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): May 3, 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 May 3, 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 quarter ended March 31, 2023.
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 May 3, 2023, the Company provided information in an earnings presentation on its website, www.magnoliaoilgas.com, regarding its financial and operational results for the quarter ended March 31, 2023.
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: May 3, 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 First Quarter 2023 Results
HOUSTON, TX, May 3, 2023 - Magnolia Oil & Gas Corporation (“Magnolia,” “we,” “our,” or the “Company”) (NYSE: MGY) today announced its financial and operational results for the first quarter of 2023.
First Quarter 2023 Highlights:
| (In millions, except per share data) | For the<br><br>Quarter Ended<br><br>March 31, 2023 | For the<br><br>Quarter Ended<br><br>March 31, 2022 | Percentage increase (decrease) | |||
|---|---|---|---|---|---|---|
| Net income | $ | 106.7 | $ | 208.6 | (49) | % |
| Adjusted net income(1) | $ | 119.3 | $ | 208.6 | (43) | % |
| Earnings per share - diluted | $ | 0.50 | $ | 0.90 | (44) | % |
| Adjusted EBITDAX(1) | $ | 216.9 | $ | 298.4 | (27) | % |
| Capital expenditures - D&C | $ | 139.7 | $ | 83.4 | 68 | % |
| Average daily production (Mboe/d) | 79.3 | 71.8 | 10 | % | ||
| Cash balance as of period end | $ | 667.3 | $ | 346.4 | 93 | % |
| Diluted weighted average total shares outstanding(2) | 213.9 | 227.4 | (6) | % |
First Quarter 2023 Highlights:
•Magnolia reported first quarter 2023 net income attributable to Class A Common Stock of $96.3 million, or $0.50 per diluted share. First quarter 2023 total net income was $106.7 million and total adjusted net income(1) was $119.3 million. Diluted weighted average total shares outstanding decreased by 6% to 213.9 million(2) compared to first quarter 2022.
•Adjusted EBITDAX(1) was $216.9 million during the first quarter of 2023. Total drilling and completions (“D&C”) capital during the first quarter was $139.7 million, which was below the low end of our guidance and is expected to be the highest quarterly level of capital expenditures during the year.
•Magnolia currently expects its 2023 capital spending for D&C to be between $440 million and $460 million, at least 10% lower than previous guidance and lower than the prior year. The reduction in capital is intended to improve our allocated spending in a period where oil service costs are not reflective of lower oil and especially natural gas prices. The lower spending is expected to be achieved primarily through lower oil services and materials costs and a modest reduction in our operated activity. Despite the decline in activity, full-year 2023 production is expected to grow 5 to 7% compared to 2022 levels, and in line with our business model.
•Net cash provided by operating activities was $219.8 million during the first quarter of 2023 and the Company generated free cash flow(1) of $60.6 million. Magnolia generated adjusted operating income(1) as a percentage of revenue of 46% during the quarter.
•Total production in the first quarter of 2023 grew 10% compared to the prior-year first quarter and 8% sequentially to 79.3 thousand barrels of oil equivalent per day (“Mboe/d”). Production at Giddings and Other in the first quarter of 2023 grew 22% compared to last year’s first quarter to 52.3 Mboe/d, including oil production growth of 36%.
•The Company repurchased 2.4 million of its Class A Common shares during the first quarter for $51.3 million. Magnolia has 6.5 million Class A Common shares remaining under its current repurchase authorization, which are specifically allocated toward open market share repurchases.
•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 June 1, 2023 to shareholders of record as of May 11, 2023.
(1) Adjusted EBITDAX, adjusted net income, adjusted operating income margin, 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.
•Magnolia returned $76.4 million(3) to shareholders during the first quarter through a combination of share repurchases and dividends while ending the period with $667.3 million of cash on the balance sheet. The Company remains undrawn on its $450.0 million revolving credit facility, has no debt maturities until 2026 and has no plan to increase its debt levels.
“Magnolia delivered a strong start to the year, supported by solid operating performance and a firm commitment to the founding principles of our business model and overall strategy,” said President and CEO Chris Stavros. “Magnolia’s focus has remained consistent and includes a disciplined approach toward capital spending, targeting moderate annual production growth, with high pre-tax operating margins, while generating reliable free cash flow. We strive to achieve these goals while continuously improving our per share metrics and maintaining a strong balance sheet with low levels of debt.
“Strong well performance in both the Karnes and Giddings areas and continued operating efficiencies at Giddings helped support year-over-year production growth of 10 percent during the first quarter. We generated over $60 million of free cash flow during the quarter while sustaining lower operating margins because of weaker oil and gas prices and higher costs associated with oil field service inflation.
“The current cost structure for oil field services and materials does not reflect the sharp decline in overall product prices as compared to last year. Rather than allocating more capital to achieve higher growth and diluting our margins during this time, we are taking actions to better align our capital spending to reflect the current environment. Beginning in the first quarter, we proactively worked with our top service providers and material suppliers in order to reduce our costs while deferring only a modest amount of operated activity. These measures should result in at least a 10 percent reduction in this year’s expected capital spending, deliver full-year 2023 production growth of 5 to 7 percent, and provide us with greater operating flexibility while generating more free cash flow during the year. The outcome is consistent with our business model which includes limiting our capital spending to approximately 55 percent of our EBITDAX to generate mid-single digit annual production growth.
“I commend our teams and our valued partners for working together cooperatively to help us reduce costs and maintain a steady pace of activity. Magnolia’s disciplined approach around capital allocation ideally positions us to create value through the cycle while supporting our differentiated return of capital program which focuses on increasing the per share value of the company. Our balanced strategy is underpinned by pursuing moderate annual production growth, repurchasing at least one percent of our outstanding shares per quarter and targeting small, accretive bolt-on oil and gas property acquisitions. These activities reinforce our investment proposition of providing 10 percent annual dividend growth over time.”
Operational Update
First quarter 2023 total company production volumes averaged 79.3 Mboe/d, representing growth of more than 10 percent over the prior-year first quarter and 8 percent sequentially. Production from Giddings and Other increased 22 percent compared to last year’s first quarter to 52.3 Mboe/d with oil production growing 36 percent over the same period. Magnolia’s first quarter 2023 capital spending of $139.7 million was below the low end of guidance range and should represent the highest quarter of capital spending for the year.
Magnolia continues to operate two drilling rigs 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. We continue to generate additional D&C efficiencies in our Giddings area including establishing new records for the number of completion stages per day.
Additional Guidance
We currently expect our total D&C capital for 2023 to be in the range of $440 to $460 million, which represents at least a 10 percent reduction from our original guidance. This new level of spending, which is expected to be lower than our full year 2022 outlays, focuses on achieving improved returns until service and material costs are better aligned with the decline seen in oil and gas prices. While we plan to maintain our 2-rig operated drilling program during 2023, we currently expect to defer a modest amount of our operated activity. This level of activity is expected to deliver full-year 2023 production growth of approximately 5 to 7 percent, primarily from the development program at our Giddings field asset.
We expect second quarter D&C capital expenditures to be approximately $100 million with total production for the second quarter estimated to be approximately 80 Mboe/d. Oil price differentials are anticipated to be approximately a $3.00 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 second quarter of 2023 is expected to be approximately 212 million shares, which is approximately 5 percent lower than second quarter 2022 levels.
(3) Includes $5.5 million of share repurchases incurred during the first quarter, but settled during the second quarter of 2023.
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 months ended March 31, 2023, which is expected to be filed with the U.S. Securities and Exchange Commission (“SEC”) on May 4, 2023.
Conference Call and Webcast
Magnolia will host an investor conference call on Thursday, May 4, 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 supply and demand for oil, natural gas, NGLs, and other products or services, including impacts of actions taken by OPEC and other state-controlled oil companies; (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. Magnolia’s SEC filings are available publicly on the SEC’s website at www.sec.gov.
Contacts for Magnolia Oil & Gas Corporation
| Investors | Media | |||||
|---|---|---|---|---|---|---|
| Jim Johnson | Art Pike | |||||
| (713) 842-9033 | (713) 842-9057 | |||||
| jjohnson@mgyoil.com | apike@mgyoil.com | |||||
| Tom Fitter | ||||||
| (713) 331-4802 | ||||||
| tfitter@mgyoil.com | ||||||
| Magnolia Oil & Gas Corporation | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| Operating Highlights | ||||||
| For the Quarters Ended | ||||||
| March 31, 2023 | March 31, 2022 | |||||
| Production: | ||||||
| Oil (MBbls) | 3,221 | 2,816 | ||||
| Natural gas (MMcf) | 12,650 | 12,378 | ||||
| Natural gas liquids (MBbls) | 1,812 | 1,586 | ||||
| Total (Mboe) | 7,141 | 6,465 | ||||
| Average daily production: | ||||||
| Oil (Bbls/d) | 35,788 | 31,289 | ||||
| Natural gas (Mcf/d) | 140,552 | 137,532 | ||||
| Natural gas liquids (Bbls/d) | 20,129 | 17,624 | ||||
| Total (boe/d) | 79,342 | 71,835 | ||||
| Revenues (in thousands): | ||||||
| Oil revenues | $ | 239,122 | $ | 262,667 | ||
| Natural gas revenues | 27,771 | 56,580 | ||||
| Natural gas liquids revenues | 41,489 | 58,592 | ||||
| Total Revenues | $ | 308,382 | $ | 377,839 | ||
| Average sales price: | ||||||
| Oil (per Bbl) | $ | 74.24 | $ | 93.28 | ||
| Natural gas (per Mcf) | 2.20 | 4.57 | ||||
| Natural gas liquids (per Bbl) | 22.90 | 36.94 | ||||
| Total (per boe) | $ | 43.18 | $ | 58.44 | ||
| NYMEX WTI (per Bbl) | $ | 76.11 | $ | 94.38 | ||
| NYMEX Henry Hub (per Mcf) | $ | 3.45 | $ | 4.92 | ||
| Realization to benchmark: | ||||||
| Oil (% of WTI) | 98 | % | 99 | % | ||
| Natural Gas (% of Henry Hub) | 64 | % | 93 | % | ||
| Operating expenses (in thousands): | ||||||
| Lease operating expenses | $ | 42,371 | $ | 28,744 | ||
| Gathering, transportation and processing | 12,732 | 15,840 | ||||
| Taxes other than income | 19,292 | 20,882 | ||||
| Depreciation, depletion and amortization | 70,701 | 53,106 | ||||
| Operating costs per boe: | ||||||
| Lease operating expenses | $ | 5.93 | $ | 4.45 | ||
| Gathering, transportation and processing | 1.78 | 2.45 | ||||
| Taxes other than income | 2.70 | 3.23 | ||||
| Depreciation, depletion and amortization | 9.90 | 8.21 |
Magnolia Oil & Gas Corporation
Consolidated Statements of Operations
(In thousands, except per share data)
| For the Quarters Ended | ||||
|---|---|---|---|---|
| March 31, 2023 | March 31, 2022 | |||
| REVENUES | ||||
| Oil revenues | $ | 239,122 | $ | 262,667 |
| Natural gas revenues | 27,771 | 56,580 | ||
| Natural gas liquids revenues | 41,489 | 58,592 | ||
| Total revenues | 308,382 | 377,839 | ||
| OPERATING EXPENSES | ||||
| Lease operating expenses | 42,371 | 28,744 | ||
| Gathering, transportation and processing | 12,732 | 15,840 | ||
| Taxes other than income | 19,292 | 20,882 | ||
| Exploration expenses | 11 | 5,538 | ||
| Asset retirement obligations accretion | 841 | 789 | ||
| Depreciation, depletion and amortization | 70,701 | 53,106 | ||
| Impairment of oil and natural gas properties | 15,735 | — | ||
| General and administrative expenses | 19,766 | 17,070 | ||
| Total operating expenses | 181,449 | 141,969 | ||
| OPERATING INCOME | 126,933 | 235,870 | ||
| OTHER INCOME (EXPENSE) | ||||
| Interest income (expense), net | 487 | (9,357) | ||
| Other income (expense), net | (1,138) | 207 | ||
| Total other expense, net | (651) | (9,150) | ||
| INCOME BEFORE INCOME TAXES | 126,282 | 226,720 | ||
| Current income tax expense | 4,202 | 18,100 | ||
| Deferred income tax expense | 15,403 | — | ||
| NET INCOME | 106,677 | 208,620 | ||
| LESS: Net income attributable to noncontrolling interest | 10,342 | 42,581 | ||
| NET INCOME ATTRIBUTABLE TO CLASS A COMMON STOCK | 96,335 | 166,039 | ||
| NET INCOME PER COMMON SHARE | ||||
| Basic | $ | 0.50 | $ | 0.90 |
| Diluted | $ | 0.50 | $ | 0.90 |
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||
| Basic | 191,780 | 182,578 | ||
| Diluted | 192,054 | 183,163 | ||
| WEIGHTED AVERAGE NUMBER OF CLASS B SHARES OUTSTANDING (1) | 21,827 | 44,267 |
(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 | ||||
|---|---|---|---|---|
| March 31, 2023 | March 31, 2022 | |||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||
| NET INCOME | $ | 106,677 | $ | 208,620 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation, depletion and amortization | 70,701 | 53,106 | ||
| Exploration expenses, non-cash | 5 | — | ||
| Impairment of oil and natural gas properties | 15,735 | — | ||
| Asset retirement obligations accretion | 841 | 789 | ||
| Amortization of deferred financing costs | 1,042 | 2,812 | ||
| Deferred income tax expense | 15,403 | — | ||
| Stock based compensation | 3,772 | 2,885 | ||
| Net change in operating assets and liabilities | 5,647 | (29,343) | ||
| Net cash provided by operating activities | 219,823 | 238,869 | ||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||
| Acquisitions | 3,691 | (1,055) | ||
| Additions to oil and natural gas properties | (138,645) | (84,230) | ||
| Changes in working capital associated with additions to oil and natural gas properties | (14,977) | 13,946 | ||
| Other investing | (284) | 131 | ||
| Net cash used in investing activities | (150,215) | (71,208) | ||
| CASH FLOW FROM FINANCING ACTIVITIES | ||||
| Class A Common Stock repurchases | (45,844) | (43,486) | ||
| Class B Common Stock purchase and cancellation | — | (84,733) | ||
| Dividends paid | (22,578) | (37,174) | ||
| Cash paid for debt modification | — | (5,272) | ||
| Distributions to noncontrolling interest owners | (2,510) | (11,637) | ||
| Other financing activities | (6,833) | (5,945) | ||
| Net cash used in financing activities | (77,765) | (188,247) | ||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | (8,157) | (20,586) | ||
| Cash and cash equivalents – Beginning of period | 675,441 | 366,982 | ||
| Cash and cash equivalents – End of period | $ | 667,284 | $ | 346,396 |
Magnolia Oil & Gas Corporation
Summary Balance Sheet Data
(In thousands)
| March 31, 2023 | December 31, 2022 | |||
|---|---|---|---|---|
| Cash and cash equivalents | $ | 667,284 | $ | 675,441 |
| Other current assets | 153,062 | 175,306 | ||
| Property, plant and equipment, net | 1,582,252 | 1,533,029 | ||
| Other assets | 173,456 | 188,809 | ||
| Total assets | $ | 2,576,054 | $ | 2,572,585 |
| Current liabilities | $ | 311,244 | $ | 340,273 |
| Long-term debt, net | 390,982 | 390,383 | ||
| Other long-term liabilities | 106,751 | 101,738 | ||
| Common stock | 23 | 23 | ||
| Additional paid in capital | 1,720,487 | 1,719,875 | ||
| Treasury stock | (380,783) | (329,512) | ||
| Retained earnings | 259,636 | 185,669 | ||
| Noncontrolling interest | 167,714 | 164,136 | ||
| Total liabilities and equity | $ | 2,576,054 | $ | 2,572,585 |
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, 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 | ||||
|---|---|---|---|---|
| (In thousands) | March 31, 2023 | March 31, 2022 | ||
| NET INCOME | $ | 106,677 | $ | 208,620 |
| Exploration expenses | 11 | 5,538 | ||
| Asset retirement obligations accretion | 841 | 789 | ||
| Depreciation, depletion and amortization | 70,701 | 53,106 | ||
| Interest (income) expense, net | (487) | 9,357 | ||
| Income tax expense | 19,605 | 18,100 | ||
| EBITDAX | 197,348 | 295,510 | ||
| Impairment of oil and natural gas properties (1) | 15,735 | — | ||
| Non-cash stock based compensation expense | 3,772 | 2,885 | ||
| Adjusted EBITDAX | $ | 216,855 | $ | 298,395 |
(1) The proved property impairment was related to the natural gas well located in St. Martin Parish, Louisiana.
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 | ||||
|---|---|---|---|---|
| (In thousands) | March 31, 2023 | March 31, 2022 | ||
| NET INCOME | $ | 106,677 | $ | 208,620 |
| Adjustments: | ||||
| Impairment of oil and natural gas properties (1) | 15,735 | — | ||
| Change in estimated income tax (2) | (3,089) | — | ||
| ADJUSTED NET INCOME | $ | 119,323 | $ | 208,620 |
| Diluted weighted average shares of Class A Common Stock outstanding during the period | 192,054 | 183,163 | ||
| Weighted average shares of Class B Common Stock outstanding during the period (3) | 21,827 | 44,267 | ||
| Total weighted average shares of Class A and B Common Stock, including dilutive impact of other securities (3) | 213,881 | 227,430 |
(1) The proved property impairment was related to the natural gas well located in St. Martin Parish, Louisiana.
(2) Represents corporate income taxes at an assumed annual effective tax rate of 19.6% for the quarter ended March 31, 2023.
(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, operating income margin, and adjusted operating income margin
Our presentation of adjusted operating income margin, 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 cash operating costs per boe. We define adjusted operating income margin as operating margin excluding impairments of oil and natural gas properties. Management believes that adjusted operating income margin, 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, adjusted operating income margin, 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 operating income margin, adjusted cash operating margin may not be comparable to similar measures of other companies in our industry.
| For the Quarters Ended | ||||||
|---|---|---|---|---|---|---|
| (in $/boe) | March 31, 2023 | March 31, 2022 | ||||
| Revenue | $ | 43.18 | $ | 58.44 | ||
| Total cash operating costs: | ||||||
| Lease operating expenses (1) | (5.87) | (4.41) | ||||
| Gathering, transportation and processing | (1.78) | (2.45) | ||||
| Taxes other than income | (2.70) | (3.23) | ||||
| Exploration expenses | — | (0.86) | ||||
| General and administrative expenses (2) | (2.30) | (2.23) | ||||
| Total adjusted cash operating costs | (12.65) | (13.18) | ||||
| Adjusted cash operating margin | $ | 30.53 | $ | 45.26 | ||
| Margin (%) | 71 | % | 77 | % | ||
| Non-cash costs: | ||||||
| Depreciation, depletion and amortization | $ | (9.90) | $ | (8.21) | ||
| Impairment of oil and natural gas properties (3) | (2.20) | — | ||||
| Asset retirement obligations accretion | (0.12) | (0.12) | ||||
| Non-cash stock based compensation | (0.53) | (0.45) | ||||
| Total non-cash costs | (12.75) | (8.78) | ||||
| Operating income margin | $ | 17.78 | $ | 36.48 | ||
| Add back: Impairment of oil and natural gas properties (3) | 2.20 | — | ||||
| Adjusted operating income margin | $ | 19.98 | $ | 36.48 | ||
| Margin (%) | 46 | % | 62 | % |
(1) Lease operating expenses exclude non-cash stock based compensation of $0.4 million, or $0.06 per boe, and $0.2 million, or $0.04 per boe, for the quarters ended March 31, 2023 and 2022, respectively.
(2) General and administrative expenses exclude non-cash stock based compensation of $3.4 million, or $0.47 per boe, and $2.7 million, or $0.41 per boe, for the quarters ended March 31, 2023 and 2022, respectively.
(3) The proved property impairment was related to the natural gas well located in St. Martin Parish, Louisiana.
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 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 | ||||
|---|---|---|---|---|
| (In thousands) | March 31, 2023 | March 31, 2022 | ||
| Net cash provided by operating activities | $ | 219,823 | $ | 238,869 |
| Add back: net change in operating assets and liabilities | (5,647) | 29,343 | ||
| Cash flows from operations before net change in operating assets and liabilities | 214,176 | 268,212 | ||
| Additions to oil and natural gas properties | (138,645) | (84,230) | ||
| Changes in working capital associated with additions to oil and natural gas properties | (14,977) | 13,946 | ||
| Free cash flow | $ | 60,554 | $ | 197,928 |
11
mgy_1q23xearningspresent
Magnolia Oil & Gas First Quarter 2023 Earnings Presentation May 4, 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, 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”) 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 supply and demand for oil, natural gas, NGLs, and other products or service, including the impacts of actions taken by OPEC and other state-controlled oil companies ; (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 Securities and Exchange Commission (the "SEC"), including its Annual Report on Form 10-K for the fiscal year ended December 31, 2022. 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, adjusted cash operating margin and adjusted operating income 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, adjusted cash operating margin and adjusted operating income 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, adjusted cash operating margin and adjusted operating income 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, adjusted cash operating margin and adjusted operating income 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, adjusted cash operating margin and adjusted operating income 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.
First Quarter 2023 Key Financial Metrics 3 • 1Q23 total production grew 10% Y-o-Y to 79.3 Mboe/d, with D&C capital of $140 million • Actions were taken during the first quarter to reduce 2023 D&C capital spending to be between $440 - $460 million, or at least 10% lower than previous guidance and below the prior year spending levels • Revised capital plan is expected to deliver full-year 2023 production growth in the range of 5 to 7% • Continue to gain operating efficiencies in Giddings, with our Giddings-weighted activity program continuing to drive total company annual production growth • Returned $76.4 million(1) to shareholders during 1Q23, inclusive of $51.3 million of share repurchases (2.4 million shares) and $25.1 million of dividends, while maintaining a sturdy cash balance of $667 million Item 1Q23 1Q22 % Change Total Production (Mboe/d) 79.3 71.8 10% Giddings and Other Production as a % of total 66% 60% 6% Revenue ($ MM) $308 $378 (18%) Adjusted EBITDAX ($ MM) (2) $217 $298 (27%) Adjusted Net Income ($ MM) (2) $119 $209 (43%) D&C Capex ($ MM) $140 $83 68% Free Cash Flow ($ MM) (2) $61 $198 (69%) Cash Balance ($ MM) $667 $346 93% Weighted average diluted shares outstanding (MM) (3) 213.9 227.4 (6%) (1) Includes $5.5 MM of share repurchases incurred during the first quarter, but settled during the second quarter of 2023. (2) 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. (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.
1Q 2023 Cash Flow Reconciliation 675 214 12 25 46 139 667 0 100 200 300 400 500 600 700 800 900 1,000 Cash 12/31/22 Cash Flow from Operations Changes in Working Capital and Other Dividends Common Stock Repurchases D&C and Facilities Capital Cash 3/31/23 (1) (4)(3)(2) (In millions) (1) Cash flow from operations before changes in working capital. (2) Comprised of $9 MM of working capital changes including capital accruals and $3 MM in other investing and financing activities. (3) Includes $23 MM of dividends paid to Class A shareholders and $2 MM of distributions to noncontrolling interest holders. (4) Comprised of $46 MM Class A Common Stock. 4
Share Repurchase Summary Through 1Q 2023 5 Share Reduction Summary (Million Shares) • Since the initial repurchase authorization in 3Q19, Magnolia has reduced its dilutive share count by 27.8(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 54.7 million shares, or approximately 21% of the diluted shares outstanding as of the authorization date. ‒ Repurchased 2.4 million shares during 1Q23. • Magnolia plans to continue to opportunistically repurchase at least 1% of the total shares outstanding each quarter. • There are 6.5 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) March 31, 2023 December 31, 2022 Cash $667,284 $675,441 Current assets 153,062 175,306 Property, plant and equipment, net 1,582,252 1,533,029 Other assets 173,456 188,809 Total assets $2,576,054 $2,572,585 Current liabilities $311,244 $340,273 Long-term debt, net 390,982 390,383 Other long-term liabilities 106,751 101,738 Total equity 1,767,077 1,740,191 Total liabilities and equity $2,576,054 $2,572,585
$400 $450 2023 2024 2025 2026 1Q 2023 Capital Structure and Liquidity Overview 8 Capital Structure Overview • Maintaining low financial leverage profile ‒ Currently have a net cash position of $267 MM ‒ Net Debt / Q1 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 Base $0 Credit Facility Borrowings (as of 3/31/23) 6.00% Senior Unsecured Notes Capitalization Summary As of 3/31/2023 Cash and Cash Equivalents $667 Revolving Credit Facility $0 6.00% Senior Notes Due 2026 $400 Total Principal Debt Outstanding $400 Total Equity (2) $1,767 Net Debt / Q1 Annualized Adjusted EBITDAX -0.3x Net Debt / Total Book Capitalization -12% Liquidity Summary As of 3/31/2023 Cash and Cash Equivalents $667 Credit Facility Availability $450 Liquidity (1) $1,117
$ / Boe, unless otherwise noted For the Quarter Ended March 31, 2023 For the Quarter Ended March 31, 2022 Revenue $43.18 $58.44 Total Cash Operating Costs: Lease Operating Expenses (1) (5.87) (4.41) Gathering, Transportation & Processing (1.78) (2.45) Taxes Other Than Income (2.70) (3.23) Exploration Expense - (0.86) General & Administrative Expense (2) (2.30) (2.23) Total Adjusted Cash Operating Costs (3) (12.65) (13.18) Adjusted Cash Operating Margin (3) $30.53 $45.26 Margin % 71% 77% Non-Cash Costs: Depreciation, Depletion, and Amortization (9.90) (8.21) Impairment of oil and natural gas properties (4) (2.20) - Asset Retirement Obligations Accretion (0.12) (0.12) Non-cash stock based compensation (0.53) (0.45) Total non-cash costs (12.75) (8.78) Operating Income Margin $17.78 $36.48 Add back: Impairment of oil and natural gas properties (4) 2.20 - Adjusted Operating Income Margin (3) $19.98 $36.48 Margin % 46% 62% Magnolia Oil & Gas – Margin and Cost Structure 9 (1) Lease operating expenses exclude non-cash stock based compensation of $0.4 MM, or $0.06 per boe, and $0.2 MM, or $0.04 per boe, for the quarters ended March 31, 2023 and 2022, respectively (2) G&A expenses exclude non-cash stock comp of $3.4 MM, or $0.47 per boe, and $2.7 MM, or $0.41 per boe, for the quarters ended March 31, 2023 and 2022, respectively (3) Adjusted cash operating costs, adjusted cash operating margin and adjusted operating income margin are non-GAAP measures. For reasons management believes this is useful to investors, refer to slide 2 “Non-GAAP Financial Measures.” (4) The proved property impairment was related to the natural gas well located in St. Martin Parish, Louisiana. $15.26/Boe $16.50/Boe 92% of the decrease in Adjusted Operating Margin is due to price
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 2022, full-time field employees each received an average of 37 hours of safety training Diversity As of December 31, 2022, 25% of our employees were women (39% in our Houston corporate office) and 30% identified as a member of a minority group, as defined by the U.S. EEOC(1) Compensation In 2022, 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 2022 Chief Executive Officer’s compensation to median employee’s compensation was 22.26 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: – ~22,800 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 5/2/2023 $19.96 Common Shares Outstanding (1) 212 million Market Capitalization $4.2 billion Long-term Debt – Principal $400 million Cash as of 3/31/2022 $667 million Total Enterprise Value $4.0 billion Operating Statistics Karnes Giddings Total Net Acreage 22,785 459,246 482,031 1Q23 Net Production (Mboe/d) (2) 27.0 52.3 79.3 (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 Quarter Ended March 31, 2023 For the Quarter Ended March 31, 2022 Net cash provided by operating activities $219,823 $238,869 Add back: Changes in operating assets and liabilities (5,647) 29,343 Cash flows from operations before changes in operating assets and liabilities $214,176 $268,212 Additions to oil and natural gas properties (138,645) (84,230) Changes in working capital associated with additions to oil & gas properties (14,977) 13,946 Free cash flow(1) $60,554 $197,928
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) The proved property impairment was related to the natural gas well located in St. Martin Parish, Louisiana. (in thousands) For the Quarter Ended March 31, 2023 For the Quarter Ended March 31, 2022 Net income $106,677 $208,620 Exploration expenses 11 5,538 Asset retirement obligation accretion 841 789 Depreciation, depletion and amortization 70,701 53,106 Interest (income) expense, net (487) 9,357 Income tax expense 19,605 18,100 EBITDAX (1) $197,348 $295,510 Impairment of oil and natural gas properties (2) 15,735 - Non-cash stock based compensation expense 3,772 2,885 Adjusted EBITDAX (1) $216,855 $298,395
Adjusted Net Income Reconciliation 15 (1) The proved property impairment was related to the natural gas well located in St. Martin Parish, Louisiana. (2) Represents corporate income taxes at an assumed annual effective tax rate of 19.6% for the quarter ended March 31, 2023. (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 Quarter Ended March 31, 2023 For the Quarter Ended March 31, 2022 Net income $106,677 $208,620 Adjustments: Impairment of oil and natural gas properties (1) 15,735 - Change in estimated income tax(2) (3,089) - Adjusted Net Income (3) $119,323 $208,620 (in thousands) Total Share Count For the Quarter Ended March 31, 2023 For the Quarter Ended March 31, 2022 Diluted weighted average shares of Class A Common Stock outstanding during the period 192,054 183,163 Weighted average shares of Class B Common Stock outstanding during the period (4) 21,827 44,267 Total weighted average shares of Class A and B Common Stock, including dilutive impact of other securities (4) 213,881 227,430
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 Quarter Ended March 31, 2023 For the Quarter Ended March 31, 2022 Production: Oil (MBbls) 3,221 2,816 Natural gas (MMcf) 12,650 12,378 Natural gas liquids (MBbls) 1,812 1,586 Total (Mboe) 7,141 6,465 Average daily production: Oil (Bbls/d) 35,788 31,289 Natural gas (Mcf/d) 140,552 137,532 Natural gas liquids (Bbls/d) 20,129 17,624 Total (Boe/d) 79,342 71,835 Revenues (in thousands): Oil revenues $239,122 $262,667 Natural gas revenues 27,771 56,580 Natural gas liquids revenues 41,489 58,592 Total Revenues $308,382 $377,839 Average Sales Price: Oil (per Bbl) $74.24 $93.28 Natural gas (per Mcf) 2.20 4.57 Natural gas liquids (per Bbl) 22.90 36.94 Total (per Boe) $43.18 $58.44 NYMEX WTI (per Bbl) $76.11 $94.38 NYMEX Henry Hub (per Mcf) $3.45 $4.92 Realization to benchmark: (1) Oil (% of WTI) 98% 99% Natural gas (% of Henry Hub) 64% 93%
Magnolia Oil & Gas – Production Results 17 Combined Karnes Giddings & Other Combined Karnes Giddings & Other For the Quarter Ended March 31, 2023 For the Quarter Ended March 31, 2022 Production: Oil (MBbls) 3,221 1,409 1,812 2,816 1,487 1,329 Natural gas (MMcf) 12,650 3,238 9,412 12,378 3,549 8,829 Natural gas liquids (MBbls) 1,812 487 1,325 1,586 526 1,060 Total (Mboe) 7,141 2,436 4,705 6,465 2,605 3,860 Average Daily Production Volume: Oil (MBbls/d) 35.8 15.7 20.1 31.3 16.5 14.8 Natural gas (MMcf/d) 140.6 36.0 104.6 137.5 39.4 98.1 Natural gas liquids (MBbls/d) 20.1 5.4 14.7 17.6 5.8 11.8 Total (MBoe/d) 79.3 27.0 52.3 71.8 28.9 42.9