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): November 1, 2022
| 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 November 1, 2022, 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, 2022.
The information furnished pursuant to this Item 2.02 (including Exhibit 99.1) shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise be subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.
Item 7.01 Regulation FD Disclosure
On November 1, 2022, 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, 2022.
The earnings presentation, which is attached hereto as Exhibit 99.2, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise be subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit | |
|---|---|
| Number | Description |
| 99.1 | Press Release |
| 99.2 | Earnings Presentation |
| 104 | Cover Page Interactive Data File (formatted as inline XBRL) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| MAGNOLIA OIL & GAS CORPORATION | |
|---|---|
| Date: November 1, 2022 | 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 Third Quarter 2022 Results
HOUSTON, TX, November 1, 2022 - Magnolia Oil & Gas Corporation (“Magnolia,” “we,” “our,” or the “Company”) (NYSE: MGY) today announced its financial and operational results for the third quarter of 2022.
Third Quarter 2022 Highlights:
| (In millions, except per share data) | For the<br>Quarter Ended<br>September 30, 2022 | For the<br>Quarter Ended<br>September 30, 2021 | Percentage increase (decrease) | |||
|---|---|---|---|---|---|---|
| Net income | $ | 287.0 | $ | 159.9 | 79 | % |
| Earnings per share - diluted | $ | 1.29 | $ | 0.67 | 93 | % |
| Adjusted EBITDAX(1) | $ | 386.0 | $ | 221.5 | 74 | % |
| Capital expenditures - D&C | $ | 114.5 | $ | 67.2 | 70 | % |
| Average daily production (Mboe/d) | 81.5 | 67.4 | 21 | % | ||
| Cash balance as of period end | $ | 689.5 | $ | 245.0 | 181 | % |
| Diluted weighted average total shares outstanding(2) | 217.8 | 236.0 | (8) | % |
Third Quarter 2022 Highlights:
•Magnolia reported third quarter 2022 net income attributable to Class A Common Stock of $245.5 million, or $1.29 per diluted share. Third quarter 2022 total net income increased 79% to $287.0 million and diluted weighted average total shares outstanding decreased by 8% to 217.8 million(2) compared to third quarter 2021.
•Adjusted EBITDAX(1) was $386.0 million during the third quarter of 2022, driven by higher production and higher product prices as compared to prior year results. Total drilling and completions (“D&C”) capital during the third quarter was $114.5 million, representing just 30% of adjusted EBITDAX(1).
•Net cash provided by operating activities was $410.7 million during the third quarter of 2022 and the Company generated free cash flow(1) of $233.9 million. Magnolia generated operating income as a percentage of revenue of 65%.
•Total production in the third quarter of 2022 set a quarterly record for the Company, growing 21% compared to the prior-year quarter and 10% sequentially to 81.5 thousand barrels of oil equivalent per day (“Mboe/d”). Total volumes were 7% ahead of the high end of our production guidance range.
•During the third quarter, Magnolia repurchased a total of 3.0 million shares of Class A Common Stock, for $62.4 million, bringing the total Class A and Class B shares repurchased during 2022 to 13.1 million shares. At the end of the third quarter 2022, Magnolia had 9.3 million Class A Common shares remaining under its current repurchase authorization.
•As previously announced, the Board of Directors declared a cash dividend of $0.10 per share of Class A common stock, and a cash distribution of $0.10 per Class B unit, payable on December 1, 2022 to shareholders of record as of November 7, 2022. We expect our dividend to grow at least 10 percent annually and plan to revisit the dividend rate in early 2023.
•Magnolia returned 36% of the free cash flow generated during the third quarter through a combination of share repurchases and dividends while ending the period with $689.5 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.
(1) Adjusted EBITDAX 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.
“The most recent quarter was filled with mixed emotions. We are humbled by our continued strong financial and operating results and performance, yet deeply saddened by the recent passing of Steve Chazen, Magnolia’s founder and former CEO. I am incredibly grateful for Steve’s guidance and counsel, his steadfast leadership and importantly his friendship. We expect his legacy to continue to live on through Magnolia for years to come,” said President and CEO Chris Stavros. “The principles of the business model that Steve established during Magnolia’s founding over four years ago are expected to remain unchanged. We will continue our discipline around capital spending, while maintaining low levels of debt. We expect our record of achieving moderate annual production growth, while generating significant free cash flow and strong pre-tax margins to continue.
“Magnolia delivered very strong financial and operating results in the third quarter of 2022 driven by record quarterly production and pretax operating margins of 65 percent, and despite a sequential quarterly decline in oil prices of more than $15 per barrel. Third quarter 2022 production increased 21 percent year-over-year and 10 percent sequentially, and well-above the high end of our earlier guidance. The stronger production was seen in both our Giddings and Karnes asset areas and was primarily the result of better than expected well performance. The results were achieved while spending just 30 percent of our adjusted EBITDAX during the quarter. We repurchased 3 million shares during the third quarter, reducing our diluted share count by 8 percent from the same period last year. Including share repurchases and dividends, Magnolia returned more than a third of the free cash flow generated during the quarter to our shareholders while ending the period with nearly $700 million of cash.
“I am pleased to announce that Brian Corales, Magnolia’s VP, Investor Relations, has been promoted to the position of Chief Financial Officer. Brian has done an excellent job at Magnolia since 2018 in helping to both manage and communicate the Company’s strategy as well as shaping our message to the broad Financial Community and other stakeholders. Magnolia’s strong focus on its shareholders and emphasis on generating improved stock market value over time make Brian uniquely qualified to serve as CFO. The selection and elevation of a qualified internal candidate to the CFO role is indicative of Magnolia’s strong “bench” of talent within our team.”
Operational Update
Third quarter 2022 total company production averaged 81.5 Mboe/d, representing a 10 percent sequential increase and was 21 percent higher than the prior year’s third quarter. Compared to the same period last year, Giddings and Other production increased 30 percent. Overall production exceeded our expectations during the quarter despite spending just 30 percent of adjusted EBITDAX on drilling and completing wells. Production was above the high end of our guidance due to stronger well performance in both of our operated areas, ongoing operating efficiencies, and slightly higher non-op activity.
Magnolia continues to operate two drilling rigs and expects to maintain this level of activity through next 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 in Giddings. Magnolia continues to drive operating efficiencies, especially in the Giddings area. When comparing the 2022 total cost per stimulated foot for its development wells to the wells drilled in 2019, well costs per stimulated foot during this year have declined by 26 percent, despite the inflationary environment seen in oil field service costs. This improvement is directly attributable to the efficiencies that our operations and supply chain teams have captured at Giddings which include faster drilling and completion times, longer laterals, multi-well pads and improved asset knowledge.
Additional Guidance
We are planning a very active operating program for the fourth quarter which should provide us with a strong start to 2023. We estimate that our fourth quarter production should be in the range of 77 to 79 Mboe/d, as most of the wells in our program are expected to come online toward the latter part of the quarter. This includes the largest single pad we have drilled to date at our Giddings area. D&C capital during the fourth quarter is expected to be approximately $125 to $140 million due to a higher number of well completions and higher anticipated non-op activity in the period. As a result, we expect our total production to exit the year at a level that exceeds the record production achieved during the third quarter and further benefit production volumes during the first half of 2023. Oil price differentials are anticipated to be approximately a $3 per barrel discount to Magellan East Houston and Magnolia remains completely unhedged for all its oil and natural gas production. The fully diluted total share count for the fourth quarter of 2022 is expected to be approximately 216 million shares which is 6 percent lower than fourth quarter 2021 levels.
Our operating plan for 2023 is currently expected to be very similar to this year. We plan to operate two drilling rigs and one completion crew and anticipate that our capital spending for drilling and completing wells to be well-below our imposed ceiling of spending within 55 percent of our adjusted EBITDAX at current product prices. We estimate that next year’s capital program and activity levels should deliver full-year 2023 production growth of approximately 10 percent compared to 2022 levels while generating a significant amount of free cash flow. We plan to re-evaluate our current annual dividend rate of $0.40 per share early next year based on our full-year 2022 financial and operating results. Our share repurchase program and the payment of a secure, sustainable and growing dividend remain important components of Magnolia’s total shareholder return proposition.
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 September 30, 2022, which is expected to be filed with the U.S. Securities and Exchange Commission (“SEC”) on November 2, 2022.
Conference Call and Webcast
Magnolia will host an investor conference call on Wednesday, November 2, 2022 at 10:00 a.m. Central (11:00 a.m. Eastern) to discuss these operating and financial results. Interested parties may join the webcast by visiting Magnolia's website at www.magnoliaoilgas.com/investors/events-and-presentations and clicking on the webcast link or by dialing 1-844-701-1059. A replay of the webcast will be posted on Magnolia's website following completion of the call.
About Magnolia Oil & Gas Corporation
Magnolia (MGY) is a publicly traded oil and gas exploration and production company with operations primarily in South Texas in the core of the Eagle Ford Shale and Austin Chalk formations. Magnolia focuses on generating value for shareholders through steady production growth, strong pre-tax margins, and free cash flow. For more information, visit www.magnoliaoilgas.com.
Cautionary Note Regarding Forward-Looking Statements
The information in this press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of present or historical fact included in this press release, regarding Magnolia’s strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward looking statements. When used in this press release, the words could, should, will, may, believe, anticipate, intend, estimate, expect, project, the negative of such terms and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events. Except as otherwise required by applicable law, Magnolia disclaims any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this press release. Magnolia cautions you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of Magnolia, incident to the development, production, gathering and sale of oil, natural gas and natural gas liquids. In addition, Magnolia cautions you that the forward looking statements contained in this press release are subject to the following factors: (i) the economic effects of the COVID-19 pandemic and actions taken by federal, state and local governments and other third parties in response to the pandemic; (ii) the outcome of any legal proceedings that may be instituted against Magnolia; (iii) Magnolia’s ability to realize the anticipated benefits of its acquisitions, which may be affected by, among other things, competition and the ability of Magnolia to grow and manage growth profitably; (iv) changes in applicable laws or regulations; (v) geopolitical and business conditions in key regions of the world; and (vi) the possibility that Magnolia may be adversely affected by other economic, business, and/or competitive factors, including inflation. Should one or more of the risks or uncertainties described in this press release occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. Additional information concerning these and other factors that may impact the operations and projections discussed herein can be found in Magnolia’s filings with the SEC, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2021. 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
| Magnolia Oil & Gas Corporation | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Operating Highlights | ||||||||||||
| For the Quarters Ended | For the Nine Months Ended | |||||||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||
| Production: | ||||||||||||
| Oil (MBbls) | 3,381 | 2,851 | 9,216 | 8,346 | ||||||||
| Natural gas (MMcf) | 13,364 | 11,429 | 38,205 | 31,617 | ||||||||
| Natural gas liquids (MBbls) | 1,892 | 1,444 | 5,134 | 4,097 | ||||||||
| Total (Mboe) | 7,500 | 6,200 | 20,718 | 17,713 | ||||||||
| Average daily production: | ||||||||||||
| Oil (Bbls/d) | 36,751 | 30,989 | 33,760 | 30,573 | ||||||||
| Natural gas (Mcf/d) | 145,257 | 124,224 | 139,947 | 115,812 | ||||||||
| Natural gas liquids (Bbls/d) | 20,568 | 15,692 | 18,806 | 15,008 | ||||||||
| Total (boe/d) | 81,529 | 67,385 | 75,890 | 64,883 | ||||||||
| Revenues (in thousands): | ||||||||||||
| Oil revenues | $ | 317,243 | $ | 195,642 | $ | 912,702 | $ | 531,300 | ||||
| Natural gas revenues | 100,124 | 43,781 | 242,049 | 112,758 | ||||||||
| Natural gas liquids revenues | 65,596 | 45,619 | 190,700 | 102,140 | ||||||||
| Total Revenues | $ | 482,963 | $ | 285,042 | $ | 1,345,451 | $ | 746,198 | ||||
| Average sales price: | ||||||||||||
| Oil (per Bbl) | $ | 93.83 | $ | 68.62 | $ | 99.03 | $ | 63.66 | ||||
| Natural gas (per Mcf) | 7.49 | 3.83 | 6.34 | 3.57 | ||||||||
| Natural gas liquids (per Bbl) | 34.66 | 31.60 | 37.14 | 24.93 | ||||||||
| Total (per boe) | $ | 64.40 | $ | 45.97 | $ | 64.94 | $ | 42.13 | ||||
| NYMEX WTI (per Bbl) | $ | 91.64 | $ | 70.55 | $ | 98.14 | $ | 64.85 | ||||
| NYMEX Henry Hub (per Mcf) | $ | 8.19 | $ | 4.01 | $ | 6.77 | $ | 3.19 | ||||
| Realization to benchmark: | ||||||||||||
| Oil (% of WTI) | 102 | % | 97 | % | 101 | % | 98 | % | ||||
| Natural Gas (% of Henry Hub) | 91 | % | 96 | % | 94 | % | 112 | % | ||||
| Operating expenses (in thousands): | ||||||||||||
| Lease operating expenses | $ | 34,709 | $ | 23,593 | $ | 96,057 | $ | 64,957 | ||||
| Gathering, transportation and processing | 19,297 | 11,540 | 51,518 | 32,069 | ||||||||
| Taxes other than income | 26,623 | 14,082 | 74,917 | 38,657 | ||||||||
| Depreciation, depletion and amortization | 68,972 | 47,993 | 179,331 | 134,268 | ||||||||
| Operating costs per boe: | ||||||||||||
| Lease operating expenses | $ | 4.63 | $ | 3.81 | $ | 4.64 | $ | 3.67 | ||||
| Gathering, transportation and processing | 2.57 | 1.86 | 2.49 | 1.81 | ||||||||
| Taxes other than income | 3.55 | 2.27 | 3.62 | 2.18 | ||||||||
| Depreciation, depletion and amortization | 9.20 | 7.74 | 8.66 | 7.58 |
Magnolia Oil & Gas Corporation
Consolidated Statements of Operations
(In thousands, except per share data)
| For the Quarters Ended | For the Nine Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||
| REVENUES | ||||||||
| Oil revenues | $ | 317,243 | $ | 195,642 | $ | 912,702 | $ | 531,300 |
| Natural gas revenues | 100,124 | 43,781 | 242,049 | 112,758 | ||||
| Natural gas liquids revenues | 65,596 | 45,619 | 190,700 | 102,140 | ||||
| Total revenues | 482,963 | 285,042 | 1,345,451 | 746,198 | ||||
| OPERATING EXPENSES | ||||||||
| Lease operating expenses | 34,709 | 23,593 | 96,057 | 64,957 | ||||
| Gathering, transportation and processing | 19,297 | 11,540 | 51,518 | 32,069 | ||||
| Taxes other than income | 26,623 | 14,082 | 74,917 | 38,657 | ||||
| Exploration expenses | 1,173 | 317 | 10,119 | 2,440 | ||||
| Asset retirement obligations accretion | 814 | 1,329 | 2,404 | 4,065 | ||||
| Depreciation, depletion and amortization | 68,972 | 47,993 | 179,331 | 134,268 | ||||
| Amortization of intangible assets | — | — | — | 9,346 | ||||
| General and administrative expenses | 19,625 | 14,695 | 55,226 | 59,816 | ||||
| Total operating expenses | 171,213 | 113,549 | 469,572 | 345,618 | ||||
| OPERATING INCOME | 311,750 | 171,493 | 875,879 | 400,580 | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Interest expense, net | (5,263) | (7,474) | (21,637) | (23,519) | ||||
| Loss on derivatives, net | — | (623) | — | (3,110) | ||||
| Other income (expense), net | (166) | 142 | 6,579 | 48 | ||||
| Total other expense, net | (5,429) | (7,955) | (15,058) | (26,581) | ||||
| INCOME BEFORE INCOME TAXES | 306,321 | 163,538 | 860,821 | 373,999 | ||||
| Income tax expense | 19,358 | 3,631 | 65,333 | 6,428 | ||||
| NET INCOME | 286,963 | 159,907 | 795,488 | 367,571 | ||||
| LESS: Net income attributable to noncontrolling interest | 41,486 | 40,543 | 133,389 | 100,518 | ||||
| NET INCOME ATTRIBUTABLE TO CLASS A COMMON STOCK | 245,477 | 119,364 | 662,099 | 267,053 | ||||
| NET INCOME PER COMMON SHARE | ||||||||
| Basic | $ | 1.29 | $ | 0.68 | $ | 3.52 | $ | 1.54 |
| Diluted | $ | 1.29 | $ | 0.67 | $ | 3.51 | $ | 1.53 |
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||
| Basic | 188,635 | 174,764 | 186,475 | 172,281 | ||||
| Diluted | 189,074 | 175,683 | 186,967 | 173,280 | ||||
| WEIGHTED AVERAGE NUMBER OF CLASS B SHARES OUTSTANDING (1) | 28,710 | 60,358 | 35,528 | 68,827 |
(1) Shares of Class B Common Stock, and corresponding Magnolia LLC Units, are anti-dilutive in the calculation of weighted average number of common shares outstanding.
Magnolia Oil & Gas Corporation
Summary Cash Flow Data
(In thousands)
| For the Quarters Ended | For the Nine Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| NET INCOME | $ | 286,963 | $ | 159,907 | $ | 795,488 | $ | 367,571 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation, depletion and amortization | 68,972 | 47,993 | 179,331 | 134,268 | ||||
| Amortization of intangible assets | — | — | — | 9,346 | ||||
| Asset retirement obligations accretion | 814 | 1,329 | 2,404 | 4,065 | ||||
| Amortization of deferred financing costs | 1,032 | 1,131 | 4,812 | 3,149 | ||||
| Unrealized loss on derivatives, net | — | (2,043) | — | 277 | ||||
| Stock based compensation | 3,462 | 2,910 | 9,864 | 9,143 | ||||
| Other | — | — | — | (85) | ||||
| Net change in operating assets and liabilities | 49,438 | 10,677 | 36,786 | 201 | ||||
| Net cash provided by operating activities | 410,681 | 221,904 | 1,028,685 | 527,935 | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Acquisitions | (7,402) | (1,408) | (11,749) | (10,817) | ||||
| Additions to oil and natural gas properties | (116,050) | (68,388) | (323,510) | (162,744) | ||||
| Changes in working capital associated with additions to oil and natural gas properties | (11,342) | 621 | 14,152 | 12,435 | ||||
| Other investing | (169) | (1,661) | (1,187) | (2,316) | ||||
| Net cash used in investing activities | (134,963) | (70,836) | (322,294) | (163,442) | ||||
| CASH FLOW FROM FINANCING ACTIVITIES | ||||||||
| Class A Common Stock repurchases | (60,983) | (25,988) | (153,138) | (70,316) | ||||
| Class B Common Stock purchase and cancellation | — | (49,140) | (138,753) | (171,671) | ||||
| Non-compete settlement | — | — | — | (42,074) | ||||
| Dividends paid | (19,043) | (14,103) | (56,220) | (14,103) | ||||
| Cash paid for debt modification | (221) | — | (5,494) | (4,976) | ||||
| Distributions to noncontrolling interest owners | (7,608) | (5,276) | (23,852) | (5,706) | ||||
| Other financing activities | (215) | (1,820) | (6,377) | (3,185) | ||||
| Net cash used in financing activities | (88,070) | (96,327) | (383,834) | (312,031) | ||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | 187,648 | 54,741 | 322,557 | 52,462 | ||||
| Cash and cash equivalents – Beginning of period | 501,891 | 190,282 | 366,982 | 192,561 | ||||
| Cash and cash equivalents – End of period | $ | 689,539 | $ | 245,023 | $ | 689,539 | $ | 245,023 |
Magnolia Oil & Gas Corporation
Summary Balance Sheet Data
(In thousands)
| September 30, 2022 | December 31, 2021 | |||
|---|---|---|---|---|
| Cash and cash equivalents | $ | 689,539 | $ | 366,982 |
| Other current assets | 209,421 | 150,936 | ||
| Property, plant and equipment, net | 1,374,849 | 1,216,087 | ||
| Other assets | 26,827 | 12,737 | ||
| Total assets | $ | 2,300,636 | $ | 1,746,742 |
| Current liabilities | $ | 341,972 | $ | 218,545 |
| Long-term debt, net | 389,794 | 388,087 | ||
| Other long-term liabilities | 99,164 | 94,861 | ||
| Common stock | 24 | 24 | ||
| Additional paid in capital | 1,637,279 | 1,689,500 | ||
| Treasury stock | (320,204) | (164,599) | ||
| Accumulated deficit | (46,069) | (708,168) | ||
| Noncontrolling interest | 198,676 | 228,492 | ||
| Total liabilities and equity | $ | 2,300,636 | $ | 1,746,742 |
Magnolia Oil & Gas Corporation
Non-GAAP Financial Measures
Reconciliation of net income to adjusted EBITDAX
In this press release, we refer to adjusted EBITDAX, a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders, and rating agencies. We define adjusted EBITDAX as net income before interest expense, income taxes, depreciation, depletion and amortization, amortization of intangible assets, exploration 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) | September 30, 2022 | September 30, 2021 | ||
| NET INCOME | $ | 286,963 | $ | 159,907 |
| Exploration expenses | 1,173 | 317 | ||
| Asset retirement obligations accretion | 814 | 1,329 | ||
| Depreciation, depletion and amortization | 68,972 | 47,993 | ||
| Interest expense, net | 5,263 | 7,474 | ||
| Income tax expense | 19,358 | 3,631 | ||
| EBITDAX | 382,543 | 220,651 | ||
| Non-cash stock based compensation expense | 3,462 | 2,910 | ||
| Unrealized loss on derivatives, net | — | (2,043) | ||
| Adjusted EBITDAX | $ | 386,005 | $ | 221,518 |
Magnolia Oil & Gas Corporation
Non-GAAP Financial Measures
Reconciliation of revenue to adjusted cash operating margin and to operating income margin
Our presentation of adjusted cash operating margin and total adjusted cash operating costs are supplemental non-GAAP financial measures that are used by management. Total adjusted cash operating costs exclude the impact of non-cash activity. We define adjusted cash operating margin per boe as total revenues per boe less operating expenses per boe. Management believes that total adjusted cash operating costs per boe and adjusted cash operating margin per boe provide relevant and useful information, which is used by our management in assessing the Company’s profitability and comparability of results to our peers.
As a performance measure, total adjusted cash operating costs and adjusted cash operating margin may be useful to investors in facilitating comparisons to others in the Company’s industry because certain items can vary substantially in the oil and gas industry from company to company depending upon accounting methods, book value of assets, and capital structure, among other factors. Management believes excluding these items facilitates investors and analysts in evaluating and comparing the underlying operating and financial performance of our business from period to period by eliminating differences caused by the existence and timing of certain expense and income items that would not otherwise be apparent on a GAAP basis. However, our presentation of adjusted cash operating margin may not be comparable to similar measures of other companies in our industry.
| For the Quarters Ended | ||||||
|---|---|---|---|---|---|---|
| (in $/boe) | September 30, 2022 | September 30, 2021 | ||||
| Revenue | $ | 64.40 | $ | 45.97 | ||
| Total cash operating costs: | ||||||
| Lease operating expenses (1) | (4.59) | (3.79) | ||||
| Gathering, transportation and processing | (2.57) | (1.86) | ||||
| Taxes other than income | (3.55) | (2.27) | ||||
| Exploration expenses | (0.16) | (0.05) | ||||
| General and administrative expenses (2) | (2.20) | (1.92) | ||||
| Total adjusted cash operating costs | (13.07) | (9.89) | ||||
| Adjusted cash operating margin | $ | 51.33 | $ | 36.08 | ||
| Margin (%) | 80 | % | 78 | % | ||
| Non-cash costs: | ||||||
| Depreciation, depletion and amortization | $ | (9.20) | $ | (7.74) | ||
| Asset retirement obligations accretion | (0.11) | (0.21) | ||||
| Non-cash stock based compensation | (0.46) | (0.47) | ||||
| Total non-cash costs | (9.77) | (8.42) | ||||
| Operating income margin | $ | 41.56 | $ | 27.66 | ||
| Margin (%) | 65 | % | 60 | % |
(1) Lease operating expenses exclude non-cash stock based compensation of $0.3 million, or $0.04 per boe, and $0.1 million, or $0.02 per boe, for the quarters ended September 30, 2022 and 2021, respectively.
(2) General and administrative expenses exclude non-cash stock based compensation of $3.1 million, or $0.42 per boe, and $2.8 million, or $0.45 per boe, for the quarters ended September 30, 2022 and 2021, respectively.
Magnolia Oil & Gas Corporation
Non-GAAP Financial Measures
Reconciliation of net cash provided by operating activities to free cash flow
Free cash flow is a non-GAAP financial measure. Free cash flow is defined as cash flows from operations before net change in operating assets and liabilities less additions to oil and natural gas properties and changes in working capital associated with additions to oil and natural gas properties. Management believes free cash flow is useful for investors and widely accepted by those following the oil and gas industry as financial indicators of a company’s ability to generate cash to internally fund drilling and completion activities, fund acquisitions, and service debt. It is also used by research analysts to value and compare oil and gas exploration and production companies and 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) | September 30, 2022 | September 30, 2021 | ||
| Net cash provided by operating activities | $ | 410,681 | $ | 221,904 |
| Add back: net change in operating assets and liabilities | (49,438) | (10,677) | ||
| Cash flows from operations before net change in operating assets and liabilities | 361,243 | 211,227 | ||
| Additions to oil and natural gas properties | (116,050) | (68,388) | ||
| Changes in working capital associated with additions to oil and natural gas properties | (11,342) | 621 | ||
| Free cash flow | $ | 233,851 | $ | 143,460 |
10
mgy_3q22xearningspresent
Magnolia Oil & Gas Third Quarter 2022 Earnings Presentation November 2, 2022 Exhibit 99.2
Disclaimer 2 FORWARD LOOKING STATEMENTS The information in this presentation and the oral statements made in connection therewith include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of present or historical fact included in this presentation, regarding Magnolia Oil & Gas Corporation’s (“Magnolia,” “we,” “us,” “our” or the “Company”) financial and production guidance, strategy, future operations, financial position, estimated revenues, and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this presentation, including any oral statements made in connection therewith, the words could, should, will, may, believe, anticipate, intend, estimate, expect, project, the negative of such terms and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events. Except as otherwise required by applicable law, Magnolia disclaims any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this presentation. Magnolia cautions you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of Magnolia, incident to the development, production, gathering and sale of oil, natural gas and natural gas liquids. In addition, Magnolia cautions you that the forward looking statements contained in this press release are subject to the following factors: (i) the economic effects of the COVID-19 pandemic and actions taken by federal, state and local governments and other third parties in response to the pandemic; (ii) the outcome of any legal proceedings that may be instituted against Magnolia; (iii) Magnolia’s ability to realize the anticipated benefits of its acquisitions, which may be affected by, among other things, competition and the ability of Magnolia to grow and manage growth profitably; (iv) changes in applicable laws or regulations; (v) geopolitical and business conditions in key regions of the world; and (vi) the possibility that Magnolia may be adversely affected by other economic, business, and/or competitive factors, including inflation. Should one or more of the risks or uncertainties described in this press release occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. Additional information concerning these and other factors that may impact Magnolia's operations and projections can be found in its filings with the Securities and Exchange Commission (the "SEC"), including its Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the SEC on February 17, 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 free cash flow, EBITDAX, adjusted EBITDAX, adjusted cash operating costs and adjusted cash operating margin. Magnolia believes these metrics are useful because they allow Magnolia to more effectively evaluate its operating performance and compare the results of its operations from period to period and against its peers without regard to accounting methods or capital structure. Magnolia does not consider these non-GAAP measures in isolation or as an alternative to similar financial measures determined in accordance with GAAP. The computations of these non-GAAP measures may not be comparable to other similarly titled measures of other companies. Adjusted EBITDAX should not be considered an alternative to, or more meaningful than, net income as determined in accordance with GAAP. Certain items excluded from free cash flow, adjusted EBITDAX, adjusted cash operating costs and adjusted cash operating margin are significant components in understanding and assessing a company’s financial performance, and should not be construed as an inference that its results will be unaffected by unusual or non-recurring terms. As performance measures adjusted EBITDAX, adjusted cash operating costs and adjusted cash operating margin may be useful to investors in facilitating comparisons to others in the Company’s industry because certain items can vary substantially in the oil and gas industry from company to company depending upon accounting methods, book value of assets, and capital structure, among other factors. Management believes excluding these items facilitates investors and analysts in evaluating and comparing the underlying operating and financial performance of our business from period to period by eliminating differences caused by the existence and timing of certain expense and income items that would not otherwise be apparent on a GAAP basis. As a liquidity measure, management believes free cash flow is useful for investors and widely accepted by those following the oil and gas industry as financial indicators of a company’s ability to generate cash to internally fund drilling and completion activities, fund acquisitions, and service debt. Our presentation of adjusted EBITDAX, free cash flow, adjusted cash operating costs and adjusted cash operating margin may not be comparable to similar measures of other companies in our industry. A free cash flow reconciliation is shown on page 13, adjusted EBITDAX reconciliation is shown on page 14 of the presentation and adjusted cash operating costs and adjusted cash operating margin reconciliations are shown on page 9. INDUSTRY AND MARKET DATA This presentation has been prepared by Magnolia and includes market data and other statistical information from sources believed by Magnolia to be reliable, including independent industry publications, governmental publications or other published independent sources. Some data is also based on the good faith estimates of Magnolia, which are derived from its review of internal sources as well as the independent sources described above. Although Magnolia believes these sources are reliable, it has not independently verified the information and cannot guarantee its accuracy and completeness.
Third Quarter 2022 Key Financial Metrics 3 Key Financial Metrics 3Q22 3Q21 % Change Net income ($ MM) $287 $160 79% Diluted EPS ($ per share) $1.29 $0.67 93% Operating income margin % 65% 60% 5% Total production (Mboe/d) 81.5 67.4 21% Giddings & Other production (Mboe/d) 47.9 36.8 30% Adjusted EBITDAX ($ MM) (1) $386 $222 74% D&C capex ($ MM) $114 $67 70% D&C capex as a % of adjusted EBITDAX 30% 30% 0% Free cash flow ($ MM) (1) $234 $143 63% Cash balance as of period end ($ MM) $690 $245 181% Weighted average diluted shares outstanding (MM) (2) 218 236 -8% • Record production volumes combined with higher year-over-year product prices resulted in significantly better financial metrics compared to the prior year period. • Based on strong well results from both of our assets, ongoing efficiencies, and higher non-operated activity, third quarter total production increased 21% YOY. ‒ Giddings and other production increased 30% YOY. • Generated $234 million of free cash flow and 65% Operating Income margins in 3Q22. • During 3Q22, we repurchased a total of 3 million shares; repurchased 13.1 million shares YTD. (1) Adjusted EBITDAX and Free Cash Flow are non-GAAP measures. For a reconciliation of the most comparable GAAP measure see pages 14 and 13. (2) Weighted average total shares outstanding include diluted weighted average shares of Class A Common Stock outstanding during the period and shares of Class B Common Stock, which are anti-dilutive in the calculation of weighted average number of common shares outstanding.
3Q 2022 QTD Cash Flow Reconciliation 502 361 31 27 61 116 690 0 100 200 300 400 500 600 700 800 900 1000 Cash 6/30/22 Cash Flow from Operations Changes in Working Capital and Other Dividends Common Stock Repurchases D&C and Facilities Capital Cash 9/30/22 (1) (3)(2) (In millions) (1) Cash flow from operations before changes in working capital. (2) Includes $39 MM change in working capital including capital accruals and offset by a $8 MM change in other investing and financing items. (3) Includes $19 MM of dividends paid to Class A shareholders and $8 MM of distributions to noncontrolling interest holders. 4
Share Repurchase Summary Through 3Q 2022 5 Share Reduction Summary (Million Shares) • Since the initial repurchase authorization in 3Q19, Magnolia has reduced its dilutive share count by 25.0(1) million shares of Class A common stock as well as 24.9 million shares of Class B common stock, for a total reduction of 49.9 million shares, or approximately 19% of the diluted shares outstanding as of the authorization date. ‒ Repurchased 3 million shares during 3Q22. • Magnolia plans to continue to opportunistically repurchase at least 1% of the total shares outstanding each quarter. • There are 9.3 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 $0.10 per share is a 43% annualized increase from 2021. • 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 2021 2022 43% Increase
Magnolia Oil & Gas – Summary Balance Sheets 7 (in thousands) September 30, 2022 December 31, 2021 Cash $689,539 $366,982 Current assets 209,421 150,936 Property, plant and equipment, net 1,374,849 1,216,087 Other assets 26,827 12,737 Total assets $2,300,636 $1,746,742 Current liabilities $341,972 $218,545 Long-term debt, net 389,794 388,087 Other long-term liabilities 99,164 94,861 Total equity 1,469,706 1,045,249 Total liabilities and equity $2,300,636 $1,746,742
$400 $450 2022 2023 2024 2025 2026 3Q 2022 Capital Structure and Liquidity Overview 8 Capital Structure Overview • Maintaining low financial leverage profile ‒ Currently have a net cash position of $290 MM ‒ Net Debt / Q3 Annualized adjusted EBITDAX of -0.2x • Current Liquidity of $1.1 billion, including fully undrawn credit facility (1) • No debt maturities until senior unsecured notes mature in 2026 Debt Maturity Schedule ($MM) (1) Liquidity defined as cash plus availability under revolving credit facility. (2) Total Equity includes noncontrolling interest. Capitalization & Liquidity ($MM) Borrowing BaseCredit Facility Borrowings (as of 9/30/22) $0 6.00% Senior Unsecured Notes Capitalization Summary As of 9/30/2022 Cash and Cash Equivalents $690 Revolving Credit Facility $0 6.00% Senior Notes Due 2026 $400 Total Principal Debt Outstanding $400 Total Equity (2) $1,470 Net Debt / Q3 Annualized Adjusted EBITDAX -0.2x Net Debt / Total Book Capitalization -15% Liquidity Summary As of 9/30/2022 Cash and Cash Equivalents $690 Credit Facility Availability $450 Liquidity (1) $1,140
$ / Boe, unless otherwise noted For the Quarter Ended September 30, 2022 For the Quarter Ended September 30, 2021 Revenue $64.40 $45.97 Total Cash Operating Costs: Lease Operating Expenses (1) (4.59) (3.79) Gathering, Transportation & Processing (2.57) (1.86) Taxes Other Than Income (3.55) (2.27) Exploration Expenses (0.16) (0.05) General & Administrative Expenses (2) (2.20) (1.92) Total Adjusted Cash Operating Costs (3) (13.07) (9.89) Adjusted Cash Operating Margin (3) $51.33 $36.08 Margin % 80% 78% Non-Cash Costs: Depreciation, Depletion, and Amortization (9.20) (7.74) Asset Retirement Obligations Accretion (0.11) (0.21) Non-cash stock based compensation (0.46) (0.47) Total non-cash expenses (9.77) (8.42) Operating Income Margin $41.56 $27.66 Margin % 65% 60% Magnolia Oil & Gas – Margin and Cost Structure 9 (1) Lease operating expenses exclude non-cash stock based compensation of $0.3 MM, or $0.04 per boe, and $0.1 MM, or $0.02 per boe, for the quarters ended September 30, 2022 and 2021. (2) General and administrative expenses exclude non-cash stock based compensation of $3.1 MM, or $0.42 per boe, and $2.8 MM, or $0.45 per boe, for the quarters ended September 30, 2022 and 2021, respectively. (3) Adjusted cash operating costs and adjusted cash operating margin are non-GAAP measures. For reasons management believes this is useful to investors, refer to slide 2 “Non-GAAP Financial Measures.” ∆ $18.43/boe ∆ $3.18/boe ∆ $13.90/boe
Commitment to Sustainability 10 ENVIRONMENTAL SOCIAL GOVERNANCE Air Emissions Reduced our 2021 GHG intensity rate by 9.5% compared to 2020, following an 8.2% reduction in 2019 Flaring Do not conduct routine flaring; reduced our 2021 gas flared as a percent of total production by 72% compared to 2019 Fugitive Emissions Integrate vapor recovery towers and units into storage tanks to minimize fugitive emissions Surface Impacts Use pad drilling to significantly reduce surface acreage needed for operations Groundwater Routinely install 7 alternating layers of steel and cement as a barrier between wellbores and groundwater Workforce Health & Safety Have not recorded a fatal accident in connection with our operations since the company’s inception Training In 2021, full-time field employees each received an average of 37 hours of safety training Diversity As of December 31, 2021, 26% of our employees were women (38% in our Houston corporate office) and 31% identified as a member of a minority group, as defined by the U.S. EEOC(1) Compensation In 2021, every Magnolia employee received a minimum of 1,000 shares under our long-term incentive program Workplace Flexibility We offer a workplace flexibility program to eligible employees who can work from home effectively Board Independence 71% of board members are independent Board Diversity 29% of board members are women; 14% identify as a member of a minority group Executive Compensation Ratio of 2021 Chief Executive Officer’s compensation to median employee’s compensation was 2.14 to 1 Say-on-Pay More than 92% of stockholders approved say-on-pay at 2022 Annual Meeting of Stockholders Oversight Expanded the duties of our Nominating and Corporate Governance Committee to include formal oversight of ESG policies and practices Magnolia 2022 Sustainability Report is Available on Our Website Under the Sustainability Tab (1) U.S. Equal Employment Opportunity Commission
Appendix
Magnolia Oil & Gas – Overview • High-quality, low-risk pure-play South Texas operator with a core Eagle Ford and Austin Chalk position acquired at an attractive entry multiple • Significant scale and PDP base generates material free cash flow, reduces development risk, and increases optionality • Asset Overview: – ~23,600 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 – ~450,000 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 ~472,000 Net Acre Position Targeting Two of the Top Oil Plays in the U.S. Market Statistics Trading Symbol (NYSE) MGY Share Price as of 10/31/2022 $25.68 Common Shares Outstanding (1) 216 million Market Capitalization $5.5 billion Long-term Debt – Principal $400 million Cash as of 9/30/2022 $690 million Total Enterprise Value $5.3 billion Operating Statistics Karnes Giddings Total Net Acreage 23,622 448,263 471,885 3Q22 Net Production (Mboe/d) (2) 33.6 47.9 81.5 (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) Free Cash Flow Reconciliation For the Quarter Ended September 30, 2022 For the Quarter Ended September 30, 2021 Net cash provided by operating activities $410,681 $221,904 Add back: Net change in operating assets and liabilities (49,438) (10,677) Cash flows from operations before net change in operating assets and liabilities $361,243 $211,227 Additions to oil and natural gas properties (116,050) (68,388) Changes in working capital associated with additions to oil & gas properties (11,342) 621 Free cash flow (1) $233,851 $143,460
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.” (in thousands) Adjusted EBITDAX reconciliation to net income For the Quarter Ended September 30, 2022 For the Quarter Ended September 30, 2021 Net income $286,963 $159,907 Exploration expenses 1,173 317 Asset retirement obligations accretion 814 1,329 Depreciation, depletion and amortization 68,972 47,993 Interest expense, net 5,263 7,474 Income tax expense 19,358 3,631 EBITDAX (1) $382,543 $220,651 Non-cash stock based compensation expense 3,462 2,910 Unrealized loss on derivatives, net - (2,043) Adjusted EBITDAX (1) $386,005 $221,518
Magnolia Oil & Gas – Operating Highlights 15 (1) Benchmarks are the NYMEX WTI and NYMEX HH average prices for oil and natural gas, respectively. For the Quarter Ended September 30, 2022 For the Quarter Ended September 30, 2021 Production: Oil (MBbls) 3,381 2,851 Natural gas (MMcf) 13,364 11,429 Natural gas liquids (MBbls) 1,892 1,444 Total (Mboe) 7,500 6,200 Average daily production: Oil (Bbls/d) 36,751 30,989 Natural gas (Mcf/d) 145,257 124,224 Natural gas liquids (Bbls/d) 20,568 15,692 Total (Boe/d) 81,529 67,385 Revenues (in thousands): Oil revenues $317,243 $195,642 Natural gas revenues 100,124 43,781 Natural gas liquids revenues 65,596 45,619 Total Revenues $482,963 $285,042 Average Sales Price: Oil (per Bbl) $93.83 $68.62 Natural gas (per Mcf) 7.49 3.83 Natural gas liquids (per Bbl) 34.66 31.60 Total (per Boe) $64.40 $45.97 NYMEX WTI (per Bbl) $91.64 $70.55 NYMEX Henry Hub (per Mcf) $8.19 $4.01 Realization to benchmark: (1) Oil (% of WTI) 102% 97% Natural gas (% of Henry Hub) 91% 96%
Magnolia Oil & Gas – Production Results 16 Combined Karnes Giddings & Other Combined Karnes Giddings & Other For the Quarter Ended September 30, 2022 For the Quarter Ended September 30, 2021 Production: Oil (MBbls) 3,381 1,828 1,553 2,851 1,631 1,220 Natural gas (MMcf) 13,364 3,869 9,495 11,429 3,872 7,557 Natural gas liquids (MBbls) 1,892 621 1,271 1,444 540 904 Total (Mboe) 7,500 3,094 4,406 6,200 2,816 3,384 Average Daily Production Volume: Oil (MBbls/d) 36.8 19.9 16.9 31.0 17.7 13.3 Natural gas (MMcf/d) 145.3 42.1 103.2 124.2 42.1 82.1 Natural gas liquids (MBbls/d) 20.6 6.8 13.8 15.7 5.9 9.8 Total (MBoe/d) 81.5 33.6 47.9 67.4 30.6 36.8