Magnolia Oil & Gas Corporation · NYSE:MGY
Magnolia Oil & Gas — Investor Presentation (November 2019)
28 slides from Magnolia Oil & Gas's investor presentation, Nov 12, 2019
Slide 1: Magnolia Oil & Gas Corporation Investor Presentation – November 2019
Magnolia Oil & Gas Corporation Investor Presentation – November 2019
Slide 2: Disclaimer: Forward Looking Statements
Disclaimer 2 FORWARD LOOKING STATEMENTS The information in this presentation and the oral statements made in connection therewith include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities
Slide 3: Magnolia Oil & Gas – Overview
Magnolia Oil & Gas – Overview • High-quality, low-risk pure-play South Texas operator with a core Eagle Ford and Austin Chalk position acquired at an attractive entry multiple • Significant scale and PDP base generates material free cash flow, reduces development risk and increases optionality • Ass
Slide 4: Corporate Business Model and Strategy
Corporate Business Model and Strategy 4 Magnolia Value Creation Strategy 2019 Expectations 1 Consistent organic production growth Production growth of ~10% 4Q/4Q 3 Conservative leverage profile $164 million of cash and $400 million of principal debt outstanding, representing ~0.3x third quarter annu
Slide 5: Magnolia Oil & Gas – Financial Policy
Magnolia Oil & Gas – Financial Policy 5 Return-focused, long-term value creation through execution on (i) debt reduction, (ii) accretive bolt-on acquisitions, and (iii) share repurchases. No Commodity Hedging Capital Spending Plan Targeted at 50 - 60% of annual EBITDAX (Plan expected to deliver 10%+
Slide 6: Cash Flow Summary from Inception
Cash Flow Summary from Inception 116 816 9 10 27 233 507 164 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 Opening Cash After Transaction Cash Flow from Operations After Closing Transaction Costs Working Capital Changes Common Stock Repurchases Other Acquisitions D&C and Facilities Capital
Slide 7: Karnes Net Acreage Additions Since Inception
7 Karnes Net Acreage Additions Since Inception Magnolia has added ~7,500 net acres to its Karnes position, representing a 52% increase over original amount Achieving Key Objectives Through Steady Growth Production Growth (1) Q3 2018 Successor Period is July 31, 2018 through September 30, 2018. (1)
Slide 8: Peer Leading Margins and Credit Metrics
Peer Leading Margins and Credit Metrics Source: Company filings, S&P Capital IQ consensus projections as of 11/7/2019. Peers include CDEV, CPE, CRZO, JAG, MTDR, MUR, OAS, PDCE, PE, SM, WLL and WPX. Callon not pro forma for acquisition of Carrizo. PDCE not pro forma for acquisition of SRC Energy. Par
Slide 9: Cash Flow Priorities to Maximize Shareholder Returns
Cash Flow Priorities to Maximize Shareholder Returns 9 With a targeted goal of always being free cash flow positive, Magnolia intends to be a prudent steward of shareholder’s capital Return- focused Value Creation Debt Reduction Accretive Bolt-On Acquisitions Share Repurchases
Slide 10: Magnolia Oil & Gas – 3rd Quarter 2019 Highlights
Magnolia Oil & Gas – 3rd Quarter 2019 Highlights 10 • Grew total Company production nearly 10% sequentially to 71.3 Mboe/d (54% oil) ‒ Karnes production grew 12% sequentially due to new wells turned in-line • Oil realizations averaged 105% of WTI for the quarter • Total cash operating costs includin
Slide 11: Magnolia Oil & Gas – Q3 2019 Key Metrics
Magnolia Oil & Gas – Q3 2019 Key Metrics 11 Earnings and EPS (GAAP) (1) Total Production 71.3 Mboe/d (54% oil) ~10% Sequential Growth Adj. Net Income, Adj. EPS and Total Shares(3) (4) $16.2 Million Adjusted EPS $0.06 258.9 Million Shares Adjusted EBITDAX (3) $183.4 Million D&C Capex $88.4 Million (4
Slide 12: Q3 2019 Cash Flow Summary
97 173 6 4 10 98 164 $0 $50 $100 $150 $200 $250 $300 Cash 6/30/19 Cash Flow from Operations Working Capital Changes Other Common Stock Repurchases D&C and Facilities Capital Cash 9/30/19 Q3 2019 Cash Flow Summary 12 ($ In Millions) (1) Cash flow from operations before changes in working capital. (2)
Slide 13: Asset Overview
Asset Overview
Slide 14: Karnes County – Core Eagle Ford and Austin Chalk
Karnes County – Core Eagle Ford and Austin Chalk • World-class acreage footprint located in the core of the Eagle Ford, substantially de-risked ‒ 21,946 net acres, 65% operated, 95% HBP, 49.2 Mboe/d Q3 2019 production (69% oil, 84% liquids) ‒ EOG represented ~85% of non-operated activity in 2018 • S
Slide 15: Located in an Attractive Neighborhood
Located in an Attractive Neighborhood 15 (1) Source: RSEG Core position in Karnes County Oil Window adjacent to EOG and Marathon with $28 to $32/barrel breakevens(1) and typically less than 1-year new well paybacks Eagle Ford – Karnes Trough Area Magnolia BP EOG MRO COP Fluid Windows Oil Wet Gas Dry
Slide 16: Karnes County Results Show Superior Economics
Karnes County Results Show Superior Economics 16 Note: Magnolia type curves normalized to 5,000’ laterals. Projections based on flat $58 WTI and $2.75 Henry Hub pricing. (1) Source: RSEG, Delaware North Reeves Wolfcamp A curve. (2) Commodity percentage splits represent first 24 months of production.
Slide 17: Giddings Field – Redeveloping as an Emerging Play
Giddings Field – Redeveloping as an Emerging Play • Emerging, high-growth asset with extensive inventory potential and significant development flexibility ‒ ~430,000 net acres, ~98% HBP and ~87% operated, ~22 Mboe/d Q2 2019 production (20% oil, 47% liquids) • HBP nature of asset allows for systemati
Slide 18: Financial Overview
Financial Overview
Slide 19: Capital Structure and Liquidity Overview
$550 $400 2018 2019 2020 2021 2022 2023 2024 2025 2026 2Q19 Capital Structure and Liquidity Overview 19 Capital Structure Overview • Maintaining low financial leverage profile ‒ Net Debt / Total Book Capitalization of 7% ‒ Net Debt / Q3 annualized Adjusted EBITDAX of 0.3x • Liquidity as of 9/30/2019
Slide 20: Business Risks Adequately Managed
Business Risks Adequately Managed 20 Level of Risk Generally Acceptable to Magnolia Low Moderate Risk Factor Geologic/Exploratory Political Cost Risk Reinvestment Commodity Financial Fully Exposed
Slide 21: Summary Investment Highlights
Summary Investment Highlights 21 Multiple Levers of Growth • Steady organic growth through proven drilling program while remaining well within cash flow • Clean balance sheet and strong free cash flow enables Magnolia to pursue accretive acquisitions Strong Balance Sheet, Financial Flexibility & Con
Slide 22: Appendix
Appendix
Slide 23: Magnolia Oil & Gas – Operating Highlights
Magnolia Oil & Gas – Operating Highlights 23 For the Quarter Ended September 30, 2019 For the Quarter Ended June 30, 2019 Production: Oil (MBbls) 3,520 3,189 Natural Gas (MMcf) 10,763 10,057 NGLs (MBbls) 1,245 1,060 Total (Mboe) 6,559 5,925 Average Daily Production: Oil (Bbls/d) 38,261 35,044 Natura
Slide 24: Magnolia Oil & Gas – Margins
Magnolia Oil & Gas – Margins 24 (1) General & administrative expense excludes non-cash stock based compensation of $2.8 million and $3.1 million, or $0.43 and $0.52 per Boe, for the three months ended September 30, 2019 and June 30, 2019, respectively. (2) Adjusted Operating Margin and Total Cash Op
Slide 25: Reconciliation of Net Income to Adjusted EBITDAX
Reconciliation of Net Income to Adjusted EBITDAX 25 (1) Includes net income attributable to noncontrolling interest. (2) Transaction costs incurred related to the execution of our business combination with EnerVest, Ltd. and its affiliates and the Harvest acquisition, including legal fees, advisory
Slide 26: Adjusted Net Income Reconciliation
Adjusted Net Income Reconciliation 26 (1) Includes net income attributable to noncontrolling interest. (2) Represents corporate income taxes at an assumed effective tax rate of 22.6 percent and 21.0 percent for the three months ended September 30, 2019 and June 30, 2019, respectively, applied to inc
Slide 27: Adjusted Earnings Reconciliation
Adjusted Earnings Reconciliation 27 (1) Includes amounts attributable to Class A Common Stock. (in thousands) For the Quarter Ended September 30, 2019 Per Share Diluted EPS For the Quarter Ended June 30, 2019 Per Share Diluted EPS Net income attributable to Class A Common Stock $7,784 $0.05 $18,506
Slide 28: Magnolia Oil & Gas – Summary Balance Sheet
Magnolia Oil & Gas – Summary Balance Sheet 28 (in thousands) September 30, 2019 December 31, 2018 Cash $164,489 $135,758 Current assets 127,766 156,601 Property, plant and equipment, net 3,180,166 3,073,204 Other assets 60,712 67,960 Total assets $3,533,133 $3,433,523 Current liabilities $190,311 $1
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