Magnolia Oil & Gas(MGY)2024-08-01 21:20Financial Data and Key Metrics Changes - Magnolia Oil & Gas reported total GAAP net income attributable to Class A common stock of 104 million, equating to 246 million, with total capital expenditures (CapEx) of 97 million, with approximately 103 million for share repurchases [8][14] Business Line Data and Key Metrics Changes - Total company production reached approximately 90,000 barrels of oil equivalent per day, a record for the company, reflecting a 10% increase year-over-year and a 6% increase sequentially [6][15] - Oil production was nearly 38,000 barrels per day, an 11% increase from the previous year, with Giddings production accounting for approximately 77% of total volumes [7][15] - Giddings production grew 21% year-over-year, with oil production in Giddings increasing by 28% [7] Market Data and Key Metrics Changes - The company ended the quarter with 400 million in senior notes maturing in 2026, providing total liquidity of approximately 11.10 per BOE, a 7% increase compared to the previous year, primarily due to higher lease operating expenses (LOE) from acquisitions [18] Company Strategy and Development Direction - Magnolia aims to be the most efficient operator of oil and gas assets, focusing on generating high returns while minimizing capital employed for drilling and completing wells [5] - The company plans to continue returning a substantial portion of free cash flow to shareholders through share repurchases and dividends, with a growing base dividend announced at 125 million added 27,000 net acres adjacent to Giddings, enhancing development opportunities [8][9] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of oil production for the remainder of the year, with expectations for continued strong performance from Giddings [7][28] - The company anticipates maintaining low field-level costs through the second half of the year, supporting operating margins and free cash flow [12] - Management reiterated guidance for 2024 D&C capital spending in the range of 480 million, with production growth expected in the high single digits [19] Other Important Information - The company has successfully reduced LOE to $5.40 per BOE, a 10% sequential decline, through field-level optimization and cost reduction initiatives [12] - Magnolia's average return on capital employed was reported at 18% over five years, with an annualized ROCE of 23% for the first half of 2024 [13] Q&A Session Summary Question: Variability in Giddings Development Acreage - Management acknowledged variability in Giddings acreage but noted that within the core development area, variability is less pronounced [21] Question: Reinvestment Rate and Capital Return - The company expects to maintain a reinvestment rate of around 47%, with no significant changes anticipated in capital return methodology [25] Question: Oil Mix Trends - Management indicated that oil production should remain steady, with no significant changes expected in the oil mix for the upcoming quarters [28] Question: Cash Return Methodology Post-Sale of Stock - Management stated that ongoing share repurchase programs are important, and they will consider market conditions when making decisions [31][33] Question: Non-Operated Activity and Production - Management indicated that while there may be an uptick in non-operated activity, it is too early to provide specific guidance for 2025 [40]