Earnings call transcript: Magnolia Oil & Gas Q2 2025 revenue beats forecast

Magnolia Oil & Gas reported its Q2 2025 earnings, meeting EPS expectations and surpassing revenue forecasts. The company posted an EPS of $0.41, aligning with analyst predictions, while revenue reached $318.98 million, exceeding the forecast of $313.91 million. Following the announcement, the stock saw a premarket increase of 2.54%, trading at $25.

Key Takeaways

• Magnolia Oil & Gas met EPS expectations but beat revenue forecasts.
• The stock responded positively in premarket trading, rising 2.54%.
• The company increased its full-year production growth guidance to 10%.
• Capital spending estimates for 2025 were lowered to $430-$470 million.
• Magnolia completed strategic acquisitions to expand its acreage.

Company Performance

Magnolia Oil & Gas demonstrated a steady performance in Q2 2025, with significant growth in production and strategic acquisitions. The company’s focus on high-return, low-capital-intensity development is evident in its record quarterly production of 98,200 barrels of oil equivalent per day, marking a 5% year-over-year growth in total oil production. Additionally, the company expanded its Giddings development acreage by 20%.

Financial Highlights

• Revenue: $318.98 million, surpassing the forecast of $313.91 million
• Earnings per share: $0.41, meeting analyst expectations
• Adjusted Net Income: $81 million
• Adjusted EBITDAX: $222 million
• Free Cash Flow: $107 million

Earnings vs. Forecast

Magnolia Oil & Gas met EPS expectations with a reported $0.41, matching the forecast. However, the company surprised on the upside with revenue, reporting $318.98 million against a forecast of $313.91 million, a 1.62% surprise. This performance aligns with the company’s strategic focus on production efficiency and operational improvements.

Market Reaction

Following the earnings release, Magnolia Oil & Gas saw a positive premarket reaction, with shares rising 2.54% to $25. This movement contrasts with the previous day’s close of $24.38. The stock’s performance reflects investor optimism driven by the company’s revenue beat and strong operational results.

Outlook & Guidance

Looking ahead, Magnolia Oil & Gas has increased its full-year 2025 production growth guidance to approximately 10%. The company also projects Q3 2025 total production to reach 99,000 barrels of oil equivalent per day and plans to maintain capital discipline with D&C capital expenditures estimated at $115 million for the quarter.

Executive Commentary

"Our goal is to drill the best wells with the least amount of capital as possible in order to generate the highest amount of free cash flow," stated Chris Stavros, CEO. He emphasized the success of the Giddings field, noting, "Giddings has far exceeded our expectations as far as what it’s been able to generate in terms of growth."

Risks and Challenges

• Volatility in oil and gas prices could impact revenue.
• Deferred well completions may affect future production timelines.
• Potential service cost deflation could influence operational expenses.
• Legislative changes might alter tax implications despite minimal expected cash taxes for 2025 and 2026.
• Continued focus on capital efficiency requires careful management to sustain growth.

Q&A

During the earnings call, analysts inquired about Magnolia’s Giddings field development strategy and the potential for future mergers and acquisitions. Executives addressed these queries by highlighting their tactical decisions in well completions and the strategic importance of expanding their acreage.

Full transcript - Magnolia Oil & Gas Corp (MGY) Q2 2025:

Kim, Moderator: Good morning, everyone, and thank you for participating in the Magnolia Oil and Gas Corporation Second Quarter twenty twenty five Earnings Conference Call. My name is Kim, and I will be your moderator for today’s call. At this time, all participants will be placed in a listen only mode as our call is being recorded. I will now turn the call over to Magnolia’s management for their prepared remarks, which will be followed by a brief question and answer session.

Tom, Unspecified, Magnolia Oil and Gas: Thank you, Kim, and good morning, everyone. Welcome to Magnolia Oil and Gas’ second quarter earnings conference call. Participating on the call today are Chris Stavros, Magnolia’s Chairman, President and Chief Executive Officer and Brian Corrales, Senior Vice President and Chief Financial Officer. As a reminder, today’s conference call contains certain projections and other forward looking statements within the meaning of the federal securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements.

Additional information on risk factors that could cause results to differ is available in the company’s annual report on Form 10 ks filed with the SEC. A full Safe Harbor can be found on Slide two of the conference call slide presentation with the supplemental data on our website. You can download Magnolia’s second quarter twenty twenty five earnings press release as well as the conference call slides from the Investors section of the company’s website at www.magnoliaoilgas.com. I will now turn the call over to Mr. Chris Savros.

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: Thank you, Tom, and good morning, everyone. We appreciate you joining us today for a discussion of our second quarter twenty twenty five financial and operating results. I plan to highlight our second quarter results, which define another strong quarter of consistent execution for Magnolia and one that has delivered an even more capital efficient program than what we outlined earlier this year. In addition to our strong results second quarter results, I’ll point out some small bolt on acquisitions that we completed within the last month and emphasize how this continues to benefit both our operational and financial performance even through periods of product pricing volatility. Brian will then review our second quarter financial results in greater detail and provide some additional guidance before we take your questions.

Turning to Slide three of the investor presentation, Magnolia delivered strong results across all financial and operational metrics during the second quarter. Our total adjusted net income for the quarter was $81,000,000 with adjusted EBITDAX of $222,000,000 D and C capital was only $95,000,000 during the second quarter providing a reinvestment rate of just 43% highlighting our asset quality and the efficiency of our capital program. Pretax operating margins were 34% in the quarter and our annualized return on capital employed was 18%. Magnolia generated free cash flow of $107,000,000 and we returned 72% or approximately approximately $78,000,000 of that free cash flow to our shareholders through our growing base dividend and ongoing share repurchase program. The company achieved another record quarterly production rate with total volumes of 98,200 barrels of oil equivalent per day during the quarter, which was above our earlier guidance and the result of continued strong well performance from both earlier wells and some newer completions.

This represents year over year production growth of 9% with total production at Giddings showing growth of 11%. Second quarter total oil production of 40,000 barrels per day also set a new company record and remained resilient representing 5% year over year growth. As a result of the continued strong well performance throughout our asset base, we have raised our full year 2025 production growth guidance to approximately 10% from the prior range of 7% to 9% growth. Notably and because of the additional operational flexibility and higher growth afforded to us by the better well performance and capital efficiencies, we are continuing with our plan to defer and preserve several well completions into 2026 and maintaining our estimate of 2025 capital spending in the range of $430,000,000 to $470,000,000 Simply put, our better than expected results seen during the first half of the year allows us to spend less capital in 2025, while generating higher than expected production and advances our goal of being the most efficient operator of best in class oil and gas assets and generating high returns on those assets while deploying the least amount of capital. Second quarter results are an ideal example of our team’s success in executing this strategy and with our recent financial results exhibiting this principle.

We were able to use some of the excess cash generated by the business to close on multiple oil and gas property acquisitions from several small private operators during late June and early July totaling about $40,000,000 These bolt on transactions are shown on Slide four added approximately 18,000 net acres in Giddings including roughly 500 barrels of oil equivalent per day of production. This acreage is contiguous to our current Giddings position and adds new leases, increases our working interest in existing leases while also adding new royalty acreage. These acquisitions further strengthen Magnolia and not simply by adding a small amount of oil and gas production, but more importantly by expanding our prospects and extending the durability of our high return business. We have regularly deployed this similar approach in Giddings of appraise, acquire, grow and further exploit since the company’s inception and leveraging off the significant subsurface knowledge and experience we have gained while operating in the Giddings field. Our pursuit of this strategy has allowed us to increase the extent of our development acreage in Giddings by an additional 20% to 240,000 net acres, which now represents more than 40% of our net acreage position in the area.

This increase includes approximately 30,000 net acres from organic appraisal efforts within our existing acreage and roughly 10,000 net acres from the recent bolt on deals. The Giddings area has a large amount of oil and gas in place we will continue to appraise and learn more about this asset over time, feeling confident that our development acreage in the area will continue to grow. Strong well productivity, capital efficiencies and high operating margins are all features that are prevalent in our Giddings asset area. These high quality attributes along with our continued focus, capital discipline and competitive advantages gained throughout our accumulated knowledge in the field are responsible for much of Magnolia’s overall success. A core competency of Magnolia is acquiring bolt on oil and gas properties that have similar attractive operational and financial characteristics to our existing core assets.

We will continue to look for additional opportunities over time to expand our presence and footprint within the field. For Magnolia, the crucial aspect around any acquisition is that it continues to provide us with the ability to execute our proven business model while maintaining the same successful recipe of balance sheet strength, capital discipline, realizing high pretax operating margins, generating mid single digit production growth and returning a significant portion of our free cash flow to our shareholders for our ongoing share repurchases and a safe, sustainable and growing base dividend. Magnolia’s operations remain consistent and steady and we continue to execute a differentiated focus and investable E and P business model that is enduring. Solid well performance continues to drive our overall production higher while supporting our disciplined capital spend that has been well below our self imposed 55% reinvestment ceiling. Ongoing capital efficiencies has allowed us to generate consistent free cash flow throughout periods volatility.

Our top tier assets and focused strategy centered on prudent reinvestment, steady production growth and reliable free cash flow should continue to drive shareholder returns over the long term. I’ll now turn the call over to Brian to provide some further details on our second quarter twenty twenty five results and some additional guidance for the third quarter of this year.

Brian Corrales, Senior Vice President and Chief Financial Officer, Magnolia Oil and Gas: Thanks, Chris, and good morning, everyone. I’ll review some items from our second quarter results and refer to the presentation slides found on our website. I’ll also provide some additional guidance for the 2025 and the remainder of the year before turning it over for questions. Starting on Slide six, Magnolia delivered an excellent quarter as we continue to adhere to our differentiated business model. During the second quarter, we generated total and adjusted net income of $81,000,000 or $0.42 per diluted share.

Our adjusted EBITDAX for the quarter was $223,000,000 with total capital associated with drilling completions and associated facilities of $95,000,000 representing 43% of our adjusted EBITDAX. Second quarter production volumes grew 9% year over year to 98,200 barrels of oil equivalent per day, while generating free cash flow of 107,000,000 Looking at the quarterly cash flow waterfall chart on Slide seven, we started the quarter with $248,000,000 of cash. Cash flow from operations before changes in working capital was $214,000,000 with working capital changes and other small items impacting cash by 16,000,000 During the quarter, we paid dividends of $29,000,000 and allocated $49,000,000 towards share repurchases. We had $16,000,000 of small bolt on acquisitions during the quarter comprised of acreage additions, working interest and royalties. We incurred 100,000,000 on drilling, completions and associated facilities as well as leasehold and ended the quarter with $252,000,000 of cash.

Looking at Slide eight, this chart illustrates the progress in reducing our total outstanding shares since we began our repurchase program in the 2019. Since that time, we have repurchased 77,200,000.0 shares leading to a reduction in weighted average diluted shares outstanding of 25% net of issuances. Magnolia’s weighted average diluted share count declined by approximately 2,000,000 shares sequentially, averaging 192,100,000 shares during the second quarter. We currently have 7,400,000.0 shares remaining under our repurchase authorization, which are specifically directed toward repurchasing Class A shares in the open market. Turning to Slide nine, our dividend has grown substantially over the past few years, including a 15% increase announced earlier this year to $0.15 per share on a quarterly basis.

Our next quarterly dividend is payable on September 2 and provides an annualized dividend payout rate of $0.60 per share. Our plan for annualized dividend growth is an important part of Magnolia’s investment proposition and supported by our overall strategy of achieving moderate annual production growth, reducing our outstanding shares and increasing the dividend payout capacity of the company. Magnolia has maintained a strong balance sheet and is a key principle of our business model. Our 400,000,000 senior notes do not mature until 02/1932, including our second quarter ending cash balance of $252,000,000 and our undrawn $450,000,000 revolving credit facility. Our total liquidity is approximately $700,000,000 Our condensed balance sheet as of June 30 is shown on Slide 10.

Turning to Slide 11 and looking at our per unit cash costs and operating income margins. Total revenue per BOE declined approximately 13% year over year due to prices and partially offset by an increase in natural gas and NGL prices. Our total adjusted cash operating costs including G and A were down 4% to $10.7 per BOE in the 2025. LOE was exceptionally low during the quarter at $4.88 per BOE due to lower workover expense in the quarter. We expect that to moderate in the back half of the year to approximately $5.25 per BOE.

Our operating income margin for the second quarter was $12.07 per BOE or 34% of our total revenue. Turning to guidance, we are reiterating our 2025 drilling completion and facilities capital spending to be in the range of $430,000,000 to $470,000,000 This includes an estimate of non operated capital that is about the same as 2024 levels. We are increasing our full year production growth guidance to approximately 10% from a prior range of 7% to 9%. This represents the second quarter in a row of increasing our production guidance for 2025 with a capital budget that is approximately 5% below our initial capital guidance in February. Total production for the third quarter is expected to be approximately 99,000 barrels of oil equivalent a day with third quarter D and C capital expenditures expected to be approximately $115,000,000 Oil price differentials are anticipated to be approximately $3 per barrel discount to Magellan East Houston and Magnolia remains completely unhedged for all of its oil and natural gas production.

We expect our effective tax rate to be approximately 21% and with the passing of new legislation during the third quarter, we expect minimal cash taxes for the full year 2025 and assuming a similar price environment expect minimal cash taxes in 2026 and should benefit us going forward. The fully diluted share count for the 2025 is expected to be approximately 191,000,000 shares, which is 4% lower than the 2024 levels. We are now ready to take your questions.

Kim, Moderator: We will now begin the question and answer session. Our first question comes from Carlos Escalante with Wolfe Research.

Carlos Escalante, Analyst, Wolfe Research: Yes. Good morning, team. Thank you for taking my question this morning. First of all, I’d like to ask about your where you see free cash flow trending. And let me frame the question real quick.

So we like to think that the value of an NPE is relatively simple, it’s free cash flow times duration. And the steps that you’ve taken this first half of the year by raising production guidance and lowering your capital intensity, you’ve evidently grown both. So I know it’s perhaps too early to talk 2026, but it seems like given recent well performance growth in the low single digits, it’s probably inevitable, but so is further capital efficiency improvement. So I wonder if you could frame the 2026 and beyond growth versus capital efficiency conversation for us and specifically in terms of free cash flow optimization. What do you think gives in first and what do you prioritize out of these two items moving forward?

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: Hi, Carlos. Yes, it seems reasonable, I guess. I don’t know how much I want to get into 2026 just yet. It’s a little early, but it’s all trending in the right direction. I’ve said this a number of times on other calls.

And so recall, we find ourselves in a position where we’re in an older field in Giddings. It’s been operating for decades with an enormous amount of oil and gas in place that had not been developed with modern technology and completions. So when we started out from the beginning, we viewed it if we were able to crack the code subsurface wise, there was a lot of upside potential in the field. And this is exactly what we’ve experienced during the last several years. So what you’ve seen as a result of this are further capital efficiencies creeping into our development program over time.

And as I mentioned in my remarks, our more gradual and tactical way of approaching this has been to appraise, acquire, grow and further exploit. And so as we further expand the Giddings footprint, which I’m confident that we will, simply by the nature of moving into newer areas, you should likely pick up further efficiencies. So I do see this over time trending better for us. Will it’s an old field that will just continue to give and give and give and get better. And remember, as I said, I mentioned this in many prior calls, the goal for us, it should be the goal I suppose for most, goal for us is to the best wells with the least amount of capital as possible in order to generate the highest amount of free cash flow, which I think is where you’re getting at and that’s your point.

It shouldn’t go unnoticed that we began the year by saying that this year by saying that we would spend about $475,000,000 in capital and see production growth of about 5% to 7%. So here we are in late July and we plan to spend 5% less or about $550,000,000 of capital and we’ll grow our volumes by 10%. So hardly anything to complain about as far as I’m concerned. So I hope that gives you a little context.

Carlos Escalante, Analyst, Wolfe Research: Yes, most definitely. Thank you for the incremental color. I guess I’ll keep it on the same line of conversation for my follow-up, but perhaps focus more on product mix. So there is clearly a ton of variability across your Giddings position just given how the Austin Chalk is laid out. And a question that we often get is, if your incremental molecule is getting gassier, now you turned in line some very good wells that had a lot of liquids, but also a lot of gas earlier this year.

So could you possibly perhaps frame what you view your capital allocation within your Giddings plan year in year out?

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: It’s interesting. We get the question too and I understand maybe a little bit of maybe the confusion. But at the end of the day, Giddings, whether it’s a little areas of that are a little bit maybe oilier or certainly areas that are gassy, they which I think is what you’re getting at, the gassier wells in Giddings do come with a lot of liquids and quite a bit of oil more often than not. And so to say that we’re focusing on one particular area in Giddings, I mean, this is Giddings the way we see it broadly and our goal is to sort of drill good wells and maybe this is an odd way of putting it, but sort of do a tour around Giddings and we’ll rotate around the field. And again, part of this is to learn more about it because we’re at the relatively early stages of it, but we’ll move around.

And typically it on a broad basis, the well performance is quite strong. The well returns are very, very strong. And so we don’t and this is pockets of general of a little differentiation. But at the end of the day broadly, we’re seeing very good returns from most of the wells that we bring online.

Carlos Escalante, Analyst, Wolfe Research: Fair enough. Thank you, Chris and congratulations on the solid quarter again. Thanks.

Kim, Moderator: Our next question comes from Peyton Doorn with UBS.

Peyton Doorn, Analyst, UBS: Hey, thanks guys. This is Peyton on from UBS. Quick question on Brian’s side, think I might have missed it in the prepared remarks, but you mentioned, I think it was a minimal cash taxes as a result of the new budget bill. So just if you mind clarifying that? And then any impact on taxes or forecast for 2026 and beyond that you should be thinking about?

Thanks.

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: Yes. The taxes for this year minimal or maybe I would say negligible for 2025. For 2026 as Brian said in his remarks, probably not all that different at current product prices. So if that gives you I mean I think the range that we had given prior to the bill was 6%, 78%, 9% in that vicinity. This is quite different than that, quite a bit lower.

Negligible.

Peyton Doorn, Analyst, UBS: Yes, certainly. Good to see extra free cash flow too. And I guess just otherwise on the operating cost side, it was a nice trend down for the LOE. I know you attributed some of that to lower workover. But just curious if there’s any more juice to squeeze there or any other outlook on potential for declining costs on the operating side in the back half of the year?

Thank you.

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: Sure. We definitely benefited from what I would call a lighter quarter of workover activity and maybe some lower surface facility expenses during the period. But having said that, we did if you recall, we embarked on an effort to address field level operating costs more than a year ago. And we definitely experienced some broad improvements throughout our field operations and there are a lot of smaller items that begin to add up. I think we have and we’ll continue to see some of those improvements trickle into our field operating expenses, couple of items I’ve mentioned that are either helping or will help utilization of chemicals, water hauling.

And so while lower workovers did pull things down quite a bit in the second quarter, yes, we’re seeing some broad improvements. But having said that, I think we’ll normalize more towards 5%, 5.25% per BOE in that sort of frame and we’ll see where that goes. But that’s still about 5% of where we were last 5% lower than where we were last year and I hope to do better through the remainder of the year.

Peyton Doorn, Analyst, UBS: All right, great. Thanks for getting me on. Sure.

Kim, Moderator: Our next question comes from Zach Parham with JPMorgan.

Zach Parham, Analyst, JPMorgan: Hey, thanks for taking my questions. Chad, first, just wanted to ask on oil production and the trajectory from here. You all hit 40,000 barrels a day in 2Q, which you’d previously stated was kind of the goal for 4Q this year. Do you expect continued growth in oil production in the second half of the year and as we go into 2026?

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: Yes. I think as I look at the program, how it play out from here on in for the year, I think similar to slightly higher than what we saw in the second quarter. And I would tell you probably, and that would include the small amount of production volumes that we grabbed from those bolt on acquisitions, the little bit of volumes. So as I said, maybe 99,000 a day for the third quarter. Oil should sort of follow the same general trajectory on a percentage basis.

So I think you’ll get a little bit of bump in both total volumes and oil for the rest of the year.

Zach Parham, Analyst, JPMorgan: And then as you go into 2026, would you expect to grow oil at a similar rate as total or should that grow a

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: little bit slower? I don’t know for 2026 in terms of total volumes. I would tell you right now the plan would be to really mid single digit growth. But in terms of the split, typically with as we’ve seen with Giddings with more and more of the focus and capital and the business generally growing more so there than the rest of it, you’re going to see that be a little bit lower on oil side. I would imagine that mid single digit growth on the total company basis would be a little bit lower on oil.

Zach Parham, Analyst, JPMorgan: Thanks. And then my follow-up is just on the M and A outlook. You did the $40,000,000 in acquisitions this quarter. Some of that really right on top of some of your core acreage there. Can you just talk about what you’re seeing in the market going forward from an M and A perspective, from a bolt on perspective?

Do you see the ability to continue to kind of add acreage in these core areas going forward?

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: I think we can. There’s some ongoing smaller opportunities and these tend to be oftentimes individuals, people, families, or that nature and that’s not very different than what we experienced here with what we’ve just done. When you look at larger things, those can tend to have other complications or complexities be managed by more like asset managers or financial managers that may take a different view and just by the nature of its size, it’s just generally more complex. And with the fall away or fall off of product prices that adds another dynamic. So that’s generally not there as much in some of the smaller opportunities.

So I think there’s still things to be had, but on a smaller level. Thanks, Chris.

Kim, Moderator: Our next question comes from Oliver Hang from Tudor, Pickering and Holt.

Oliver Hang, Analyst, Tudor, Pickering and Holt: Good morning, Chris and Brian, and thanks for taking the questions. Oliver. Maybe first off just good to see success in the appraisal program driving the confidence to increase your house views on core Giddings development acreage. Just trying to think through relative economics of the incremental 40,000 net acres being folded into the program. So hoping that you all could maybe talk a bit more on the criteria or any return thresholds you all typically look at when such a decision is made to shift acreage into that bucket?

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: Well, think if you back out any value for the production that we received, the remainder of that which is really the point was a very reasonable amount to pay for the entry point or tuck in if you will of the additional acreage that is in our core area for the most part and is adjacent to where we are and could offer opportunities for lengthening laterals or clearly brand new wells and whatnot. So it’s more about the upside potential and the entry point, the cost of the entry point, which is I would view as very low in terms of picking up the acreage. So I that’s how I look at it.

Oliver Hang, Analyst, Tudor, Pickering and Holt: Okay. Makes sense. And maybe just on service costs as we kind of think about trends there. The front end of the oil curve is certainly held in stronger than expected and does seem like there is potential for service companies softening their stance a bit here. But just kind of wondering how initial discussions have been and sort of expectations as we enter R and D season?

Tim Rezvan, Analyst, KeyBanc Capital Markets: Yes. I don’t want to

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: speak for the service guys very, very specifically. But I will tell you, it’s obviously harder for them right now. I don’t want to say that it’s you’re down to the bone, but there’s certainly seeing bone as opposed to many fatter skin left on the bone. So it’s harder for them. And but things have come off and you’ve seen some ongoing deflation as activity is rolled over a bit.

And certainly in the second quarter is product prices certainly for liquids for oil rolled over. And I think that certainly spooked some operators where they’ve reduced either reduced activity or just laid off rigs, etcetera. And so as you continue to see that, which you very well may well see into towards the end of the year, if you sort of sit around these prices, you do have a little bit of ability to nudge or push on it somewhat, but not a whole lot. I think what you’re seeing is some improved benefits on OFS into Q3. And then you get into Q4 where there’s more in the way of steel inflation and OCTG items as a result of tariffs.

So that may start to rub against it, if you will, and flatten it out. But I would tell you, what we’ve seen is probably several percent into Q3, a little bit more than what we saw in the first half of the year. And maybe all in I would tell you from the exit of 24%, 6%, 7%, something like that, But then it sort of flattens out and may in fact depending on what happens with activity, you might see a little bit of a soup bowl or the bottom of the soup bowl and then you start to perhaps trickle higher with activity ramping as operators typically do into the beginning of next year. But we’ll see. It’s a hard one to call based on product price and exact activity for operators right now.

Oliver Hang, Analyst, Tudor, Pickering and Holt: Okay. That’s helpful color. Thanks for the time.

Peyton Doorn, Analyst, UBS: Sure.

Kim, Moderator: Our next question comes from Charles Meade with Johnson Rice.

Charles Meade, Analyst, Johnson Rice: Good morning, Chris, Brian and Tom.

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: Good morning.

Charles Meade, Analyst, Johnson Rice: Good morning. Chris, I have to say you’re cutting down to the bone. That was quite a vivid metaphor that you offered for us. I really just have one question, Chris. You mentioned in your prepared remarks that some of your recent completions have been, or I guess, stronger than you guys had expected or modeled.

Can you talk about where those are? And what I’m really curious about is are those some of those recent completions on this 30,000 acres that you recently added to your development area?

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: Yes, probably. That’s what I said in my remarks. Tactically as you look at how you exploit Giddings, moving around the field appraise, acquire and that’s sort of this is an indication of the way we’ve done it. And so the real ideal or perfect example was in an area where we were drilling late last year into early this year where the wells outperformed. That was the exact way it panned out where we had appraised an area and then like to what we had seen and then had an opportunity to acquire much more of it which led to having a bigger development, swath of development area.

And so I imagine that this is what this will lead to as well over time, same sort of concept giving you precision as far as GPS location where it is. I’m not going to do that, but anyway.

Charles Meade, Analyst, Johnson Rice: Got it. That’s it for me. Thanks.

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: Okay. Thanks.

Kim, Moderator: Our next question comes from Tim Moore with Clear Street.

Tom, Unspecified, Magnolia Oil and Gas0: Thanks and nice consistent execution along with the drilling runway still strong followed by your production growth guidance. Most of my questions were already answered, but I’m just had two remaining ones. You mentioned the uptick percentage in the Giddings acreage added since the original acquisition. And as you explore and kind of exploit those acreages, I’m curious just are you finding better whole areas clustered for more output yield and better pressures? And have you done any type of enhancements to maybe the drilling efficiencies and completions?

Are you know, like four to five well pads more there in the last few months. Just any a little bit more color on Giddings is going so well.

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: Yes. No, we’ve done that throughout the development period time period of Giddings. We’ve looked at things like down spacing, we’ve looked at things like adding more wells per pad to optimize a development area once we know more about it. We’ve done that in some parts of that core development area that’s now that 240,000 acres. So over time, yes, we will continue to further optimize as we get to it because we haven’t got to it obviously all yet.

But as we get to it, there’ll be more not just more efficiencies, but different ways to maximize and optimize the capital as we spend and further develop as we learn. Yes, there will be more improvements with the development.

Tom, Unspecified, Magnolia Oil and Gas0: That’s very helpful and it’s really good catalyst. Just one quick follow-up on the efficiency in LOE per BOE was very impressive in the quarter. I think you’d already given commentary a while ago that gathering transport and processing expense per BOE would go up this year. But do you envision the transport gathering processing side to maybe go down a little bit next year? Do you think the run rate now is really the level for next year?

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: It’s going to be somewhat dependent on gas prices for the most part, but probably fairly similar, I would say.

Tom, Unspecified, Magnolia Oil and Gas0: Thanks a lot, Chris. And those are my questions.

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: Okay. Thanks, Sam.

Kim, Moderator: Our next question comes from Foo Fam with Roth Capital.

Tom, Unspecified, Magnolia Oil and Gas1: Hi, good morning, Sam. Thanks for asking me questions. So I just have a question about the Giddings expansion. So we know that 70% of the expansion comes from the appraisal wells. So I would say, can you be more specific about like the number of appraisal wells you drilled and how does that compare to the past few quarters?

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: Yes. On an ongoing basis, I would tell you appraisal program typically is maybe 10% of what we do on an overall basis plus or minus. So we always try to fold in some things that we’ll look at on a different type of from a different angle, test some new concepts. So we’re always looking to pull in some opportunities to examine area for other types of opportunities in a different way to do things where potentially more things will get folded into the derisked area of the acreage. So or improve our results over time and may lead to other bolt ons with that.

So I would tell you plus or minus sort of 10%.

Tom, Unspecified, Magnolia Oil and Gas1: All right. Thank you.

Kim, Moderator: Our next question comes from Noah Hewness with Bank of America.

Tom, Unspecified, Magnolia Oil and Gas2: Good morning. Just one for me. I guess I was wondering the how many completions are being deferred at the 26, if that number has changed from what you guys have talked about last quarter? And then, how are you thinking about killing that spare capacity? And would you consider maybe pulling some of that activity forward?

And if so, what would you need to see to feel comfortable doing that?

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: I guess the last portion of the question I’ll take first. No, I don’t right now as I see it, I mean we’re sort of if we pulled any of it forward, we’d grow at a faster clip. And the need to do that right now, I just don’t see it. Things are performing better than what we had anticipated, expected. So I don’t see that right now.

10% of growth is just fine. The completions that we’re deferring that number didn’t change. It’s about a half a dozen that will be deferred into next year.

Tom, Unspecified, Magnolia Oil and Gas2: And would you how would you consider using that spare capacity I guess in 2026? Like is there was that something that you think you would for sure use as part of your program? Or is that something that you think that maybe you would want to maybe save depending on the environment that you’re seeing?

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: No. Well, it’s going to depend. But I mean if you’re sitting here in the environment that we’re in, it will since it’s been drilled, will be part of the program for next year, with all likelihood. If this is sort of the commodity environment that we’re in, it will get completed.

Tom, Unspecified, Magnolia Oil and Gas2: Got you. Very helpful stuff guys. Thank you.

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: Okay. Thanks.

Kim, Moderator: Our next question comes from Tim Rezvan with KeyBanc Capital Markets.

Tim Rezvan, Analyst, KeyBanc Capital Markets: Thanks for taking my questions, folks. I wanted to ask about the really strong well results we saw you all turn to sales in the 2024, very sort of differentiated production profile, mid-30s oil cut, but they were so strong that the total oil was really comparable to other vintages. So I was just curious, did you all sort of expect that production profile? Was that a tactical decision into winter with gas rallying? And just trying to think about how you can be nimble with your drilling, especially as we look at the natural gas strip in Contango in 2026?

I know there’s a few questions in one, but just curious any insight on what you did there? Thank you.

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: No, good question. We as I mean, did say this at the time back in the May call, it was a tactical decision to pivot a little bit more to what we believe to be a gassier area to try to capture some of what we thought would be some better pricing for gas and it did work out just fine in that sense. What we didn’t anticipate was the prolific nature of the wells, strength of the wells both on the gas and the oil side. So the wells were very high pressure, very good returns and even what we’ve seen since then in terms of the cadence of the productivity has been continues to be good. And so it’s been rather durable up to now.

So it’s worked out very well. I would tell you that we’ll plan we haven’t done it much since then in that area, but we’ll go back to it next year and revisit it. So if that if anyone cares, but we’ll do that. We’ll plan to do that.

Tim Rezvan, Analyst, KeyBanc Capital Markets: Okay. That’s helpful. I appreciate the insight there. And then as my follow-up, looking at where commodity prices are shaking out, you seem to be somewhere around 48% investment rate as a percentage of CapEx this year. With the underleveraged balance sheet and sort of this larger sandbox of derisked inventory and you have seven years of experience now in Giddings, why not grow a little more?

And where I’m going with that is like and then related question, this sort of high single digit production growth CAGR you’ve had, can you continue to do that the next couple of years with two rigs? Or is kind of an increase of activity inevitable to sustain that? Thanks.

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: So the model has us looking to grow mid single digits as I define it 4%, 56%. As you know, if you were to stretch and try to reach beyond that and the more you sort of reach for growth, it only usually anyway enhances your rate of decline and makes it more difficult thereafter and as you get larger. So you’re pretty spot on the 48. So there’s obvious uncertainties around product price environment. There’s not a lot of folks optimistic out there on oil, but current prices seem just okay to me.

I don’t see needing to reach beyond what the field and Giddings has provided us. Giddings is clearly the growth part of the business, growth of your asset, while the Karnes area has been more the free cash flow generative piece of the business. Giddings has far exceeded our expectations as far as what it’s been able to generate in terms of growth. So almost every year, year in year out, we’ve overshot what we’ve anticipated or expected going into it in terms of our development plan. So the outcome of the growth has been really more better than expected.

It wasn’t the modeled plan. So we got more out of the wells pound for pound on a capital dollar than what we had anticipated broadly. And so I just continue to look for that sort of benefit. I’m claiming that that’s going to be the go forward case, but we’ll continue to sort of do the best we can and that’s the plan. We’ll try to squeeze as much as we can out of the field and some of these newer areas we’re optimistic about and the plan is still mid single digit if we exceed that great with the same amount of capital.

Tim Rezvan, Analyst, KeyBanc Capital Markets: Okay. I appreciate the insight. Thanks.

Chris Stavros, Chairman, President and Chief Executive Officer, Magnolia Oil and Gas: Okay. Thanks, Tim.

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