What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-04 compared with 2022-11-02 · 77 added, 150 removed, 130 unchanged (64% of the section changed)

7 unchanged sentences

Important factors that could cause actual results to differ materially from the Company’s expectations include, but are not limited to, Magnolia’s assumptions about:

• the economic effects of the COVID-19 pandemic and actions taken by federal, state and local governments and other third parties in response to the pandemic;

• legislative, regulatory, or policy changes, including those following the change in presidential administrations;

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• production and reserve levels;

• the timing and extent of the Company’s success in discovering, developing, producing and estimating reserves;

• geopolitical and business conditions in key regions of the world;

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

As of September 30, 2022, Magnolia operated two rigs.

The Company’s gradual and measured approach toward both the appraisal and development of the Giddings area has created operating efficiencies leading to higher production growth this year.

COVID-19 Pandemic and Market Conditions Update

The COVID-19 pandemic and related economic repercussions have created significant volatility, uncertainty, and turmoil in the oil and natural gas industry.

As the global economy continues to recover from the effects of the COVID-19 pandemic, economic indicators have continued to strengthen.

However, the economy has begun to experience elevated inflation levels as a result of global supply and demand imbalances.

Inflationary pressures and labor shortages could result in further increases to our operating and capital costs.

As of March 31, 2023, Magnolia operated two rigs.

Market Conditions Update

After Magnolia experienced record operating margins during 2022, natural gas prices have significantly declined and oil prices have weakened, while material and labor costs remained elevated.

This has resulted in lower revenue and lower operating margins.

As the operating environment continues to evolve, the Company took actions to reduce its capital spending to better reflect the current cost and commodity environment for the remainder of the year.

The capital spending level is in line with the principles of Magnolia’s business model and is expected to provide the Company more operational flexibility going forward.

Business Overview

As of September 30, 2022, Magnolia’s assets in South Texas included 43,327 gross (23,622 net) acres in the Karnes area, and 638,153 gross (448,263 net) acres in the Giddings area.

As of September 30, 2022, Magnolia held an interest in approximately 2,096 gross (1,336 net) wells, with total production of 81.5 thousand and 75.9 thousand barrels of oil equivalent per day for the three and nine months ended September 30, 2022, respectively.

During the third quarter of 2022, Magnolia was running a two-rig program.

Magnolia recognized net income attributable to Class A Common Stock of $245.5 million and $662.1 million, or $1.29 and $3.51 per diluted common share, for the three and nine months ended September 30, 2022, respectively.

Magnolia recognized net income of $287.0 million and $795.5 million, which includes a noncontrolling interest of $41.5 million and $133.4 million related to the Magnolia LLC Units (and corresponding shares of Class B Common Stock) held by certain affiliates of EnerVest, for the three and nine months ended September 30, 2022, respectively.

During the nine months ended September 30, 2022, the Company declared cash dividends to holders of its Class A Common Stock totaling $56.4 million.

As of March 31, 2023, Magnolia’s assets in South Texas included 42,451 gross (22,785 net) acres in the Karnes area, and 645,397 gross (459,246 net) acres in the Giddings area.

As of March 31, 2023, Magnolia held an interest in approximately 2,139 gross (1,370 net) wells, with total production of 79.3 thousand barrels of oil equivalent per day for the three months ended March 31, 2023.

During the first quarter of 2023, Magnolia was running a two-rig program.

Magnolia recognized net income attributable to Class A Common Stock of $96.3 million, or $0.50 per diluted common share, for the three months ended March 31, 2023.

Magnolia recognized net income of $106.7 million, which includes a noncontrolling interest of $10.3 million related to the Magnolia LLC Units (and corresponding shares of Class B Common Stock) held by certain affiliates of EnerVest, for the three months ended March 31, 2023.

During the three months ended March 31, 2023, the Company declared cash dividends to holders of its Class A Common Stock totaling $22.4 million.

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

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

As of September 30, 2022, the Company had repurchased 20.7 million shares under the program at a cost of $308.6 million and had 9.3 million shares of Class A Common Stock re maining under its current repurchase authorization.

During the nine months ended September 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 nine months ended September 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”).

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

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.

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

As of September 30, 2022, Magnolia owned approximately 86.7% of the interest in Magnolia LLC and the noncontrolling interest was approximately 13.3%.

As of March 31, 2023, the Company had repurchased 23.5 million shares under the program at a cost of $369.2 million and had 6.5 million shares of Class A Common Stock remaining under its current repurchase authorization.

As of March 31, 2023, Magnolia owned approximately 89.7% of the interest in Magnolia LLC and the noncontrolling interest was approximately 10.3%.

Results of Operations

Factors Affecting the Comparability of the Historical Financial Results

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

• On February 16, 2022, Magnolia Operating, as borrower, amended and restated the RBL Facility (“Amended and Restated RBL Facility”) in its entirety, which will now mature in February 2026.

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

• During the second quarter of 2021, the Company amended the Non-Compete (the “Second Non-Compete Amendment”), which modified the term of the Non-Compete to end on June 30, 2021.

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

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

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

Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

Oil, Natural Gas and NGL Sales Revenues.

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Three Months Ended

(In thousands, except per unit data) September 30, 2022 September 30, 2021

(In thousands, except per unit data) March 31, 2023 March 31, 2022

Oil (MBbls) 3,221 2,816

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NGLs (per barrel) 22.90 36.94

Oil revenues were 66% and 69% of the Company’s total revenues for the three months ended September 30, 2022 and 2021, respectively.

Oil production was 45% and 46% of total production volume for the three months ended September 30, 2022 and 2021, respectively.

Oil revenues for the three months ended September 30, 2022 were $121.6 million higher than for the three months ended September 30, 2021.

A 37% increase in average prices increased third quarter 2022 revenues by $71.9 million compared to the same period in the prior year, while a 19% increase in oil production increased revenues by $49.7 million.

Natural gas revenues were 20% and 15% of the Company’s total revenues for the three months ended September 30, 2022 and 2021, respectively.

Natural gas production was 30% and 31% of total production volume for the three months ended September 30, 2022 and 2021, respectively.

Natural gas revenues for the three months ended September 30, 2022 were $56.3 million higher than the three months ended September 30, 2021.

A 96% increase in average prices increased third quarter 2022 revenues by $41.8 million compared to the same period in the prior year, while a 17% increase in natural gas production increased revenues by $14.5 million.

NGL revenues were 14% and 16% of the Company’s total revenues for the three months ended September 30, 2022 and 2021, respectively.

NGL production was 25% and 23% of total production volume for the three months ended September 30, 2022 and 2021, respectively.

NGL revenues for the three months ended September 30, 2022 were $20.0 million higher than the three months ended September 30, 2021.

A 10% increase in average prices increased third quarter 2022 revenues by $4.4 million compared to the same period in the prior year, while a 31% increase in NGL production increased revenues by $15.6 million.

Oil revenues were 78% and 70% of the Company’s total revenues for the three months ended March 31, 2023 and 2022, respectively.

Oil production was 45% and 44% of total production volume for the three months ended March 31, 2023 and 2022, respectively.

Oil revenues for the three months ended March 31, 2023 were $23.5 million lower than for the three months ended March 31, 2022.

A 20% decrease in average prices decreased first quarter 2023 revenues by $53.6 million compared to the same period in the prior year, partially offset by a 14% increase in oil production which increased revenues by $30.1 million.

Natural gas revenues were 9% and 14% of the Company’s total revenues for the three months ended March 31, 2023 and 2022, respectively.

Natural gas production was 30% and 32% of total production volume for the three months ended March 31, 2023 and 2022, respectively.

Natural gas revenues for the three months ended March 31, 2023 were $28.8 million lower than the three months ended March 31, 2022.

A 52% decrease in average prices decreased first quarter 2023 revenues by $29.4 million compared to the same period in the prior year, partially offset by a 2% increase in natural gas production which increased revenues by $0.6 million.

NGL revenues were 13% and 16% of the Company’s total revenues for the three months ended March 31, 2023 and 2022, respectively.

NGL production was 25% and 24% of total production volume for the three months ended March 31, 2023 and 2022, respectively.

NGL revenues for the three months ended March 31, 2023 were $17.1 million lower than the three months ended March 31, 2022.

A 38% decrease in average prices decreased first quarter 2023 revenues by $22.3 million compared to the same period in the prior year, partially offset by a 14% increase in NGL production which increased revenues by $5.2 million.

Operating Expenses and Other Income (Expense) .

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Three Months Ended

(In thousands, except per unit data) September 30, 2022 September 30, 2021

(In thousands, except per unit data) March 31, 2023 March 31, 2022

Operating Expenses:

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Depreciation, depletion and amortization 70,701 53,106

Impairment of oil and natural gas properties 15,735 —

General and administrative expenses 19,766 17,070

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Other Income (Expense):

Interest expense, net $ (5,263) $ (7,474)

Loss on derivatives, net — (623)

Interest income (expense), net $ 487 $ (9,357)

Other income (expense), net (1,138) 207

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Depreciation, depletion and amortization 9.90 8.21

Impairment of oil and natural gas properties 2.20 —

General and administrative expenses 2.77 2.64

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

Lease operating expenses for the three months ended September 30, 2022 were $11.1 million, or $0.82 per boe, higher compared to the corresponding 2021 period, due to an increase in costs including operating and maintenance costs, workover activities and additional non-operated activities.

Lease operating expenses for the three months ended March 31, 2023 were $13.6 million, or $1.48 per boe, higher compared to the corresponding 2022 period, due to increased activity, an increase in costs including operating and maintenance costs, workover activities and additional non-operated activities.

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

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

The gathering, transportation and processing costs for the three months ended September 30, 2022 were $7.8 million, or $0.71 per boe, higher than the three months ended September 30, 2021, primarily due to increased natural gas production and higher prices.

The gathering, transportation and processing costs for the three months ended March 31, 2023 were $3.1 million, or $0.67 per boe, lower than the three months ended March 31, 2022, primarily due to lower natural gas and NGL prices which resulted in lower processing costs.

Taxes other than income include production and ad valorem taxes.

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

Taxes other than income for the three months ended September 30, 2022 were $12.5 million, or $1.28 per boe, higher compared to the three months ended September 30, 2021, primarily due to an increase in oil, natural gas, and NGL revenues.

Depreciation, depletion and amortization (“DD&A”) during the three months ended September 30, 2022 was $21.0 million, or $1.46 per boe, higher than the three months ended September 30, 2021 due to increased production and a higher depreciable cost basis.

General and administrative expenses during the three months ended September 30, 2022 were $4.9 million, or $0.25 per boe, higher than the three months ended September 30, 2021, primarily driven by higher corporate payroll expenses related to increased employee headcount and professional service fees.

Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021

Oil, Natural Gas and NGL Sales Revenues.

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

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

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

Nine Months Ended

(In thousands, except per unit data) September 30, 2022 September 30, 2021

Oil (MBbls) 9,216 8,346

Natural gas (MMcf) 38,205 31,617

NGLs (MBbls) 5,134 4,097

Total (Mboe) 20,718 17,713

Average daily production:

Oil (Bbls/d) 33,760 30,573

Natural gas (Mcf/d) 139,947 115,812

NGLs (Bbls/d) 18,806 15,008

Total (boe/d) 75,890 64,883

Oil revenues $ 912,702 $ 531,300

Natural gas revenues 242,049 112,758

Natural gas liquids revenues 190,700 102,140

Total revenues $ 1,345,451 $ 746,198

Average Price:

Oil (per barrel) $ 99.03 $ 63.66

Natural gas (per Mcf) 6.34 3.57

NGLs (per barrel) 37.14 24.93

Oil revenues were 68% and 71% of the Company’s total revenues for the nine months ended September 30, 2022 and 2021, respectively.

Oil production was 44% and 47% of total production volume for the nine months ended September 30, 2022 and 2021, respectively.

Oil revenues for the nine months ended September 30, 2022 were $381.4 million higher than the nine months ended September 30, 2021.

A 56% increase in average prices increased revenues by $295.2 million during the nine months ended September 30, 2022 compared to the same period in the prior year, while a 10% increase in oil production increased revenues by $86.2 million.

Natural gas revenues were 18% and 15% of the Company’s total revenues for the nine months ended September 30, 2022 and 2021, respectively.

Natural gas production was 31% and 30% of total production volume for the nine months ended September 30, 2022 and 2021, respectively.

Natural gas revenues for the nine months ended September 30, 2022 were $129.3 million higher than the nine months ended September 30, 2021.

A 78% increase in average prices increased revenues by $87.5 million during the nine months ended September 30, 2022 compared to the same period in the prior year, while a 21% increase in natural gas production increased revenues by $41.8 million.

NGL revenues were 14% of the Company’s total revenues for each of the nine months ended September 30, 2022 and 2021.

NGL production was 25% and 23% of total production volume for the nine months ended September 30, 2022 and 2021, respectively.

NGL revenues for the nine months ended September 30, 2022 were $88.6 million higher than the nine months ended September 30, 2021.

A 49% increase in average prices increased revenues by $50.1 million during the nine months ended September 30, 2022 compared to the same period in the prior year, while a 25% increase in NGL production increased revenues by $38.5 million.

Operating Expenses and Other Income (Expense) .

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

Nine Months Ended

(In thousands, except per unit data) September 30, 2022 September 30, 2021

Operating Expenses:

Lease operating expenses $ 96,057 $ 64,957

Gathering, transportation and processing 51,518 32,069

Taxes other than income 74,917 38,657

Exploration expenses 10,119 2,440

Asset retirement obligations accretion 2,404 4,065

Depreciation, depletion and amortization 179,331 134,268

Amortization of intangible assets — 9,346

General and administrative expenses 55,226 59,816

Total operating expenses $ 469,572 $ 345,618

Other Income (Expense):

Interest expense, net $ (21,637) $ (23,519)

Loss on derivatives, net — (3,110)

Other income, net 6,579 48

Total other expense, net $ (15,058) $ (26,581)

Average Operating Costs per boe:

Lease operating expenses $ 4.64 $ 3.67

Gathering, transportation and processing 2.49 1.81

Taxes other than income 3.62 2.18

Exploration expenses 0.49 0.14

Asset retirement obligations accretion 0.12 0.23

Depreciation, depletion and amortization 8.66 7.58

Amortization of intangible assets — 0.53

General and administrative expenses 2.67 3.38

Lease operating expenses for the nine months ended September 30, 2022 were $31.1 million, or $0.97 per boe, higher compared to the corresponding 2021 period, due to an increase in costs including operating and maintenance costs, workover activities, and additional non-operated activities.

The gathering, transportation and processing costs for the nine months ended September 30, 2022 were $19.4 million, or $0.68 per boe, higher than the nine months ended September 30, 2021, primarily due to increased natural gas production and higher prices.

Taxes other than income for the nine months ended September 30, 2022 were $36.3 million, or $1.44 per boe, higher compared to the nine months ended September 30, 2021, primarily due to an increase in oil, natural gas, and NGL revenues.

The exploration expenses for the nine months ended September 30, 2022 were $7.7 million, or $0.35 per boe, higher than the nine months ended September 30, 2021, due to the purchase of seismic licenses and increased seismic surveying costs.

DD&A during the nine months ended September 30, 2022 was $45.1 million, or $1.08 per boe, higher than the nine months ended September 30, 2021 due to increased production and a higher depreciable cost basis.

For the nine months ended September 30, 2022, the Company did not recognize any amortization of intangible assets, because the intangible assets were fully amortized in June 2021 as a result of the termination of the Non-Compete.

During the nine months ended September 30, 2021, the Company recognized $9.3 million of amortization of intangible assets.

General and administrative expenses during the nine months ended September 30, 2022 were $4.6 million, or $0.71 per boe, lower than the nine months ended September 30, 2021, primarily driven by the reduction in costs due to the termination of the

Services Agreement on June 30, 2021, partially offset by higher corporate payroll expenses related to increased employee headcount and professional service fees.

Other income (expense), net, during the nine months ended September 30, 2022 was $6.6 million.

This is primarily comprised of the receipt of an earnout payment in the second quarter of 2022 associated with the sale of the Company’s 35% membership interest in Ironwood Eagle Ford Midstream, LLC in 2020.

Taxes other than income for the three months ended March 31, 2023 were $1.6 million, or $0.53 per boe, lower compared to the three months ended March 31, 2022, primarily due to a decrease in oil, natural gas, and NGL revenues.

Exploration expenses are geological and geophysical costs that include seismic surveying costs, costs of unsuccessful exploratory dry wells, costs of expired or abandoned leases, and delay rentals.

The exploration expenses for the three months ended March 31, 2023 were $5.5 million, or $0.86 per boe, lower than the three months ended March 31, 2022, due to decreased seismic surveying costs.

Depreciation, depletion and amortization (“DD&A”) during the three months ended March 31, 2023 was $17.6 million, or $1.69 per boe, higher than the three months ended March 31, 2022 due to increased production and a higher depreciable cost basis.

During the three months ended March 31, 2023, the Company recognized a $15.7 million proved property impairment related to the natural gas well located in St.

Martin Parish, Louisiana.

General and administrative expenses during the three months ended March 31, 2023 were $2.7 million, or $0.13 per boe, higher than the three months ended March 31, 2022, primarily driven by higher corporate payroll expenses.

Interest income, net, during the three months ended March 31, 2023 was $0.5 million as compared to $9.4 million of interest expense during the three months ended March 31, 2022, driven by higher interest income realized during 2023.

Income tax expense.

The following table summarizes the Company’s income tax expense for the periods indicated.

Three Months Ended

(In thousands) March 31, 2023 March 31, 2022

Current income tax expense $ 4,202 $ 18,100

Deferred income tax expense 15,403 —

Income tax expense $ 19,605 $ 18,100

For the three months ended March 31, 2023, income tax expense was $1.5 million higher than the three months ended March 31, 2022, comprised of movements in both current and deferred income taxes.

This was primarily driven by $15.4 million of deferred income tax expense recognized in 2023 which was not recognized in 2022 due to the existence of a full valuation allowance against net deferred tax assets.

This was partially offset by a $13.9 million decrease in current income tax expense due to lower taxable income.

As of December 31, 2022, the Company released the valuation allowance against net deferred tax assets.

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, 2023, Magnolia has no valuation allowance as the Company concluded that it is more likely than not that it will be able to realize all of its deferred tax assets.

See Note 9—Income Taxes in the Notes to the Company’s consolidated financial statements included in this Quarterly Report on Form 10-Q for further detail.

Liquidity and Capital Resources

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The Company’s primary uses of cash have been for development of the Company’s oil and natural gas properties, returning capital to shareholders, bolt-on acquisitions of oil and natural gas properties, and general working capital needs.

The Company may also utilize borrowings under other various financing sources available to it, including its Amended and Restated RBL Facility and the issuance of equity or debt securities through public offerings or private placements, to fund Magnolia’s acquisitions and long-term liquidity needs.

The Company may also utilize borrowings under other various financing sources available to it, including its RBL Facility and the issuance of equity or debt securities through public offerings or private placements, to fund Magnolia’s acquisitions and long-term liquidity needs.

Magnolia’s ability to complete future offerings of equity or debt securities and the timing of these offerings will depend upon various factors, including prevailing market conditions and the Company’s financial condition.

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

As of September 30, 2022, the Company had $400.0 million of principal debt related to the 2026 Senior Notes outstanding and no outstanding borrowings related to the Amended and Restated RBL Facility.

As of September 30, 2022, the Company had $1,139.5 million of liquidity comprised of the $450.0 million of borrowing base capacity of the Amended and Restated RBL Facility, and $689.5 million of cash and cash equivalents.

As of March 31, 2023, the Company had $400.0 million of principal debt related to the 2026 Senior Notes outstanding and no outstanding borrowings related to the RBL Facility.

As of March 31, 2023, the Company had $1,117.3 million of liquidity comprised of the $450.0 million of borrowing base capacity of the RBL Facility, and $667.3 million of cash and cash equivalents.

Cash and Cash Equivalents

At September 30, 2022, Magnolia had $689.5 million of cash and cash equivalents.

At March 31, 2023, Magnolia had $667.3 million of cash and cash equivalents.

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

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

Nine Months Ended

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

Three Months Ended

(In thousands) March 31, 2023 March 31, 2022

SOURCES OF CASH AND CASH EQUIVALENTS

6 unchanged sentences

Class B Common Stock purchases and cancellations — (84,733)

Non-compete settlement — (42,074)

Dividends paid (22,578) (37,174)

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Operating cash flows are the Company’s primary source of liquidity and are impacted, in the short- and long-term, by oil and natural gas prices.

The factors that determine operating cash flows are largely the same as those that affect net earnings, with the exception of certain non-cash expenses such as DD&A, stock based compensation, amortization of deferred financing costs, the non-cash portion of exploration expenses, and asset retirement obligations accretion.

Net cash provided by operating activities totaled $1,028.7 million and $527.9 million for the nine months ended September 30, 2022 and 2021, respectively.

During the nine months ended September 30, 2022, cash provided by operating activities was positively impacted by increased oil, natural gas, and NGL prices, partially offset by higher operating expenses and income tax payments.

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

Net cash provided by operating activities totaled $219.8 million and $238.9 million for the three months ended March 31, 2023 and 2022, respectively.

During the three months ended March 31, 2023, cash provided by operating activities was negatively impacted by a decrease in realized oil and natural gas prices, partially offset by the timing of collections and payments.

Uses of Cash and Cash Equivalents

The Company made individually insignificant bolt-on acquisitions during each of the nine months ended September 30, 2022 and 2021.

The Company made individually insignificant bolt-on acquisitions and purchase price adjustments during each of the three months ended March 31, 2023 and 2022.

Additions to Oil and Natural Gas Properties

The following table sets forth the Company’s capital expenditures for the periods presented:

Three Months Ended Nine Months Ended

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

Three Months Ended

(In thousands) March 31, 2023 March 31, 2022

Drilling and completion $ 139,730 $ 83,357

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Total capital expenditures $ 138,645 $ 84,230

During the third quarter of 2022, Magnolia was running a two-rig program.

During the first quarter of 2023, Magnolia was running a two-rig program.

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

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

During the nine months ended September 30, 2022 and 2021, the Company repurchased 6.6 million and 6.0 million shares for a total cost of approximately $144.0 million and $73.8 million, respectively.

During the nine months ended September 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.

During the three months ended March 31, 2023 and 2022, the Company repurchased 2.4 million and 1.5 million shares for a total cost of approximately $51.3 million and $33.3 million, respectively.

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 nine months ended September 30, 2022 and 2021, Magnolia LLC repurchased and subsequently canceled 5.9 million and 13.0 million Magnolia LLC Units with an equal number of shares of corresponding Class B Common Stock for $138.8 million and $171.7 million of cash consideration, respectively.

As of September 30, 2022, Magnolia owned approximately 86.7% of the interest in Magnolia LLC and the noncontrolling interest was approximately 13.3%.

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

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

On June 30, 2021, as part of the Second Non-Compete Amendment, the Company paid $24.9 million in cash in lieu of delivering the remaining 1.6 million shares of Class A Common Stock.

During the nine months ended September 30, 2022, the Company declared cash dividends to holders of its Class A Common Stock totaling $56.4 million, of which $56.2 million was paid as of September 30, 2022.

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, respectively.

As of March 31, 2023, Magnolia owned approximately 89.7% of the interest in Magnolia LLC and the noncontrolling interest was approximately 10.3%.

During the three months ended March 31, 2023, the Company declared cash dividends to holders of its Class A Common Stock totaling $22.4 million.

During the same time period, cash paid for dividends was $22.6 million, inclusive of dividends on vested non-participating securities.

Additionally, $2.5 million was distributed to the Magnolia LLC Unit Holders.

During the nine months ended September 30, 2021, the Company declared cash dividends to holders of its Class A Common Stock totaling $14.2 million, of which $14.1 million was paid as of September 30, 2021.

During the three months ended March 31, 2022, the Company declared cash dividends to holders of its Class A Common Stock totaling $37.3 million, of which $37.2 million was paid as of March 31, 2022.

Additionally, $8.6 million was distributed to the Magnolia LLC Unit Holders.

1 unchanged sentence

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What changed 10-Q

Item 2. Management’s Discussion and Analysis