MGY

Business Context and Reporting Period

Company: Magnolia Oil & Gas Corp (MGY)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Year ended December 31, 2025
Operations: Independent oil and natural gas company focused on the Eagle Ford Shale (Karnes area) and Austin Chalk (Giddings area) in South Texas. The company operates in a single reportable segment.

Key Financial Metrics

Production (Average Daily): 99,793 boe/d in 2025 (up from 89,709 boe/d in 2024).
Proved Reserves (Year-End): 210.2 MMboe (166.6 MMboe developed; 43.6 MMboe undeveloped).

Material Changes vs. Prior Period

• Revenue Mix Shift: While total revenue remained flat, the composition changed significantly. Oil revenue decreased by $128.6 million due to a 15% drop in average oil prices ($63.18/bbl vs. $74.66/bbl), partially offset by a 4% production increase. Conversely, natural gas revenue surged $100.0 million, driven by a 79% price increase ($2.76/Mcf vs. $1.54/Mcf) and a 17% production increase.
• Profitability: Net income attributable to Class A common stock declined 11% to $325.3 million, primarily due to lower oil prices and higher interest expense ($21.6 million vs. $14.4 million).
• Cost Efficiency: Lease operating expenses per boe decreased to $5.12 from $5.51, and Depreciation, Depletion, and Amortization (DD&A) per boe dropped to $12.02 from $12.62, reflecting operational efficiencies and reserve growth.
• Capital Structure: The company maintained a debt-free status on its revolving credit facility (RBL) with $450.0 million in available capacity. The 2032 Senior Notes ($400 million principal) remain outstanding.

Guidance, Outlook, and Risks

Management Commentary & Strategy: Magnolia continues to prioritize disciplined capital allocation, spending within cash flow to maintain low financial leverage. The strategy focuses on moderate organic production growth, high full-cycle operating margins, and returning capital to shareholders via dividends and share repurchases. The company operated two rigs in 2025.

Shareholder Returns:

• Dividends: Declared $113.1 million in cash dividends to Class A shareholders in 2025 ($0.60 per share annually).
• Repurchases: Repurchased 8.9 million shares for $205.5 million in 2025. On February 5, 2026, the board increased the repurchase authorization by 10.0 million shares, bringing the total authorization to 60.0 million shares.

Risks and Contingencies:

• Commodity Price Volatility: Significant exposure to fluctuations in oil, natural gas, and NGL prices.
• Regulatory Environment: Ongoing uncertainty regarding EPA methane emission rules, the Waste Emissions Charge (WEC), and potential changes in federal climate policy following the 2025 election and executive orders.
• Geographic Concentration: Substantially all assets are located in South Texas, exposing the company to regional weather events (hurricanes, winter storms) and local regulatory changes.
• Customer Concentration: Two customers accounted for 61% of combined revenue in 2025.

Investor Verification Checklist

• Reserve Estimates: Verify the 210.2 MMboe proved reserve estimate prepared by Miller and Lents, specifically the 43.6 MMboe of proved undeveloped reserves planned for development within one year.
• Debt Covenants: Confirm continued compliance with the RBL Facility leverage ratio (<3.50:1) and current ratio (>1.00:1) covenants.
• Regulatory Compliance: Monitor the status of EPA methane regulations and the potential impact of the "One Big Beautiful Bill Act of 2025" on tax provisions and R&D deductions.
• Share Repurchase Execution: Track the utilization of the newly expanded 60.0 million share repurchase authorization.
• Customer Concentration: Assess the stability of contracts with the two primary customers representing 61% of revenue.