Magnolia Oil & Gas Corporation Class A

Good morning and welcome to the Magnolia Oil and Gas fourth quarter and full year 2022 earnings 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 Jim Johnson. Please go ahead.

Thank you, Gary. Good morning, everyone. Welcome to Magnolia Oil & Gas' fourth quarter earnings conference call. Participating on the call today are Chris Stavros, Magnolia's President and Chief Executive Officer, and Brian Corrales, Senior 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 fourth 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. Chris Stavros.

Thanks, Jim, and good morning, everyone. Thanks for joining us today. I'll provide some comments on our results and accomplishments during 2022, and we'll then give an update on our outlook for 2023 and how we plan to allocate our free cash flow during the year. Brian will then review our fourth quarter and full year 2022 results and provide some additional guidance before we take your questions. As we enter our sixth year as a public company, the core principles of Magnolia's business model established at the beginning are expected to continue. I've said previously that my plan is not to make significant changes or put my personal stamp on Magnolia. Throughout the halls here in the office and out in the field, every one of our employees is a Magnolia shareholder and it's aligned with our investors. We run Magnolia for our shareholders, and my objective will always be to do what is in the best interest of our investors. We plan to maintain our discipline around capital spending while keeping low levels of debt, and we expect to continue our track record of achieving moderate annual production growth while generating significant amounts of free cash flow with strong operating margins. 2022 was a record year for Magnolia, and I want to recognize our team's strong contributions, which helped support Magnolia's exceptional financial and operational results. We achieved goals that further solidified the strength of Magnolia's business model and strategy while also marking some important milestones. Record production in 2022 combined with higher product prices and our team's continued focus on managing costs all contributed to expand our full-year pre-tax operating margins to 63%, leading to record net income for the company. Last year, we successfully executed our development program at Giddings, and the positive performance of this asset is reflected in our financial results. Giddings now represents more than half of Magnolia's overall production and approved reserves, and is a significant contributor to our strong financial performance. Our Giddings development was responsible for driving overall productivity during 2022, while spending only 34% of our total EBITDAX on DMC and associated facilities capital. We generated a record $823 million of free cash flow last year and returned 54% of this amount to our shareholders in the form of share purchases and a regular-based dividend, which is paid quarterly. We repurchased more than 15 million Magnolia shares during 2022, reducing our diluted share count by 8% compared to 2021 levels. Our ability to deliver moderate annual production growth in our production volumes and reducing our outstanding shares builds greater dividend per share payout capacity over time and is demonstrated by the recent announcement of a 15% increase to our quarterly base dividend. The increase to our dividend reflects our strong operating and financial performance achieved during 2022 and demonstrates our ongoing confidence in the outlook of the business. Inclusive of the cash returned to shareholders and after spending approximately $90 million on some small bolt-on oil and gas property acquisitions during the year, our cash balance nearly doubled during 2022, ending the year at $675 million. While Magnolia's unhedged business captured the benefit of much higher product prices last year, this year's plan will focus on improving our execution and generating further operating and cost efficiencies in order to partially offset the impact of higher oilfield service costs. Operationally, we expect our 2023 plan to be quite similar to last year. We expect to continue to operate a two-rig drilling program, which we estimate should generate full-year production growth of approximately 10%. year and starting in the first quarter. As I noted earlier, we will stay disciplined around our DNC capital and limit our spending approximately 55% of EBITDAX, which would provide us with significant free cash flow. We estimate the current year's capital expenditures to be approximately $500 million, with the year's heaviest capital outlays occurring in the earlier part of 2023. Our supply chain and operations team did a superb job of strengthening the valued partnerships with our key vendors well as managing through the inflationary environment of rising oil field service costs that occurred throughout 2022. These efforts have helped to mitigate some of the increased costs and with recent signs indicating that some of the service cost inflation starting to flatten or even decline modestly in certain products and services. We plan to continue to allocate a sizable portion of our free cash flow toward enhancing the value of the existing business and improving our per share metrics. This includes our ongoing share repurchase program, where we expect to repurchase at least 1% of our outstanding shares each quarter. We also expect to pursue small accretive bolt-on oil and gas property acquisitions in and around our current operating areas. These acquisition opportunities would have characteristics comparable to our existing assets and match some of the skills and learnings from our experience in Giddings. As an example, in late 2022, we were able to acquire some acreage, minerals, and additional working interests in Giddings, and primarily outside of our core development area. This further builds on our strong position in the play and is in line with our strategy of incrementally improving our opportunity set as well as our drilling economics. Allocating our free cash flow through these actions is intended to enhance the underlying value of the business, expand our dividend per share payout capacity, and strengthen our investment proposition dividend growth over time. I'll now turn the call to Brian who will review our fourth quarter and full year financial results.