Magnolia Oil & Gas(US:MGY)2026-02-06 17:00Financial Data and Key Metrics Changes - For the full year 2025, total company production grew by 11% to approximately 100,000 barrels of oil equivalent per day, with oil production growing by 4% to nearly 40,000 barrels per day [7][9] - Fourth quarter adjusted net income was approximately $71 million or $0.38 per diluted share, with adjusted EBITDA at $216 million [9][17] - Free cash flow for the full year exceeded $425 million, with approximately 75% returned to shareholders through dividends and share repurchases [10][20] Business Line Data and Key Metrics Changes - The company achieved a new production record in Q4, averaging nearly 104,000 barrels of oil equivalent per day, reflecting a sequential increase of 3% [8] - Field-level cash operating expenses declined by 7% to $5.12 per BOE during 2025, contributing to improved operational efficiency [7][9] Market Data and Key Metrics Changes - Total revenue per BOE declined 13% quarter-over-quarter due to lower oil prices, impacting operating income margins [21] - The company remains unhedged for all oil and natural gas production, which allows for upside potential in commodity prices [24] Company Strategy and Development Direction - The company's strategy focuses on steady mid-single-digit production growth, high pre-tax margins, and reliable free cash flow while maintaining a low reinvestment rate [11][12] - Magnolia plans to maintain capital spending at similar levels year-over-year while targeting a production growth of approximately 5% in 2026 [13][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate product price volatility and emphasized the importance of maintaining low leverage for financial flexibility [15][20] - The outlook for 2026 includes expectations for gradual production growth despite potential weather impacts in Q1 [24][43] Other Important Information - The company repurchased approximately 8.9 million shares throughout 2025, reducing the diluted share count by roughly 4.5% [10][18] - A 10% increase in the quarterly dividend was announced, marking the fifth consecutive annual increase [14][19] Q&A Session Summary Question: Performance of recent wells in Giddings - Management noted that recent wells have outperformed type curves, attributing success to improved drilling techniques and better rock quality [26][27] Question: M&A activity and pricing trends - Management acknowledged increased competition and rising prices for acreage but emphasized a preference for undeveloped opportunities rather than PDP-heavy deals [28][30] Question: Cost reductions and capital efficiency - Management indicated that well costs have decreased, with current costs around $1,000 per foot for standard Giddings wells, and service costs are expected to remain flat to slightly down [34][35] Question: Capital allocation strategy - Management stated that excess cash from higher oil prices would be directed towards dividends, share repurchases, or opportunistic acquisitions, without plans to add another rig [96][99] Question: Production outlook for 2026 - Management expects steady growth throughout 2026, with a heavier capital outlay in the first half of the year [42][43] Question: Development approach and well pad sizes - The average well pad size remains around 3-4 wells, with opportunities for longer laterals if adjacent acreage can be acquired [49][51] Question: Maintenance capital estimates - Management suggested that maintenance capital is likely around $400 million, reflecting efficiencies gained over the years [78][80]