Magnolia Oil & Gas Corporation Class A

Good day and welcome to the Magnolia Oil & Gas first quarter 2020 earnings release and conference call. Today all participants will be in a listen only mode. Should you need assistance during today's conference, please signal for a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch tone phone. To withdraw your question, please press star then two. Please note that today's event is being recorded. At this time, I would like to turn the call over to Brian Corales. Please proceed.

Thank you, Chris, and good morning, everyone. Welcome to Magnolia Oil & Gas' first quarter 2020 earnings conference call. Participating on the call today are Steve Chazen, Magnolia's Chairman, President, and Chief Executive Officer, and Chris Stavros, Executive Vice President and Chief Financial Officer. As a reminder, today's conference call contains certain projections and other forward-looking statements within the meeting of the federal security laws. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements. Additional information on risk factors that could cause results to differ is available in the company's annual report on Form 10-K filed with the SEC. A full safe harbor can be found on slide two of the conference call slide presentation with the supplemental data on our website. You can download Magnolia's first quarter 2020 earnings press release as well as the conference call slides from the investor section of the company's website at www.magnoliaoilgas.com. I will now turn the call over to Mr. Steve Chazen.

Thank you, Brian. Good morning and thank you for joining us today. My comments will focus primarily on how Magnolia is positioned to navigate the and Jim Stavros. Thank you for joining us. since our inception and continue to provide us with a strong foundation for the long term. Our business model, predicated on low financial leverage, is designed to withstand periods of weak product prices. We exited the quarter with $146 million of cash in our balance sheet, $450 million of undrawn revolver, and $400 million of debt that does not mature until 2026. Our targeted annual capital spending for drilling and completing wells remains at 60% of our adjusted EBITDAX, and we generated $23 million of free cash flow during the first quarter. We remain focused on the things that are in our control. Most of our current planned capital spending and activity for the year occurred in the first quarter. The current weak product prices do not justify bringing new wells online. As a result, our capital spending is expected to see a sharp decline for the remainder of the year. We currently plan to drill a few additional wells in Giddings Thank you for joining us. including any additional savings from our capital program expect to realize at least $55 million improvement in our 2020 cash operating costs in G&A compared with our original plan. A portion of these savings should be realized in the second quarter and more fully captured in the second half of the year. Our cost reduction initiatives will remain an ongoing effort throughout the remainder of the year. As a company, we run a focused business. as a result, narrow focus business, really. And as a result, we can optimize our production on each well. Sometimes that's an advantage, sometimes not. But right now, this allows us, this focus allows us on generating free cash flow at very low product price, in a very low product price environment, and allows us to manage our business more effectively. We can share products and John Stavros. Thank you. and Tom Stavros. Thank you very much. Two of these wells were drilled from the same pad to replicate early stage development. These two wells had 90-day average rates of 1,000 barrels of oil a day. The cost of these wells were more than 20% lower than the 2019 average cost in Giddings, despite having lateral lengths that were approximately 25% longer. Our recent positive results in Giddings increased our confidence on the future development opportunity of the field. with the potential for several hundred drilling locations. Giddings would be the first area where we would bring back a rig and complete wells as product prices recover. We continue to evaluate several small to mid-sized bolt-on and oil and gas property acquisitions opportunities. While the M&A market has been stagnant so far this year due to the weakness in volatility in product prices, there are some signs the process is beginning to loosen. We expect opportunities to expand. Our business will appear later this year once market conditions clarify. As always, we will ensure that anything that is done is accretive to our business and is clearly positive for our shareholders. To summarize, Magnolia's financial position remains strong and the balance sheet provides us with a competitive advantage. Our current cash balance would allow us to fund all remaining capital spending for this year, as well as our cash overhead and our interest payments, at least the remainder of 2020 before considering any revenue generated by our production. Our free cash flow generating business model continues to provide us optionality to allocate capital towards opportunities that are most beneficial to our shareholders. I'd now like to turn the call over to Chris Stavros.