Magnolia Oil & Gas (MGY) Q1 Results - April 30

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MGY released Q1 2025 financial and operating results after the markets closed on April 30.

First Quarter 2025 Highlights:

Magnolia reported first quarter 2025 net income attributable to Class A Common Stock of $102.9 million, or $0.54 per diluted share. First quarter 2025 total net income was $106.6 million and total adjusted net income was $105.6 million. < Beat my forecast of $99.5 million net income attributable to Class A common stock.

Diluted weighted average total shares outstanding decreased by 5% to 194.2 million(2) compared to first quarter 2024.

Adjusted EBITDAX was $248.4 million during the first quarter of 2025. Total drilling and completions ("D&C") capital was $130.4 million and below our earlier guidance. The first quarter D&C capital represented approximately 53% of adjusted EBITDAX and is expected to be the largest quarterly capital outlay during 2025.

Net cash provided by operating activities was $224.5 million during the first quarter of 2025 and the Company generated free cash flow of $110.5 million. Magnolia generated operating income as a percentage of revenue (pre-tax margins) of 39% during the first quarter.

Total Company production volumes in the first quarter of 2025 grew by 14% on a year-over-year basis to 96.5 thousand barrels of oil equivalent per day ("Mboe/d") including 39.1 thousand barrels of oil per day ("Mbbls/d"). < Beat my forecast of 94,000 Boepd, but oil production was slightly lower than my forecast of 39,480 bpd.

The better-than-expected production levels were the result of stronger than anticipated well productivity and shallower than expected well declines in Giddings. Production from Giddings was 76.7 Mboe/d, providing overall growth of 25% compared to last year’s first quarter, including oil production growth of 17%.

We are increasing our full-year 2025 production growth guidance range to 7 to 9 percent, from 5 to 7 percent previously, due to the stronger than expected first quarter production volumes and improved overall well performance. In addition, we are reducing our capital spending program for 2025 to a new range of $430 to $470 million, compared to our initial plan of $460 to $490 million, a decrease of a little more than 5%. Our strong start to the year, including better well performance and improved capital efficiencies provides us with operational flexibility to deliver higher growth while spending less and maintaining the discipline of our business model. < My forecasts for MGY are always based on the high end of their production guidance because they always under-promise and over-deliver on production.

The Company repurchased 2.2 million of its Class A Common Stock during the first quarter for $52.0 million. Magnolia has 9.6 million Class A Common shares remaining under its current repurchase authorization, which are specifically allocated toward open market share repurchases.

As previously announced, the Board of Directors declared a cash dividend of $0.15 per share of Class A common stock, and a cash distribution of $0.15 per Class B unit, payable on June 2, 2025 to shareholders of record as of May 12, 2025.

Magnolia returned $81.7 million, or 74% of the Company’s free cash flow to shareholders during the first quarter through a combination of share repurchases and dividends. Together with the significant return of cash to shareholders, Magnolia ended the first quarter with $247.6 million of cash on the balance sheet and an undrawn $450 million revolving credit facility. < MGY has a strong balance sheet and no near-term debt issues.

"Magnolia’s very strong start to 2025 as demonstrated by our first quarter results, was supported by better than expected well performance, providing us with greater confidence in this year’s development program and continuing to validate the high-quality nature of our assets," said President and CEO Chris Stavros. "Our total production during the first quarter of 96.5 thousand barrels of oil equivalent per day exceeded our expectations and was driven by strong well productivity in our Giddings asset together with shallower than expected declines. Much of this benefit originated from a newer area of Giddings which we had previously appraised, acquired additional acreage and more recently brought online multiple pads that have outperformed. As this area was expected to be a little gassier than the average Giddings well, we tactically planned some activity here to be brought online during the winter months to take advantage of historically higher pricing.

"The Giddings area has continued to surprise us to the upside as we have applied more modern drilling and completion techniques to this older vintage oil and gas field, which has delivered strong well productivity and returns.

"The strong start to this year including our better well performance and improved capital efficiency allows us to raise our guidance for 2025 year-over-year production growth to a range of 7 to 9 percent compared to our initial outlook of 5 to 7 percent. At the same time, we are lowering the range for our 2025 capital spending to $430 to $470 million, a reduction of approximately $25 million or more than 5 percent from the midpoint of our original spending plan. At current product prices, we now expect to see somewhat higher production and for less capital while maintaining a high level of flexibility in our activity program for the remainder of the year.

"Recent volatility in the financial markets and for product prices suggest that we have entered a period of elevated uncertainty for the global economy. With our low level of debt and business model oriented toward capital discipline, Magnolia is well-prepared and able to manage through periods of weaker product prices or potential market instability. As we noted earlier this year, our teams took proactive measures during the last couple of years to reduce both our field-level operating costs as well as working with our key oil field service providers and material vendors to lower our overall well costs. These early efforts taken during a period of higher product prices has reduced our overall cost structure placing us in a stronger position should prices weaken, allowing for our sustainable return of cash to shareholders through our base dividend and ongoing share repurchases."

Operational Update

Total Company production volumes in the first quarter of 2025 grew by 14 percent on a year-over-year basis to 96.5 Mboe/d including 39.1 Mbbls/d, both setting new quarterly production records for the Company. First quarter Giddings production increased by 25 percent, compared to the prior year period with Giddings oil production growing 17 percent compared to the first quarter of 2024. Giddings production represented 79 percent of total Company volumes during the first quarter. Magnolia’s first quarter 2025 capital spending on drilling, completions, and associated facilities was $130.4 million and is expected to be the highest quarterly spending rate during 2025.

Magnolia had targeted to bring online some gas-weighted multi-well pads in a newer area during the winter months to take advantage of seasonally higher prices, and well productivity and performance exceeded the Company’s expectations. The wells in this newer area have strong production rates and exhibited shallower declines with excellent returns and quick pay back periods. These results should allow us to generate high single-digit total production growth in 2025 and with fewer total wells turned in line compared to last year. Other areas within Giddings saw strong oil production performance with meaningful associated gas volumes. Flexibility with our operating program could allow for additional appraisal tests later this year.

Magnolia plans to continue to operate two drilling rigs and one completion crew during 2025 and expects to maintain this level of activity through the remainder of the year.

Our two operated rig and one completion crew development program has been in place consistently for the last four years driving total Company production growth of more than 40 percent and more than doubling our production volumes in Giddings. Approximately 75 to 80 percent of the 2025 activity will consist of multi-well development pads in the Giddings area combined with some appraisal wells intended to test some concepts and extend the boundaries of the play within our sizable acreage position. Our development program at Giddings consists of drilling multi-well pads throughout our core 200,000 net acre development area. This creates a balanced and efficient program that provides consistent year-over-year results.

Additional Guidance

The better than expected first quarter production supported by continued strong well performance leads us to increase our guidance for year-over-year production growth in the range of 7 to 9 percent, compared to our prior forecast of 5 to 7 percent. Magnolia is also reducing its total 2025 D&C capital spending by slightly more than 5 percent within the range of $430 to $470 million, from $460 to $490 million previously. This includes an estimate of non-operated capital that is similar to 2024 levels. Second quarter 2025 D&C capital spending is estimated to be approximately $110 million and total production for the second quarter is estimated to be roughly flat on a sequential quarterly basis, or approximately 97 Mboe/d.

Oil price differentials are anticipated to be approximately a $3 per barrel discount to Magellan East Houston and Magnolia remains completely unhedged for all its oil and natural gas production. The fully diluted share count for the second quarter of 2025 is expected to be approximately 193 million shares, which is 4 percent lower than second quarter 2024 levels.