Magnolia Oil & Gas Q4 2024 Earnings Report

Magnolia Oil & Gas EPS Results

• Actual EPS: $0.49
• Consensus EPS: $0.46
• Beat/Miss: Beat by +$0.03
• One Year Ago EPS: N/A

Magnolia Oil & Gas Revenue Results

• Actual Revenue: $326.61 million
• Expected Revenue: $327.40 million
• Beat/Miss: Missed by -$789.00 thousand
• YoY Revenue Growth: N/A

Magnolia Oil & Gas Announcement Details

• Quarter: Q4 2024
• Date: 2/18/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, February 19, 2025
• Conference Call Time: 11:00AM ET

Magnolia Oil & Gas (NYSE:MGY) Corp. engages in the acquisition, development, exploration, and production of oil and natural gas properties. It operates assets located in the Eagle Ford Shale and Austin Chalk formations in South Texas. The company was founded on February 14, 2017 and is headquartered in Houston, TX.

Magnolia Oil & Gas Q4 2024 Earnings Call Transcript

Key Takeaways

• Magnolia delivered record production of 93,100 BOE/d in Q4 2024 and achieved 9% annual growth to 89,700 BOE/d, with oil volumes up 11% year-over-year.
• The company generated $953 million of adjusted EBITDAX and $430 million of free cash flow at a 50% reinvestment rate, returning 88% ($378 million) to shareholders via a 15% dividend increase and ongoing share repurchases.
• Operational efficiencies drove a 10% reduction in lease operating costs per BOE and lower finding & development costs, supporting a 22% return on capital employed and one of the industry’s lowest reinvestment rates.
• For 2025, Magnolia plans $460–490 million of D&C capital (reinvestment <55%) to fund 5–7% production growth with two drilling rigs, one completion crew, and appraisal wells to expand its Giddings acreage.
• The board raised the quarterly dividend to $0.15/share (annualized $0.60) and authorized an additional 10 million shares for repurchase, underscoring the company’s disciplined capital return strategy.

Presentation

[Operator]

Good morning, everyone, and thank you for participating in Magnolia Oil and Gas Corporation's Fourth Quarter twenty twenty four Earnings Conference Call. My name is Megan, and I will be your moderator for today's call. At this time, all participants will be placed in a listen only mode as our call is being recorded. I will now turn the call over to Magnolia's management for their prepared remarks, which will be followed by a brief question and answer session.

[Tom Fitter, Director - Investor Relations at Magnolia Oil & Gas]

Thank you, Megan, and good morning, everyone. Welcome to Magnolia Oil and Gas' fourth quarter twenty twenty four earnings conference call. Participating on the call today are Chris Stavros, Magnolia's President and Chief Executive Officer and Brian Corrales, Senior Vice President and Chief Financial Officer. As a reminder, today's conference call contains certain projections and other forward looking statements within the meaning of the federal securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements.

[Tom Fitter, Director - Investor Relations at Magnolia Oil & Gas]

Additional information on risk factors that could cause results to differ is available in the company's annual report on Form 10 K filed with the SEC. The full Safe Harbor can be found on Slide two of the conference call slide presentation with the supplemental data on our website. You can download Magnolia's fourth quarter twenty twenty four earnings press release as well as the conference call slides from the Investors section of the company's website at www.magnoliaoilgas.com. I will now turn the call over to Mr. Chris Stomiris.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

Thanks, Tom, and good morning, everyone. We appreciate you joining us for our discussion of our fourth quarter and full year twenty twenty four financial and operating results. I plan to briefly speak to our full year results and fourth quarter, which closed out another year of strong reliable performance and execution aligned with Magnolia's business model and helped by some conscious actions taken around reducing our field level operating costs. I'll briefly highlight how our business model and core principles continue to deliver results that compound per share value and as evidenced through Magnolia's performance and its founding. Finally, I'll conclude by providing an outlook of Magnolia's twenty twenty five capital and operating plan, which is expected to deliver moderate growth with a similar level of capital spending while providing additional capture of low cost resource opportunities.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

Brian will then review our financial results in greater detail and provide some additional guidance before we take your questions. Starting on Slide three of the investor presentation and looking at the highlights. Magnolia ended 2024 on a high note with across the board strength in both financially and in our operations. Record quarterly production volume during the fourth quarter of '90 '3 thousand 100 barrels of oil equivalent per day lifted full year 2024 total production to 89,700 BOE per day. This amounted to annual total company production growth of 9% for a second consecutive year and with full year oil production growth of 11% exceeding our original expectations.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

Our total production at Giddings grew 16% with oil growing 21% and partially supported by a prior year acquisition in addition to strong well productivity and a continued expansion of our development area in this field. Total adjusted net income for the year was approximately $4.00 $1,000,000 and adjusted EBITDAX was $953,000,000 and our D and C capital spending of $477,000,000 led to a reinvestment rate of just 50%. This allowed the company to generate free cash flow of $430,000,000 last year and we returned 88% of the free cash flow or approximately $378,000,000 to our shareholders through our growing base dividend and ongoing share repurchase program. Our asset teams and field employees embraced our asset optimization at field level cost reduction initiatives implemented early last year and were successful in lowering our lease operating costs by 10% per BOE through the year. This in combination with our efforts and continuing to work with our materials vendors and oilfield service providers lowered our overall finding and development cost, helping us achieve a return on capital employed of 22% last year and places Magnolia's overall cost structure in a position of strength into 2025.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

The confidence and strength in Magnolia's outlook supported our board's approval of a 15% increase to our quarterly dividend payment earlier this month to $0.15 per share or an annualized payment of $0.6 per share. Magnolia's board also authorized an increase of 10,000,000 shares to our existing share repurchase program designated for open market repurchases and as we continue with our plan to repurchase 1% of our shares outstanding per quarter. Turning to Slide four, Magnolia's business model has remained reliably consistent and steady since the company was founded. As I've stated before, our objective has been and continues to be to operate a highly investable attractive E and P business that is enduring and focused on generating absolute per share value over the long term. Our objective is to be the most efficient operator of best in class oil and gas assets generating the highest returns on those assets while deploying the least amount of capital for drilling and completing our wells.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

Our continued low in reinvestment rate, which delivered moderate growth and significant free cash flow generation serves as evidence of achieving that goal. This formula enables a significant portion of the free cash flow to be returned to our shareholders, in our case through our consistent and ongoing share repurchases and secure and growing base dividend. The combination of reducing our total share count, moderate production growth and low cost structure creates an investment proposition that provides average annual dividend growth of approximately 10%. Additional free cash flow accrues to the balance sheet allowing us to opportunistically pursue attractive bolt on oil and gas property acquisitions that can improve and extend our high return business. The results of our model and strategy are apparent when examining what we've achieved over the longer term.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

As shown on Slide five, Magnolia has had one of the lowest capital reinvestment rates, while realizing one of the highest rates of production per share growth among U. S. Oil and gas producers over the past four years. Turning to Slide six. Magnolia continues to generate high pretax operating margins, largely a result of our high quality assets, our emphasis around efficiencies and cost containment.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

We successfully lowered our overall well cost and P and C Capital during 2023 and reduced field level operating costs last year, which at current product prices should lead to improve full cycle operating margins in 2025. As shown on Slide seven, the strength of our balance sheet remains best in class. Maintaining low leverage is a key component of our business model, minimizing overall financial risk while providing flexibility and optionality for the company. The absence of any oil and gas hedges provides us with the ability to accrue a significant amount of excess cash flow to the balance sheet during a period of higher product prices, which can then gradually be deployed as product prices recede. Deploying this countercyclical strategy has been in our experience benefiting the company and our shareholders by executing on accretive bolt on acquisition opportunities during more modest product prices.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

While other producers have shown the ability to capitalize on one or two of these metrics, it is uncommon to have a low reinvestment rate with above average growth per share combined with high operating margins and low debt. This effective and potent combination allows us to maximize free cash flow generation and continue to support our highly competitive capital return program. Slide eight shows our returns at the corporate level or the overall financial outcome of our business model. As I mentioned, our return on capital employed delivered another solid result with RCE of 22% during 2024 and despite lower year over year product prices. Magnolia's return on capital employed on average over the past six years or approximately since the company's inception was 26 or roughly three times our weighted average cost of capital.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

These superior returns are a function of our high quality assets, our strategy around disciplined capital allocation, maintaining our low debt, a low cost structure and further enhanced by our ongoing share repurchase program. This combination is proven to be a successful recipe. Finally, on Slide nine, Magnolia's business model continues to result in consistent and reliable free cash flow through the cycle with significant portion of that free cash returned to our shareholders. Since inception, Magnolia has returned nearly $1,600,000,000 or approximately 35 percent of its current market capitalization through a combination of share repurchases and dividends. We entered 2025 on south footing after a very solid year of operating performance and a strong financial position with an improved cost structure.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

Our business model and strategy remains largely unchanged. Magnolia plans to operate two drilling rigs and one completion group during 2025 and expects to maintain this level of activity through the year with total D and C capital spending anticipated in the range of $460,000,000 to $490,000,000 This level is roughly flat with last year and the current product prices represents a reinvestment rate of less than 55% of our adjusted EBITDAX. This also includes an estimate of non operated capital that is roughly the same as 2024 levels. Our activity and spending is expected to deliver total annual production growth of 5% to 7%, including low single digit annual growth in oil production, with the overall characteristics and quality of this year's program expected to be very similar to what we experienced last year. Most of our oilfield service materials costs are under contract through at least mid-twenty twenty five and we continue to see some ongoing D and C efficiency improvements generated by our operations team at Giddings, inclusive of last year's 7% increase in drilling fee per day.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

While our D and C spending levels are expected to be similar to 2024, lower overall well costs combined with improved operating efficiencies allows more wells to be drilled, completed and turned in line, supporting Magnolia's high margin growth while providing additional operational flexibility. Approximately 75% to 80% of this year's activity will consist of multi well development pads in the Guineas area. Over the last several years, we have gained a much better understanding of the subsurface and a normal technical knowledge through our own drilling and data gathering at Giddings. We plan to put some of this knowledge to work and allocate a portion of our capital to further delineate our significant acreage position at Giddings through some appraisal wells, signed to test some concepts, further extend the boundaries of the field and expand the competitive advantage that we have gained in the area. Our Karnes area assets continue to generate significant free cash flow and we expect to allocate approximately 20% to 25% of our capital to this asset this year, including modest development as well as some appraisal activity.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

We believe that our business model and strategy provides with a durable competitive advantage to sustain our moderate growth over time and allowing us to continue to act as serial compounders of value for our shareholders. I'll now turn the call over to Brian to provide more details on our financial and operating results. Thanks, Chris, and good morning, everyone.

[Brian Corales, Chief Financial Officer at Magnolia Oil & Gas]

I will review some items from our fourth quarter and full year results and refer to the presentation slides found on our website. I'll also provide some additional guidance for the first quarter of twenty twenty five and the remainder of the year before turning it over for questions. Magnolia ended 2024 in a strong note highlighted by steady and consistent execution. During the fourth quarter, we generated total net income of $89,000,000 with total adjusted net income of $95,000,000 or $0.49 per diluted share. Our adjusted EBITDAX for the quarter was $236,000,000 with total capital associated with drilling completions and associated facilities of $132,000,000 dollars For the full year, adjusted EBITDAX was $953,000,000 with D and C Capital representing 50% of EBITDAX.

[Brian Corales, Chief Financial Officer at Magnolia Oil & Gas]

Fourth quarter production volumes grew 9% year over year to 93,100 barrels of oil equivalent a tank. For the full year, production volumes grew 9% to 89,700 barrels of oil equivalent a day with oil growth of 11%. During the year, we repurchased a total of 11,000,000 shares and our diluted share count fell by 5% year over year. Looking at the quarterly cash flow waterfall chart on Slide 11, we started the year with $4.00 $1,000,000 of cash. Cash flow from operations before changes in working capital was $919,000,000 worth working capital changes and other small items impacting cash by $11,000,000 During the year, we paid dividends of $107,000,000 and allocated $273,000,000 towards share repurchases.

[Brian Corales, Chief Financial Officer at Magnolia Oil & Gas]

We added $165,000,000 of bolt on acquisitions through the year. We incurred $487,000,000 on drilling completions, facilities and leasehold and ended the year with $260,000,000 of cash. Looking at Slide 12, this chart illustrates the progress in reducing our total outstanding shares since we began our repurchase program in the second half of 'nineteen. Since that time, we have repurchased 72,900,000.0 shares, leading to a change in weighted average diluted shares outstanding of 23% net of issuance. Magnolia's weighted average diluted share count declined by more than 2,000,000 shares sequentially, averaging 196,200,000 shares during the fourth quarter.

[Brian Corales, Chief Financial Officer at Magnolia Oil & Gas]

As Chris discussed, the Board recently approved a 10,000,000 share increase to our share repurchase authorization, leaving 11,700,000.0 shares remaining under our current repurchase authorization, which are specifically directed toward repurchasing Class A shares in the open market. Turning to Slide 13. Our dividend has grown substantially over the past few years, including a 15% increase announced earlier this month to $0.15 per share on a quarterly basis. Our next quarterly dividend is payable on March 3 and provides an annualized dividend payout rate of $0.6 per share. Our plan for annualized dividend growth is an important part of Magnolia's investment proposition and supported by our overall strategy of achieving moderate annual production growth, reducing our outstanding shares and increasing the dividend per share payout capacity of the company.

[Brian Corales, Chief Financial Officer at Magnolia Oil & Gas]

Magnolia continues to have a very strong balance sheet. We ended the quarter with $260,000,000 of cash. Our recently financed senior notes of $400,000,000 do not mature until 02/1932. Including our fourth quarter ending cash balance of $260,000,000 and our undrawn $450,000,000 revolving credit facility, our total liquidity is approximately $710,000,000 Our condensed balance sheet as of December 31 is shown on Slide 14. Turning to Slide 15 and looking at our per unit cash costs and operating income margins.

[Brian Corales, Chief Financial Officer at Magnolia Oil & Gas]

Total revenue per BOE declined year over year due to the decline in oil prices. Our total adjusted cash operating costs, including G and A, were $10.62 per BOE in the fourth quarter of twenty twenty four. Our operating income margin for the fourth quarter was $14.48 per barrel or 38% of total revenue. 95% of the decrease in our quarter over quarter pretax operating margin was driven by the decrease in commodity prices. On Slide 16, Magnolia had a very successful organic drilling program during the year.

[Brian Corales, Chief Financial Officer at Magnolia Oil & Gas]

The total proved developed reserves at year end twenty twenty four were 149,000,000 BOEs. Excluding acquisitions and price related revisions, the company added 44,000,000 barrels of oil equivalent of proved developed reserves during the year. Total drilling and completions capital was $477,000,000 and $24,000,000 resulting in organic proved developed F and D cost of $10.77 per BOE and reflective of our current drilling program. Turning to guidance, we expect our 2025 capital spending for drilling completions and associated facilities to be in the range of $460,000,000 to $490,000,000 which includes an estimate of non op capital that is about the same as 2024 levels. We expect first quarter D and C capital expenditures to be approximately $135,000,000 and anticipate this to be the highest quarterly rate of spending for the year.

[Brian Corales, Chief Financial Officer at Magnolia Oil & Gas]

Total production for the first quarter is estimated to be approximately 94 MBOE a day with 2025 full year total production growth expected to be 5% to 7%. Oil price differentials are anticipated to be approximately a $3 per barrel discount to Magellan East Houston and Magnolia remains completely unhedged for all of its oil and natural gas production. The fully diluted share count for the first quarter of twenty twenty five is expected to be approximately 100 90 five million shares, which is 5% lower than first quarter twenty twenty four levels. We expect our effective tax rate to be approximately 21% with most of this being deferred. Our cash tax rate is expected to be between 7% to 9% for 2025.

[Brian Corales, Chief Financial Officer at Magnolia Oil & Gas]

We are now ready to take your questions.

[Operator]

We will now begin the question and answer session. The first question comes from Neal Dingmann with Truist Securities. Please go ahead.

[Neal Dingmann, Managing Director - Energy Research at Truist Securities]

Congratulations guys, another great quarter. Chris, my first question is just on your well costs, specifically, one time I know you all had a good bit of your well costs included a number of tests that you performed downhole before actually producing the well. I'm just wondering, now when you look at the plan, are you still doing a fair amount of science as you drill some of these Giddens wells or is it now just strictly a development program?

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

We're sort of down the path pretty good here. We've been doing this for a while, several years in getting certainly after COVID fairly consistently. So, the science now is probably far and away more limited maybe to some of the newer areas. And I would tell you that we're more down the development path in Giddings other than maybe some of the appraisal activity, which is a bit different. But as far as pouring actual science down wells, it's more limited right now.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

So it's really more pure development.

[Neal Dingmann, Managing Director - Energy Research at Truist Securities]

No, that's what's great to hear. And then second question just on shareholder return. I believe I continue to think you all have one of the more appropriate dividend and buyback policies. I'm just wondering, assuming you don't probably spend too much terribly on bolt on and other opportunities and the cash position continues to grow to, I don't know, $500,000,000 6 hundred million dollars Are you comfortable with keeping that on the balance sheet or will there be various other strategic plans? Thanks.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

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 with a little bit of patience not believing that it would burn a hole in our pocket for too long. We deployed it when the time was right or when 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 would occur for that long.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

So anyway, I think there'll be things that always come up.

[Operator]

Our next question comes from Oliver Wong with TTH. Please go ahead.

[Oliver Huang, Director at TPH&Co]

Good morning, Chris and Brian, and thanks for taking the questions. I know you all are fairly conservative when it comes to booking of reserves, but it would appear that you all have 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, just kind of given the trajectory of gas prices in the near term to maybe unlock some of that value there?

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

Yes. I guess part of the answer is that we 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 both exactly the same within our extensive position in Giddings, the 550,000 acres, probably not.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

There's probably some variability in the performance or whatnot or any acreage. But 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 a little bit of time.

[Oliver Huang, Director at TPH&Co]

Okay. Makes sense. And maybe for a follow-up question just on well costs. 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 to the drilling side last year. But 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?

[Oliver Huang, Director at TPH&Co]

And if not, is there anything in particular that's keeping you all from kind of taking that step?

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

No, nothing that's preventing us from taking the step. I mean, again, we continue it's 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 million dollars or whatever per undrilled location that we should probably take a 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.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

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 inventory. And over time, 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.

[Operator]

The next question comes from Carlos Collantes with Wolfe Research. Please go ahead.

[Carlos Escalante, Senior Associate at Wolfe Research LLC]

Hi, it's McKinley in for callers. So it's good solid quarter for the team. Thank you guys for taking my questions. So my question is, what does your 2025 capital program of more sales same capital say about your long term sustained capital? And my second question is how close are you guys to trucking a rig even at partial going forward?

[Carlos Escalante, Senior Associate at Wolfe Research LLC]

Thank you.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

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 the type of 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 that would have to be something below $60 before we even thought about that side on oil.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

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.

[Operator]

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

[Zach Parham, Executive Director, Equity Research at JP Morgan]

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.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

Thanks, Zack. 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 You'll see growth in 4Q to 1Q, 1Q to 2Q generally.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

The

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

percentage between quarters may jump around a bit, just depending on the pace of activity. And as we said, the first quarter will be a little bit higher in the highest part of the year in terms of capital, which should see good first half volumes. But then I fully expect to end the year at 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 certainly in the year, maybe 40,000 a day of oil, if not a little bit better.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

I think these numbers are more or less in line with consensus maybe a little bit better.

[Zach Parham, Executive Director, Equity Research at JP Morgan]

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

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

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 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.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

We have had 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.

[Zach Parham, Executive Director, Equity Research at JP Morgan]

Thanks, Chris.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

Thanks.

[Operator]

The next question comes from Noah Hungness with Bank of America. Please go ahead.

[Noah Hungness, Associate at Bank of America Merrill Lynch]

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 or the natural gas or somewhere in the middle?

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

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 of varying quality and size. As we've said often times, 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.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

There isn't anything that 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 be happy the chance to improve our resource set and upside over time. So, we carefully look at those things too. But they are generally

[Noah Hungness, Associate at Bank of America Merrill Lynch]

Sorry.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

Yes, they are. They have tended to be a bit oilier as you would imagine in the lower Eagle Ford.

[Noah Hungness, Associate at Bank of America Merrill Lynch]

Yes, makes sense. And then for my second question, I was just wondering your current CapEx guidance has a range for the splitting it out by area for Karnes between 2025% and Giddings between eighty percent and seventy five percent. How should we think about what would cause it to go one way or the other?

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

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 into the wording of 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 Karnes. It might be slanted a little bit more around some appraisal work that we do in one area versus the other, etcetera. It could be partially timing, But I wouldn't tell you that there's going to be a sizable or significant shift one way or the other.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

I mean, we still like both assets for what they're capable of delivering and providing to the organization, to the company. So I wouldn't expect a big change.

[Operator]

Our next question comes from Neil Mehta with Goldman Sachs. Please go ahead.

[Neil Mehta, Head of Americas Natural Resources Equity Research at Goldman Sachs]

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 milestones that the market should be looking for in terms of continuing to assess how that project is developing?

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

Well, I hope 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 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 maybe provide some more actual feedback or data around our results second half of this year.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

We're really just starting to get at it in terms of this year. So hopefully back half of the year we'll have more to say.

[Neil Mehta, Head of Americas Natural Resources Equity Research at Goldman Sachs]

That's great. We'll stay tuned. And then the follow-up is you 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 mid cap E and P. And so just your perspective on the sustainability of that dividend growth and your ability to continue to achieve 10% type of numbers?

[Neil Mehta, Head of Americas Natural Resources Equity Research at Goldman Sachs]

And how do you balance whether dividends or buybacks are the right use of that incremental dollar?

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

Well, on the dividend, the safety and security of the dividend 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 sort of promises dividend growth, implements a growing dividend and 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 promise. So the dividend I view is a promise to the shareholders. And so 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.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

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 the per share of the dividend. So it's sort of a natural benefit that and plays hand in hand in that growth.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

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 recipe of our overall shareholder return program. And I feel confident that it's we've done the right thing by our shareholders and sort of dollar cost averaging for share repurchases and it's improved everything on a per share metric over time. So the balance of how we're doing it, I think is a reasonable approach.

[Neil Mehta, Head of Americas Natural Resources Equity Research at Goldman Sachs]

Thanks, team. Appreciate it.

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

Thanks.

[Operator]

The next question comes from Jeff Jay with Daniel Energy Partners. Please go ahead.

[Geoff Jay, Partner at Daniel Energy Partners]

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 count down there? I mean, is it incremental or is this sort of a really big deal?

[Christopher Stavros, CEO, President & Director at Magnolia Oil & Gas]

Well, it's a really big deal in terms of what the potential is because you got, as I said, 550,000 acres and we always look to add more opportunistically if and when we can and that might even include some additional lease opportunities with time and some 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 that drilling inventory, 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 and over multiple years, it can be quite sizable.

[Geoff Jay, Partner at Daniel Energy Partners]

Excellent. Thank you. Thanks.

[Operator]

This concludes our question and answer session. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Tom Fitter, Director - Investor Relations
• Christopher Stavros, CEO, President & Director
• Brian Corales, Chief Financial Officer

Analysts

• Neal Dingmann, Managing Director - Energy Research at Truist Securities
• Oliver Huang, Director at TPH&Co
• Carlos Escalante, Senior Associate at Wolfe Research LLC
• Zach Parham, Executive Director, Equity Research at JP Morgan
• Noah Hungness, Associate at Bank of America Merrill Lynch
• Neil Mehta, Head of Americas Natural Resources Equity Research at Goldman Sachs
• Geoff Jay, Partner at Daniel Energy Partners