its recently reaffirmed $450.0 million revolving credit facility. The Company has no debt maturities until 2026 and has no plans to increase its debt levels. |
|---|
“Magnolia is in a strong position with an attractive, high-margin asset base and a business model that generates consistent free cash flow with low levels of debt,” said Magnolia Chairman, President, and CEO, Steve Chazen. “We generated $46 million of free cash flow after capital outlays during the quarter, ending the period with $149 million of cash and after allocating $10 million toward buying back our stock and for a small bolt-on acquisition. This general framework of organic investment in our business and small bolt-on acquisitions that generate moderate growth, while returning excess cash to shareholders, is expected to continue into next year.
“As we had previously indicated, the third quarter marked a trough period for the Company’s production as we had not completed any wells since February. Production volumes are expected to rebound in the fourth quarter by 7 to 10 percent, particularly in Giddings, where we started bringing on new well completions last month. While still early, we remain very optimistic on Giddings as the results of the initial batch of wells brought on last month are better than the average of the 14 wells we drilled in this area and laid out last quarter. Our initial core area of development in Giddings continues to outperform our expectations providing us with longer term confidence in this opportunity.”
Operational Update
Third quarter total company production averaged 54.3 Mboe/d, with oil production representing half of our total volumes. Production from Karnes and Giddings and other averaged 33.9 Mboe/d and 20.4 Mboe/d, respectively, during the third quarter 2020. As per our scheduled plan, Magnolia did not complete or turn on any operated wells during the third quarter. The delay of several non-operated wells in Karnes, previously expected to come online in the third quarter, negatively impacted our production during the period, and these wells have since come online in the fourth quarter.
Magnolia is currently operating one rig in Giddings that continues to drill multi-well pads in our initial core developmental area. We ended the third quarter with 8 drilled but uncompleted wells in Giddings which are expected to be brought online during the fourth quarter. The first 3-well pad was brought online in mid-October and early results indicate that the performance of these wells exceeds the average of the wells that we have drilled thus far within the initial 70,000-acre core area. We are not planning any operated activity in Karnes during the fourth quarter.
^(1)^ Includes 0.1 million shares of Class A Common Stock repurchased for $0.5 million in September with settlement dates in October. 1
Our total cost per well at Giddings continues to improve with recent well costs averaging $6.5 million. Drilling times are continuing to set new company records providing further confidence that well costs should experience additional declines. Drilling costs per lateral foot have declined nearly 55 percent and completion costs per lateral foot have decreased 50 percent compared to 2019 levels. These operational efficiencies have resulted in a 45 percent improvement in the total costs per lateral foot (including costs for drilling and completion, and facilities). Magnolia anticipates well costs in Giddings to decline toward $6 million per well in our development area driven by continued efficiencies.
Guidance
Our total capital spending for drilling, completions, and facilities is expected to be approximately 55 percent of our adjusted EBITDAX in the fourth quarter. Fourth quarter production is expected to increase 7 to 10 percent sequentially. The increase in our overall volumes is expected to be driven by several multi-well pads in Giddings to be turned in line throughout the current quarter in addition to several non-operated wells in Karnes. Overall, we continue to run one operated rig in Giddings where our development drilling program is expected to continue through the fourth quarter.
Oil price differentials are anticipated to be a roughly $3 per barrel discount to Magellan East Houston (“MEH”) during the fourth quarter, which is in line with historical levels. During the third quarter, Magnolia hedged 50,000 million British thermal units (“MMbtu”) per day of natural gas production (just under half our total natural gas production) using costless collars with a weighted average floor price of $2.31 per MMbtu and a weighted average ceiling price of $3.00 per MMbtu, from September 2020 through August of 2021.
Looking into 2021, we plan to invest approximately 60 percent of our adjusted EBITDAX on drilling and completing wells consistent with the capital discipline that has supported our business model since our inception. At current product prices, Magnolia plans to operate one rig focused on pad drilling in the Giddings initial core area. Based on current drill times in Giddings, we estimate a one rig drilling program is on pace to drill approximately 20 wells per year.
Quarterly Report on Form 10-Q
Magnolia's financial statements and related footnotes will be available in its Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2020, which is expected to be filed with the U.S. Securities and Exchange Commission (“SEC”) on November 6, 2020.
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Conference Call and Webcast
Magnolia will host an investor conference call on Friday, November 6, 2020 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 and are based on currently available information as to the outcome and timing of 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 length, scope and severity of the ongoing coronavirus disease 2019 (“COVID-19”) pandemic, including the effects of related public health concerns and the impact of continued actions taken by governmental authorities and other third parties in response to the pandemic and its impact on commodity prices, supply and demand considerations, and storage capacity; (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; and (v) the possibility that Magnolia may be adversely affected by other economic, business, and/or competitive factors. 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, 2019. 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
Media
Art Pike
(713) 842-9057
apike@mgyoil.com
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Magnolia Oil & Gas Corporation | ||||||||||||||||
| Operating Highlights | ||||||||||||||||
| | | | | | | | | | ||||||||
| | For the Three Months Ended | | For the Nine Months Ended | |||||||||||||
| | September 30, 2020 | | September 30, 2019 | | September 30, 2020 | | September 30, 2019 | |||||||||
| Production: | | | | | | | | | ||||||||
| Oil (MBbls) | | 2,485 | | | 3,520 | | | 8,965 | | | 9,615 | | ||||
| Natural gas (MMcf) | | 9,444 | | | 10,763 | | | 29,261 | | | 30,583 | | ||||
| Natural gas liquids (MBbls) | | 937 | | | 1,245 | | | 3,213 | | | 3,389 | | ||||
| Total (Mboe) | | 4,996 | | | 6,559 | | | 17,055 | | | 18,101 | | ||||
| | | | | | | | | | ||||||||
| Average daily production: | | | | | | | | | ||||||||
| Oil (Bbls/d) | | 27,016 | | | 38,261 | | | 32,718 | | | 35,220 | | ||||
| Natural gas (Mcf/d) | | 102,653 | | | 116,989 | | | 106,790 | | | 112,026 | | ||||
| Natural gas liquids (Bbls/d) | | 10,181 | | | 13,533 | | | 11,725 | | | 12,414 | | ||||
| Total (boe/d) | | 54,306 | | | 71,292 | | | 62,241 | | | 66,305 | | ||||
| | | | | | | | | | ||||||||
| Revenues (in thousands): | | | | | | | | | ||||||||
| Oil revenues | | $ | 95,677 | | | $ | 207,840 | | | $ | 311,153 | | | $ | 584,009 | |
| Natural gas revenues | | 14,895 | | | 21,243 | | | 44,238 | | | 71,208 | | ||||
| Natural gas liquids revenues | | 10,495 | | | 15,716 | | | 29,880 | | | 51,215 | | ||||
| Total Revenues | | $ | 121,067 | | | $ | 244,799 | | | $ | 385,271 | | | $ | 706,432 | |
| | | | | | | | | | ||||||||
| Average sales price: | | | | | | | | | ||||||||
| Oil (per Bbl) | | $ | 38.50 | | | $ | 59.05 | | | $ | 34.71 | | | $ | 60.74 | |
| Natural gas (per Mcf) | | 1.58 | | | 1.97 | | | 1.51 | | | 2.33 | | ||||
| Natural gas liquids (per Bbl) | | 11.20 | | | 12.62 | | | 9.30 | | | 15.11 | | ||||
| Total (per boe) | | $ | 24.23 | | | $ | 37.32 | | | $ | 22.59 | | | $ | 39.03 | |
| | | | | | | | | | ||||||||
| NYMEX WTI ($/Bbl) | | $ | 40.94 | | | $ | 56.45 | | | $ | 38.30 | | | $ | 57.06 | |
| NYMEX Henry Hub ($/Mcf) | | $ | 1.97 | | | $ | 2.23 | | | $ | 1.88 | | | $ | 2.67 | |
| Realization to benchmark: | | | | | | | | | ||||||||
| Oil (per Bbl) | | 94 | % | | 105 | % | | 91 | % | | 106 | % | ||||
| Natural Gas (per Mcf) | | 80 | % | | 88 | % | | 80 | % | | 87 | % | ||||
| | | | | | | | | | ||||||||
| Operating expenses (in thousands): | | | | | | | | | ||||||||
| Lease operating expenses | | $ | 18,802 | | | $ | 24,344 | | | $ | 61,275 | | | $ | 70,752 | |
| Gathering, transportation and processing | | 5,771 | | | 9,270 | | | 20,579 | | | 26,016 | | ||||
| Taxes other than income | | 7,331 | | | 13,333 | | | 22,874 | | | 40,825 | | ||||
| Depreciation, depletion and amortization | | 44,731 | | | 143,894 | | | 238,273 | | | 385,942 | | ||||
| | | | | | | | | | ||||||||
| Operating costs per boe: | | | | | | | | | ||||||||
| Lease operating expenses | | $ | 3.76 | | | $ | 3.71 | | | $ | 3.59 | | | $ | 3.91 | |
| Gathering, transportation and processing | | 1.16 | | | 1.41 | | | 1.21 | | | 1.44 | | ||||
| Taxes other than income | | 1.47 | | | 2.03 | | | 1.34 | | | 2.26 | | ||||
| Depreciation, depletion and amortization | | 8.95 | | | 21.94 | | | 13.97 | | | 21.32 | |
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Magnolia Oil & Gas Corporation
Consolidated Statements of Operations
(In thousands, except per share data)
| | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | For the Three Months Ended | | For the Nine Months Ended | ||||||||||||
| | September 30, 2020 | | September 30, 2019 | | September 30, 2020 | | September 30, 2019 | |||||||||
| REVENUES | | | | | | | | |||||||||
| Oil revenues | | $ | 95,677 | | | $ | 207,840 | | | $ | 311,153 | | | $ | 584,009 | |
| Natural gas revenues | | 14,895 | | | 21,243 | | | 44,238 | | | 71,208 | | ||||
| Natural gas liquids revenues | | 10,495 | | | 15,716 | | | 29,880 | | | 51,215 | | ||||
| Total revenues | | 121,067 | | | 244,799 | | | 385,271 | | | 706,432 | | ||||
| OPERATING EXPENSES | | | | | | | | | ||||||||
| Lease operating expenses | | 18,802 | | | 24,344 | | | 61,275 | | | 70,752 | | ||||
| Gathering, transportation and processing | | 5,771 | | | 9,270 | | | 20,579 | | | 26,016 | | ||||
| Taxes other than income | | 7,331 | | | 13,333 | | | 22,874 | | | 40,825 | | ||||
| Exploration expense | | 701 | | | 3,924 | | | 563,589 | | | 10,017 | | ||||
| Impairment of oil and natural gas properties | | — | | | — | | | 1,381,258 | | | — | | ||||
| Asset retirement obligation accretion | | 1,501 | | | 1,394 | | | 4,403 | | | 4,095 | | ||||
| Depreciation, depletion and amortization | | 44,731 | | | 143,894 | | | 238,273 | | | 385,942 | | ||||
| Amortization of intangible assets | | 3,626 | | | 3,626 | | | 10,879 | | | 10,879 | | ||||
| General & administrative expenses | | 16,663 | | | 17,345 | | | 50,472 | | | 52,651 | | ||||
| Transaction related costs | | — | | | — | | | — | | | 438 | | ||||
| Total operating costs and expenses | | 99,126 | | | 217,130 | | | 2,353,602 | | | 601,615 | | ||||
| | | | | | | | | | ||||||||
| OPERATING INCOME (LOSS) | | 21,941 | | | 27,669 | | | (1,968,331) | | | 104,817 | | ||||
| | | | | | | | | | ||||||||
| OTHER INCOME (EXPENSE) | | | | | | | | | ||||||||
| Income from equity method investee | | 1,007 | | | 92 | | | 2,059 | | | 608 | | ||||
| Interest expense, net | | (7,333) | | | (6,896) | | | (21,345) | | | (21,611) | | ||||
| Loss on derivatives, net | | (2,208) | | | — | | | (2,208) | | | — | | ||||
| Other expense, net | | (51) | | | 21 | | | (510) | | | 8 | | ||||
| Total other income (expense) | | (8,585) | | | (6,783) | | | (22,004) | | | (20,995) | | ||||
| | | | | | | | | | ||||||||
| INCOME (LOSS) BEFORE INCOME TAXES | | 13,356 | | | 20,886 | | | (1,990,335) | | | 83,822 | | ||||
| Income tax expense (benefit) | | (339) | | | 3,529 | | | (79,340) | | | 12,449 | | ||||
| NET INCOME (LOSS) | | 13,695 | | | 17,357 | | | (1,910,995) | | | 71,373 | | ||||
| LESS: Net income (loss) attributable to noncontrolling interest | | 4,548 | | | 6,810 | | | (674,860) | | | 29,294 | | ||||
| NET INCOME ATTRIBUTABLE TO MAGNOLIA | | 9,147 | | | 10,547 | | | (1,236,135) | | | 42,079 | | ||||
| LESS: Non-cash deemed dividend related to warrant exchange | | — | | | 2,763 | | | — | | | 2,763 | | ||||
| NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON STOCK | | $ | 9,147 | | | $ | 7,784 | | | $ | (1,236,135) | | | $ | 39,316 | |
| | | | | | | | | | ||||||||
| NET INCOME (LOSS) PER COMMON SHARE | | | | | ||||||||||||
| Basic | | $ | 0.05 | | | $ | 0.05 | | | $ | (7.41) | | | $ | 0.25 | |
| Diluted | | $ | 0.05 | | | $ | 0.05 | | | $ | (7.41) | | | $ | 0.24 | |
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | | | | | ||||||||||||
| Basic | | 166,467 | | | 166,872 | | | 166,728 | | | 160,051 | | ||||
| Diluted | | 170,676 | | | 167,108 | | | 166,728 | | | 161,488 | | ||||
| WEIGHTED AVERAGE NUMBER OF CLASS B SHARES OUTSTANDING^(1)^ | | 85,790 | | | 91,790 | | | 85,790 | | | 92,292 | |
^^^^^^^(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.
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Magnolia Oil & Gas Corporation
Summary Cash Flow Data
(In thousands)
| | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | For the Three Months Ended | | For the Nine Months Ended | ||||||||||||
| | | September 30, 2020 | | September 30, 2019 | | September 30, 2020 | | September 30, 2019 | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||||||
| NET INCOME (LOSS) | | $ | 13,695 | | | $ | 17,357 | | | $ | (1,910,995) | | | $ | 71,373 | |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | | | | | ||||||||
| Depreciation, depletion and amortization | | 44,731 | | | 143,894 | | | 238,273 | | | 385,942 | | ||||
| Amortization of intangible assets | | 3,626 | | | 3,626 | | | 10,879 | | | 10,879 | | ||||
| Exploration expense, non-cash | | — | | | 53 | | | 561,629 | | | 536 | | ||||
| Impairment of oil and natural gas properties | | — | | | — | | | 1,381,258 | | | — | | ||||
| Asset retirement obligation accretion | | 1,501 | | | 1,394 | | | 4,403 | | | 4,095 | | ||||
| Amortization of deferred financing costs | | 913 | | | 892 | | | 2,710 | | | 2,644 | | ||||
| Loss on derivatives, net | | 2,208 | | | — | | | 2,208 | | | — | | ||||
| Deferred tax expense (benefit) | | — | | | 3,414 | | | (77,834) | | | 11,765 | | ||||
| Stock based compensation | | 2,927 | | | 2,829 | | | 8,871 | | | 8,376 | | ||||
| Other | | (1,007) | | | (88) | | | (2,059) | | | (512) | | ||||
| Net change in operating assets and liabilities | | (3,438) | | | 5,849 | | | 11,656 | | | (6,487) | | ||||
| Net cash provided by operating activities | | 65,156 | | | 179,220 | | | 230,999 | | | 488,611 | | ||||
| | | | | | | | | | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | | ||||||||
| Acquisition of EnerVest properties | | — | | | — | | | — | | | 4,250 | | ||||
| Acquisitions, other | | (3,920) | | | (1,318) | | | (73,702) | | | (93,221) | | ||||
| Additions to oil and natural gas properties | | (27,674) | | | (88,403) | | | (157,325) | | | (351,467) | | ||||
| Changes in working capital associated with additions to oil and natural gas properties | | 5,409 | | | (9,147) | | | (18,972) | | | (13,392) | | ||||
| Other investing | | (496) | | | 1 | | | (842) | | | (247) | | ||||
| Net cash used in investing activities | | (26,681) | | | (98,867) | | | (250,841) | | | (454,077) | | ||||
| | | | | | | | | | ||||||||
| CASH FLOW FROM FINANCING ACTIVITIES | | | | | | | | | ||||||||
| Contributions from noncontrolling interest owners | | — | | | — | | | — | | | 7,301 | | ||||
| Distributions to noncontrolling interest owners | | (104) | | | (490) | | | (594) | | | (716) | | ||||
| Class A Common Stock repurchases | | (6,479) | | | (9,722) | | | (12,962) | | | (9,722) | | ||||
| Other financing activities | | (209) | | | (2,361) | | | (702) | | | (2,666) | | ||||
| Net cash used in financing activities | | (6,792) | | | (12,573) | | | (14,258) | | | (5,803) | | ||||
| | | | | | | | | | ||||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | | 31,683 | | | 67,780 | | | (34,100) | | | 28,731 | | ||||
| Cash and cash equivalents – Beginning of period | | 116,850 | | | 96,709 | | | 182,633 | | | 135,758 | | ||||
| Cash and cash equivalents – End of period | | $ | 148,533 | | | $ | 164,489 | | | $ | 148,533 | | | $ | 164,489 | |
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Magnolia Oil & Gas Corporation
Summary Balance Sheet Data
(In thousands)
| | | | | | | | | |
|---|---|---|---|---|---|---|---|---|
| | | September 30, 2020 | | December 31, 2019 | ||||
| Cash and cash equivalents | | $ | 148,533 | | | $ | 182,633 | |
| Other current assets | | 66,329 | | | 110,585 | | ||
| Property, plant and equipment, net | | 1,169,949 | | | 3,116,757 | | ||
| Other assets | | 49,468 | | | 56,431 | | ||
| Total assets | | $ | 1,434,279 | | | $ | 3,466,406 | |
| | | | | | ||||
| Current liabilities | | $ | 124,462 | | | $ | 175,208 | |
| Long-term debt, net | | 390,787 | | | 389,835 | | ||
| Other long-term liabilities | | 106,849 | | | 172,834 | | ||
| Common stock | | 26 | | | 26 | | ||
| Additional paid in capital | | 1,709,043 | | | 1,703,362 | | ||
| Treasury stock | | (23,240) | | | (10,277) | | ||
| Retained earnings (accumulated deficit) | | (1,153,195) | | | 82,940 | | ||
| Noncontrolling interest | | 279,547 | | | 952,478 | | ||
| Total liabilities and equity | | $ | 1,434,279 | | | $ | 3,466,406 | |
7
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 costs, accretion of asset retirement obligation, non-cash stock based compensation expense, and loss on derivatives, net. 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 Three Months Ended | ||||||
| (In thousands) | | September 30, 2020 | | September 30, 2019 | ||||
| NET INCOME | | $ | 13,695 | | | $ | 17,357 | |
| Exploration expense | | 701 | | | 3,924 | | ||
| Asset retirement obligation accretion | | 1,501 | | | 1,394 | | ||
| Depreciation, depletion and amortization | | 44,731 | | | 143,894 | | ||
| Amortization of intangible assets | | 3,626 | | | 3,626 | | ||
| Interest expense, net | | 7,333 | | | 6,896 | | ||
| Income tax expense (benefit) | | (339) | | | 3,529 | | ||
| EBITDAX | | 71,248 | | | 180,620 | | ||
| Non-cash stock based compensation expense | | 2,927 | | | 2,829 | | ||
| Loss on derivatives, net^(1)^ | | 2,208 | | | — | | ||
| Adjusted EBITDAX | | $ | 76,383 | | | $ | 183,449 | |
^^^(1)^ There were no cash settlements or realized gains or losses on the Company’s derivative instruments during the three months ended September 30, 2020 and 2019.
8
Magnolia Oil & Gas Corporation
Non-GAAP Financial Measures
Reconciliation of net income attributable to Class A Common Stock to adjusted earnings
Our presentation of adjusted earnings and adjusted earnings per share are non-GAAP measures because they exclude the effect of certain items included in net income attributable to Class A Common Stock. Management uses adjusted earnings and adjusted earnings per share 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 earnings 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 earnings and adjusted earnings per share may not be comparable to similar measures of other companies in our industry.
| | For the Three Months Ended<br><br>September 30, 2020 | | Per Share Diluted EPS | | For the Three Months Ended<br><br>September 30, 2019 | | Per Share Diluted EPS | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (In thousands, except per share data) | | | | | | | | |||||||||||
| NET INCOME ATTRIBUTABLE TO CLASS A COMMON STOCK | $ | 9,147 | | | $ | 0.05 | | | $ | 7,784 | | | $ | 0.05 | | |||
| Adjustments: | | | | | | | | |||||||||||
| Non-cash deemed dividend | — | | | — | | | 2,763 | | | 0.01 | ||||||||
| Loss on derivatives, net | 2,208 | | | 0.01 | | — | | | — | | ||||||||
| Noncontrolling interest impact of adjustments | (752) | | | — | | | — | | | — | | |||||||
| ADJUSTED NET INCOME ATTRIBUTABLE TO <br>CLASS A COMMON STOCK | $ | 10,603 | | | $ | 0.06 | | | $ | 10,547 | | | $ | 0.06 | |
9
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 and adjusts for income taxes assuming the exchange of all outstanding Magnolia LLC Units and corresponding Class B Common Stock for shares of Class A Common Stock. 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 Three Months Ended | ||||||
| (In thousands) | September 30, 2020 | | September 30, 2019 | ||||
| NET INCOME | $ | 13,695 | | | $ | 17,357 | |
| Income tax expense (benefit) | (339) | | | 3,529 | | ||
| INCOME BEFORE INCOME TAXES | 13,356 | | | 20,886 | | ||
| Adjustments: | | | | ||||
| Loss on derivatives, net | 2,208 | | | — | | ||
| Adjusted income tax expense^(1)^ | — | | | 4,720 | | ||
| ADJUSTED NET INCOME | $ | 15,564 | | | $ | 16,166 | |
| | | | | ||||
| Diluted weighted average shares of Class A Common Stock outstanding during the period | 170,676 | | | 167,108 | | ||
| Weighted average shares of Class B Common Stock outstanding during the period^(2)^ | 85,790 | | | 91,790 | | ||
| Total weighted average shares of Class A and B Common Stock, including dilutive impact of other securities^(2)^ | 256,466 | | | 258,898 | |
^^^^^^^(1)^ Represents corporate income taxes at an assumed effective tax rate of 0% and 22.6% for the three months ended September 30, 2020 and 2019, respectively.
^^^^^(2)^ 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.
10
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 are frequently included in published research when providing investment recommendations. Free cash flow, therefore, is an additional measure of liquidity, but 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 Three Months Ended | ||||||
| (In thousands) | | September 30, 2020 | | September 30, 2019 | ||||
| Net cash provided by operating activities | | $ | 65,156 | | | $ | 179,220 | |
| Net change in operating assets and liabilities | | 3,438 | | | (5,849) | | ||
| Cash flows from operations before net change in operating assets and liabilities | | 68,594 | | | 173,371 | | ||
| Additions to oil and natural gas properties | | (27,674) | | | (88,403) | | ||
| Changes in working capital associated with additions to oil and natural gas properties | | 5,409 | | | (9,147) | | ||
| Free cash flow | | $ | 46,329 | | | $ | 75,821 | |
11
Exhibit 99.2
| Third Quarter 2020<br>Earnings Presentation<br>November 5, 2020<br>Stephen Chazen – Chairman, President & CEO<br>Christopher Stavros – Executive Vice President & CFO<br>Brian Corales – Vice President, Investor Relations |
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| Disclaimer<br>2<br>FORWARD LOOKING STATEMENTS<br>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<br>(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<br>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,<br>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,”<br>“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<br>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<br>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<br>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<br>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<br>contained in this press release are subject to the following factors: (i) the length, scope and severity of the ongoing coronavirus disease 2019 (“COVID-19”) pandemic, including the effects of related public<br>health concerns and the impact of continued actions taken by governmental authorities and other third parties in response to the pandemic and its impact on commodity prices, supply and demand<br>considerations, and storage capacity; (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<br>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; and (v) the possibility that Magnolia may be<br>adversely affected by other economic, business, and/or competitive factors. Should one or more of the risks or uncertainties described in this press release occur, or should underlying assumptions prove<br>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<br>operations and projections can be found in its filings with the Securities and Exchange Commission (the "SEC"), its Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on<br>February 26, 2020. Magnolia’s SEC filings are available publicly on the SEC’s website at www.sec.gov.<br>NON-GAAP FINANCIAL MEASURES<br>This presentation includes non-GAAP financial measures, including free cash flow, EBITDAX, adjusted EBITDAX, adjusted net income and adjusted earnings. Magnolia believes these metrics are useful because<br>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 financing methods or capital<br>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<br>measures may not be comparable to other similarly titled measures of other companies.<br>Magnolia excludes certain items from net income in arriving at adjusted net income and adjusted earnings because these amounts can vary substantially from company to company within its industry<br>depending upon accounting methods, book values of assets and the method by which the assets were acquired. Adjusted EBITDAX, adjusted net income, and adjusted earnings should not be considered as<br>alternatives to, or more meaningful than, net income as determined in accordance with GAAP. Certain items excluded from free cash flow, adjusted EBITDAX, adjusted net income, and adjusted earnings are<br>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.<br>As performance measures, adjusted EBITDAX, adjusted net income and adjusted earnings may be useful to investors in facilitating comparisons to others in the Company’s industry because certain items can<br>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<br>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<br>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<br>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<br>presentation of adjusted EBITDAX, adjusted net income, free cash flow and adjusted earnings and may not be comparable to similar measures of other companies in our industry. A free cash flow reconciliation<br>is shown on page 11, adjusted EBITDAX reconciliation is shown on page 12 of the presentation, adjusted net income reconciliation is shown on page 13 and adjusted earnings reconciliation is shown on page<br>14.<br>INDUSTRY AND MARKET DATA<br>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,<br>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<br>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. |
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| Magnolia Oil & Gas – 3Q 2020 Highlights<br>3<br>• Generated adjusted EBITDAX of $76 million versus our D&C Capital of $27 million, or just 36%, during<br>the 3rd quarter. Magnolia is on track to spend ~60% of 2020 Adjusted EBITDAX on D&C Capital.<br>• Free cash flow during the 3rd quarter was $46 million.<br>• Ended the 3rd quarter 2020 with $149 million of cash on the balance sheet and an undrawn $450 million<br>revolver, providing MGY with ~$599 million(1) of liquidity.<br>• Magnolia repurchased 1.2 million shares for $7 million during the 3rd quarter. YTD we have bought back<br>2.2 million shares and have 6.8 million shares remaining on the repurchase authorization(2).<br>• After not bringing any new wells online in 8 months, MGY plans to bring 8 Giddings DUCs online<br>during the 4th quarter. Reduced Giddings well costs to $6.5 million from 2019 levels of $8.5 million.<br>• 3rd quarter marked the trough period of production this year and we expect total 4th quarter production<br>to increase 7 to 10% sequentially.<br>• Giddings Production is expected to grow at least 20% sequentially.<br>(1) Liquidity defined as cash plus availability under revolving credit facility.<br>(2) Includes 0.1 million shares of Class A Common Stock repurchased for $0.5 million in September with settlement dates in October. |
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| Magnolia Oil & Gas – 3Q 2020 Key Metrics<br>4<br>Adj. Net Income (1) & Adj. EPS (1) Total Production<br>54.3 Mboe/d<br>(50% Oil)<br>Adjusted EBITDAX (1)<br>$76 Million<br>D&C Capex<br>$27 Million<br>36% of Adj. EBITDAX<br>Cash Balance at 9/30/20<br>$149 Million<br>Free Cash Flow (1)<br>$46 million<br>(1) Adjusted EPS, Adjusted Net Income, Free Cash Flow and Adjusted EBITDAX are non-GAAP measures. For a reconciliation to the most directly comparable GAAP<br>measure see pages 14, 13, 11 and 12.<br>$15.6 million<br>$0.06/share |
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| 117<br>69<br>2<br>1 4 7<br>27<br>149<br>0<br>20<br>40<br>60<br>80<br>100<br>120<br>140<br>160<br>180<br>200<br>Cash<br>6/30/20<br>Cash Flow<br>from<br>Operations<br>Changes in<br>WC<br>Other Acquisitions Common<br>Stock<br>Repurchases<br>D&C and<br>Facilities<br>Capital<br>Cash<br>9/30/20<br>3Q 2020 Cash Flow Summary<br>($ In Millions)<br>5<br>(1) Cash flow from operations before changes in working capital.<br>(2) Includes $3 million decrease in working capital offset by $5 million increase in capital accruals which are included in the investing activities of the statement of cash flows.<br>(3) Includes other investing and financing activities of the statement of cash flows.<br>(4) D&C Capital of $27 million includes $5 million of capital activities that have been accrued but not yet paid<br>(1)<br>(2)<br>(3)<br>(4) |
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| Magnolia Oil & Gas – Summary Balance Sheet<br>6<br>(in thousands)<br>September 30, 2020 December 31, 2019<br>Cash $148,533 $182,633<br>Current assets 66,329 110,585<br>Property, plant and equipment, net 1,169,949 3,116,757<br>Other assets 49,468 56,431<br>Total assets $1,434,279 $3,466,406<br>Current liabilities $124,462 $175,208<br>Long-term debt, net 390,787 389,835<br>Other long-term liabilities 106,849 172,834<br>Total stockholders' equity 812,181 2,728,529<br>Total liabilities and equity $1,434,279 $3,466,406 |
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| $450<br>2018 2019 2020 2021 2022 2023 2024 2025 2026<br>3Q20 Capital Structure and Liquidity Overview<br>7<br>Capital Structure Overview<br>• Maintaining low financial leverage profile<br>‒ Net Debt / Total Book Capitalization of 21%<br>‒ Net Debt / Q3 Annualized adjusted EBITDAX of 0.8x<br>• Current Liquidity of $599 MM, including fully undrawn credit facility (1)<br>• No debt maturities until senior unsecure notes mature in 2026<br>Debt Maturity Schedule ($MM)<br>Borrowing<br>Base<br>Credit Facility<br>Borrowings<br>(as of 9/30/20)<br>$0<br>6.00% Senior<br>Unsecured<br>Notes<br>(1) Liquidity defined as cash plus availability under revolving credit facility.<br>(2) Total Shareholders’ Equity includes noncontrolling interest.<br>Capitalization & Liquidity ($MM)<br>Capitalization Summary As of 9/30/20<br>Cash and Cash Equivalents $149<br>Revolving Credit Facility $0<br>6.00% Senior Notes Due 2026 $400<br>Total Principal Debt Outstanding $400<br>Total Shareholder's Equity (2) $812<br>Net Debt / Q3 Annualized Adjusted EBITDAX 0.8x<br>Net Debt / Total Book Capitalization 21%<br>Liquidity Summary As of 9/30/20<br>Cash and Cash Equivalents $149<br>Credit Facility Availability $450<br>Liquidity (1) $599 |
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| 4th Quarter 2020 Guidance<br>8<br>Total Company Production<br>D&C Capex<br>~55% of adj. EBITDAX<br>Oil Differential<br>$3/Bbl discount to<br>MEH<br>Activity<br>8 Giddings TILs<br>Giddings Production<br>>20% Sequential<br>Growth<br>7% - 10% Sequential<br>Growth |
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| Appendix |
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| Magnolia Oil & Gas – Overview<br>• High-quality, low-risk pure-play South Texas operator with a core<br>Eagle Ford and Austin Chalk position acquired at an attractive entry<br>multiple<br>• Significant scale and PDP base generates material free cash flow,<br>reduces development risk, and increases optionality<br>• Asset Overview:<br>– ~23,500 net acres in a well-delineated, low-risk position in the<br>core of Karnes County, representing some of the most prolific<br>acreage in the United States with industry leading breakevens<br>– ~440,000 net acres in the Giddings Field, a re-emerging oil play<br>with significant upside and what we believe to be substantial<br>inventory<br>– Both assets expected to remain self funding and within cash flow<br>10<br>Karnes County<br>Giddings Field<br>~460,000 Net Acre Position Targeting Two of the Top<br>Oil Plays in the U.S.<br>Market Statistics<br>Trading Symbol (NYSE) MGY<br>Share Price as of 11/4/2020 $4.14<br>Common Shares Outstanding (1) 251.3 million<br>Market Capitalization $1.0 billion<br>Long-term Debt - Principal $400 million<br>Total Enterprise Value $1.3 billion<br>Operating Statistics Karnes Giddings Total<br>Net Acreage 23,559 437,128 460,687<br>3Q20 Net Production (Mboe/d) (2) 33.9 20.4 54.3<br>Industry Leading Breakevens ($/Bbl WTI)<br>Source: IHS Performance Evaluator.<br>$28 $32 $34 $35 $38 $39 $39<br>$45<br>Karnes Austin<br>Chalk<br>Karnes Lower<br>Eagle Ford<br>Midland Delaware DJ Basin Eagle Ford STACK Bakken<br>Source: RSEG.<br>Wilson<br>Dewitt<br>Gonzales<br>(1) Common Stock outstanding includes Class A and Class B Stock.<br>(2) Giddings Includes other production not located in the Giddings Field. |
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| Free Cash Flow Reconciliation<br>11<br>(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.”<br>(in thousands)<br>Free Cash Flow Reconciliation For the Quarter Ended<br>September 30, 2020<br>For the Quarter Ended<br>September 30, 2019<br>Net cash provided by operating activities $65,156 $179,220<br>Changes in operating assets and liabilities 3,438 (5,849)<br>Cash flows from operations before changes in operating assets<br>and liabilities $68,594 $173,371<br>Additions to oil and natural gas properties (27,674) (88,403)<br>Changes in working capital associated with additions<br>to oil & gas properties 5,409 (9,147)<br>Free cash flow (1) $46,329 $75,821 |
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| Reconciliation of Net Income to Adjusted EBITDAX<br>12<br>(in thousands)<br>Adjusted EBITDAX reconciliation to net income: For the Quarter Ended<br>September 30, 2020<br>For the Quarter Ended<br>September 30, 2019<br>Net income $13,695 $17,357<br>Exploration expense 701 3,924<br>Asset retirement obligation accretion 1,501 1,394<br>Depreciation, depletion and amortization 44,731 143,894<br>Amortization of intangible assets 3,626 3,626<br>Interest expense, net 7,333 6,896<br>Income tax expense (benefit) (339) 3,529<br>EBITDAX (1) $71,248 $180,620<br>Non-cash stock based compensation expense $2,927 $2,829<br>Loss on derivatives, net (2) $2,208 -<br>Adjusted EBITDAX (1) $76,383 $183,449<br>(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<br>Measures.”<br>(2) There were no cash settlements or realized gains or losses on the Company’s derivative instruments during the quarters ended September 30, 2020 and 2019. |
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| Adjusted Net Income Reconciliation<br>13<br>(in thousands)<br>Adjusted Net Income For the Quarter Ended<br>September 30, 2020<br>For the Quarter Ended<br>September 30, 2019<br>Net income $13,695 $17,357<br>Income tax expense (benefit) ($339) $3,529<br>Income Before Income Taxes 13,356 20,886<br>Loss of derivatives, net 2,208 -<br>Adjusted income tax expense (benefit) (1) - 4,720<br>Adjusted Net Income $15,564 $16,166<br>(in thousands)<br>Total Share Count For the Quarter Ended<br>September 30, 2020<br>For the Quarter Ended<br>September 30, 2019<br>Diluted weighted average of Class A Common Stock outstanding during<br>the period 170,676 167,108<br>Weighted average shares of Class B Common Stock outstanding during<br>the period (2) 85,790 91,790<br>Total weighted average shares of Class A and B Common Stock,<br>including dilutive impact of other securities (3) 256,466 258,898<br>(1) Represents corporate income taxes at an assumed effective tax rate of 0% and 22.6% for the quarters ended September 30, 2020 and 2019, respectively.<br>(2) Shares of Class B Common Stock, and corresponding Magnolia LLC Units, are anti-dilutive in the calculation of weighted average number of common shares<br>outstanding.<br>(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.” |
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| Adjusted Earnings Reconciliation<br>14<br>(1) Adjusted earnings (loss) is a non-GAAP measure. For reasons management believes this is useful to investors, refer to slide 2 “Non-GAAP Financial Measures.”<br>(in thousands)<br>For the Quarter Ended<br>September 30, 2020<br>Per Share<br>Diluted EPS<br>For the Quarter Ended<br>September 30, 2019<br>Per Share<br>Diluted EPS<br>Net income attributable to Class A Common Stock $9,147 $0.05 $7,784 $0.05<br>Adjustments:<br>Non-cash deemed dividend -- 2,763 0.01<br>Loss on derivatives, net 2,208 0.01 --<br>Noncontrolling interest impact of adjustments (752) ---<br>Adjusted net income attributable to Class A Common Stock (1) $10,603 $0.06 $10,547 $0.06 |
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| Magnolia Oil & Gas – Operating Highlights<br>15<br>(1) Benchmarks are the NYMEX WTI and NYMEX HH average prices for oil and natural gas, respectively.<br>For the Quarter Ended<br>September 30, 2020<br>For the Quarter Ended<br>September 30, 2019<br>Production:<br>Oil (MBbls) 2,485 3,520<br>Natural gas (MMcf) 9,444 10,763<br>Natural gas liquids (MBbls) 937 1,245<br>Total (Mboe) 4,996 6,559<br>Average daily production:<br>Oil (Bbls/d) 27,016 38,261<br>Natural gas (Mcf/d) 102,653 116,989<br>Natural gas liquids (Bbls/d) 10,181 13,533<br>Total (Mboe) 54,306 71,292<br>Revenues (in thousands):<br>Oil revenues $95,677 $207,840<br>Natural gas revenues 14,895 21,243<br>Natural gas liquids revenues 10,495 15,716<br>Total Revenues $121,067 $244,799<br>Average sales price:<br>Oil (per Bbl) $38.50 $59.05<br>Natural gas (per Mcf) 1.58 1.97<br>Natural gas liquids (per Bbl) 11.20 12.62<br>Total (per Boe) $24.23 $37.32<br>NYMEX WTI ($/Bbl) $40.94 $56.45<br>NYMEX Henry Hub($/Mcf) 1.97 2.23<br>Realization to benchmark: (1)<br>Oil (per Bbl) 94% 105%<br>Natural gas (per Mcf) 80% 88% |
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| Magnolia Oil & Gas – Production Results<br>16<br>Combined Karnes Giddings & Other Combined Karnes Giddings & Other<br>Three Months Ended September 30, 2020 Three Months Ended September 30, 2019<br>Production:<br>Oil (MBbls) 2,485 2,025 460 3,520 3,106 414<br>Natural Gas (MMcf) 9,444 3,888 5,556 10,763 4,256 6,507<br>NGLs (MBbls) 937 442 495 1,245 714 531<br>Total (Mboe) 4,996 3,115 1,881 6,559 4,529 2,030<br>Average Daily Production Volume:<br>Oil (MBbls/d) 27.0 22.0 5.0 38.3 33.8 4.5<br>Natural Gas (MMcf/d) 102.7 42.3 60.4 117.0 46.3 70.7<br>NGLs (MBbls/d) 10.2 4.8 5.4 13.5 7.7 5.8<br>Total (MBoe/d) 54.3 33.9 20.4 71.3 49.2 22.1 |
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