Magnolia Oil & Gas(MGY) - 2022 Q4 - Annual Report

Reserves and Production - As of December 31, 2022, Magnolia's total proved reserves amounted to 157.0 million barrels of oil equivalent (MMboe), consisting of 62.9 million barrels of natural gas, 313.1 million barrels of oil, and 41.9 million barrels of natural gas liquids (NGLs) [82] - The company had 2,131 gross (1,366 net) wells with total production of 75.4 thousand barrels of oil equivalent per day (Mboe/d) for the year ended December 31, 2022 [68] - Approximately 44% of Magnolia's production was attributable to oil, 31% to natural gas, and 25% to NGLs for the year ended December 31, 2022 [68] - Magnolia's total developed acreage was 631,378 acres, while undeveloped acreage stood at 56,655 acres as of December 31, 2022 [91] - Magnolia's proved undeveloped reserves are expected to be converted to proved developed reserves within one year [82] - As of December 31, 2022, Magnolia's proved undeveloped reserves increased to approximately 31.4 MMboe, up by 5.8 MMboe from the previous year [84] - The company converted 21.9 MMboe of proved undeveloped reserves to proved developed reserves during 2022, incurring costs of approximately $210.4 million for this conversion [85] - Magnolia drilled 50 net productive development wells in 2022, an increase from 42 in 2021 and 44 in 2020 [87] - Total production for 2022 included 12.2 MMBbls of crude oil, 50.7 Bcf of natural gas, and 6.9 MMBbls of natural gas liquids, with average sales prices of $95.01 per barrel for crude oil and $5.95 per Mcf for natural gas [90] Financial Strategy and Performance - The company aims to generate moderate annual organic production growth while maintaining a conservative financial leverage profile and significant free cash flow after capital expenditures [65] - Magnolia's long-term strategy includes effective reinvestment of free cash flow to maximize shareholder returns [65] - Magnolia's business model emphasizes prudent capital allocation and financial stability, with plans to spend within cash flow on drilling and completing wells [64] - The company has no long-term service obligations, providing significant flexibility within its capital program [64] - Four customers accounted for 61% of Magnolia's combined oil, natural gas, and NGL revenue in 2022, indicating a concentration risk [97] Operations and Assets - Magnolia's assets included a total leasehold position of 688,033 gross (482,015 net) acres, with 43,022 gross (23,259 net) acres in the Karnes area and 645,011 gross (458,756 net) acres in the Giddings area as of December 31, 2022 [68] - The company operated two rigs during 2022, focusing on maximizing returns and improving operational efficiencies in its core areas [68] - The Karnes County Assets are under a crude oil gathering agreement with Ironwood Eagle Ford Midstream, LLC, expiring in July 2027, facilitating competitive pricing for oil sales [95] Environmental and Regulatory Compliance - Magnolia's operations are subject to various environmental regulations, which may impose significant compliance costs and operational constraints [103] - The EPA proposed a new rule to reduce methane emissions from oil and gas sources, with states required to develop compliance plans within three years [105] - The Inflation Reduction Act of 2022 includes a methane emissions reduction program that may impose a "waste emissions charge" on certain oil and gas sources [105] - Compliance with existing environmental laws has not materially affected operations, but new regulations could lead to increased costs and project delays [109] - The EPA is expected to issue a final rule on methane regulations by August 2023, which could impact compliance costs for Magnolia [105] Workforce and Community Engagement - As of December 31, 2022, Magnolia had 213 employees, with 39% of employees at the Houston headquarters identifying as female and 37% as a minority group [119][124] - Magnolia's commitment to diversity includes hiring practices that promote a diverse workforce, with 25% of total employees being female and 30% identifying as a minority group [124] - In 2022, Magnolia employees directed nearly $193,000 in donations to various non-profits, with the company also donating over $23,000 to local organizations [130][131] - Magnolia's full-time field employees received an average of 37 hours of safety training in 2022, focusing on various safety and environmental subjects [128] - The company has implemented a workplace flexibility program allowing eligible employees to telecommute for up to two days a week [120] - Magnolia maintains comprehensive emergency response plans and conducts periodic drills to enhance team capabilities in incident response [129] - Magnolia's Nominating and Corporate Governance Committee oversees the company's ESG policies, focusing on safety and social responsibility [118]