Magnolia Oil & Gas(MGY) - 2025 Q4 - Earnings Call Transcript

Financial 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][16] - Fourth quarter adjusted net income was approximately $71 million or $0.38 per diluted share, with adjusted EBITDA at $216 million [8][16] - Free cash flow for the full year exceeded $425 million, with approximately 75% returned to shareholders through dividends and share repurchases [9][16] - The balance sheet ended the year with a cash balance of $267 million, providing ample liquidity [20] Business Line Data and Key Metrics Changes - The company achieved a new production record in the fourth quarter, averaging nearly 104,000 barrels of oil equivalent per day, reflecting a sequential increase of 3% [8][16] - Operationally, field-level cash operating expenses declined by 7% to $5.12 per BOE during 2025 [7] Market Data and Key Metrics Changes - Total revenue per BOE declined 13% quarter-over-quarter due to lower oil prices [21] - The company remains unhedged for all oil and natural gas production, with anticipated oil price differentials of approximately $3 per barrel [23] 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 [10][11] - The company plans to maintain capital spending at similar levels in 2026 while targeting a production growth of approximately 5% [13][23] - The company emphasizes a disciplined approach to capital allocation and operational efficiency, aiming to maximize returns while minimizing financial risk [11][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate product price volatility and highlighted the importance of maintaining low leverage [11][15] - The outlook for 2026 is optimistic, with expectations for gradual production growth despite potential weather impacts in the first quarter [23][44] Other Important Information - The company repurchased approximately 8.9 million shares throughout 2025, reducing the diluted share count by roughly 4.5% [9][17] - A 10% increase in the quarterly dividend was announced, marking the fifth consecutive annual increase [19][14] Q&A Session Summary Question: Performance of recent wells in Giddings - Management noted that recent wells have outperformed type curves due to improved drilling practices and better rock quality [25][26] 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: Well-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 [35][36] Question: Production outlook for 2026 - Management expects steady growth throughout 2026, with a heavier capital outlay in the first half of the year [44][23] Question: Maintenance capital estimates - Management suggested that maintenance capital is likely around $400 million, reflecting efficiencies gained over the years [78][80]