Magnolia Oil & Gas (MGY) 1 Aug 242024 Q2 Earnings call transcript

Good morning, everyone, and thank you for participating in Magnolia Oil & Gas Corporation's Second Quarter 2024 Earnings Conference Call. My name is Megan, and I will be your moderator for today's call. [Operator Instructions] I will now turn the call over to Magnolia's management for their prepared remarks, which will be followed by a brief question-and-answer session.

Thank you, Megan, and good morning, everyone. Welcome to Magnolia Oil & Gas' second quarter earnings conference call. today and Stavros, President Brian Financial call Chief President and the Officer. Officer; Executive Corales, on are Magnolia's Chris and Chief Participating Senior Vice

forward-looking contains reminder, from securities federal those differ in may statements risks implied projections conference cause a to These the these call expressed subject uncertainties As and of or today's laws. other statements. materially and statements are the actual within meaning to certain that results

is full differ in that filed on could can conference cause annual the presentation the Additional on the be call of information on report with to company's supplemental risk factors with results the safe found available Form on XX-K data website. slide X SEC. Slide A harbor our

Magnolia's well Mr. quarter release website from second call slides at press earnings the as to Chris turn Investors now conference call download section the as the XXXX over www.magnoliaoilgas.com. I Stavros. You of company's the can will

integration some our then an detail your additional greater which smooth have will some today financial you also plan our update a good shown and operating will Tom, provide Thanks, our on XXXX XXXX provide Brian execution of in financial which the of of some cost quarter we year provide acquisition second review initiatives, business our results. our continued us reduction morning, guidance discuss early discussion results take on full recent and our of and I demonstrate comments consistency We I'll Giddings, and appreciate of our results, bolt-on quarter questions. field-level the progress second positive before quarterly and joining model. for everyone. a briefly in results.

highest Magnolia's for are of amount on the capital reminder, least of returns goals efficient the those drilling gas and to a wells. and operator be assets, while assets the objectives generate primary employing As best-in-class oil most and completing

in shareholders free dividend. of to and our flow repurchases and a share a secure cash substantial to the strive return form portion also growing our of We

cash of Finally, targeted generated simply gas we plan that the but a importantly, are already excess been accretive pursue to business knowledge opportunity increase returns to upside property and and the our produced, lower our basin. Acquisitions payout bolt-on business, to our competitive acquisition financially the oil also provide to dividend and we a and advantage both share improve the attractive by in for of experience are per where not the ongoing and both have overall acquisitions, replace set gas sustainability that optionality to enhance our We with utilize some and of accretive leveraging entry our to look opportunities technical cost capacity. of high oil has stock.

our barrels quarter strong year XX% spending per for than adjusted Looking guidance on production represented of year's to compared wells. Total approximately and growth continued business and year Giddings sequentially. our XX,XXX This per was growing oil on year-over-year. in production delivering oil we million drilling quarter in resilient to total came production at overall of and our strong of the barrels ago benefit the Slide XX% company half of the to XX% Overall remain XX% production second better year's last equivalent with during Giddings grew ago company of Magnolia's by quarter quarter, was of day, oil should investor execute model, record the generated quarter completing of by and to growth XX% production to oil results. the presentation, quarter XX,XXX company equivalent results our day, approximately second growing a have of approximately the $XXX Total of during continues X this Magnolia little the achieve quarterly XX,XXX barrels well able a performance. We oil levels, through compared anticipate Giddings from second in volumes. representing nearly year. Production the remainder EBITDAX X% at second which a from by day production were per

cash $XX total million, to $XXX Magnolia, during X% million the was and $XXX for shares period, million for repurchase million second of free we Our quarter approximately the X flow of including the shareholders this returned allows representing our outstanding to our shares. With plan a continue focused base cash flow, to to growing portion free shareholders our return our consistently and significant our ongoing through dividend. is share business of us model to that our of a repurchases generate

acquisition as as assets well and in a lot we These acreage our activity amount small in technical $XXX of have new door Giddings. we next completed to and which our bolt-on working added knowledge. interest which This both strong includes quarter, the current acreage an is disclosed, during subsurface a experience adjacent acres, where for to a in are production. XX,XXX transaction previously and had million we area existing asset As development net area of Giddings

expect provide We us Giddings will high-return our opportunities be significant development acquisition development ongoing that plan. into with folded to this

has program to some opportunities additional within delineate Magnolia an towards of our sizable in year, continued capital to position. effort past dedicate the acreage its Over its appraisal

recent to represents during Giddings additional pad As multi-well acres fourth mentioned, our net expanded has a last area opportunities. over development drilling large result a that to high our our grown legacy footprint XXX,XXX bolt-on now quarter. This acres acreage activity Giddings area return acquisition development of that net of this XXX,XXX portion acreage in Giddings offers the compared appraisal and total year's I

drill pads. continue. evaluate well take and bolt-on and from look a those have We will additional is when the opportunities results, or can years we multi-well appraising if our other a or developing systematically regularly finally and to new been often each first there for and move in X gradual area, to measured acreage before process acreage Giddings minerals, This potential year, efforts

set should lead over to Our for which strategy opportunity Magnolia further for time, appraising approach improving capture, has business. been resource a continue additional prospects the we for successful the future and areas

operations a our year. program quarter, teams chain reduction initiated last this discussed level supply and and field optimization cost As early

X% reducing LOE to second successfully per team fruit. field lower first our BOE Our improvements XXXX some expectations during the quarter. Magnolia's compared cash of these our well were by to half captured that schedule, ahead low-hanging efforts XX% costs, the of would

level decline. included a equipment. representing these LOE of the of of addition and efforts, costs management part the to to resulted already optimization in actions meaningful As $X.XX field our workovers, digital per which maintenance, field have lowering sequential quarterly a the implementation software utilization in of XX% reduction BOE, field operating to These

expect year, to which similarly of cash costs flow. operating support margins second the should half continue, a and the While we low our field level will continue further to maintain actions level through free of

of XX% containing capital. I'll on XXXX an second employed call average and turn on over for our on and ahead to cash as Brian the the quarter of return to results. our a details shown Slide of our further XX% annualized capital cost expenses well together for has first our ongoing and as operating ROCE X, of financial half well now on operating and As of D&C both top-tier XXXX our and with our efficient costs assets led share X-year high-quality both focus repurchases

some found remainder the of it third review guidance and quarter. questions. Beginning turning and as and had the Thanks, I provide refer Chris, our second year the of will slides second over some Slide website. Chris and quarter XXXX to on good for discussed, strong from the also quarter items presentation everyone. morning, X, before our for I'll results additional Magnolia on a

total million A share. During with stock to the attributable adjusted net or quarter, million diluted $XXX Class we generated of common $X.XX total GAAP $XX net income of income per

the for million XX% CapEx facilities adjusted $XXX quarter EBITDAX was drilling, completions our EBITDAX. with total and or associated with adjusted Our of million, associated $XXX of

of equivalent Giddings year-over-year per asset. share day, volumes quarter XX,XXX X% our year-over-year count to to grew fell Second And driven our oil total million barrels XXX.X by diluted production XX% by shares.

the $XXX chart incurred, waterfall million, $XX million the with flow with We quarter million, the repurchases towards in $XXX $XXX of cash. before leasehold million Slide cash and $XXX Total $XXX cash dividends allocated flow on $XXX working including Cash to with quarter increasing changes items, in million. ending addition by started working million small quarterly quarter second acquisitions. changes bolt-on share the of was for other at $XX changing operations X. cash. from -- capital of capital We million capital of was million paid in Looking

in approximately in than during million more by sequentially, that Looking progress at a diluted the decrease the total This share outstanding average since to we million count reducing share chart million have diluted total XX.X of in shares our XX%. shares shares Magnolia's XXX.X 'XX. averaging fully repurchased Slide repurchase our the second program illustrates shares of time, shares, weighted quarter. X we outstanding second -- declined X. began half Since leading

the A current our under toward remaining shares open market. which million specifically Class repurchase X.X in directed repurchasing are have We share authorization, shares

to Turning X. Slide

increase a XXXX over Our grown has dividend XX% basis. share per announced including the early few substantially in to a past quarterly on $X.XX years,

Our annualized on an share. and of dividend payout next provides is September dividend payable Xrd quarterly $X.XX per rate

$XXX ending of million the our of dividend our production increasing is moderate million $XXX of investment $XXX XXXX, important annual Magnolia's million. outstanding balance liquidity million credit capacity revolving notes, very company. Magnolia strong including of part undrawn which strategy $XXX and annualized we an $XXX and of the the Our mature million ended senior of sheet, for supported facility, dividend and and a is and of cash the quarter total growth payout overall plan our proposition quarter our by shares our in growth, with achieving has benefit reducing second cash approximately balance

Slide Our condensed on balance X. sheet is as XXth shown June of

at of the operating compared and increased Turning year-over-year to cash Total increase revenue second looking per to income margins. oil cost BOE when XX prices in to our Slide unit quarter due 'XX. per and

X% year late adjusted levels. due BOE an second operating per production $X.XX to in from acquisition LOE increase year-over-year was to higher primarily taxes. total the the The $XX.XX last was of cash Our BOE year including per compared quarter higher increase or oil-weighted year, G&A, and of costs, ago

was for of Our total revenue. $XX.XX our the of quarter income margin operating BOE XX% per second

to on Turning guidance the Slide XX.

range expected to still single spending million annual are on in We our to total and capital be the and production an XXXX million basis. reiterating expected production are digits $XXX $XXX D&C high of oil to grow

be and quarter XX,XXX gas to and are expected day. Oil all natural its expenditures share shares, Magnolia unhedged price third the quarter remains $X is quarter X% third to is capital diluted the to to facilities for oil Houston, be a per total are approximately a million the BOEs XXXX to quarter, XXXX million, be East Magellan for approximately XXX and approximately than second with production third approximately production. estimated The barrel our which the D&C $XXX of fully differentials associated expected anticipated For lower completely discount for levels. count be

tax cash X% our to and XX% approximately the for be be XX% to year. rate approximately rate tax effective our expect We to

We to your take are ready now questions.

from first Instructions] [Operator Our question comes with SunTrust. Neal Dingmann

you there net -- results. first Chris, there you about area talking see could as on we're this acreage? now confident Guys, wondering over if what question I'm you acres. my Nice development in just development. you white as far is among space that wondering, is is that much sounded talk Giddings -- still Certainly, can about much more And XXX,XXX add? variability there's the

different The things to within Neal. area, variability. east is on within west. will, are south; generally, much tends to answer or But here. And I you said you if is give think a I I part that see a some in is some development And Giddings time. add less. to you core example sort Thanks, my our of of this what the maybe but probably expand it's I this more is And about -- me from for has expect different is far north how area. yes, about from Giddings Yes. give the there development wouldn't other and variability Giddings be a there of fair, of bit which expanded how with little always to that come Giddings Giddings maybe real-life things remarks, think come

came acquisition, development while cited the So bolt-on other of from half we increase appraisal from in the the program. success that came out of the half acreage the

doesn't my mentioned in overnight. I it mean, And our to happen simply it's view simply long of the As development assessment remarks, I adding acreage, and a journey.

least how So I'll how to us. this of life of for works, real sort give you at example -- it try

X So or in of we Giddings. early then appraisal maybe in late X our area outside wells XXXX, development drilled XXXX,

we pad closed reasonable in Our evaluation confirmed positive position a XXXX, results. in we acquisition Later this accumulating an earlier a year. where drilled very on this area, successful

to plenty to of with program, acreage And can accumulated that to it the us. take play out, we this our and do ongoing. as couple on so a part continue and around and position efforts appraisal of measured gradual activity We've years continues to year process a but for drilling are be work significant each

through I would continue it lead to may expand acreage often that we to on things similar with that So to done additional success. acquire And We've appraisal with that. can expect we a process see follow that we'll some time. and

And rate. you it I like the changing? Great do looks Do anticipate reinvestment details. second my be just forward, going to that on capital question, you anticipate the return continues quite low. guess,

Yes.

it's So year so anniversary. rate the we years, over interesting. has -- sixth XX%. X reinvestment mean just our I And been our passed

of moderate which is discipline cash the sort really model. is XX%. of and free business really a for of delivers lot the Magnolia, Our crux This is This foundation ceiling business the the growth flow. of model

nothing So year next as and to I see very remainder the part of expect year. this into of different the really would plan,

Our next Johnston Capital question with from comes Phillips One.

guys asked should the I to to oil I'd think the next aware quarter, I I streak quarter-to-quarter. from pretty about bit in year. resilient quarters. in any you've oil over just keep the remain mix be lumpy the see your oil think throughout should few or mentioned But so you I every trends volumes to wanted that be Chris, get And said you mix nuances thought the should just past, of if continue we a check alive.

and has and Not resilient. pretty been that steady production necessarily. oil I'm has overall steady the been pleased mix fairly the

oilier. that and done Some has program our little activity this certainly bit year been for a we've acquisitions

And think, pretty well. up, so allowed things that's to hold I

can activity you As is see, our proportion a our of activity. Giddings high overall

should less than but little And pretty of for so year direction. the I we as sort wouldn't the steer necessarily think I and I oil now, the depends production remainder one the of a well rest company, think But up, in Giddings next year should for is hold you oil oily drill. well. the into generally up of on how hold it

It's mix X to helpful. slower? that in pace? at obviously, I shift interest keep working the in sort but really early, pretty should X XXXX, just That's that anything sort there of frac we program faster is or guess, a Okay. spread of on for might geographic or either of And or mind affect terms assume steady now, of pace anything growth rigs,

in No, the frac terms I rigs spread. the think X X it's pretty operated steady just of and

So I expect that that, -- that change. wouldn't would

differences. efficiencies. Our any earlier at we'll in appraisal later the getting where cycle changes times and anticipate that as We'll continue to in significant look improve. or continue I us. We're this to into year -- opportunities said more takes see don't or response, the way But or question to of drilling major I next some

with Our JPMorgan. next question Zach comes Parham from

change I Just stock about methodology some at more does open all? have just consider in that now past how wanted you down Do stock, completely cash on your cash out to don't first. of you the EnerVest quarter on and buying ask return a market? curious left. sold think that. Once they're stock lot the this return

consistent in to pivoting be to We terms the just Yes. I have or to bit to share little certainly confidence And for that a lot a is in maybe it have shares share sort that. repurchase mean, prudence buying way Magnolia. little certainly, just think about at believe a have I'll in one think be price program terms I of a little exactly what having you I on to I'm because dictate for degree. a giving that ongoing sensitive I the quite I little are the Magnolia we But think about how of important, least know some would it buying. about of sense differently. frank, share another. repurchases, and personal and a of do I of

there's addition, been shares cumulative years. tremendous past to a benefit over In our X repurchasing the

we that or per improved million-plus earnings share. the XX XX%, example, as a an by about $X.XX since So XXXX has shares share repurchased our

and So of I of sort I it trade a the extent share that. that to that's some stock, think can't value we how represents roughly in ignore earnings, if at or XXx $X about

value the we also remaining in to creating as continue the shares, greater So buy for it's program, shareholders. all the

in will. created if purchases shares, scarcity So some you the has

just So and S&P happened, to that indexes, when when for distinguishing more XXX they demand and we year, between ]. the this the that share. created 'XX were added shares, SmallCap added the run at 'XX those probably what's stock weren't Index relatively scarce They folks or [ the they

on So the think are think things the program. all these model. the of value on base approach share that's ongoing to these think grows I dividend, why doing we the stock over business the growing an business got to a -- And I've the in execution the basis this can consistent model, I how repurchase of about the reasons add out time. But couple dividend

So production, call in continue ability the dividend share a sort as every to continue digits we if per to you X% payout and which the provides our of time, shares, That we over the grow it, mid-single thereabouts. quarter, the over capacity, on we basis to buy greater grow will. time, call

about sort So I it. that's how think of

'XX the And follow-up guidance. just then my CapEx on

in half some how got a frac have range, you're guidance XQ. on step that midpoint activity you'd into Just of back the to now. plan? hit of plan? Is year. about going XQ the thinking a in activity to there the have holiday down You've Is And the slowdown decent in out the or spending there curious

range timing on expect it's fair completions But year as describe half the I positively frac be timing this XXXX. quarter get we into in and year. not I capital lumpy upper program the to little activity activity. guidance for think, impact some It that had that full say each non-op I non-op we to the spending the holiday, to later of any activity Yes. come year. that's as some folded into additional be it of can of I as can Most depending expected the mean, think into recently, I see. bit should, production wouldn't a well early the in

continue We efficiencies also drilling completion. in and experience to

improved So times. as cycle that's earlier, I our said

guidance think going necessarily so bias an not but range, faster, has created higher bad which we're end. but the bit still a I essentially It's upward And of of to the capital, inside our way. a little in just at all

question Wolfe Escalante next with Research. comes Carlos Our from

it's Chris, the like specific DNA But your -- I'd sets of about revisiting. it to net inventory I provided in talk it's not stab or take past worth of you acres, recent expansion to [ to know that at light in because getting locations ]. in a the remarks some to XXX,XXX

inventory. So if to Would a reticent program comment of X,XXX again, a think number that net that of your years has acres as outlined provide assume acres, If locations. fair specific you're you XXX in Giddings proxy I the directionally equivalent your that are I to I where you've use reverse acquired it roughly that XX,XXX or recently and engineer know north net to that's be locations. to couple

Yes. you right my certainly the not I bones. It's -- whole way about I Carlos. you're sort But one this conversation of thing. is like mean, think, in

acre attributes. necessarily the a because I would necessarily is moving can precise extrapolating that in direction, I different and similarly, variables and manner. not you're a tell don't the know exact in same that equal same if way, created on directionally, variety would you every in do So probably, of basins, I depend lot the in but right

start like or you So not right, anything directionally, arm-wrestling I'm to over going numbers that. precise but you're

to the the capital And on wasn't I I shot any back, what the have towards a you see that we of it. allocation Magnolia online there you then itself that mentioned early you follow-up obviously, No, of my amount would a you going non-op way, but non-op Can of will non-op, 'XX. sense didn't on, end have take you in plans year, my expecting come production that from forward? come be ratable either XXXX, do at have

because on mean, we I out. hard sometimes XX a a a Yes. very call get basis. to forward things information This is timely lot don't we days these get one XX of

a and latter of So uptick, later. that a the it's little just dramatically hard guess, for should longer we influence to say. That of which too the 'XX, there for lower full early. feel part I now, side. back different year into or look it like. that's I change, for or an It to for gotten It's broadly like next what changing a full volumes was strong you bit feels But than just could don't on the just know. any and term the half year If again XXXX of the of had what a right sense might year suggested give doesn't haven't 'XX seeing yet. is the we're but I indication year like capital

Huang with Holt. next Our Oliver Tudor, question comes Pickering, from

to wanted off initial start Just Giddings. with to a question Neal's follow-up on

all previously Just given enough now development might appraisal confidence we acres it additional higher should these how look a you to going about drilling into bucket, how add the to your the gained kind slightly when area, forward? thinking in the just with sat schedule acreage allocation expect drive core of

like. and a because sort a occasionally flip drill are no, about just the Karnes when and wouldn't some of activity of that I how about pads the result the about we'll asking, towards [ to about to all XX% continue to money of talking appraisal more Giddings, back roughly allocation But the you're you're and fields of to of what for as be think will we it necessarily year. allocating now increasingly This go is Giddings, assets right ] look happening of through money, overall there we part and going I what's of shifting If pool think program. the

at bucket. for Could Giddings, you're that's given clarify allocation XX,XXX see this, from it acres looking basis? kind net higher of kind core just Giddings development stand-alone guess, just I of incremental a And we kind of when how a within added Okay. the getting to to

I laid plus it's -- exact I thousand program a but is yet out mean, hundred a -- the couple haven't perhaps, maybe, XXXX, acres large area. mean, for of a we I large

We of And part some during we will But to look exactly. hop in of things And can proceed back the so would well and that Giddings bear this that does take we like we at I all continue time. sort XXX,XXX hop tend some acres. out different the and to forth and typically We time reasons. areas don't planning where to that year. scheduling there's And around drill might look different lot -- drilling different when consider consideration of say and into you imagine. a wells of goes to any that's sort what we'll overly a a logical fashion we'll just we likely from additional additional to as for areas opportunities. now It program appraisal we have

Okay. LOE all front, done more always of ourselves, at know on kind but too squeeze looking out to costs. of kind you of I I looking the That of get we're far that And drilling know all I system be want question, focused kind across makes when completion touch might sense. And quarter. of the job year past on team you the solid is cost the for I program have the on side this and side this my tackling reduction a wanted second even year, reductions. next wondering to what board last to just don't just managing ahead. ahead very

remember, if that had we will, of think higher led late LOE that last that oilier, some bit achieved, I of come the out saw Look, to we very of did some acquisitions you the so the wins, increases a this a bit and and that little a year were of done we Yes. that year, early quick Sure. as in result LOE.

such cooling So the recently I and now field the workover some this, this from labor, enough really data mentioned can't that this it help this here I field we of spending procure-to-pay improving utilization -- as process. actual came can examples. about but trucking In field level this units. And platform. optimization, reduce equipments, of also remarks, tool gains contract included implementation a some control really that this digitize my And services of and realized say over us increase management as compressors

we've broader implemented so this hauling Giddings. also platform now in over And

we the that use. roustabout forward, going crews, this things plan other So services oil for hauling of and expand to to field like most we

reduction, that push strong to cost processes will for that around and progress. in initiative whole said, other equipment. continue areas include get items certain and too made always But don't on bids I will pursuing the further as you forecasting So early for on and materials we've field. pop up of can gains ahead that ourselves the some significant large there's arise want much like

But of job maintaining the and for of the is field to want while now. for and the I really done they've forward always fair be priority first at us is mindful initiative. teams looking the have proud forecasting guys embracing right I whole So levels we're mindful progress -- I'm least This continually these safety. probably our made, terrific always to going improve. would that that say a

well. it's So going

with comes Our America. of from Bank Hungness next question Noah

ask Giddings to all Could first guys' -- there? wanted drill an about give programs. Earlier any this that appraisal mentioned you oilier were I that us year, well formation. you appraisal to your an update planning just was the in you targeting Northern

plan modest be may out nothing that done actually development exactly of into appraisal later that of of going you in there's overall these we last in work integrated earlier of there's northern right on acquisition a there's had say right I But amount activity they've pointing we have of time, can't know in over part was appraisal I well some position. that Sure. on our do I terms tell but been to appraisal our acquired lot a There now. assets, of specifically and year. now. an have the Yes. broader recall part -- and mean, there Giddings I Giddings that can't in -- area about north of an area as or part Giddings There's Giddings. don't the we if Northern plan,

taxes. for to Okay. cash ask question, Good. on then And second just wanted I my

a XX% into You forward as all this that mentioned year. to well for X% and moving beyond? 'XX Is good assumption

Yes.

For Noah, prices, It's dependent, on very that. it's fine. product year, so this sensitive to

So ahead strip want terms this I I for year, going next looking at you're year, in ourselves. next this But probably it's of what beyond don't about for out fair to is right. too get that, think in prices, sort just it's of if of range,

Citi. next with Our Paul question Diamond from comes

portending of Just a the one quick of bolt-on kind on the acquisition.

see Louis set So you [ all Or think place? Fayette deal more out this the and down you it do blocking where the Washington at of more and disparate ], biggest did? recent over across kind Fayette, is like opportunity

out on fair opportunity in specific that It could some things some of at, specific overly acquisition the it we mentioned side focusing are terms county But what or described out do I'd of on oftentimes looking that for that the a can all of areas side a the rather just rather we get game when be fair places. we're or come there. and that. is opportunities you or and get I through kind go we area. not process see by But different the on land again, appraisal variety others. not of call competitive I'd say too in to work

conference now today's you has for attending The concluded. Thank presentation.

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