Magnolia Oil & Gas Corporation Announces Third Quarter 2019 Results

HOUSTON--()--Magnolia Oil & Gas Corporation (“Magnolia,” “we,” “our,” or the “Company”) (NYSE: MGY) today announced its financial and operational results for the third quarter of 2019.

Third Quarter 2019 Summary Financial Results:

  • Total reported net income: $17.4 million
  • Earnings per share - diluted: $0.05
  • Adjusted net income(1): $16.2 million; Weighted average total shares outstanding(2): 258.9 million
  • Adjusted earnings per share(1): $0.06
  • Adjusted EBITDAX(1): $183.4 million
  • Capital expenditures - drilling and completions ("D&C"): $88.4 million
  • Cash acquisition expenditures: $1.3 million
  • Cash balance as of September 30, 2019: $164.5 million

Third Quarter 2019 Highlights:

  • Magnolia reported third quarter net income attributable to Class A Common Stock of $7.8 million, or $0.05 per diluted share. Total adjusted net income including noncontrolling interest was $16.2 million, or $0.06 per adjusted diluted share, which excludes a non-cash special item associated with our earlier warrant exchange.
  • Our production averaged 71.3 thousand barrels of oil equivalent per day ("Mboe/d") for the third quarter of 2019, a 9.5 percent increase compared to 65.1 Mboe/d in the second quarter. Third quarter oil production averaged 53.7 percent of total volumes. Both total production and total oil volumes were at the high end of our guidance, with the strong sequential increase in production driven almost entirely by our organic drilling program and primarily due to new wells in the Karnes area.
  • Adjusted EBITDAX was $183.4 million during the third quarter of 2019, with capital expenditures for drilling and completions of $88.4 million for the period. D&C capital represented 48 percent of our adjusted EBITDAX and slightly better than expectations.
  • Our average realized oil price was $59.05 per barrel for the third quarter of 2019, or 105 percent of the average NYMEX WTI benchmark price during the period.
  • Total cash operating costs including G&A declined to $9.96 per Boe in the third quarter compared to $10.98 per Boe in the second quarter of 2019.
  • Cash on the balance sheet increased to $164.5 million at the end of the third quarter from $96.7 million at the end of the second quarter. In addition, we had an undrawn revolving credit facility with $550.0 million of capacity and $400.0 million of principal debt outstanding.

We continue to focus on building a business which generates significant free cash flow and our third quarter results further demonstrate our ability to execute on our strategy,” said Magnolia Chairman, President and CEO, Steve Chazen. “While our production grew nearly 10 percent sequentially our capital spending for drilling and completing wells declined to less than half of our operating cash flow during the third quarter. The quality of our assets and disciplined business model positions us to spend within 60 percent of our adjusted EBITDAX for 2019.”

Using our current methodology, we brought on two new wells in the Giddings Field late in the third quarter. Combined, these two wells produced more than 2,700 Boe per day during their first 30 days on line, which included approximately 1,700 barrels of oil per day and 6,400 Mcf per day of natural gas. These wells are currently producing about 2,900 Boe per day, including more than 1,800 barrels per day of oil and approximately 6,700 Mcf per day of gas. We plan to complete three additional wells in Giddings later in the fourth quarter as part of our ongoing appraisal program.”

(1)

Adjusted net income, adjusted EBITDAX, adjusted earnings per share, and total cash operating costs are non-GAAP financial measures. For reconciliations to the most comparable GAAP measures, please see "Non-GAAP Financial Measures" at the end of this press release.

(2)

Weighted average total shares outstanding include diluted weighted average shares of Class A Common Stock outstanding during the period and shares of Class B Common Stock, which are anti-dilutive in the calculation of weighted average number of common shares outstanding.

Operational Update

Production averaged 71.3 Mboe/d during the third quarter of 2019, a nearly 10 percent sequential increase and ahead of our expectations. Total oil production averaged 53.7 percent of our overall volumes and at the higher end of guidance range. Production in the Karnes area averaged 49.2 Mboe/d during the third quarter, a 12.3 percent sequential increase from second quarter levels of 43.8 Mboe/d, due to the combination of new operated and non-operated wells coming on line. Production from Giddings and Other increased to 22.1 Mboe/d in the third quarter from 21.3 Mboe/d in the prior quarter, 85 percent of which was from the Giddings Field.

We continue to operate one rig in each of our Karnes area and Giddings assets, as well as using one completion crew between our assets to optimize efficiencies. In our Karnes area, we added 430 net acres during the quarter, bringing our acreage position to 21,946 net acres. Our appraisal program in Giddings remains ongoing and we continue to make meaningful progress toward better understanding this sizeable asset. While we have had good recent success implementing our current methodology in Giddings, we are still pursuing an appraisal program which by its nature is inherently higher risk.

Cash Flow

Our cash flow from operating activities was $179.2 million during the third quarter and we ended the period with $164.5 million of cash on the balance sheet compared to $96.7 million at the end of the prior quarter. Total cash outlays related to our capital program including drilling, completions and leasehold acquisitions were $97.6 million, including $1.3 million of cash spent acquiring oil and gas properties.

Updated Guidance

We expect our fourth quarter production to be similar as compared to third quarter volume levels. Total capital spending for drilling and completions is expected to decline slightly in the fourth quarter, and in keeping with our business model. As our overall well completions will be weighted more towards Giddings, we expect production in Giddings to increase about 10 percent sequentially during the fourth quarter.

Quarterly Report on Form 10-Q

Magnolia's financial statements and related footnotes will be available in its Quarterly Report on Form 10-Q for the three months ended September 30, 2019, which is expected to be filed with the U.S. Securities and Exchange Commission ("SEC") on November 5, 2019.

Conference Call and Webcast

Magnolia will host an investor conference call on Tuesday, November 5, 2019 at 10:00 a.m. Central (11:00 a.m. Eastern) to discuss these operating and financial results. Interested parties may join the webcast by visiting Magnolia's website at www.magnoliaoilgas.com/investors/events-and-presentations and clicking on the webcast link or by dialing 1-844-701-1059. A replay of the webcast will be posted on Magnolia's website following completion of the call.

About Magnolia Oil & Gas Corporation

Magnolia (MGY) is a publicly traded oil and gas exploration and production company with operations primarily in South Texas in the core of the Eagle Ford Shale and Austin Chalk formations. Magnolia focuses on generating value for shareholders through steady production growth, strong pre-tax margins, and free cash flow. For more information, visit www.magnoliaoilgas.com.

Cautionary Note Regarding Forward-Looking Statements

The information in this press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of present or historical fact included in this press release, regarding Magnolia’s strategy, future operations, financial position, estimated revenues, and losses, projected costs, prospects, plans and objectives of management are forward looking statements. When used in this press release, the words could, should, will, may, believe, anticipate, intend, estimate, expect, project, the negative of such terms and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. Except as otherwise required by applicable law, Magnolia disclaims any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this press release. Magnolia cautions you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of Magnolia, incident to the development, production, gathering and sale of oil, natural gas and natural gas liquids. In addition, Magnolia cautions you that the forward looking statements contained in this press release are subject to the following factors: (i) the outcome of any legal proceedings that may be instituted against Magnolia; (ii) Magnolia’s ability to realize the anticipated benefits of its business combination, which may be affected by, among other things, competition and the ability of Magnolia to grow and manage growth profitably; (iii) changes in applicable laws or regulations; and (iv) the possibility that Magnolia may be adversely affected by other economic, business, and/or competitive factors. Should one or more of the risks or uncertainties described in this press release occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. Additional information concerning these and other factors that may impact the operations and projections discussed herein can be found in Magnolia’s filings with the SEC, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2018. Magnolia’s SEC filings are available publicly on the SEC’s website at www.sec.gov.

Magnolia Oil & Gas Corporation

Operating Highlights

 

 

 

 

 

 

 

For the

Quarter Ended

September 30, 2019

 

For the

Quarter Ended

June 30, 2019

 

 

 

Production:

 

 

 

 

Oil (MBbls)

 

 

3,520

 

 

 

3,189

 

Natural gas (MMcf)

 

 

10,763

 

 

 

10,057

 

NGLs (MBbls)

 

 

1,245

 

 

 

1,060

 

Total (MBoe)

 

 

6,559

 

 

 

5,925

 

 

 

 

 

 

Average daily production:

 

 

 

 

Oil (Bbls/d)

 

 

38,261

 

 

 

35,044

 

Natural gas (Mcf/d)

 

 

116,989

 

 

 

110,516

 

NGLs (Bbls/d)

 

 

13,533

 

 

 

11,648

 

Total (Boe/d)

 

 

71,292

 

 

 

65,111

 

 

 

 

 

 

Revenues (in thousands):

 

 

 

 

Oil sales

 

$

207,840

 

 

$

204,513

 

Natural gas sales

 

 

21,243

 

 

 

22,590

 

NGL sales

 

 

15,716

 

 

 

15,855

 

Total Revenues

 

$

244,799

 

 

$

242,958

 

 

 

 

 

 

Average sales price:

 

 

 

 

Oil (per Bbl)

 

$

59.05

 

 

$

64.13

 

Natural gas (per Mcf)

 

 

1.97

 

 

 

2.25

 

NGL (per Bbl)

 

 

12.62

 

 

 

14.96

 

Total (per Boe)

 

$

37.32

 

 

$

41.01

 

 

 

 

 

 

NYMEX WTI ($/Bbl)

 

$

56.45

 

 

$

59.83

 

NYMEX Henry Hub ($/Mcf)

 

$

2.23

 

 

$

2.64

 

Realization to benchmark:

 

 

 

 

Oil (per Bbl)

 

 

105

%

 

 

107

%

Natural Gas (per Mcf)

 

 

88

%

 

 

85

%

 

 

 

 

 

Operating Expenses (in thousands):

 

 

 

 

Lease operating expenses

 

$

24,344

 

 

$

24,895

 

Gathering, transportation and processing

 

 

9,270

 

 

 

7,431

 

Taxes other than income

 

 

13,333

 

 

 

13,091

 

Depreciation, depletion and amortization

 

 

143,894

 

 

 

126,102

 

 

 

 

 

 

Operating costs per Boe:

 

 

 

 

Lease operating expenses

 

$

3.71

 

 

$

4.20

 

Gathering, transportation and processing

 

 

1.41

 

 

 

1.25

 

Taxes other than income

 

 

2.03

 

 

 

2.21

 

Depreciation, depletion and amortization

 

 

21.94

 

 

 

21.28

 

Magnolia Oil & Gas Corporation

Consolidated Statements of Operations

(In thousands, except per share data)

 

 

 

For the

Quarter Ended

September 30, 2019

 

For the
Quarter Ended
June 30, 2019

REVENUES

 

 

 

 

Oil revenues

 

$

207,840

 

 

$

204,513

 

Natural gas revenues

 

 

21,243

 

 

 

22,590

 

Natural gas liquids revenues

 

 

15,716

 

 

 

15,855

 

Total revenues

 

 

244,799

 

 

 

242,958

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

Lease operating expenses

 

 

24,344

 

 

 

24,895

 

Gathering, transportation and processing

 

 

9,270

 

 

 

7,431

 

Taxes other than income

 

 

13,333

 

 

 

13,091

 

Exploration expense

 

 

3,924

 

 

 

3,617

 

Asset retirement obligation accretion

 

 

1,394

 

 

 

1,373

 

Depreciation, depletion and amortization

 

 

143,894

 

 

 

126,102

 

Amortization of intangible assets

 

 

3,626

 

 

 

3,626

 

General & administrative expenses

 

 

17,345

 

 

 

19,106

 

Transaction related costs

 

 

 

85

 

Total operating costs and expenses

 

 

217,130

 

 

 

199,326

 

 

 

 

 

 

OPERATING INCOME

 

 

27,669

 

 

 

43,632

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

Income (loss) from equity method investee

 

 

92

 

 

 

128

 

Interest expense, net

 

 

(6,896

)

 

 

(7,299

)

Other income (expense), net

 

 

21

 

 

 

(13

)

Total other income (expense)

 

 

(6,783

)

 

 

(7,184

)

 

 

 

 

 

INCOME BEFORE INCOME TAXES

 

 

20,886

 

 

 

36,448

 

Income tax expense

 

 

3,529

 

 

 

5,145

 

NET INCOME

 

 

17,357

 

 

 

31,303

 

LESS: Net income attributable to noncontrolling interest

 

 

6,810

 

 

 

12,797

 

NET INCOME ATTRIBUTABLE TO MAGNOLIA

 

 

10,547

 

 

 

18,506

 

LESS: Non-cash deemed dividend related to warrant exchange

 

 

2,763

 

 

NET INCOME ATTRIBUTABLE TO CLASS A COMMON STOCK

 

$

7,784

 

 

$

18,506

 

 

 

 

 

 

NET INCOME PER COMMON SHARE

 

 

 

 

Basic

 

$

0.05

 

 

$

0.12

 

Diluted

 

$

0.05

 

 

$

0.12

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

 

 

 

 

Basic

 

 

166,872

 

 

 

156,844

 

Diluted

 

 

167,108

 

 

 

159,057

 

WEIGHTED AVERAGE NUMBER OF CLASS B SHARES OUTSTANDING(1)

 

 

91,790

 

 

 

91,790

 

(1)

Shares of Class B Common Stock, and corresponding Magnolia LLC Units, are anti-dilutive in the calculation of weighted average number of common shares outstanding.

Magnolia Oil & Gas Corporation

Summary Cash Flow Data

(In thousands)

 

 

 

 

 

 

 

For the Three
Months Ended
September 30, 2019

 

For the Nine

Months Ended

September 30, 2019

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

Net Income

 

$

17,357

 

 

$

71,373

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation, depletion and amortization

 

 

143,894

 

 

 

385,942

 

Amortization of intangible assets

 

 

3,626

 

 

 

10,879

 

Exploration expense, non-cash

 

 

53

 

 

 

536

 

Asset retirement obligations accretion expense

 

 

1,394

 

 

 

4,095

 

Amortization of deferred financing costs

 

 

892

 

 

 

2,644

 

Deferred taxes

 

 

3,414

 

 

 

11,765

 

Stock based compensation

 

 

2,829

 

 

 

8,376

 

Other

 

 

(97

)

 

 

(526

)

Changes in operating assets and liabilities

 

 

5,858

 

 

 

(6,473

)

Net cash provided by operating activities

 

 

179,220

 

 

 

488,611

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

Acquisition of EnerVest properties, final settlement

 

 

 

4,250

 

Acquisitions, other

 

 

(1,318

)

 

 

(93,221

)

Additions to oil and natural gas properties

 

 

(97,550

)

 

 

(364,859

)

Other investing

 

 

1

 

 

 

(247

)

Net cash used in investing activities

 

 

(98,867

)

 

 

(454,077

)

 

 

 

 

 

CASH FLOW FROM FINANCING ACTIVITIES

 

 

 

 

Contributions from noncontrolling interest owners

 

 

 

7,301

 

Distributions to noncontrolling interest owners

 

 

(490

)

 

 

(716

)

Common stock repurchased

 

 

(9,722

)

 

 

(9,722

)

Other financing activities

 

 

(2,361

)

 

 

(2,666

)

Net cash provided by (used in) financing activities

 

 

(12,573

)

 

 

(5,803

)

 

 

 

 

 

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

 

67,780

 

 

 

28,731

 

Cash and cash equivalents – Beginning of period

 

 

96,709

 

 

 

135,758

 

Cash and cash equivalents – End of period

 

$

164,489

 

 

$

164,489

 

Magnolia Oil & Gas Corporation

Summary Balance Sheet Data

(In thousands)

 

 

September 30, 2019

 

December 31, 2018

Cash and cash equivalents

 

$

164,489

 

 

$

135,758

 

Other current assets

 

127,766

 

 

156,601

 

Property, plant and equipment, net

 

3,180,166

 

 

3,073,204

 

Other assets

 

60,712

 

 

67,960

 

Total assets

 

$

3,533,133

 

 

$

3,433,523

 

 

 

 

 

 

Current liabilities

 

$

190,311

 

 

$

197,361

 

Long-term debt, net

 

389,528

 

 

388,635

 

Other long-term liabilities

 

169,341

 

 

139,572

 

Common stock

 

26

 

 

25

 

Additional paid in capital

 

1,704,652

 

 

1,641,237

 

Treasury stock

 

(9,722

)

 

 

Retained earnings

 

74,823

 

 

35,507

 

Noncontrolling interests

 

1,014,174

 

 

1,031,186

 

Total liabilities and equity

 

$

3,533,133

 

 

$

3,433,523

 

Magnolia Oil & Gas Corporation
Non-GAAP Financial Measures

Reconciliation of net income to adjusted EBITDAX

In this press release, we refer to adjusted EBITDAX, a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. We define adjusted EBITDAX as net income before interest expense, income taxes, depreciation, depletion and amortization, amortization of intangible assets, accretion of asset retirement obligations, non-cash stock based compensation expense, exploration costs, and certain transaction costs. Adjusted EBITDAX is not a measure of net income in accordance with GAAP.

Our management believes that adjusted EBITDAX is useful because it allows them to more effectively evaluate our operating performance and compare the results of our operations from period to period and against our peers without regard to our financing methods or capital structure. We also believe that securities analysts, investors and other interested parties may use adjusted EBITDAX in the evaluation of our Company. We exclude the items listed above from net income in arriving at adjusted EBITDAX because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDAX should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of our operating performance or liquidity. Certain items excluded from adjusted EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of adjusted EBITDAX. Our presentation of adjusted EBITDAX should not be construed as an inference that our results will be unaffected by unusual or non-recurring items. Our computations of adjusted EBITDAX may not be comparable to other similarly titled measures of other companies.

The following table presents a reconciliation of net income to adjusted EBITDAX, our most directly comparable financial measure calculated and presented in accordance with GAAP:

(In thousands)

 

For the

Quarter Ended

September 30, 2019

 

For the

Quarter Ended

June 30, 2019

 

 

 

Net income(1)

 

$

17,357

 

 

$

31,303

 

Exploration expense

 

3,924

 

 

3,617

 

Asset retirement obligations accretion

 

1,394

 

 

1,373

 

Depreciation, depletion and amortization

 

143,894

 

 

126,102

 

Amortization of intangible assets

 

3,626

 

 

3,626

 

Interest expense, net

 

6,896

 

 

7,299

 

Income tax expense

 

3,529

 

 

5,145

 

EBITDAX

 

180,620

 

 

178,465

 

Non-cash stock based compensation expense

 

2,829

 

 

3,115

 

Transaction related costs(2)

 

 

 

85

 

Adjusted EBITDAX

 

$

183,449

 

 

$

181,665

 

(1)

Includes net income attributable to noncontrolling interest.

(2)

Transaction costs incurred related to the execution of our business combination with EnerVest, Ltd. and its affiliates and the Harvest acquisition, including legal fees, advisory fees, consulting fees, accounting fees, employee placement fees, and other transaction and facilitation costs.

Magnolia Oil & Gas Corporation
Non-GAAP Financial Measures

Reconciliation of net income attributable to Class A Common Stock to adjusted earnings

Our presentation of adjusted earnings and adjusted earnings per share are non-GAAP measures because they exclude the effect of certain items included in Income Attributable to Class A Common Stock. Management uses adjusted earnings and adjusted earnings per share to evaluate our operating and financial performance because it eliminates the impact of certain items that management does not consider to be representative of the Company’s on-going business operations. As a performance measure, adjusted earnings may be useful to investors in facilitating comparisons to others in the Company’s industry because certain items can vary substantially in the oil and gas industry from company to company depending upon accounting methods, book value of assets, and capital structure, among other factors. Management believes excluding these items facilitates investors and analysts in evaluating and comparing the underlying operating and financial performance of our business from period to period by eliminating differences caused by the existence and timing of certain expense and income items that would not otherwise be apparent on a GAAP basis. However, our presentation of adjusted earnings and adjusted earnings per share may not be comparable to similar measures of other companies in our industry.

 

For the
Quarter Ended
September 30, 2019

 

Per Share
Diluted
EPS

 

For the
Quarter Ended
June 30, 2019

 

Per Share
Diluted
EPS

(In thousands, except per share data)

 

 

 

 

 

 

 

 

Net income attributable to Class A Common Stock

$

7,784

 

$

0.05

 

$

18,506

 

$

0.12

Adjustments for certain items affecting comparability(1):

 

 

 

 

 

 

 

Non-cash deemed dividend

 

2,763

 

 

0.01

 

 

 

0.00

Transaction costs

 

 

0.00

 

 

85

 

 

0.00

Change in estimated income tax

 

 

0.00

 

 

(18)

 

 

0.00

Adjusted earnings

$

10,547

 

$

0.06

 

$

18,573

 

$

0.12

 

(1) Includes amounts attributable to Class A Common Stock.

Magnolia Oil & Gas Corporation
Non-GAAP Financial Measures

Reconciliation of net income to adjusted net income

Our presentation of adjusted net income is a non-GAAP measures because it excludes the effect of certain items included in Net Income and adjusts for income taxes assuming the exchange of all outstanding Magnolia LLC Units and corresponding Class B Common Stock for shares of Class A Common Stock. Management uses adjusted net income to evaluate our operating and financial performance because it eliminates the impact of certain items that management does not consider to be representative of the Company’s on-going business operations. As a performance measure, adjusted net income may be useful to investors in facilitating comparisons to others in the Company’s industry because certain items can vary substantially in the oil and gas industry from company to company depending upon accounting methods, book value of assets, and capital structure, among other factors. Management believes adjusting these items facilitates investors and analysts in evaluating and comparing the underlying operating and financial performance of our business from period to period by eliminating differences caused by the existence and timing of certain expense and income items that would not otherwise be apparent on a GAAP basis. However, our presentation of adjusted net income may not be comparable to similar measures of other companies in our industry.

 

For the Quarter
Ended
September 30, 2019

 

For the Quarter
Ended
June 30, 2019

(In thousands)

Net income(1)

$

17,357

 

 

$

31,303

 

Income tax expense

3,529

 

 

5,145

 

Income before income taxes

20,886

 

 

36,448

 

Adjustments for certain items affecting comparability:

 

 

 

Adjusted income tax expense(2)

(4,720

)

 

(7,654

)

Transaction costs

 

 

85

 

Tax impact of adjustments

 

 

(18

)

Adjusted net income

$

16,166

 

 

$

28,861

 

 

 

 

 

Diluted weighted average shares of Class A Common Stock outstanding during the period

167,108

 

 

159,057

 

Weighted average shares of Class B Common Stock outstanding during the period (3)

91,790

 

 

91,790

 

Total weighted average shares of Class A and B Common Stock, including dilutive impact of other securities(3)

258,898

 

 

250,847

 

(1)

Includes net income attributable to noncontrolling interest.

(2)

Represents corporate income taxes at an assumed effective tax rate of 22.6 percent and 21.0 percent for the three months ended September 30, 2019 and June 30, 2019, respectively, applied to income before income taxes.

(3)

Shares of Class B Common Stock, and corresponding Magnolia LLC Units, are anti-dilutive in the calculation of weighted average number of common shares outstanding.

Magnolia Oil & Gas Corporation
Non-GAAP Financial Measures

Reconciliation of operating margin to adjusted operating margin

Our presentation of adjusted operating margin and total cash operating costs are supplemental non-GAAP financial measures that are used by management. Total cash operating costs exclude stock based compensation expense because it is non-cash in nature. We define adjusted operating margin per Boe as total revenues per Boe less operating expenses per Boe adjusted for certain unusual or non-recurring items per Boe that management does not consider to be representative of the Company's on-going business operations. Management believes that total cash operating costs per Boe and adjusted operating margin per Boe provide relevant and useful information, which is used by our management in assessing the Company’s profitability and comparability of results to our peers.

As a performance measure, total cash operating costs and adjusted operating margin may be useful to investors in facilitating comparisons to others in the Company’s industry because certain items can vary substantially in the oil and gas industry from company to company depending upon accounting methods, book value of assets, and capital structure, among other factors. Management believes excluding these items facilitates investors and analysts in evaluating and comparing the underlying operating and financial performance of our business from period to period by eliminating differences caused by the existence and timing of certain expense and income items that would not otherwise be apparent on a GAAP basis. However, our presentation of adjusted operating margin and adjusted operating margin per Boe may not be comparable to similar measures of other companies in our industry.

(in $/Boe)

For the

Quarter Ended
September 30, 2019

 

For the
Quarter Ended
June 30, 2019

 

 

Revenue

$

37.32

 

 

$

41.01

 

Direct operating expenses

 

 

 

Less: Lease operating expenses

(3.71

)

 

(4.20

)

Less: Gathering, transportation and processing

(1.41

)

 

(1.25

)

Less: Taxes other than income

(2.03

)

 

(2.21

)

Less: Exploration expense

(0.60

)

 

(0.61

)

Less: General & administrative expense(1)

(2.21

)

 

(2.70

)

Less: Transaction related expense

 

 

(0.01

)

Total cash operating costs

(9.96

)

 

(10.98

)

Cash Operating Margin

$

27.36

 

 

$

30.03

 

Margin (%)

73

%

 

73

%

 

 

 

 

Non-cash expenses

 

 

 

Less: Asset retirement obligations accretion

$

(0.21

)

 

$

(0.23

)

Less: Depreciation, depletion, and amortization

(21.94

)

 

(21.28

)

Less: Amortization on intangible assets

(0.55

)

 

(0.61

)

Less: Non-cash stock based compensation

(0.43

)

 

(0.52

)

Total non-cash expenses

(23.13

)

 

(22.64

)

Operating margin

$

4.23

 

 

$

7.39

 

Margin (%)

11

%

 

18

%

 

 

 

 

Adjustments

 

 

 

Add: Transaction related expense

$

 

 

$

0.01

 

Adjusted operating margin

$

4.23

 

 

$

7.40

 

Margin (%)

11

%

 

18

%

(1)

 

General & administrative expense excludes non cash stock based compensation of $2.8 million and $3.1 million, or $0.43 and $0.52 per Boe, for the three months ended September 30, 2019 and June 30, 2019, respectively.

Magnolia Oil & Gas Corporation
Non-GAAP Financial Measures

Reconciliation of net cash provided by operating activities to cash flows from operations before changes in operating assets and liabilities

Cash flows from operations before changes in operating assets and liabilities is a non-GAAP financial measure. Management believes it is useful for investors and widely accepted by those following the oil and gas industry as a financial indicator of a company’s ability to generate cash to internally fund drilling and completion activities, fund acquisitions, and service debt. It is also used by research analysts to value and compare oil and gas exploration and production companies and is frequently included in published research when providing investment recommendations. Cash flows from operations before changes in operating assets and liabilities, therefore, is an additional measure of liquidity but is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing, or financing activities.

(In thousands)

 

For the Three

Months Ended
September 30, 2019

 

For the Nine

Months Ended
September 30, 2019

Net cash provided by operating activities

 

$

179,220

 

 

$

488,611

 

Changes in operating assets and liabilities

 

5,858

 

 

(6,473

)

Cash flows from operations before changes in operating assets and liabilities

 

$

173,362

 

 

$

495,084

 

 

Contacts

Investors
Brian Corales
(713) 842-9036
bcorales@mgyoil.com

Media
Art Pike
(713) 842-9057
apike@mgyoil.com

Release Summary

Magnolia Oil & Gas Corporation Announces Third Quarter 2019 Results

Contacts

Investors
Brian Corales
(713) 842-9036
bcorales@mgyoil.com

Media
Art Pike
(713) 842-9057
apike@mgyoil.com