Magnolia Oil & Gas Corporation (“Magnolia,”) (MGY) announced its financial and operational results for the first quarter of 2021.
- Magnolia reported first quarter 2021 net income attributable to Class A Common Stock of $63.2 million, or $0.37 per diluted share. First quarter 2021 total net income was $91.5 million and adjusted net income was $93.8 million, or $0.38 per diluted share.
- Adjusted EBITDAX for the first quarter of 2021 was $150.8 million, a 54% sequential quarterly increase driven by both higher overall production and stronger product prices. Total capital allocated to drilling and completions (“D&C”) during the first quarter was $38.9 million, or 26% of adjusted EBITDAX.
- Net cash provided by operating activities was $118.2 million and the Company generated free cash flow(1) of $100.0 million during the first quarter.
- During the first quarter of 2021, we generated operating income as a percent of revenue of 48%, compared to 29% during fourth quarter 2020.
- Total production in the first quarter of 2021 increased 3% sequentially to 62.3 thousand barrels of oil equivalent per day (“Mboe/d”). Production at Giddings achieved another record level in the first quarter with total volumes of 34.6 Mboe/d increasing 22% sequentially and 45% from prior year levels. Giddings oil production of 11.3 Mbbl/d increased by 32% sequentially and 73% over the same period last year.
- Magnolia spent $88 million reducing its shares during the first quarter of 2021. As a result, the fully diluted share count is expected to decline by approximately 4% to 245 million diluted shares in the second quarter of 2021 from 255 million shares in the fourth quarter of 2020. Magnolia ended the first quarter with 12.6 million Class A Common shares remaining under the current share repurchase authorization.
- Magnolia had approximately $178.2 million of cash on its balance sheet at the end of the first quarter of 2021 and remains undrawn on its $450.0 million revolving credit facility. The Company has no debt maturities until 2026 and has no plans to increase its debt levels.
- As stated earlier this year, Magnolia expects to begin paying a semi-annual cash dividend during the third quarter of 2021.
“Magnolia had a very strong start to 2021, achieving record quarterly earnings. The characteristics of our strategy and business model should gain momentum through the year as our per share and unit metrics continue to improve,” said Chairman, President and CEO Steve Chazen. “Our disciplined approach toward allocating capital to our assets is expected to generate moderate growth and strong profit margins this year, while generating meaningful free cash flow.
“Despite lower capital spending, total production continued to grow in the first quarter, demonstrating the quality of our assets. The growth in volumes was driven by record production from the Giddings area, which increased 22 percent sequentially and 45 percent compared to the prior-year quarter. Based on continued strong well results in Giddings and increased activity in Karnes, we now expect our full-year 2021 production to grow 6 to 9 percent compared to prior year levels, while spending somewhat less than $300 million.
“Our ongoing free cash flow generation and strong financial position will allow us to allocate the excess cash toward accretive, small bolt-on property acquisitions, or repurchasing our shares. We used our free cash flow and some of our balance sheet cash to reduce our share count by roughly 4 percent compared to fourth quarter 2020 levels. We continue to target repurchasing around 1 percent of our outstanding shares each quarter. In addition, Magnolia plans to pay its first semi-annual dividend during the third quarter of this year. Magnolia’s oil production remains unhedged as part of our strategy, allowing us to fully capture the benefit of improved prices.”
First quarter total company production averaged 62.3 Mboe/d, representing a 3 percent increase from fourth quarter 2020 levels. The higher production outcome was a result of better-than-expected production at our Giddings asset and as several new wells were turned in-line. Giddings and Other production averaged 34.6 Mboe/d representing a 22 percent increase in sequential volumes and a 45 percent increase from the same prior-year quarter. Oil production at Giddings averaged 11.3 Mbbl/d, a 32 percent sequential increase and a 73 percent increase compared to last year’s first quarter. Production in the Karnes area averaged 27.7 Mboe/d during the first quarter of 2021.
We plan to add a second drilling rig this summer. One rig will continue drilling multi-well pads in our Giddings area. The second rig will operate in both the Karnes and Giddings areas, including some appraisal wells at Giddings. Total well costs associated with drilling, completion and facilities continue to average about $6 million per well at Giddings and we expect to drill about 2 wells per month.
Inclusive of the additional rig for the back half of the year, we expect Magnolia’s capital spending for drilling and completing wells to be somewhat less than $300 million this year. Our D&C capital is expected to increase during the second quarter and during the second half of the year, which coincides with the added activity. Magnolia’s total production for 2021 is currently expected to grow 6 to 9 percent compared to full-year 2020 levels.
Looking at the second quarter of 2021, total production is forecast to be about 66 Mboe/d, a 6 percent increase from first quarter production levels. Oil price differentials are anticipated to be approximately a $3 per barrel discount to Magellan East Houston (“MEH”) during the second quarter. The fully diluted share count for the second quarter of 2021 is expected to be approximately 245 million shares which is 4 percent lower than fourth quarter 2020 levels.
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, 2021, which is expected to be filed with the U.S. Securities and Exchange Commission (“SEC”) on May 5, 2021.