Magnolia Oil & Gas Corporation Class A

Good day and welcome to the Magnolia Oil and Gas fourth quarter 2021 in full year earnings release and conference call. All participants will be in listen-only mode. Should you need assistance, please signal 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 telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Brian Corral, Investor Relations. Please go ahead.

Thank you, Sarah, and good morning, everyone. Welcome to Magnolia Oil & Gas's fourth quarter and full year of 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 securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ material 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 in slide two of the conference call slide presentation with the supplemental data on our website. You can download Magnolia's fourth quarter and full year 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, Brian. Good morning, and thank you for joining us today. I'll provide some comments on our results and accomplishments in 2021. I will then give an update about our plans for 2022 and how we anticipate allocating our significant free cash flow. Chris will then review our fourth quarter and full year results, provide some additional guidance before we take your questions. We ended a very strong year on a high note, both operationally and financially. Last year's achievements further solidified the strength of Magnolia's business model and strategy, while also marking some important milestones. Higher product prices and our team's continued focus on managing our costs expanded our pre-tax operating margin to 56%. We continued our capital discipline, spending just 28% of our EBITDAX on drilling and completing wells, which generated significant free cash flow and resulted in year-over-year production growth of 7%. During the year, we returned approximately 65% of our free cash to our shareholders, in the form of significant share repurchases, as well as initiating our first dividend payment. We've repurchased more than 25 million shares, reducing our diluted share count by 10%. At the same time, our cash position nearly doubled, leaving us with about zero net debt a year ahead. Our greatest accomplishment last year was the execution of a full development program at Giddings. Giddings now represents more than half of our approved reserves, and key financial metrics. Improved confidence in the continued strong well performance at Giddings supported the addition of a second drilling rig in the field in mid-2021. Having recently increased our lateral lengths to greater than 7,000 feet and now averaging four wells per pad, our program continues to experience additional operating efficiencies. We plan to continue to operate a two-rig program this year, which we expect to generate high single digit full-year production growth. Operating efficiencies are expected to continue into this year, helping to offset some of the oil field service cost inflation. Our goal is to continue to allocate a sizable portion of the free cash flow we generate towards enhancing the existing business and improving our per share metrics. This could include some small, accretive bolt-on oil and gas property acquisitions with characteristics similar to our existing assets. As I mentioned, we returned approximately 65% of our free cash flow to investors during 2021, with the majority of this in the form of share repurchases, which reduced our fully diluted shares outstanding by 10%. Most of our share repurchases last year was stock purchased directly from Intervest, our largest shareholder. As Intervest sold throughout the year, we purchased approximately one quarter to one third of the amount they sold. Should Intervest continue to sell shares this year, we would expect to repurchase a similar proportion. To adequately plan for this, we expect to keep a higher level of cash in our balance sheet to allow for these repurchases. Beyond this year, we would expect to see a shift in how we allocate our free cash flow, which will likely lead to a more normalized level of share repurchases of about 1% per quarter. During the third quarter of last year, we paid our first semiannual dividend installment of $0.08 per share, which we believe is safe and secure at $40 oil. Earlier this month, we announced our second semiannual dividend of $0.20 per share. This brings the combined dividend payments on our 2021 financial results recast at $55 oil and $2.75 gas to $0.28 per share. Our dividend philosophy is meant to appeal to long-term investors who seek dividend safety, dividend growth, and a dividend that is paid out of actual earnings generated by the business. We expect that each of the dividend payments to grow annually as we continue to execute our business plan consisting of moderate production growth, the reduction of our outstanding shares. We ended 2021 with positive momentum that should benefit Magnolia into this year. We are very optimistic on the outlook for our 2022 operational plan, which includes development of both Giddings and Carnes, as well as some appraisal wells at Giddings. Improvement in drilling times at Giddings will result in more wells and more capital for the same number of rigs. As a result of our strong balance sheet, Magnolia fully captures current high product prices by remaining fully hedged, fully unhedged, I should say. Our capital reinvestment this year will be well below our limit of 55% of EBITDAX at current product prices, providing high single-digit growth and generating significant amount of free cash. The combination of organic production growth and share reduction is supportive of growing dividend at Magnolia's double-digit return investment proposition. I'll now return the call over to Chris.