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Magnolia Oil & Gas Corporation Announces 2021 Fourth Quarter and Year-End Results

HOUSTON, February 16, 2022--(BUSINESS WIRE)--Magnolia Oil & Gas Corporation ("Magnolia," "we," "our," or the "Company") (NYSE: MGY) today announced its financial and operational results for the fourth quarter and full year 2021.

Fourth Quarter Summary Financial Results:

(In millions, except per share data)

For the
Quarter Ended
December 31, 2021

For the
Year Ended
December 31, 2021

Production (Mboe/d)

69.4

66.0

Net income

$

192.1

$

559.7

Diluted earnings per share

0.82

2.36

Adjusted EBITDAX(1)

260.6

828.9

Capital expenditures - D&C

72.1

231.9

Cash balance

$

367.0

$

367.0

Diluted weighted average total shares outstanding(2)

231.0

239.3

Fourth Quarter and Full Year 2021 Highlights:

  • Magnolia reported fourth quarter and full-year 2021 net income attributable to Class A Common Stock of $150.2 million, or $0.82 per diluted share, and $417.3 million or $2.36 per diluted share, respectively. Fourth quarter and full-year 2021 total net income was $192.1 million and $559.7 million, respectively.

  • Adjusted EBITDAX was $260.6 million during the fourth quarter of 2021, with drilling and completions ("D&C") capital of $72.1 million, representing just 28% of quarterly adjusted EBITDAX. Adjusted EBITDAX for the full-year 2021 was $828.9 million with total D&C capital of $231.9 million, also representing 28% of adjusted EBITDAX, and well below our annual spending limit of 55% of EBITDAX.

  • Net cash provided by operating activities was $260.5 million during the fourth quarter and $788.5 million during full-year 2021. The Company generated free cash flow(1) of $178.5 million during the fourth quarter and $555.9 million during full-year 2021.

  • Total production in the fourth quarter of 2021 grew 15% from the fourth quarter of 2020 to 69.4 thousand barrels of oil equivalent per day ("Mboe/d"). Production for full-year 2021 averaged 66.0 Mboe/d representing year-over-year volume growth of 7%.

  • Production at Giddings and Other in the fourth quarter of 2021 grew 27% compared to the prior year fourth quarter to 36.0 Mboe/d including year-over-year oil production growth of more than 40%. This was accomplished with asset level D&C spending of around 35% of asset level adjusted EBITDAX, leading to significant free cash flow generation at Giddings. We continue to achieve further operational efficiencies at Giddings including an increase in drilling feet per day, fewer drilling days per well, and an improvement in stimulation stages per day.

  • Magnolia added 31.0 MMboe of proved developed reserves, excluding acquisitions and price-related revisions, representing the reserve additions from our 2021 drilling program. These proved developed additions provide an organic proved developed Finding & Development ("F&D") cost of $7.48/boe(3).

  • Magnolia repurchased 2.7 million shares during the fourth quarter, reducing the Company’s total diluted shares outstanding by 25.3 million shares(4) or approximately 10% compared to the prior year. Magnolia’s board recently increased the existing share repurchase authorization by an additional 10 million with 15.8 million Class A Common shares remaining on the current authorization. This action accommodates our ongoing share repurchase plan during the year and is specifically allocated toward open market repurchases.

  • Together with the initiation of a dividend payment and our share reduction efforts, Magnolia returned $358 million to its shareholders last year or approximately 65% of full-year 2021 free cash flow and ended the year with $367 million of cash on the balance sheet. The Company remains undrawn on its $450.0 million revolving credit facility, with no debt maturities until 2026 and has no plans to increase its debt levels.

  • Magnolia’s board recently declared its final semi-annual dividend for 2021 of $0.20 a share payable on March 1, 2022. This final payment is based on Magnolia’s full-year 2021 financial results recast using oil prices of $55 per barrel.

(1)

Adjusted EBITDAX, and free cash flow are non-GAAP financial measures. For reconciliations to the most comparable GAAP measures, please see "Non-GAAP Financial Measures" at the end of this press release.

(2)

Weighted average total shares outstanding include diluted weighted average shares of Class A Common Stock outstanding during the period and shares of Class B Common Stock, which are anti-dilutive in the calculation of weighted average number of common shares outstanding.

(3)

Organic F&D costs per boe means total costs incurred as defined by GAAP excluding property acquisition costs, exploration expenses and asset retirement obligation costs divided by the summation of annual proved developed reserves, on a boe basis, attributable to extensions, revisions of previous estimates (excluding price revisions) and transfers from proved undeveloped reserves at year-end 2021.

(4)

Includes 3.6 million non-compete shares that were paid in cash in lieu of stock.

"2021 was a defining year for Magnolia," said Chairman, President and CEO Steve Chazen. "We achieved several new company records including EBIT margins and earnings per share. We also initiated our first dividend payment during the year and were able to significantly reduce our share count. Perhaps our greatest accomplishment for the year was moving our Giddings asset into full development. The positioning of Giddings toward full development provided a significant improvement in operating efficiencies which resulted in lower overall capital required to grow our total company production. We spent just 28 percent of our EBITDAX on drilling and completing wells, which resulted in year-over-year production growth of 7 percent.

"Our disciplined capital spending and our team’s continued focus on managing our costs provided strong pre-tax margins and generated significant free cash flow. During the year, we returned approximately 65 percent of our free cash flow to our shareholders in the form of significant share repurchases and our dividend. We repurchased more than 25 million shares reducing our diluted share count by 10 percent. Notwithstanding the significant return of cash to shareholders, our year-end cash balance nearly doubled from the prior year resulting in zero net debt.

"Our plan for 2022 is expected to build on many of last year’s achievements. After adding a second drilling rig during mid-2021, we plan to continue to operate a two-rig drilling program which we expect to generate high single digit full-year production growth. While we continue to limit our capital spending to 55 percent of EBITDAX, our spending percentage would be well-below this level in the current product price environment, providing significant free cash flow. We expect that our free cash flow would be allocated toward areas that would improve the per share value of the company including small, accretive bolt-on oil and gas property acquisitions and repurchasing at least 1 percent of our outstanding shares per quarter. So far this year, we have repurchased 2 million shares. The combination of organic production growth and share reduction is supportive of a growing dividend and Magnolia’s double-digit return investment proposition."

Operational Update

Fourth quarter total company production averaged 69.4 Mboe/d, a 3% sequential increase from third quarter levels and growth of 15% from the prior year’s fourth quarter. Production grew during the quarter despite spending only 28% of adjusted EBITDAX on drilling and completing wells. Fourth quarter 2021 turn-in lines were more weighted to the Karnes area which resulted in a sequential quarterly production increase of 9% to 33.4 Mboe/d. Giddings and Other production averaged 36.0 Mboe/d which increased 27% from the prior year quarter.

Magnolia continues to operate two drilling rigs and plans to maintain this level of activity for the balance of the year. One rig will continue to drill multi-well development pads in our Giddings area consisting primarily of wells with greater than 7,000-foot laterals and with four wells per pad. The second rig will drill a mix of wells in both the Karnes and Giddings areas, including some appraisal wells in Giddings.

2021 Oil and Gas Reserves Replacement and F&D Costs

Magnolia’s total proved developed reserves at year-end 2021 were 109.8 MMboe. Excluding acquisitions and price related revisions, the company added 31.0 MMboe of proved developed reserves during the year. Total costs incurred excluding property acquisition costs, exploration expenses and asset retirement obligation costs were $231.9 million in 2021 resulting in organic proved developed F&D costs of $7.48 per boe.

Total 2021 proved reserves increased to 135.4 MMboe from 112.3 MMboe at year end 2020 and replaced 196%(5) of 2021 production. Magnolia books only one year of proved undeveloped reserves and as a result, 81% of its 2021 proved reserves were developed. The proved undeveloped reserves represent what we expect to convert to proved developed producing during 2022.

(5)

Calculated as the sum of the 2021 change in total proved reserves of 23.1 MMboe and 2021 production of 24.1 MMboe divided by 2021 production.

Additional Guidance

Based on our 2-rig drilling plan for full-year 2022, we estimate our D&C capital to be approximately $350 million which is expected to deliver high single-digit, year-over-year production growth. Non-operated capital is expected to be similar to last year’s level. Most of the growth is expected to come from our development program at Giddings, with production at the field expected to average about 40 Mboe/d during the year. Within the current product price environment, we would expect that our full-year 2022 D&C spending to be well-below our limit of 55% of EBITDAX.

For the first quarter of 2022, we expect our D&C capital to be in the range of $85 to $90 million and total production to be approximately 70 to 72 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 first quarter of 2022 is expected to be approximately 228 million shares which is 9 percent lower than first quarter 2021 levels.

Annual Report on Form 10-K

Magnolia's financial statements and related footnotes will be available in its Annual Report on Form 10-K for the year ended December 31, 2021, which is expected to be filed with the U.S. Securities and Exchange Commission ("SEC") on February 17, 2022.

Conference Call and Webcast

Magnolia will host an investor conference call on Thursday, February 17, 2021 at 9:00 a.m. Central (10:00 a.m. Eastern) to discuss these operating and financial results. Interested parties may join the webcast by visiting Magnolia's website at www.magnoliaoilgas.com/investors/events-and-presentations and clicking on the webcast link or by dialing 1-844-701-1059. A replay of the webcast will be posted on Magnolia's website following completion of the call.

About Magnolia Oil & Gas Corporation

Magnolia (MGY) is a publicly traded oil and gas exploration and production company with operations primarily in South Texas in the core of the Eagle Ford Shale and Austin Chalk formations. Magnolia focuses on generating value for shareholders through steady production growth, strong pre-tax margins, and free cash flow. For more information, visit www.magnoliaoilgas.com.

Cautionary Note Regarding Forward-Looking Statements

The information in this press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of present or historical fact included in this press release, regarding Magnolia’s strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward looking statements. When used in this press release, the words could, should, will, may, believe, anticipate, intend, estimate, expect, project, the negative of such terms and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events. Except as otherwise required by applicable law, Magnolia disclaims any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this press release. Magnolia cautions you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of Magnolia, incident to the development, production, gathering and sale of oil, natural gas and natural gas liquids. In addition, Magnolia cautions you that the forward looking statements contained in this press release are subject to the following factors: (i) the length, scope and severity of the ongoing coronavirus disease 2019 ("COVID-19") pandemic, including the emergence and spread of variant strains of COVID-19, including the effects of related public health concerns and the impact of continued actions taken by governmental authorities and other third parties in response to the pandemic and its impact on commodity prices and, supply and demand considerations; (ii) the outcome of any legal proceedings that may be instituted against Magnolia; (iii) Magnolia’s ability to realize the anticipated benefits of its acquisitions, which may be affected by, among other things, competition and the ability of Magnolia to grow and manage growth profitably; (iv) changes in applicable laws or regulations; and (v) the possibility that Magnolia may be adversely affected by other economic, business, and/or competitive factors. Should one or more of the risks or uncertainties described in this press release occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. Additional information concerning these and other factors that may impact the operations and projections discussed herein can be found in Magnolia’s filings with the SEC, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which is expected to be filed with the SEC on February 17, 2022. Magnolia’s SEC filings are available publicly on the SEC’s website at www.sec.gov.

Magnolia Oil & Gas Corporation

Operating Highlights

For the Quarters Ended

For the Years Ended

December 31, 2021

December 31, 2020

December 31, 2021

December 31, 2020

Production:

Oil (MBbls)

2,844

2,646

11,190

11,610

Natural gas (MMcf)

11,820

10,168

43,436

39,429

Natural gas liquids (MBbls)

1,572

1,237

5,669

4,449

Total (Mboe)

6,386

5,577

24,099

22,631

Average daily production:

Oil (Bbls/d)

30,913

28,756

30,659

31,722

Natural gas (Mcf/d)

128,475

110,522

119,003

107,728

Natural gas liquids (Bbls/d)

17,085

13,440

15,532

12,156

Total (boe/d)

69,411

60,617

66,025

61,833

Revenues (in thousands):

Oil revenues

$

216,596

$

107,373

$

747,896

$

421,520

Natural gas revenues

59,890

23,930

172,648

70,416

Natural gas liquids revenues

55,667

19,487

157,807

49,367

Total revenues

$

332,153

$

150,790

$

1,078,351

$

541,303

Average sales price:

Oil (per Bbl)

$

76.16

$

40.58

$

66.83

$

36.31

Natural gas (per Mcf)

5.07

2.35

3.97

1.79

Natural gas liquids (per Bbl)

35.41

15.75

27.84

11.10

Total (per boe)

$

52.01

$

27.04

$

44.75

$

23.92

NYMEX WTI (per Bbl)

$

77.17

$

42.67

$

67.96

$

39.40

NYMEX Henry Hub (per Mcf)

$

5.84

$

2.66

$

3.86

$

2.08

Realization to benchmark:

Oil (% of WTI)

99

%

95

%

98

%

92

%

Natural gas (% of Henry Hub)

87

%

88

%

103

%

86

%

Operating expenses (in thousands):

Lease operating expenses

$

28,064

$

17,917

$

93,021

$

79,192

Gathering, transportation, and processing

13,466

9,622

45,535

35,442

Taxes other than income

17,177

8,376

55,834

31,250

Depreciation, depletion and amortization

53,420

45,080

187,688

283,353

Operating costs per boe:

Lease operating expenses

$

4.39

$

3.21

$

3.86

$

3.50

Gathering, transportation, and processing

2.11

1.73

1.89

1.57

Taxes other than income

2.69

1.50

2.32

1.38

Depreciation, depletion and amortization

8.37

8.08

7.79

12.52

Magnolia Oil & Gas Corporation

Consolidated Statements of Operations

(In thousands, except per share data)

For the Quarters Ended

For the Years Ended

December 31,
2021

December 31,
2020

December 31,
2021

December 31,
2020

REVENUES

Oil revenues

$

216,596

$

107,373

$

747,896

$

421,520

Natural gas revenues

59,890

23,930

172,648

70,416

Natural gas liquids revenues

55,667

19,487

157,807

49,367

Total revenues

332,153

150,790

1,078,351

541,303

OPERATING EXPENSES

Lease operating expenses

28,064

17,917

93,021

79,192

Gathering, transportation and processing

13,466

...

9,622

45,535

35,442

Taxes other than income

17,177

8,376

55,834

31,250

Exploration expenses

1,685

3,744

4,125

567,333

Impairment of oil and natural gas properties

1,381,258

Asset retirement obligations accretion

864

1,315

4,929

5,718

Depreciation, depletion and amortization

53,420

45,080

187,688

283,353

Amortization of intangible assets

3,626

9,346

14,505

General and administrative expenses

15,463

18,445

75,279

68,918

Total operating costs and expenses

130,139

108,125

475,757

2,466,969

OPERATING INCOME (LOSS)

202,014

42,665

602,594

(1,925,666

)

OTHER INCOME (EXPENSE)

Income from equity method investee

54

2,113

Interest expense, net

(7,483

)

(7,353

)

(31,002

)

(28,698

)

Gain (loss) on derivatives, net

2,774

(3,110

)

565

Other income, net

37

3,872

85

3,363

Total other expense, net

(7,446

)

(653

)

(34,027

)

(22,657

)

INCOME (LOSS) BEFORE INCOME TAXES

194,568

42,012

568,567

(1,948,323

)

Income tax expense (benefit)

2,423

8,851

(79,340

)

NET INCOME (LOSS)

192,145

42,012

559,716

(1,868,983

)

LESS: Net income (loss) attributable to noncontrolling interest

41,916

14,267

142,434

(660,593

)

NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON STOCK

$

150,229

$

27,745

$

417,282

$

(1,208,390

)

NET INCOME (LOSS) PER SHARE OF CLASS A COMMON STOCK

Basic

$

0.83

$

0.17

$

2.38

$

(7.27

)

Diluted

$

0.82

$

0.16

$

2.36

$

(7.27

)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

Basic

180,655

164,907

174,364

166,270

Diluted

181,411

169,326

175,360

166,270

WEIGHTED AVERAGE NUMBER OF CLASS B SHARES OUTSTANDING(1)

49,568

85,790

63,973

85,790

(1) Shares of Class B Common Stock, and corresponding Magnolia LLC Units, are anti-dilutive in the calculation of weighted average number of common shares outstanding.

Magnolia Oil & Gas Corporation

Summary Cash Flow Data

(In thousands)

For the Quarters Ended

For the Years Ended

December 31,
2021

December 31,
2020

December 31,
2021

December 31,
2020

CASH FLOWS FROM OPERATING ACTIVITIES

NET INCOME (LOSS)

$

192,145

$

42,012

$

559,716

$

(1,868,983

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation, depletion and amortization

53,420

45,080

187,688

283,353

Amortization of intangible assets

3,626

9,346

14,505

Exploration expenses, non-cash

888

2,370

888

563,999

Impairment of oil and natural gas properties

1,381,258

Asset retirement obligations accretion

864

1,315

4,929

5,718

Amortization of deferred financing costs

1,140

918

4,290

3,628

Unrealized (gain) on derivatives, net

(2,485

)

277

(277

)

(Gain) on sale of equity method investment

(5,071

)

(5,071

)

Deferred taxes

(77,834

)

Stock based compensation

2,593

1,158

11,736

10,029

Other

1,332

(84

)

(728

)

Net change in operating assets and liabilities

9,492

(11,133

)

9,691

524

Net cash provided by operating activities

260,542

79,122

788,477

310,121

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisitions

(7,529

)

(18,345

)

(73,702

)

Proceeds from sale of equity method investment

27,074

27,074

Additions to oil and natural gas properties

(73,682

)

(40,532

)

(236,426

)

(197,858

)

Changes in working capital associated with additions to oil and natural gas properties

1,133

(5,382

)

13,568

(24,354

)

Other investing

78

(307

)

(2,239

)

(1,148

)

Net cash used in investing activities

(80,000

)

(19,147

)

(243,442

)

(269,988

)

CASH FLOW FROM FINANCING ACTIVITIES