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): August 2, 2021
| 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 August 2, 2021, 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 June 30, 2021.
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 August 2, 2021, the Company provided information in an earnings presentation on its website, www.magnoliaoilgas.com, regarding its financial and operational results for the quarter ended June 30, 2021.
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: August 2, 2021 | By: /s/ Timothy D. Yang |
| Name: Timothy D. Yang | |
| Title: Executive Vice President,<br> General Counsel and Corporate Secretary |
2
Document
Exhibit 99.1
Magnolia Oil & Gas Corporation Announces Second Quarter 2021 Results
HOUSTON, TX, August 2, 2021 - Magnolia Oil & Gas Corporation (“Magnolia,” “we,” “our,” or the “Company”) (NYSE: MGY) today announced its financial and operational results for the second quarter of 2021.
Second Quarter 2021 Highlights:
| (In millions, except per share data) | For the<br>Quarter Ended<br>June 30, 2021 | |
|---|---|---|
| Net income | $ | 116.2 |
| Earnings per share - diluted | 0.48 | |
| Adjusted net income(1) | 135.0 | |
| Adjusted earnings per share(1) | 0.56 | |
| Adjusted EBITDAX(1) | 195.1 | |
| Capital expenditures - D&C | 53.8 | |
| Cash balance as of June 30, 2021 | $ | 190.3 |
| Average daily production (Mboe/d) | 64.9 | |
| Diluted weighted average total shares outstanding(2) | 242.2 |
•Magnolia reported second quarter 2021 net income attributable to Class A Common Stock of $84.4 million, or $0.48 per diluted share. Second quarter 2021 total net income was $116.2 million and adjusted net income was $135.0 million, or $0.56 per diluted share. The adjustments to net income primarily reflect the positive impact of one-time cash and non-cash items associated with the termination of the Services Agreement with EnerVest Operating L.L.C.
•Adjusted EBITDAX for the second quarter of 2021 was $195.1 million a 29% sequential quarterly increase driven by both higher overall production and stronger product prices. Total capital allocated to drilling and completions (“D&C”) during the second quarter was $53.8 million, or 28% of adjusted EBITDAX.
•Net cash provided by operating activities was $187.9 million during the second quarter and the Company generated free cash flow(1) of $134.0 million.
•During the second quarter of 2021, Magnolia generated operating income as a percent of total revenue of 52%.
•Total production in the second quarter of 2021 increased 4% sequentially to 64.9 thousand barrels of oil equivalent per day (“Mboe/d”). Oil production increased 11% sequentially to 31.9 thousand barrels per day ("MBbls/d"), with both our Karnes and Giddings assets contributing to the increase. Total production in Giddings increased by 55% compared to last year’s second quarter.
•Magnolia spent $120.7 million reducing its diluted shares during the second quarter of 2021. As a result, the fully diluted share count is expected to decline to 237 million shares in the third quarter of 2021. During the first half of 2021, Magnolia has reduced its fully diluted share count by 17.6 million shares or 7% compared to the fourth quarter 2020 levels. Magnolia ended the second quarter with 10.5 million Class A Common shares remaining under the current share repurchase authorization.
•Magnolia had $190.3 million of cash on its balance sheet at the end of the second quarter and remains undrawn on its $450.0 million revolving credit facility. The Company has no debt maturities until 2026 and has no plans to increase its debt levels.
•Magnolia declared its first partial semi-annual dividend of $0.08 per share payable on September 1, 2021.
(1) Adjusted net income, adjusted earnings per share, 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.
“We continue to consistently execute on our business plan as demonstrated by the strength of our second quarter operating and financial performance,” said Chairman, President and CEO Steve Chazen. “The business has fundamentally improved resulting from the strong productivity and efficiencies in our Giddings asset. The quality of our assets and a business unencumbered by large debt allows for moderate production growth, with high operating margins while generating significant free cash flow at much lower product prices. We now believe this can be achieved by spending within 55 percent of our adjusted EBITDAX. Another of our important corporate objectives was to generate EBIT equal to 50 percent or more of our realized price per boe. Our ability to attain this goal in the second quarter is a direct result of our team’s focus on cost control, safety, and well productivity and I am especially pleased with this achievement.
“Our disciplined capital investment provided 4 percent sequential organic volume growth in the second quarter, with most of our free cash flow allocated toward repurchasing our shares. During the first half of 2021, we spent more than $200 million in reducing our share count by 17.6 million shares or about 7 percent of the total shares outstanding. This approach toward allocating our capital and free cash has provided volume growth of 7 percent compared to fourth quarter 2020 levels while enhancing our per share metrics and leaving our cash position unchanged during that period. We plan to continue to repurchase at least 1 percent of our shares each quarter.
“I am pleased to declare our first partial semi-annual dividend which conveys continued confidence in our business plan and the quality of our assets. Our differentiated dividend framework is aligned with the principles of our business model and this first interim dividend payment is secure and sustainable at oil prices below $40 a barrel. We plan to declare the remaining annual dividend payment next February with the release of our full-year 2021 financial results. The second payment will be based on our longer-term view of product prices, or approximately $55 oil, and the prior year’s results. We expect that these regular dividend payments should grow annually based on our ability to execute our business plan which includes moderate production growth and the reduction of our outstanding shares.”
Operational Update
Second quarter total company production averaged 64.9 Mboe/d, representing 4 percent sequential growth from first quarter levels, and despite spending only 28 percent of our adjusted EBITDAX on drilling and completing wells. Oil production averaged 31.9 MBbl/d, an 11 percent sequential increase. Giddings and Other production grew 5 percent sequentially averaging 36.2 Mboe/d during the most recent quarter, or a year-over-year increase of 55 percent. Production in the Karnes area averaged 28.7 Mboe/d during the second quarter of 2021, a sequential increase of 4 percent, and driven by the completion of several DUCs.
We added a second drilling rig at the end of the second quarter which is currently drilling wells in the Giddings field. We plan to use this rig to drill wells in both the Karnes and Giddings areas, including some appraisal wells in Giddings. The other rig will continue to drill multi-well pads in our Giddings area. Recent Giddings wells have averaged approximately $6 million with continued efficiencies offsetting the modest inflation experienced in the field. The results of recent wells drilled as part of our early-stage Giddings development continue to be representative of the strong outcome we previously disclosed as part of this program.
Guidance
Concurrent with the addition of the second drilling rig, we expect our capital spending for drilling and completing wells to be in the range of approximately $150 to $175 million for the back half of the year. We expect that most of the impact to production generated from the second rig to be realized in the latter part of this year with the full benefit reflected in 2022.
Looking at the third quarter of 2021, total production is estimated to be around 67 Mboe/d, representing a 3 percent increase from second quarter levels. A portion of our capital and activity will be directed toward drilling and completing some gassier wells in both Karnes and Giddings and in order to benefit from the recent strength in natural gas prices. Oil price differentials are anticipated to be approximately a $3 per barrel discount to Magellan East Houston (“MEH”) during the third quarter. The fully diluted share count for the third quarter of 2021 is expected to be approximately 237 million shares which is 7 percent lower than fourth quarter 2020 levels.
The EnerVest operating and other agreements were terminated at the end of the second quarter, resulting in several one-time cash and non-cash charges. As a result of the conclusion of the operating services agreement, the run rate for our cash G&A costs is expected to be approximately $2.00 per boe beginning in the third quarter, compared to $2.60 per boe (3) during full-year 2020. In addition, EnerVest had 1.6 million time-vested contingent shares remaining from the time of Magnolia’s formation, that were settled by the Company for cash during the quarter, thereby reducing the fully diluted share count.
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 June 30, 2021, which is expected to be filed with the U.S. Securities and Exchange Commission (“SEC”) on August 3, 2021.
(3) Full year 2020 cash G&A costs of $2.60 per boe are derived from General and administrative expenses of $3.05 per boe less non-cash stock based compensation of $0.45 per boe.
Conference Call and Webcast
Magnolia will host an investor conference call on Tuesday, August 3, 2021 at 10:00 a.m. Central (11:00 a.m. Eastern) to discuss these operating and financial results. Interested parties may join the webcast by visiting Magnolia's website at www.magnoliaoilgas.com/investors/events-and-presentations and clicking on the webcast link or by dialing 1-844-701-1059. A replay of the webcast will be posted on Magnolia's website following completion of the call.
About Magnolia Oil & Gas Corporation
Magnolia (MGY) is a publicly traded oil and gas exploration and production company with operations primarily in South Texas in the core of the Eagle Ford Shale and Austin Chalk formations. Magnolia focuses on generating value for shareholders through steady production growth, strong pre-tax margins, and free cash flow. For more information, visit www.magnoliaoilgas.com.
Cautionary Note Regarding Forward-Looking Statements
The information in this press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of present or historical fact included in this press release, regarding Magnolia’s strategy, future operations, financial position, estimated revenues, and losses, projected costs, prospects, plans and objectives of management are forward looking statements. When used in this press release, the words could, should, will, may, believe, anticipate, intend, estimate, expect, project, the negative of such terms and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. Except as otherwise required by applicable law, Magnolia disclaims any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this press release. Magnolia cautions you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of Magnolia, incident to the development, production, gathering and sale of oil, natural gas and natural gas liquids. In addition, Magnolia cautions you that the forward looking statements contained in this press release are subject to the following factors: (i) the length, scope and severity of the ongoing coronavirus disease 2019 (“COVID-19”) pandemic, including the effects of related public health concerns and the impact of continued actions taken by governmental authorities and other third parties in response to the pandemic and its impact on commodity prices as well as supply and demand considerations; (ii) the outcome of any legal proceedings that may be instituted against Magnolia; (iii) Magnolia’s ability to realize the anticipated benefits of its acquisitions, which may be affected by, among other things, competition and the ability of Magnolia to grow and manage growth profitably; (iv) changes in applicable laws or regulations; and (v) the possibility that Magnolia may be adversely affected by other economic, business, and/or competitive factors. Should one or more of the risks or uncertainties described in this press release occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. Additional information concerning these and other factors that may impact the operations and projections discussed herein can be found in Magnolia’s filings with the SEC, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2020. 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 Six Months Ended | |||||||||||
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |||||||||
| Production: | ||||||||||||
| Oil (MBbls) | 2,903 | 3,089 | 5,495 | 6,479 | ||||||||
| Natural gas (MMcf) | 9,947 | 9,763 | 20,188 | 19,817 | ||||||||
| Natural gas liquids (MBbls) | 1,349 | 1,122 | 2,654 | 2,276 | ||||||||
| Total (Mboe) | 5,910 | 5,838 | 11,514 | 12,058 | ||||||||
| Average daily production: | ||||||||||||
| Oil (Bbls/d) | 31,897 | 33,940 | 30,361 | 35,600 | ||||||||
| Natural gas (Mcf/d) | 109,313 | 107,289 | 111,536 | 108,882 | ||||||||
| Natural gas liquids (Bbls/d) | 14,830 | 12,324 | 14,661 | 12,506 | ||||||||
| Total (boe/d) | 64,946 | 64,146 | 63,611 | 66,253 | ||||||||
| Revenues (in thousands): | ||||||||||||
| Oil revenues | $ | 188,096 | $ | 60,790 | $ | 334,509 | $ | 215,476 | ||||
| Natural gas revenues | 32,595 | 13,168 | 67,359 | 29,343 | ||||||||
| Natural gas liquids revenues | 30,035 | 8,881 | 56,521 | 19,385 | ||||||||
| Total Revenues | $ | 250,726 | $ | 82,839 | $ | 458,389 | $ | 264,204 | ||||
| Average sales price: | ||||||||||||
| Oil (per Bbl) | $ | 64.80 | $ | 19.68 | $ | 60.87 | $ | 33.26 | ||||
| Natural gas (per Mcf) | 3.28 | 1.35 | 3.34 | 1.48 | ||||||||
| Natural gas liquids (per Bbl) | 22.26 | 7.92 | 21.30 | 8.52 | ||||||||
| Total (per boe) | $ | 42.42 | $ | 14.19 | $ | 39.81 | $ | 21.91 | ||||
| NYMEX WTI (per Bbl) | $ | 66.06 | $ | 27.85 | $ | 61.95 | $ | 36.97 | ||||
| NYMEX Henry Hub (per Mcf) | $ | 2.83 | $ | 1.71 | $ | 2.77 | $ | 1.83 | ||||
| Realization to benchmark: | ||||||||||||
| Oil (% of WTI) | 98 | % | 71 | % | 98 | % | 90 | % | ||||
| Natural Gas (% of Henry Hub) | 116 | % | 79 | % | 121 | % | 81 | % | ||||
| Operating expenses (in thousands): | ||||||||||||
| Lease operating expenses | $ | 21,971 | $ | 18,310 | $ | 41,363 | $ | 42,473 | ||||
| Gathering, transportation and processing | 8,963 | 6,788 | 17,762 | 14,807 | ||||||||
| Taxes other than income | 13,812 | 5,525 | 24,574 | 15,543 | ||||||||
| Depreciation, depletion and amortization | 43,332 | 50,870 | 86,275 | 193,542 | ||||||||
| Operating costs per boe: | ||||||||||||
| Lease operating expenses | $ | 3.72 | $ | 3.14 | $ | 3.59 | $ | 3.52 | ||||
| Gathering, transportation and processing | 1.52 | 1.16 | 1.54 | 1.23 | ||||||||
| Taxes other than income | 2.34 | 0.95 | 2.13 | 1.29 | ||||||||
| Depreciation, depletion and amortization | 7.33 | 8.71 | 7.49 | 16.05 |
Magnolia Oil & Gas Corporation
Consolidated Statements of Operations
(In thousands, except per share data)
| For the Quarters Ended | For the Six Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |||||
| REVENUES | ||||||||
| Oil revenues | $ | 188,096 | $ | 60,790 | $ | 334,509 | $ | 215,476 |
| Natural gas revenues | 32,595 | 13,168 | 67,359 | 29,343 | ||||
| Natural gas liquids revenues | 30,035 | 8,881 | 56,521 | 19,385 | ||||
| Total revenues | 250,726 | 82,839 | 458,389 | 264,204 | ||||
| OPERATING EXPENSES | ||||||||
| Lease operating expenses | 21,971 | 18,310 | 41,363 | 42,473 | ||||
| Gathering, transportation and processing | 8,963 | 6,788 | 17,762 | 14,807 | ||||
| Taxes other than income | 13,812 | 5,525 | 24,574 | 15,543 | ||||
| Exploration expense | 62 | 6,462 | 2,124 | 562,888 | ||||
| Impairment of oil and natural gas properties | — | — | — | 1,381,258 | ||||
| Asset retirement obligations accretion | 1,405 | 1,464 | 2,736 | 2,902 | ||||
| Depreciation, depletion and amortization | 43,332 | 50,870 | 86,275 | 193,542 | ||||
| Amortization of intangible assets | 7,233 | 3,626 | 9,346 | 7,253 | ||||
| General and administrative expenses | 24,757 | 15,729 | 45,122 | 33,809 | ||||
| Total operating expenses | 121,535 | 108,774 | 229,302 | 2,254,475 | ||||
| OPERATING INCOME (LOSS) | 129,191 | (25,935) | 229,087 | (1,990,271) | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Income from equity method investee | — | 611 | — | 1,052 | ||||
| Interest expense, net | (8,752) | (7,256) | (16,046) | (14,012) | ||||
| Loss on derivatives, net | (2,004) | — | (2,486) | — | ||||
| Other income (expense), net | 135 | 13 | (94) | (460) | ||||
| Total other expense, net | (10,621) | (6,632) | (18,626) | (13,420) | ||||
| INCOME (LOSS) BEFORE INCOME TAXES | 118,570 | (32,567) | 210,461 | (2,003,691) | ||||
| Income tax expense (benefit) | 2,398 | (3,176) | 2,797 | (79,001) | ||||
| NET INCOME (LOSS) | 116,172 | (29,391) | 207,664 | (1,924,690) | ||||
| LESS: Net income (loss) attributable to noncontrolling interest | 31,727 | (11,119) | 59,975 | (679,408) | ||||
| NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON STOCK | 84,445 | (18,272) | 147,689 | (1,245,282) | ||||
| NET INCOME (LOSS) PER COMMON SHARE | ||||||||
| Basic | $ | 0.48 | $ | (0.11) | $ | 0.86 | $ | (7.46) |
| Diluted | $ | 0.48 | $ | (0.11) | $ | 0.85 | $ | (7.46) |
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||
| Basic | 175,169 | 166,572 | 171,083 | 166,860 | ||||
| Diluted | 176,129 | 166,572 | 172,085 | 166,860 | ||||
| WEIGHTED AVERAGE NUMBER OF CLASS B SHARES OUTSTANDING (1) | 66,088 | 85,790 | 73,131 | 85,790 |
(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 Six Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| NET INCOME (LOSS) | $ | 116,172 | $ | (29,391) | $ | 207,664 | $ | (1,924,690) |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Depreciation, depletion and amortization | 43,332 | 50,870 | 86,275 | 193,542 | ||||
| Amortization of intangible assets | 7,233 | 3,626 | 9,346 | 7,253 | ||||
| Exploration expense, non-cash | — | 6,440 | — | 561,629 | ||||
| Impairment of oil and natural gas properties | — | — | — | 1,381,258 | ||||
| Asset retirement obligations accretion | 1,405 | 1,464 | 2,736 | 2,902 | ||||
| Amortization of deferred financing costs | 1,108 | 901 | 2,018 | 1,797 | ||||
| Loss on derivatives, net | 1,838 | — | 2,320 | — | ||||
| Deferred tax expense (benefit) | — | (3,181) | — | (77,834) | ||||
| Stock based compensation | 3,528 | 3,065 | 6,233 | 5,944 | ||||
| Other | — | (611) | (85) | (1,052) | ||||
| Net change in operating assets and liabilities | 13,263 | (2,219) | (10,476) | 15,093 | ||||
| Net cash provided by operating activities | 187,879 | 30,964 | 306,031 | 165,842 | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Acquisitions | (8,851) | (392) | (9,409) | (69,782) | ||||
| Additions to oil and natural gas properties | (54,190) | (28,260) | (94,356) | (129,651) | ||||
| Changes in working capital associated with additions to oil and natural gas properties | 13,558 | (31,562) | 11,814 | (24,381) | ||||
| Other investing | (239) | (145) | (655) | (345) | ||||
| Net cash used in investing activities | (49,722) | (60,359) | (92,606) | (224,159) | ||||
| CASH FLOW FROM FINANCING ACTIVITIES | ||||||||
| Class A Common Stock repurchases | (24,047) | — | (44,328) | (6,483) | ||||
| Class B Common Stock purchase and cancellation | (71,750) | — | (122,531) | — | ||||
| Non-compete settlement | (24,922) | — | (42,074) | — | ||||
| Cash paid for debt modification | (4,976) | — | (4,976) | — | ||||
| Distributions to noncontrolling interest owners | (276) | (206) | (431) | (490) | ||||
| Other financing activities | (98) | (41) | (1,364) | (493) | ||||
| Net cash used in financing activities | (126,069) | (247) | (215,704) | (7,466) | ||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | 12,088 | (29,642) | (2,279) | (65,783) | ||||
| Cash and cash equivalents – Beginning of period | 178,194 | 146,492 | 192,561 | 182,633 | ||||
| Cash and cash equivalents – End of period | $ | 190,282 | $ | 116,850 | $ | 190,282 | $ | 116,850 |
Magnolia Oil & Gas Corporation
Summary Balance Sheet Data
(In thousands)
| June 30, 2021 | December 31, 2020 | |||
|---|---|---|---|---|
| Cash and cash equivalents | $ | 190,282 | $ | 192,561 |
| Other current assets | 122,579 | 88,965 | ||
| Property, plant and equipment, net | 1,171,633 | 1,149,527 | ||
| Other assets | 13,851 | 22,367 | ||
| Total assets | $ | 1,498,345 | $ | 1,453,420 |
| Current liabilities | $ | 167,949 | $ | 128,949 |
| Long-term debt, net | 386,996 | 391,115 | ||
| Other long-term liabilities | 100,744 | 93,934 | ||
| Common stock | 24 | 26 | ||
| Additional paid in capital | 1,684,579 | 1,712,544 | ||
| Treasury stock | (83,286) | (38,958) | ||
| Retained earnings (accumulated deficit) | (977,761) | (1,125,450) | ||
| Noncontrolling interest | 219,100 | 291,260 | ||
| Total liabilities and equity | $ | 1,498,345 | $ | 1,453,420 |
Magnolia Oil & Gas Corporation
Non-GAAP Financial Measures
Reconciliation of net income (loss) 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 (loss) 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 (loss). 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 (loss) 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 (loss) 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 (loss) to adjusted EBITDAX, our most directly comparable financial measure, calculated and presented in accordance with GAAP:
| For the Quarters Ended | ||||
|---|---|---|---|---|
| (In thousands) | June 30, 2021 | June 30, 2020 | ||
| NET INCOME (LOSS) | $ | 116,172 | $ | (29,391) |
| Exploration expense | 62 | 6,462 | ||
| Asset retirement obligations accretion | 1,405 | 1,464 | ||
| Depreciation, depletion and amortization | 43,332 | 50,870 | ||
| Amortization of intangible assets | 7,233 | 3,626 | ||
| Interest expense, net | 8,752 | 7,256 | ||
| Income tax expense (benefit) | 2,398 | (3,176) | ||
| EBITDAX | 179,354 | 37,111 | ||
| Service agreement transition costs (1) | 10,345 | — | ||
| Non-cash stock based compensation expense | 3,528 | 3,065 | ||
| Unrealized loss on derivatives, net | 1,838 | — | ||
| Adjusted EBITDAX | $ | 195,065 | $ | 40,176 |
(1) Costs incurred during the transition period related to the termination of the Services Agreement with EnerVest Operating L.L.C. included within “General and administrative expenses” on the Company's consolidated statements of operations.
Magnolia Oil & Gas Corporation
Non-GAAP Financial Measures
Reconciliation of net income (loss) attributable to Class A Common Stock to adjusted earnings
Our presentation of adjusted earnings and adjusted earnings per share are non-GAAP measures because they exclude the effect of certain items included in net income (loss) attributable to Class A Common Stock. Management uses adjusted earnings and adjusted earnings per share to evaluate our operating and financial performance because it eliminates the impact of certain items that management does not consider to be representative of the Company’s on-going business operations. As a performance measure, adjusted earnings may be useful to investors in facilitating comparisons to others in the Company’s industry because certain items can vary substantially in the oil and gas industry from company to company depending upon accounting methods, book value of assets, and capital structure, among other factors. Management believes excluding these items facilitates investors and analysts in evaluating and comparing the underlying operating and financial performance of our business from period to period by eliminating differences caused by the existence and timing of certain expense and income items that would not otherwise be apparent on a GAAP basis. However, our presentation of adjusted earnings and adjusted earnings per share may not be comparable to similar measures of other companies in our industry.
| For the<br><br>Quarter Ended<br><br>June 30, 2021 | Per Share Diluted EPS | For the<br><br>Quarter Ended<br><br>June 30, 2020 | Per Share Diluted EPS | |||||
|---|---|---|---|---|---|---|---|---|
| (In thousands, except per share data) | ||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON STOCK | $ | 84,445 | $ | 0.48 | $ | (18,272) | $ | (0.11) |
| Adjustments: | ||||||||
| Impairment of unproved properties (1) | — | — | 6,440 | 0.04 | ||||
| Service agreement transition costs (2) | 10,345 | 0.06 | — | — | ||||
| Accelerated amortization of intangible | 5,877 | 0.03 | — | — | ||||
| Unrealized loss on derivatives, net | 1,838 | 0.01 | — | — | ||||
| Interest expense costs related to debt modification | 1,147 | 0.01 | — | — | ||||
| Noncontrolling interest impact of adjustments | (5,140) | (0.03) | (2,183) | (0.01) | ||||
| Change in estimated income tax | (281) | — | — | — | ||||
| ADJUSTED NET INCOME (LOSS) ATTRIBUTABLE TO <br>CLASS A COMMON STOCK | $ | 98,231 | $ | 0.56 | $ | (14,015) | $ | (0.08) |
(1) Impairment of unproved properties is included within Exploration expense on the consolidated statements of operations.
(2) Costs incurred during the transition period related to the termination of the Services Agreement with EnerVest Operating L.L.C. included within “General and administrative expenses” on the Company's consolidated statements of operations.
Magnolia Oil & Gas Corporation
Non-GAAP Financial Measures
Reconciliation of net income (loss) to adjusted net income (loss)
Our presentation of adjusted net income (loss) is a non-GAAP measures because it excludes the effect of certain items included in net income and adjusts for income taxes assuming the exchange of all outstanding Magnolia LLC Units and corresponding Class B Common Stock for shares of Class A Common Stock. Management uses adjusted net income (loss) 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 (loss) 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 (loss) may not be comparable to similar measures of other companies in our industry.
| For the Quarters Ended | ||||
|---|---|---|---|---|
| (In thousands) | June 30, 2021 | June 30, 2020 | ||
| NET INCOME (LOSS) | $ | 116,172 | $ | (29,391) |
| Income tax expense (benefit) | 2,398 | (3,176) | ||
| INCOME (LOSS) BEFORE INCOME TAXES | 118,570 | (32,567) | ||
| Adjustments: | ||||
| Impairment of unproved properties (1) | — | 6,440 | ||
| Service agreement transition costs (2) | 10,345 | — | ||
| Accelerated amortization of intangible | 5,877 | — | ||
| Unrealized loss on derivatives, net | 1,838 | — | ||
| Interest expense costs related to debt modification | 1,147 | — | ||
| ADJUSTED INCOME (LOSS) BEFORE INCOME TAXES | 137,777 | (26,127) | ||
| Adjusted income tax expense (benefit) | 2,755 | (5,629) | ||
| ADJUSTED NET INCOME (LOSS) | $ | 135,022 | $ | (20,498) |
| Diluted weighted average shares of Class A Common Stock outstanding during the period | 176,129 | 166,572 | ||
| Weighted average shares of Class B Common Stock outstanding during the period (3) | 66,088 | 85,790 | ||
| Total weighted average shares of Class A and B Common Stock, including dilutive impact of other securities (3) | 242,217 | 252,362 |
(1) Impairment of unproved properties is included within “Exploration expense” on the consolidated statements of operations.
(2) Costs incurred during the transition period related to the termination of the Services Agreement with EnerVest Operating L.L.C. included within “General and administrative expenses” on the Company's consolidated statements of operations.
(3) Shares of Class B Common Stock, and corresponding Magnolia LLC Units, are anti-dilutive in the calculation of weighted average number of common shares outstanding.
Magnolia Oil & Gas Corporation
Non-GAAP Financial Measures
Reconciliation of revenue to adjusted cash operating margin and to operating income margin
Our presentation of adjusted cash operating margin and total adjusted cash operating costs are supplemental non-GAAP financial measures that are used by management. Total adjusted cash operating costs exclude the impact of non-cash activity. We define adjusted cash operating margin per boe as total revenues per boe less operating expenses per boe. Management believes that total adjusted cash operating costs per boe and adjusted cash operating margin per boe provide relevant and useful information, which is used by our management in assessing the Company’s profitability and comparability of results to our peers.
As a performance measure, total adjusted cash operating costs and adjusted cash operating margin may be useful to investors in facilitating comparisons to others in the Company’s industry because certain items can vary substantially in the oil and gas industry from company to company depending upon accounting methods, book value of assets, and capital structure, among other factors. Management believes excluding these items facilitates investors and analysts in evaluating and comparing the underlying operating and financial performance of our business from period to period by eliminating differences caused by the existence and timing of certain expense and income items that would not otherwise be apparent on a GAAP basis. However, our presentation of adjusted cash operating margin may not be comparable to similar measures of other companies in our industry.
| For the Quarters Ended | ||||||
|---|---|---|---|---|---|---|
| (in $/boe) | June 30, 2021 | March 31, 2021 | ||||
| Revenue | $ | 42.42 | $ | 37.06 | ||
| Total cash operating costs: | ||||||
| Lease operating expenses (1) | (3.70) | (3.44) | ||||
| Gathering, transportation and processing | (1.52) | (1.57) | ||||
| Taxes other than income | (2.34) | (1.92) | ||||
| Exploration expense | (0.01) | (0.37) | ||||
| General and administrative expenses (2) | (3.61) | (3.17) | ||||
| Total adjusted cash operating costs | (11.18) | (10.47) | ||||
| Adjusted cash operating margin | $ | 31.24 | $ | 26.59 | ||
| Margin (%) | 74 | % | 72 | % | ||
| Non-cash costs: | ||||||
| Depreciation, depletion and amortization | $ | (7.33) | $ | (7.66) | ||
| Asset retirement obligations accretion | (0.24) | (0.24) | ||||
| Amortization of intangible assets | (1.22) | (0.38) | ||||
| Non-cash stock based compensation | (0.60) | (0.48) | ||||
| Total non-cash costs | (9.39) | (8.76) | ||||
| Operating income margin | $ | 21.85 | $ | 17.83 | ||
| Margin (%) | 52 | % | 48 | % |
(1) Lease operating expenses exclude non-cash stock based compensation of $0.1 million, or $0.02 per boe, for each of the quarters ended June 30, 2021 and March 31, 2021.
(2) General and administrative expenses exclude non-cash stock based compensation of $3.4 million, or $0.58 per boe, and $2.6 million, or $0.46 per boe, for the quarters ended June 30, 2021 and March 31, 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, therefore, is an additional measure of liquidity, but is not a measure of financial performance under GAAP and should not be considered an alternative to cash flows from operating, investing, or financing activities.
| For the Quarters Ended | ||||
|---|---|---|---|---|
| (In thousands) | June 30, 2021 | March 31, 2021 | ||
| Net cash provided by operating activities | $ | 187,879 | $ | 118,153 |
| Add back: net change in operating assets and liabilities | (13,263) | 23,740 | ||
| Cash flows from operations before net change in operating assets and liabilities | 174,616 | 141,893 | ||
| Additions to oil and natural gas properties | (54,190) | (40,166) | ||
| Changes in working capital associated with additions to oil and natural gas properties | 13,558 | (1,744) | ||
| Free cash flow | $ | 133,984 | $ | 99,983 |
13
mgy_2q21xearningsxpresen
Second Quarter 2021 Earnings Presentation August 3, 2021 Stephen Chazen – Chairman, President & CEO Christopher Stavros – Executive Vice President & CFO Brian Corales – Vice President, Investor Relations 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 length, scope and severity of the ongoing coronavirus disease 2019 (“COVID-19”) pandemic, including the effects of related public health concerns and the impact of continued actions taken by governmental authorities and other third parties in response to the pandemic and its impact on commodity prices, supply and demand considerations, and storage capacity; (ii) the outcome of any legal proceedings that may be instituted against Magnolia; (iii) Magnolia’s ability to realize the anticipated benefits of its acquisitions, which may be affected by, among other things, competition and the ability of Magnolia to grow and manage growth profitably; (iv) changes in applicable laws or regulations; and (v) the possibility that Magnolia may be adversely affected by other economic, business, and/or competitive factors. Should one or more of the risks or uncertainties described in this press release occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. Additional information concerning these and other factors that may impact Magnolia's operations and projections can be found in its filings with the Securities and Exchange Commission (the "SEC"), its Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on February 23, 2021. 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 net income, adjusted earnings, 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. Magnolia excludes certain items from net income in arriving at adjusted net income and adjusted earnings because these amounts can vary substantially from company to company within its industry depending upon accounting methods, book values of assets and the method by which the assets were acquired. Adjusted EBITDAX, adjusted net income, and adjusted earnings should not be considered as alternatives to, or more meaningful than, net income as determined in accordance with GAAP. Certain items excluded from free cash flow, adjusted EBITDAX, adjusted net income, adjusted earnings, 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 net income, adjusted earnings, 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, adjusted net income, free cash flow, adjusted earnings, 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 14, adjusted EBITDAX reconciliation is shown on page 15 of the presentation, adjusted net income reconciliation is shown on page 16, adjusted earnings reconciliation is shown on page 17 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.
Magnolia Oil & Gas – 2Q 2021 Highlights 3 • Total production in the second quarter 2021 increased 4% sequentially to 64.9 Mboe/d. Oil production increased 11% sequentially. • Production at Giddings was 36.2 Mboe/d increasing 55% from prior year levels. Giddings oil production of 12.6 Mbbl/d increased 97% over the same period last year. • Generated adjusted EBITDAX of $195 million versus our D&C Capital of $54 million, or just 28% of adjusted EBITDAX, during the second quarter. • Generated free cash flow of $134 million during the second quarter. • Second quarter 2021 operating income margin was 52%. • Cash G&A expense for the second half of the year is expected to be reduced greater than 20% to $2.00/boe from $2.60/boe(1) in 2020. • Decreased long-term D&C spending to within 55% of EBITDAX, down from 60%, to generate moderate production growth. • Magnolia spent $121 million reducing its diluted share count during the second quarter. As a result, the fully diluted share count is expected to decline by approximately 7% to 237 million diluted shares in the third quarter of 2021 from 255 million shares in the fourth quarter of 2020. ‒ Magnolia ended the second quarter with 10.5 million Class A Common shares remaining under the current share repurchase authorization. • Magnolia announced its inaugural semi-annual cash dividend of $0.08 per share to be paid in the third quarter. • Third Quarter production is expected to average 67 Mboe/d, a 3 percent sequential increase. (1) Full year 2020 cash G&A costs of $2.60 per boe are derived from general and administrative expenses of $3.05 per boe less non-cash stock based compensation of $0.45 per boe.
Magnolia Oil & Gas – 2Q 2021 Key Metrics 4 Adj. Net Income (1) & Adj. EPS (1) Total Production 64.9 Mboe/d (4% sequential growth) Adjusted EBITDAX (1) $195.1 Million D&C Capex $53.8 Million 28% of Adj. EBITDAX Free Cash Flow (1) $134.0 million Giddings Production 36.2 Mboe/d (55% YOY growth) (1) Adjusted EPS, Adjusted Net Income, Free Cash Flow and Adjusted EBITDAX are non-GAAP measures. For a reconciliation to the most directly comparable GAAP measure see pages 17, 16, 14 and 15. $135.0 million $0.56/share
178 175 21 9 54 121 190 0 50 100 150 200 250 300 350 400 Cash 3/31/21 Cash Flow from Operations Changes in Working Capital and Other Acquisitions D&C and Facilities Capital Share Repurchase Cash 6/30/21 2Q 2021 Cash Flow Summary ($In Millions) (1) Cash flow from operations before changes in working capital. (2) Includes $13 million increase in working capital and $14 million increase in capital accruals which are included in the investing activities of cash flows offset by $6 million in other activities. (3) D&C Capital of $54 million includes $14 million of capital activities that have been accrued but not yet paid (4) Comprised of $72 million Class B Common Stock repurchases outside of share repurchase program and approximately $24 million of Class A Common Stock repurchases as part of the share repurchase program, and a $25 million cash settlement for the non-compete agreement in lieu of Class A Common Stock Issuance. 5 (1) (2) (3) (4)
Share Repurchase Summary Through 2Q 2021 6 Quarterly Share Reduction Summary (Million Shares) • Magnolia received initial authorization to repurchase up to 10 million shares of Class A common stock in Q3 2019. The Board of Directors increased the share repurchase authorization by an additional 10 million shares in February 2021. • Through Q2 2021, Magnolia has reduced its dilutive share count by 13.1 million shares of Class A common stock as well as 16 million shares of Class B common stock, for a total reduction of 29.1 million shares, or approximately ~11% of the diluted shares outstanding as of the authorization date. ‒ Q3 2021 diluted share count is expected to be approximately 237 million shares. • Going forward, Magnolia plans to repurchase 1% of the total shares outstanding each quarter. • There are 10.5 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.
Magnolia Oil & Gas – Summary Balance Sheet 7 (in thousands) June 30, 2021 December 31, 2020 Cash $190,282 $192,561 Current assets 122,579 88,965 Property, plant and equipment, net 1,171,633 1,149,527 Other assets 13,851 22,367 Total assets $1,498,345 $1,453,420 Current liabilities $167,949 $128,949 Long-term debt, net 386,996 391,115 Other long-term liabilities 100,744 93,934 Total stockholders' equity 842,656 839,422 Total liabilities and equity $1,498,345 $1,453,420
2Q 2021 Capital Structure and Liquidity Overview 8 Capital Structure Overview • Maintaining low financial leverage profile ‒ Net Debt / Total Book Capitalization of 17% ‒ Net Debt / Q2 Annualized adjusted EBITDAX of 0.3x • Current Liquidity of $640 million, including fully undrawn credit facility (1) • No debt maturities until senior unsecured notes mature in 2026 Debt Maturity Schedule ($MM) (1) Liquidity defined as cash plus availability under revolving credit facility. (2) Total Equity includes noncontrolling interest. Capitalization & Liquidity ($MM) $450 $400 2020 2021 2022 2023 2024 2025 2026 Borrowing Base Credit Facility Borrowings (as of 6/30/21) $0 6.00% Senior Unsecured Notes Capitalization Summary As of 6/30/2021 Cash and Cash Equivalents $190 Revolving Credit Facility $0 6.00% Senior Notes Due 2026 $400 Total Principal Debt Outstanding $400 Total Equity (2) $843 Net Debt / Q2 Annualized Adjusted EBITDAX 0.3x Net Debt / Total Book Capitalization 17% Liquidity Summary As of 6/30/2021 Cash and Cash Equivalents $190 Credit Facility Availability $450 Liquidity (1) $640
Magnolia Oil & Gas – Margin and Cost Structure 9 $ / boe, unless otherwise noted For the Quarter Ended June 30, 2021 For the Quarter Ended March 31, 2021 Revenue $42.42 $37.06 Total Cash Operating Costs: Lease Operating Expenses (1) (3.70) (3.44) Gathering, Transportation & Processing (1.52) (1.57) Taxes Other Than Income (2.34) (1.92) Exploration Expense (0.01) (0.37) General & Administrative Expenses (2) (3.61) (3.17) Total Adjusted Cash Operating Costs (11.18) (10.47) Adjusted Cash Operating Margin $31.24 $26.59 Margin % 74% 72% Non-Cash Costs: Depreciation, Depletion, and Amortization (7.33) (7.66) Asset Retirement Obligations Accretion (0.24) (0.24) Amortization on Intangible Assets (1.22) (0.38) Non-cash stock based compensation (0.60) (0.48) Total non-cash expenses (9.39) (8.76) Operating Income Margin $21.85 $17.83 Margin % 52% 48% (1) Lease operating expenses excludes non-cash stock based compensation of $0.1 million, or $0.02 per boe, for each of the quarters ended 6/30/2021 and 3/31/2021. (2) General & administrative expenses excludes non-cash stock based compensation of $3.4 million, or $0.58 per boe, and $2.6 million, or $0.46 per boe, for the quarters ended 6/30/2021 and 3/31/2021, respectively.
$416 $288 $280 $440 $696 $728 2019 Actual 2021E Consensus D&C Capex EBITDAX - Capex $100 $489 Actual 2019 2021E Consensus 2021 Consensus Estimates(1) vs 2019 Actuals 10 Total Net Production (Mboe/d) D&C Capex / Adjusted EBITDAX ($MM) Pre-Tax Net Income ($MM) Diluted Share Count (MM) (1) Based on FactSet Estimates as of 7/27/2021. (2) Assumes MGY’s 237 million diluted share guidance for 3Q21 and a 1% reduction of the share count in 4Q21, respectively. (60%) (40%) (2) Realized Oil Price: $60.00 Realized Oil Price: $59.80 33% 56% 67% 44% 66.8 66.7 2019 Actual 2021E Consensus Giddings Karnes 263 235 4Q 2019 YE 2021 Estimate
Commitment to Sustainability 11 ENVIRONMENTAL SOCIAL GOVERNANCE Flaring Flare less than 1% of our total net production Fugitive Emissions Operate vent and flare systems to minimize fugitive emissions from storage tanks Water Resources Operations do not produce large volumes of water after initial production Groundwater Design wells to minimize the possibility of well failure and ensure groundwater is protected Workforce Health & Safety Both employee total recordable incident rate and fatality rate were zero in 2020 Diversity 24% of employee population are women (38% in our Houston corporate office) and 32% identify as Asian, Black or African American, Hispanic or Latino, or two or more races Community Support Gave more than $105,000 to local communities, supporting more than 100 organizations Board Independence 71% of board members are independent Board Diversity 29% of board members are women Executive Compensation Ratio of 2020 Chief Executive Officer’s compensation to median employee’s compensation was 1.48 to 1 Say-on-Pay More than 99% of stockholders approved say-on-pay at 2021 Annual Meeting of Stockholders Magnolia 2021 Sustainability Report is Available on Our Website Under the Sustainability Tab
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: – ~23,500 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 13 ~476,000 Net Acre Position Targeting Two of the Top Oil Plays in the U.S. Market Statistics Trading Symbol (NYSE) MGY Share Price as of 7/30/2021 $14.00 Common Shares Outstanding (1) 236 million Market Capitalization $3.3 billion Long-term Debt – Principal $400 million Cash as of 6/30/2021 $190 million Total Enterprise Value $3.5 billion Operating Statistics Karnes Giddings Total Net Acreage 23,513 452,496 476,009 2Q21 Net Production (Mboe/d) (2) 28.7 36.2 64.9 Industry Leading Breakevens ($/Bbl WTI) $28 $32 $34 $35 $38 $39 $39 $45 Karnes Austin Chalk Karnes Lower Eagle Ford Midland Delaware DJ Basin Eagle Ford STACK Bakken Source: RSEG. (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 Source: IHS Performance Evaluator. Wilson Dewitt Gonzales
Free Cash Flow Reconciliation 14 (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 June 30, 2021 For the Quarter Ended March 31, 2021 Net cash provided by operating activities $187,879 $118,153 Add back: Changes in operating assets and liabilities (13,263) 23,740 Cash flows from operations before changes in operating assets and liabilities $174,616 $141,893 Additions to oil and natural gas properties (54,190) (40,166) Changes in working capital associated with additions to oil & gas properties 13,558 (1,744) Free cash flow (1) $133,984 $99,983
Reconciliation of Net Income (Loss) to Adjusted EBITDAX 15 (1) EBITDAX and Adjusted EBITDAX are non-GAAP measures. For reasons management believes these are useful to Investors, refer to slide 2 “Non-GAAP Financial Measures.” (2) Costs incurred during the transition period related to the termination of the Services Agreement with EnerVest Operating L.L.C. included within “General and administrative expenses” on the Company's consolidated statements of operations. (in thousands) For the Quarter Ended June 30, 2021 For the Quarter Ended June 30, 2020 Net income (loss) $116,172 ($29,391) Exploration expense 62 6,462 Asset retirement obligation accretion 1,405 1,464 Depreciation, depletion and amortization 43,332 50,870 Amortization of intangible assets 7,233 3,626 Interest expense, net 8,752 7,256 Income tax expense (benefit) 2,398 (3,176) EBITDAX (1) $179,354 $37,111 Service agreement transition costs (2) $10,345 - Non-cash stock based compensation expense $3,528 $3,065 Unrealized loss on derivatives, net $1,838 - Adjusted EBITDAX (1) $195,065 $40,176
Adjusted Net Income (Loss) Reconciliation 16 (1) Impairment of unproved properties is included within Exploration expense on the consolidated statements of operations. (2) Costs incurred during the transition period related to the termination of the Services Agreement with EnerVest Operating L.L.C. included within “General and administrative expenses” on the Company's consolidated statements of operations. (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 June 30, 2021 For the Quarter Ended June 30, 2020 Net income $116,172 ($29,391) Income tax expense (benefit) $2,398 ($3,176) Income Before Income Taxes 118,570 (32,567) Adjustments: Impairment of unproved properties (1) - 6,440 Service agreement transition costs (2) 10,345 - Accelerated amortization of intangible 5,877 - Unrealized loss on derivatives, net 1,838 - Interest expense costs related to debt modification 1,147 - Adjusted Income (Loss) before income taxes 137,777 (26,127) Adjusted income tax expense (benefit) 2,755 (5,629) Adjusted Net Income (Loss) (3) $135,022 ($20,498) (in thousands) Total Share Count For the Quarter Ended June 30, 2021 For the Quarter Ended June 30, 2020 Diluted weighted average of Class A Common Stock outstanding during the period 176,129 166,572 Weighted average shares of Class B Common Stock outstanding during the period (4) 66,088 85,790 Total weighted average shares of Class A and B Common Stock, including dilutive impact of other securities (4) 242,217 252,362
Adjusted Earnings Reconciliation 17 (1) Impairment of unproved properties is included within Exploration expense on the consolidated statements of operations. (2) Costs incurred during the transition period related to the termination of the Services Agreement with EnerVest Operating L.L.C. included within “General and administrative expenses” on the Company's consolidated statements of operations. (3) Adjusted earnings 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 June 30, 2021 Per Share Diluted EPS For the Quarter Ended June 30, 2020 Per Share Diluted EPS Net income (loss) attributable to Class A Common Stock $84,445 $0.48 ($18,272) ($0.11) Adjustments: Impairment of unproved properties (1) - - 6,440 0.04 Service agreement transition costs (2) 10,345 0.06 - - Accelerated amortization of intangible 5,877 0.03 - - Unrealized loss on derivatives, net 1,838 0.01 - - Interest expense related to debt modification 1,147 0.01 - - Noncontrolling interest impact of adjustments (5,140) (0.03) (2,183) (0.01) Change in estimated income tax (281) - - - Adjusted net income (loss) attributable to Class A Common Stock (3) $98,231 $0.56 ($14,015) ($0.08)
Magnolia Oil & Gas – Operating Highlights 18 (1) Benchmarks are the NYMEX WTI and NYMEX HH average prices for oil and natural gas, respectively. For the Quarter Ended June 30, 2021 For the Quarter Ended June 30, 2020 Production: Oil (MBbls) 2,903 3,089 Natural gas (MMcf) 9,947 9,763 Natural gas liquids (MBbls) 1,349 1,122 Total (Mboe) 5,910 5,838 Average daily production: Oil (Bbls/d) 31,897 33,940 Natural gas (Mcf/d) 109,313 107,289 Natural gas liquids (Bbls/d) 14,830 12,324 Total (Mboe) 64,946 64,146 Revenues (in thousands): Oil revenues $188,096 $60,790 Natural gas revenues 32,595 13,168 Natural gas liquids revenues 30,035 8,881 Total Revenues $250,726 $82,839 Average Sales Price: Oil (per Bbl) $64.80 $19.68 Natural gas (per Mcf) 3.28 1.35 Natural gas liquids (per Bbl) 22.26 7.92 Total (per boe) $42.42 $14.19 NYMEX WTI (per Bbl) $66.06 $27.85 NYMEX Henry Hub (per Mcf) $2.83 $1.71 Realization to benchmark: (1) Oil (% of WTI) 98% 71% Natural gas (% of Henry Hub) 116% 79%
Magnolia Oil & Gas – Production Results 19 Combined Karnes Giddings & Other Combined Karnes Giddings & Other Three Months Ended June 30, 2021 Three Months Ended June 30, 2020 Production: Oil (MBbls) 2,903 1,755 1,148 3,089 2,503 586 Natural gas (MMcf) 9,947 2,752 7,195 9,763 3,781 5,982 Natural gas liquids (MBbls) 1,349 404 945 1,122 586 536 Total (Mboe) 5,910 2,618 3,292 5,838 3,719 2,119 Average Daily Production Volume: Oil (MBbls/d) 31.9 19.3 12.6 33.9 27.5 6.4 Natural gas (MMcf/d) 109.3 30.2 79.1 107.3 41.5 65.8 Natural gas liquids (MBbls/d) 14.8 4.4 10.4 12.3 6.4 5.9 Total (Mboe/d) 64.9 28.7 36.2 64.1 40.8 23.3