$MGY earnings report

This filing is an interim update following the WildFire Energy acquisition rather than a full third-quarter earnings release. Magnolia provided estimated Q3 production of 116 to 118 Mboe/d (~42% oil) and expected D&C capital spending of $155 to $165 million, but did not report finalized revenue, profitability, cash flow, or per-share results. The company will discuss third-quarter financial and operational results on Thursday, November 5th.

The portfolio changed materially during the quarter. Magnolia completed the WildFire acquisition and sold non-core Dimmit and Zavala assets for $47.5 million plus 616 net acres in Gonzales County. The divested properties included approximately 1.4 Mboe/d (~84% oil) of next-twelve-month production. The acquired Gonzales acreage increases Magnolia’s average operated working interest in the contiguous block to 98 percent, while Q4 will be the first full quarter pro forma for the acquisition.

The balance-sheet update was constructive. Magnolia ended the third quarter with approximately $1.9 billion of net debt, which it described as lower than expected because of strong cash flow and asset-sale proceeds. At current strip pricing, the company stated leverage is below 1.0x net debt to 2027E EBITDA. Management reiterated a target of 0.5x net debt to EBITDA or below and paired debt reduction with a safe and growing dividend and repurchases of at least 1 percent of outstanding shares per quarter. The company purchased approximately 2.3 million shares in the third quarter, and shares outstanding were approximately 267 million at quarter-end.

The Q4 outlook calls for 159 to 161 Mboe/d of production, with 49% to 50% oil, and approximately $235 million of D&C capital spending. The guidance also specifies LOE of $5.80 - $6.20 per Boe, GP&T of $1.80 - $2.10 per Boe, DD&A of $14.00 - $15.00 per Boe, production and ad valorem taxes of 5.5% - 6.5%, interest expense of $35 - $40 million, an effective tax rate of ~21%, and a cash tax rate of 0% - 2%. Magnolia expects transaction and integration-related costs of approximately $65 to $75 million in Q3 and approximately $14 million of exploration expense from 3D seismic purchased over newly acquired acreage.

For 2027, Magnolia expects 4 to 5 percent growth in both oil volumes and total production from a second-quarter 2026 pro forma base of approximately 78 Mbo/d and 158 Mboe/d, with D&C capital spending of $900 to $950 million. The company expects to realize at least one-third of estimated >$100 million annual run-rate synergies by year-end 2026. Additional costless-collar hedges supplement those acquired with WildFire, and management stated that more than half of oil production is hedged through second quarter 2027, supporting continued debt reduction while retaining exposure to higher prices.

Magnolia delivered a strong second quarter of 2026. GAAP net income was $181.8 million, compared with $81.0 million, while diluted earnings per share was $0.97, compared with $0.41. Adjusted net income was $184.3 million and adjusted EBITDAX was $370.3 million. The Company attributed the earnings improvement primarily to higher oil and NGL prices and growth in overall production volumes.

Operational performance supported the financial result. Average daily production increased to 106.1 Mboe/d from 98.2 Mboe/d, while average daily oil production rose to 41.9 Mbbls/d from 40.0 Mbbls/d. Giddings production reached 85.5 Mboe/d and represented 81 percent of total Company volumes. The Company cited continued strong well performance as the driver of Giddings growth and stated that overall production exceeded earlier guidance.

Cash generation and capital efficiency were central features of the quarter. Net cash provided by operating activities was $384.0 million and free cash flow was $234.6 million. Total D&C capital was $125.0 million, representing approximately 34% of adjusted EBITDAX. Magnolia reported operating income as a percentage of revenue, or pre-tax margins, of 50%. The Company repurchased 1.7 million Class A Common shares for $49.3 million and returned $80.1 million to shareholders through repurchases and dividends.

The outlook raises standalone full-year 2026 production growth guidance to 6 percent from 5 percent. Third-quarter standalone production is expected to be similar to second-quarter levels, while third-quarter D&C capital spending is estimated at approximately $115 million. Full-year standalone capital spending was reiterated at $440 to $480 million. Third-quarter pricing is an area of attention because the Company expects oil price differentials to be approximately a $3 per barrel discount to Magellan East Houston.

The WildFire acquisition is the major strategic and financing development. Magnolia expects the transaction to close late in the third quarter of 2026 and stated it will more than double its Giddings acreage. To partially fund the acquisition, the Company issued 53.3 million shares for net proceeds of $1.23 billion and issued $500 million of senior notes at 6.625% due in 2034. The Company stated that the acquisition will be funded with approximately half equity and half debt.