HOUSTON, Texas – Magnolia Oil & Gas Corp (NYSE:MGY) has entered into a material definitive agreement, amending and restating its existing senior secured reserve-based revolving credit facility (RBL Facility). The agreement, effective today, provides Magnolia with a borrowing base of $800 million and a maximum commitment of $1.5 billion, including a $50 million sublimit for letters of credit.
The Amended and Restated RBL Facility, managed by Magnolia Operating, a wholly-owned indirect subsidiary of Magnolia Oil & Gas Corporation, is set to mature on November 13, 2029. It may mature earlier if certain conditions related to the company's 6.0% Senior Notes due 2026 are met. The facility is backed by guarantees from specific Magnolia Operating parent companies and subsidiaries and is secured by certain oil and natural gas properties.
Interest rates on the facility are tied to the term SOFR rate or the alternative base rate, with an added margin depending on Magnolia Operating's utilization of the facility. The company also incurs a quarterly commitment fee on the undrawn portion of the facility, which varies based on utilization levels.
Magnolia Operating must adhere to specific financial covenants, maintaining a leverage ratio of less than 3.50 to 1.00 and a current ratio of greater than 1.00 to 1.00. These covenants are standard for this type of financing and help ensure the company's financial stability.
In other recent news, Magnolia Oil & Gas has announced plans for a $400 million private placement of senior unsecured notes due 2032, with the goal of fully repurchasing and redeeming the company's outstanding 6.00% Senior Notes due 2026. This move is subject to market conditions and will be conducted through a private offering memorandum. In financial performance, Magnolia reported a significant 18% increase in oil production year-over-year and a net income of $106 million for Q3, alongside a generation of $126 million in free cash flow, returning 70% to its shareholders.
The company also plans to maintain a disciplined capital expenditure of approximately $470 million for 2024. Despite lower total revenue per barrel due to falling oil prices, Magnolia managed to reduce its field-level operating costs. The company has a strong balance sheet, including $276 million in cash and total liquidity of $726 million, positioning it well for strategic investments and growth. However, Magnolia has expressed concerns over reliability and predictability in midstream operations due to ongoing power issues, acknowledging potential challenges in midstream facilities and power generation. Despite these potential headwinds, Magnolia remains committed to its growth strategy and shareholder value.
InvestingPro Insights
Magnolia Oil & Gas Corp's (NYSE:MGY) recent amendment to its credit facility aligns well with its current financial position and future prospects. According to InvestingPro data, the company boasts a market capitalization of $5.32 billion and operates with a moderate level of debt, which is consistent with the newly established $800 million borrowing base.
The company's financial health is further underscored by its strong profitability metrics. With a P/E ratio of 13.51 and an EBITDA of $937.7 million for the last twelve months as of Q3 2024, Magnolia demonstrates solid earnings potential relative to its stock price. This financial strength is likely a key factor in securing favorable terms for the amended credit facility.
InvestingPro Tips highlight that Magnolia has raised its dividend for 4 consecutive years, indicating a commitment to shareholder returns. This is supported by a current dividend yield of 1.92% and a notable dividend growth of 13.04% over the last twelve months. The company's ability to maintain and grow its dividend while securing a substantial credit facility suggests prudent financial management.
It's worth noting that Magnolia is trading near its 52-week high, with the stock price at 96.85% of its peak. This could reflect market confidence in the company's recent financial decisions, including the credit facility amendment.
For investors seeking more comprehensive analysis, InvestingPro offers additional tips and insights. Currently, there are 6 more InvestingPro Tips available for Magnolia Oil & Gas Corp, providing a deeper understanding of the company's financial position and market performance.
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