What changed in this filing

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Item 1. Financial Statements

2022-08-03 compared with 2022-05-10 · 130 added, 104 removed, 366 unchanged (39% of the section changed)

3 unchanged sentences

(In thousands)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

ASSETS (Unaudited) (Audited)

42 unchanged sentences

(In thousands, except per share data)

Three Months Ended

March 31, 2022 March 31, 2021

Three Months Ended Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Oil revenues $ 332,791 $ 188,701 $ 595,459 $ 335,659

34 unchanged sentences

Common Stock Class B

Common Stock Additional Paid In Capital Treasury Stock Retained Earnings/ 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

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

For the Three Months Ended June 30, 2021 Shares Value Shares Value Shares Value

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, net of forfeitures — — — — 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, net 244 — — — ( 839 ) — — — ( 839 ) ( 399 ) ( 1,238 )

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 purchases and cancellations — — ( 5,000 ) ( 1 ) 1 — — — — ( 50,781 ) ( 50,781 )

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 )

2 unchanged sentences

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

For the Three Months Ended June 30, 2022

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

Stock based compensation expense, net of forfeitures — — — — 2,990 — — — 2,990 527 3,517

Changes in ownership interest adjustment — — — — ( 4,305 ) — — — ( 4,305 ) 4,305 —

Common stock issued related to stock based compensation and other, net 83 — — — ( 159 ) — — — ( 159 ) ( 29 ) ( 188 )

Class A Common Stock repurchases — — — — — 2,065 ( 48,419 ) — ( 48,419 ) ( 48,419 )

Class B Common Stock purchase and cancellation — — ( 2,000 ) — — — — — — ( 54,020 ) ( 54,020 )

Conversion of Class B Common Stock to Class A Common Stock 4,884 1 ( 4,884 ) ( 1 ) — — — — — —

Distributions to noncontrolling interest owners — — — — — — — — — ( 4,606 ) ( 4,606 )

Net income — — — — — — — 250,583 250,583 49,322 299,905

Balance, June 30, 2022 208,729 $ 21 28,710 $ 3 $ 1,647,637 18,283 $ ( 257,837 ) $ ( 291,546 ) $ 1,098,278 $ 170,279 $ 1,268,557

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

Magnolia Oil & Gas Corporation

3 unchanged sentences

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

For the Six Months Ended June 30, 2021

Shares Value Shares Value Shares Value

5 unchanged sentences

Class B Common Stock purchase and cancellation — — ( 10,000 ) ( 2 ) 2 — — — — ( 122,531 ) ( 122,531 )

Non-compete settlement 375 — — — ( 29,758 ) — — — ( 29,758 ) ( 12,316 ) ( 42,074 )

Conversion of Class B Common Stock to Class A Common Stock 15,266 1 ( 15,266 ) ( 1 ) — — — — — — —

Distributions to noncontrolling interest owners — — — — — — — — — ( 431 ) ( 431 )

Net income — — — — — — — 147,689 147,689 59,975 207,664

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

For the Six Months Ended June 30, 2022

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 — — — — 5,349 — — — 5,349 1,053 6,402

Changes in ownership interest adjustment — — — — ( 4,900 ) — — — ( 4,900 ) 4,900 —

Common stock issued related to stock based compensation and other, net 659 — — — ( 5,029 ) — — — ( 5,029 ) ( 1,073 ) ( 6,102 )

Class A Common Stock repurchases — — — — — 4,115 ( 93,238 ) — ( 93,238 ) — ( 93,238 )

Class B Common Stock purchase and cancellation — — ( 5,950 ) — — — — — — ( 138,753 ) ( 138,753 )

Conversion of Class B Common Stock to Class A Common Stock 14,633 2 ( 14,633 ) ( 2 ) — — — — — — —

Distributions to noncontrolling interest owners — — — — — — — — — ( 16,243 ) ( 16,243 )

Dividends declared ($ 0.20 per share)

1 unchanged sentence

Net income — — — — — — — 416,622 416,622 91,903 508,525

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

Balance, June 30, 2022 208,729 $ 21 28,710 $ 3 $ 1,647,637 18,283 $ ( 257,837 ) $ ( 291,546 ) $ 1,098,278 $ 170,279 $ 1,268,557

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

2 unchanged sentences

( In thousands)

Three Months Ended

March 31, 2022 March 31, 2021

Six Months Ended

June 30, 2022 June 30, 2021

CASH FLOWS FROM OPERATING ACTIVITIES

63 unchanged sentences

Summary of Significant Accounting Policies

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.

As of June 30, 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

2 unchanged sentences

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.

Receivables from contracts with customers totaled $ 210.5 million as of June 30, 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

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

The Company 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.

2 unchanged sentences

When the settlement price was below the floor price, the counterparty was required to make a payment to the Company and when the settlement price was above the ceiling price, the Company was required to make a payment to the counterparty.

The Company has elected not to designate any of its derivative instruments as hedging instruments.

The Company elected not to designate any of its derivative instruments as hedging instruments.

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 months ended March 31, 2022 and 2021:

Three Months Ended

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

The following table summarizes the effects of derivative instruments on the Company’s consolidated statements of operations during the three and six months ended June 30, 2022 and 2021:

Three Months Ended Six Months Ended

(In thousands) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Derivative settlements, realized loss $ — $ ( 166 ) $ — $ ( 166 )

1 unchanged sentence

Loss on derivatives, net $ — $ ( 2,004 ) $ — $ ( 2,486 )

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

The Company had no outstanding derivative contracts in place as of June 30, 2022.

Fair Value Measurements

8 unchanged sentences

Recurring Fair Value Measurements

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 March 31, 2022 and December 31, 2021 is as follows:

March 31, 2022 December 31, 2021

The carrying value and fair value of the financial instrument that is not carried at fair value in the accompanying consolidated balance sheets at June 30, 2022 and December 31, 2021 is as follows:

June 30, 2022 December 31, 2021

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

Long-term debt $ 389,216 $ 372,016 $ 388,087 $ 411,500

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 fair value of the 2026 Senior Notes at June 30, 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.

Non-financial assets and

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

Nonrecurring Fair Value Measurements

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.

For further detail, see Note 12—Stock Based Compensation in the Notes to the Consolidated Financial Statements.

There were no other nonrecurring fair value measurements as of June 30, 2022 or December 31, 2021.

Intangible Assets

Non-Compete Agreement

On July 31, 2018 (the “Closing Date”), the Company and EnerVest, separate and apart from the Business Combination, entered into the Non-Compete, which prohibited EnerVest and certain of its affiliates from competing with the Company in the Eagle Ford Shale (the “Market Area”) until July 31, 2022 (“Prohibited Period End Date”).

On July 31, 2018 (the “Closing Date”), the Company and EnerVest, separate and apart from the Business Combination, entered into the Non-Compete, which prohibited EnerVest and certain of its affiliates from competing with the Company in the Eagle Ford Shale until July 31, 2022 (“Prohibited Period End Date”).

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 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.

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 June 30, 2021, the Company amended the 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”).

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

2 unchanged sentences

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

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

(In thousands) June 30, 2022 December 31, 2021

Accrued capital expenditures $ 55,430 $ 29,936

3 unchanged sentences

Long-term Debt

The Company’s debt is comprised of the following:

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

The Company’s long-term debt is comprised of the following:

(In thousands) June 30, 2022 December 31, 2021

Revolving credit facility $ — $ —

6 unchanged sentences

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 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.

administrative agent, collateral agent, issuing bank, and swingline lender.

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.

The Amended and Restated RBL Facility, maturing in February 2026, 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 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.

2 unchanged sentences

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.

As of June 30, 2022, the Company was in compliance with all covenants under the Amended and Restated RBL Facility.

The Company incurred approximately $ 5.5 million of lender and transaction fees related to the modification of which $ 5.1 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 six months ended June 30, 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.

The Company recognized interest expense related to the Amended and Restated RBL Facility and the RBL Facility, as applicable, of $ 1.0 million for each of the three months ended June 30, 2022 and 2021, and $ 3.7 million and $ 2.0 million for the six months ended June 30, 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 June 30, 2022.

The Company did no t have any outstanding borrowings under the Amended and Restated RBL Facility as of June 30, 2022.

2026 Senior Notes

8 unchanged sentences

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 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 March 31, 2022.

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.

After August 1, 2022, the Issuers may redeem all or a part of the 2026 Senior Notes based on principal plus a set premium, as set forth in the Indenture, including any accrued and unpaid interest.

Deferred financing costs related to the issuance of, and the amendment to the Indenture governing, the 2026 Senior Notes 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 Company recognized interest expense related to the 2026 Senior Notes of $ 6.6 million and $ 7.7 million for the three months ended June 30, 2022 and 2021, respectively, and $ 13.1 million and $ 14.0 million for the six months ended June 30, 2022 and 2021, respectively.

At any time, the Issuers may redeem all or a part of the 2026 Senior Notes based on principal plus a set premium, as set forth in the Indenture, including any accrued and unpaid interest.

Commitments and Contingencies

9 unchanged sentences

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.

At June 30, 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 June 30, 2022 or June 30, 2021.

Environmental Matters

4 unchanged sentences

Risks and Uncertainties

The Company’s revenue, profitability, and future growth are substantially dependent upon the prevailing and future prices for oil and natural gas, which depend on numerous factors beyond the Company’s control such as overall oil and natural gas production and inventories in relevant markets, economic conditions, the global political environment, regulatory developments, and competition from other energy sources.

The Company’s revenue, profitability, and future growth are substantially dependent upon the prevailing and future prices for oil and natural gas, which depend on numerous factors beyond the Company’s control such as overall oil and natural gas production and inventories in relevant markets, economic conditions, the global and domestic political environments, regulatory developments, and competition from other energy sources.

Oil and natural gas prices historically have been volatile and may be subject to significant fluctuations in the future.

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 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.

The extent of any further impact of the pandemic, including the emergence and spread of variant strains of COVID-19, on the Company’s industry and business cannot be reasonably predicted at this time.

While oil and natural gas prices have increased since 2020, the extent of any further impact of the pandemic, including the emergence and spread of variant strains of COVID-19, on the Company’s industry and business cannot be reasonably predicted at this time.

Further, Russia’s invasion of Ukraine in the first quarter of 2022, and global sanctions placed on Russia in response, have had and may continue to have a global impact on supply and demand for oil and natural gas.

Magnolia continues to monitor any impacts from the Russia-Ukraine war on the global markets for its commodities.

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

Three Months Ended

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

Three Months Ended Six Months Ended

(In thousands) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Federal $ 25,902 $ 1,645 $ 42,687 $ 1,645

State 1,973 753 3,288 1,152

27,875 2,398 45,975 2,797

Federal — — — —

State — — — —

Income tax expense $ 27,875 $ 2,398 $ 45,975 $ 2,797

2 unchanged sentences

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 March 31, 2022 and 2021 was 8.0 % and 0.4 %, 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 March 31, 2022 and March 31, 2021.

The Company’s effective tax rate for the three months ended June 30, 2022 and 2021 was 8.5 % and 2.0 %, respectively.

The Company’s effective tax rate for the six months ended June 30, 2022 and 2021 was 8.3 % and 1.3 %, 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 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.

As of June 30, 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 six months ended June 30, 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 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.

During the six months ended June 30, 2022, the Magnolia LLC Unit Holders redeemed 14.6 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.

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

1 unchanged sentence

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

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

As of June 30, 2022, the Company’s net deferred tax asset was $ 198.4 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.

1 unchanged sentence

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

As of June 30, 2022, the Company assessed the realizability of the deferred tax assets and recorded a full valuation allowance of $ 198.4 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.

2 unchanged sentences

Class A Common Stock

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.

At June 30, 2022, there were 208.7 million shares of Class A Common Stock issued and 190.4 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.

There is no cumulative voting with respect to the election of directors, which results in the holders of more than 50% of the Company’s outstanding common shares being able to elect all of the directors, subject to

voting obligations under the Stockholder Agreement.

There is no cumulative voting with respect to the election of directors, which

results in the holders of more than 50% of the Company’s outstanding common shares being able to elect all of the directors, subject to voting obligations under the Stockholder Agreement.

In the event of a liquidation, dissolution, or winding up of the Company, the holders of the Class A Common Stock are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having preference over the common stock.

1 unchanged sentence

Class B Common Stock

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

At June 30, 2022, there were 28.7 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.

6 unchanged sentences

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

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.

As of June 30, 2022, the Company had repurchased 17.7 million shares under the program at a cost of $ 246.3 million.

During the six months ended June 30, 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 six months ended June 30, 2022 Magnolia LLC repurchased and subsequently canceled 5.9 million Magnolia LLC Units with an equal number of shares of corresponding Class B Common Stock for $ 138.8 million of cash consideration (the “Class B Common Stock Repurchases”).

During the same period, the Magnolia LLC Unit Holders redeemed 14.6 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.

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 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, the Magnolia LLC Unit Holders 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.

5 unchanged sentences

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 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.

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 June 30, 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.

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

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).

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

As of June 30, 2022, Magnolia owned approximately 86.9 % of the interest in Magnolia LLC and the noncontrolling interest was approximately 13.1 %.

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.

Stock Based Compensation

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 March 31, 2022.

On October 8, 2018, the Company’s board of directors adopted the “Magnolia Oil & Gas Corporation Long Term Incentive Plan” (as amended, 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 June 30, 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 and $ 2.7 million for the three months ended March 31, 2022 and 2021, 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 $ 3.5 million for each of the three months ended June 30, 2022 and 2021, and $ 6.4 million and $ 6.2 million for the six months ended June 30, 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 March 31, 2022.

Restricted Stock Units Performance Stock Units Performance Restricted Stock Units

The following table presents a summary of Magnolia’s unvested RSU, PSU, and PRSU activity for the three months ended June 30, 2022.

Stock Units Performance

Stock Units Performance Restricted

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

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

Granted 45,548 24.30 — — 262 28.34

Vested ( 91,266 ) 11.75 — — ( 39 ) 10.84

Forfeited ( 7,370 ) 14.74 — — — —

Unvested at June 30, 2022 1,053,514 $ 11.83 278,485 $ 6.14 1,261,957 $ 13.29

The following table presents a summary of Magnolia’s unvested RSU, PSU, and PRSU activity for the six months ended June 30, 2022.

Stock Units Performance

Stock Units Performance Restricted

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

Unvested at December 31, 2021 1,187,509 $ 8.94 460,414 $ 9.20 968,654 $ 9.36

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Forfeited ( 14,106 ) 12.66 — — ( 936 ) 11.38

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

Unvested at June 30, 2022 1,053,514 $ 11.83 278,485 $ 6.14 1,261,957 $ 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.

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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.

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.

The aggregate fair value of RSUs that vested during the six months ended June 30, 2022 and 2021 was $ 10.2 million and $ 5.8 million, respectively.

Unrecognized compensation expense related to unvested RSUs as of June 30, 2022 was $ 9.6 million, which the Company expects to recognize over a weighted average period of 2.6 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.

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 aggregate fair value of PRSU awards that vested during the six months ended June 30, 2022 was $ 4.8 million.

Unrecognized compensation expense related to unvested PRSUs as of June 30, 2022 was $ 12.9 million, which the Company expects to recognize over a weighted average period of 2.4 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.

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.

The aggregate fair value of PSU awards that vested during the six months ended June 30, 2022 and 2021 was $ 5.5 million and $ 0.2 million, respectively.

Unrecognized compensation expense related to unvested PSUs as of June 30, 2022 was $ 0.3 million, which the Company expects to recognize over a weighted average period of 0.6 years.

The grant date fair values of the PRSUs granted during the six months ended June 30, 2022 and 2021, were $ 9.7 million and $ 9.5 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.

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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

Six Months Ended

PRSU Grant Date Fair Value Assumptions June 30, 2022 June 30, 2021

Expected term (in years)

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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

Three Months Ended Six Months Ended

(In thousands, except per share data) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Net income attributable to Class A Common Stock $ 250,583 $ 84,445 $ 416,622 $ 147,689

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$ 1.32 $ 0.48 $ 2.22 $ 0.85

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.

For the three months ended June 30, 2022 and 2021, the Company excluded 33.8 million and 66.1 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 six months ended June 30, 2022 and 2021, the Company excluded 39.0 million and 73.1 million, respectively, 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 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 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 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.

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

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.

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.

As of June 30, 2022, no entity held more than 10% of the Company’s common stock or qualified as a principal owner of the Company, as defined in ASC 850, “Related Party Disclosures.”

Subsequent Events

On August 2, 2022, the Company’s board of directors declared a quarterly cash dividend of $ 0.10 per share of Class A Common Stock, and Magnolia LLC declared a cash distribution of $ 0.10 per Magnolia LLC Unit to each holder of Magnolia LLC Units, each payable on September 1, 2022 to shareholders or members of record, as applicable, as of August 12, 2022.

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