Magnolia Oil & Gas Corporation Class A

Good day and welcome to the Magnolia Oil & Gas first quarter 2022 earnings release and conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. 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 Corales. Please go ahead.

Thank you, Matt, and good morning, everyone. Welcome to Magnolia Oil & Gas' first quarter earnings conference call. Participating in 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 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 2022 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. We continue to execute on our strategy and business model, which limits our spending to 55% of our EBITDAX on drilling, completing wells. This is expected to deliver mid-single-digit annual production growth along with high full cycle operating margins. The remaining 45% will be allocated towards a mix of accretive bolt-on acquisitions, dividends, and share repurchases. During the first quarter of 2022, we grew our total production 15% year over year and 3.5% sequentially while spending just 28% of our EBITDAX drilling and completing wells and generating operating income margins or EBIT of 62%. Quarterly production was at the high end of our guidance, mainly due to better performance at our Giddings assets. Total production at Giddings grew 24%, and oil production grew 31% compared to the same period last year. Our free cash flow in the first quarter was approximately $200 million, and we distributed nearly all of it to our investors through share repurchases and dividends. We repurchased a total of 6 million shares during the first quarter, reducing our total diluted share outstanding by 9% compared to last year's first quarter. We also paid the second installment of our semi-annual dividend of 20 cents a share, which is based on our full year 2021 results recast at $55 oil, bringing the total dividend associated with 2021 results to 28 cents per share. Despite the significant return of cash to our shareholders, we ended the quarter with $346 million of cash on our balance sheet, roughly unchanged during the quarter. Together with our 15% production growth and 9% decrease in our total diluted share count, our year-over-year production per share growth was 27%. A combination of continued moderate growth and share reduction provides greater capacity for dividend growth over time. We continue to operate two drilling rigs and expect to maintain this level of activity for the balance of the year. Efficiencies such as faster drill times, longer laterals, and more wells per pad are expected to lead to more net wells during the year, leading to approximately $25 million of additional capital. We expect to see another $25 million of spending resulting from increased oil service cost inflation for both material and labor. The longer laterals and shorter cycle times are expected to benefit our production volumes during the remainder of 2022 and into early next year. As a result, we now expect our full year 2022 production growth to exceed 10% compared to our previous forecast of high single-digit growth. Our operating team continues to make strong progress, steadily advancing the development of our Giddings assets. and we've been successful in offsetting some of the oil field costs inflation through ongoing efficiency gains. We have improved the drilling feet per day by about 20% compared to a year ago and increased the lateral length of the average Giddings well by about 15% to 8,000 feet with some wells expected to surpass 10,000 feet. With Giddings still in relatively early stages of development, our operating teams improved understanding and growing experience will allow us to increase the oil and gas recoverability from the asset to the application of modern completion techniques and further fuel field efficiencies. Giddings now makes up nearly 60% of our total company production compared to one-third of our volumes in 2019. Magnolia remains very well positioned in the current environment. We believe that reinvesting in our business to achieve moderate and predictable annual volume growth is important for a company of our size while balancing this with meaningful amount of cash returned to our shareholders. Our gradual and measured approach toward both the appraisal and development of Giddings Field has created operating efficiencies leading to some additional net wells and higher growth this year. At current product prices, we expect our capital for drilling and completing wells Thank you very much. We will also expect our dividend to grow at least 10% annually as a result of production growth combined with a steady reduction of our share count. I will now turn the call over to Chris.