What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-03 compared with 2021-05-05 · 152 added, 67 removed, 142 unchanged (61% of the section changed)

39 unchanged sentences

The Company’s ongoing plan is to spend within cash flow on drilling and completing wells while maintaining low leverage.

In the first quarter of 2021, Magnolia operated one rig in the Giddings area.

During the majority of the second quarter of 2021, Magnolia operated one rig in the Giddings area.

The Company added a second rig at the end of the second quarter which is currently drilling wells in the Giddings area.

The Company is well positioned to reduce or increase operations given the significant flexibility within its capital program, as its operated drilling rig is on a short-term contract and the Company has no long-term service obligations.

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In order to protect the health and safety of its workers, Magnolia and its contractors have implemented protocols to reduce the risk of an outbreak within the Company’s operations, and these protocols have not reduced production or efficiency in a significant manner.

Magnolia's board of directors is continuing to monitor the unfolding COVID-19 pandemic very closely.

Magnolia's board of directors is continuing to closely monitor the unfolding COVID-19 pandemic.

Magnolia has been able to maintain a consistent level of effectiveness, including maintaining day-to-day operations, financial reporting systems, and internal control over financial reporting.

Business Overview

As of March 31, 2021, Magnolia’s assets in South Texas included 42,970 gross (23,512 net) acres in the Karnes area, and 634,210 gross (436,585 net) acres in the Giddings area.

As of March 31, 2021, Magnolia held an interest in approximately 1,841 gross (1,174 net) wells, with total production of 62.3 thousand barrels of oil equivalent per day (“Mboe/d”) for the three months ended March 31, 2021.

In the first quarter of 2021, Magnolia operated one rig in the Giddings area.

Magnolia recognized net income attributable to Class A Common Stock of $63.2 million, or $0.37 per diluted common share, for the three months ended March 31, 2021.

Magnolia recognized net income of $91.5 million, which includes a noncontrolling interest of $28.2 million related to the Magnolia LLC Units (and corresponding Class B Common Stock) held by certain affiliates of EnerVest for the three months ended March 31, 2021.

As of June 30, 2021, Magnolia’s assets in South Texas included 42,972 gross (23,513 net) acres in the Karnes area, and 652,113 gross (452,496 net) acres in the Giddings area.

As of June 30, 2021, Magnolia held an interest in approximately 1,949 gross (1,237 net) wells, with total production of 64.9 thousand and 63.6 thousand barrels of oil equivalent per day (“Mboe/d”) for the three and six months ended June 30, 2021, respectively.

The Company primarily operated one rig in the Giddings area for the first six months of 2021 and added a second rig at the end of the second quarter.

Magnolia recognized net income attributable to Class A Common Stock of $84.4 million and $147.7 million, or $0.48 and $0.85 per diluted common share, for the three and six months ended June 30, 2021, respectively.

Magnolia recognized net income of $116.2 million and $207.7 million, which includes a noncontrolling interest of $31.7 million and $60.0 million related to the Magnolia LLC Units (and corresponding Class B Common Stock) held by certain affiliates of EnerVest for the three and six months ended June 30, 2021, respectively.

The Company’s board of directors has authorized a share repurchase program of up to 20.0 million shares.

The program does not require purchases to be made within a particular timeframe.

As of March 31, 2021, the Company had repurchased 7.4 million shares under the plan at an aggregate cost of $59.2 million.

On March 5, 2021, Magnolia LLC repurchased and subsequently canceled 5.0 million Magnolia LLC Units with an equal number of shares of corresponding Class B Common Stock for $50.8 million of cash consideration (the “Class B Common Stock Repurchase”).

In addition, EnerVest redeemed 14.2 million shares of Class B Common Stock for Class A Common Stock and subsequently sold the stock as part of the secondary offering completed on March 5, 2021.

The program does not require purchases to be made within a particular time frame.

As of June 30, 2021, the Company had repurchased 9.5 million shares under the plan at an aggregate cost of $83.3 million.

During the six months ended June 30, 2021 Magnolia LLC repurchased and subsequently canceled 10.0 million Magnolia LLC Units with an equal number of shares of corresponding Class B Common Stock for $122.5 million of cash consideration (the “Class B Common Stock Repurchases”).

During the same period, EnerVest redeemed 15.3 million Magnolia LLC Units (and a corresponding number of shares of Class B Common Stock) for an equivalent number of shares of Class A Common Stock and subsequently sold these shares to the public.

Magnolia did not receive any proceeds from the sale of shares of Class A Common Stock by EnerVest.

Magnolia funded the Class B Common Stock Repurchase with cash on hand.

As of March 31, 2021, Magnolia owned approximately 72.6% of the interest in Magnolia LLC and the noncontrolling interest was 27.4%.

Magnolia funded the Class B Common Stock Repurchases with cash on hand.

As of June 30, 2021, Magnolia owned approximately 74.3% of the interest in Magnolia LLC and the noncontrolling interest was 25.7%.

Results of Operations

Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020

Factors Affecting the Comparability of the Historical Financial Results

Magnolia’s historical financial condition and results of operations for the periods presented may not be comparable, either from period to period or going forward, as a result of the following factors:

• During the second quarter of 2021, the Company amended the term of the Services Agreement to end on June 30, 2021.

As part of the termination and transition of the Services Agreement, the Company incurred $11.2 million for the six months ended June 30, 2021, included in “General and administrative expenses” on the Company’s consolidated statements of operations.

• During the second quarter of 2021, the Company amended the Non-Compete (the “Second Non-Compete Amendment”), which modified the term of the Non-Compete to end on June 30, 2021, resulting in the Company accelerating the amortization of the intangible assets by approximately $5.9 million.

• The 2026 Senior Notes issued under the Indenture, dated as of July 31, 2018 (the “Indenture”), were amended on April 5, 2021.

This debt modification included approximately $1.1 million of one-time transaction fees which were expensed and $5.0 million in fees paid to holders of the 2026 Senior Notes, which were reflected as deferred financing costs reducing Long-term debt and will be amortized over the remaining term of the 2026 Senior Notes.

As a result of the factors listed above, the historical results of operations and period-to-period comparisons of these results and certain financial data may not be comparable or indicative of future results.

Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020

Oil, Natural Gas and NGL Sales Revenues.

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Three Months Ended

(In thousands, except per unit data) March 31, 2021 March 31, 2020

(In thousands, except per unit data) June 30, 2021 June 30, 2020

Oil (MBbls) 2,903 3,089

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NGLs (per barrel) 22.26 7.92

Oil revenues were 71% and 85% of the Company’s total revenues for the three months ended March 31, 2021 and 2020, respectively.

Oil production was 46% and 55% of total production volume for the three months ended March 31, 2021 and 2020, respectively.

Oil revenues for the three months ended March 31, 2021 were $8.3 million lower than the three months ended March 31, 2020.

A 24% decrease in oil production reduced revenues by $45.1 million compared to the same period in the prior year, while a 24% increase in average prices increased first quarter 2021 revenues by $36.8 million.

The decrease in oil production was the result of the Company bringing fewer wells online in the three months ended March 31, 2021.

Natural gas revenues were 17% and 9% of the Company's total revenues for the three months ended March 31, 2021 and 2020, respectively.

Natural gas production was 30% and 27% of total production volume for the three months ended March 31, 2021 and 2020, respectively.

Natural gas revenues for the three months ended March 31, 2021 were $18.6 million higher than the three months ended March 31, 2020.

A 111% increase in average prices increased first quarter 2021 revenues by $18.0 million compared to the same period in the prior year, while a 2% increase in natural gas production increased revenues by $0.6 million.

NGL revenues were 13% and 6% of the Company’s total revenues for the three months ended March 31, 2021 and 2020, respectively.

NGL production was 23% and 19% of total production volume for the three months ended March 31, 2021 and 2020, respectively.

NGL revenues for the three months ended March 31, 2021 were $16.0 million higher than the three months ended March 31, 2020.

A 123% increase in average prices increased first quarter 2021 revenues by $13.0 million compared to the same period in the prior year, while a 13% increase in NGL production increased revenues by $3.0 million.

Oil revenues were 75% and 73% of the Company’s total revenues for the three months ended June 30, 2021 and 2020, respectively.

Oil production was 49% and 53% of total production volume for the three months ended June 30, 2021 and 2020, respectively.

Oil revenues for the three months ended June 30, 2021 were $127.3 million higher than the three months ended June 30, 2020.

A 229% increase in average prices increased second quarter 2021 revenues by $139.4 million, while a 6% decrease in oil production reduced revenues by $12.1 million compared to the same period in the prior year.

Natural gas revenues were 13% and 16% of the Company’s total revenues for the three months ended June 30, 2021 and 2020, respectively.

Natural gas production was 28% of total production volume for each of the three months ended June 30, 2021 and 2020.

Natural gas revenues for the three months ended June 30, 2021 were $19.4 million higher than the three months ended June 30, 2020.

A 143% increase in average prices increased second quarter 2021 revenues by $18.8 million compared to the same period in the prior year, while a 2% increase in natural gas production increased revenues by $0.6 million.

NGL revenues were 12% and 11% of the Company’s total revenues for the three months ended June 30, 2021 and 2020, respectively.

NGL production was 23% and 19% of total production volume for the three months ended June 30, 2021 and 2020, respectively.

NGL revenues for the three months ended June 30, 2021 were $21.2 million higher than the three months ended June 30, 2020.

A 181% increase in average prices increased second quarter 2021 revenues by $16.1 million compared to the same period in the prior year, while a 20% increase in NGL production increased revenues by $5.1 million.

Operating Expenses and Other Income (Expense) .

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Three Months Ended

(In thousands, except per unit data) March 31, 2021 March 31, 2020

(In thousands, except per unit data) June 30, 2021 June 30, 2020

Operating Expenses:

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Exploration expenses 62 6,462

Impairment of oil and natural gas properties — 1,381,258

Asset retirement obligations accretion 1,405 1,464

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Loss on derivatives, net (2,004) —

Other expense, net (229) (472)

Other income, net 135 13

Total other expense, net $ (10,621) $ (6,632)

4 unchanged sentences

Exploration expense 0.01 1.11

Impairment of oil and natural gas properties — 222.00

Asset retirement obligations accretion 0.24 0.25

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Lease operating expenses are costs incurred in the operation of producing properties, including expenses for utilities, direct labor, water disposal, workover rigs, workover expenses, materials, and supplies.

Lease operating expenses for the three months ended March 31, 2021 were $4.8 million, or $0.42 per boe, lower compared to the corresponding 2020 period primarily due to a reduction of workover expenses associated with bringing fewer new wells online, resulting in lower production.

Lease operating expenses for the three months ended June 30, 2021 were $3.7 million, or $0.58 per boe, higher compared to the corresponding 2020 period, due to an increase in costs including workover activities and additional non-operated activities.

Gathering, transportation and processing costs are costs incurred to deliver oil, natural gas, and NGLs to the market.

These expenses can vary based on the volume of oil, natural gas, and NGLs produced as well as the cost of commodity processing.

gathering, transportation and processing costs for the three months ended March 31, 2021 were $0.8 million, or $0.28 per boe, higher than the three months ended March 31, 2020 primarily due to higher natural gas production and prices.

The gathering, transportation and processing costs for the three months ended June 30, 2021 were $2.2 million, or $0.36 per boe, higher than the three months ended June 30, 2020, primarily due to increased natural gas production and higher prices.

Taxes other than income include production and ad valorem taxes.

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Ad valorem taxes are based on the fair market value of the mineral interests or business assets.

Taxes other than income for the three months ended March 31, 2021 were $0.7 million, or $0.31 per boe, higher compared to the three months ended March 31, 2020 primarily due to an increase in natural gas and NGL revenues.

Taxes other than income for the three months ended June 30, 2021 were $8.3 million, or $1.39 per boe, higher compared to the three months ended June 30, 2020, primarily due to an increase in oil, natural gas, and NGL revenues.

Exploration expenses are geological and geophysical costs that include unproved property impairments, seismic surveying costs, costs of expired or abandoned leases, and delay rentals.

Exploration expenses for the three months ended March 31, 2021 were lower than the three months ended March 31, 2020 by $554.4 million, or $89.06 per boe, as a result of an impairment recorded for the quarter ended March 31, 2020 related to Magnolia’s unproved oil and natural gas properties due to the sharp decline in commodity prices primarily driven by the COVID-19 pandemic and oversupply by producers relating to oil price and production controls.

Exploration expenses for the three months ended June 30, 2021 were lower than the three months ended June 30, 2020 by $6.4 million, or $1.10 per boe, due to lower leasehold abandonment expenses related to the Company’s unproved natural gas properties.

Depreciation, depletion and amortization (“DD&A”) during the three months ended June 30, 2021 was $7.5 million, or $1.38 per boe, lower than the three months ended June 30, 2020, primarily as a result of shifting activity from the Karnes area to the Giddings area, which has a lower DD&A rate.

Amortization of intangible assets during the three months ended June 30, 2021 was $3.6 million, or $0.60 per boe, higher than the three months ended June 30, 2020, driven by the accelerated amortization of the intangible assets as a result of the termination of the Non-Compete.

General and administrative (“G&A”) expenses during the three months ended June 30, 2021 were $9.0 million, or $1.50 per boe, higher than the three months ended June 30, 2020, primarily driven by costs associated with the termination of the Services Agreement and increased corporate payroll expenses related to increased employee headcount.

Interest expense, net, during the three months ended June 30, 2021 was $1.5 million higher than the three months ended June 30, 2020, driven by third-party costs associated with the debt modification pursuant to the amendment of the Indenture in the second quarter of 2021.

Loss on derivatives, net, was $2.0 million related to the Company’s natural gas costless collar entered into during the third quarter of 2020.

There was no derivative activity in the corresponding 2020 period.

Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020

Oil, Natural Gas and NGL Sales Revenues.

The following table provides the components of Magnolia’s revenues for the periods indicated, as well as each period’s respective average prices and production volumes.

This table shows production on a boe basis in which natural gas is converted to an equivalent barrel of oil based on a ratio of six Mcf to one barrel.

This ratio may not be reflective of the current price ratio between the two products.

Six Months Ended

(In thousands, except per unit data) June 30, 2021 June 30, 2020

Oil (MBbls) 5,495 6,479

Natural gas (MMcf) 20,188 19,817

NGLs (MBbls) 2,654 2,276

Total (Mboe) 11,514 12,058

Average daily production:

Oil (Bbls/d) 30,361 35,600

Natural gas (Mcf/d) 111,536 108,882

NGLs (Bbls/d) 14,661 12,506

Total (boe/d) 63,611 66,253

Oil revenues $ 334,509 $ 215,476

Natural gas revenues 67,359 29,343

Natural gas liquids revenues 56,521 19,385

Total revenues $ 458,389 $ 264,204

Average Price:

Oil (per barrel) $ 60.87 $ 33.26

Natural gas (per Mcf) 3.34 1.48

NGLs (per barrel) 21.30 8.52

Oil revenues were 73% and 82% of the Company’s total revenues for the six months ended June 30, 2021 and 2020, respectively.

Oil production was 48% and 54% of total production volume for the six months ended June 30, 2021 and 2020, respectively.

Oil revenues for the six months ended June 30, 2021 were $119.0 million higher than the six months ended June 30,

An 83% increase in average prices increased second quarter 2021 revenues by $178.9 million, while a 15% decrease in oil production reduced revenues by $59.9 million compared to the same period in the prior year.

Natural gas revenues were 15% and 11% of the Company’s total revenues for the six months ended June 30, 2021 and 2020, respectively.

Natural gas production was 29% and 27% of total production volume for the six months ended June 30, 2021 and 2020, respectively.

Natural gas revenues for the six months ended June 30, 2021 were $38.0 million higher than the six months ended June 30, 2020.

A 125% increase in average prices increased second quarter 2021 revenues by $36.8 million compared to the same period in the prior year, while a 2% increase in natural gas production increased revenues by $1.2 million.

NGL revenues were 12% and 7% of the Company’s total revenues for the six months ended June 30, 2021 and 2020, respectively.

NGL production was 23% and 19% of total production volume for the six months ended June 30, 2021 and 2020, respectively.

NGL revenues for the six months ended June 30, 2021 were $37.1 million higher than the six months ended June 30, 2020.

A 150% increase in average prices increased second quarter 2021 revenues by $29.1 million compared to the same period in the prior year, while a 17% increase in NGL production increased revenues by $8.0 million.

Operating Expenses and Other Income (Expense) .

The following table summarizes the Company’s operating expenses and other income (expense) for the periods indicated.

Six Months Ended

(In thousands, except per unit data) June 30, 2021 June 30, 2020

Operating Expenses:

Lease operating expenses $ 41,363 $ 42,473

Gathering, transportation and processing 17,762 14,807

Taxes other than income 24,574 15,543

Exploration expenses 2,124 562,888

Impairment of oil and natural gas properties — 1,381,258

Asset retirement obligations accretion 2,736 2,902

Depreciation, depletion and amortization 86,275 193,542

Amortization of intangible assets 9,346 7,253

General and administrative expenses 45,122 33,809

Total operating expenses $ 229,302 $ 2,254,475

Other Income (Expense):

Income from equity method investee $ — $ 1,052

Interest expense, net (16,046) (14,012)

Loss on derivatives, net (2,486) —

Other expense, net (94) (460)

Total other expense, net $ (18,626) $ (13,420)

Average Operating Costs per boe:

Lease operating expenses $ 3.59 $ 3.52

Gathering, transportation and processing 1.54 1.23

Taxes other than income 2.13 1.29

Exploration expense 0.18 46.68

Impairment of oil and natural gas properties — 114.55

Asset retirement obligations accretion 0.24 0.24

Depreciation, depletion and amortization 7.49 16.05

Amortization of intangible assets 0.81 0.60

General and administrative expenses 3.92 2.80

Lease operating expenses for the six months ended June 30, 2021 were $1.1 million lower than the six months ended June 30, 2020, and $0.07 per boe higher, primarily due to lower production.

Gathering, transportation and processing costs for the six months ended June 30, 2021 were $3.0 million, or $0.31 per boe, higher than the six months ended June 30, 2020, primarily due to increased natural gas production and higher prices.

Taxes other than income for the six months ended June 30, 2021 were $9.0 million, or $0.84 per boe, higher compared to the six months ended June 30, 2020, primarily due to an increase in oil, natural gas, and NGL revenues.

Exploration expenses for the six months ended June 30, 2021 were lower than the six months ended June 30, 2020 by $560.8 million, or $46.50 per boe, as a result of an impairment recorded for the quarter ended March 31, 2020 related to Magnolia’s unproved oil and natural gas properties due to the sharp decline in commodity prices.

For more information, please see Note 6—Fair Value Measurements in the Company’s Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

For the three months ended March 31, 2021, the Company did not recognize any impairments.

For the three months ended March 31, 2020, the Company recognized $1.4 billion of impairment included in “Impairment of oil and natural gas properties” in the consolidated statement of operations related to its proved oil and natural gas properties.

For the six months ended June 30, 2021, the Company did not recognize any impairments.

For the six months ended June 30, 2020, the Company recognized $1.4 billion of impairment included in “Impairment of oil and natural gas properties” in the consolidated statements of operations related to its proved oil and natural gas properties.

The impairment was driven by the sharp decline in commodity prices.

For more information, please see Note 6—Fair Value Measurements in the Company’s Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Depreciation, depletion and amortization (“DD&A”) during the three months ended March 31, 2021 was $99.7 million, or $15.27 per boe, lower than the three months ended March 31, 2020, primarily as a result of lower oil and natural gas property balances associated with proved property impairments recorded in the first quarter of 2020.

General and administrative (“G&A”) expenses during the three months ended March 31, 2021 were $2.3 million, or $0.72 per boe, higher than the three months ended March 31, 2020 primarily driven by costs associated with the termination of the Services Agreement and increased corporate payroll expenses related to increased employee headcount.

Loss on derivatives, net was a $0.5 million unrealized loss related to the Company’s natural gas costless collar entered into during the third quarter of 2020.

DD&A during the six months ended June 30, 2021 was $107.3 million, or $8.56 per boe, lower than the six months ended June 30, 2020, primarily as a result of lower oil and natural gas property balances associated with proved property impairments recorded in the first quarter of 2020.

Amortization of intangible assets during the six months ended June 30, 2021 was $2.1 million, or $0.21 per boe, higher than the six months ended June 30, 2020, driven by the accelerated amortization of the intangible assets as a result of the termination of the Non-Compete.

G&A expenses during the six months ended June 30, 2021 were $11.3 million, or $1.12 per boe, higher than the six months ended June 30, 2020, primarily driven by costs associated with the termination of the Services Agreement and increased corporate payroll expenses related to increased employee headcount.

Interest expense, net, during the six months ended June 30, 2021 was $2.0 million higher than the six months ended June 30, 2020, driven by third-party costs associated with the debt modification pursuant to the amendment of the Indenture in the second quarter of 2021.

Loss on derivatives, net, was $2.5 million related to the Company’s natural gas costless collar entered into during the third quarter of 2020.

There was no derivative activity in the corresponding 2020 period.

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The Company anticipates its current cash balance, cash flows from operations, and its available sources of liquidity to be sufficient to meet the Company’s cash requirements.

As of March 31, 2021, the Company had $400.0 million of principal debt related to the 2026 Senior Notes outstanding and no outstanding borrowings related to the RBL Facility.

As of March 31, 2021, the Company had $628.2 million of liquidity comprised of the $450.0 million of borrowing base capacity of the RBL Facility, which was reaffirmed on April 12, 2021, and $178.2 million of cash and cash equivalents.

As of June 30, 2021, the Company had $400.0 million of principal debt related to the 2026 Senior Notes outstanding and no outstanding borrowings related to the RBL Facility.

As of June 30, 2021, the Company had $640.3 million of liquidity comprised of the $450.0 million of borrowing base capacity of the RBL Facility, which was reaffirmed on April 12, 2021, and $190.3 million of cash and cash equivalents.

Cash and Cash Equivalents

At March 31, 2021, Magnolia had $178.2 million of cash and cash equivalents.

At June 30, 2021, Magnolia had $190.3 million of cash and cash equivalents.

The Company’s cash and cash equivalents are maintained with various financial institutions in the United States.

Deposits with these institutions may exceed the amount of insurance provided on such deposits.

However, the Company regularly monitors the financial stability of its financial institutions and believes that the Company is not exposed to any significant default risk.

Deposits with these institutions may exceed the amount of

insurance provided on such deposits.

However, the Company regularly monitors the financial stability of such financial institutions and believes that the Company is not exposed to any significant default risk.

Sources and Uses of Cash and Cash Equivalents

The following table presents the sources and uses of the Company’s cash and cash equivalents for the periods presented:

Three Months Ended

(In thousands) March 31, 2021 March 31, 2020

Six Months Ended

(In thousands) June 30, 2021 June 30, 2020

Sources of cash and cash equivalents

Net cash provided by operating activities $ 306,031 $ 165,842

$ 118,153 $ 134,878

Uses of cash and cash equivalents

Acquisitions, other $ (558) $ (69,390)

Acquisitions $ (9,409) $ (69,782)

Additions to oil and natural gas properties (94,356) (129,651)

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The factors that determine operating cash flows are largely the same as those that affect net earnings or net losses, with the exception of certain non-cash expenses such as DD&A, the non-cash portion of exploration expense, impairment of oil and natural gas properties, asset retirement obligations accretion, and deferred income tax expense.

Net cash provided by operating activities totaled $118.2 million and $134.9 million for the three months ended March 31, 2021 and 2020, respectively.

During the three months ended March 31, 2021, cash provided by operating activities was negatively impacted by lower oil production, partially offset by positive impacts from increased oil and natural gas prices, and by a decrease in expenses associated with bringing fewer new wells online.

Net cash provided by operating activities totaled $306.0 million and $165.8 million for the six months ended June 30, 2021 and 2020, respectively.

During the six months ended June 30, 2021, cash provided by operating activities was positively impacted by increased oil, natural gas, and NGL prices, partially offset by an increase in accounts receivable, additional costs associated with the termination of the Services Agreement and higher production tax payments.

Uses of Cash and Cash Equivalents

During the three months ended March 31, 2020, the Company completed various leasehold and property acquisitions, primarily comprised of a $69.7 million acquisition of certain non-operated oil and natural gas assets located in Karnes and DeWitt Counties, Texas.

There were no such acquisitions during the three months ended March 31, 2021.

During the six months ended June 30, 2020, the Company completed various leasehold and property acquisitions, primarily comprised of a $69.7 million acquisition of certain non-operated oil and natural gas assets located in Karnes and DeWitt Counties, Texas.

The Company did not make any major acquisitions during the six months ended June 30, 2021.

Additions to Oil and Natural Gas Properties

The following table sets forth the Company’s capital expenditures for the three months ended March 31, 2021 and 2020:

Three Months Ended

(In thousands) March 31, 2021 March 31, 2020

The following table sets forth the Company’s capital expenditures for the three and six months ended June 30, 2021 and 2020:

Three Months Ended Six Months Ended

(In thousands) June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Drilling and completion $ 53,808 $ 27,272 $ 92,658 $ 127,883

1 unchanged sentence

Total capital expenditures $ 54,190 $ 28,260 $ 94,356 $ 129,651

As of March 31, 2021, Magnolia was running a one-rig program for the Giddings Assets.

The activity during the three months ended March 31, 2021 was largely driven by the number of operated and non-operated drilling rigs.

The number of operated

drilling rigs is largely dependent on commodity prices and the Company’s strategy of maintaining spending to accommodate the Company’s business model.

During the six months ended June 30, 2021, Magnolia was running primarily a one-rig program for the Giddings Assets.

The activity during this period was largely driven by the number of operated and non-operated drilling rigs.

The number of operated drilling rigs is largely dependent on commodity prices and the Company’s strategy of maintaining spending to accommodate the Company’s business model.

The Company added a second rig at the end of the second quarter which is currently drilling wells in the Giddings area.

Capital Requirements

The Company’s board of directors has authorized a share repurchase program of up to 20.0 million shares of Class A Common Stock.

The program does not require purchases to be made within a particular timeframe and whether the Company undertakes these additional repurchases is ultimately subject to numerous considerations, market conditions, and other factors.

During the three months ended March 31, 2021 and 2020, the Company repurchased 2.0 million and 1.0 million shares for a total cost of approximately $20.3 million and $6.5 million, respectively.

Magnolia funded the Class B Common Stock Repurchase with cash on hand.

As of March 31, 2021, Magnolia owned approximately 72.6% of the interest in Magnolia LLC and the noncontrolling interest was 27.4%.

In January 2021, the Company amended the Non-Compete agreement such that, rather than delivering an aggregate of 4.0 million shares of Class A Common Stock upon the two and one-half year and the four year anniversaries of July 31, 2018 (the “Closing Date”), the Company would deliver (i) the cash value of approximately 2.0 million shares of Class A Common Stock and approximately 0.4 million shares of Class A Common Stock on the two and one-half year anniversary of the Closing Date and (ii) an aggregate of 1.6 million shares of Class A Common Stock on the four year anniversary of the Closing Date, in each case subject to the terms and conditions of the Non-Compete.

The program does not require purchases to be made within a particular time frame and whether the Company undertakes these additional repurchases is ultimately subject to numerous considerations, market conditions, and other factors.

During the six months ended June 30, 2021 and 2020, the Company repurchased 4.0 million and 1.0 million shares for a total cost of approximately $44.3 million and $6.5 million, respectively.

During the six months ended June 30, 2021, Magnolia LLC repurchased and subsequently canceled 10.0 million Magnolia LLC Units with an equal number of shares of corresponding Class B Common Stock for $122.5 million of cash consideration (the “Class B Common Stock Repurchases”).

As of June 30, 2021, Magnolia owned approximately 74.3% of the interest in Magnolia LLC and the noncontrolling interest was 25.7%.

In January 2021, the Company amended the Non-Compete such that, rather than delivering an aggregate of 4.0 million shares of Class A Common Stock upon the two and one-half year and the four year anniversaries of July 31, 2018 (the “Closing Date”), the Company would deliver (i) the cash value of approximately 2.0 million shares of Class A Common Stock and approximately 0.4 million shares of Class A Common Stock on the two and one-half year anniversary of the Closing Date and (ii) an aggregate of 1.6 million shares of Class A Common Stock on the four year anniversary of the Closing Date, in each case subject to the terms and conditions of the Non-Compete.

On February 1, 2021, as consideration for compliance with the Non-Compete, the Company paid $17.2 million in cash and issued 0.4 million shares of Class A Common Stock.

As part of the Second Non-Compete Amendment, the Company paid $24.9 million in cash in lieu of delivering the remaining 1.6 million shares of Class A Common Stock.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis