Magnolia Oil & Gas Corp Q3 FY2024 earnings call

• Continued strong financial and operational performance with initiatives to lower field-level operating costs. • Operations team, field workers, and supply chain team reduced operating costs and improved capital program efficiency. • Third quarter free cash flow was $126 million, with 70% returned to shareholders via dividends and share repurchases. • Lower capital spending and reduced lease operating costs led to improved free cash flow. • Completed small royalty and working interest deals totaling $15 million in the third quarter. • Aiming to utilize excess cash for attractive bolt-on oil and gas property acquisitions to enhance business sustainability and dividend capacity.

Total company production during the third quarter was approximately 91,000 barrels of oil equivalent per day. Total company oil production was nearly 39,000 barrels per day, representing a 18% year-over-year growth. Production in the Giddings area was 68,700 barrels of oil equivalent per day, growing 12% compared to the year-ago quarter, with Giddings oil production growing 24% year-over-year. Field-level operating costs were reduced to $5.33 per BOE in the third quarter, a 11% decline from the first quarter.

• Full year 2024 drilling completion associated facilities capital spending expected to be approximately $470 million, midpoint of original guidance $450M-$480M. • Fourth quarter drilling and completion associated facilities capital estimated at approximately $125 million. • Fourth quarter production estimated at approximately 93,000 BOE per day. • Fully diluted share count expected to be approximately 197 million shares in the fourth quarter. • Effective tax rate expected to be approximately 21%, cash rate 5%-7% for fourth quarter and full year.

• Concern about reoccurring unplanned third-party midstream facility outages. • Power issues affecting midstream facilities, which could be an ongoing concern. • Uncertainty around predictability and reliability of third-party midstream providers due to factors like power and weather.

Q: Neal Dingmann asked about the continued drivers of Giddings growth and low reinvestment rate.

A: Chris Stavros mentioned talented teams, lower decline rate in Giddings, wells exceeding expectations, and leveraging knowledge for further opportunities.

Q: Neal Dingmann asked about concerns over reoccurring midstream outages and potential capital for infrastructure.

A: Chris Stavros stated concern over predictability, power issues, and unlikely large capital spend on infrastructure from Magnolia.

Q: Phillips Johnston asked about LOE trend in 2025 and impact of natural gas.

A: Chris Stavros said maintaining reduced LOE levels, modest fluctuations, and pushing for improvement despite inflation and regulations.

Q: Oliver Huang asked about service costs trend and land position.

A: Chris Stavros mentioned mid-single-digit service cost savings, and no meaningful change in land obligations from deals.

Q: Unidentified Analyst asked about D&C costs and LOE target.

A: Chris Stavros said $10-15M for the pulled four-well pad in D&C costs, and modest fluctuation in LOE targets with ongoing improvements.

Q: Noah Hungness asked about M&A market and pulling activity forward.

A: Chris Stavros said M&A opportunities of varying sizes, and pulling activity forward for flexibility amid soft product prices.

Q: Neil Mehta asked about midstream challenges and hedging philosophy.

A: Chris Stavros said midstream issues resolved, and unhedged position as fire insurance, avoiding financial risk and complexity.

Q: Tim Rezvan asked about basis swaps and Matterhorn.

A: Chris Stavros said Matterhorn impacts priced into curve, and challenges in hedging basis due to moving parts.

Q: Sean Mitchell asked about bolt-on opportunities and power concerns.

A: Chris Stavros said continued bolt-on opportunities with patience, and power issues as a Lower 48 growing concern affecting midstream facilities.