MGY Q3 2026 earnings call transcript, November 5, 2026

Thanks, Tom, and good morning, everyone.

Thank you all for joining us today for discussion of our third quarter 2026 financial and operating results. And on another very busy day of earnings releases. As you may recall, we provided an update and released preliminary guidance for both the third and fourth quarters in early October, a few weeks after we closed on the acquisition of Wildfire. I'll briefly cover our third quarter results, which confirm our ability to consistently execute at a high level. I'll then highlight a few of the key milestones we have achieved since announcing the Wildfire acquisition early last quarter, including some added color around our progress on the integration and synergy capture. Brian will then review our financial results for the third quarter in greater detail and provide some further guidance before we. Take your questions. Beginning on slide three in our quarterly investor presentation, while our third quarter results include only a partial 20-day period of Wildfire ownership following the September closing, the benefits of the combined asset base are already clear. Our third quarter adjusted net income was approximately $166 million. or $0.71 per diluted share with adjusted EBITDAX of $392 million during the period. Adjusted net income, which increased by 114% compared to the year ago quarter, excludes special items consisting primarily of transaction and integration costs related to the Wildfire Act.

acquisition and net unrealized losses on derivative contracts. Drilling and completion capital for the third quarter was $147 million and below our earlier guidance with a reinvestment rate of just 38% of our adjusted EBITDAX. Magnolia generated $224 million of adjusted free capital. Cash flow in the third quarter with adjusted operating income or pre-tax margins of 43% and annualized return on capital employed of approximately 20%. Third quarter total production company production volumes grew by 17% year over year to 117.3 thousand barrels. of oil equivalent per day and in line with our earlier guidance. Oil production grew by 24% and averaged 49.1 thousand barrels per day. Total Giddings production volumes increased by 23% year over year to 97.7 thousand barrels of oil equivalent per day with Giddings oil production climbing 39. percent to 37.3 thousand barrels per day. Giddings production accounted for approximately 83% of Magnolia's total volumes and will make up a higher proportion of overall company production in the fourth quarter as a result of a full quarters contribution from wildfire. Production in our current. area was roughly 20,000 barrels of oil and cooling per day during the third quarter, a level which we expect to sustain for an extended period while generating a significant amount of free cash flow. As I've often said, Magnolia's goals and objectives are to be the most efficient operator of our best in class oil and gas assets.

to generate the highest returns on those assets while employing the least amount of capital for drilling and completing our wells. Overall, our strong momentum is carried into the fourth quarter, the first period with a full contribution of the wildfire assets. Supported by these strong operational financial results, Magnolia returned approximately a hundred. $3 million if it's free cash flow to shareholders during the quarter through a combination of our base dividend and ongoing share and purchase program where we bought back 2.3 million shares. We also reduced our net debt by $100 million to approximately 1.9 billion from the time we closed the wildfire acquisition to the end of the. third quarter. Finally, Magnolia's board has increased our share of purchase authorization by an incremental by an incremental 15 million shares, bringing the remaining authorization to 22.6 million shares or nearly 8.5% of current shares outstanding. This is indicative of the confidence Magnolia's value prop. acquisition and gives us the flexibility to lean into share of purchases above the 1% per quarter level, either opportunistically or when warranted. Turning to slide four, we highlight some key milestones achieved since we announced the wildfire acquisition. First, we divested some non-core assets in the Western Eagle for during our during the third quarter for a sales price of $47.5 million while also receiving consideration of 616 net acres in our contiguous block of acreage, primarily in Gonzalez County and in our Carnes area. This divestiture not only improves the focus of our portfolio, it also increases our working interest in our

operated tracks in this acreage block to approximately 98% with an average NRI of 80%. Second, we've already made strong progress on reducing debt, ending the third quarter with approximately 1.9 billion of net debt and achieving our goal of less than one times net debt to forecasted EBITDAX by the end of 2027. Within a year sooner than originally planned when announcing the wildfire acquisition. At current product prices, we expect to fully repay the outstanding debt on a revolving credit facility into early 2027. Next, we proactively and opportunistically added some oil hedges using costless collars with floor prices between 70 and 75. to provide greater assurance around our ability to reduce debt should oil prices experience a sharp decline while maintaining exposure to the current higher prices. Finally, we continue to make good progress in capturing synergies from the acquisition, which are proceeding a bit faster than we anticipated and expect to realize at least one-third of the more than $100 million of estimated annual run rate synergies by year-end 2026. Looking at slide five, the integration of wildfire continues to progress very smoothly, and we're meeting all our planned milestones. As I mentioned, synergy capture is moving ahead of schedule. We now expect to realize at least three-quarters of the projected annual run rate synergies by mid-2027. Part of the speed of the integration and synergy capture could be ascribed to the significant overlap of the wildfire acreage to our existing Giddings position, in addition to our strong existing knowledge of field operations and the

subsurface. Nearly all the DNC and subsurface efforts have now been transitioned with the full operations team expected to be in place next month. We are currently running four rigs and two completion crews and have recently substituted some equipment to capture further operation and capital efficiencies and are in the early stages of implementing Magnolia's playbook of operating practices and procedures. D&C synergies that have been identified amount to at least a million dollars per well and include procurement benefits, faster drilling times, transitioning to multi-well pads, lower cost of sand resulting from our ownership of the sandbox. which cuts our sand costs by roughly a third, and completions optimization to name a few. These are incorporated in our current estimated 2027 capital budget of $900 to $950 million. Over time, we anticipate additional synergies through completion design improvements and the drill. of longer laterals. Recent Austin Chalk well results on wildfires operated acreage are encouraging and are supportive of our geologic model that led to Magnolia's strong Austin Chalk development plan over the last several years. These results have increased our confidence in the acreage and suggest greater inventory. toward potential than our earlier baseline acquisition analysis. We plan to continue to delineate the Austin Chalk across our now 1.25 million net acre position in Giddings and our 2027 company wide drilling program is expected to allocate approximately 65% of targeted activity to the Austin Chalk.

And 35% to the Eagleford. Development wells on the legacy wildfire acreage are expected to be split about evenly between the Austin Chalk and Eagleford. Finishing off my discussion with slide 6, perhaps most importantly, Magnolia's differentiated improving business model remains unchanged but would improve durability. We will continue to do this. Continue to limit our D&C spending to 55% of adjusted EBITDAX, supporting annual moderate production growth and consistent free cash flow through the cycle. With approximately 50% wealth production, we expect to generate strong operating margins and significant free cash flow, allowing us to return meaningful capital to shareholders through a growing dividend. And ongoing share of purchases of at least 1% per quarter. Magnolia will continue to operate a focused business with the same discipline around allocating capital, controlling our costs, and managing risk that has historically defined our strategy. The significant free cash flow generation should allow us to continue reducing our leverage. with the goal of getting our metric of net debt EBITDA below half a term. I will now turn the call over Brian for further details on the quarter and for some additional guidance.

The next question comes from Jerry Spiker with Goldman Sachs. Please go ahead.

Thank you for attending today's presentation. You may now disconnect.