Magnolia Oil & Gas Provides Update on Current Operations
March 24 2020 - 8:11AM
Business Wire
Magnolia Oil & Gas Corporation (“Magnolia” or the “Company”)
(NYSE: MGY) today provided an update to its operations and first
quarter guidance in response to recent product price and market
volatility.
Operational Update
Magnolia’s business model prioritizes free cash flow, financial
stability, and prudent capital allocation, and is designed to
withstand challenging environments such as the one we are currently
experiencing. In line with the guidance provided in Magnolia’s
fourth quarter operating results, the Company’s ongoing plan is to
spend approximately 60 percent of its adjusted EBITDAX on drilling
and completing wells, providing consistent free cash flow
generation, while maintaining low leverage and moderate production
growth over time. Magnolia expects its capital outlays to be
approximately half the levels of last year, and the Company expects
to generate free cash flow during 2020 which can be used to further
improve the business as opportunities emerge.
In response to the sharp decline in product prices, Magnolia
plans to adjust its drilling and completion activity this year so
that its capital spending is in line with its business model. As a
result, the Company plans to drop its one operated rig in the
Karnes area at the end of the first quarter. The Company is well
positioned to make this adjustment given the significant
flexibility within its capital program, as both of its operated
drilling rigs are on short-term contracts and the Company has no
long-term service obligations. Moreover, Magnolia is not required
to drill to maintain any of its credit metrics nor does it have any
contractual drilling obligations, and nearly all the Company’s
acreage is held by production. If the current environment persists,
Magnolia expects to cease its remaining operated activity across
its asset base.
Updated Guidance
Magnolia’s first quarter production is expected to be at least
66 Mboe/d, above its earlier guidance, with oil production
consisting of at least 53 percent of total volumes. While the
Company’s capital spending will be heavier during the first
quarter, Magnolia expects to generate free cash during the period.
Spending is expected to fall sharply during the remainder of this
year to accommodate the Company’s business model. Magnolia’s
non-operated program remained very active during the first quarter
and in line with expectations. While some non-op well activity
could be curtailed in the existing environment, Magnolia expects
that its participation in non-op activity will continue to the
extent these programs are supported by strong economics. The
Company is currently working with many of its vendors and suppliers
to reduce the cost of their services in order to improve its
margins.
A Message from Steve Chazen, President, Chief Executive
Officer and Chairman
It was announced today that Steve Chazen, President, CEO and
Chairman of Magnolia, has been elected to Occidental Petroleum’s
Board of Directors as Chairman. “As I rejoin the Oxy Board, I hope
to use my experience to help guide its management though this
challenging environment. My objective is to administer steps to
preserve as many non-executive jobs as possible, while overseeing
actions that help enhance Oxy’s stock market value. Under no
circumstances, will I become an employee or executive officer of
Occidental. My full-time efforts have and will continue to be
focused on helping Magnolia navigate the current downturn and
position the Company to emerge from a position of strength once the
environment improves.”
Chazen continued: “Consistent with our strategy, we will
continue to maintain a low levered balance sheet and have no debt
maturities prior to 2026. We do not expect to incur any additional
bonded indebtedness or draw on our revolver. We expect significant
opportunities to expand our business will appear later this year
once market conditions clarify. As always, we will ensure that
anything done is accretive to our business and is clearly positive
for our shareholders. We will continue to manage our business
prudently as conditions evolve, and I remain confident that our
strategy and business model provide us with the flexibility to
respond effectively. I am highly aligned with our shareholders, as
I own more than 6.8 million Magnolia shares outright.”
About Magnolia Oil & Gas
Magnolia (MGY) is a publicly traded oil and gas exploration and
production company with operations primarily in South Texas in the
core of the Eagle Ford Shale and Austin Chalk formations. Magnolia
focuses on generating value for shareholders through steady
production growth, strong pre-tax margins, and free cash flow. For
more information, visit www.magnoliaoilgas.com.
Cautionary Note Regarding Forward-Looking Statements
The information in this press release includes forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. All statements, other than statements of
present or historical fact included in this press release,
regarding Magnolia’s strategy, future operations, financial
position, estimated revenues, and losses, projected costs,
prospects, plans and objectives of management are forward-looking
statements. When used in this press release, the words could,
should, will, may, believe, anticipate, intend, estimate, expect,
project, the negative of such terms and other similar expressions
are intended to identify forward-looking statements, although not
all forward-looking statements contain such identifying words.
These forward-looking statements are based on management’s current
expectations and assumptions about future events and are based on
currently available information as to the outcome and timing of
future events. Except as otherwise required by applicable law,
Magnolia disclaims any duty to update any forward-looking
statements, all of which are expressly qualified by the statements
in this section, to reflect events or circumstances after the date
of this press release. Magnolia cautions you that these
forward-looking statements are subject to all of the risks and
uncertainties, most of which are difficult to predict and many of
which are beyond the control of Magnolia, incident to the
development, production, gathering and sale of oil, natural gas and
natural gas liquids. In addition, Magnolia cautions you that the
forward-looking statements contained in this press release are
subject to the following factors: (i) the outcome of any legal
proceedings that may be instituted against Magnolia; (ii)
Magnolia’s ability to realize the anticipated benefits of its
business combination, which may be affected by, among other things,
competition and the ability of Magnolia to grow and manage growth
profitably; (iii) changes in applicable laws or regulations; and
(iv) the possibility that Magnolia may be adversely affected by
other economic, business, and/or competitive factors. Should one or
more of the risks or uncertainties described in this press release
occur, or should underlying assumptions prove incorrect, actual
results and plans could differ materially from those expressed in
any forward-looking statements. Additional information concerning
these and other factors that may impact the operations and
projections discussed herein can be found in Magnolia’s filings
with the SEC, including its Annual Report on Form 10-K for the
fiscal year ended December 31, 2019. Magnolia’s SEC filings are
available publicly on the SEC’s website at www.sec.gov.
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Investors Brian Corales (713) 842-9036 bcorales@mgyoil.com
Media Art Pike (713) 842-9057 apike@mgyoil.com
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