Magnolia Oil & Gas Corp (MGY) Q3 2025 Earnings Call Highlights: Strong Production Growth ...

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Adjusted Net Income: $78 million or $0.41 per diluted share. Adjusted EBITDAX: $219 million. Free Cash Flow: $134 million. Operating Income Margin: 31%. Return on Capital Employed: 17% annualized. Production Growth: 11% year over year to 15,000 barrels of oil equivalent per day. Capital Reinvestment Rate: 54% of adjusted EBITDAX. Cash Balance: $280 million at quarter end. Share Repurchases: $51 million for more than 2.1 million shares. Quarterly Dividend: $0.15 per share, payable on December 1st. Total Liquidity: Approximately $730 million. Fourth Quarter Production Estimate: Approximately 101,000 barrels equivalent per day. Fourth Quarter Capital Expenditures: Approximately $110 million. Effective Tax Rate: Approximately 21% with zero cash taxes for full year 2025.

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Release Date: October 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Magnolia Oil & Gas Corp (NYSE:MGY) achieved a record quarterly total production rate of 15,000 barrels of oil equivalent per day, representing a year-over-year production growth of 11%. The company generated a strong level of free cash flow in the quarter, amounting to $134 million. Magnolia returned 60% of its free cash flow to shareholders through share repurchases and dividends, demonstrating a strong commitment to shareholder returns. The company maintained a low capital reinvestment rate of 54% of its adjusted EBITDAX, highlighting its disciplined approach to capital allocation. Magnolia ended the quarter with a cash balance of $280 million, the highest level of the year, providing significant financial flexibility.

Negative Points

Despite strong production growth, Magnolia experienced a decline in total revenue per BOE by approximately 12% year-over-year due to lower oil prices. The company anticipates a $3 per barrel discount to Magellan and East Houston for its price differentials, which could impact revenue. Magnolia remains completely unhedged on all of its oil and natural gas production, exposing it to potential price volatility. The company deferred the completion of several wells into next year, which could delay potential revenue from these assets. Magnolia's operating income margin was 31%, which, while solid, indicates room for improvement in cost management and efficiency.

Q & A Highlights

Q: Chris, with the operational efficiencies seen in Giddings, could you envision accelerating production or cutting CapEx? A: Christopher Stavros, President and CEO, emphasized staying true to the business model, which maximizes free cash flow for shareholders. Rather than increasing activity levels, Magnolia will continue to probe and appraise new areas over time, maintaining moderate growth without overstretching capital or activity.

Story Continues

Q: Regarding M&A, is there still potential for strategic bolt-ons in your area? A: Christopher Stavros noted there is a fair amount of "white space" and smaller private operators that Magnolia evaluates. Any acquisition must improve the business and fit within Magnolia's model. While opportunities are considered, the company remains selective and cautious.

Q: Can you elaborate on the appraisal work at Karnes, given its perception as a mature play? A: Christopher Stavros stated that Karnes still has potential, with good rock providing long life. Magnolia is exploring iterations and testing areas that may extend Karnes' life, focusing on economic viability and duration.

Q: How does Magnolia view the potential for natural gas resource development in the Western Hainesville area? A: Stavros mentioned that while Magnolia is not currently in the area discussed, there are other parts of Giddings with significant natural gas exposure. The focus remains on economic viability rather than just resource quantity.

Q: How will Magnolia manage its appraisal program in 2026 amid potential oil price weakness? A: Stavros highlighted the importance of the appraisal program in expanding resources. While reluctant to cut it drastically, Magnolia will adjust based on oil and gas prices, maintaining a balance between exploration and economic returns.

Q: How does Magnolia plan to use its growing cash reserves? A: Stavros indicated that the goal is to allocate cash to generate returns, potentially through share buybacks or strategic bolt-ons. Magnolia remains committed to its business model, focusing on shareholder returns and maintaining flexibility.

Q: What is the outlook for operating expenses in 2026? A: Stavros mentioned ongoing efforts to improve efficiencies in areas like water disposal and fluid management. While seasonal increases are expected, overall costs are anticipated to decrease slightly from current levels.

Q: How does Magnolia view service pricing in relation to current oil prices? A: Stavros noted that service pricing has softened throughout 2025, with some leveling recently. While there is potential for further softness if prices decline, current conditions are stable, with efficiencies and contractual arrangements providing some offset.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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