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Magnolia Oil & Gas Corp (MGY)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 delivered solid operational execution with record production of 93.1 Mboe/d (+9% YoY) and oil at 38.8 Mbbl/d, while GAAP diluted EPS fell to $0.44 on lower commodity prices; operating margin compressed to 38% from 43% YoY as price realizations declined .
  • 2025 outlook targets 5–7% total production growth on flat D&C capital of $460–$490mm, with Q1’25 ~94 Mboe/d and ~$135mm D&C; company remains fully unhedged and expects ~$3/bbl MEH oil differential .
  • Capital returns remain aggressive: 88% of 2024 FCF (~$430mm) returned via buybacks/dividends; quarterly dividend raised 15% to $0.15 ($0.60 annualized) and buyback authorization increased by 10mm shares .
  • Catalysts: sustained LOE discipline ($5.36/boe in Q4), ratable 2025 growth, appraisal/delineation in Giddings, and continued capital return cadence; risks include commodity exposure (no hedges) and potential midstream/power reliability outside Magnolia’s control .

What Went Well and What Went Wrong

  • What Went Well

    • Delivered record quarterly volumes: 93.1 Mboe/d (+9% YoY) with strong Giddings growth (+14% YoY to 71.8 Mboe/d) and oil +17% YoY in Giddings .
    • Field-level costs reduced: LOE $5.36/boe in Q4 (down ~10% vs Q1’24) supporting margins and FCF; management emphasized successful cost program and vendor/OFS efficiencies .
    • Shareholder returns and balance sheet: 88% of 2024 FCF returned; dividend up 15% to $0.60 annualized; authorization lifted; ended Q4 with $260mm cash and undrawn $450mm RCF (~$710mm liquidity) .

  • What Went Wrong

    • Margin compression from commodity prices: operating income margin fell to 38% vs 43% YoY; adjusted cash operating margin to 72% vs 74% .
    • Free cash flow down QoQ: $90.3mm in Q4 vs $126.1mm in Q3 and $131.3mm in Q4’23, reflecting lower pricing and higher D&C cadence late in the year .
    • EPS down YoY/QoQ: diluted EPS $0.44 vs $0.53 (Q4’23) and $0.52 (Q3’24); CFO cited pricing as ~95% of pretax margin decrease QoQ in Q4 .

Financial Results

MetricQ4 2023Q3 2024Q4 2024Consensus (Q4 2024)
Revenues ($MM)$322.6 $333.1 $326.6 N/A – SPGI consensus unavailable
Diluted EPS ($)$0.53 $0.52 $0.44 N/A – SPGI consensus unavailable
Adjusted EBITDAX ($MM)$240.0 $243.6 $235.8 N/A – SPGI consensus unavailable
Operating income margin (%)43% 39% 38% N/A
Adjusted cash operating margin (%)74% 73% 72% N/A
Total production (Mboe/d)85.414 90.702 93.096 N/A
Oil production (Mbbl/d)35.466 38.902 38.821 N/A
LOE ($/boe)$5.15 $5.33 $5.36 N/A
Free cash flow ($MM)$131.3 $126.1 $90.3 N/A
D&C Capex ($MM)$91.5 $103.1 $131.6 N/A

Segment production (Karnes vs Giddings)

MetricQ4 2023Q4 2024
Karnes Total (Mboe)2,062 1,961
Giddings Total (Mboe)5,796 6,604
Karnes Avg MBoe/d22.4 21.3
Giddings Avg MBoe/d63.0 71.8
Karnes Oil (MBbls)1,213 1,163
Giddings Oil (MBbls)2,050 2,409

KPIs

MetricQ4 2023Q3 2024Q4 2024
Cash balance ($MM)$401.1 $276.1 $260.0
Adjusted EBITDAX ($MM)$240.0 $243.6 $235.8
Free cash flow ($MM)$131.3 $126.1 $90.3
D&C capex ($MM)$91.5 $103.1 $131.6
Diluted weighted avg shares (MM)206.5 198.4 196.2

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
D&C Capital ($MM)FY 2025N/A$460–$490 New
Total Production GrowthFY 2025N/A5%–7% YoY New
Oil Differential (to MEH)FY 2025N/A~($3)/bbl New
Fully diluted share count (MM)Q1 2025N/A~195 New
D&C Capital ($MM)Q1 2025N/A~$135 New
Total Production (Mboe/d)Q1 2025N/A~94 New
Dividend per share (quarterly)Ongoing$0.13 (prior rate) $0.15 (annual $0.60) Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
LOE/cost disciplineInitiated field-level program; LOE down ~10% QoQ to $5.40/boe; aim to sustain in 2H LOE $5.33/boe; 11% lower vs Q1; 95% of margin decline driven by prices QoQ LOE $5.36/boe; mgmt reaffirms cost gains and vendor/OFS efficiencies Improving and sustained
Reinvestment rate/capex efficiency50% of EBITDAX; ceiling 55%; steady model Capex $103mm (42% of EBITDAX); pulled one 4-well pad forward 2025 D&C flat YoY; 5–7% growth expected Efficient/steady
Production growth/mixOil resilient; Giddings core expanded >200k net acres 90.7 Mboe/d; Giddings +12% YoY; midstream outages resolved 93.1 Mboe/d; Giddings +14% YoY; oil +17% in Giddings Positive
Hedging/basisUnhedged philosophy reiterated Explicitly fully unhedged; basis hedging avoided (Q3 Q&A) “Completely unhedged” reiterated for 2025 Unchanged
M&A/bolt‑ons$125mm bolt-on; expanding development area ~$15mm small bolt‑ons; pipeline of opportunities Continued appetite for accretive bolt‑ons; authorization for buybacks increased Active/targeted
Midstream/power reliability—Noted outages/power reliability risk with third parties (Q3 Q&A) No new issues raised in Q4; plan ratable growth through 2025 Stabilized
Capital returns/dividendOngoing repurchases; dividend growth plan Returned ~70% of FCF; dividend $0.13 88% of FY24 FCF returned; dividend raised 15% to $0.60 annual Increasing returns

Management Commentary

  • “Steady, reliable, and consistent… high-quality assets and continued low reinvestment rate of 50 percent of adjusted EBITDAX delivered 9 percent total company production growth and 11 percent oil growth year over year” — Chris Stavros, CEO .
  • “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.” — Brian Corales, CFO .
  • “Magnolia’s plants to operate 2 drilling rigs and 1 completion [crew] during 2025… D&C capital spending… $460 to $490 million… deliver total annual production growth of 5% to 7%.” — CEO .
  • “Magnolia remains completely unhedged for all its oil and natural gas production.” — Company guidance .

Q&A Highlights

  • Giddings program now largely development: “The science now is… more limited… we’re more down the development path in Giddings” .
  • Capital/optional cash: Comfortable holding cash temporarily and deploying opportunistically into bolt‑ons when attractive .
  • Gas inventory optionality: Cost reductions are improving well economics; appraisal work in 2025 could expand what works over time .
  • Well design/costs: Company continues testing to expand lateral footage and optimize, adding “tens of thousands of incremental lateral feet” to inventory .
  • 2025 cadence: Expect ratable growth through the year; potential to approach triple‑digit Mboe/d run-rate and ~40 Mbbl/d oil by year-end 2025 .
  • Karnes appraisal: Early wells encouraging, but still being studied; could complement Karnes development if proven .
  • M&A lens: Focus on oily Eagle Ford packages that improve resource set and per‑share value over time .

Estimates Context

  • Wall Street (S&P Global) consensus for Q4 2024 revenue/EPS/EBITDA was unavailable at the time of this analysis due to data access limits. As a result, estimate comparisons are not shown (default source: S&P Global).
  • Given company commentary and pricing-driven margin compression, near-term estimate revisions may modestly reflect: slightly lower realized pricing and unit margins, partially offset by stable LOE and steady 2025 volume growth outlook .

Key Takeaways for Investors

  • 2025 guide implies durable, capital-efficient growth: 5–7% total growth on flat D&C ($460–$490mm) with ratable quarterly volumes, supporting a steady FCF profile at current strip .
  • Structural cost work provides cushion: LOE at $5.36/boe and broader cost reductions underpin margins and limit downside if prices soften .
  • Shareholder yield remains a core pillar: 88% of 2024 FCF returned; dividend raised 15% (annual $0.60) with ongoing buybacks (11.7mm shares remaining authorization) .
  • High-quality Giddings engine: Continued delineation/appraisal and multi‑well pad focus should sustain capital efficiency and per‑share growth; watch for appraisal updates in 2H25 .
  • Full commodity exposure: No oil/gas hedges heightens sensitivity to price swings (positive leverage in upcycle; risk in downcycle) .
  • Balance sheet flexibility: ~$710mm liquidity and low net leverage (0.1x Q4 annualized adjusted EBITDAX) enable counter‑cyclical bolt‑ons .
  • Near-term trading setup: Dividend increase, flat capex with growth, and cost discipline are supportive; sensitivity remains to crude/NGL realizations and any third‑party midstream/power issues (not acute in Q4) .