What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-08 compared with 2023-11-02 · 125 added, 166 removed, 326 unchanged (47% of the section changed)

3 unchanged sentences

(In thousands)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

ASSETS (Unaudited) (Audited)

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TOTAL ASSETS $ 2,807,942 $ 2,756,216

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES AND EQUITY

CURRENT LIABILITIES

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COMMITMENTS AND CONTINGENCIES ( Note 8)

STOCKHOLDERS’ EQUITY

Class A Common Stock, $ 0.0001 par value, 1,300,000 shares authorized, 215,177 shares issued and 181,494 shares outstanding in 2024 and 214,497 shares issued and 183,164 shares outstanding in 2023

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Total equity 1,897,784 1,882,668

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,652,493 $ 2,572,585

TOTAL LIABILITIES AND EQUITY $ 2,807,942 $ 2,756,216

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

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(In thousands, except per share data)

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Three Months Ended

March 31, 2024 March 31, 2023

Oil revenues $ 259,182 $ 239,122

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Interest income (expense), net ( 2,312 ) 487

Other income (expense), net ( 479 ) ( 166 ) 7,643 6,579

Total other income (expense), net 555 ( 5,429 ) 8,015 ( 15,058 )

Other expense, net ( 4,313 ) ( 1,138 )

Total other expense, net ( 6,625 ) ( 651 )

INCOME BEFORE INCOME TAXES 117,933 126,282

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Magnolia Oil & Gas Corporation

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

Consolidated Statements of Changes in Equity (Unaudited)

(In thousands)

Common Stock Class B

Common Stock Additional Paid In Capital Treasury Stock Retained Earnings/ (Accumulated Deficit) Total Stockholders’ Equity Noncontrolling Interest Total

For the Three Months Ended September 30, 2022

Common Stock Additional Paid In Capital Treasury Stock Retained Earnings Total Stockholders’ Equity Noncontrolling Interest Total

For the Three Months Ended March 31, 2023

Shares Value Shares Value Shares Value

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

Stock based compensation expense, net of forfeitures — — — — 3,004 — — — 3,004 458 3,462

Changes in ownership interest adjustment — — — — 5,914 — — — 5,914 ( 5,914 ) —

Common stock issued related to stock based compensation and other, net 29 — — — ( 164 ) — — — ( 164 ) ( 25 ) ( 189 )

Class A Common Stock repurchases — — — — — 3,000 ( 62,367 ) — ( 62,367 ) — ( 62,367 )

Dividends declared ($ 0.10 per share)

— — — — ( 19,112 ) — — — ( 19,112 ) — ( 19,112 )

Distributions to noncontrolling interest owners — — — — — — — — — ( 7,608 ) ( 7,608 )

Net income — — — — — — — 245,477 245,477 41,486 286,963

Balance, September 30, 2022

208,758 $ 21 28,710 $ 3 $ 1,637,279 21,283 $ ( 320,204 ) $ ( 46,069 ) $ 1,271,030 $ 198,676 $ 1,469,706

For the Three Months Ended September 30, 2023

Balance, June 30, 2023 214,400 $ 21 21,827 $ 2 $ 1,731,059 26,334 $ ( 425,604 ) $ 329,011 $ 1,634,489 $ 175,369 $ 1,809,858

Balance, December 31, 2022 213,727 $ 21 21,827 $ 2 $ 1,719,875 21,684 $ ( 329,512 ) $ 185,669 $ 1,576,055 $ 164,136 $ 1,740,191

Stock based compensation expense, net of forfeitures — — — — 3,386 — — — 3,386 386 3,772

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Net income — — — — — — — 96,335 96,335 10,342 106,677

Balance, September 30, 2023

214,415 $ 21 21,827 $ 2 $ 1,738,668 28,833 $ ( 483,745 ) $ 409,230 $ 1,664,176 $ 182,981 $ 1,847,157

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

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 Retained Earnings/ (Accumulated Deficit) Total Stockholders’ Equity Noncontrolling Interest Total

For the Nine Months Ended September 30, 2022

Shares Value Shares Value Shares Value

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 — — — — 8,353 — — — 8,353 1,511 9,864

Changes in ownership interest adjustment — — — — 1,013 — — — 1,013 ( 1,013 ) —

Common stock issued related to stock based compensation and other, net 688 — — — ( 5,192 ) — — — ( 5,192 ) ( 1,098 ) ( 6,290 )

Class A Common Stock repurchases — — — — — 7,115 ( 155,605 ) — ( 155,605 ) — ( 155,605 )

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 ) — — — — — — —

Dividends declared ($ 0.30 per share)

— — — — ( 56,395 ) — — — ( 56,395 ) — ( 56,395 )

Distributions to noncontrolling interest owners — — — — — — — — — ( 23,852 ) ( 23,852 )

Net income — — — — — — — 662,099 662,099 133,389 795,488

Balance, September 30, 2022

Balance, March 31, 2023

214,355 $ 21 21,827 $ 2 $ 1,720,487 24,084 $ ( 380,783 ) $ 259,636 $ 1,599,363 $ 167,714 $ 1,767,077

For the Nine Months Ended September 30, 2023

For the Three Months Ended March 31, 2024

Balance, December 31, 2023 214,497 $ 21 21,827 $ 2 $ 1,743,930 31,333 $ ( 538,445 ) $ 486,162 $ 1,691,670 $ 190,998 $ 1,882,668

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Net income — — — — — — — 85,086 85,086 12,511 97,597

Balance, September 30, 2023

Balance, March 31, 2024

215,177 $ 22 21,827 $ 2 $ 1,745,157 33,683 $ ( 591,175 ) $ 547,261 $ 1,701,267 $ 196,517 $ 1,897,784

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( In thousands)

Nine Months Ended

September 30, 2023 September 30, 2022

Three Months Ended

March 31, 2024 March 31, 2023

CASH FLOWS FROM OPERATING ACTIVITIES

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Amortization of deferred financing costs 1,089 1,042

(Gain) on sale of assets ( 3,946 ) —

Deferred income tax expense 8,708 15,403

Loss on revaluation of contingent consideration 4,205 —

Stock based compensation 4,658 3,772

Other 2,921 —

Changes in operating assets and liabilities:

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Class A Common Stock repurchases ( 51,201 ) ( 45,844 )

Class B Common Stock purchases and cancellations — ( 138,753 )

Dividends paid ( 24,010 ) ( 22,578 )

Cash paid for debt modification — ( 5,494 )

Distributions to noncontrolling interest owners ( 2,837 ) ( 2,510 )

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Cash and cash equivalents – End of period $ 399,317 $ 667,284

SUPPLEMENTAL CASH FLOW INFORMATION:

Supplemental cash items:

Cash paid for income taxes $ 26,628 $ 60,906

Cash paid for interest 25,763 26,060

Supplemental non-cash investing and financing activity:

Accrued capital expenditures $ 46,235 $ 44,088

Supplemental non-cash lease operating activity:

Right-of-use assets obtained in exchange for operating lease obligations $ 12,009 $ 3,773

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

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Magnolia Oil & Gas Corporation (the “Company” or “Magnolia”) is an independent oil and natural gas company engaged in the acquisition, development, exploration, and production of oil, natural gas, and natural gas liquid (“NGL”) reserves.

The Company’s oil and natural gas properties are located primarily in Karnes County and the Giddings area in South Texas where the Company targets the Eagle Ford Shale and Austin Chalk formations.

The Company’s oil and natural gas properties are located primarily in the Karnes and Giddings areas in South Texas where the Company targets the Eagle Ford Shale and Austin Chalk formations.

Magnolia’s objective is to generate stock market value over the long-term through consistent organic production growth, high full cycle operating margins, an efficient capital program with short economic paybacks, significant free cash flow after capital expenditures, and effective reinvestment of free cash flow.

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Operating results for the periods presented are not necessarily indicative of expected results for the full year.

Certain reclassifications of prior period financial statements have been made to conform to current reporting practices.

The consolidated financial statements include the accounts of the Company and its subsidiaries after elimination of intercompany transactions and balances.

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Summary of Significant Accounting Policies

As of September 30, 2023, 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 2022 Form 10-K.

As of March 31, 2024, 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 2023 Form 10-K.

Recent Accounting Pronouncements

In December 2023, the Financial Standards Accounting Board (FASB) issued ASU 2023-09 “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures” to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid.

ASU 2023-09 is effective for annual periods beginning January 1, 2025, with early adoption permitted.

The Company is currently evaluating the potential effect that the updated standard will have on its financial statement disclosures.

Revenue Recognition

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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 $ 126.2 million as of September 30, 2023 and $ 138.6 million as of December 31, 2022.

Receivables from contracts with customers totaled $ 125.3 million as of March 31, 2024 and $ 124.4 million as of December 31, 2023.

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 2023 Form 10-K.

2024 Acquisitions

On July 31, 2023, the Company completed the acquisition of certain oil and natural gas assets located in the Giddings area for approximately $ 40.0 million, subject to customary closing adjustments.

The transaction was accounted for as an asset acquisition.

In September 2023, the Company entered into a definitive purchase agreement to acquire certain oil and gas producing properties including leasehold and mineral interests in the Giddings area for $ 300 million, subject to customary purchase price adjustments.

The seller may also receive up to a maximum of $ 40 million in additional contingent cash consideration through December 2025 based on future commodity prices.

During the three months ended September 30, 2023, the Company paid a $ 22.5 million deposit related to this acquisition.

The remaining consideration will be funded with cash on hand.

The transaction is expected to close in the fourth quarter of 2023 and be accounted for as an asset acquisition.

On April 30, 2024, the Company acquired certain oil and gas producing properties including leasehold and mineral interests in the Giddings area for approximately $ 125.0 million, subject to customary purchase price adjustments.

During the three months ended March 31, 2024, the Company paid a $ 12.5 million deposit related to this acquisition.

The remaining consideration was funded at closing with cash on hand.

2023 Acquisitions

In November 2023, the Company acquired certain oil and gas producing properties including leasehold and mineral interests in the Giddings area for $ 264.1 million, subject to customary purchase price adjustments.

The seller may also receive up to a maximum of $ 40.0 million in additional contingent cash consideration through January 2026 based on future commodity prices.

For more information regarding the contingent consideration, refer to Note 5—Fair Value Measurements .

In July 2023, the Company completed the acquisition of certain oil and natural gas assets located in the Giddings area for $ 41.8 million.

The Company accounted for the aforementioned acquisitions as asset acquisitions.

Fair Value Measurements

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The inputs used in determination of fair value require significant judgment and estimation.

Recurring Fair Value Measurements

The carrying value and fair value of the financial instrument that is not carried at fair value in the Company’s consolidated balance sheets at September 30, 2023 and December 31, 2022 are as follows:

September 30, 2023 December 31, 2022

Fair Value of Financial Instruments

The carrying value and fair value of the financial instrument that is not carried at fair value in the Company’s consolidated balance sheets at March 31, 2024 and December 31, 2023 are as follows:

March 31, 2024 December 31, 2023

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

Long-term debt $ 393,480 $ 393,639 $ 392,839 $ 394,356

The fair value of the 2026 Senior Notes at September 30, 2023 and December 31, 2022 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, 2024 and December 31, 2023 is based on unadjusted quoted prices in an active market, which is considered a Level 1 input in the fair value hierarchy.

Recurring Fair Value Measurements

In November 2023, the Company acquired certain oil and gas producing properties including leasehold and mineral interests in the Giddings area.

As part of this transaction, the seller may receive up to $ 40.0 million in contingent cash consideration based on future commodity prices.

The contingent consideration is payable in three tranches based on average NYMEX WTI prices for (i) the period beginning July 1, 2023 through December 31, 2023, (ii) the year ending December 31, 2024, and (iii) the year ending December 31, 2025.

The fair value of the contingent consideration is estimated using observable market data (NYMEX WTI forward price curve) and Monte Carlo simulation models, which are considered Level 2 inputs in the fair value hierarchy.

The fair value of the contingent consideration carried at fair value within the Company’s consolidated balance sheets at March 31, 2024 and December 31, 2023 are as follows:

(In thousands) March 31, 2024 December 31, 2023

Included within other current liabilities $ 6,678 $ 6,700

Included within other long-term liabilities 9,108 7,631

Total fair value $ 15,786 $ 14,331

The first tranche was settled for $ 2.7 million in January 2024.

A loss on revaluation of the remaining tranches of $ 4.2 million is included in “Other income, net” on the Company’s consolidated statements of operations for the three months ended March 31, 2024.

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.

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For further detail, see Note 11—Stock Based Compensation in the notes to the consolidated financial statements.

There were no other material nonrecurring fair value measurements as of September 30, 2023 or December 31, 2022.

There were no other material nonrecurring fair value measurements as of March 31, 2024 or December 31, 2023.

Other Current Liabilities

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

(In thousands) September 30, 2023 December 31, 2022

(In thousands) March 31, 2024 December 31, 2023

Accrued capital expenditures $ 54,375 $ 34,131

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

(In thousands) September 30, 2023 December 31, 2022

(In thousands) March 31, 2024 December 31, 2023

Revolving credit facility $ — $ —

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The 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 September 30, 2023, the Company was in compliance with all covenants under the RBL Facility.

As of March 31, 2024, the Company was in compliance with all covenants under the RBL Facility.

Deferred financing costs in connection with the 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 income (expense), net” in the Company’s consolidated statements of operations.

The Company recognized interest expense related to the RBL Facility of $ 1.0 million and $ 1.1 million for the three months ended September 30, 2023 and 2022, respectively, and $ 3.1 million and $ 4.8 million for the nine months ended September 30, 2023 and 2022, respectively.

During the nine months ended September 30, 2022, 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 RBL Facility and $ 0.4 million of which were expensed in the same period.

The unamortized portion of the deferred financing costs is included in “Deferred financing costs, net” on the Company’s consolidated balance sheets as of September 30, 2023 and December 31, 2022.

The Company did no t have any outstanding borrowings under the RBL Facility as of September 30, 2023.

The Company recognized interest expense related to the RBL Facility of $ 1.0 million for each of the three months ended March 31, 2024 and 2023.

The unamortized portion of the deferred financing costs is included in “Deferred financing costs, net” on the Company’s consolidated balance sheets as of March 31, 2024 and December 31, 2023.

The Company did no t have any outstanding borrowings under the RBL Facility as of March 31, 2024.

2026 Senior Notes

On July 31, 2018, the Issuers issued and sold $ 400.0 million aggregate principal amount of 2026 Senior Notes in a private placement under Rule 144A and Regulation S under the Securities Act of 1933, as amended.

The 2026 Senior Notes were issued under the Indenture, dated as of July 31, 2018 (the “Indenture”), by and among the Issuers and Deutsche Bank Trust Company Americas, as

The 2026 Senior Notes were issued under the Indenture, dated as of July 31, 2018 (the “Indenture”), by and among the Issuers and Deutsche Bank Trust Company Americas, as trustee.

On April 5, 2021, the terms of the Indenture were amended to modify, among other things, the criteria used by the Company to make Restricted Payments (as defined in the Indenture).

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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 income (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 sheets as of September 30, 2023 and December 31, 2022.

The Company recognized interest expense related to the 2026 Senior Notes of $ 6.6 million for each of the three months ended September 30, 2023 and 2022, and $ 19.8 million and $ 19.7 million for the nine months ended September 30, 2023 and 2022, respectively.

The Company recognized interest expense related to the 2026 Senior Notes of $ 6.6 million for each of the three months ended March 31, 2024 and 2023.

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.

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Upon appeal to the Third Court of Appeals in Austin, Texas (the “Court of Appeals”), the Court of Appeals reversed in part and affirmed in part the District Court’s ruling and remanded the matter to the Commission.

The plaintiff’s motion for rehearing with the Court of Appeals was denied, and if a party chooses, the parties have until November 22, 2023 to file a petition for review with the Supreme Court of Texas.

At September 30, 2023, 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, 2023 or September 30, 2022.

The plaintiffs filed a petition for review with the Supreme Court of Texas in late 2023.

Matters that are probable of unfavorable outcome to Magnolia and which can be reasonably estimated are accrued.

Such accruals are based on information known about the matters, Magnolia’s estimates of the outcomes of such matters and its experience in contesting, litigating and settling similar matters.

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 after consideration of recorded accruals.

Actual amounts could differ materially from management’s estimates.

Environmental Matters

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The Company maintains insurance coverage, which it believes is customary in the industry, although the Company is not fully insured against all environmental risks.

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 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.

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

In recent years, the economy has experienced elevated levels of inflation as a result of global supply and demand imbalances, including impacts of the Russia-Ukraine war.

Inflationary pressures have gradually declined in 2023.

The Company will continue to monitor fluctuations in the market and any potential impacts on its future operating and capital costs.

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

Three Months Ended Nine Months Ended

(In thousands) September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Three Months Ended

(In thousands) March 31, 2024 March 31, 2023

Federal $ 10,981 $ 3,650

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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, 2023 and 2022 was 21.0 % and 6.3 %, respectively, and 18.7 % and 7.6 % for the nine months ended September 30, 2023 and 2022, 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, 2022.

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

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, 2023, the Company does not anticipate recognition of any significant liabilities for uncertain tax positions during the next 12 months.

For the nine months ended September 30, 2023, no significant amounts were incurred for interest and penalties.

The Company’s effective tax rate for the three months ended March 31, 2024 and 2023 was 17.2 % and 15.5 %, 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 changes in valuation allowances.

As of March 31, 2024, the Company does not anticipate recognition of any significant liabilities for uncertain tax positions during the next 12 months.

For the three months ended March 31, 2024, no significant amounts were incurred for 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.

As of September 30, 2023, the Company’s total deferred tax assets were $ 118.6 million.

As of March 31, 2024, the Company’s total deferred tax assets were $ 87.2 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, 2023, the Company recorded a valuation allowance of $ 3.8 million to offset the deferred tax asset created by the capital loss attributable to the sale of the Company’s interest in Highlander.

As of March 31, 2024, the Company recorded a valuation allowance of $ 5.6 million to offset the deferred tax asset created by the capital loss attributable to the sale of the Company’s interest in Highlander.

On August 16, 2022, the U.S.

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These changes include, among others, a new 15% corporate alternative minimum tax on adjusted financial statement income of corporations with profits over $1 billion, a 1% excise tax on stock buybacks, and various tax incentives for energy and climate initiatives.

The Company evaluated the provisions of the IRA and determined that none of the provisions have a material impact on the Company’s reported results, cash flows or financial position for the current year.

As of March 31, 2024, the Company is in compliance with all applicable provisions of the IRA, including the excise tax on stock buybacks.

The Company is not subject to the corporate alternative minimum tax.

The stock buyback excise tax did not have a material impact on the Company’s consolidated financial statements.

The Company will continue to evaluate the impacts of the IRA in future tax years.

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Class A Common Stock

At September 30, 2023, there were 214.4 million shares of Class A Common Stock issued and 185.6 million shares of Class A Common Stock outstanding.

At March 31, 2024, there were 215.2 million shares of Class A Common Stock issued and 181.5 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.

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.

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.

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

Class B Common Stock

At September 30, 2023, there were 21.8 million shares of Class B Common Stock issued and outstanding.

At March 31, 2024, there were 21.8 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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Share Repurchases

As of September 30, 2023, the Company’s board of directors had authorized a share repurchase program of up to 40.0 million shares of Class A Common Stock.

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

The Company had repurchased 28.3 million shares under the program at a cost of $ 470.8 million and had 11.7 million shares of Class A Common Stock remaining under its share repurchase authorization as of September 30, 2023.

During the nine months ended September 30, 2022, the Company 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”).

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.

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

As of March 31, 2024, the Company’s board of directors had authorized a share repurchase program of up to 40.0 million shares of Class A Common Stock.

In addition, the Company may repurchase shares pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, which would permit the Company to repurchase shares at times that may otherwise be prohibited under the Company’s insider trading policy.

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

The Company had repurchased 33.1 million shares under the program at a cost of $ 577.3 million and had 6.9 million shares of Class A Common Stock remaining under its share repurchase authorization as of March 31, 2024.

Dividends and Distributions

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Dividends in excess of retained earnings are recorded as a reduction of additional paid-in capital and distributions to the Magnolia LLC Unit Holders are recorded as a reduction of noncontrolling interest.

The following table sets forth information with respect to cash dividends and distributions declared by the Company’s board of directors during the nine months ended September 30, 2023 and the year ended December 31, 2022, on its own behalf and in its capacity as the managing member of Magnolia LLC, on issued and outstanding shares of Class A Common Stock and Magnolia LLC Units:

The following table sets forth information with respect to cash dividends and distributions declared by the Company’s board of directors during the three months ended March 31, 2024 and the year ended December 31, 2023, on its own behalf and in its capacity as the managing member of Magnolia LLC, on issued and outstanding shares of Class A Common Stock and Magnolia LLC Units:

Distribution Amount per share (1)

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(In thousands, except per share amounts)

August 10, 2023 September 1, 2023 $ 0.115 $ 24,321 $ 21,811 $ 2,510

May 11, 2023 June 1, 2023 $ 0.115 $ 24,627 $ 22,117 $ 2,510

February 16, 2024 March 1, 2024 $ 0.130 $ 26,824 $ 23,987 $ 2,837

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August 10, 2023 September 1, 2023 $ 0.115 $ 24,321 $ 21,811 $ 2,510

May 11, 2023 June 1, 2023 $ 0.115 $ 24,627 $ 22,117 $ 2,510

February 10, 2023 March 1, 2023 $ 0.115 $ 24,878 $ 22,368 $ 2,510

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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 September 30, 2023, Magnolia owned approximately 89.5 % of the interest in Magnolia LLC and the noncontrolling interest was approximately 10.5 %.

As of March 31, 2024, Magnolia owned approximately 89.3 % of the interest in Magnolia LLC and the noncontrolling interest was approximately 10.7 %.

Highlander was a joint venture whereby MGY Louisiana LLC, a wholly owned subsidiary of Magnolia Operating, held approximately 84.7 % of the units of Highlander, with the remaining 15.3 % attributable to noncontrolling interest.

On May 30, 2023, the Company sold its interest in Highlander and recognized a gain on sale of $ 3.9 million included within “Other income, net” on the Company’s consolidated statements of operations.

On May 30, 2023, the Company sold its interest in Highlander.

Stock Based Compensation

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 September 30, 2023.

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 March 31, 2024.

The Company grants stock based compensation awards in the form of restricted stock units (“RSU”), performance restricted stock units (“PRSU”), and performance stock units (“PSU”) 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 $ 4.2 million and $ 3.5 million for the three months ended September 30, 2023 and 2022, and $ 12.1 million and $ 9.9 million for the nine months ended September 30, 2023 and 2022, 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 $ 4.7 million and $ 3.8 million for the three months ended March 31, 2024 and 2023, 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, PRSU, and PSU activity for the three months ended September 30, 2023.

Stock Units Performance Restricted

Stock Units Performance

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, 2023 1,173,407 $ 18.89 950,855 $ 13.73 232,700 $ 24.69

Granted 24,346 22.40 — — — —

Vested ( 18,141 ) 13.30 ( 2,444 ) 23.41 — —

Forfeited ( 7,650 ) 23.01 — — — —

Unvested at September 30, 2023

1,171,962 $ 19.01 948,411 $ 13.70 232,700 $ 24.69

The following table presents a summary of Magnolia’s unvested RSU, PRSU, and PSU activity for the nine months ended September 30, 2023.

The total income tax benefit recognized for stock that vested during the three months ended March 31, 2024 and 2023 was $ 4.8 million and $ 4.4 million, respectively.

The following table presents a summary of Magnolia’s unvested RSU, PRSU, and PSU activity for the three months ended March 31, 2024.

Stock Units Performance Restricted

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Granted 857,361 20.36 — — 372,202 21.12

Granted for performance multiple (1)

— — — — 12,981 6.14

Vested ( 348,110 ) 18.94 ( 648,548 ) 11.08 ( 5,264 ) 24.18

Forfeited ( 14,140 ) 22.09 ( 9,036 ) 18.95 ( 19,677 ) 22.41

Unvested at September 30, 2023

Unvested at March 31, 2024

1,569,997 $ 20.62 285,990 $ 19.34 579,961 $ 22.48

(1) Upon completion of the performance period for the PSUs granted in 2020, a performance multiple of 105 % was applied to each of the grants resulting in additional grants of PSUs in 2023.

The weighted average grant date fair values of the RSUs, PRSUs, and PSUs granted during the three months ended March 31, 2023 were $ 23.06 , $ 22.96 , and $ 24.69 per share, respectively.

Restricted Stock Units

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 .

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

Non-employee directors may elect to defer the RSU settlement date.

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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 nine months ended September 30, 2023 and 2022 were $ 8.7 million and $ 11.0 million, respectively.

Unrecognized compensation expense related to unvested RSUs as of September 30, 2023 was $ 16.3 million, which the Company expects to recognize over a weighted average period of 2.4 years.

The aggregate fair value of RSUs that vested during the three months ended March 31, 2024 and 2023 were $ 7.9 million and $ 7.2 million, respectively.

Unrecognized compensation expense related to unvested RSUs as of March 31, 2024 was $ 28.8 million, which the Company expects to recognize over a weighted average period of 2.6 years.

Performance Restricted Stock Units and Performance Stock Units

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PRSUs generally vest either ratably over a three-year service period or at the end of a three-year service period, in each case, subject to the recipient’s continued employment or service through each applicable vesting date.

Each PRSU is earned based on whether Magnolia’s stock price achieves a target average stock price for any 20 consecutive trading days during the five-year performance period.

If PRSUs are not earned by the end of the five-year performance period (“Performance Condition”), the PRSUs will be forfeited and no shares of Class A Common Stock will be issued, even if the vesting conditions have been met.

Each PRSU is earned based on whether Magnolia’s stock price achieves a target average stock price for any 20 consecutive trading days during the five-year performance period (“Performance Condition”).

If PRSUs are not earned by the end of the five-year performance period, the PRSUs will be forfeited and no shares of Class A Common Stock will be issued, even if the vesting conditions have been met.

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 nine months ended September 30, 2023 and 2022 were $ 7.1 million and $ 4.8 million.

Unrecognized compensation expense related to unvested PRSUs as of September 30, 2023 was $ 4.6 million, which the Company expects to recognize over a weighted average period of 1.3 years.

The aggregate fair value of PRSUs that vested during the three months ended March 31, 2024 and 2023 were $ 14.9 million and $ 7.0 million, respectively.

Unrecognized compensation expense related to unvested PRSUs as of March 31, 2024 was $ 1.8 million, which the Company expects to recognize over a weighted average period of 1.1 years.

The Company grants PSUs to certain employees.

Each PSU, to the extent earned, represents the contingent right to receive one share of Class A Common Stock and the awardee may earn between zero and 150 % of the target number of PSUs granted based on the total shareholder return (“TSR”) of the Class A Common Stock relative to the TSR achieved by a specific industry peer group over a three-year performance period, the last day of which is also the vesting date.

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 nine months ended September 30, 2023 and 2022 were $ 6.7 million and $ 5.5 million, respectively.

Unrecognized compensation expense related to unvested PSUs as of September 30, 2023 was $ 4.5 million, which the Company expects to recognize over a weighted average period of 2.3 years.

The Performance Condition for the PRSUs granted in 2022 were met on March 28, 2022, therefore 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 PSUs in 2023 and PRSUs in 2022.

Nine Months Ended

PSU and PRSU Grant Date Fair Value Assumptions September 30, 2023 September 30, 2022

The aggregate fair value of PSUs that vested during the three months ended March 31, 2024 and 2023 were $ 0.1 million and $ 6.7 million, respectively.

Unrecognized compensation expense related to unvested PSUs as of March 31, 2024 was $ 10.6 million, which the Company expects to recognize over a weighted average period of 2.5 years.

The following table summarizes the Monte Carlo simulation assumptions used to calculate the grant date fair value of the PSUs in 2024 and 2023.

Three Months Ended

PSU Grant Date Fair Value Assumptions March 31, 2024 March 31, 2023

Expected term (in years)

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The components of basic and diluted net income per share attributable to Class A Common Stock are as follows:

Three Months Ended Nine Months Ended

(In thousands, except per share data) September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Three Months Ended

(In thousands, except per share data) March 31, 2024 March 31, 2023

Net income attributable to Class A Common Stock $ 85,086 $ 96,335

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$ 0.46 $ 0.50

For the three months ended September 30, 2023 and 2022, the Company excluded 21.8 million and 28.7 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 nine months ended September 30, 2023 and 2022, the Company excluded 21.8 million and 35.5 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 each of the three months ended March 31, 2024 and 2023, the Company excluded 21.8 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.

Related Party Transactions

As of September 30, 2023, 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.”

For the three months ended March 31, 2024 and 2023, there were no related party transactions with an entity that 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.”

Supplemental Cash Flow

Supplemental cash flow disclosures are presented below:

Three Months Ended

(In thousands) March 31, 2024 March 31, 2023

Supplemental cash items:

Cash paid for income taxes $ — $ —

Cash paid for interest 12,588 12,019

Supplemental non-cash investing and financing activity:

Accrued capital expenditures 54,375 52,946

Liabilities assumed in connection with acquisitions 6,968 —

Supplemental non-cash lease operating activity:

Right-of-use assets obtained in exchange for operating lease obligations 2,440 6,412

Subsequent Events

On October 30, 2023, the Company’s board of directors declared a quarterly cash dividend of $ 0.115 per share of Class A Common Stock, and a cash distribution of $ 0.115 per Magnolia LLC Unit, payable on December 1, 2023 to shareholders or members of record, as applicable, as of November 9, 2023.

On May 2, 2024, the Company’s board of directors declared a quarterly cash dividend of $ 0.13 per share of Class A Common Stock, and Magnolia LLC declared a cash distribution of $ 0.13 per Magnolia LLC Unit to each holder of Magnolia LLC Units, each payable on June 3, 2024 to shareholders or members of record, as applicable, as of May 13, 2024.

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