Magnolia Oil & Gas(MGY) - 2024 Q1 - Quarterly Results

First Quarter 2024 Results Overview Financial and Operational Highlights The company reported a 7% production increase and 5% Adjusted EBITDAX growth, generating $117.1 million in free cash flow despite lower net income Key Financial and Operational Metrics | (In millions, except per share data) | March 31, 2024 | March 31, 2023 | Percentage increase (decrease) | | :--- | :--- | :--- | :--- | | Net income | $97.6 | $106.7 | (9)% | | Adjusted net income | $101.0 | $119.3 | (15)% | | Earnings per share - diluted | $0.46 | $0.50 | (8)% | | Adjusted EBITDAX | $227.8 | $216.9 | 5 % | | Capital expenditures - D&C | $119.0 | $139.7 | (15)% | | Average daily production (Mboe/d) | 84.8 | 79.3 | 7 % | | Cash balance as of period end | $399.3 | $667.3 | (40)% | | Diluted weighted average total shares outstanding | 204.3 | 213.9 | (5)% | - Total production grew 7% year-over-year to 84.8 Mboe/d, with production from the Giddings and Other area growing 17%[5] - The company generated $117.1 million in free cash flow and maintained capital discipline with D&C capital at $119.0 million, a 15% decrease from Q1 2023[5] - Returned $79.2 million (68% of free cash flow) to shareholders through $52.4 million in share repurchases and a declared dividend of $0.13 per share[5][6] Management Commentary and Strategy Management emphasized disciplined capital spending, bolt-on acquisitions, and a new cost reduction program to enhance returns - A key strategic objective is to use excess cash for attractive bolt-on oil and gas property acquisitions to enhance returns[7] - The company initiated a cost reduction program aiming for a 5% to 10% reduction in cash operating costs per boe in the second half of 2024[5][8] Operational Update and Acquisitions Production growth was driven by the Giddings area, supported by a two-rig program and a recent $125 million acquisition - Q1 2024 total production averaged 84.8 Mboe/d, with production from Giddings and Other increasing by 17% YoY to 61.4 Mboe/d[9] - Magnolia continues to operate two drilling rigs and one completion crew, focusing on multi-well pads with longer laterals in the Giddings area[10] - The company acquired approximately 27,000 net acres in Giddings for about $125 million, adding 1,000 Mboe/d of production[5][11] 2024 Outlook and Guidance The company reaffirmed its full-year capital and production growth guidance while providing specific targets for Q2 2024 2024 Guidance | Guidance Metric | Full Year 2024 | Second Quarter 2024 | | :--- | :--- | :--- | | D&C Capital | $450 - $480 million | $120 - $125 million | | Total Production Growth | High single-digit % (YoY) | ~89 Mboe/d | | Oil Production Growth | High single-digit % (YoY) | N/A | - The company remains completely unhedged for all its oil and natural gas production[14] - The fully diluted share count for Q2 2024 is expected to be approximately 203 million shares, about 4% lower than Q2 2023 levels[14] Financial Statements Operating Highlights Total production and revenues increased year-over-year, though profitability was impacted by lower natural gas prices Key Operating Metrics | | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Production: | | | | Total (Mboe) | 7,715 | 7,141 | | Total (boe/d) | 84,784 | 79,342 | | Revenues (in thousands): | | | | Total Revenues | $319,417 | $308,382 | | Average sales price: | | | | Oil (per Bbl) | $75.89 | $74.24 | | Natural gas (per Mcf) | $1.53 | $2.20 | | Total (per boe) | $41.40 | $43.18 | | Operating costs per boe: | | | | Lease operating expenses | $5.98 | $5.93 | | Depreciation, depletion and amortization | $12.58 | $9.90 | Consolidated Statements of Operations Revenues grew slightly, but net income and diluted EPS declined compared to the prior-year quarter Q1 2024 Statement of Operations | (In thousands, except per share data) | For the Quarter Ended March 31, 2024 | For the Quarter Ended March 31, 2023 | | :--- | :--- | :--- | | Total revenues | $319,417 | $308,382 | | Total operating expenses | $194,859 | $181,449 | | OPERATING INCOME | $124,558 | $126,933 | | NET INCOME | $97,597 | $106,677 | | NET INCOME ATTRIBUTABLE TO CLASS A COMMON STOCK | $85,086 | $96,335 | | Diluted NET INCOME PER COMMON SHARE | $0.46 | $0.50 | Summary Cash Flow Data Operating cash flow slightly decreased while cash was primarily used for property investments and shareholder returns Q1 2024 Cash Flow Summary | (In thousands) | For the Quarter Ended March 31, 2024 | For the Quarter Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $210,932 | $219,823 | | Net cash used in investing activities | ($127,308) | ($150,215) | | Net cash used in financing activities | ($85,428) | ($77,765) | | NET CHANGE IN CASH AND CASH EQUIVALENTS | ($1,804) | ($8,157) | | Cash and cash equivalents – End of period | $399,317 | $667,284 | Summary Balance Sheet Data The balance sheet shows total assets of $2.81 billion, a cash position of $399.3 million, and total equity of $1.90 billion Balance Sheet Summary | (In thousands) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $399,317 | $401,121 | | Total assets | $2,807,942 | $2,756,216 | | Current liabilities | $350,011 | $314,887 | | Long-term debt, net | $393,480 | $392,839 | | Total liabilities and equity | $2,807,942 | $2,756,216 | Non-GAAP Financial Measures Reconciliation of Net Income to Adjusted EBITDAX Adjusted EBITDAX increased 5% year-over-year to $227.8 million after reconciling from GAAP net income Adjusted EBITDAX Reconciliation | (In thousands) | For the Quarter Ended March 31, 2024 | For the Quarter Ended March 31, 2023 | | :--- | :--- | :--- | | NET INCOME | $97,597 | $106,677 | | Adjustments (DD&A, Taxes, Interest, etc) | $125,572 | $94,443 | | EBITDAX | $218,964 | $197,348 | | Other Adjustments | $8,863 | $19,507 | | Adjusted EBITDAX | $227,827 | $216,855 | Reconciliation of Net Income to Adjusted Net Income Adjusted Net Income was $101.0 million after excluding non-recurring and non-cash items from GAAP net income Adjusted Net Income Reconciliation | (In thousands) | For the Quarter Ended March 31, 2024 | For the Quarter Ended March 31, 2023 | | :--- | :--- | :--- | | NET INCOME | $97,597 | $106,677 | | Adjustments | $3,410 | $12,646 | | ADJUSTED NET INCOME | $101,007 | $119,323 | Reconciliation of Revenue to Adjusted Operating Income Margin The adjusted cash operating margin remained stable at 71%, while the adjusted operating income margin declined to 39% Adjusted Margin Analysis | (in $/boe) | For the Quarter Ended March 31, 2024 | For the Quarter Ended March 31, 2023 | | :--- | :--- | :--- | | Revenue | $41.40 | $43.18 | | Total adjusted cash operating costs | ($11.86) | ($12.65) | | Adjusted cash operating margin | $29.54 | $30.53 | | Margin (%) | 71% | 71% | | Adjusted operating income margin | $16.15 | $19.98 | | Margin (%) | 39% | 46% | Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow Free cash flow increased significantly to $117.1 million from $60.6 million in the prior-year quarter Free Cash Flow Reconciliation | (In thousands) | For the Quarter Ended March 31, 2024 | For the Quarter Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $210,932 | $219,823 | | Cash flows from operations before net change in operating assets and liabilities | $217,873 | $214,176 | | Less: Additions to oil and natural gas properties (net of working capital changes) | ($100,742) | ($153,622) | | Free cash flow | $117,131 | $60,554 |