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Magnolia Oil & Gas Corp (MGY)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered record production of 96.5 Mboe/d (+14% YoY) and strong profitability: operating income margin 39%, adjusted EBITDAX $248.4M, and free cash flow $110.5M .
  • Magnolia raised 2025 total production growth guidance to 7–9% (from 5–7%) and cut D&C capital to $430–$470M (from $460–$490M), reflecting outperformance in Giddings and capital efficiencies; Q2 production guided ~97 Mboe/d and D&C ~$110M .
  • Wall Street consensus: Revenue beat ($350.3M vs $342.5M*), while S&P Primary EPS showed a slight miss ($0.525* actual vs $0.534* est) despite company-reported diluted EPS of $0.54 . Values retrieved from S&P Global*.
  • Capital returns remained robust: ~$81.7M (74% of FCF) via buybacks and dividends; 2.2M shares repurchased and $0.15 dividend declared (payable June 2, 2025) .

What Went Well and What Went Wrong

What Went Well

  • Record total production and stronger well performance: 96.5 Mboe/d, driven by Giddings (76.7 Mboe/d; +25% YoY) with shallower declines and quick paybacks .
  • Capital efficiency and guidance upgrade: FY25 production growth raised to 7–9% with less capital ($430–$470M), maintaining discipline at ≤55% reinvestment rate .
  • Management tone: “The strong start… improved capital efficiency allows us to raise guidance… while lowering capital spending” — Chris Stavros (CEO) .

What Went Wrong

  • EPS vs S&P consensus: Primary EPS slightly missed ($0.525* vs $0.534*), likely reflecting S&P methodology differences versus company diluted EPS $0.54 . Values retrieved from S&P Global*.
  • Cash balance declined to $247.6M from $260.0M sequentially, reflecting active capital program and returns; net debt rose to ~$152M (cash $248M vs $400M notes) .
  • GP&T costs increased alongside higher gas prices; management noted GP&T generally moves with gas price directionality (contango) .

Financial Results

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$319.4 $333.1 $326.6 $350.3
Diluted EPS ($)$0.46 $0.52 $0.44 $0.54
Operating Income Margin (%)39% 39% 38% 39%
Net Income ($USD Millions)$97.6 $105.9 $88.7 $106.6
Total Production (Mboe/d)84.8 90.7 93.1 96.5

Consensus vs actual (Q1 2025):

MetricConsensusActualOutcome
Revenue ($USD Millions)$342.5*$350.3 Bold beat
Primary EPS ($)$0.534*$0.525*Slight miss

Values retrieved from S&P Global*.

Segment breakdown (production volumes):

AreaQ1 2024 Total (Mboe)Q1 2025 Total (Mboe)
Combined7,715 8,689
Karnes2,126 1,789
Giddings5,589 6,900

KPIs

KPIQ3 2024Q4 2024Q1 2025
Adjusted EBITDAX ($USD Millions)$243.6 $235.8 $248.4
Free Cash Flow ($USD Millions)$126.1 $90.3 $110.5
D&C Capital ($USD Millions)$103.1 $131.6 $130.4
LOE ($/boe)$5.33 $5.36 $5.42
Operating Income Margin (%)39% 38% 39%
Oil Production (Mbbls/d)38.9 38.8 39.1

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total production growth (YoY)FY 20255–7% 7–9% Raised
D&C capitalFY 2025$460–$490M $430–$470M Lowered (~>5%)
Total productionQ2 2025—~97 Mboe/d New detail
D&C capitalQ2 2025—~$110M New detail
Oil differential (to MEH)Q2 2025~$3/bbl ~$3/bbl Maintained
Fully diluted share countQ2 2025~195M (Q1 guide) ~193M Lowered
Effective tax rateFY 2025—~21% New detail
Cash tax rateFY 2025—~7–9% New detail
DividendQ2 2025$0.15 declared (Q1) $0.15 payable Jun 2 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q1 2025)Trend
Capital discipline (≤55% reinvestment)FY25 plan ≤55% of EBITDAX; steady 2 rigs/1 crew Reiterated; Q1 reinvestment ~53%; capex cut with growth raised Strengthening discipline
Giddings outperformance2024: strong productivity, expanded development area Newer gassier area outperformed with shallower declines, quick paybacks Positive momentum
Service costs/OCTG tariffsContracts through mid-2025; efficiencies improved costs Pricing roughly flat; minor OCTG increases tied to steel tariffs; diesel relief Stable-to-easing
M&A bolt-onsFocus on small bolt-ons in EF/Austin Chalk; bid-ask wider Continued focus; Q1 added $24M bolt-ons without production Selective
Unhedged commodity exposureUnhedged policy reiterated Unhedged; MEH differential ~$3/bbl Unchanged
GP&T dynamics vs gas prices—GP&T moves with gas price directionality Awareness of cost linkage
Dividend and buybacks15% dividend increase to $0.15; 1% buybacks/quarter $0.15 dividend; 74% of FCF returned; 2.2M shares repurchased Ongoing returns

Management Commentary

  • “The strong start to this year… allows us to raise our guidance for 2025 year-over-year production growth to a range of 7 to 9 percent… At the same time, we are lowering… capital spending to $430 to $470 million” — Chris Stavros, CEO .
  • “We made a tactical decision to bring a couple of multi-well pads online in the first quarter that are in a gassier portion of Giddings… The wells not only exceeded our performance expectations but are also exhibiting a shallower decline profile” — CEO .
  • “Operating income margin for the first quarter was $15.63 per BOE or 39% of our total revenue… highlighting our success reducing our lease operating expenses last year” — CFO Brian Corales .

Q&A Highlights

  • Giddings well performance and area characterization: management cited ~a dozen wells in a newer area with strong oil rates (~500 bbl/d average per well), shallower declines, and high single-digit F&D per barrel .
  • Sustaining capital/outlook: completion deferrals (~half a dozen) create flexibility; capex range $430–$470M seen as sufficient given efficiencies and potential softening OFS pricing .
  • Capital allocation between gas/oil windows: returns robust across streams; oil expected to grow low single digits, balanced development across 200k-acre development area .
  • Service costs: pricing roughly flat QoQ; minor OCTG increases tied to steel tariffs offset by diesel relief; potential softness in back half if commodities stay subdued .
  • GP&T cost trend: generally moves with gas price directionality (e.g., higher with rising gas) .
  • Oil mix: oil cut expected roughly stable around ~40–41% through 2025, with slight absolute oil growth .

Estimates Context

  • Revenue beat: $350.3M vs consensus $342.5M*; production outperformance (Giddings wells, better gas realizations) drove upside . Values retrieved from S&P Global*.
  • EPS: S&P Primary EPS actual $0.525* vs $0.534* consensus (slight miss), while company-reported diluted EPS was $0.54 . Values retrieved from S&P Global*.
  • Implication: Consensus likely nudges higher on production trajectory and margin durability, while EPS models should reconcile Primary vs diluted definitions and non-GAAP adjustments .

Key Takeaways for Investors

  • Guidance upgrade with lower capex is a high-quality positive surprise: FY25 growth 7–9% with $430–$470M D&C; reinvestment ≤55% supports sustained FCF return program .
  • Giddings continues to exceed expectations, with newer pads showing strong productivity and shallower declines—key driver of per-share value compounding and operating leverage .
  • Cost discipline remains intact: operating income margin held at 39% despite lower oil prices; LOE per boe contained; diesel relief offsets minor OCTG tariff-related increases .
  • Capital returns: 74% of FCF returned in Q1, $0.15 dividend payable June 2, and ongoing buybacks; remaining authorization 9.6M Class A shares .
  • Near-term setup: Q2 production ~flat (~97 Mboe/d) as activity normalizes; watch GP&T trajectory if gas prices rise and any incremental deferrals to optimize returns .
  • Risk/defense: Unhedged profile increases commodity sensitivity, but low leverage (net debt ~0.2x Q1 annualized EBITDAX) and liquidity ~$698M provide resilience .
  • Modeling notes: Align EPS definitions (Primary vs diluted), incorporate tax guidance (effective ~21%; cash ~7–9%), and reflect area mix impacts on realizations and GP&T .
Bold = beat/miss definition used in Financial Results/Consensus tables.