Magnolia Oil & Gas Corp Q1 FY2025 earnings call

Management Statement and Operational Highlights: - Giddings asset quality drives operational execution, with newer areas in Giddings showing strong well performance, including shallower decline profiles and strong financial returns. - First quarter achieved record production, strong financial results with adjusted net income and EBITDAX up year-over-year. - Capital spending in first quarter was $130 million, with first quarter being the highest quarterly spending rate for the year. - Adjusted the full year 2025 production growth guidance to 7%-9% from 5%-7%, and lowered capital spending range to $430 million-$470 million from $460 million-$490 million. - Continues to focus on South Texas, Eagle Ford and Austin Chalk areas, with subsurface team advancing knowledge of Austin Chalk reservoir, drilling and completion crews executing well, and production group ensuring efficient well production.

Magnolia achieved a record quarterly production rate of 96,500 barrels of oil equivalent per day during the first quarter of 2025, which was well ahead of earlier guidance. Year-over-year total production growth was 14%, with oil production growth of 4%. Total production at Giddings grew by 25% compared to the prior year quarter with Giddings oil volumes growing by 17%. Adjusted net income for the quarter was $106 million and adjusted EBITDAX was $248 million, both up 9% compared to the year ago period. D&C capital spending was $130 million with a reinvestment rate of 53% during the first quarter. Magnolia generated free cash flow of $111 million and returned approximately $82 million to shareholders through the dividend and share repurchase program. Revenue contribution details weren't explicitly broken down by product segment in terms of percentage, but the focus was on overall performance across the business.

Guidance: - Increased full year 2025 production growth guidance to 7% to 9% from 5% to 7%. - Lowered 2025 capital spending range to $430 million to $470 million from $460 million to $490 million. - Second quarter production expected to be similar to first quarter levels, approximately 97,000 barrels' equivalent a day. - Second quarter D&C capital expenditures expected to be approximately $110 million. - Oil price differentials anticipated to be approximately a $3 per barrel discount to Magellan East Houston. - Fully diluted share count for second quarter of 2025 expected to be approximately 193 million shares, 4% lower than second quarter 2024 levels. - Effective tax rate expected to be approximately 21%, cash tax expected to be between 7% to 9% for full year 2025.

Risks: - Product price volatility and macroeconomic uncertainty which may cause actual results to differ materially from forward-looking statements. - Uncertainty in the M&A market with widened bid-ask between buyers and sellers.

Q: Please explore a little bit about what's going on with these new wells and what this means for Magnolia.

A: Chris Stavros mentioned it's a new area in their development acres, performance of wells was very good with strong financial returns and shallow decline profiles, but couldn't disclose exact location for competitive reasons.

Q: What's going on with sustaining capital given updated 2025 go-forward drilling guidance?

A: Chris Stavros said they'll defer roughly half a dozen completions into next year, capital cadence stretched out, and no notable upside pressure on oilfield service pricing.

Q: How to think about capital allocation between gassier and oilier areas?

A: Chris Stavros said Giddings wells have good mix of gas and oil, returns are good, no strategic shift to one over the other currently.

Q: What are you seeing as far as M&A out there in the current market?

A: Chris Stavros said evaluating smaller bolt-on opportunities in backyard areas, but M&A activity slowed with widened bid-ask.

Q: What might occur to take a closer look at the program in case commodity risk to the downside plays out?

A: Chris Stavros said no immediate plan to curtail activity, but could defer some things further into next year if needed.

Q: How can we think about the oil cut through the remainder of 2025?

A: Chris Stavros said there will be a little bit of absolute oil growth, relatively stable on percentage basis.

Q: How to think about GP&T costs trending through the rest of 2025 and into 2026?

A: Chris Stavros said GP&T tends to move in tandem with gas prices.