What changed in this filing

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Item 1. Financial Statements

2022-05-10 compared with 2021-11-02 · 142 added, 236 removed, 328 unchanged (54% of the section changed)

3 unchanged sentences

(In thousands)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

ASSETS (Unaudited) (Audited)

13 unchanged sentences

Deferred financing costs, net 7,017 3,701

Intangible assets, net — 9,346

Other long-term assets 8,854 9,036

27 unchanged sentences

(In thousands, except per share data)

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Three Months Ended

March 31, 2022 March 31, 2021

Oil revenues $ 262,667 $ 146,958

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Taxes other than income 20,882 10,762

Exploration expense 317 701 2,440 563,589

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

Exploration expenses 5,538 2,062

Asset retirement obligations accretion 789 1,331

3 unchanged sentences

Total operating expenses 141,969 109,211

OPERATING INCOME (LOSS) 171,493 21,941 400,580 ( 1,968,331 )

OPERATING INCOME 235,870 99,896

OTHER INCOME (EXPENSE)

Income from equity method investee — 1,007 — 2,059

Interest expense, net ( 9,357 ) ( 7,294 )

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Total other expense, net ( 9,150 ) ( 8,005 )

INCOME (LOSS) BEFORE INCOME TAXES 163,538 13,356 373,999 ( 1,990,335 )

Income tax expense (benefit) 3,631 ( 339 ) 6,428 ( 79,340 )

NET INCOME (LOSS) 159,907 13,695 367,571 ( 1,910,995 )

Net income (loss) attributable to noncontrolling interest 40,543 4,548 100,518 ( 674,860 )

NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON STOCK $ 119,364 $ 9,147 $ 267,053 $ ( 1,236,135 )

NET INCOME (LOSS) PER SHARE OF CLASS A COMMON STOCK

INCOME BEFORE INCOME TAXES 226,720 91,891

Income tax expense 18,100 399

NET INCOME 208,620 91,492

Net income attributable to noncontrolling interest 42,581 28,248

NET INCOME ATTRIBUTABLE TO CLASS A COMMON STOCK $ 166,039 $ 63,244

NET INCOME PER SHARE OF CLASS A COMMON STOCK

Basic $ 0.90 $ 0.38

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Balance, December 31, 2020 168,755 $ 17 85,790 $ 9 $ 1,712,544 5,475 $ ( 38,958 ) $ ( 1,125,450 ) $ 548,162 $ 291,260 $ 839,422

Stock based compensation expense — — — — 1,902 — — — 1,902 977 2,879

Stock based compensation expense, net of forfeitures — — — — 1,835 — — — 1,835 870 2,705

Changes in ownership interest adjustment — — — — 28,924 — — — 28,924 ( 28,924 ) —

1 unchanged sentence

Class A Common Stock repurchases — — — — — 1,973 ( 20,281 ) — ( 20,281 ) — ( 20,281 )

Distributions to noncontrolling interest owners — — — — — — — — — ( 284 ) ( 284 )

Net loss — — — — — — — ( 1,227,010 ) ( 1,227,010 ) ( 668,289 ) ( 1,895,299 )

Balance, March 31, 2020 168,473 $ 17 85,790 $ 9 $ 1,703,996 2,000 $ ( 16,760 ) $ ( 1,144,070 ) $ 543,192 $ 285,698 $ 828,890

Stock based compensation expense — — — — 2,023 — — — 2,023 1,042 3,065

Changes in ownership interest adjustment — — — — 124 — — — 124 ( 124 ) —

Common stock issued related to stock based compensation and other, net 114 — — — ( 22 ) — — — ( 22 ) ( 11 ) ( 33 )

Distributions to noncontrolling interest owners — — — — — — — — — ( 207 ) ( 207 )

Net loss — — — — — — — ( 18,272 ) ( 18,272 ) ( 11,119 ) ( 29,391 )

Balance, June 30, 2020 168,587 $ 17 85,790 $ 9 $ 1,706,121 2,000 $ ( 16,760 ) $ ( 1,162,342 ) $ 527,045 $ 275,279 $ 802,324

Stock based compensation expense — — — — 1,931 — — — 1,931 996 2,927

Changes in ownership interest adjustment — — — — 1,110 — — — 1,110 ( 1,110 ) —

Common stock issued related to stock based compensation and other, net 89 — — — ( 119 ) — — — ( 119 ) ( 61 ) ( 180 )

Class A Common Stock repurchases — — — — — 1,100 ( 6,480 ) — ( 6,480 ) — ( 6,480 )

Distributions to noncontrolling interest owners — — — — — — — — — ( 105 ) ( 105 )

Net income — — — — — — — 9,147 9,147 4,548 13,695

Balance, September 30, 2020 168,676 $ 17 85,790 $ 9 $ 1,709,043 3,100 $ ( 23,240 ) $ ( 1,153,195 ) $ 532,634 $ 279,547 $ 812,181

Magnolia Oil & Gas Corporation

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

(In thousands)

Common Stock Class B

Common Stock Additional Paid In Capital Treasury Stock Accumulated Deficit Total Stockholders’ Equity Noncontrolling Interest Total

Shares Value Shares Value Shares Value

Balance, December 31, 2020 168,755 $ 17 85,790 $ 9 $ 1,712,544 5,475 $ ( 38,958 ) $ ( 1,125,450 ) $ 548,162 $ 291,260 $ 839,422

Stock based compensation expense — — — — 1,835 — — — 1,835 870 2,705

Changes in ownership interest adjustment — — — — 28,924 — — — 28,924 ( 28,924 ) —

Common stock issued related to stock based compensation and other, net 244 — — — ( 839 ) — — — ( 839 ) ( 399 ) ( 1,238 )

Class A Common Stock repurchases — — — — — 1,973 ( 20,281 ) — ( 20,281 ) — ( 20,281 )

Class B Common Stock purchase and cancellation — — ( 5,000 ) ( 1 ) 1 — — — — ( 50,781 ) ( 50,781 )

Class B Common Stock purchases and cancellations — — ( 5,000 ) ( 1 ) 1 — — — — ( 50,781 ) ( 50,781 )

Non-compete settlement 375 — — — ( 11,231 ) — — — ( 11,231 ) ( 5,921 ) ( 17,152 )

3 unchanged sentences

Balance, March 31, 2021 183,540 $ 18 66,624 $ 7 $ 1,731,234 7,448 $ ( 59,239 ) $ ( 1,062,206 ) $ 609,814 $ 234,198 $ 844,012

Stock based compensation expense — — — — 2,577 — — — 2,577 951 3,528

Changes in ownership interest adjustment — — — — ( 30,662 ) — — — ( 30,662 ) 30,662 —

Common stock issued related to stock based compensation and other, net 160 — — — ( 44 ) — — — ( 44 ) ( 17 ) ( 61 )

Class A Common Stock repurchases — — — — — 2,025 ( 24,047 ) — ( 24,047 ) — ( 24,047 )

Class B Common Stock purchase and cancellation — — ( 5,000 ) ( 1 ) 1 — — — — ( 71,750 ) ( 71,750 )

Non-compete settlement — — — — ( 18,527 ) — — — ( 18,527 ) ( 6,395 ) ( 24,922 )

Conversion of Class B Common Stock to Class A Common Stock 1,100 — ( 1,100 ) — — — — — — — —

Distributions to noncontrolling interest owners — — — — — — — — — ( 276 ) ( 276 )

Net income — — — — — — — 84,445 84,445 31,727 116,172

Balance, June 30, 2021 184,800 $ 18 60,524 $ 6 $ 1,684,579 9,473 $ ( 83,286 ) $ ( 977,761 ) $ 623,556 $ 219,100 $ 842,656

Magnolia Oil & Gas Corporation

4 unchanged sentences

Shares Value Shares Value Shares Value

Balance, June 30, 2021 184,800 $ 18 60,524 $ 6 $ 1,684,579 9,473 $ ( 83,286 ) $ ( 977,761 ) $ 623,556 $ 219,100 $ 842,656

Stock based compensation expense — — — — 2,180 — — — 2,180 730 2,910

Balance, December 31, 2021 193,437 $ 19 49,293 $ 5 $ 1,689,500 14,168 $ ( 164,599 ) $ ( 708,168 ) $ 816,757 $ 228,492 $ 1,045,249

Stock based compensation expense, net of forfeitures — — — — 2,360 — — — 2,360 525 2,885

Changes in ownership interest adjustment — — — — ( 595 ) — — — ( 595 ) 595 —

3 unchanged sentences

Conversion of Class B Common Stock to Class A Common Stock 9,749 1 ( 9,749 ) ( 1 ) — — — — — — —

Distributions to noncontrolling interest owners — — — — — — — — — ( 11,637 ) ( 11,637 )

Dividends declared ($ 0.20 per share)

— — — — ( 37,283 ) — — — ( 37,283 ) — ( 37,283 )

Distributions to noncontrolling interest owners — — — — — — — — — ( 5,276 ) ( 5,276 )

Net income — — — — — — — 166,039 166,039 42,581 208,620

Balance, September 30, 2021 189,627 $ 19 52,916 $ 5 $ 1,665,805 11,468 $ ( 112,796 ) $ ( 858,397 ) $ 694,636 $ 210,881 $ 905,517

Balance, March 31, 2022 203,762 $ 20 35,594 $ 4 $ 1,649,111 16,218 $ ( 209,418 ) $ ( 542,129 ) $ 897,588 $ 174,780 $ 1,072,368

The accompanying notes are an integral part to these consolidated financial statements.

2 unchanged sentences

( In thousands)

Nine Months Ended

September 30, 2021 September 30, 2020

Three Months Ended

March 31, 2022 March 31, 2021

CASH FLOWS FROM OPERATING ACTIVITIES

NET INCOME (LOSS) $ 367,571 $ ( 1,910,995 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

NET INCOME $ 208,620 $ 91,492

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, depletion and amortization 53,106 42,944

Amortization of intangible assets — 2,113

Exploration expense, non-cash — 561,629

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

Asset retirement obligations accretion 789 1,331

1 unchanged sentence

Unrealized loss on derivatives, net — 482

Deferred taxes — ( 77,834 )

Stock based compensation 2,885 2,705

27 unchanged sentences

Supplemental cash items:

Cash paid (received) for income taxes $ ( 1,128 ) $ ( 724 )

Cash paid for income taxes $ 13,000 $ —

Cash paid for interest 12,225 12,441

14 unchanged sentences

Accordingly, certain disclosures normally included in an Annual Report on Form 10-K have been omitted.

The consolidated financial statements and related notes included in this Quarterly Report should be read in conjunction with the Company’s consolidated and combined financial statements and related notes included in the Company’s Annual Report on Form 10-K for the period ended December 31, 2020 (the “2020 Form 10-K”).

Except as disclosed herein, there have been no material changes to the information disclosed in the notes to the consolidated and combined financial statements included in the Company’s 2020 Form 10-K.

The consolidated financial statements and related notes included in this Quarterly Report should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the period ended December 31, 2021 (the “2021 Form 10-K”).

Except as disclosed herein, there have been no material changes to the information disclosed in the notes to the consolidated financial statements included in the Company’s 2021 Form 10-K.

In the opinion of management, all normal, recurring adjustments and accruals considered necessary to present fairly, in all material respects, the Company’s interim financial results have been included.

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Summary of Significant Accounting Policies

As of September 30, 2021, the Company’s significant accounting policies are consistent with those discussed in Note 2 — Summary of Significant Accounting Policies of its consolidated and combined financial statements contained in the Company’s 2020 Form 10-K.

Recent Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update No.

2019-12, Income Taxes (Topic 740):

“Simplifying the Accounting for Income Taxes,” which reduces the complexity of accounting for income taxes by removing certain exceptions to the general principles and also simplifying areas such as separate entity financial statements and interim recognition of enactment of tax laws or rate changes.

This standard is effective for interim and annual periods beginning after December 15, 2020 and shall be applied on either a prospective basis, a retrospective basis for all periods presented, or a modified retrospective basis through a cumulative-effect adjustment to retained earnings depending on which aspects of the new standard are applicable to an entity.

The Company adopted this standard on a prospective basis on January 1, 2021.

The adoption of this guidance did not have any material impact on the Company’s financial position, cash flows, or results of operations.

As of March 31, 2022, the Company’s significant accounting policies are consistent with those discussed in Note 1—Organization and Summary of Significant Accounting Policies of its consolidated financial statements contained in the Company’s 2021 Form 10-K.

Revenue Recognition

Magnolia’s revenues include the sale of crude oil, natural gas, and NGLs.

Oil, natural gas, and NGL sales are recognized as revenue when production is sold to a customer in fulfillment of performance obligations under the terms of agreed contracts.

Performance obligations are primarily comprised of delivery of oil, natural gas, or NGLs at a delivery point, as negotiated and reflected within each contract.

Each barrel of oil, million Btu of natural gas, gallon of NGLs, or other unit of measure is separately identifiable and represents a distinct performance obligation to which the transaction price is allocated.

The Company’s oil production is primarily sold under market-sensitive contracts that are typically priced at a differential to the New York Mercantile Exchange (“NYMEX”) price or at purchaser-posted prices for the producing area.

For oil contracts, the Company generally records sales based on the net amount received.

For natural gas contracts, the Company generally records wet gas sales (which consists of natural gas and NGLs based on end products after processing) at the wellhead or inlet of the gas processing plant (i.e., the point of control transfer) as revenues net of gathering, transportation and processing expenses if the processor is the customer and there is no redelivery of commodities to the Company at the tailgate of the plant.

Conversely, the Company generally records residual natural gas and NGL sales at the tailgate of the plant (i.e., the point of control transfer) on a gross basis along with the associated gathering, transportation and processing expenses if the processor is a service provider and there is redelivery of one or several commodities to the Company at the tailgate of the plant.

The facts and circumstances of an arrangement are considered and judgment is often required in making this determination.

For processing contracts that require noncash consideration in exchange for processing services, the Company recognizes revenue and an equal gathering, transportation and processing expense for commodities transferred to the service provider.

Customers are invoiced once the Company’s performance obligations have been satisfied.

Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 days.

There are no judgments that significantly affect the amount or timing of revenue from contracts with customers.

Additionally, the Company’s product sales contracts do not give rise to material contract assets or contract liabilities.

The Company’s receivables consist mainly of trade receivables from commodity sales and joint interest billings due from owners on properties the Company operates.

Receivables from contracts with customers totaled $ 114.8 million as of September 30, 2021 and $ 72.0 million as of December 31, 2020.

The Company has concluded that disaggregating revenue by product type appropriately depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors and has reflected this disaggregation of revenue on the Company’s consolidated statements of operations for all periods presented.

Performance obligations are satisfied at a point in time once control of the product has been transferred to the customer.

The Company considers a variety of facts and circumstances in assessing the point of control transfer, including, but not limited to:

whether the purchaser can direct the use of the hydrocarbons, the transfer of significant risks and rewards, the Company’s right to payment, and the transfer of legal title.

The Company does not disclose the value of unsatisfied performance obligations for contracts as all contracts have either an original expected length of one year or less, or the entire future consideration is variable and allocated entirely to a wholly unsatisfied performance obligation.

2020 Acquisitions

On February 21, 2020, the Company completed the acquisition of certain non-operated oil and natural gas assets located in Karnes and DeWitt Counties, Texas, for approximately $ 69.7 million in cash.

The transaction was accounted for as an asset acquisition.

The Company’s receivables consist mainly of trade receivables from commodity sales and joint interest billings due from owners on properties the Company operates.

Receivables from contracts with customers totaled $ 151.1 million as of March 31, 2022 and $ 125.1 million as of December 31, 2021.

For further detail regarding the Company’s revenue recognition policies, please refer to Note 1—Organization and Summary of Significant Accounting Policies of the consolidated financial statements contained in the Company’s 2021 Form 10-K.

Derivative Instruments

As of September 30, 2021, the Company had settled all of its natural gas costless collar derivative contracts.

Prior to September 30, 2021, Magnolia utilized natural gas costless collars to reduce its exposure to price volatility for a portion of its natural gas production volumes.

The Company had settled all of its natural gas costless collar derivative contracts by September 30, 2021.

From September 30, 2020 to September 30, 2021, Magnolia utilized natural gas costless collars to reduce its exposure to price volatility for a portion of its natural gas production volumes.

The Company’s policies do not permit the use of derivative instruments for speculative purposes.

3 unchanged sentences

Accordingly, changes in the fair value of the Company’s derivative instruments were recorded immediately to earnings as “Loss on derivatives, net” on the Company’s consolidated statements of operations.

The following table summarizes the effects of derivative instruments on the Company’s consolidated statements of operations during the three and nine months ended September 30, 2021 and 2020:

Three Months Ended Nine Months Ended

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

The following table summarizes the effects of derivative instruments on the Company’s consolidated statements of operations during the three months ended March 31, 2022 and 2021:

Three Months Ended

(In thousands) March 31, 2022 March 31, 2021

Derivative settlements, realized (loss) $ — $ —

Unrealized gain (loss) on derivatives 2,043 ( 2,208 ) ( 277 ) ( 2,208 )

Unrealized (loss) on derivatives — ( 482 )

(Loss) on derivatives, net $ — $ ( 482 )

The Company had no outstanding derivative contracts in place as of September 30, 2021.

See Note 6 — Fair Value Measurement for the fair value hierarchy of the Company’s derivative contracts.

The Company had no outstanding derivative contracts in place as of March 31, 2022.

Fair Value Measurements

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Debt Obligations

The carrying value and fair value of the financial instrument that is not carried at fair value in the accompanying consolidated balance sheets at September 30, 2021 and December 31, 2020 is as follows:

September 30, 2021 December 31, 2020

The carrying value and fair value of the financial instrument that is not carried at fair value in the accompanying consolidated balance sheets at March 31, 2022 and December 31, 2021 is as follows:

March 31, 2022 December 31, 2021

(In thousands) Carrying Value Fair Value Carrying Value Fair Value

Long-term debt $ 388,647 $ 407,460 $ 388,087 $ 411,500

The fair value of the 2026 Senior Notes at September 30, 2021 and December 31, 2020 is based on unadjusted quoted prices in an active market, which is considered a Level 1 input in the fair value hierarchy.

The fair value of the 2026 Senior Notes at March 31, 2022 and December 31, 2021 is based on unadjusted quoted prices in an active market, which is considered a Level 1 input in the fair value hierarchy.

The Company has other financial instruments consisting primarily of receivables, payables, and other current assets and liabilities that approximate fair value due to the nature of the instruments and their relatively short maturities.

Non-financial assets and liabilities initially measured at fair value include assets acquired and liabilities assumed in business combinations and asset retirement obligations.

Derivative Instruments

The Company had no outstanding derivative instruments as of September 30, 2021.

The fair values of the Company’s outstanding natural gas costless collar derivative instruments prior to September 30, 2021 were measured using an industry-standard pricing model and were provided by a third party.

The inputs used in the third-party pricing model included quoted forward prices for natural gas, the contracted volumes, volatility factors, and time to maturity, which are considered Level 2 inputs.

The Company’s derivative instruments outstanding as of December 31, 2020 were recorded at fair value within “Other current assets” on the Company’s consolidated balance sheet.

These fair values were recorded by netting asset and liability positions with the same counterparty and were subject to contractual terms that provided for net settlement.

The following table presents the classification of the outstanding derivative instruments and the fair value hierarchy table for the Company’s derivative assets and liabilities as of December 31, 2020 that were required to be measured at fair value on a recurring basis:

Fair Value Measurements Using

(In thousands) Level 1 Level 2 Level 3 Total Fair Value Netting Carrying Amount

December 31, 2020

Current assets:

Natural gas derivative instruments $ — $ 1,375 $ — $ 1,375 $ ( 1,098 ) $ 277

Current liabilities:

Natural gas derivative instruments $ — $ 1,098 $ — $ 1,098 $ ( 1,098 ) $ —

See Note 5 — Derivative Instruments for additional information on the Company’s derivative contracts.

Nonrecurring Fair Value Measurements

The Company applies the provisions of the fair value measurement standard on a nonrecurring basis to its non-financial assets and liabilities, including oil and natural gas properties.

These assets and liabilities are not measured at fair value on a recurring basis but are subject to fair value adjustments when facts and circumstances arise that indicate a need for remeasurement.

During the first quarter of 2020, Magnolia recorded impairments of $ 1.9 billion related to proved and unproved properties as a result of a sharp decline in commodity prices.

Proved property impairment of $ 1.4 billion is included in “Impairment of oil and natural gas properties” and unproved property impairment of $ 0.6 billion is included in “Exploration expense” on the Company’s consolidated statement of operations for the nine months ended September 30, 2020.

Proved and unproved properties that were impaired had aggregate fair values of $ 0.8 billion and $ 0.3 billion, respectively.

The fair values of these oil and natural gas properties were measured using the income approach based on inputs that are not observable in the market, and therefore, represent Level 3 inputs.

The Company calculated the estimated fair values of its oil and natural gas properties using a discounted future cash flow model.

Significant inputs associated with the calculation of discounted future net cash flows include estimates of future commodity prices based on NYMEX strip pricing adjusted for price differentials, estimates of proved oil and natural gas reserves and risk adjusted probable and possible reserves, estimates of future expected operating and capital costs, and a market participant based weighted average cost of capital of 10 % for proved property impairments and 12 % for unproved property impairments.

No impairments were recorded for the three and nine months ended September 30, 2021.

Certain of the Company’s assets and liabilities are measured at fair value on a nonrecurring basis.

Specifically, stock based compensation is not measured at fair value on an ongoing basis but is subject to fair value calculations in certain circumstances.

For further detail, see Note 12—Stock Based Compensation in the Notes to the Company’s consolidated financial statements.

There were no other nonrecurring fair value measurements as of March 31, 2022 or December 31, 2021.

Intangible Assets

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On June 30, 2021, the Company amended the Non-Compete Prohibited Period End Date to terminate on June 30, 2021 and paid $ 24.9 million in cash in lieu of delivering the remaining 1.6 million shares of Class A Common Stock (the “Second Non-Compete Amendment”).

On the Closing Date of the initial Business Combination, the Company recorded an estimated cost of $ 44.4 million for the Non-Compete as intangible assets on the Company’s consolidated balance sheet.

These intangible assets had a definite life and were subject to amortization utilizing the straight-line method over their economic life, previously estimated to be two and one-half to four years .

The Second Non-Compete Amendment resulted in the Company accelerating the amortization of the remaining intangible assets.

The Company includes the amortization in “Amortization of intangible assets” on the Company’s consolidated statements of operations.

(In thousands) September 30, 2021 December 31, 2020

Non-compete intangible assets $ 44,400 $ 44,400

Accumulated amortization ( 44,400 ) ( 35,054 )

Intangible assets, net $ — $ 9,346

Weighted average amortization period (in years) 2.70 3.25

Other Current Liabilities

The following table provides detail of the Company’s other current liabilities for the periods presented:

(In thousands) September 30, 2021 December 31, 2020

(In thousands) March 31, 2022 December 31, 2021

Accrued capital expenditures $ 43,882 $ 29,936

Accrued production taxes 12,235 10,084

Other 47,965 50,616

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The Company’s debt is comprised of the following:

(In thousands) September 30, 2021 December 31, 2020

(In thousands) March 31, 2022 December 31, 2021

Revolving credit facility $ — $ —

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Credit Facility

In connection with the consummation of the Business Combination, the RBL Facility was entered into by and among Magnolia Operating, as borrower, Magnolia Intermediate, as its holding company, the banks, financial institutions, and other lending institutions from time to time party thereto, as lenders, the other parties from time to time party thereto, and Citibank, N.A., as administrative agent, collateral agent, issuing bank, and swingline lender, providing for maximum commitments in an aggregate principal amount of $ 1.0 billion with a letter of credit facility with a $ 100.0 million sublimit.

The borrowing base as of September 30, 2021 was $ 450.0 million, which was reaffirmed in the semi-annual redetermination on October 15, 2021.

administrative agent, collateral agent, issuing bank, and swingline lender, providing for maximum commitments in an aggregate principal amount of $ 1.0 billion with a letter of credit facility with a $ 100.0 million sublimit.

The RBL Facility is guaranteed by certain parent companies and subsidiaries of Magnolia LLC and is collateralized by certain of Magnolia Operating’s oil and natural gas properties.

Borrowings under the RBL Facility bear interest, at Magnolia Operating’s option, at a rate per annum equal to either the LIBOR rate or the alternative base rate plus the applicable margin.

Additionally, Magnolia Operating is required to pay a commitment fee quarterly in arrears in respect of unused commitments under the RBL Facility.

The applicable margin and the commitment fee rate are calculated based upon the utilization levels of the RBL Facility as a percentage of the borrowing base then in effect.

The RBL Facility contains certain affirmative and negative covenants customary for financings of this type, including compliance with a leverage ratio of less than 4.00 to 1.00 and, if the leverage ratio is in excess of 3.00 to 1.00, a current ratio of greater than 1.00 to 1.00.

As of September 30, 2021, the Company was in compliance with all covenants under the RBL Facility.

Deferred financing costs incurred in connection with securing the RBL Facility were $ 11.7 million, which are amortized on a straight-line basis over a period of five years and included in “Interest expense, net” in the Company’s consolidated statements of operations.

The Company recognized interest expense related to the RBL Facility of $ 1.0 million for each of the three months ended September 30, 2021 and 2020, and $ 3.1 million and $ 3.2 million for the nine months ended September 30, 2021 and 2020, respectively.

The unamortized portion of the deferred financing costs is included in “Deferred financing costs, net” on the accompanying consolidated balance sheet as of September 30, 2021.

The Company did no t have any outstanding borrowings under its RBL Facility as of September 30, 2021.

On February 16, 2022, Magnolia Operating, as borrower, amended and restated the RBL Facility (“Amended and Restated RBL Facility”) in its entirety, providing for maximum commitments in an aggregate principal amount of $ 1.0 billion with a letter of credit facility with a $ 50.0 million sublimit, with an initial borrowing base of $ 450.0 million.

The Amended and Restated RBL Facility matures in February 2026.

Borrowings under the Amended and Restated RBL Facility bear interest, at Magnolia Operating’s option, at a rate per annum equal to either the term SOFR rate or the alternative base rate plus the applicable margin.

Additionally, Magnolia Operating is required to pay a commitment fee quarterly in arrears in respect of unused commitments under the Amended and Restated RBL Facility.

The applicable margin and the commitment fee rate are calculated based upon the utilization levels of the Amended and Restated RBL Facility as a percentage of unused lender commitments then in effect.

The Amended and Restated RBL Facility contains certain affirmative and negative covenants customary for financings of this type, including compliance with a leverage ratio of less than 3.50 to 1.00 and a current ratio of greater than 1.00 to 1.00.

As of March 31, 2022, the Company was in compliance with all covenants under the Amended and Restated RBL Facility.

The Company incurred approximately $ 5.6 million of lender and transaction fees related to the modification of which $ 5.2 million were recorded as deferred financing costs and will be amortized prospectively over the remaining term of the Amended and Restated RBL Facility and $ 0.4 million of which were expensed and are reflected in “Interest expense, net” on the Company’s consolidated statements of operations for the three months ended March 31, 2022.

Deferred financing costs in connection with the Amended and Restated RBL Facility are amortized on a straight-line basis over a period of four years from February 2022 to February 2026 and included in “Interest expense, net” in the Company’s consolidated statements of operations.

The Company recognized interest expense related to the Amended and Restated RBL Facility and the RBL facility, as applicable, of $ 2.8 million and $ 1.0 million for the three months ended March 31, 2022 and 2021, respectively.

The unamortized portion of the deferred financing costs is included in “Deferred financing costs, net” on the accompanying consolidated balance sheet as of March 31, 2022.

The Company did no t have any outstanding borrowings under the Amended and Restated RBL Facility as of March 31, 2022.

2026 Senior Notes

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Costs incurred with third parties directly related to the modification were expensed as incurred.

The Company incurred approximately $ 1.1 million of transaction fees related to the modification which were expensed and are reflected in “Interest expense, net” on the Company’s consolidated statements of operations for the nine months ended September 30, 2021.

The Company incurred approximately $ 1.1 million of transaction fees in the second quarter of 2021 related to the modification which were expensed.

The Company also paid $ 5.0 million in fees to holders of the 2026 Senior Notes, which fees are recorded as deferred financing costs and amortized using the new effective interest rate applied prospectively over the remaining term of the 2026 Senior Notes.

As of September 30, 2021, the Company had incurred and capitalized a total of $ 16.8 million of deferred financing costs related to the issuance of, and the amendment to the Indenture governing, the 2026 Senior Notes.

As of March 31, 2022, the Company had incurred and capitalized a total of $ 16.8 million of deferred financing costs related to the issuance of, and the amendment to the Indenture governing, the 2026 Senior Notes.

These costs are amortized using the effective interest method over the term of the 2026 Senior Notes and are included in “Interest expense, net” in the Company’s consolidated statements of operations.

The unamortized portion of the deferred financing costs is included as a reduction to the carrying value of the 2026 Senior Notes, which has been recorded as “Long-term debt, net” on the Company’s consolidated balance sheet as of September 30, 2021.

The Company recognized interest expense related to the 2026 Senior Notes of $ 6.5 million and $ 6.3 million for the three months ended September 30, 2021 and 2020, respectively, and $ 20.5 million and $ 19.0 million for the nine months ended September 30, 2021 and 2020, respectively.

The Company recognized interest expense related to the 2026 Senior Notes of $ 6.6 million and $ 6.3 million for the three months ended March 31, 2022 and 2021, respectively.

At any time prior to August 1, 2022, the Issuers may, on any one or more occasions, redeem all or a part of the 2026 Senior Notes at a redemption price equal to 100 % of the principal amount of the 2026 Senior Notes redeemed, plus a “make whole” premium on accrued and unpaid interest, if any, to, but excluding, the date of redemption.

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After the Commission affirmed the granting of the permit, and after judicial review of the Commission’s order by the 53rd Judicial District Court Travis County, Texas (the “District Court”), the District Court reversed and remanded the Commission’s order.

The Commission and Magnolia have appealed the District Court’s judgment to the Third Court of Appeals in Austin, Texas, and the appeal is in the preliminary stage.

At September 30, 2021, the Company does not believe the outcome of any such disputes or legal actions will have a material effect on its consolidated statements of operations, balance sheet, or cash flows.

No amounts were accrued with respect to outstanding litigation at September 30, 2021 or September 30, 2020.

The Commission and Magnolia have appealed the District Court’s judgment to the Third Court of Appeals in Austin, Texas.

At March 31, 2022, the Company does not believe the outcome of any such disputes or legal actions will have a material effect on its consolidated statements of operations, balance sheet, or cash flows.

No amounts were accrued with respect to outstanding litigation at March 31, 2022 or March 31, 2021.

Environmental Matters

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The coronavirus disease 2019 (“COVID-19”) pandemic and related economic repercussions have created significant volatility, uncertainty, and turmoil in the oil and natural gas industry.

While oil and natural gas prices have increased in 2021, demand and pricing may again decline if there is a resurgence of the outbreak across the U.S.

While oil and natural gas prices increased in 2021 and 2022, demand and pricing may again decline if there is a resurgence of the outbreak across the U.S.

or other locations across the world or as a result of any related social distancing guidelines, travel restrictions, and stay-at-home orders.

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The Company’s income tax provision consists of the following components:

Three Months Ended Nine Months Ended

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

Federal $ 2,604 $ — $ 4,248 $ ( 1,167 )

State 1,027 ( 339 ) 2,180 ( 339 )

3,631 ( 339 ) 6,428 ( 1,506 )

Three Months Ended

(In thousands) March 31, 2022 March 31, 2021

Federal $ 16,784 $ —

State 1,316 399

— — — ( 77,834 )

Income tax expense (benefit) $ 3,631 $ ( 339 ) $ 6,428 $ ( 79,340 )

Income tax expense $ 18,100 $ 399

The Company is subject to U.S.

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The Company estimates its annual effective tax rate in recording its quarterly provision for income taxes in the various jurisdictions in which it operates.

The Company’s effective tax rate for the three months ended September 30, 2021 and 2020 was 2.2 % and negative 2.5 %, respectively.

The Company’s effective tax rate for the nine months ended September 30, 2021 and 2020 was 1.7 % and 4.0 %, respectively.

As a result of impairments in the first quarter of 2020, the Company established full valuation allowances on the federal and state deferred tax assets, which resulted in additional differences between the effective tax rate and the statutory rate as of September 30, 2021 and September 30, 2020.

The Company’s effective tax rate for the three months ended March 31, 2022 and 2021 was 8.0 % and 0.4 %, respectively.

The primary differences between the annual effective tax rate and the statutory rate of 21.0% are income attributable to noncontrolling interest, state taxes, and valuation allowances.

As of September 30, 2021, the Company did no t have an accrued liability for uncertain tax positions and does not anticipate recognition of any significant liabilities for uncertain tax positions during the next 12 months.

For the quarter ended September 30, 2021, no amounts were incurred for income tax uncertainties or interest and penalties.

As of March 31, 2022, the Company did no t have an accrued liability for uncertain tax positions and does not anticipate recognition of any significant liabilities for uncertain tax positions during the next 12 months.

For the quarter ended March 31, 2022, no amounts were incurred for income tax uncertainties or interest and penalties.

Currently, the Company is not aware of any issues under review that could result in significant payments, accruals, or a material deviation from its position.

The Company’s tax years since its formation remain subject to possible income tax examinations by its major taxing authorities for all periods.

During the nine months ended September 30, 2021, the Magnolia LLC Unit Holders redeemed 19.9 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.

During the three months ended March 31, 2022, the Magnolia LLC Unit Holders redeemed 9.7 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 the Magnolia LLC Unit Holders.

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There was no net tax impact as the Company recorded a full valuation allowance.

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

Applying the net operating loss carryback provision resulted in an income tax benefit of $ 1.2 million in the first quarter of 2020.

During the first quarter of 2020, the Company moved from a net deferred tax liability position to an estimated net deferred tax asset position, resulting primarily from oil and natural gas impairments.

As of September 30, 2021, the Company’s net deferred tax asset was $ 203.1 million.

As of March 31, 2022, the Company’s net deferred tax asset was $ 204.6 million.

Management assessed whether it is more-likely-than-not that it will generate sufficient taxable income to realize its deferred income tax assets, including the investment in partnership and net operating loss carryforwards.

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The Company considered, among other things, the overall business environment, its historical earnings and losses, current industry trends, and its outlook for future years.

As of September 30, 2021, the Company assessed the realizability of the deferred tax assets and recorded a full valuation allowance of $ 203.1 million.

As of March 31, 2022, the Company assessed the realizability of the deferred tax assets and recorded a full valuation allowance of $ 204.6 million.

As commodity prices have improved during 2021 and 2022, Magnolia has begun to sustain a level of increased profitability such that, net of its net operating loss, Magnolia is beginning to project modest taxable income.

Should this continue, increased weight will be given to positive operating results, along with projections of future taxable income, in determining whether future taxable income will be sufficient to provide for realization of the Company’s deferred tax assets, and if so, this new evidence may result in a change in estimate of the Company’s valuation allowance in the next 12 months.

Stockholders’ Equity

Class A Common Stock

At September 30, 2021, there were 189.6 million shares of Class A Common Stock issued and 178.2 million shares of Class A Common Stock outstanding.

At March 31, 2022, there were 203.8 million shares of Class A Common Stock issued and 187.5 million shares of Class A Common Stock outstanding.

The holders of Class A Common Stock and Class B Common Stock vote together as a single class on all matters and are entitled one vote for each share held.

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Class B Common Stock

At September 30, 2021, there were 52.9 million shares of Class B Common Stock issued and outstanding.

At March 31, 2022, there were 35.6 million shares of Class B Common Stock issued and outstanding.

Holders of Class B Common Stock vote together as a single class with holders of Class A Common Stock on all matters properly submitted to a vote of the stockholders.

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The holders of the Class B Common Stock have no preemptive or other subscription rights, and there are no sinking fund provisions applicable to such shares.

Share Repurchase Program

Share Repurchases

The Company’s board of directors has authorized a share repurchase program of up to 30.0 million shares of Class A Common Stock.

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

As of September 30, 2021, the Company had repurchased 11.5 million shares under the program at a cost of $ 112.8 million.

As of March 31, 2022, the Company had repurchased 15.7 million shares under the program at a cost of $ 197.9 million.

During the three months ended March 31, 2022, the Company also repurchased 0.6 million shares of Class A Common Stock for $ 11.6 million from EnerVest Energy Institutional Fund XIV-C, L.P.

outside of the share repurchase program.

During the three months ended March 31, 2022 Magnolia LLC repurchased and subsequently canceled 3.9 million Magnolia LLC Units with an equal number of shares of corresponding Class B Common Stock for $ 84.7 million of cash consideration (the “Class B Common Stock Repurchases”).

During the same period, the Magnolia LLC Unit Holders redeemed 9.7 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.

During the three months ended March 31, 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 Repurchases”).

During the same period, the Magnolia LLC Unit Holders redeemed 14.2 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 the Magnolia LLC Unit Holders.

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

Dividends and Distributions

Distributions

On February 3, 2022, Magnolia LLC declared a cash distribution of $ 0.20 per Magnolia LLC Unit totaling $ 45.9 million, of which $ 37.3 million was distributed to the Company and $ 8.6 million was distributed to the Magnolia LLC Unit Holders.

On August 2, 2021, Magnolia LLC declared a cash distribution of $ 0.08 per Magnolia LLC Unit totaling $ 19.0 million, of which $ 14.2 million was distributed to the Company and $ 4.8 million was distributed to the Magnolia LLC Unit Holders.

The distribution to the Magnolia LLC Unit Holders was recorded as a reduction of noncontrolling interest on the Company’s consolidated balance sheet as of September 30, 2021.

Cash Dividend

The distributions to the Magnolia LLC Unit Holders were recorded as a reduction of noncontrolling interest on the Company’s consolidated balance sheets as of March 31, 2022 and December 31, 2021.

On February 3, 2022, the Company’s board of directors declared a semi-annual cash dividend of $ 0.20 per share of Class A Common Stock totaling approximately $ 37.3 million.

The dividend was paid on March 1, 2022 to shareholders of record as of the close of business on February 14, 2022.

On August 2, 2021, the Company’s board of directors declared a semi-annual interim cash dividend of $ 0.08 per share of Class A Common Stock totaling approximately $ 14.2 million.

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Dividends in excess of retained earnings are recorded as a reduction of additional paid-in capital.

The $ 14.2 million dividend declared during the third quarter of 2021 was recorded as a reduction of additional paid-in capital on the Company’s consolidated balance sheet as of September 30, 2021.

The $ 37.3 million and $ 14.2 million dividends declared during the first quarter of 2022 and the third quarter of 2021, respectively, were recorded as a reduction of additional paid-in capital on the Company’s consolidated balance sheets as of March 31, 2022 and December 31, 2021.

Noncontrolling Interest

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The noncontrolling interest percentage is affected by various equity transactions such as issuances and repurchases of Class A Common Stock, the exchange of Class B Common Stock (and corresponding Magnolia LLC Units) for Class A Common Stock, or the cancellation of Class B Common Stock (and corresponding Magnolia LLC Units).

During the nine months ended September 30, 2021 Magnolia LLC repurchased and subsequently canceled 13.0 million Magnolia LLC Units with an equal number of shares of corresponding Class B Common Stock for $ 171.7 million of cash consideration (the “Class B Common Stock Repurchases”).

During the same period, the Magnolia LLC Unit Holders redeemed 19.9 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 the Magnolia LLC Unit Holders.

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

As of September 30, 2021, Magnolia owned approximately 77.1 % of the interest in Magnolia LLC and the noncontrolling interest was 22.9 %.

Subsequent to September 30, 2021, the Magnolia LLC Unit Holders redeemed an additional 3.6 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.

As of March 31, 2022, Magnolia owned approximately 84.0 % of the interest in Magnolia LLC and the noncontrolling interest was approximately 16.0 %.

In the first quarter of 2019, Magnolia Operating formed Highlander Oil & Gas Holdings LLC (“Highlander”) as a joint venture whereby MGY Louisiana LLC, a wholly owned subsidiary of Magnolia Operating, holds approximately 84.7 % of the units of Highlander, with the remaining 15.3 % attributable to noncontrolling interest.

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On October 8, 2018, the Company’s board of directors adopted the “Magnolia Oil & Gas Corporation Long Term Incentive Plan” (the “Plan”), effective as of July 17, 2018.

A total of 16.8 million shares of Class A Common Stock have been authorized for issuance under the Plan as of September 30, 2021.

A total of 16.8 million shares of Class A Common Stock have been authorized for issuance under the Plan as of March 31, 2022.

The Company grants stock based compensation awards in the form of restricted stock units (“RSU”), performance stock units (“PSU”), and performance restricted stock units (“PRSU”) to eligible employees and directors to enhance the Company and its affiliates’ ability to attract, retain, and motivate persons who make important contributions to the Company and its affiliates by providing these individuals with equity ownership opportunities.

Shares issued as a result of awards granted under the Plan are generally new shares of Class A Common Stock.

Stock based compensation expense is recognized net of forfeitures within “General and administrative expenses” and “Lease operating expenses” on the consolidated statements of operations and was $ 2.9 million for each of the three months ended September 30, 2021 and 2020, and $ 9.1 million and $ 8.9 million for the nine months ended September 30, 2021 and 2020, respectively.

Stock based compensation expense is recognized net of forfeitures within “General and administrative expenses” and “Lease operating expenses” on the consolidated statements of operations and was $ 2.9 million and $ 2.7 million for the three months ended March 31, 2022 and 2021, respectively.

The Company has elected to account for forfeitures of awards granted under the Plan as they occur in determining compensation expense.

The following table presents a summary of Magnolia’s unvested RSU, PSU, and PRSU activity for the three months ended September 30, 2021.

Restricted Stock Units Performance Stock Units Performance Restricted Stock Units

Units Weighted Average Grant Date Fair Value Units Weighted Average Grant Date Fair Value Units Weighted Average Grant Date Fair Value

Unvested at June 30, 2021 1,552,716 $ 9.00 749,611 $ 11.06 1,010,491 $ 9.36

Granted 24,913 14.82 — — — —

Vested ( 81,954 ) 13.65 ( 260,834 ) 14.58 — —

Forfeited ( 26,461 ) 8.23 ( 28,363 ) 8.80 ( 37,854 ) 9.33

Unvested at September 30, 2021 1,469,214 $ 8.85 460,414 $ 9.20 972,637 $ 9.36

The following table presents a summary of Magnolia’s unvested RSU, PSU, and PRSU activity for the nine months ended September 30, 2021.

The following table presents a summary of Magnolia’s unvested RSU, PSU, and PRSU activity for the three months ended March 31, 2022.

Restricted Stock Units Performance Stock Units Performance Restricted Stock Units

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Granted 241,671 20.29 — — 506,703 19.14

Granted for performance multiple (1)

— — 90,965 13.88 — —

Vested ( 315,842 ) 9.31 ( 272,894 ) 13.88 ( 212,687 ) 9.33

Forfeited ( 6,736 ) 10.38 — — ( 936 ) 11.38

Unvested at September 30, 2021 1,469,214 $ 8.85 460,414 $ 9.20 972,637 $ 9.36

Unvested at March 31, 2022 1,106,602 $ 11.33 278,485 $ 6.14 1,261,734 $ 13.29

(1) Upon completion of the performance period for the PSUs granted in 2019, a performance multiple of 150 % was applied to each of the grants resulting in additional grants of PSUs in 2022.

Restricted Stock Units

The Company grants service-based RSU awards to employees and non-employee directors, which generally vest ratably over a three-year service period, in the case of awards to employees, and vest in full after one year , in the case of awards to directors.

The Company grants service-based RSU awards to employees, which generally vest ratably over a three-year or four-year service period, and to non-employee directors, which vest in full after one year .

RSUs represent the right to receive shares of Class A Common Stock at the end of the vesting period equal to the number of RSUs that vest.

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Compensation expense for the service-based RSU awards is based upon the grant date market value of the award and such costs are recorded on a straight-line basis over the requisite service period for each separately vesting portion of the award, as if the award was, in-substance, multiple awards.

Unrecognized compensation expense related to unvested RSUs as of September 30, 2021 was $ 7.9 million, which the Company expects to recognize over a weighted average period of 1.9 years.

The aggregate fair value of RSUs that vested during the three months ended March 31, 2022 and 2021 was $ 7.9 million and $ 4.0 million, respectively.

Unrecognized compensation expense related to unvested RSUs as of March 31, 2022 was $ 9.9 million, which the Company expects to recognize over a weighted average period of 2.8 years.

Performance Stock Units and Performance Restricted Stock Units

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Compensation expense for the PRSU awards is based upon grant date fair market value of the award, calculated using a Monte Carlo simulation, as presented below, and such costs are recorded on a straight-line basis over the requisite service period for each separately vesting portion of the award, as if the award was, in-substance, multiple awards, as applicable.

Unrecognized compensation expense related to unvested PRSUs as of September 30, 2021 was $ 7.3 million, which the Company expects to recognize over a weighted average period of 2.5 years.

The aggregate fair value of PRSU awards that vested during the three months ended March 31, 2022 was $ 4.8 million.

Unrecognized compensation expense related to unvested PRSUs as of March 31, 2022 was $ 14.9 million, which the Company expects to recognize over a weighted average period of 2.6 years.

The Company grants PSUs to certain employees.

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In addition to the TSR conditions, vesting of the PSUs is subject to the awardee’s continued employment through the date of settlement of the PSUs, which will occur within 60 days following the end of the performance period.

Unrecognized compensation expense related to unvested PSUs as of September 30, 2021 was $ 1.0 million, which the Company expects to recognize over a weighted average period of 1.1 years.

The grant date fair values of the PRSUs granted during the nine months ended September 30, 2021 and the PSUs granted during the nine months ended September 30, 2020, were $ 9.5 million and $ 2.5 million, respectively.

Since the Performance Condition was met on March 17, 2021, the fair value of the PRSUs granted after this date was based upon the grant date market value of the award.

The fair values of the awards granted prior to March 17, 2021 were determined using a Monte Carlo simulation.

The following table summarizes the Monte Carlo simulation assumptions used to calculate the grant date fair value of the PRSUs in 2021 and the PSUs in 2020.

Nine Months Ended

PRSU and PSU Grant Date Fair Value Assumptions September 30, 2021 September 30, 2020

The aggregate fair value of PSU awards that vested during the three months ended March 31, 2022 and 2021 was $ 5.5 million and $ 0.1 million, respectively.

Unrecognized compensation expense related to unvested PSUs as of March 31, 2022 was $ 0.5 million, which the Company expects to recognize over a weighted average period of 0.8 years.

The grant date fair values of the PRSUs granted during the three months ended March 31, 2022 and 2021, were $ 9.7 million and $ 9.4 million, respectively.

Since the Performance Condition for the PRSUs granted in 2022 and 2021 were met on March 28, 2022 and March 17, 2021, respectively, the fair value of the PRSUs granted after the Performance Condition were met were based upon the grant date market value of the award.

The fair values of the awards granted prior to the date the Performance Condition was met were determined using a Monte Carlo simulation.

The following table summarizes the Monte Carlo simulation assumptions used to calculate the grant date fair value of the PRSUs in 2022 and 2021.

Three Months Ended

PRSU Grant Date Fair Value Assumptions March 31, 2022 March 31, 2021

Expected term (in years)

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Risk-free interest rate 1.89 % 0.56 %

Earnings (Loss) Per Share

The Company’s unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are deemed participating securities and, therefore, have been deducted from earnings in computing basic and diluted net income (loss) per share under the two-class method.

Diluted net income (loss) per share attributable to common stockholders is calculated under both the two-class method and the treasury stock method and the more dilutive of the two calculations is presented.

The components of basic and diluted net income (loss) per share attributable to common stockholders are as follows:

Three Months Ended Nine Months Ended

(In thousands, except per share data) September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Net income (loss) attributable to Class A Common Stock $ 119,364 $ 9,147 $ 267,053 $ ( 1,236,135 )

Dividend yield 1.97 % — %

Earnings Per Share

The Company’s unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are deemed participating securities, and therefore dividends and net income allocated to such awards have been deducted from earnings in computing basic and diluted net income per share under the two-class method.

Diluted net income per share attributable to common stockholders is calculated under both the two-class method and the treasury stock method and the more dilutive of the two calculations is presented.

The components of basic and diluted net income per share attributable to common stockholders are as follows:

Three Months Ended

(In thousands, except per share data) March 31, 2022 March 31, 2021

Net income attributable to Class A Common Stock $ 166,039 $ 63,244

Dividends and net income allocated to participating securities 1,416 213

Net income (loss), net of participating securities $ 118,425 $ 9,147 $ 265,339 $ ( 1,236,135 )

Net income, net of participating securities $ 164,623 $ 63,031

Weighted average number of common shares outstanding during the period - basic 182,578 166,952

Net income (loss) per share of Class A Common Stock - basic

Net income per share of Class A Common Stock - basic

$ 0.90 $ 0.38

Net income (loss) attributable to Class A Common Stock $ 119,364 $ 9,147 $ 267,053 $ ( 1,236,135 )

Net income attributable to Class A Common Stock $ 166,039 $ 63,244

Dividends and net income allocated to participating securities 1,413 210

Net income (loss), net of participating securities $ 118,430 $ 9,147 $ 265,348 $ ( 1,236,135 )

Net income, net of participating securities $ 164,626 $ 63,034

Weighted average number of common shares outstanding during the period - basic 182,578 166,952

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Weighted average number of common shares outstanding during the period - diluted 183,163 169,636

Net income (loss) per share of Class A Common Stock - diluted

Net income per share of Class A Common Stock - diluted

$ 0.90 $ 0.37

For the three and nine months ended September 30, 2021, the Company excluded 60.4 million and 68.8 million, respectively, of weighted average shares of Class A Common Stock issuable upon the exchange of Class B Common Stock (and corresponding Magnolia LLC Units) as the effect was anti-dilutive.

For the three and nine months ended September 30, 2020, the Company excluded 85.8 million weighted average shares of Class A Common Stock issuable upon the exchange of Class B Common Stock (and corresponding Magnolia LLC Units).

In addition, for the nine months ended September 30, 2020, the Company excluded 4.0 million contingent shares of Class A Common Stock issuable to an affiliate of EnerVest, provided EnerVest did not compete in the Market Area, and 0.2 million RSUs and PSUs, because the effect was anti-dilutive.

For the three months ended March 31, 2022, the Company excluded 44.3 million of weighted average shares of Class A Common Stock issuable upon the exchange of Class B Common Stock (and corresponding Magnolia LLC Units) as the effect was anti-dilutive.

For the three months ended March 31, 2021, the Company excluded 80.3 million weighted average shares of Class A Common Stock issuable upon the exchange of Class B Common Stock (and corresponding Magnolia LLC Units), as the effect was anti-dilutive.

Related Party Transactions

As of September 30, 2021, EnerVest Energy Institutional Fund XIV-A, L.P., a Delaware limited partnership, which is part of the Magnolia LLC Unit Holders, held more than 10% of the Company’s common stock and qualified as a principal owner of the Company, as defined in ASC 850, “Related Party Disclosures.”

As of March 31, 2022, EnerVest Energy Institutional Fund XIV-A, L.P., a Delaware limited partnership, which is part of the Magnolia LLC Unit Holders, held more than 10% of the Company’s common stock and qualified as a principal owner of the Company, as defined in ASC 850, “Related Party Disclosures.”

Distributions

On August 2, 2021, Magnolia LLC declared a cash distribution of $ 0.08 per Magnolia LLC Unit totaling $ 19.0 million, of which $ 3.2 million was distributed to EnerVest Energy Institutional Fund XIV-A, L.P.

On February 3, 2022, Magnolia LLC declared a cash distribution of $ 0.20 per Magnolia LLC Unit totaling $ 45.9 million, of which $ 5.7 million was distributed to EnerVest Energy Institutional Fund XIV-A, L.P.

Class B Common Stock Repurchases and Redemptions

During the nine months ended September 30, 2021, EnerVest Energy Institutional Fund XIV-A, L.P.

During the three months ended March 31, 2022, EnerVest Energy Institutional Fund XIV-A, L.P.

received $ 56.1 million in cash and surrendered 2.6 million Magnolia LLC Units with an equal number of shares of corresponding Class B Common Stock.

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also redeemed 6.5 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, which were subsequently sold to the public.

Subsequently, Magnolia LLC canceled the surrendered Magnolia LLC Units and a corresponding number of shares of Class B Common Stock.

Magnolia did not receive any proceeds from the sale of shares of Class A Common Stock by EnerVest Energy Institutional Fund XIV-A, L.P.

Subsequent to September 30, 2021, EnerVest Energy Institutional Fund XIV-A, L.P.

redeemed an additional 2.4 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 which were subsequently sold to the public.

During the three months ended March 31, 2021, EnerVest Energy Institutional Fund XIV-A, L.P.

received $ 33.6 million in cash and surrendered 3.3 million Magnolia LLC Units with an equal number of shares of corresponding Class B Common Stock.

EnerVest Energy Institutional Fund XIV-A, L.P.

also redeemed 9.4 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, which were subsequently sold to the public.

During the three months ended March 31, 2022 and 2021, Magnolia LLC subsequently canceled the surrendered Magnolia LLC Units and a corresponding number of shares of Class B Common Stock.

Magnolia did not receive any proceeds from the sales of shares of Class A Common Stock by EnerVest Energy Institutional Fund XIV-A, L.P.

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 1. Financial Statements