Magnolia Oil & Gas Corporation Price & Performance (MGY)

Well, we've seen this happen before. Where the cash built to $700,000,000 for a little bit of time I called it the winnings during a period of very high product prices and then not believing that it would burn a hole in our pocket for too long. We deployed it when the time was right. What we saw attractive opportunities come along. So I'm not averse to seeing it happen and holding on to the cash for a little bit of time. But not a lengthy period of time. I just don't think that it it would occur for that long. So anyway, I think there'll be things that always come up. Our next question comes from Oliver Huang with TPH. Please go ahead.

Good morning, Chris and Brian, and thanks for taking the questions. I know you all are fairly quite a bit of gassy inventory that gets very little credit from the market. So just kind of wondering what it would what would it take to just lean into that acreage a bit more kind of given the trajectory of gas prices in the near term to maybe unlock some of that value there?

Yes. I guess part of the answer [indiscernible] I think our cost structure has seen quite a bit improvement So it all starts with well economics and some of the actions that we've taken in the last couple of years around reducing our well costs may have improved the returns in certain areas that might have been previously a little bit more marginal and puts us in a much better position. So we continuously revisit, review these areas to see if they could work. And revisit them again as we further optimize just in terms of other efficiencies. So look, I think Built exactly the same within our Extents extensive position in Giddings, the 550,000 acres. Probably not.

There's probably some variability in the performance or whatnot or in the acreage. [indiscernible] will more of it work out over time? Probably yes. Because we're learning more every day and that's part of the going to be part of the appraisal work that we're doing this year. And so I think it's more along the lines of stay tuned. Probably have more to say about it or you'll just see it happen. With a little bit of time Okay, makes sense. And maybe for a follow-up question just on well cost. I know you all have done a good job of lowering well costs over the past couple of years, first starting with the completion side, then moving drilling side last year. Just kind of wondering, are there any immediate levers or line of sight to things that you could potentially do maybe along the lines of longer laterals just given how contiguous the acreage is. And if not, is there anything in particular that's keeping you all from kind of taking that step? No, nothing that's preventing us from taking the step. I mean, again, we continue as I said, it really all starts with the economics and that we're in a much better position right now.

So We're examining different parts of the field and trying to test some new things. And push the boundaries a little bit around the field. So It seems to me before we go out and pay $4,000,000 or $5,000,000 6,000,000 or whatever per undrilled location that we should probably take closer look within the acreage that we already own. So as I mentioned, we gathered a lot of data subsurface and also from some of the eight assets that we've acquired in the Northern Part Of Giddings, Southern Part Of Giddings and as we integrate and optimize some of the learnings from those assets. It should allow us to expand some of the boundaries of the field and actions that we've already taken around not just the cost, but also some of the optimization around inventory, etcetera, I think it's led to us adding tens of thousands of incremental lateral feet to our drilling [indiscernible] It will likely amount to multiples of that. So we continue to test some concepts And I think it's going to go well for us over time. Awesome. Thanks for the time.

The next question comes from Carlos Colanz with Research.

Please go ahead. [indiscernible] So good solid quarter for the team.

Thank you guys for taking my questions. So my question is, What is your [indiscernible] your long term sustained capital? And my second question is how close are you guys to dropping a rig? Even if partially going forward? Thank you.

Yes. I feel very comfortable with the range of capital spending, the $460,000,000 to $490,000,000 that we gave. Sort of the midpoint is right around certainly at current product prices, what it will take to generate growth that we talked about, the 5% to 7% and lower single digit oil growth. I wouldn't imagine that we'd have to if your question was around slowing activity or dropping a rig, I wouldn't and certainly a current product price is not going to happen. I would imagine that would have to be something below $60 before we we even thought about that. [indiscernible] On oil, I don't see that happening right now, but we're prepared to do it. We have a lot of optionality. And flexibility in the program. We've done a lot to improve our cost structure. And so we're well set up to achieve what we plan to achieve for this year. So I think I expect the plan to be fairly steady.

The next question comes from Zach Parham with JPMorgan. Please go ahead.

Just wanted to ask on the trajectory of your expected production through the year. You talked about 1Q CapEx being the high point of the year. Should that drive more growth in 2Q and then maybe flatten out in the back half? Just curious if you could provide some color there?

Thanks, Zach. Yes. So I expect it to grow ratably through the year. It may You may see some variability, but I expect it to grow fairly ratably through the year. You'll see growth in 4Q to 1Q, 1Q to 2Q generally. Between quarters may be jump around a bit, it's depending on the pace of activity. And as we said, the first quarter which should see good first half volumes. But then I fully expect to end the year at at a a pretty good clip. We could start to see likely, frankly, maybe triple digits on overall volumes or certainly getting close to that. And then then certainly in the year maybe 40,000 a day of oil if not a little bit better. I think these numbers are more or less in line with consensus maybe a little bit better.

Thanks for that color. My follow-up, I just wanted to ask about Karnes. You mentioned some appraisal work that you're doing there. Can you just give us us a little more color on what you're testing at Karnes?

Yes. There was an opportunity that we got involved in about a year or so ago through a small acquisition. About 25,000 acres. I've mentioned it on previous calls And again, I would describe it as as an exploitation or appraisal option It's an oily area and if we can make it work, it could go together with some of the activity that we typically pursue in Karnes. A couple of recent wells there that have performed quite good. But I do think we still need to study it a bit further before moving forward. So we'll just have to see how it goes. It's still a little early. But I'm encouraged by what we've seen so far. Thanks. The next question comes from Noah Hungness with Bank of America.

Please go ahead.

Good morning, guys. My first question I was just hoping to get your latest take on the M and A opportunity set across the Eagle Ford and where you see that greatest opportunity set? Is it in the oily window the natural gas or somewhere in the middle? [indiscernible] Yes. Look, over the last six to twelve months, there have been several opportunities and assets or packages that have popped up in the Eagle Ford mainly West Of Karnes and a varying quality and size. As we've said oftentimes, we look at everything We take a lot of tires and we may or may not participate in some actual processes. But anyway, we look at a lot of things.

And we'll just sort of see how it goes.

There isn't anything that's I would describe as massive or huge but it certainly does have a varying degree of quality. And we've always talked about on M and A, not looking to just add existing volumes, but looking to add opportunities where we can we have the chance to improve our resource set and upside over time. So So we carefully look at those things too.

But they are generally [indiscernible] Yes, they are they have tended to be a bit oilier as you would imagine in the Lower Eagle Ford.

Makes sense. And then for my second question, I was just wondering, current CapEx guidance has a range for splitting it out by area for Karnes between $20,000,000 and 25% and Giddings between 8075%. How How should we think about what would cause it to go one way or the other?

I don't think it's I don't think you're going to see any subtleties that you might have appreciated or looked through in the wording of the the remarks is really around the noise. I mean, for Giddings as an example last year, it represented 76%, I think, of our overall company volumes. I think it's within a range, the 75% to 80%, same for for Karnes. It might be slanted a little bit more around some appraisal work that we do, in one area versus the other, etcetera, could be partially timing. But I wouldn't tell you that there's going to be sizable or significant shift one way or the other. I mean, we still like both assets for what they are capable of delivering and providing to the organization to the company So I wouldn't expect a big change. Thanks. Our next question comes from Neil Mehta with Goldman Sachs.

Please go ahead.

Yes. Good morning, team. And I apologize if this question was asked already. But just your perspective on the big focus areas around Giddings and in the year ahead, what are some of the operational mile that the market should be looking for in terms of continuing to assess how that project is developing?

Well, I hope to to be able to talk about some further expansion of the field in terms of our appraisal work and some of the things in terms of further developing it and delineating it, As I said before, it all starts with well economics and we're just in such a much better position or a really, really strong position from our our cost side of things. And so more comes into the fold with some of that. And it provides us with more flexibility and optionality to pursue some things or take a little bit more risk around appraisal work and test some areas. Test the boundaries, expand the boundaries of the field, if you will. So I hope to have more color and and maybe provide some more actual feedback or data around our results second half of this year We're really just starting to get at it. So in terms of this year, so hopefully back half of the year we'll have more to say.

That's great. We'll stay tuned. And then the follow-up is you've got a really solid track record of dividend growth. I mean, you're targeting $0.6 here in 2025. Which is differentiated relative to a lot of 10% type of numbers? And how do you balance whether dividends or buybacks are the right use of that incremental dollar?

Well, on the dividend, the safety and security of the dividend is is a critical element of it. I don't want to be one of those small, mid cap or any peak company for that matter that is sort of promises dividend growth, implements a growing dividend, then it sort of somehow vanishes in the midst of deteriorating portion of the cycle. So I don't want to be one of those companies that sort of has to fall back on that on that promise. So the dividend on our view is a promise to the shareholders. And so we we thoroughly stress test the dividend at much lower product prices when we go to the Board for an increase every year whenever that happens and so I'm comfortable knowing that we'll be able to grow it And remember, we talk about growing this dividend per share payout capacity. So the share repurchase program and the consistency of that sort of builds into that and works for you in terms of reducing the share count So your actual cash dollars outlay doesn't increase as much as the percentage increase in in the per share of the dividend. So it's sort of a natural benefit and plays hand in hand in that growth.

And so I think it's on the share repurchases, the consistency of the program really is a good mix of ingredients, if you will, around the rest [indiscernible] And I feel confident that it's we've done the right thing by our shareholders in certain dollar cost averaging for share repurchases and improved everything on a per share metric over time. So the balance of how we're doing it, I think is a reasonable approach. Thanks, team. Appreciate it. Thanks. The next question comes from Jeff Jay with Daniel Energy Partners.

Please go ahead.

Hey, guys. I just was looking for some clarification around the Giddings appraisal work. If this works out and you find what you're looking for, how significant is it for your location countdown there? I mean, is it incremental or is this sort of a really big deal?

Well, it's a really big deal in terms of of what the potential is because you got a I said, 550,000 acres and we always look to add more opportunistically if and when we can. That might even include some additional lease opportunities with time and some bolt ons as we've done in the past.

Look, it doesn't take much. We continue to, as I said, press on the boundaries of the field and by adding, as I mentioned, incremental lateral feet to to that drilling inventory. [indiscernible] It doesn't take much to make a sizable impact on our overall resource relative to our annual drilling program. So I think about it that way. But over time, over multiple years, it can be quite sizable.

Excellent.

Thank you.

Thanks.

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