Magnolia Oil & Gas NYSE: MGY reported a stronger start to 2026, with management highlighting year-over-year production growth, steady free cash flow generation and a busy quarter of bolt-on acquisitions across its South Texas operating areas.
Chairman, President and Chief Executive Officer Chris Stavros said the company’s first-quarter results reflected “consistent performance” under Magnolia’s business model, which emphasizes a low reinvestment rate, high operating margins and moderate production growth.
Total company production rose 6% from a year earlier to 102.6 thousand barrels of oil equivalent per day, while oil production increased 4% to 40.7 thousand barrels per day. Stavros said Giddings was the primary driver of growth, with total production in that area up 9% year over year and oil production up 8%. Giddings volumes reached a company record and accounted for about 82% of Magnolia’s total production during the quarter.
Magnolia reported first-quarter net income of approximately $101 million, or $0.54 per diluted share. Adjusted EBITDAX was $253 million, and drilling and completion capital totaled roughly $129 million, representing 51% of adjusted EBITDAX. The company generated about $146 million of free cash flow, while pre-tax operating margins averaged 36%.
Bolt-on acquisitions add acreage in Karnes and Giddings
Stavros said the first quarter was active for acquisitions, with Magnolia closing several small bolt-on oil and gas property transactions totaling $155 million. The deals added roughly 6,200 net acres and about 500 barrels of oil equivalent per day of low-decline proved developed producing volumes, about 45% of which was oil.
In the Karnes area, Stavros said the acquired acreage helped create a largely contiguous 10,000-gross-acre block of primarily undeveloped acreage in the core of the Eagle Ford trend across Karnes and Gonzales counties. The transactions increased Magnolia’s working interest in the area to about 93%, with an average net revenue interest of roughly 80%.
“At our current development pace in the Karnes area, this acquisition adds multiple years of development locations,” Stavros said, adding that the larger contiguous position should allow for longer lateral development.
In Giddings, the company acquired additional working interests and royalty interests across about 45,000 gross acres, along with new contiguous acreage. Stavros said the deals support Magnolia’s strategy of “buying more of what we already own” and leverage the company’s technical knowledge from drilling and completion work in the Austin Chalk and Eagle Ford formations.
During the question-and-answer portion of the call, Stavros described the Karnes acquisition as a “tactical commercial transaction” that created a “blank canvas” for development. He said the asset could be worked into Magnolia’s drilling program “sooner rather than later,” but would not change the company’s overall allocation of capital or activity.
Shareholder returns and balance sheet remain central
Senior Vice President and Chief Financial Officer Brian Corales said Magnolia began the quarter with $267 million of cash and ended with $124 million. During the quarter, the company paid $31 million in dividends and used $53 million for share repurchases. It also spent $128 million on drilling, completion, facilities and leasehold, and $155 million on bolt-on acquisitions.
Stavros said Magnolia returned $83 million to shareholders through dividends and repurchases, buying back just over 1% of its outstanding shares during the quarter. He also noted that EnerVest, Magnolia’s original private equity shareholder, completed the sale of its remaining ownership position during the period, eliminating the company’s remaining Class B shares outstanding at quarter-end.
Corales said Magnolia has repurchased 83.7 million shares since beginning its buyback program in the second half of 2019, reducing weighted average diluted shares outstanding by 28% net of issuances. The company had 11.6 million shares remaining under its repurchase authorization for open-market repurchases.
The company’s weighted average diluted share count was 185.9 million in the first quarter, down by about 2 million shares sequentially. Corales said Magnolia’s fully diluted share count for the second quarter is expected to be 185 million shares, 4% below the year-earlier period.
Magnolia also raised its quarterly dividend by 10% earlier in 2026 to $0.165 per share. The next quarterly dividend is payable June 1, with an annualized payout rate of $0.66 per share.
Guidance unchanged despite higher oil prices
Management reiterated its full-year 2026 outlook for total production growth of approximately 5% and its drilling and completion capital budget of $440 million to $480 million. Magnolia plans to continue running two rigs and one completion crew.
For the second quarter, Corales said total production is estimated at approximately 105,000 barrels of oil equivalent per day. He added that oil realizations have improved and are expected to be similar to Magellan East Houston benchmark pricing during the quarter.
Stavros said recent narrowing in oil price differentials should support higher realizations in the second quarter. Magnolia remains completely unhedged across its oil and natural gas production, which management said should allow the company to benefit from stronger commodity prices.
Asked whether higher oil prices might prompt Magnolia to accelerate activity, Stavros said the company could consider additional appraisal work, workovers or possibly an exploration well, but he emphasized that management is not planning a dramatic shift.
“I view this more as a marathon, not a sprint,” Stavros said. “With every barrel we accelerate and pull forward, it simply means I have to replace that barrel that much quicker.”
Management sees acquisitions staying close to core areas
Stavros said Magnolia continues to evaluate additional acquisition opportunities but remains focused on assets it understands in and around its existing operating areas. He said investors should not expect the company to pursue out-of-basin deals or a transaction intended to “shock and awe.”
“All of what we look at is really what we understand and within our ability to manage and in and around our neighborhood,” Stavros said.
Management said royalty and working interest acquisitions are intended to improve Magnolia’s economics and margins, rather than serve as financial assets to be monetized separately. The company said royalty-related production is more than 5,000 barrels of oil equivalent per day and supports margins by increasing the company’s ownership of its existing assets.
Corales said Magnolia ended the quarter with $124 million of cash, no borrowings on its $450 million revolving credit facility and $400 million of senior notes that mature in 2032. Total liquidity at quarter-end was approximately $574 million.
About Magnolia Oil & Gas NYSE: MGY
Magnolia Oil & Gas Corp NYSE: MGY is an independent exploration and production company focused on the acquisition, development and optimization of onshore oil and gas assets in South Texas. Headquartered in Houston, the company concentrates its efforts on the Eagle Ford Shale, where it holds significant working interests in key producing counties.
The company's core operations center on horizontal drilling and multi-stage completions designed to extract light crude oil, natural gas and natural gas liquids (NGLs).
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