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What changed in Magnolia Oil & Gas Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Magnolia Oil & Gas Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+168 added−174 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-16)

Top changes in Magnolia Oil & Gas Corp's 2023 10-K

168 paragraphs added · 174 removed · 133 edited across 5 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

65 edited+16 added−14 removed160 unchanged
Biggest changeSeparately, a number of states have developed programs that are aimed at reducing GHG emissions by means of cap and trade programs, carbon taxes, or encouraging the use of renewable energy or alternative low-carbon fuels. Cap and trade programs typically require major sources of GHG emissions to acquire and surrender emission allowances in return for emitting those GHGs.
Biggest changeAs a result of these regulatory changes, the scope of any final methane regulations or the costs for complying with federal methane regulations are uncertain. Separately, a number of states have developed programs that are aimed at reducing GHG emissions by means of cap and trade programs, carbon taxes, or encouraging the use of renewable energy or alternative low-carbon fuels.
Increasing attention from governmental and regulatory bodies, investors, consumers, industry, and other stakeholders on combating climate change, together with changes in consumer and industrial/commercial behavior, societal expectations on companies to address climate change, investor and societal expectations regarding voluntary climate-related disclosures, preferences and attitudes with respect to the generation and consumption of energy, the use of hydrocarbons, and the use of products manufactured with, or powered by, hydrocarbons, may result in the enactment of climate change-related regulations, policies and initiatives (at the government, regulator, corporate and/or investor community levels), including alternative energy requirements, new fuel consumption standards, energy conservation and emissions reductions measures and responsible energy development; technological advances with respect to the generation, transmission, storage and consumption of energy (including advances in wind, solar and hydrogen power, as well as battery technology); increased availability of, and increased demand from consumers and industry for, energy sources other than oil and natural gas (including wind, solar, nuclear, and geothermal sources as well as electric vehicles); and development of, and increased demand from consumers and industry for, lower-emission products and services (including electric vehicles and renewable residential and commercial power supplies), as well as more efficient products and services.
Increasing attention from governmental and regulatory bodies, investors, consumers, industry, and other stakeholders on combating climate change, together with changes in consumer and industrial/commercial behavior, societal expectations on companies to address climate change, investor and societal expectations regarding voluntary climate-related disclosures, preferences and attitudes with respect to the generation and consumption of energy, the use of hydrocarbons, and the use of products manufactured with, or powered by, hydrocarbons, may result in the enactment of climate change-related regulations, policies and initiatives (at the government, regulator, corporate and/or investor community levels), including alternative energy requirements, new fuel consumption standards, energy conservation and emissions reductions measures and responsible energy development; technological advances with respect to the generation, transmission, storage and consumption of energy (including advances in wind, solar and hydrogen power, as well as battery technology); increased availability of, and increased demand from consumers and industry for, energy sources other 24 than oil and natural gas (including wind, solar, nuclear, and geothermal sources as well as electric vehicles); and development of, and increased demand from consumers and industry for, lower-emission products and services (including electric vehicles and renewable residential and commercial power supplies), as well as more efficient products and services.
Negative public perception regarding the 24 Company and/or its industry resulting from, among other things, concerns raised by advocacy groups about climate change, emissions, hydraulic fracturing, seismicity, or oil spills may lead to increased litigation risk and regulatory, legislative and judicial scrutiny, which may, in turn, lead to new state and federal safety and environmental laws, regulations, guidelines and enforcement interpretations.
Negative public perception regarding the Company and/or its industry resulting from, among other things, concerns raised by advocacy groups about climate change, emissions, hydraulic fracturing, seismicity, or oil spills may lead to increased litigation risk and regulatory, legislative and judicial scrutiny, which may, in turn, lead to new state and federal safety and environmental laws, regulations, guidelines and enforcement interpretations.
For example, a significant hurricane or similar weather event could damage refining and other oil and natural gas-related facilities on the Gulf Coast of Texas and Louisiana, which (if significant enough) could limit the availability of gathering and transportation facilities across Texas and could then cause production in the Eagle Ford Shale and Giddings area (including potentially Magnolia’s production) to be curtailed or shut in or (in the case of natural gas) flared.
For example, a significant hurricane or similar weather event could damage refining and other oil and natural gas-related facilities on the Gulf Coast, which (if significant enough) could limit the availability of gathering and transportation facilities across Texas and could then cause production in the Eagle Ford Shale and Giddings area (including potentially Magnolia’s production) to be curtailed or shut in or (in the case of natural gas) flared.
The RBL Facility limits the amounts Magnolia can borrow up to a borrowing base amount, which the lenders determine, in good faith, in accordance with their respective usual and customary oil and natural gas lending criteria, based upon the loan value of the proved oil and natural gas reserves located within the geographic boundaries of the United States included in the most recent reserve report provided to the lenders.
The RBL Facility limits the amounts Magnolia can borrow up to a borrowing base amount, which the lenders determine, in good faith, in accordance with their respective usual and customary oil and natural gas lending criteria, based upon the loan value of 27 the proved oil and natural gas reserves located within the geographic boundaries of the United States included in the most recent reserve report provided to the lenders.
Such actions could adversely impact the Company’s business by distracting management and other personnel from their primary 25 responsibilities, require the Company to incur increased costs, and/or result in reputational harm. Activist shareholders have introduced proposals that may seek to force companies to adopt aggressive emission reduction targets or to shift away from more carbon-intensive industries.
Such actions could adversely impact the Company’s business by distracting management and other personnel from their primary responsibilities, require the Company to incur increased costs, and/or result in reputational harm. Activist shareholders have introduced proposals that may seek to force companies to adopt aggressive emission reduction targets or to shift away from more carbon-intensive industries.
To the extent that commodity prices continue to increase in the future, the demand for and prices of these goods and services are likely to increase, and Magnolia could encounter delays in securing, or an inability to secure, the personnel, equipment, power, services, resources, and facilities access necessary for it to resume or increase 21 Magnolia’s development activities, which could result in production volumes being below its forecasted volumes.
To the extent that commodity prices continue to increase in the future, the demand for and prices of these goods and services are likely to increase, and Magnolia could encounter delays in securing, or an inability to secure, the personnel, equipment, power, services, resources, and facilities access necessary for it to resume or increase Magnolia’s development activities, which could result in production volumes being below its forecasted volumes.
If any of these security breaches were to occur, they could lead to losses of, or damage to, sensitive information, facilities, infrastructure, and systems essential to its business and operations, as well as data corruption, communication interruptions, or other disruptions to its operations, which, in turn, could have a material adverse effect on its business, financial position, results of operations, and cash flows.
If any of these security breaches were to occur, they could lead to losses of, or damage to, sensitive information, facilities, infrastructure, and systems essential to Magnolia’s business and operations, as well as data corruption, communication interruptions, or other disruptions to its operations, which, in turn, could have a material adverse effect on its business, financial position, results of operations, and cash flows.
Cyber security risks, including phishing-attacks, unauthorized access, malicious software, data privacy breaches by employees or others with authorized access, ransomware, and other cyber security issues could compromise computer and telecommunications systems and result in disruptions to the Company’s business operations or the access, disclosure, or loss of Company data and proprietary information.
Cyber security risks, including phishing-attacks, unauthorized access, malicious software, data exfiltration, data privacy breaches by employees or others with authorized access, ransomware, and other cyber security issues could compromise computer and telecommunications systems and result in disruptions to the Company’s business operations or the access, disclosure, or loss of Company data and proprietary information.
Magnolia’s future effective tax rates could be subject to volatility or adversely affected by a number of factors, including changes in the valuation of Magnolia’s deferred tax assets and liabilities, expected timing and amount of the release of any tax valuation allowances, tax effects of stock based compensation, or changes in tax laws, regulations, or interpretations thereof.
Magnolia’s future effective tax rates could be subject to volatility or adversely affected by a number of factors, including changes in the valuation of Magnolia’s deferred tax assets and liabilities, expected timing and amount of the release of any tax valuation allowances, tax effects of stock based compensation, or 26 changes in tax laws, regulations, or interpretations thereof.
To the extent that Magnolia needs funds and Magnolia LLC or its subsidiaries are restricted 28 from making such distributions or payments under applicable law or regulation or under the terms of any financing arrangements, or are otherwise unable to provide such funds, Magnolia’s liquidity and financial condition could be materially adversely affected.
To the extent that Magnolia needs funds and Magnolia LLC or its subsidiaries are restricted from making such distributions or payments under applicable law or regulation or under the terms of any financing arrangements, or are otherwise unable to provide such funds, Magnolia’s liquidity and financial condition could be materially adversely affected.
Inflation may adversely affect Magnolia’s business, results of operations, and financial condition. Magnolia is in an industry that has experienced inflationary pressures on operating costs - namely fuel, steel (i.e., wellbore tubulars and facilities manufactured using steel), labor, and drilling and completion services.
Inflation may adversely affect Magnolia’s business, results of operations, and financial condition. Magnolia is in an industry that has experienced inflationary pressures on operating costs - namely fuel, steel (i.e., wellbore 16 tubulars and facilities manufactured using steel), labor, and drilling and completion services.
To the extent Magnolia LLC has available cash, Magnolia intends to cause Magnolia LLC to make (i) generally pro rata distributions to its unitholders, including Magnolia, in an amount at least sufficient to allow Magnolia to pay its taxes and (ii) non-pro rata payments to Magnolia to reimburse it for its corporate and other overhead expenses.
To the extent Magnolia LLC has available cash, Magnolia intends to cause Magnolia LLC 28 to make (i) generally pro rata distributions to its unitholders, including Magnolia, in an amount at least sufficient to allow Magnolia to pay its taxes and (ii) non-pro rata payments to Magnolia to reimburse it for its corporate and other overhead expenses.
Events that could adversely affect Magnolia’s ability to conduct operations or result in substantial loss as a result of claims 23 include injury or loss of life, damage to and destruction of property, natural resources, and equipment, pollution and other environmental damage, regulatory investigations and penalties, and repair and remediation costs.
Events that could adversely affect Magnolia’s ability to conduct operations or result in substantial loss as a result of claims include injury or loss of life, damage to and destruction of property, natural resources, and equipment, pollution and other environmental damage, regulatory investigations and penalties, and repair and remediation costs.
There is risk that these parties may at any time have economic, business, or legal interests or 19 goals that are inconsistent with Magnolia’s, and therefore decisions may be made that are not what the Company believes are in its best interest.
There is risk that these parties may at any time have economic, business, or legal interests or goals that are inconsistent with Magnolia’s, and therefore decisions may be made that are not what the Company believes are in its best interest.
Moreover, there can be no assurance that reserves will ultimately be produced or that proved undeveloped reserves will be developed within the periods anticipated. Actual future prices and costs may differ materially from those used in the present value estimate.
Moreover, there can be no assurance that reserves will ultimately be produced or that proved undeveloped reserves will be developed within the periods anticipated. 18 Actual future prices and costs may differ materially from those used in the present value estimate.
Although these provisions were largely unchanged in recent federal tax legislation such as the Inflation Reduction Act of 2022 (the “IRA”), Congress could consider, and could include, some or all of these proposals as part of future tax reform legislation.
Although these provisions were largely unchanged in recent federal tax legislation such as the Inflation Reduction Act of 2022, Congress could consider, and could include, some or all of these proposals as part of future tax reform legislation.
Oil, natural gas, and NGLs are commodities, and their 16 prices may fluctuate widely in response to market uncertainty and to relatively minor changes in the supply of and demand for oil, natural gas, and NGLs. Historically, oil, natural gas, and NGL prices have been volatile.
Oil, natural gas, and NGLs are commodities, and their prices may fluctuate widely in response to market uncertainty and to relatively minor changes in the supply of and demand for oil, natural gas, and NGLs. Historically, oil, natural gas, and NGL prices have been volatile.
Additionally, the borrowing base is subject to unscheduled reductions due to certain issuances of new junior lien indebtedness, unsecured indebtedness or 27 subordinated indebtedness, certain sales or acquisitions of borrowing base properties, or early monetizations or terminations of certain hedge or swap positions.
Additionally, the borrowing base is subject to unscheduled reductions due to certain issuances of new junior lien indebtedness, unsecured indebtedness or subordinated indebtedness, certain sales or acquisitions of borrowing base properties, or early monetizations or terminations of certain hedge or swap positions.
Negative perceptions regarding the Company’s industry and reputational risks, including perceptions regarding the sufficiency of the Company’s ESG program (which may include policies, practices, and extralegal objectives related to climate change, environmental stewardship, social responsibility, and corporate governance), may also in the future adversely affect the Company’s ability to successfully carry out the Company’s business strategy by adversely affecting Magnolia’s access to capital.
Negative perceptions regarding the Company’s industry and reputational risks, including perceptions regarding the sufficiency of the Company’s ESG program (which may include policies, practices, and extralegal objectives related to climate change, environmental stewardship, social responsibility, and corporate governance), may also in the future adversely affect the Company’s ability to successfully carry out the Company’s business strategy by adversely affecting its access to capital.
See “Magnolia’s producing properties are predominantly located in South Texas, making Magnolia vulnerable to risks associated with operating in a limited geographic area.” New climate disclosure rules proposed by the SEC may increase Magnolia’s costs of compliance and adversely impact its business. On March 21, 2022, the U.S.
See “Magnolia’s producing properties are predominantly located in South Texas, making Magnolia vulnerable to risks associated with operating in a limited geographic area.” New climate disclosure rules proposed by the SEC may increase Magnolia’s costs of compliance and adversely impact its business. In March 2022, the U.S.
The demand for drilling rigs, pipe, and other equipment and supplies, as well as for qualified and experienced field personnel to drill wells and conduct field operations, geologists, geophysicists, engineers, and other professionals in the oil and gas industry, can fluctuate significantly, often in correlation with oil, natural gas, and NGL prices, causing periodic shortages of supplies and needed personnel.
The demand for drilling rigs, pipe, and other equipment and supplies, as well as for qualified and experienced field personnel to drill wells and conduct field operations, geologists, geophysicists, engineers, and other professionals in the oil and gas industry, can fluctuate significantly, often correlated with oil, natural gas, and NGL prices, causing periodic shortages of supplies and needed personnel.
Magnolia’s management team and board may determine to secure and deploy development capital at a faster or slower pace than currently assumed. Actual future production, oil prices, natural gas prices, NGL prices, revenues, taxes, development expenditures, operating expenses, and quantities of recoverable oil and natural gas reserves may vary from Magnolia’s estimates.
Magnolia’s management team and board may determine to secure and deploy development capital at a faster or slower pace than currently assumed. Actual future production, oil prices, natural gas prices, NGL prices, revenues, taxes other than income taxes, development expenditures, operating expenses, and quantities of recoverable oil and natural gas reserves may vary from Magnolia’s estimates.
Private individuals or public entities may seek to enforce environmental laws and regulations against us and could allege personal injury, property damages or other liabilities. While the Company’s business is not a party to any such litigation, Magnolia could be named in actions making similar allegations.
Private individuals or public entities may seek to enforce environmental laws and regulations against the Company and could allege personal injury, property damages or other liabilities. While the Company’s business is not a party to any such litigation, Magnolia could be named in actions making similar allegations.
As of December 31, 2022, the Company had $450.0 million of borrowing base capacity and no borrowings during the year or outstanding at the end of the period, and therefore there were no restrictions under the RBL Facility on the ability of Magnolia LLC and its subsidiaries to transfer funds to Magnolia.
As of December 31, 2023, the Company had $450.0 million of borrowing base capacity and no borrowings during the year or outstanding at the end of the period, and therefore there were no restrictions under the RBL Facility on the ability of Magnolia LLC and its subsidiaries to transfer funds to Magnolia.
For a discussion of the uncertainty involved in these processes, see “Crude oil, natural gas, and NGL reserves are estimates, and actual recoveries may vary significantly.” In addition, the cost of drilling, completing, and operating wells is often uncertain.
For a discussion of the uncertainty involved in these processes, see the risk factor “Crude oil, natural gas, and NGL reserves are estimates, and actual recoveries may vary significantly.” In addition, the cost of drilling, completing, and operating wells is often uncertain.
Institutional lenders who provide financing to energy companies such as the Company’s have also become more attentive to sustainable lending practices, and some may elect not to provide traditional energy producers or companies that support such producers with funding.
Institutional lenders who provide financing to energy companies such as the Company have also become more attentive to sustainable lending practices, and some may elect not to provide traditional energy producers or companies that support such producers with funding.
The concentration of Magnolia’s assets in a limited geographic area also increases its exposure to changes in local laws and regulations, certain lease stipulations designed to protect wildlife and unexpected events that may occur in the regions such as natural disasters, severe weather events, seismic events, industrial accidents, or labor difficulties.
The concentration of Magnolia’s assets 19 in a limited geographic area also increases its exposure to changes in local laws and regulations, certain lease stipulations designed to protect wildlife and unexpected events that may occur in the region such as natural disasters, severe weather events, seismic events, industrial accidents, or labor difficulties.
As of December 31, 2022, the Company had $400.0 million of principal debt related to the 2026 Senior Notes outstanding and no outstanding borrowings related to the RBL Facility and $450.0 million of borrowing capacity of the RBL Facility.
As of December 31, 2023, the Company had $400.0 million of principal debt related to the 2026 Senior Notes outstanding and no outstanding borrowings related to the RBL Facility and $450.0 million of borrowing capacity of the RBL Facility.
As of December 31, 2022, the Company had $450.0 million of borrowing base capacity and no borrowings. The RBL Facility requires periodic borrowing base redeterminations based on reserve reports.
As of December 31, 2023, the Company had $450.0 million of borrowing base capacity and no borrowings. The RBL Facility requires periodic borrowing base redeterminations based on reserve reports.
Risks Related to Environmental and Political Conditions Magnolia’s operations are subject to environmental and occupational health and safety laws and regulations that may expose the Company to significant costs and liabilities.
Risks Related to Environmental, Regulatory, and Political Conditions Magnolia’s operations are subject to environmental and occupational health and safety laws and regulations that may 22 expose the Company to significant costs and liabilities.
The process also requires economic assumptions about matters such as oil and natural gas prices, drilling and operating expenses, capital expenditures, taxes, and availability of funds. Magnolia cannot assure you that its management team’s assumptions 18 with respect to projected production and/or the timing of development expenditures will not materially change in subsequent periods.
The process also requires economic assumptions about matters such as oil and natural gas prices, drilling and operating expenses, capital expenditures, taxes other than income taxes, and availability of funds. Magnolia cannot assure you that its management team’s assumptions with respect to projected production and/or the timing of development expenditures will not materially change in subsequent periods.
Magnolia normally sells its production to a relatively small number of customers, as is customary in the oil and natural gas business. In 2022, there were four purchasers who accounted for an aggregate 61% of the total revenue attributable to Magnolia’s assets. The loss of any significant purchaser could adversely affect Magnolia’s revenues in the short-term.
Magnolia normally sells its production to a relatively small number of customers, as is customary in the oil and natural gas business. In 2023, there were three purchasers who accounted for an aggregate 61% of the total revenue attributable to Magnolia’s assets. The loss of any significant purchaser could adversely affect Magnolia’s revenues in the short-term.
A write-down constitutes a non-cash impairment charge to earnings. Declines in commodity prices may adversely affect proved reserve values, which would likely result in a proved property impairment of Magnolia’s properties, which could have a material adverse effect on results of operations for the periods in which such charges are taken.
A write-down constitutes a non-cash impairment charge to earnings. Long-term declines in commodity prices may adversely affect proved reserve values, which may result in a proved property impairment of Magnolia’s properties, which could have a material adverse effect on results of operations for the periods in which such charges are taken.
In addition, the effect of fluctuations on supply and demand may become more pronounced within specific geographic oil and natural gas producing areas such as Karnes County and Austin Chalk, which may cause these conditions to occur with greater frequency or magnify the effects of these conditions.
In addition, the effect of fluctuations on supply and demand may become more pronounced within specific geographic oil and natural gas producing areas such as the Karnes and Giddings areas, which may cause these conditions to occur with greater frequency or magnify the effects of these conditions.
In addition, any such negative effect on production volumes, or significant increases in costs, could have a material adverse effect on cash flow and profitability. Furthermore, if it is unable to secure a sufficient number of drilling rigs at reasonable costs, Magnolia may not be able to drill all of its acreage before its leases expire.
In addition, any 21 such negative effect on production volumes, or significant increases in costs, could have a material adverse effect on cash flow and profitability. Furthermore, if Magnolia is unable to secure drilling rigs, it may not be able to drill all of its acreage before its leases expire.
Recent equity returns in the sector versus other industry sectors have led to lower oil and natural gas representation in certain key equity market indices. Limitation of investments in and financings for energy companies could also result in the restriction, delay, or cancellation of infrastructure projects and energy production activities.
Lower equity returns in the sector versus other industry sectors may lead to lower oil and natural gas representation in certain key equity market indices. Limitation of investments in and financings for energy companies could also result in the restriction, delay, or cancellation of infrastructure projects and energy production activities.
The prices Magnolia receives for its production and the levels of Magnolia’s production depend on numerous factors beyond Magnolia’s control, which include, without limitation, the following: • the economic effects of the COVID-19 pandemic and actions taken by federal, state and local governments and other third parties in response to the pandemic; • U.S. federal, state, local, and non-U.S. governmental regulation and taxes; • worldwide and regional economic conditions impacting the global supply and demand for oil, natural gas, and NGLs; • the price and quantity of foreign imports of oil, natural gas, and NGLs; • political and economic conditions in or affecting other producing regions or countries, including the Middle East, Africa, South America, and Russia; • actions of OPEC, its members, and other state-controlled oil companies relating to oil price and production controls; • the level of global exploration, development, and production; • the level of global inventories; • prevailing prices on local price indexes in the areas in which Magnolia operates; • the proximity, capacity, cost, and availability of gathering, transportation, and processing facilities; • localized and global supply, demand fundamentals, and transportation availability; • the cost of exploring for, developing, producing, and transporting reserves; • weather conditions and natural disasters; • inflation rates; • technological advances affecting energy consumption; • the price and availability of alternative fuels; • expectations about future commodity prices; and • other events that impact global market demand.
The prices Magnolia receives for its production and the levels of Magnolia’s production depend on numerous factors beyond Magnolia’s control, which include, without limitation, the following: • U.S. federal, state, local, and non-U.S. governmental regulation and taxes; • worldwide and regional economic conditions impacting the global supply and demand for oil, natural gas, and NGLs; • the price and quantity of foreign imports of oil, natural gas, and NGLs; • political and economic conditions in or affecting other producing regions or countries, including the Middle East, Africa, South America, and Russia; • actions of OPEC, its members, and other state-controlled oil companies relating to oil price and production controls; • the level of global exploration, development, and production; • the impact on worldwide economic activity of an epidemic, pandemic, outbreak, or other public health event, such as COVID-19; • the level of global inventories; • prevailing prices on local price indexes in the areas in which Magnolia operates; • the proximity, capacity, cost, and availability of gathering, transportation, and processing facilities; • localized and global supply, demand fundamentals, and transportation availability; • the cost of exploring for, developing, producing, and transporting reserves; • weather conditions and natural disasters; • inflation rates; • technological advances affecting energy consumption; • the price and availability of alternative fuels; • expectations about future commodity prices; and • other events that impact global market demand.
Further, many factors may curtail, delay, or cancel scheduled drilling projects, including: • delays imposed by, or resulting from, permitting activities, compliance with regulatory requirements, including limitations on wastewater disposal, emission of greenhouse gases (“GHGs”), and hydraulic fracturing; • pressure or irregularities in geological formations; • sustained periods of low oil and natural gas prices; • shortages of or delays in obtaining equipment and qualified personnel; • access to water for hydraulic fracturing activities and waste disposal or recycling services at a reasonable cost and in accordance with applicable environmental regulations; • equipment failures, accidents, or other unexpected operational events; • lack of available gathering facilities or delays in construction of gathering facilities; • lack of available capacity on interconnecting transmission pipelines; • adverse weather conditions; • issues related to compliance with environmental regulations; • environmental or safety hazards, such as oil and natural gas leaks, oil spills, pipeline and tank ruptures, and unauthorized discharges of brine, well stimulation and completion fluids, toxic gases, or other pollutants into the surface and subsurface environment; • limited availability of financing on acceptable terms; • title issues; • other market limitations in Magnolia’s industry; • the economic effects of the COVID-19 pandemic and actions taken by federal, state and local governments and other third parties in response to the pandem ic; and • changes in the supply chain of the Company’s vendors that may adversely impact the supply of key components.
Further, many factors may curtail, delay, or cancel scheduled drilling projects, including: • delays imposed by, or resulting from, permitting activities, compliance with regulatory requirements, including limitations on wastewater disposal, emission of GHGs, and hydraulic fracturing; • pressure or irregularities in geological formations; • sustained periods of low oil and natural gas prices; • shortages of or delays in obtaining equipment and qualified personnel; • access to water for hydraulic fracturing activities and waste disposal or recycling services at a reasonable cost and in accordance with applicable environmental regulations; • equipment failures, accidents, or other unexpected operational events; • lack of available gathering facilities or delays in construction of gathering facilities; • lack of available capacity on interconnecting transmission pipelines; • adverse weather conditions; • issues related to compliance with environmental regulations; • environmental or safety hazards, such as oil and natural gas leaks, oil spills, pipeline and tank ruptures, and unauthorized discharges of brine, well stimulation and completion fluids, toxic gases, or other pollutants into the surface and subsurface environment; • limited availability of financing on acceptable terms; • title issues; • other market limitations in Magnolia’s industry; • the impact on worldwide economic activity of an epidemic, pandemic, outbreak, or other public health event, such as COVID-19; and • changes in the supply chain of the Company’s vendors that may adversely impact the supply of key components.
Most recently, at the 27th conference of parties, President Biden announced the EPA’s supplemental proposed rule to reduce methane emissions from existing oil and gas sources (discussed above), and agreed, in conjunction with the European Union and a number of other partner countries, to develop standards for monitoring and reporting methane emissions to help create a market for low methane-intensity natural gas.
At the 27th conference of parties in November 2022, President Biden announced the EPA’s supplemental proposed rule to reduce methane emissions from existing oil and gas sources (discussed above), and agreed, in conjunction with the European Union and a number of other partner countries, to develop standards for monitoring and reporting methane emissions to help create a market for low methane-intensity natural gas, and at the 28th conference of parties in December 2023, the Biden administration announced the final methane rule (discussed above).
Magnolia may be unable to obtain required capital or financing on satisfactory terms, which could lead to a decline in its ability to access or grow production and reserves.
Magnolia’s ability to fund these expenditures is subject to several risks. Magnolia may be unable to obtain required capital or financing on satisfactory terms, which could lead to a decline in its ability to access or grow production and reserves.
For example, on November 15, 2021, the EPA published a proposed rule that would strengthen the existing emissions reduction requirements in Subpart OOOOa and create a Subpart OOOOb to expand reduction requirements for new, modified and reconstructed oil and natural gas sources, and would impose methane emissions limitations on existing oil and natural gas sources nationwide for the first time.
In December 2023, the EPA published a final rule to strengthen the existing emissions reduction requirements in Subpart OOOOa, expand reduction requirements for new, modified and reconstructed oil and natural gas sources in Subpart OOOOb, and impose methane emissions limitations on existing oil and natural gas sources nationwide for the first time.
While supply chain disruptions and inflation have not materially affected Magnolia’s operating results to date, if Magnolia is unable to pass any increases in its costs of operations along to its customers, it could adversely affect its operating results.
While supply chain disruptions and inflation have not materially affected Magnolia’s operating results to date, if Magnolia is unable to work with its suppliers to limit or prevent increases in its costs of operations, it could adversely affect its operating results.
The threat of climate change continues to attract considerable attention globally. In the United States, no comprehensive climate change legislation regulating the emission of greenhouse gases or directly imposing a price on carbon has been implemented at the federal level.
In the United States, no comprehensive climate change legislation regulating the emission of GHGs or directly imposing a price on carbon has been implemented at the federal level.
More broadly, the enactment of climate change-related policies and initiatives across the market at the corporate level and/or investor community level may in the future result in increases in the Company’s compliance costs and other operating costs and have other adverse effects (e.g., greater potential for governmental investigations or litigation).
More broadly, the enactment of climate change-related policies and initiatives across the market at the corporate level and/or investor community level may in the future result in increases in the Company’s compliance costs and other operating costs and have other adverse effects (e.g., greater potential for governmental investigations or litigation, driving down demand for the Company’s products, or stimulating demand for alternative forms of energy that do not rely on combustion of fossil fuels).
Magnolia’s producing properties are predominantly located in South Texas, making Magnolia vulnerable to risks associated with operating in a limited geographic area. Substantially all of Magnolia’s producing properties are geographically concentrated in the Karnes County portion of the Eagle Ford Shale in South Texas and the Giddings area of the Austin Chalk.
Magnolia’s producing properties are predominantly located in South Texas, making Magnolia vulnerable to risks associated with operating in a limited geographic area. Substantially all of Magnolia’s producing properties are geographically concentrated in South Texas.
Furthermore, the results of drilling in new or emerging formations are more uncertain initially than drilling results in areas that are more developed and have a longer history of established production. Newer and emerging formations and areas have limited or no production history and, consequently, Magnolia may be more limited in assessing future drilling results in these areas.
Furthermore, the results of drilling in new or emerging areas of certain formations are more uncertain initially than drilling results in areas that are more developed and have a longer history of established production.
Magnolia’s implementation of various procedures and controls to monitor and mitigate such security threats and to increase security for its information, systems, facilities, and infrastructure may result in increased costs.
Magnolia’s implementation of various procedures and controls to monitor and mitigate such security threats and to increase security for its information, systems, facilities, and infrastructure may result in increased costs. Moreover, there can be no assurance that such procedures and controls will be sufficient to prevent security breaches from occurring.
Lower commodity prices may reduce Magnolia’s cash flow and borrowing ability. If Magnolia is unable to obtain needed capital or financing on satisfactory terms, its ability to acquire and develop future reserves could be adversely affected. Also, using lower prices in estimating proved reserves may result in a reduction in proved reserves volumes due to economic limits.
Lower commodity prices may reduce Magnolia’s cash flow and borrowing ability and cause the Company to shut in wells or curtail production. If Magnolia is unable to obtain needed capital or financing on satisfactory terms, its ability to acquire and develop future reserves could be adversely affected.
If there is a resurgence of the COVID-19 outbreak, or if variants of COVID-19 continue to emerge, across the United States and other locations across the world and the related responsive measures due to the pandemic are renewed or newly imposed, and if such events reduce demand for oil and natural gas, available storage and transportation capacity for the Company’s production may be limited or unavailable in the future.
If there are widespread public health crises, epidemics and outbreaks of infectious diseases such as COVID-19 across the United States and other locations across the world and related responsive measures are imposed, and if such events reduce demand for oil and natural gas, available storage and transportation capacity for the Company’s production may be limited or unavailable in the future.
The adoption of any new federal, state, or local laws or the implementation of regulations regarding hydraulic fracturing in areas in which the Company operates could result in operational delays, increased compliance costs, or a decrease in Magnolia’s production, which could have an adverse effect on the Company’s business, financial condition, and results of operations. 26 Risks Related to Financing and Liquidity Magnolia may not be able to generate sufficient cash to service all of its indebtedness and may be forced to take other actions to satisfy debt obligations, which may not be successful.
The adoption of any new federal, state, or local laws or the implementation of regulations regarding hydraulic fracturing in areas in which the Company operates could result in operational delays, increased compliance costs, or a decrease in Magnolia’s production, which could have an adverse effect on the Company’s business, financial condition, and results of operations.
In addition, the proposed rule would establish “Emissions Guidelines,” creating a Subpart OOOOc that would require states to develop plans to reduce methane emissions from existing sources that must be at least as effective as presumptive standards set by the EPA.
In addition, the final rule establishes “Emissions Guidelines,” creating a Subpart OOOOc that requires states to develop plans to reduce methane emissions from existing sources that must be at least as effective as presumptive standards set by the EPA. The final rule also creates a new third-party monitoring program to flag large emissions events, referred to as “super emitters”.
The difficulties that Magnolia faces while completing its wells include the ability to fracture stimulate the planned number of stages, the ability to run tools the entire length of the wellbore during completion operations, and the ability to successfully clean out the wellbore after completion of the final fracture stimulation stage. 17 Use of new technologies may not prove successful and could result in significant cost overruns or delays or reductions in production, and, in extreme cases, the abandonment of a well.
The difficulties that Magnolia faces while completing its wells include the ability to fracture stimulate the planned number of stages, the ability to run tools the entire length of the wellbore during completion operations, and the ability to successfully clean out the wellbore after completion of the final fracture stimulation stage.
In addition, efforts have been made and continue to be made in the international community toward the adoption of international treaties or protocols that would address global climate change issues.
Cap and trade programs typically require major sources of GHG emissions to acquire and surrender emission allowances in return for emitting those GHGs. In addition, efforts have been made and continue to be made in the international community toward the adoption of international treaties or protocols that would address global climate change issues.
As of December 31, 2022, Magnolia’s assets contained 31.4 MMboe of proved undeveloped reserves consisting of 9.4 MMBbls of oil, 68.5 Bcf of natural gas, and 10.6 MMBbls of NGLs. Development of these proved undeveloped reserves may take longer and require higher levels of capital expenditures than anticipated. Magnolia’s ability to fund these expenditures is subject to several risks.
Therefore, proved undeveloped reserves may not be ultimately developed or produced. As of December 31, 2023, Magnolia’s assets contained 34.6 MMboe of proved undeveloped reserves consisting of 11.0 MMBbls of oil, 73.4 Bcf of natural gas, and 11.3 MMBbls of NGLs. Development of these proved undeveloped reserves may take longer and require higher levels of capital expenditures than anticipated.
The occurrence of an event that is not fully covered by insurance could have a material adverse effect on business, financial condition, and results of operations. Certain of Magnolia’s properties are subject to land use restrictions, which could limit the manner in which Magnolia conducts business.
The occurrence of an event that is not fully covered by insurance could have a material adverse effect on Magnolia’s business, financial condition, and results of operations. Magnolia’s operations are subject to a series of risks arising from the threat of climate change. The threat of climate change continues to attract considerable attention globally.
The costs incurred to comply with such restrictions may be significant in nature, and Magnolia may experience delays or curtailment in the pursuit of development activities and perhaps even be precluded from the drilling of wells. Magnolia’s operations are subject to a series of risks arising from the threat of climate change.
The costs incurred to comply with such restrictions may be significant in nature, and Magnolia may experience delays or curtailment in the pursuit of development activities and perhaps even be precluded from the drilling of wells. The development of proved undeveloped reserves may take longer and may require higher levels of capital expenditures than anticipated.
For example, President Biden has recommitted the United States to the Paris Agreement and, in April 2021, announced a goal of reducing the United States’ emissions by at least 50% below 2005 levels by 2030.
For example, pursuant to the terms of the Paris Agreement, the United States has committed to reducing its GHG emissions by at least 50% below 2005 levels by 2030.
Energy needs could increase or decrease as a result of extreme weather conditions depending on the duration and magnitude of any such climate changes and adversely impact Magnolia’s operating costs or revenues.
These events could adversely affect or delay demand for the Company’s products or cause the Company to incur significant costs in preparing for, or responding to, the effects thereof. Energy needs could increase or decrease as a result of weather conditions, depending on the duration and magnitude of any such weather events, and adversely impact Magnolia’s operating costs or revenues.
Moreover, there can be no assurance that such procedures and controls will be sufficient to prevent security breaches from occurring. 22 Potential future legislation may generally affect the taxation of oil and natural gas exploration and development companies and may adversely affect Magnolia’s future cash flows and results of operations.
Potential future legislation may generally affect the taxation of oil and natural gas exploration and development companies and may adversely affect Magnolia’s future cash flows and results of operations.
If the Company is able to bring wells back online, there is no assurance that such wells will be as productive following recommencement as they were prior to being shut in. Should sustained periods of lower oil and natural gas prices return, the Company may shut in wells or curtail production.
If the Company is able to bring wells back online, there is no assurance that such wells will be as productive following recommencement as they were prior to being shut in. 17 Drilling for and producing oil and natural gas are high risk activities with many uncertainties that could adversely affect Magnolia’s business, financial condition, or results of operations.
To the extent the frequency of extreme weather events increases, this could impact operations in various ways, including damage to the Company’s facilities, increased insurance premiums or increases to the cost of providing service. Any of these effects could have an adverse effect on the Company’s assets and operations.
To the extent the frequency of extreme weather events increases, due to climate change or otherwise, this could impact operations in various ways, including damage to or disruption of operations at the Company’s facilities, increased insurance premiums or increases to the cost of providing service, reduced availability of electrical power, road accessibility, and transportation facilities, as well as impacts on personnel, supply chain, distribution chain or customers.
This program requires the EPA to impose a “waste emissions charge” on certain oil and gas sources that are already required to report under EPA’s Greenhouse Gas Reporting Program. As a result of these regulatory changes, the scope of any final methane regulations or the costs for complying with federal methane regulations are uncertain.
This program requires the EPA to impose a “waste emissions charge” on certain oil and gas sources that are already required to report emissions under EPA’s Greenhouse Gas Reporting Program. To implement the program, the Inflation Reduction Act required revisions to GHG reporting regulations for petroleum and natural gas systems (Subpart W) by 2024.
This may also potentially result in a reduction of available capital funding for potential development projects, impacting the Company’s future financial results.
This may also potentially result in a reduction of available capital funding for potential development projects, impacting the Company’s future financial results. Magnolia’s assets are located in areas that may be prone to severe weather events, due to climate change or otherwise, including hurricanes, winter storms, floods, and major tropical storms.
Securities and Exchange Commission proposed new rules relating to the disclosure of a range of climate-related risks. Magnolia is currently assessing the proposed rule, but at this time cannot predict the costs of implementation or any potential adverse impacts resulting from the rule.
Securities and Exchange Commission proposed new rules relating to the disclosure of a range of climate-related risks.
Removed
Risks Related to the Ongoing COVID-19 Pandemic COVID-19 and other pandemic outbreaks could negatively impact Magnolia’s business and results of operations. The Company may face additional risks related to the resurgence of COVID-19 or the emergence of any other pandemic.
Added
Also, using lower prices in estimating proved reserves may result in a reduction in proved reserves volumes due to economic limits.
Removed
Any preventative or protective actions that the Company, its customers, or governmental authorities may take in response to COVID-19 or other pandemics may result in a period of disruption, including with respect to the Company’s financial reporting capabilities and its operations generally, and could potentially impact the Company’s customers, distribution partners, and third parties.
Added
Although for many years, inflation in the United States had been relatively low, there was a significant increase in inflation beginning in the second half of 2021, which has continued into 2023, due to a substantial increase in money supply, a stimulative fiscal policy, a significant rebound in consumer demand as COVID-19 restrictions were relaxed, the Russia-Ukraine war and worldwide supply chain disruptions resulting from the economic contraction caused by COVID-19 and lockdowns followed by a rapid recovery.
Removed
For example, China’s strict lockdown measures as a result of COVID-19 have put downward pressure on the demand for oil and gas, which may materially and adversely affect Magnolia’s financial condition and results of operations.
Added
According to the Bureau of Labor Statistics, inflation rose to a peak of 9.1% in June 2022, and has since decreased to 3.4% as of December 2023.
Removed
Any resulting impacts from the resurgence of the COVID-19 pandemic cannot be reasonably estimated, and may materially affect the business and the Company’s financial condition and results of operations.
Added
Use of new technologies may not prove successful and could result in significant cost overruns or delays or reductions in production, and, in extreme cases, the abandonment of a well.
Removed
The extent and duration of such impacts will depend on future developments, which are highly uncertain and cannot be predicted, including, among others, new information which may emerge concerning the severity of, and the actions to contain or curb the impact of the resurgence of COVID-19 variants thereof, or any other pandemic.
Added
Newer and emerging areas of certain formations have limited or no production history and, consequently, Magnolia may be more limited in assessing future drilling results in these areas.
Removed
Such inflationary pressures have resulted from supply chain disruptions caused by the COVID-19 pandemic, increased demand, labor shortages and other factors, including the conflict between Russia and Ukraine which began in late February 2022.
Added
In such cases, the amount paid for such oil or natural gas lease or leases would be lost. Certain of Magnolia’s properties are subject to land use restrictions, which could limit the manner in which Magnolia conducts business.
Removed
Supply chain disruptions have been further exacerbated by the recent resurgence of the COVID-19 pandemic in certain parts of China, which resulted in the temporary closure of manufacturing facilities in certain parts of China.
Added
Notably, the EPA imposed a December 6, 2022 applicability date for Subparts OOOOb and OOOOc, meaning that sources constructed prior to that date will be considered existing sources with later compliance dates.
Removed
Drilling for and producing oil and natural gas are high risk activities with many uncertainties that could adversely affect Magnolia’s business, financial condition, or results of operations.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeWalker 77 Director Christopher G. Stavros is Magnolia’s President and Chief Executive Officer, and serves as a member of the Company’s board of directors. Before taking this position he served as Magnolia’s Executive Vice President and Chief Financial Officer since the closing of the Business Combination. Prior to joining the Company, Mr.
Biggest changeLarson 74 Director John B. Walker 78 Director Christopher G. Stavros is Magnolia’s President and Chief Executive Officer and serves as a member of the Company’s board of directors. Before his appointment to this position in September 2022, he served as Magnolia’s Executive Vice President and Chief Financial Officer since the closing of the Business Combination.
Corales serves as Magnolia’s Senior Vice President and Chief Financial Officer. Prior this appointment, Mr. Corales served as the Company’s Vice President, Investor Relations since November 2018. Prior to joining the Company in November 2018, Mr.
Corales serves as Magnolia’s Senior Vice President and Chief Financial Officer. Prior to this appointment, Mr. Corales served as the Company’s Vice President, Investor Relations since November 2018. Prior to joining the Company in November 2018, Mr.
Busch currently serves as the Executive Vice President of Corporate and Business Development for Ecolab Inc., a global leader in water, hygiene, and energy technologies and services, where she is responsible for acquisitions, divestitures, and alliances in support of Ecolab’s strategic objectives related to its global portfolio of businesses and activities. Edward P. Djerejian served in the U.S.
Busch currently serves as the Executive Vice President of Corporate and Business Development for Ecolab Inc., a global leader in water, hygiene, and energy technologies and services, where she is responsible for acquisitions, divestitures, and alliances in support of Ecolab’s strategic objectives related to its global portfolio of businesses and activities. 31 Edward P. Djerejian served in the U.S.
Mr. Larson retired in January 2006 from his position as senior vice president of Anadarko Petroleum Corporation (“Anadarko”), an independent exploration and production company, and he held various tax and financial positions within Anadarko upon joining the company in 1981. John B. Walker is Executive Chairman of EnerVest, Ltd., a position he has held since December 2020.
Mr. Larson retired in January 2006 from his position as senior vice president of Anadarko Petroleum Corporation (“Anadarko”), an independent exploration and production company, and he held various tax and financial positions within Anadarko since joining the company in 1981. John B. Walker is Executive Chairman of EnerVest, Ltd., a position he has held since December 2020.
Stavros was the Chief Financial Officer of Occidental Petroleum Corporation (“Occidental”), whose principal businesses consist of oil and gas, chemical and midstream, and marketing segments. Mr. Stavros served in this position from 2014 to 2017, having previously served in various investor relations and treasury roles at Occidental since 2005. Brian M.
Prior to joining the Company, Mr. Stavros was the Chief Financial Officer of Occidental Petroleum Corporation (“Occidental”), whose principal businesses consist of oil and gas, chemical and midstream, and marketing segments. Mr. Stavros served in this position from 2014 to 2017, having previously served in various investor relations and treasury roles at Occidental since 2005. Brian M.
Corales was a senior analyst at Johnson Rice & Co. and previously spent 15 years in positions at other investment banks, including as a director at Scotia Howard Weil from October 2009 to February 2018, where he covered E&P companies with a range of market caps located in various basins throughout the United States. Timothy D.
Corales was a senior analyst at Johnson Rice & Co. and previously spent 15 years in positions at other investment banks, including as a director at Scotia Howard Weil from October 2009 to February 2018, where he covered exploration and production companies with a range of market caps located in various basins throughout the United States. Timothy D.
Acosta is the Chief Executive Officer of CARCON Industries & Construction, a full-service construction firm, and is also the founder and Chief Executive Officer of Southwestern Testing Laboratories (STL Engineers), a geotechnical engineering and construction materials testing firm, both of which are based in Dallas, Texas. Angela M.
Acosta is the Chief Executive Officer of CARCON Industries & Construction, a full-service construction firm, and is also the founder and Chief Executive Officer of Southwestern Testing Laboratories (STL Engineers), a geotechnical engineering and construction materials testing firm, both of which are based in Dallas, Texas. Ms.
Foreign Service for eight presidents, from John F. Kennedy in 1962 to William J. Clinton in 1994. After his retirement from government service in 1994, he became the founding director of Rice University’s Baker Institute for Public Policy, a premier nonpartisan public policy think tank, which he led for 28 years until June 2022. 30 James R.
Foreign Service for eight presidents, from John F. Kennedy in 1962 to William J. Clinton in 1994. After his retirement from government service in 1994, he became the founding director of Rice University’s Baker Institute for Public Policy, a premier nonpartisan public policy think tank, which he led for 28 years until June 2022. David M.
He previously served as EnerVest’s Chief Executive Officer since its formation in 1992. Mr. Walker served as Chairman of the Independent Petroleum Association of America from 2003 to 2005 and served on the board of Petrologistics LP from 2012 until 2014. Mr. Walker serves on the Board of Regents of the Texas Tech University System. 31 PART II
He previously served as EnerVest’s Chief Executive Officer since its formation in 1992. Mr. Walker served as Chairman of the Independent Petroleum Association of America from 2003 to 2005 and served on the board of Petrologistics LP from 2012 until 2014. Mr. Walker served on the Board of Regents of the Texas Tech University System from 2012 until 2023. Mr.
Item 4. Mine Safety Disclosures Not applicable. 29 Information About Magnolia’s Executive Officers and Directors The following table sets forth, as of February 16, 2023, the names, ages, and positions held by Magnolia’s executive officers and directors: Name Age Position Christopher G. Stavros 59 President, Chief Executive Officer and Director Brian M.
Item 4. Mine Safety Disclosures Not applicable. 30 Information About Magnolia’s Executive Officers and Directors The following table sets forth, as of February 15, 2024, the names, ages, and positions held by Magnolia’s executive officers and directors: Name Age Position Christopher G. Stavros 60 President, Chief Executive Officer and Director Brian M.
Corales 43 Senior Vice President and Chief Financial Officer Timothy D. Yang 51 Executive Vice President, General Counsel, Corporate Secretary and Land Steve F. Millican 47 Senior Vice President, Operations Dan F. Smith 76 Chairman Arcilia C. Acosta 57 Director Angela M. Busch 56 Director Edward P. Djerejian 83 Director James R. Larson 73 Director John B.
Corales 44 Senior Vice President and Chief Financial Officer Timothy D. Yang 52 Executive Vice President, General Counsel, Corporate Secretary and Land Steve F. Millican 48 Senior Vice President, Operations Dan F. Smith 77 Chairman Arcilia C. Acosta 58 Director Angela M. Busch 57 Director Edward P. Djerejian 84 Director David M. Khani 60 Director James R.
Added
Acosta is currently a member of the board of directors of Vistra Corporation and Veritex Holdings, Inc. Angela M.
Added
Khani served as Chief Financial Officer of EQT Corporation, a leading independent U.S. natural gas producer with an asset base in the core of the Appalachian Basin (“EQT Corp.”), from January 2020 until July 2023. Prior to joining EQT Corp., Mr.
Added
Khani served as the Executive Vice President and Chief Financial Officer of CONSOL Energy (“CONSOL”), an energy company whose businesses during his tenure included natural gas, exploration and production, and coal mining. During his time at CONSOL, Mr.
Added
Khani also held chief financial officer and board member roles at CONSOL affiliates, including at CNX Midstream Partners LLC (formerly, CONE Midstream LLC), a joint venture with Noble Energy. Mr. Khani spent the first 18 years of his career at various investment banking and capital market firms, including FBR & Co., Prudential Financial, Inc., and Lehman Brothers, Inc. James R.
Added
Walker is a member of the National Petroleum Council, where he currently serves as Chairman of the Nominating Committee. 32 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−6 removed1 unchanged
Biggest changeIssuer Purchases of Equity Securities The following table sets forth the Company’s share repurchase activities for the year ended December 31, 2022: Period Number of Shares of Class A Common Stock Purchased Average Price Paid per Share Total Number of Common Shares Purchased as Part of Publicly Announced Program (1) Maximum Number of Common Shares that May Yet be Purchased Under the Program January 1, 2022 - September 30, 2022 (2) 7,115,815 $ 21.87 6,565,000 9,267,455 October 1, 2022 - October 31, 2022 600 20.99 600 9,266,855 November 1, 2022 - November 30, 2022 — — — 9,266,855 December 1, 2022 - December 31, 2022 399,750 23.25 399,750 8,867,105 Total 7,516,165 $ 21.94 6,965,350 8,867,105 (1) As of December 31, 2022, the Company’s board of directors had authorized a share repurchase program of up to 30.0 million shares of Class A Common Stock.
Biggest changeIssuer Purchases of Equity Securities The following table sets forth the Company’s share repurchase activities for the year ended December 31, 2023: Period Number of Shares of Class A Common Stock Purchased Average Price Paid per Share Total Number of Shares of Class A Common Stock Purchased as Part of Publicly Announced Program Maximum Number of Shares of Class A Common Stock that May Yet be Purchased Under the Program (1) January 1, 2023 - September 30, 2023 7,149,000 $ 21.38 7,149,000 11,718,105 October 1, 2023 - October 31, 2023 520,216 22.40 520,216 11,197,889 November 1, 2023 - November 30, 2023 1,050,000 21.63 1,050,000 10,147,889 December 1, 2023 - December 31, 2023 929,784 21.30 929,784 9,218,105 Total 9,649,000 $ 21.46 9,649,000 9,218,105 (1) As of December 31, 2023, the Company’s board of directors had authorized a share repurchase program of up to 40.0 million shares of Class A Common Stock.
The above information under the caption “Comparative Stock Performance” shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Exchange Act except to the extent that Magnolia specifically requests that such information be treated as “soliciting material” or specifically incorporate such information by reference into such a filing. 33
The above information under the caption “Comparative Stock Performance” shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Exchange Act except to the extent that Magnolia specifically requests that such information be treated as “soliciting material” or specifically incorporate such information by reference into such a filing. 34
The graph assumes an investment of $100 was made in the Company’s Class 32 A Common Stock and in each of the S&P 500 Index and the S&P 500 Oil & Gas Exploration and Production Index on December 31, 2017. Note: The stock price performance of Magnolia’s Class A Common Stock is not necessarily indicative of future performance .
The graph assumes an 33 investment of $100 was made in the Company’s Class A Common Stock and in each of the S&P 500 Index and the S&P 500 Oil & Gas Exploration and Production Index on December 31, 2018. Note: The stock price performance of Magnolia’s Class A Common Stock is not necessarily indicative of future performance .
Comparative Stock Performance The performance graph below compares the cumulative total stockholder return for the Company’s Class A Common Stock to that of the Standard and Poor’s (“S&P”), 500 Index and the S&P 500 Oil & Gas Exploration and Production Index.
The program does not require purchases to be made within a particular time frame. Comparative Stock Performance The performance graph below compares the cumulative total stockholder return (including the reinvestment of dividends) for the Company’s Class A Common Stock to that of the Standard and Poor’s (“S&P”), 500 Index and the S&P 500 Oil & Gas Exploration and Production Index.
Item 5. Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Market Information Magnolia’s Class A Common Stock are currently traded on the NYSE under the ticker symbol “MGY.” Through July 30, 2018, Magnolia’s Class A Common Stock and warrants were listed under the symbols “TPGE” and “TPGE.W,” respectively.
Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Market Information Magnolia’s Class A Common Stock are currently traded on the NYSE under the ticker symbol “MGY.” As of February 12, 2024, there were 11 holders of record of Magnolia’s Class A Common Stock, and 5 holders of record of the Company’s Class B Common Stock, par value $0.0001 per share.
Removed
On July 31, 2018, the Company delisted the units offered in its initial public offering, each consisting of one share of Class A Common Stock and one-third of a warrant, which were listed under the symbol “TPGE.U,” and the units ceased to trade.
Removed
In July 2019, the Company exchanged all of its public and private warrants, which, in the case of the public warrants, were listed under the symbol “MGY.WS,” for Class A Common Stock, and the warrants ceased to trade.
Removed
Holders As of February 10, 2023, there were 12 holders of record of Magnolia’s Class A Common Stock, and 5 holders of record of the Company’s Class B Common Stock, par value $0.0001 per share.
Removed
The program does not require purchases to be made within a particular time frame. (2) The company repurchased 0.6 million shares of Class A Common Stock for $11.6 million in a privately negotiated transaction with EnerVest Energy Institutional Fund XIV-C, L .P. outside of the share repurchase program.
Removed
During the year ended December 31, 2022, outside of the share repurchase program, Magnolia LLC repurchased and subsequently canceled a total of 7.9 million Magnolia LLC Units with an equal number of shares of corresponding Class B Common Stock for cash consideration of $187.3 million at an average price of $23.56 per share.
Removed
There is no public market for the Class B Common Stock. For further detail, see Note 12—Stockholders’ Equity in the Notes to the Company’s consolidated financial statements included in this Annual Report on Form 10-K.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

50 edited+14 added−21 removed26 unchanged
Biggest changeYears Ended (In thousands, except per unit data) December 31, 2022 December 31, 2021 Operating Expenses: Lease operating expenses $ 131,513 $ 93,021 Gathering, transportation, and processing 64,754 45,535 Taxes other than income 94,031 55,834 Exploration expenses 11,586 4,125 Asset retirement obligations accretion 3,245 4,929 Depreciation, depletion and amortization 243,152 187,688 Amortization of intangible assets — 9,346 General and administrative expenses 72,426 75,279 Total operating costs and expenses $ 620,707 $ 475,757 Other Income (Expense): Interest expense, net $ (23,442) $ (31,002) Loss on derivatives, net — (3,110) Other income, net 6,543 85 Total other expense, net $ (16,899) $ (34,027) Average Operating Costs per boe: Lease operating expenses $ 4.78 $ 3.86 Gathering, transportation, and processing 2.35 1.89 Taxes other than income 3.42 2.32 Exploration expenses 0.42 0.17 Asset retirement obligations accretion 0.12 0.20 Depreciation, depletion and amortization 8.84 7.79 Amortization of intangible assets — 0.39 General and administrative expenses 2.63 3.12 Lease operating expenses are the costs incurred in the operation of producing properties, including expenses for utilities, direct labor, water disposal, workover rigs, workover expenses, materials, and supplies.
Biggest changeYears Ended (In thousands, except per unit data) December 31, 2023 December 31, 2022 Operating Expenses: Lease operating expenses $ 155,491 $ 131,513 Gathering, transportation, and processing 44,327 64,754 Taxes other than income 65,565 94,031 Exploration expenses 5,445 11,586 Asset retirement obligations accretion 4,039 3,245 Depreciation, depletion and amortization 324,790 243,152 Impairment of oil and natural gas properties 15,735 — General and administrative expenses 77,102 72,426 Total operating costs and expenses $ 692,494 $ 620,707 Other Income (Expense): Interest expense, net $ (33) $ (23,442) Other income, net 15,360 6,543 Total other income (expense), net $ 15,327 $ (16,899) Average Operating Costs per boe: Lease operating expenses $ 5.17 $ 4.78 Gathering, transportation, and processing 1.47 2.35 Taxes other than income 2.18 3.42 Exploration expenses 0.18 0.42 Asset retirement obligations accretion 0.13 0.12 Depreciation, depletion and amortization 10.81 8.84 Impairment of oil and natural gas properties 0.52 — General and administrative expenses 2.57 2.63 Lease operating expenses are the costs incurred in the operation of producing properties, including expenses for utilities, direct labor, water disposal, workover rigs, workover expenses, materials, and supplies.
Key assumptions used in developing a discounted cash flow model described above include estimated quantities of crude oil and natural gas reserves; estimates of market prices considering forward commodity price curves as of the measurement date; and estimates of 41 operating, administrative, and capital costs adjusted for inflation.
Key assumptions used in developing a discounted cash flow model described above include estimated quantities of crude oil and natural gas reserves; estimates of market prices considering forward commodity price curves as of the measurement date; and estimates of operating, administrative, and capital costs adjusted for inflation.
Undrilled locations can be classified as undeveloped reserves only if a plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances justify a longer time. All of Magnolia’s proved undeveloped reserves as of December 31, 2022, that are included in this Annual Report, are planned to be developed within one year.
Undrilled locations can be classified as undeveloped reserves only if a plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances justify a longer time. All of Magnolia’s proved undeveloped reserves as of December 31, 2023, that are included in this Annual Report, are planned to be developed within one year.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company’s consolidated financial statements and the related notes thereto. This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company’s consolidated financial statements and the related notes thereto. This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
The activity during the year ended December 31, 2022 was largely driven by the number of operated and non-operated drilling rigs. The number of operated drilling rigs is largely dependent on commodity prices and the Company’s strategy of maintaining spending to accommodate the Company’s business model.
The activity during the year ended December 31, 2023 was largely driven by the number of operated and non-operated drilling rigs. The number of operated drilling rigs is largely dependent on commodity prices and the Company’s strategy of maintaining spending to accommodate the Company’s business model.
The Company’s ongoing plan is to spend within cash flow on drilling and completing wells while maintaining low financial leverage. As of December 31, 2022, Magnolia operated two rigs. The Company’s gradual and measured approach toward the development of the Giddings area has created operating efficiencies leading to higher production growth in 2022.
The Company’s ongoing plan is to spend within cash flow on drilling and completing wells while maintaining low financial leverage. As of December 31, 2023, Magnolia operated two rigs. The Company’s gradual and measured approach toward the development of the Giddings area has created operating efficiencies leading to higher production in 2023.
As of December 31, 2022, the Company had $400.0 million of principal debt related to the 2026 Senior Notes outstanding and no outstanding borrowings related to the RBL Facility.
As of December 31, 2023, the Company had $400.0 million of principal debt related to the 2026 Senior Notes outstanding and no outstanding borrowings related to the RBL Facility.
The Company’s ongoing plan is to continue to spend within cash flow on drilling and completing wells while maintaining low financial leverage. Capital Requirements As of December 31, 2022, the Company’s board of directors had authorized a share repurchase program of up to 30.0 million shares of Class A Common Stock.
The Company’s ongoing plan is to continue to spend within cash flow on drilling and completing wells while maintaining low financial leverage. Capital Requirements As of December 31, 2023, the Company’s board of directors had authorized a share repurchase program of up to 40.0 million shares of Class A Common Stock.
The factors that determine operating cash flows are largely the same as those that affect net earnings or net losses, with the exception of certain non-cash expenses such as DD&A, stock based compensation, amortization of deferred financing costs, the non-cash portion of exploration expenses, impairment of oil and natural gas properties, asset retirement obligations accretion, and deferred taxes.
The factors that determine operating cash flows are largely the same as those that affect net earnings or net losses, with the exception of certain non-cash expenses such as DD&A, stock based compensation, amortization of deferred financing costs, gain on revaluation of contingent consideration, the non-cash portion of exploration expenses, impairment of oil and natural gas properties, asset retirement obligations accretion, and deferred taxes.
Reserves Estimates Proved oil and natural gas reserves are those quantities of oil, natural gas, and NGLs which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation.
The following is a discussion of Magnolia’s most critical accounting policies and estimates. 40 Reserves Estimates Proved oil and natural gas reserves are those quantities of oil, natural gas, and NGLs which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation.
The Company’s oil and natural gas properties are located primarily in Karnes County and the Giddings area in South Texas, where the Company primarily targets the Eagle Ford Shale and the Austin Chalk formations.
The Company’s oil and natural gas properties are located primarily in the Karnes and Giddings areas in South Texas, where the Company primarily targets the Eagle Ford Shale and the Austin Chalk formations.
As of December 31, 2022, the Company’s board of directors had authorized a share repurchase program of up to 30.0 million shares of Class A Common Stock. The program does not require purchases to be made within a particular timeframe.
As of December 31, 2023, the Company’s board of directors had authorized a share repurchase program of up to 40.0 million shares of Class A Common Stock. The program does not require purchases to be made within a particular timeframe.
As of December 31, 2022, Magnolia held an interest in approximately 2,131 gross (1,366 net) wells, with total production of 75.4 thousand barrels of oil equivalent per day (“Mboe/d”) for the year ended December 31, 2022. As of December 31, 2022, Magnolia was running a two-rig program.
As of December 31, 2023, Magnolia held an interest in approximately 2,483 gross (1,680 net) wells, with total production of 82.3 thousand barrels of oil equivalent per day (“Mboe/d”) for the year ended December 31, 2023. As of December 31, 2023, Magnolia was running a two-rig program.
As of December 31, 2022, the Company’s Adjusted Consolidated Net Tangible Asset, as calculated in accordance with the Company’s Indenture relating to its 2026 Senior Notes, was approximately $5.9 billion. Cash and Cash Equivalents At December 31, 2022, Magnolia had $675.4 million of cash and cash equivalents.
As of December 31, 2023, the Company’s Adjusted Consolidated Net Tangible Asset, as calculated in accordance with the Company’s Indenture relating to its 2026 Senior Notes, was approximately $3.8 billion. Cash and Cash Equivalents At December 31, 2023, Magnolia had $401.1 million of cash and cash equivalents.
As of December 31, 2022, the Company has $1,125.4 million of liquidity comprised of the $450.0 million of borrowing base capacity of the RBL Facility, and $675.4 million of cash and cash equivalents.
As of December 31, 2023, the Company has $851.1 million of liquidity comprised of the $450.0 million of borrowing base capacity of the RBL Facility, and $401.1 million of cash and cash equivalents.
The Company’s primary uses of cash have been for development of the Company’s oil and natural gas properties, returning capital to shareholders, bolt-on acquisitions of oil and natural gas properties, and general working capital needs.
Liquidity and Capital Resources Magnolia’s primary source of liquidity and capital has been its cash flows from operations. The Company’s primary uses of cash have been for development of the Company’s oil and natural gas properties, returning capital to shareholders, bolt-on acquisitions of oil and natural gas properties, and general working capital needs.
Gathering, transportation, and processing costs are costs incurred to deliver oil, natural gas, and NGLs to the market. These expenses can vary based on the volume of oil, natural gas, and NGLs produced as well as the cost of commodity processing.
These expenses can vary based on the volume of oil, natural gas, and NGLs produced as well as the cost of commodity processing.
For the Years Ended (In thousands) December 31, 2022 December 31, 2021 Current income tax expense $ 72,358 $ 8,851 Deferred income tax benefit (65,720) — Income tax expense $ 6,638 $ 8,851 For the year ended December 31, 2022, income tax expense was $2.2 million lower than the year ended December 31, 2021, comprised of movements in both current and deferred income taxes.
For the Years Ended (In thousands) December 31, 2023 December 31, 2022 Current income tax expense $ 31,852 $ 72,358 Deferred income tax expense (benefit) 75,356 (65,720) Income tax expense $ 107,208 $ 6,638 For the year ended December 31, 2023, income tax expense was $100.6 million higher than the year ended December 31, 2022, comprised of movements in both current and deferred income taxes.
A 42% increase in average prices increased revenues for the year ended December 31, 2022 by $315.3 million compared to the same period in the prior year, and a 9% increase in oil production increased revenue $94.8 million. Natural gas revenues were 18% and 16% of the Company’s total revenues for the years ended December 31, 2022 and 2021, respectively.
A 20% decrease in average prices decreased revenues for the year ended December 31, 2023 by $231.5 million compared to the same period in the prior year, partially offset by a 3% increase in oil production which increased revenues by $31.9 million. 36 Natural gas revenues were 8% and 18% of the Company’s total revenues for the years ended December 31, 2023 and 2022, respectively.
Years Ended (In thousands) December 31, 2022 December 31, 2021 Drilling and completion $ 459,837 $ 231,904 Leasehold acquisition costs 5,302 4,522 Total capital expenditures $ 465,139 $ 236,426 As of December 31, 2022, Magnolia was running a two-rig program.
Years Ended (In thousands) December 31, 2023 December 31, 2022 Drilling and completion $ 421,623 $ 459,837 Leasehold acquisition costs 3,267 5,302 Total capital expenditures $ 424,890 $ 465,139 As of December 31, 2023, Magnolia was running a two-rig program.
Oil production was 44% and 46% of total production volume for the years ended December 31, 2022 and 2021, respectively. Oil revenues for the year ended December 31, 2022 were $410.1 million higher than the year ended December 31, 2021.
Oil production was 42% and 44% of total production volume for the years ended December 31, 2023 and 2022, respectively. Oil revenues for the year ended December 31, 2023 were $199.6 million lower than the year ended December 31, 2022.
Sources and Uses of Cash and Cash Equivalents The following table presents the sources and uses of the Company’s cash and cash equivalents for the periods presented: Years Ended (In thousands) December 31, 2022 December 31, 2021 SOURCES OF CASH AND CASH EQUIVALENTS Net cash provided by operating activities $ 1,296,687 $ 788,477 USES OF CASH AND CASH EQUIVALENTS Acquisitions $ (90,126) $ (18,345) Additions to oil and natural gas properties (465,139) (236,426) Changes in working capital associated with additions to oil and natural gas properties 37,987 13,568 Class A Common Stock repurchases (164,913) (125,641) Class B Common Stock purchases and cancellations (187,273) (171,671) Non-compete settlement — (42,073) Dividends paid (75,198) (14,131) Distributions to noncontrolling interest owners (29,362) (7,207) Other (14,204) (12,130) Net uses of cash and cash equivalents (988,228) (614,056) NET CHANGE IN CASH AND CASH EQUIVALENTS $ 308,459 $ 174,421 Sources of Cash and Cash Equivalents Net Cash Provided by Operating Activities Operating cash flows are the Company’s primary source of liquidity and are impacted, in the short term and long term, by oil and natural gas prices.
Sources and Uses of Cash and Cash Equivalents The following table presents the sources and uses of the Company’s cash and cash equivalents for the periods presented: Years Ended (In thousands) December 31, 2023 December 31, 2022 SOURCES OF CASH AND CASH EQUIVALENTS Net cash provided by operating activities $ 855,789 $ 1,296,687 USES OF CASH AND CASH EQUIVALENTS Acquisitions $ (355,499) $ (90,126) Additions to oil and natural gas properties (424,890) (465,139) Changes in working capital associated with additions to oil and natural gas properties (33,793) 37,987 Class A Common Stock repurchases (205,320) (164,913) Class B Common Stock purchases and cancellations — (187,273) Dividends paid (88,077) (75,198) Distributions to noncontrolling interest owners (14,065) (29,362) Other (8,465) (14,204) Net uses of cash and cash equivalents (1,130,109) (988,228) NET CHANGE IN CASH AND CASH EQUIVALENTS $ (274,320) $ 308,459 Sources of Cash and Cash Equivalents Net Cash Provided by Operating Activities Operating cash flows are the Company’s primary source of liquidity and are impacted, in the short term and long term, by oil and natural gas prices.
A 23% increase in average prices increased revenues for the year ended December 31, 2022 by $36.0 million compared to the same period in the prior year, and a 21% increase in NGL production increased revenue $41.2 million. 36 Operating Expenses and Other Income (Expense) .
A 41% decrease in average prices decreased revenues for the year ended December 31, 2023 by $96.5 million compared to the same period in the prior year, partially offset by a 20% increase in NGL production which increased revenues by $28.0 million. Operating Expenses and Other Income (Expense) .
Magnolia recognized net income attributable to Class A Common Stock of $893.8 million, or $4.71 per diluted common share, for the year ended December 31, 2022. Magnolia also recognized net income of $1,050.2 million, which includes noncontrolling interest of $156.4 million for the year ended December 31, 2022.
Magnolia recognized net income attributable to Class A Common Stock of $388.3 million, or $2.04 per diluted common share, for the year ended December 31, 2023. Magnolia also recognized net income of $442.6 million, which includes noncontrolling interest of $54.3 million for the year ended December 31, 2023.
Management routinely discusses the development, selection, and disclosure of each of the critical accounting policies. The following is a discussion of Magnolia’s most critical accounting policies and estimates.
Management routinely discusses the development, selection, and disclosure of each of the critical accounting policies.
Natural gas production was 31% and 30% of total production volume for the years ended December 31, 2022 and 2021, respectively. Natural gas revenues for the year ended December 31, 2022 were $128.8 million higher than the year ended December 31, 2021.
Natural gas production was 31% of total production volume for each of the years ended December 31, 2023 and 2022. Natural gas revenues for the year ended December 31, 2023 were $199.4 million lower than the year ended December 31, 2022.
Net cash provided by operating activities totaled $1,296.7 million and $788.5 million for the years ended December 31, 2022 and 2021, respectively.
Net cash provided by operating activities totaled $855.8 million and $1.3 billion for the years ended December 31, 2023 and 2022, respectively.
The amount and frequency of future dividends is subject to the discretion of the Company’s board of directors and primarily depends on earnings, capital expenditures, debt covenants, and various other factors. 40 Critical Accounting Policies and Estimates Magnolia prepares its financial statements and the accompanying notes in conformity with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions about future events that affect the reported amounts in the financial statements and the accompanying notes.
Critical Accounting Policies and Estimates Magnolia prepares its financial statements and the accompanying notes in conformity with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions about future events that affect the reported amounts in the financial statements and the accompanying notes.
NGL production was 25% and 24% of total production volume for the years ended December 31, 2022 and 2021, respectively. NGL revenues for the year ended December 31, 2022 were $77.2 million higher than the year ended December 31, 2021.
NGL revenues were 14% of the Company’s total revenues for each of the years ended December 31, 2023 and 2022. NGL production was 27% and 25% of total production volume for the years ended December 31, 2023 and 2022, respectively. NGL revenues for the year ended December 31, 2023 were $68.5 million lower than the year ended December 31, 2022.
During the years ended December 31, 2022 and 2021, the Company repurchased 7.0 million and 8.7 million shares under this authorization, for a total cost of approximately $153.3 million and $125.6 million, respectively.
During the years ended December 31, 2023 and 2022, the Company repurchased 9.6 million and 7.0 million shares under this authorization, for a total cost of approximately $207.0 million and $153.3 million, respectively. As of December 31, 2023, Magnolia owned approximately 89.4% of the interest in Magnolia LLC and the noncontrolling interest was 10.6%.
Interest expense, net, during the year ended December 31, 2022 was $7.6 million lower than the year ended December 31, 2021, driven by higher interest income realized during the year. Other income, net during the year ended December 31, 2022 was $6.5 million.
Interest expense, net, during the year ended December 31, 2023 was $23.4 million lower than the year ended December 31, 2022, driven by higher interest income realized during 2023 as a result of a higher interest rates. Other income, net, during the year ended December 31, 2023 was $8.8 million higher than the year ended December 31, 2022.
During the year ended December 31, 2022, the Company repurchased 7.0 million shares of Class A Common Stock under the program at a weighted average price of $22.02, for a total cost of approximately $153.3 million.
During the year ended December 31, 2023, the Company repurchased 9.6 million shares of Class A Common Stock under the program at a weighted average price of $21.46, for a total cost of approximately $207.0 million. As of December 31, 2023, 9.2 million shares of Class A Common Stock remained under the share repurchase program.
Negative revisions of estimated reserves quantities, increases in future cost estimates, or sustained decreases in oil or natural gas prices could lead to a reduction in expected future cash flows and possibly an additional impairment of long-lived assets in future periods.
Negative revisions of estimated reserves quantities, increases in future cost estimates, or sustained decreases in oil or natural gas prices could lead to a reduction in expected future cash flows and possibly an impairment of long-lived assets in future periods. 41 Income Taxes The Company is subject to U.S. federal, state and local income taxes with respect to its allocable share of any taxable income or loss of Magnolia LLC.
During the year ended December 31, 2021, the Company declared cash dividends to holders of its Class A Common Stock totaling $14.2 million, of which $14.1 million was paid as of December 31, 2021. Additionally, $4.8 million was distributed to the Magnolia LLC Unit Holders.
During the year ended December 31, 2023, the Company declared cash dividends to holders of its Class A Common Stock totaling $87.8 million. During the same time period, cash paid for dividends was $88.1 million, inclusive of dividends on vested non-participating securities. Additionally, $10.0 million was distributed to the Magnolia LLC Unit Holders.
Years Ended (In thousands, except per unit data) December 31, 2022 December 31, 2021 Production: Oil (MBbls) 12,189 11,190 Natural gas (MMcf) 50,660 43,436 NGLs (MBbls) 6,874 5,669 Total (Mboe) 27,506 24,099 Average daily production: Oil (Bbls/d) 33,394 30,659 Natural gas (Mcf/d) 138,796 119,003 NGLs (Bbls/d) 18,833 15,532 Total (boe/d) 75,360 66,025 Revenues: Oil revenues $ 1,158,006 $ 747,896 Natural gas revenues 301,494 172,648 Natural gas liquids revenues 234,993 157,807 Total revenues $ 1,694,493 $ 1,078,351 Average Price: Oil (per barrel) $ 95.01 $ 66.83 Natural gas (per Mcf) 5.95 3.97 NGLs (per barrel) 34.18 27.84 Oil revenues were 68% and 69% of the Company’s total revenues for the years ended December 31, 2022 and 2021, respectively.
Years Ended (In thousands, except per unit data) December 31, 2023 December 31, 2022 Production: Oil (MBbls) 12,608 12,189 Natural gas (MMcf) 55,085 50,660 NGLs (MBbls) 8,266 6,874 Total (Mboe) 30,054 27,506 Average daily production: Oil (Bbls/d) 34,541 33,394 Natural gas (Mcf/d) 150,918 138,796 NGLs (Bbls/d) 22,645 18,833 Total (boe/d) 82,340 75,360 Revenues: Oil revenues $ 958,388 $ 1,158,006 Natural gas revenues 102,054 301,494 Natural gas liquids revenues 166,537 234,993 Total revenues $ 1,226,979 $ 1,694,493 Average Price: Oil (per barrel) $ 76.02 $ 95.01 Natural gas (per Mcf) 1.85 5.95 NGLs (per barrel) 20.15 34.18 Oil revenues were 78% and 68% of the Company’s total revenues for the years ended December 31, 2023 and 2022, respectively.
Taxes other than income for the year ended December 31, 2022 were $38.2 million, or $1.10 per boe, higher than the year ended December 31, 2021 primarily due to an increase in oil, natural gas, and NGL revenues. Exploration expenses are geological and geophysical costs that include seismic surveying costs, costs of expired or abandoned leases, and delay rentals.
Exploration expenses are geological and geophysical costs that include seismic surveying costs, costs of expired or abandoned leases, and delay rentals. The exploration expenses for the year ended December 31, 2023 were $6.1 million, or $0.24 per boe, lower than the year ended December 31, 2022, due to decreased spending on seismic licenses.
As a result of the factors listed above, the historical results of operations and period-to-period comparisons of these results and certain financial data may not be comparable or indicative of future results. 35 Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 Oil, Natural Gas and NGL Sales Revenues.
The transaction was accounted for as an asset acquisition. As a result of the factors listed above, the historical results of operations and period-to-period comparisons of these results and certain financial data may not be comparable or indicative of future results.
Business Overview As of December 31, 2022, Magnolia’s assets in South Texas included 43,022 gross (23,259 net) acres in the Karnes area and 645,011 gross (458,756 net) acres in the Giddings area.
Business Overview As of December 31, 2023, Magnolia’s assets in South Texas included 72,503 gross (50,681 net) acres in the Karnes area and 717,216 gross (525,823 net) acres in the Giddings area.
During the year ended December 31, 2022, cash provided by operating activities was positively impacted by increased oil, natural gas, and NGL prices partially offset by higher operating expenses. 39 Uses of Cash and Cash Equivalents Acquisitions During the year ended December 31, 2022, the Company completed various leasehold, mineral rights, and property acquisitions of certain oil and natural gas assets totaling $90.1 million, subject to customary closing adjustments.
During the year ended December 31, 2023, cash provided by operating activities was negatively impacted by lower realized oil, natural gas, and NGL prices. 39 Uses of Cash and Cash Equivalents Acquisitions During the year ended December 31, 2023, the Company completed various leasehold, mineral rights, and property acquisitions totaling $355.5 million, primarily comprised of two acquisitions of certain oil and gas producing properties located in the Giddings area for $264.1 million and $41.8 million.
The Company made individually immaterial bolt-on acquisitions during the year ended December 31, 2021. Additions to Oil and Natural Gas Properties The following table sets forth the Company’s capital expenditures for the years ended December 31, 2022 and 2021.
During the year ended December 31, 2022, the Company completed various leasehold, mineral rights, and property acquisitions of certain oil and natural gas assets totaling $90.1 million, subject to customary closing adjustments. Additions to Oil and Natural Gas Properties The following table sets forth the Company’s capital expenditures for the years ended December 31, 2023 and 2022.
The gathering, transportation, and processing costs for the year ended December 31, 2022 were $19.2 million, or $0.46 per boe, higher than the year ended December 31, 2021 primarily due to increased natural gas production and higher prices. Taxes other than income include production and ad valorem taxes.
The gathering, transportation, and processing costs for the year ended December 31, 2023 were $20.4 million, or $0.88 per boe, lower than the year ended December 31, 2022, primarily due to lower natural gas and NGL prices which resulted in lower processing costs, partially offset by higher volumes.
The exploration expenses for the year ended December 31, 2022 were $7.5 million, or $0.25 per boe, higher than the year ended December 31, 2021, due to the purchase of seismic licenses and increased seismic surveying costs. 37 Depreciation, depletion and amortization (“DD&A”) during the year ended December 31, 2022 was $55.5 million, or $1.05 per boe, higher than the year ended December 31, 2021 due to increased production and a higher depreciable cost basis.
Depreciation, depletion and amortization (“DD&A”) during the year ended December 31, 2023 was $81.6 million, or $1.97 per boe, higher than the year ended December 31, 2022 due to increased production and a higher depreciable cost basis. During the year ended December 31, 2023, the Company recognized a $15.7 million proved property impairment related to the Highlander property.
The following table provides the components of Magnolia’s revenues for the periods indicated, as well as each period’s respective average prices and production volumes. This table shows production on a boe basis in which natural gas is converted to an equivalent barrel of oil based on a ratio of six Mcf to one barrel.
This table shows production on a boe basis in which natural gas is converted to an equivalent barrel of oil based on a ratio of six Mcf to one barrel. This ratio may not be reflective of the current price ratio between the two products.
Lease operating expenses for the year ended December 31, 2022 were $38.5 million, or $0.92 per boe, higher than the year ended December 31, 2021 primarily due to an increase in costs including operating and maintenance costs, workover activities and additional non-operated activities.
Lease operating expenses for the year ended December 31, 2023 were $24.0 million, or $0.39 per boe, higher than the year ended December 31, 2022, due to increased activity, acquisitions, and an increase in costs including chemicals, compression and maintenance costs. Gathering, transportation, and processing costs are costs incurred to deliver oil, natural gas, and NGLs to the market.
General and administrative expenses during the year ended December 31, 2022 were $2.9 million, or $0.49 per boe, lower than the year ended December 31, 2021, primarily driven by the reduction in costs related to the termination of the Services Agreement on June 30, 2021, partially offset by higher corporate payroll expenses related to increased employee headcount and professional service fees.
General and administrative expenses during the year ended December 31, 2023 were $4.7 million higher, but $0.06 per boe lower, than the year ended December 31, 2022. General and administrative expenses were higher year over year primarily due to higher corporate payroll expenses as a result of higher headcount, but lower on a per boe basis because of increased production.
A 50% increase in average prices increased revenues for the year ended December 31, 2022 by $85.8 million compared to the same period in the prior year, and a 17% increase in natural gas production increased revenue $43.0 million. NGL revenues were 14% and 15% of the Company’s total revenues for the years ended December 31, 2022 and 2021, respectively.
A 69% decrease in average prices decreased revenues for the year ended December 31, 2023 by $207.6 million compared to the same period in the prior year, partially offset by a 9% increase in natural gas production which increased revenues by $8.2 million. The realized revenue pricing included the impact of gas plant processing fees that were netted from revenue.
See Note 11—Income taxes in the Notes to the Company’s consolidated financial statements included in this Annual Report on Form 10-K for further detail. Liquidity and Capital Resources Magnolia’s primary source of liquidity and capital has been its cash flows from operations.
The increase in deferred income tax expense was partially offset by the $40.5 million decrease in current income tax expense due to lower taxable income, primarily as a result of the decline in commodity prices. See Note 11—Income taxes in the Notes to the Company’s consolidated financial statements included in this Annual Report on Form 10-K for further detail.
This is primarily comprised of the receipt of an earnout payment in the second quarter of 2022 associated with the sale of the Company’s 35% membership interest in Ironwood Eagle Ford Midstream, LLC in 2020. Income tax expense. The following table summarizes the Company’s income tax expense for the periods indicated.
This is primarily comprised of the gain on revaluation of the contingent consideration liability associated with the acquisition of certain oil and gas producing properties in the Giddings area in the fourth quarter of 2023. Income tax expense. The following table summarizes the Company’s income tax expense for the periods indicated.
Current income tax expense increased $63.5 million year over year due to higher taxable income, a higher controlling interest, and a lower utilization of net operating loss carryforwards. The increase in current income tax expense was offset by the $65.7 million increase in deferred income tax benefit from the release of the valuation allowance against the Company’s deferred tax assets.
For the year ended December 31, 2023, the Company recognized $75.4 million of deferred income tax expense, while the Company recognized $65.7 million of deferred income tax benefit in the prior year due to the release of the valuation allowance against the Company’s deferred tax assets.
Removed
Market Conditions Update The COVID-19 pandemic and related economic repercussions have created significant volatility, uncertainty, and turmoil in the oil and natural gas industry. As the global economy continues to recover from the effects of the COVID-19 pandemic, economic indicators have continued to strengthen.
Added
Market Conditions Update After Magnolia experienced record operating margins during 2022, natural gas and NGL prices have significantly declined and oil prices have weakened, while material and labor costs remained elevated. This has resulted in lower revenue and lower operating margins.
Removed
However, the economy is experiencing elevated inflation levels as a result of global supply and demand imbalances. Elevated inflation levels have resulted in increased capital and oilfield service costs and continued inflationary pressures and labor shortages could result in further increases to the Company’s operating and capital costs.
Added
As a result, Magnolia took actions to reduce its operating and capital spending to better reflect the current cost and commodity environment. The capital spending level is in line with the principles of Magnolia’s business model and is expected to provide the Company more operational and financial flexibility going forward.
Removed
During the year ended December 31, 2022, the Company also repurchased 0.6 million shares of Class A Common Stock for $11.6 million from EnerVest Energy Institutional Fund XIV-C, L.P. outside of the share repurchase program. 34 During the year ended December 31, 2022, outside of the share repurchase program, Magnolia LLC repurchased and subsequently canceled 7.9 million Magnolia LLC Units with an equal number of shares of corresponding Class B Common Stock for $187.3 million of cash consideration.
Added
As of December 31, 2023, Magnolia owned approximately 89.4% of the interest in Magnolia LLC and the noncontrolling interest was 10.6%. 35 Results of Operations Factors Affecting the Comparability of the Historical Financial Results Magnolia’s historical financial condition and results of operations for the periods presented may not be comparable, either from period to period or going forward, as a result of the following factors: • In November 2023, the Company acquired certain oil and gas producing properties including leasehold and mineral interests in the Giddings area for approximately $264.1 million, subject to customary purchase price adjustments, and an additional contingent cash consideration of up to $40.0 million through January 2026 based on future commodity prices.
Removed
During the same period, the Magnolia LLC Unit Holders redeemed 19.5 million Magnolia LLC Units (and a corresponding number of shares of Class B Common Stock) for an equivalent number of shares of Class A Common Stock and subsequently sold these shares to the public.
Added
Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Oil, Natural Gas and NGL Sales Revenues. The following table provides the components of Magnolia’s revenues for the periods indicated, as well as each period’s respective average prices and production volumes.
Removed
Magnolia did not receive any proceeds from the sale of shares of Class A Common Stock by the Magnolia LLC Unit Holders. As of December 31, 2022, Magnolia owned approximately 89.8% of the interest in Magnolia LLC and the noncontrolling interest was 10.2%.
Added
The Company is party to a number of contracts that are recorded gross within natural gas and NGL 37 revenues, which track with natural gas and NGL pricing, and thereby have contributed to a decrease in gathering, transportation, and processing expense. Taxes other than income include production, ad valorem, and franchise taxes.
Removed
Results of Operations Factors Affecting the Comparability of the Historical Financial Results Magnolia’s historical financial condition and results of operations for the periods presented may not be comparable, either from period to period or going forward, as a result of the following factors: • On February 16, 2022, Magnolia Operating, as borrower, amended and restated the original RBL Facility in its entirety, which will now mature in February 2026. • During the second quarter of 2021, the Company amended the term of the Services Agreement to end on June 30, 2021. • During the second quarter of 2021, the Company amended the Non-Compete (the “Second Non-Compete Amendment”), which modified the term of the Non-Compete to end on June 30, 2021. • The 2026 Senior Notes issued under the Indenture, dated as of July 31, 2018 (the “Indenture”), were amended on April 5, 2021.
Added
Taxes other than income for the year ended December 31, 2023 were $28.5 million, or $1.24 per boe, lower than the year ended December 31, 2022, primarily due to a decrease in production taxes as a result of the decrease in oil, natural gas, and NGL revenues.
Removed
This debt modification included approximately $1.1 million of one-time transaction fees which were expensed and $5.0 million in fees paid to holders of the 2026 Senior Notes, which were reflected as deferred financing costs reducing Long-term debt and will be amortized over the remaining term of the 2026 Senior Notes.
Added
The amount and frequency of future dividends is subject to the discretion of the Company’s board of directors and primarily depends on earnings, capital expenditures, debt covenants, and various other factors.
Removed
This ratio may not be reflective of the current price ratio between the two products.
Added
The amount of income taxes recorded by the Company requires interpretations of complex rules related to the Company’s partnership structure and regulations of various tax jurisdictions throughout the United States.
Removed
For the year ended December 31, 2022, the Company did not recognize any amortization of intangible assets, because the intangible assets were fully amortized in June 2021 as a result of the termination of the Non-Compete. During the year ended December 31, 2021, the Company recognized $9.3 million of amortization of intangible assets.
Added
Deferred tax assets and liabilities are recognized based on the tax effects of temporary differences between the carrying amounts on the consolidated financial statements and the tax basis of assets and liabilities, as measured using currently enacted tax rates.
Removed
Valuation allowances for deferred tax assets are recognized when it is more likely than not that some or all of the benefit from the deferred tax assets will not be realized. As of December 31, 2022, the Company’s total deferred tax assets were $162.8 million.
Added
These differences will result in taxable income or deductions in future years when the reported amounts of the assets or liabilities are recovered or settled, respectively. Considerable judgment is required in predicting when these events may occur and whether recovery of an asset is more likely than not.
Removed
Management assessed whether it is more likely than not that the Company will generate sufficient taxable income to realize its deferred income tax assets. In making this determination, the Company considered all available positive and negative evidence and made certain assumptions.
Added
Magnolia records deferred tax assets and associated valuation allowances, when appropriate, to reflect amounts more likely than not to be realized based upon Company analysis. Additionally, federal and state income tax returns are generally not filed before the consolidated financial statements are prepared.
Removed
The Company considered, among other things, the overall business environment, its historical earnings and losses, current industry trends, and its outlook for future years.
Added
Therefore, Magnolia estimates the tax basis of its assets and liabilities at the end of each period, as well as the effects of tax rate changes, tax credits, and net operating and capital loss carryforwards and carrybacks, if any.
Removed
As of December 31, 2022, the Company concluded that it is more likely than not that it will be able to realize all of its deferred tax assets and that a valuation allowance is no longer necessary.
Added
Adjustments related to differences between the estimates used by the Company and the actual amounts reported are recorded in the periods in which the Company’s income tax returns are filed. These adjustments and changes in estimates of asset recovery and liability settlement as well as significant enacted tax rate changes could have an impact on the Company’s results of operations.
Removed
During the year ended December 31, 2022, the Company also repurchased 0.6 million shares of Class A Common Stock for $11.6 million from EnerVest Energy Institutional Fund XIV-C, L.P. outside of the share repurchase program.
Added
Please refer to Note 1—Organization and Summary of Significant Accounting Policies and Note 11—Income Taxes in Part II, Item 8 of this report for additional discussion.
Removed
During the year ended December 31, 2022, Magnolia LLC repurchased and subsequently canceled 7.9 million Magnolia LLC Units with an equal number of shares of corresponding Class B Common Stock for $187.3 million of cash consideration. As of December 31, 2022, Magnolia owned approximately 89.8% of the interest in Magnolia LLC and the noncontrolling interest was 10.2%.
Removed
In January 2021, the Company amended the Non-Compete such that, rather than delivering an aggregate of 4.0 million shares of Class A Common Stock upon the two and one-half year and the four year anniversaries of July 31, 2018 (the “Closing Date”), the Company would deliver (i) the cash value of approximately 2.0 million shares of Class A Common Stock and approximately 0.4 million shares of Class A Common Stock on the two and one-half year anniversary of the Closing Date and (ii) an aggregate of 1.6 million shares of Class A Common Stock on the four year anniversary of the Closing Date, in each case subject to the terms and conditions of the Non-Compete.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−0 removed3 unchanged
Biggest changeA $1.00 per barrel increase (decrease) in the weighted average oil price for the year ended December 31, 2022 would have increased (decreased) the Company’s revenues by approximately $12.2 million and a $0.10 per Mcf increase (decrease) in the weighted average natural gas price for the year ended December 31, 2022 would have increased (decreased) Magnolia’s revenues by approximately $5.1 million. 42
Biggest changeA $1.00 per barrel increase (decrease) in the weighted average oil price for the year ended December 31, 2023 would have increased (decreased) the Company’s revenues by approximately $12.6 million and a $0.10 per Mcf increase (decrease) in the weighted average natural gas price for the year ended December 31, 2023 would have increased (decreased) Magnolia’s revenues by approximately $5.5 million. 42
The Company is subject to market risk exposure related to changes in interest rates on borrowings under the RBL Facility. Interest on borrowings under the RBL Facility is based on the SOFR rate or alternative base rate plus an applicable margin. At December 31, 2022, the Company had no borrowings outstanding under the RBL Facility.
The Company is subject to market risk exposure related to changes in interest rates on borrowings under the RBL Facility. Interest on borrowings under the RBL Facility is based on the SOFR rate or alternative base rate plus an applicable margin. At December 31, 2023, the Company had no borrowings outstanding under the RBL Facility.

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