Magnolia Oil & Gas Corporation (“Magnolia,” “we,” “our,” or
the “Company”) (NYSE: MGY) today announced its financial and
operational results for the first quarter of 2020.
First Quarter 2020 Highlights:
- Magnolia reported a first quarter 2020 net loss of $1.9 billion
and net loss attributable to Class A Common Stock of $1.2 billion,
or $7.34 per share. Included in the Company's first quarter results
are $1.9 billion of pretax asset impairment charges related to the
significant weakness in product prices. Excluding the impact of
these charges, the first quarter 2020 total adjusted earnings were
a loss of $18.5 million, or $0.11 per share.
- First quarter 2020 production averaged 68.4 thousand barrels of
oil equivalent per day ("Mboe/d"), exceeding our earlier guidance.
Oil production averaged 37.3 thousand barrels per day ("Mbbl/d") or
55 percent of total volumes. Total production increased by 10
percent compared to the first quarter of 2019 with oil production
increasing by 15 percent. The higher than expected production was a
result of stronger than expected well performance and new wells
coming on line in the Giddings field.
- Giddings and other production averaged 23.9 Mboe/d with oil
production averaging 6.5 Mbbl/d, a 17 percent sequential oil
increase. Four new wells were brought online during the quarter
with an average per well 60-day oil rate of approximately 800
barrels per day. Recent drilling cost reductions and further
efficiencies have allowed Magnolia to reduce drilling and
completion ("D&C") costs in Giddings by more than 20 percent
compared to 2019, lowering average well costs to approximately $7
million.
- Adjusted EBITDAX during the first quarter of 2020 was $123.9
million. D&C costs for the quarter were 81 percent of EBITDAX
or $100.6 million, which was lower than our guidance. Magnolia
continues to target 2020 D&C capital to be around 60 percent of
EBITDAX and expect capital expenditures to significantly decline
during the remainder of 2020.
- Total cash operating costs, including general and
administrative ("G&A") expenses, were $9.42 per boe in the
first quarter 2020 representing a 14 percent decline compared to
$11.00 per boe in the prior year period.
- Magnolia has identified cash cost savings during 2020 of
approximately $55 million compared to the original 2020 plan. The
reduction is generated from operating costs and G&A
expenses.
- Magnolia ended the quarter with approximately $146.5 million of
cash on its balance sheet and has not drawn on its $450 million
revolving credit facility. The Company has no debt maturities until
2026 and has no plans to increase its debt levels.
“Our underlying business and assets performed better than
expected during the first quarter,” said Magnolia Chairman,
President, and CEO, Steve Chazen. “Our philosophy toward
disciplined capital spending and low financial leverage should
continue to support us during the current challenging environment.
Our drilling results in the Giddings field were particularly
strong, with two of our best wells drilled to date brought online
during the quarter. We have taken steps to help mitigate the impact
of much weaker product prices caused by weaker global demand due to
COVID-19, and our business model provides us with ample liquidity,
as well as the flexibility to adjust our activity levels relatively
quickly. Our capital spending for drilling and completions will
decline significantly during the remainder of the year as we are
currently running only one operated rig and have ceased all well
completion activity. We will continue to focus on what we can
control and have implemented cost reduction initiatives throughout
the organization in order to better align our cost structure with
the current market environment.
“Magnolia continues to benefit from its strong financial
position. We ended the quarter with $146.5 million of cash on our
balance sheet and do not expect to add any new debt. Our current
cash on hand would be able to cover all our remaining capital,
overhead, and interest payments at least through 2020, even before
considering the revenue from our production.”
Cost Reduction Initiatives
Magnolia has initiated a corporate-wide cost reduction program
to help lower expenses throughout the organization, including both
our capital program and cash operating costs. As part of this plan,
we have engaged with our vendors and suppliers for a reduction in
the costs of their services in order to better align our costs to
the current environment. We have also implemented corporate-wide
salary reductions of approximately 10 percent.
- Magnolia has identified cash cost savings of approximately $55
million to be achieved during 2020 and compared to our original
plan. These reductions are generated from a combination of
operating costs and G&A expenses and, excludes any additional
savings from the capital program.
- D&C capital outlays for the remainder of the year should be
less than the D&C levels of the first quarter.
Evidence of these savings should be partially reflected in the
second quarter, and more fully reflected in the second half of the
year. Further cost reduction initiatives remain ongoing and the
Company will continue to pursue efforts to improve margins.
Operational Update
First quarter total company production averaged 68.4 Mboe/d, a
10 percent increase compared to the first quarter 2019 levels.
Production in the Karnes area averaged 44.5 Mboe/d during the first
quarter 2020, a 10 percent increase from prior year levels of 40.5
Mboe/d. Production from Giddings and other increased 9 percent to
23.9 Mboe/d in the most recent quarter compared to prior year
levels of 21.9 Mboe/d. Oil production in the Giddings area
increased 17 percent sequentially as a result of new wells brought
online in the quarter.
Magnolia brought four new Giddings wells online, including a
two-well pad in the development area, during the quarter. The per
well average oil production from these four wells was approximately
800 barrels of oil per day over the first 60 days and oil accounted
for 75% of the total production. Recent drilling cost reductions
and further efficiencies have allowed Magnolia to reduce D&C
costs in Giddings by more than 20 percent compared to 2019,
lowering average well costs to approximately $7 million.
The operated Karnes rig was released in early April and Magnolia
currently has just one rig drilling a multi-well pad in Giddings.
The Company ceased completing wells in February and does not plan
to complete additional wells in the current commodity environment.
Magnolia's business model provides for flexibility to our activity
levels allowing the Company to better navigate the downturn.
Guidance and Other Financial Information
During the first quarter of 2020, Magnolia recorded impairments
of $1.9 billion related to proved and unproved properties as a
result of the sharp decline in commodity prices. Proved property
impairment of $1.4 billion is included in “Impairment of oil and
natural gas properties” and unproved property impairment of $0.6
billion is included in “Exploration expense” on the Company’s
Consolidated Statement of Operations for the three months ended
March 31, 2020. As a result of the non-cash impairment in the first
quarter, Magnolia expects the depreciation, depletion and
amortization rate to average about $9 per boe for the remainder of
the year.
Magnolia is expecting a significant reduction of capital for the
remainder of 2020. The total D&C capital spending for the
remaining three quarters of the year is expected to be less than
the first quarter levels. Magnolia operates approximately 75
percent of the total Company production volumes and less than 5
percent of the operated volumes are expected to be shut-in for the
month of May and a smaller amount for June. As a result, we expect
our second quarter production to be in the range of 62 to 65
Mboe/d. Oil production is expected to make up 52 to 54 percent of
our total volumes for the second 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 March 31, 2020, which is expected to be filed with the U.S.
Securities and Exchange Commission ("SEC") on May 11, 2020.
Conference Call and Webcast
Magnolia will host an investor conference call on Tuesday, May
12, 2020 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 length, scope and
severity of the recent coronavirus disease 2019 (“COVID-19”)
pandemic, and the impacts of the competition between Russia and
Saudi Arabia for crude oil market share, including the effects of
related public health concerns and the impact of actions taken by
governmental authorities and other third parties in response to the
pandemic and its impact on commodity prices, supply and demand
considerations, and storage capacity; (ii) the outcome of any legal
proceedings that may be instituted against Magnolia; (iii)
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; (iv) changes in applicable laws or regulations; and (v)
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, 2019. 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 March
31, 2020
For the Quarter Ended March
31, 2019
Production:
Oil (MBbls)
3,391
2,906
Natural gas (MMcf)
10,053
9,763
NGLs (MBbls)
1,155
1,084
Total (Mboe)
6,222
5,617
Average daily production:
Oil (Bbls/d)
37,259
32,289
Natural gas (Mcf/d)
110,475
108,478
NGLs (Bbls/d)
12,688
12,044
Total (boe/d)
68,360
62,413
Revenues (in thousands):
Oil sales
$
154,686
$
171,654
Natural gas sales
16,175
27,375
NGL sales
10,504
19,645
Total Revenues
$
181,365
$
218,674
Average sales price:
Oil (per Bbl)
$
45.62
$
59.07
Natural gas (per Mcf)
1.61
2.80
NGL (per Bbl)
9.09
18.12
Total (per boe)
$
29.15
$
38.93
NYMEX WTI ($/Bbl)
$
46.08
$
54.90
NYMEX Henry Hub ($/Mcf)
$
1.95
$
3.15
Realization to benchmark:
Oil (per Bbl)
99
%
108
%
Natural Gas (per Mcf)
83
%
89
%
Operating Expenses (in
thousands):
Lease operating expenses
$
24,163
$
21,518
Gathering, transportation and
processing
8,020
9,315
Taxes other than income
10,018
14,401
Depreciation, depletion and
amortization
142,671
115,946
Operating costs per boe:
Lease operating expenses
$
3.88
$
3.83
Gathering, transportation and
processing
1.29
1.66
Taxes other than income
1.61
2.56
Depreciation, depletion and
amortization
22.93
20.64
Magnolia Oil & Gas
Corporation
Consolidated Statements of
Operations
(In thousands, except per
share data)
For the Quarter Ended March
31, 2020
For the Quarter Ended March
31, 2019
REVENUES
Oil revenues
$
154,686
$
171,654
Natural gas revenues
16,175
27,375
Natural gas liquids revenues
10,504
19,645
Total revenues
181,365
218,674
OPERATING EXPENSES
Lease operating expenses
24,163
21,518
Gathering, transportation and
processing
8,020
9,315
Taxes other than income
10,018
14,401
Exploration expense
556,427
2,476
Impairment of oil and natural gas
properties
1,381,258
—
Asset retirement obligation accretion
1,438
1,328
Depreciation, depletion and
amortization
142,671
115,946
Amortization of intangible assets
3,626
3,626
General & administrative expenses
18,080
16,196
Transaction related costs
—
353
Total operating costs and expenses
2,145,701
185,159
OPERATING INCOME (LOSS)
(1,964,336
)
33,515
OTHER INCOME (EXPENSE)
Income from equity method investee
440
388
Interest expense, net
(6,757
)
(7,416
)
Other expense, net
(472
)
1
Total other income (expense)
(6,789
)
(7,027
)
INCOME (LOSS) BEFORE INCOME TAXES
(1,971,125
)
26,488
Income tax expense (benefit)
(75,826
)
3,775
NET INCOME (LOSS)
(1,895,299
)
22,713
LESS: Net income (loss) attributable to
noncontrolling interest
(668,289
)
9,687
NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A
COMMON STOCK
$
(1,227,010
)
$
13,026
NET INCOME (LOSS) PER COMMON SHARE
Basic
$
(7.34
)
$
0.08
Diluted
$
(7.34
)
$
0.08
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING
Basic
167,149
156,322
Diluted
167,149
158,140
WEIGHTED AVERAGE NUMBER OF CLASS B SHARES
OUTSTANDING(1)
85,790
93,312
(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 Quarter Ended March
31, 2020
For the Quarter Ended March
31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)
$
(1,895,299
)
$
22,713
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation, depletion and
amortization
142,671
115,946
Amortization of intangible assets
3,626
3,626
Exploration expense, non-cash
555,189
483
Impairment of oil and natural gas
properties
1,381,258
—
Asset retirement obligations accretion
expense
1,438
1,328
Amortization of deferred financing
costs
896
871
Deferred tax expense (benefit)
(74,654
)
3,415
Stock based compensation
2,879
2,432
Other
(447
)
(393
)
Net change in operating assets and
liabilities
17,321
(33,859
)
Net cash provided by operating
activities
134,878
116,562
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of EnerVest properties, final
settlement
—
4,250
Acquisitions, other
(69,390
)
(53,326
)
Additions to oil and natural gas
properties
(94,210
)
(134,435
)
Other investing
(200
)
197
Net cash used in investing activities
(163,800
)
(183,314
)
CASH FLOW FROM FINANCING ACTIVITIES
Contributions from noncontrolling interest
owners
—
7,301
Distributions to noncontrolling interest
owners
(284
)
—
Repurchase of common stock
(6,483
)
—
Other financing activities
(452
)
—
Net cash used in financing activities
(7,219
)
7,301
NET CHANGE IN CASH AND CASH
EQUIVALENTS
(36,141
)
(59,451
)
Cash and cash equivalents – Beginning of
period
182,633
135,758
Cash and cash equivalents – End of
period
$
146,492
$
76,307
Magnolia Oil & Gas
Corporation
Summary Balance Sheet
Data
(In thousands)
March 31, 2020
December 31, 2019
Cash and cash equivalents
$
146,492
$
182,633
Other current assets
82,753
110,585
Property, plant and equipment, net
1,209,606
3,116,757
Other assets
51,978
56,431
Total assets
$
1,490,829
$
3,466,406
Current liabilities
$
170,700
$
175,208
Long-term debt, net
390,147
389,835
Other long-term liabilities
101,092
172,834
Common stock
26
26
Additional paid in capital
1,703,996
1,703,362
Treasury stock
(16,760
)
(10,277
)
Retained earnings (accumulated
deficit)
(1,144,070
)
82,940
Noncontrolling interests
285,698
952,478
Total liabilities and equity
$
1,490,829
$
3,466,406
Magnolia Oil & Gas Corporation Non-GAAP
Financial Measures
Reconciliation of net income (loss) 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 (loss) 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 (loss) 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 (loss) 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 (loss) 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
(loss) to adjusted EBITDAX, our most directly comparable financial
measure calculated and presented in accordance with GAAP:
(In thousands)
For the Quarter Ended March
31, 2020
For the Quarter Ended March
31, 2019
Net income (loss)(1)
$
(1,895,299
)
$
22,713
Exploration expense
556,427
2,476
Asset retirement obligations accretion
1,438
1,328
Depreciation, depletion and
amortization
142,671
115,946
Amortization of intangible assets
3,626
3,626
Interest expense, net
6,757
7,416
Income tax expense (benefit)
(75,826
)
3,775
EBITDAX
(1,260,206
)
157,280
Impairment of oil and natural gas
properties
1,381,258
—
Non-cash stock based compensation
expense
2,879
2,432
Transaction related costs(2)
—
353
Adjusted EBITDAX
$
123,931
$
160,065
(1)
Includes net income (loss) attributable to
noncontrolling interest.
(2)
Transaction costs incurred related to the
execution of our business combination with EnerVest, Ltd. and its
affiliates, 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 (loss) attributable to Class A
Common Stock to adjusted earnings (loss)
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.
(In thousands, except per share
data)
For the Quarter Ended March
31, 2020
Per Share Diluted
EPS
For the Quarter Ended March
31, 2019
Per Share Diluted EPS
NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A
COMMON STOCK
$
(1,227,010
)
$
(7.34
)
$
13,026
$
0.08
Adjustments:
Impairment of proved oil and natural gas
properties
1,381,258
8.26
—
—
Impairment of unproved properties(1)
555,175
3.32
—
—
Transaction costs
—
—
353
—
Noncontrolling interest impact of
adjustments
(656,527
)
(3.93
)
—
—
Tax adjustments(2)
(71,362
)
(0.42
)
(74
)
—
ADJUSTED NET INCOME (LOSS) ATTRIBUTABLE TO
CLASS A COMMON STOCK
$
(18,466
)
$
(0.11
)
$
13,305
$
0.08
(1)
Impairment of unproved properties is
included within Exploration expense on the Consolidated Statement
of Operations.
(2)
Tax adjustments relate to impairment of
oil and natural gas properties and valuation allowance associated
with the company's deferred tax asset.
Magnolia Oil & Gas Corporation Non-GAAP
Financial Measures
Reconciliation of net income (loss) to adjusted net income
(loss)
Our presentation of adjusted net income (loss) is a non-GAAP
measures because it excludes the effect of certain items included
in Net income (loss) 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 (loss) 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 (loss) 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 (loss) may not be comparable to similar measures of other
companies in our industry.
(In thousands)
For the Quarter Ended March
31, 2020
For the Quarter Ended March
31, 2019
NET INCOME (LOSS)(1)
$(1,895,299
)
$22,713
Income tax expense (benefit)
(75,826
)
3,775
INCOME (LOSS) BEFORE INCOME TAXES
(1,971,125
)
26,488
Adjustments:
Impairment of proved oil and natural gas
properties
1,381,258
—
Impairment of unproved properties(2)
555,175
—
Transaction costs
—
353
ADJUSTED INCOME (LOSS) BEFORE INCOME
TAXES
(34,692
)
26,841
Adjusted income tax expense
(benefit)(3)
(7,452
)
5,883
ADJUSTED NET INCOME (LOSS)
$(27,240
)
$20,958
Diluted weighted average shares of Class A
Common Stock outstanding during the period
167,149
158,140
Weighted average shares of Class B Common
Stock outstanding during the period(4)
85,790
93,312
Total weighted average shares of Class A
and B Common Stock, including dilutive impact of other
securities(4)
252,939
251,452
(1)
Includes net income (loss) attributable to
noncontrolling interest.
(2)
Impairment of unproved properties is
included within Exploration expense on the Consolidated Statement
of Operations.
(3)
Represents corporate income taxes at an
assumed effective tax rate of 21.5% and 21.9% for the quarters
ended March 31, 2020 and 2019, respectively, applied to adjusted
income before income taxes.
(4)
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 revenue per boe to cash operating
margin
Our presentation of cash operating margin is a supplemental
non-GAAP financial measure that is used by management. Cash
operating margin excludes stock based compensation expense and
unproved property impairment because they are non-cash in nature.
We define cash 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 cash operating margin per boe provides
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, cash 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 cash
operating margin per boe may not be comparable to similar measures
of other companies in our industry.
(in $/boe)
For the Quarter Ended March
31, 2020
For the Quarter Ended March
31, 2019
Revenue
$
29.15
$
38.93
Direct operating expenses
Lease operating expenses
(3.88
)
(3.83
)
Gathering, transportation and
processing
(1.29
)
(1.66
)
Taxes other than income
(1.61
)
(2.56
)
Exploration expense(1)
(0.20
)
(0.44
)
General & administrative
expense(2)
(2.44
)
(2.45
)
Transaction related expense
—
(0.06
)
Total cash operating costs
(9.42
)
(11.00
)
Cash operating margin
$
19.73
$
27.93
(1)
Exploration expense excludes unproved
property impairment of $555.2 million, or $89.23 per boe, for the
quarter ended March 31, 2020.
(2)
General & administrative expense
excludes non-cash stock based compensation of $2.9 million and $2.4
million, or $0.46 per boe and $0.43 per boe, for the quarters ended
March 31, 2020 and 2019, respectively.
Magnolia Oil & Gas Corporation Non-GAAP
Financial Measures
Reconciliation of net cash provided by operating activities
to cash flows from operations before net change in operating assets
and liabilities and free cash flow
Free cash flow and cash flows from operations before net change
in operating assets and liabilities are non-GAAP financial
measures. Free cash flow is defined as cash flows from operations
before net change in operating assets and liabilities less
additions to oil and natural gas properties. Management believes
free cash flow and cash flows from operations before net change in
operating assets and liabilities are useful for investors and
widely accepted by those following the oil and gas industry as
financial indicators of a company’s ability to generate cash to
internally fund drilling and completion activities, fund
acquisitions, and service debt. They are also used by research
analysts to value and compare oil and gas exploration and
production companies and are frequently included in published
research when providing investment recommendations. Free cash flow
and cash flows from operations before net change in operating
assets and liabilities, therefore, are additional measures of
liquidity but are not measures of financial performance under GAAP
and should not be considered alternatives to cash flows from
operating, investing, or financing activities.
(In thousands)
For the Quarter Ended March
31, 2020
For the Quarter Ended March
31, 2019
Net cash provided by operating
activities
$
134,878
$
116,562
Add: Net change in operating assets and
liabilities
(17,321
)
33,859
Cash flows from operations before net
change in operating assets and liabilities
117,557
150,421
Less: Additions to oil and natural gas
properties
(94,210
)
(134,435
)
Free cash flow
$
23,347
$
15,986
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200511005934/en/
Contacts for Magnolia Oil & Gas Corporation
Investors Brian Corales (713) 842-9036
bcorales@mgyoil.com
Media Art Pike (713) 842-9057 apike@mgyoil.com
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