Magnolia Oil & Gas Corp (MGY)·Q2 2025 Earnings Summary

Executive Summary

• Raised full-year 2025 production growth guidance to approximately 10% (from 7–9%) on stronger well performance and capital efficiencies, while reiterating FY D&C capital at $430–$470 million .
• Q2 2025 delivered record volumes (98.2 Mboe/d; oil 40.0 Mbbl/d) and solid profitability (Operating income margin 34%, Adjusted EBITDAX $223.2M, FCF $107.5M); returned 72% of FCF via dividends and buybacks .
• EPS and revenue modestly beat S&P Global consensus in Q2: EPS $0.41 vs $0.3987 consensus; revenue $318.98M vs $314.00M consensus.*
• Stock-relevant catalysts: guidance raise, continued bolt-on consolidation in Giddings (>18,000 net acres; ~500 Boe/d PDP) and minimal cash taxes expected for FY25 and likely FY26 absent price changes .

What Went Well and What Went Wrong

What Went Well

• Record production and resilient oil mix: total volumes 98.2 Mboe/d (+9% YoY) and oil 40.0 Mbbl/d (+5% YoY), driven by strong well performance, particularly in Giddings (+11% YoY total; +4% YoY oil) .
• Capital efficiency and returns: D&C capital $95.2M (43% of Adjusted EBITDAX), FCF $107.5M, ROCE annualized 18% .
• Strategic bolt-ons expanding core: closed multiple acquisitions (~$40M) adding >18,000 net acres and ~500 Boe/d; development area increased 20% to ~240,000 net acres; management reiterated “appraise, acquire, grow, and further exploit” strategy .
• Quote: “Strong well productivity, capital efficiencies and high operating margins…centered on prudent capital investment, steady production growth, robust pre-tax margins, and reliable free cash flow” — Chris Stavros, CEO .

What Went Wrong

• Price-driven margin compression: revenue/boe $35.68 vs $41.02 last year; operating income margin down to 34% from 40% due largely to lower oil prices despite higher gas/NGL realizations .
• Gathering/processing costs per boe higher YoY ($1.84 vs $1.03), offsetting some LOE improvements .
• Diluted EPS fell 20% YoY ($0.41 vs $0.51); Adjusted EBITDAX down 9% YoY ($223.2M vs $246.1M) on commodity price headwinds .
• Analyst concerns: durability of LOE improvement and service cost trajectory; management expects LOE to normalize (~$5.25/boe Q3) and notes Q4 OCTG tariffs could offset recent OFS deflation .

Financial Results

Core P&L and Profitability vs Prior Quarters

*Values retrieved from S&P Global.

Segment Production Breakdown

KPIs

Versus Wall Street Consensus (S&P Global)

*Values retrieved from S&P Global.

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO strategic message: “Strong well productivity, capital efficiencies and high operating margins…with our continued focus, capital discipline and the competitive advantage gained through our accumulated knowledge in the field…should continue to drive shareholder returns over the long term.” — Chris Stavros .
• Capital deployment: “Spend less capital in 2025 while generating higher-than-expected production…defer and preserve several well completions into 2026” .
• Bolt-on rationale: “Appraise, acquire, grow, and further exploit…increase development acreage in Giddings by 20% to 240,000 net acres” .
• Cost outlook: “LOE exceptionally low at $4.88/boe…normalize to ~$5.25/boe in back half” — Brian Corales .
• Tax outlook: “Minimal cash taxes for 2025…likely similar in 2026 at current product prices” .

Q&A Highlights

• Free cash flow durability and capital efficiency: management prioritizes “drill the best wells with least capital” and notes FY25 growth 10% with ~5% less capex than initial plan .
• Product mix: gassier Giddings wells typically carry strong liquids/oil; rotation across field continues; strong returns broadly .
• Taxes: cash taxes negligible in FY25; likely minimal in FY26 under current price environment .
• LOE and operating costs: Q2 benefited from lower workovers; structural initiatives (chemicals, water hauling) continue; LOE guided to ~$5.25/boe .
• M&A cadence: continued small bolt-ons from private sellers; large packages more complex; bolt-ons strengthen inventory and returns .
• Deferred completions: about six deferred to 2026; will use capacity next year depending on environment .

Estimates Context

• Q2 2025 beat on both EPS and revenue versus S&P Global consensus: EPS $0.41 vs $0.3987; revenue $318.98M vs $314.00M, modest but broad-based beats.*
• Prior quarters also modestly ahead of consensus: Q1 revenue +$7.84M; EPS +$0.006; Q4 2024 EPS +$0.035 and revenue +$1.39M.*
• Estimate implications: raised FY growth guidance and minimal cash taxes could support upward revisions to FY25–FY26 FCF and per-share metrics, even if commodity prices remain range-bound .

*Values retrieved from S&P Global.

Key Takeaways for Investors

• Guidance raise to ~10% FY25 growth with unchanged capex is a clear positive signal of asset quality and capital efficiency .
• Continued bolt-on consolidation of Giddings expands high-return inventory and supports multi-year growth visibility .
• Minimal cash taxes (FY25–FY26) enhance FCF conversion near term; paired with a disciplined reinvestment cap (~55% of EBITDAX), shareholder returns remain robust .
• Cost structure improvements are tangible (LOE down), though watch for Q4 OCTG tariff headwinds that could temper OFS deflation .
• Unhedged stance keeps upside to commodity but increases sensitivity; oil differential to MEH guided at ($3)/bbl .
• Shareholder return policy remains consistent (72% of FCF returned in Q2), with dividend at $0.15 and active buybacks; diluted share count falling (Q3 guide ~191M) .
• Tactical flexibility (deferring ~6 completions) provides optionality to manage growth, costs, and cycle volatility .