Magnolia Profit Drops, Production Rises

Magnolia Oil & Gas Corporation reported net income of $97.6 million for the first quarter, down nine percent from the same period in 2023.

The Houston-based company posted adjusted net income of $101.0 million for the quarter, a decrease of 15 percent from the previous-year figure of $119.3 million, according to its latest earnings release.

Magnolia’s total production in the first quarter grew seven percent on a year-over-year basis to 84.8 thousand barrels of oil equivalent per day (boepd), including 37.5 thousand barrels per day of oil. Production at its Giddings and Other segment was 61.4 thousand boepd, providing overall growth of 17 percent compared to last year’s first quarter, including oil production growth of 16 percent, the company said.

Magnolia said its total production volumes benefited from continued strong well performance, in addition to some production from assets acquired last year, as well as a” slightly oilier development program”. Its first-quarter capital spending on drilling, completions, and associated facilities was $119.0 million.

In April, Magnolia acquired oil and gas properties in Giddings from a private operator encompassing roughly 27,000 net acres for approximately $125 million. The assets include total production of approximately one million boepd, in addition to leasehold and royalty acres. The acquisition “significantly increases Magnolia’s working interest in future high-return development areas and adds new acreage which further expands the company’s leading position in the Giddings area,” it said.

“Magnolia’s first quarter performance delivered a solid start to 2024, continuing our strategy of disciplined capital spending, while delivering steady production growth with strong pre-tax margins and consistent free cash flow,” Magnolia President and CEO Chris Stavros said. “Our growing production and continued low reinvestment rate provided free cash flow generation of roughly $117 million. We returned 68 percent of our free cash flow to our shareholders through our recently increased dividend and share repurchase program. Higher oil production of 37.5 thousand barrels per day during the quarter was driven by strong well performance and additional volumes from assets acquired last year”.

“A key objective of Magnolia’s business plan and strategy is to utilize some of the excess cash generated by the business to pursue attractive bolt-on oil and gas property acquisitions. Properties are targeted not to simply replace the oil and gas that has already been produced but importantly, to improve the future opportunity set of our overall business and enhance the sustainability of our high returns,” Stavros outlined.

“We continue to look for bolt-on oil and gas property acquisitions utilizing our technical expertise and where we have a competitive advantage in the development of the Austin Chalk and Eagle Ford formations in South Texas,” he continued.

“While I am proud of our teams’ accomplishments, we continue to seek out areas where we can improve. Our field operations team recently initiated a field-level optimization and cost reduction program throughout our assets. Part of these efforts will employ improved field management systems that will increase efficiencies and optimize processes across the field while capturing synergies from acquired assets. These and other initiatives are expected to deliver a 5 to 10 percent reduction in cash operating costs (LOE) per boe during the second half of the year compared to the first quarter. Our goal is to improve on our track record for generating high operating margins while providing additional free cash flow to either return to our shareholders or reinvest in the business,” he concluded.

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