Magnolia Oil & Gas Corporation Class A

Good day and welcome to the Magnolia Oil and Gas Tech on Quarter 2022 earnings release and conference call. All participants will be in a listen-only mode. Should you need assistance, please find our conference specialist by pressing the Start key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Start and 1 on a touchdown stop. To withdraw your question, please press Start and 2. Please note this event is being recorded. I would now like to turn the conference over to Brian Krause. Please go ahead.

Thank you, Maria, and good morning, everyone. Welcome to Magnolia Oil & Gas's second quarter 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 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 second 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 Chasen.

Thank you, and good morning, and thank you for joining us today. Magnolia just completed its fourth year as a public company. Despite the continued product volatility, our business model remains unchanged. Our ongoing confidence in the business is supported by our core values and based on our strong financial and operating results and our team's numerous accomplishments. Over the last four years, we have profitably increased our production while transitioning our Giddings asset to a full development mode. We also continue to generate significant free cash flow, allowing us to opportunistically repurchase our shares. Our business model limits the spending on drilling and completing wells at 55% of our EBITDAX and is expected to provide mid-single-digit annual production growth over time. The remaining unallocated cash flows can be used for small bolt-on oil and gas property acquisitions, share repurchases, and dividends. So far this year, we have far exceeded our plan. We now expect our full-year 2022 production to grow between 12 and 14 percent, while investing less than a third of our cash flows, with the excess cash allocated to activities that should enhance our per share value of the company. Our second quarter results set records for several financial and operating metrics, including net income, operating income margins, earnings per share, and total production volumes, which exceeded our earlier guidance. We grew company total production 14% year-over-year and 3% sequentially, while spending just 31% of our EBITDAX drilling and completing wells and generating operating income margins of 68%. Production for the quarter was of 74.2 thousand barrels per day was at the high end of our guidance due to better well performance in both our Carnes and Giddings assets. Ongoing efficiency is Giddings, which led to more net wells. and some additional non-operated activity. Our record production, which is unencumbered by hedges combined with strong product price realizations, contributed to our record free cash flow approximately $251 million. We repurchased a total of 4.1 million shares, reducing our total diluted shares outstanding by 8% compared to last year's second quarter. The remaining free cash flow allowed our cash balance to build to more than half a billion dollars at the end of the second quarter. Our balanced approach to allocating our cash flow provides consistent production growth and a steady reduction in our outstanding shares. This combination is expected to result in double-digit annual dividend growth. As announced yesterday, we have transitioned our semi-annual base dividend to a quarterly base dividend with an initial rate of 10 cents per share on a quarterly basis. The new annualized payout of 40 cents a share represents a 43% increase to Magnolia's dividend compared to the 28 cents per share distribution associated with full year 2021. We believe that the increased dividend payment level is secure and sustainable with product prices at less than half their current level and expect our dividend to grow annually as we continue to execute our business plan. We plan to revisit the dividend payment rate early next year based on our full year 2022 financial results, and we will recast our results from this year using a $55 oil price environment. We continue to operate two drilling rigs across our two assets and expect to maintain this level of activity for the balance of the year. At current product prices, our capital for drilling and completing wells should be well below our 55% spending cap, resulting in significant free cash flow generation. Most of the free cash flow is expected to be allocated towards improving the per share value of the company, including our plan to repurchase at least 1% of our outstanding shares each quarter. Magnolia's investment proposition is differentiated. We believe that our moderate and consistent production growth, combined with a gradual reduction of our outstanding shares, will result in steady per share growth of the company and a growing dividend. And I'll turn the call over to Chris Stavros.