Magnolia Oil & Gas Corporation Class A

Good morning and welcome to the Magnolia Oil and Gas third quarter 2021 earnings release and conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your telephone keypad. To withdraw your question, please press star and then two. Please note this event is being recorded. I would now like to turn the conference over to the Vice President of Investor Relations, Mr. Brian Corrales. Please go ahead, sir.

Thank you, Chris, and good morning, everyone. Welcome to Magnolia Oil & Gas' third quarter 2021 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 meaning 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 third quarter 2021 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. Good morning, and thank you for joining us today. My comments this morning provide a brief update on our business and operations, how we plan to allocate our free cash flow, and how we plan to allocate our free cash flow for the remainder of the year. Chris will then review our third quarter results, provide some additional guidance before we take your questions. Our strong third quarter financial results demonstrate the quality of our assets and the efficiency of our capital program. We continue to execute in our business model, which prioritizes disciplined capital spending, moderate production growth, high pre-tax margins, and low levels of debt. These principles, combined with an improved lower overall cost structure, as well as an unhedged production, allows us to achieve several records during the quarter, including EBITDAX, free cash flow, net income margin, and earnings per share. We generated $143 million of free cash flow after capital outlies and interest on our debt, and repurchased 5 million shares of stock during the third quarter, or about 2% of our total outstanding shares, for approximately $79 million. Despite the $79 million allocated this per share value-enhancing activities, our cash balance grew by nearly 30% during the quarter to $245 million. For the year to date, the largest use of our free cash flow has gone towards opportunistically repurchasing our own stock. So far this year, we have repurchased 22.6 million shares, or about 9% of the total shares outstanding, when compared to the fourth quarter of 2020's fully diluted share count. Therefore, we have returned 9 percent to our shareholders in the form of share repurchases for the first nine months of this year. Since establishing the share repurchase program in the third quarter of 2019, we have spent approximately $396 million acquiring our own stock and reducing our diluted share count by 34 million shares. Our share repurchase efforts continue to enhance our per share metrics We expect to continue to repurchase at least 1% of our shares each quarter. Magnolia also paid its first interim semiannual dividend of 8 cents per share during the third quarter, which is secure at oil prices under $40 a barrel. We plan to make the remaining dividend payment in the first quarter of 2022 based on our full year 2021 results and adjusted for oil prices of $55.00. Our total production volumes grew 4% sequentially during the third quarter as a result of continued strong well performance, despite lower non-operated activity and investing only 30% of our EBITDAX on drilling and completing wells. The quality of our asset base is reflected in the continuing overall growth of our production volumes, low reinvestment rates and finding costs, and high full-cycle margins. We currently have two operator drilling rigs across our assets and plan to remain at this level into next year. At current product prices, this level of activity would result in the D&C capital program well below our cap of 55% for our adjusted EBITDAX. One rig will continue to drill development wells that are a Giddings asset. While still in the early stages of development in Giddings, the results of our drilling program have become more repeatable and increasingly predictable. The second rig will drill wells in both Carnes and Giddings areas, including some appraisal wells in Giddings. We continue to see improvement in our operating efficiencies at Giddings while maintaining well productivity. The 2021 development plan program has averaged four wells per pad, with lateral lengths averaging greater than 7,000 feet per well. This compares favorably to the prior year, where we averaged less than three wells per pad, with average lengths about 6,000 feet. More wells per pad combined with longer laterals while increasing the average drilling feet per day have helped in driving further efficiencies at Giddings and partly offsetting some materials and oil field-related inflation. Our ability to generate moderate annual production growth with strong operating margins together with our ongoing share repurchase program and the payment of a secure, sustainable, and growing dividend are important components of Magnolia's Total shareholder return proposition. I'll now turn the call over to Chris Davros.