Magnolia Oil & Gas Corporation Class A

Good morning, everyone, and thank you for participating in Magnolia Oil and Gas Corporation's fourth quarter 2024 earnings conference call. My name is Megan, and I will be your moderator for today's call. At this time, all participants will be placed in a listen-only mode as our call is being recorded. I will now turn the call over to Magnolia's management for their prepared remarks, which will be followed by a brief question and answer session.

Thank you, Megan, and good morning, everyone. Welcome to Magnolia Oil and Gas's fourth quarter 2024 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 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 fourth quarter 2024 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 Stomros.

Thanks, Tom, and good morning, everyone. We appreciate you joining us for our discussion of our fourth quarter and full year 2024 financial and operating results. I plan to briefly speak to our full year results in fourth quarter, which closed out another year of strong, reliable performance and execution aligned with Magnolia's business model and helped by some conscious actions taken around reducing our field-level operating costs. I'll briefly highlight how our business model and core principles continue to deliver results that compound per share value and is evidenced through Magnolia's performance since its founding. Finally, I'll conclude by providing an outlook of Magnolia's 2025 capital and operating plan, which is expected to deliver moderate growth with a similar level of capital spending while providing additional capture of low-cost resource opportunities. Brian will then review our financial results in greater detail and provide some additional guides before we take your questions. Starting on slide three of the investor presentation and looking at the highlights, Magnolia ended 2024 on a high note, with across-the-board strength in both financially and in our operations. Record quarterly production volume during the fourth quarter of 93.1 thousand barrels of oil equivalent per day lifted full-year 2024 total production to 89.7 thousand PoE per day. This amounted to annual total company production growth of 9 percent for a second consecutive year, and with full-year oil production growth of 11 percent, exceeding our original expectations. Our total production at Giddings grew 16%, with oil growing 21%, and partially supported by a prior year acquisition in addition to strong well productivity and the continued expansion of our development area in this field. Total adjusted net income for the year was approximately $401 million, and adjusted EBITDAX was $953 million, and our DNC capital spending of $477 million led to a reinvestment rate of just 50%. This allowed the company to generate free cash flow of $430 million last year, and we returned 88% of the free cash flow, or approximately $378 million, to our shareholders through our growing base dividend and ongoing share repurchase program. Our asset teams and field employees embraced our asset optimization and field-level cost reduction initiatives implemented early last year, and were successful in lowering our lease operating costs by 10% per BOE through the year. This, in combination with our efforts in continuing to work with our materials vendors and oilfield service providers, lowered our overall finding and development costs, helping us achieve a return on capital employed of 22% last year, and places Magnolia's overall cost structure in a position of strength into 2025. The confidence and strength in Magnolia's outlook supported our Board's approval of a 15% increase to our quarterly dividend payment earlier this month to $0.15 per share, or an annualized payment of $0.60 per share. Magnolia's board also authorized an increase of 10 million shares for our existing share repurchase program designated for open market repurchases. And as we continue with our plan to repurchase 1% of our shares outstanding per quarter. Turning to slide four, Magnolia's business model has remained reliably consistent and steady since the company was founded. As I've stated before, our objective has been and continues to be to operate a highly investable, attractive E&P business that is enduring and focused on generating absolute per share value over the long term. Our objective is to be the most efficient operator of best-in-class oil and gas assets, generating the highest returns on those assets while deploying the least amount of capital for drilling and completing our wells. Our continued low in reinvestment rate, which has delivered moderate growth and significant free cash flow generation, serves as evidence of achieving that goal. This formula enables a significant portion of the free cash flow to be returned to our shareholders, in our case, in a secure and growing-based dividend. The combination of reducing our total share count, moderate production growth, and low-cost structure creates an investment proposition that provides average annual dividend growth of approximately 10%. Additional free cash flow accrues to the balance sheet, allowing us to opportunistically pursue attractive bolt-on oil and gas property acquisitions that can improve and extend our high-return business. The results of our model and strategy are apparent when examining what we've achieved over the longer term. As shown on slide five, Magnolia has had one of the lowest capital reinvestment rates while realizing one of the highest rates of production per share growth among U.S. oil and gas producers over the past four years. Turning to slide six, Magnolia continues to generate high pre-tax operating margins, largely a result of our high-quality assets, our emphasis around efficiencies and cost containment. We successfully lowered our overall low costs in BNC capital during 2023 and reduced field level operating costs last year, which at current product prices should lead to improved full cycle operating margins in 2025. As shown on slide seven, the strength of our balance sheet remains best in class. Maintaining low leverage is a key component of our business model, minimizing overall financial risk while providing flexibility and optionality for the company. The absence of any oil and gas hedges provides us with the ability to accrue a significant amount of excess cash flow to the balance sheet during a period of higher product prices, which can then gradually be deployed as product prices recede. Deploying this countercyclical strategy has been, in our experience, benefiting the company and our shareholders by executing on accretive, bolt-on acquisition opportunities during more modest product prices. While other producers have shown the ability to capitalize on one or two of these metrics, it is uncommon to have a low reinvestment rate with above-average growth per share combined with high operating margins and low debt. This effective and potent combination allows us to maximize free cash flow generation and continue to support our highly competitive capital return program. Slide 8 shows our returns at the corporate level or the overall financial outcome of our business model. As I mentioned, our return on capital employed delivered another solid result with RCE of 22% during 2024, and despite lower year-over-year product prices. Magnolia's return on capital employed on average over the past six years, or approximately since the company's inception, was 26%, or roughly three times our weighted average cost of capital. These superior returns are a function of our high-quality assets, our strategy around disciplined capital allocation, maintaining our low debt, a low-cost structure, and further enhanced by our ongoing share repurchase program. This combination has proven to be a successful recipe. Finally, on slide nine, Magnolia's business model continues to result in consistent and reliable free cash flow through the cycle with a significant portion of that free cash returned to our shareholders. Since inception, Magnolia has returned nearly $1.6 billion, or approximately 35% of its current market capitalization, through a combination of share repurchases and dividends. We entered 2025 on south footing after a very solid year of operating performance and a strong financial position with an improved cost structure. Our business model and strategy remains largely unchanged. Magnolia plans to operate two drilling rigs and one completion group during 2025 and expects to maintain this level of activity through the year with total D&C capital spending anticipated in the range of $460 to $490 million. This level is roughly flat with last year, and at current product prices represents a reinvestment rate of less than 55% of our adjusted EBITDAX. This also includes an estimate of non-operated capital that is roughly the same as 2024 levels. Our activity and spending is expected to deliver total annual production growth of 5% to 7%, including low single-digit annual growth in oil production. with the overall characteristics and quality of this year's program expected to be very similar to what we experienced last year. Most of our oilfield service and materials costs are under contract through at least mid-2025, and we continue to see some ongoing D&C efficiency improvements generated by our operations team at Giddings, inclusive of last year's 7% increase in drilling feet per day. While our D&C spending levels are expected to be similar to 2024, Lower overall well costs combined with improved operating efficiencies allows more wells to be drilled, completed, and turned in line, supporting Magnolia's high margin growth while providing additional operational flexibility. Approximately 75% to 80% of this year's activity will consist of multi-well development pads in the Giddings area. Over the last several years, we have gained a much better understanding of the subsurface and a normal technical knowledge through our own drilling and data gathering in Giddings. We plan to put some of this knowledge to work and allocate a portion of our capital to further delineate our significant acreage position at Giddings through some appraisal wells, decide to test some concepts, further extend the boundaries of the field, and expand the competitive advantage that we have gained in the area. Our current area assets continue to generate significant free cash flow, and we expect to allocate approximately 20% to 25% of our capital to this asset this year, including modest development as well as some appraisal activity. We believe that our business model and strategy provide us with a durable competitive advantage to sustain our moderate growth over time and allowing us to continue to act as serial compounders of value for our shareholders. I'll now turn the call over to Brian to provide more details on our financial and operating results.