mgy-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number: 001-38083

Magnolia Oil & Gas Corporation

(Exact Name of Registrant as Specified in its Charter)


Delaware		81-5365682
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Nine Greenway Plaza, Suite 1300		77046
Houston,	Texas
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (713) 842-9050


Securities registered pursuant to section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.0001	MGY	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 31, 2023, there were 185,223,428 shares of Class A Common Stock, $0.0001 par value per share, and 21,826,805 shares of Class B Common Stock, $0.0001 par value per share, outstanding.

GLOSSARY OF CERTAIN TERMS AND CONVENTIONS USED HEREIN

The following are definitions of certain other terms and conventions that are used in this Quarterly Report on Form 10-Q:

The “Company” or “Magnolia.” Magnolia Oil & Gas Corporation (either individually or together with its consolidated subsidiaries, as the context requires, including Magnolia Holdings, Magnolia Intermediate, Magnolia LLC, Magnolia Operating, and Magnolia Oil & Gas Finance Corp.).

“Magnolia Holdings.” Magnolia Oil & Gas Holdings LLC.

“Magnolia Intermediate.” Magnolia Oil & Gas Intermediate LLC.

“Magnolia LLC.” Magnolia Oil & Gas Parent LLC.

“Magnolia LLC Units.” Units representing limited liability company interests in Magnolia LLC.

“Magnolia Operating.” Magnolia Oil & Gas Operating LLC.

“Highlander.” Highlander Oil & Gas Holdings LLC.

“EnerVest.” EnerVest, Ltd.

“Karnes County Assets.” Certain right, title, and interest in certain oil and natural gas assets located primarily in the Karnes County portion of the Eagle Ford Shale formation in South Texas.

“Class A Common Stock.” Magnolia’s Class A Common Stock, par value $0.0001 per share.

“Class B Common Stock.” Magnolia’s Class B Common Stock, par value $0.0001 per share.

“Issuers.” Magnolia Operating and Magnolia Oil & Gas Finance Corp., a wholly owned subsidiary of Magnolia Operating, as it relates to the 2026 Senior Notes.

“Magnolia LLC Unit Holders.” EnerVest Energy Institutional Fund XIV-A, L.P., a Delaware limited partnership, EnerVest Energy Institutional Fund XIV-WIC, L.P., a Delaware limited partnership, EnerVest Energy Institutional Fund XIV-2A, L.P., a Delaware limited partnership, EnerVest Energy Institutional Fund XIV-3A, L.P., a Delaware limited partnership, and EnerVest Energy Institutional Fund XIV-C-AIV, L.P., a Delaware limited partnership.

“RBL Facility.” Senior secured reserve-based revolving credit facility, as amended February 16, 2022.

“2026 Senior Notes.” 6.0% Senior Notes due 2026.

“OPEC.” The Organization of the Petroleum Exporting Countries.

Table of Contents

Page

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements

Consolidated Balance Sheets

Consolidated Statements of Operations (unaudited)

Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

Consolidated Statements of Cash Flows (unaudited)

Notes to Consolidated Financial Statements (unaudited)

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Other Information

Item 6.

Exhibits

Signatures

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Magnolia Oil & Gas Corporation

Consolidated Balance Sheets

(In thousands)


	September 30, 2023		December 31, 2022
ASSETS	(Unaudited)		(Audited)
CURRENT ASSETS
Cash and cash equivalents	$	618,466	$	675,441
Accounts receivable	186,763		170,770
Drilling advances	12		3,484
Other current assets	507		1,052
Total current assets	805,748		850,747
PROPERTY, PLANT AND EQUIPMENT
Oil and natural gas properties	3,278,221		2,940,011
Other	9,615		8,991
Accumulated depreciation, depletion and amortization	(1,605,380)		(1,415,973)
Total property, plant and equipment, net	1,682,456		1,533,029
OTHER ASSETS
Deferred financing costs, net	4,290		5,636
Deferred tax assets	118,628		162,792
Other long-term assets	41,371		20,381
Total other assets	164,289		188,809
TOTAL ASSETS	$	2,652,493	$	2,572,585
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	183,341	$	202,846
Other current liabilities (Note 6)	120,364		137,427
Total current liabilities	303,705		340,273
LONG-TERM LIABILITIES
Long-term debt, net	392,209		390,383
Asset retirement obligations, net of current	99,248		95,129
Other long-term liabilities	10,174		6,609
Total long-term liabilities	501,631		492,121
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS’ EQUITY
Class A Common Stock, $0.0001 par value, 1,300,000 shares authorized, 214,415 shares issued and 185,582 shares outstanding in 2023 and 213,727 shares issued and 192,043 shares outstanding in 2022	21		21
Class B Common Stock, $0.0001 par value, 225,000 shares authorized, 21,827 shares issued and outstanding in 2023 and 2022	2		2
Additional paid-in capital	1,738,668		1,719,875
Treasury Stock, at cost, 28,833 shares and 21,684 shares in 2023 and 2022, respectively	(483,745)		(329,512)
Retained earnings	409,230		185,669
Noncontrolling interest	182,981		164,136
Total equity	1,847,157		1,740,191
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,652,493	$	2,572,585

The accompanying notes are an integral part of these consolidated financial statements.

Magnolia Oil & Gas Corporation

Consolidated Statements of Operations (Unaudited)

(In thousands, except per share data)


	Three Months Ended				Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
REVENUES
Oil revenues	$	243,588	$	317,243	$	705,857	$	912,702
Natural gas revenues	27,069		100,124		75,687		242,049
Natural gas liquids revenues	45,021		65,596		122,807		190,700
Total revenues	315,678		482,963		904,351		1,345,451
OPERATING EXPENSES
Lease operating expenses	35,893		34,709		115,060		96,057
Gathering, transportation and processing	10,297		19,297		33,419		51,518
Taxes other than income	14,823		26,623		49,331		74,917
Exploration expenses	5,128		1,173		5,139		10,119
Asset retirement obligations accretion	875		814		2,539		2,404
Depreciation, depletion and amortization	81,158		68,972		228,868		179,331
Impairment of oil and natural gas properties	—		—		15,735		—
General and administrative expenses	19,371		19,625		57,863		55,226
Total operating expenses	167,545		171,213		507,954		469,572

OPERATING INCOME	148,133		311,750		396,397		875,879

OTHER INCOME (EXPENSE)
Interest income (expense), net	1,034		(5,263)		372		(21,637)
Other income (expense), net	(479)		(166)		7,643		6,579
Total other income (expense), net	555		(5,429)		8,015		(15,058)

INCOME BEFORE INCOME TAXES	148,688		306,321		404,412		860,821
Income tax expense	31,211		19,358		75,663		65,333
NET INCOME	117,477		286,963		328,749		795,488
LESS: Net income attributable to noncontrolling interest	15,447		41,486		38,893		133,389
NET INCOME ATTRIBUTABLE TO CLASS A COMMON STOCK	$	102,030	$	245,477	$	289,856	$	662,099

NET INCOME PER SHARE OF CLASS A COMMON STOCK
Basic	$	0.54	$	1.29	$	1.51	$	3.52
Diluted	$	0.54	$	1.29	$	1.51	$	3.51
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic	187,093		188,635		189,408		186,475
Diluted	187,265		189,074		189,612		186,967

The accompanying notes are an integral part of these consolidated financial statements.

Magnolia Oil & Gas Corporation

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

(In thousands)


	Class A Common Stock			Class B Common Stock			Additional Paid In Capital		Treasury Stock			Retained Earnings/ (Accumulated Deficit)		Total Stockholders’ Equity		Noncontrolling Interest		Total Equity
For the Three Months Ended September 30, 2022	Shares	Value		Shares	Value				Shares	Value
Balance, June 30, 2022	208,729	$	21	28,710	$	3	$	1,647,637	18,283	$	(257,837)	$	(291,546)	$	1,098,278	$	170,279	$	1,268,557
Stock based compensation expense, net of forfeitures	—	—		—	—		3,004		—	—		—		3,004		458		3,462
Changes in ownership interest adjustment	—	—		—	—		5,914		—	—		—		5,914		(5,914)		—
Common stock issued related to stock based compensation and other, net	29	—		—	—		(164)		—	—		—		(164)		(25)		(189)
Class A Common Stock repurchases	—	—		—	—		—		3,000	(62,367)		—		(62,367)		—		(62,367)
Dividends declared ($0.10 per share)	—	—		—	—		(19,112)		—	—		—		(19,112)		—		(19,112)
Distributions to noncontrolling interest owners	—	—		—	—		—		—	—		—		—		(7,608)		(7,608)
Net income	—	—		—	—		—		—	—		245,477		245,477		41,486		286,963
Balance, September 30, 2022	208,758	$	21	28,710	$	3	$	1,637,279	21,283	$	(320,204)	$	(46,069)	$	1,271,030	$	198,676	$	1,469,706

For the Three Months Ended September 30, 2023
Balance, June 30, 2023	214,400	$	21	21,827	$	2	$	1,731,059	26,334	$	(425,604)	$	329,011	$	1,634,489	$	175,369	$	1,809,858
Stock based compensation expense, net of forfeitures	—	—		—	—		3,758		—	—		—		3,758		439		4,197
Changes in ownership interest adjustment	—	—		—	—		3,914		—	—		—		3,914		(3,914)		—
Common stock issued related to stock based compensation and other, net	15	—		—	—		(112)		—	—		—		(112)		(13)		(125)
Class A Common Stock repurchases	—	—		—	—		—		2,499	(56,768)		—		(56,768)		—		(56,768)
Dividends declared ($0.115 per share)	—	—		—	—		—		—	—		(21,811)		(21,811)		—		(21,811)
Distributions to noncontrolling interest owners	—	—		—	—		—		—	—		—		—		(4,347)		(4,347)
Adjustment to deferred taxes	—	—		—	—		(760)		—	—		—		(760)		—		(760)
Tax impact of equity transactions	—	—		—	—		809		—	(1,373)		—		(564)		—		(564)
Net income	—	—		—	—		—		—	—		102,030		102,030		15,447		117,477
Balance, September 30, 2023	214,415	$	21	21,827	$	2	$	1,738,668	28,833	$	(483,745)	$	409,230	$	1,664,176	$	182,981	$	1,847,157

The accompanying notes are an integral part of these consolidated financial statements.

Magnolia Oil & Gas Corporation

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

(In thousands)

Class A
Common Stock

Class B
Common Stock

Additional Paid In Capital

Treasury Stock

Retained Earnings/ (Accumulated Deficit)

Total Stockholders’ Equity

Noncontrolling Interest

Total
Equity

For the Nine Months Ended September 30, 2022

SEC Form 10-Q filed by Magnolia Oil & Gas Corporation