What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-10-30 compared with 2025-07-31 · 73 added, 72 removed, 152 unchanged (49% of the section changed)

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All of Magnolia’s forward-looking information is subject to risks and uncertainties that could cause actual results to differ materially from the results expected.

and Exchange Commission, including the Company’s Annual Report on Form 10-K for the period ended December 31, 2024 (the “2024 Form 10-K”).

Although it is not possible to identify all factors, these risks and uncertainties include the risk factors and the timing of any of those risk factors identified in the reports that the Company has filed and may file with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the period ended December 31, 2024 (the “2024 Form 10-K”).

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company’s unaudited consolidated financial statements and the related notes thereto.

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Business Overview

As of June 30, 2025, Magnolia’s assets in South Texas included 79,363 gross (55,381 net) acres in the Karnes area, and 741,858 gross (551,610 net) acres in the Giddings area.

As of June 30, 2025, Magnolia held an interest in approximately 2,745 gross (1,829 net) wells, with total production of 98.2 thousand and 97.4 thousand barrels of oil equivalent per day for the three and six months ended June 30, 2025, respectively.

Magnolia recognized net income attributable to Class A Common Stock of $78.1 million and $181.0 million, or $0.41 and $0.95 per diluted common share, for the three and six months ended June 30, 2025, respectively.

Magnolia recognized net income of $81.0 million and $187.7 million, which includes noncontrolling interest of $2.9 million and $6.6 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 six months ended June 30, 2025, respectively.

During the six months ended June 30, 2025, the Company declared cash dividends to holders of its Class A Common Stock totaling $57.3 million.

As of June 30, 2025, the Company’s board of directors had authorized a share repurchase program of up to 50.0 million shares of Class A Common Stock.

As of September 30, 2025, Magnolia’s assets in South Texas included 79,363 gross (55,381 net) acres in the Karnes area, and 752,536 gross (569,217 net) acres in the Giddings area.

As of September 30, 2025, Magnolia held an interest in approximately 2,852 gross (1,934 net) wells, with total production of 100.5 thousand and 98.4 thousand barrels of oil equivalent per day for the three and nine months ended September 30, 2025, respectively.

Magnolia recognized net income attributable to Class A Common Stock of $75.5 million and $256.5 million, or $0.40 and $1.36 per diluted common share, for the three and nine months ended September 30, 2025, respectively.

Magnolia recognized net

income of $78.2 million and $265.9 million, which includes noncontrolling interest of $2.8 million and $9.4 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, 2025, respectively.

During the nine months ended September 30, 2025, the Company declared cash dividends to holders of its Class A Common Stock totaling $85.3 million.

As of September 30, 2025, the Company’s board of directors had authorized a share repurchase program of up to 50.0 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 42.6 million shares under the program at a cost of $808.5 million and had 7.4 million shares of Class A Common Stock remaining under its share repurchase authorization as of June 30, 2025.

As of June 30, 2025, Magnolia owned approximately 97.1% of the interest in Magnolia LLC and the noncontrolling interest was approximately 2.9%.

The Company had repurchased 44.8 million shares under the program at a cost of $859.9 million and had 5.2 million shares of Class A Common Stock remaining under its share repurchase authorization as of September 30, 2025.

As of September 30, 2025, Magnolia owned approximately 97.1% of the interest in Magnolia LLC and the noncontrolling interest was approximately 2.9%.

Results of Operations

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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 Company’s redemption of its 2026 Senior Notes that bore interest at 6.0% per annum and its issuance of the 2032 Senior Notes that bear interest at 6.875% per annum, both of which occurred in November 2024.

Three and Six Months Ended June 30, 2025 Compared to the Three and Six Months Ended June 30, 2024

Three and Nine Months Ended September 30, 2025 Compared to the Three and Nine Months Ended September 30, 2024

Oil, Natural Gas and NGL Sales Revenues

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

Three Months Ended Six Months Ended

(In thousands, except per unit data) June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024

Three Months Ended Nine Months Ended

(In thousands, except per unit data) September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024

Oil (MBbls) 3,628 3,579 10,784 10,447

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NGLs (per barrel) 18.98 19.46 20.27 19.30

Oil revenues for the three months ended June 30, 2025 were $49.0 million lower than the three months ended June 30, 2024.

A 22% decrease in average prices decreased second quarter 2025 revenues by $60.6 million compared to the same period in the prior year, partially offset by a 5% increase in oil production that increased revenues by $11.6 million.

Oil revenues for the six months ended June 30, 2025 were $62.6 million lower than for the six months ended June 30, 2024.

A 15% decrease in average prices

decreased revenues for the six months ended June 30, 2025 by $81.6 million compared to the same period in the prior year, partially offset by a 4% increase in oil production that increased revenues by $19.0 million.

Natural gas revenues for the three months ended June 30, 2025 were $24.3 million higher than the three months ended June 30, 2024.

A 106% increase in average prices increased second quarter 2025 revenues by $19.6 million compared to the same period in the prior year, and a 12% increase in natural gas production increased revenues by $4.7 million.

Natural gas revenues for the six months ended June 30, 2025 were $54.6 million higher than the six months ended June 30, 2024.

A 105% increase in average prices increased revenues for the six months ended June 30, 2025 by $41.6 million compared to the same period in the prior year, and a 16% increase in natural gas production increased revenues by $13.0 million.

NGL revenues for the three months ended June 30, 2025 were $7.0 million higher than the three months ended June 30, 2024.

A 5% increase in average prices increased second quarter 2025 revenues by $2.3 million compared to the same period in the prior year, and a 10% increase in NGL production increased revenues by $4.7 million.

NGL revenues for the six months ended June 30, 2025 were $21.2 million higher than the six months ended June 30, 2024.

A 9% increase in average prices increased revenues for the six months ended June 30, 2024 by $7.5 million compared to the same period in the prior year, and a 15% increase in NGL production increased revenues by $13.7 million.

Oil revenues for the three months ended September 30, 2025 were $35.2 million lower than the three months ended September 30, 2024.

A 14% decrease in average prices decreased third quarter 2025 revenues by $38.3 million compared to the same period in the prior year, partially offset by a 1% increase in oil production that increased revenues by $3.1 million.

Oil revenues for the nine months ended September 30, 2025 were $97.8 million lower than for the nine months ended September 30, 2024.

A 15% decrease in average prices decreased revenues for the nine months ended September 30, 2025 by $119.7 million compared to the same period in the prior year, partially offset by a 3% increase in oil production that increased revenues by $21.9 million.

Natural gas revenues for the three months ended September 30, 2025 were $21.0 million higher than the three months ended September 30, 2024.

A 63% increase in average prices increased third quarter 2025 revenues by $13.9 million compared to the same period in the prior year, and a 20% increase in natural gas production increased revenues by $7.1 million.

Natural gas revenues for the nine months ended September 30, 2025 were $75.5 million higher than the nine months ended September 30, 2024.

An 89% increase in average prices increased revenues for the nine months ended September 30, 2025 by $55.4 million compared to the same period in the prior year, and a 17% increase in natural gas production increased revenues by $20.1 million.

NGL revenues for the three months ended September 30, 2025 were $6.0 million higher than the three months ended September 30, 2024.

A 16% increase in NGL production increased third quarter 2025 revenues by $7.1 million compared to the same period in the prior year, partially offset by a 2% decrease in average prices that decreased revenues by $1.1 million.

NGL revenues for the nine months ended September 30, 2025 were $27.2 million higher than the nine months ended September 30, 2024.

A 16% increase in NGL production increased revenues for the nine months ended September 30, 2025 by $20.8 million compared to the same period in the prior year, and a 5% increase in average prices increased revenues by $6.4 million.

Operating Expenses and Other Expense

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

Three Months Ended Six Months Ended

(In thousands, except per unit data) June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024

Three Months Ended Nine Months Ended

(In thousands, except per unit data) September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024

Operating Expenses:

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Other income (expense), net (661) 7,286 309 4,018

Total other expense, net $ (5,848) $ (2,469) $ (9,885) $ (9,095)

Total other income (expense), net $ (6,023) $ 3,430 $ (15,909) $ (5,665)

Average Operating Costs per boe:

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

Lease operating expenses for the three months ended June 30, 2025 were $0.8 million lower, and $0.52 per boe lower, than the three months ended June 30, 2024.

Lease operating expenses for the six months ended June 30, 2025 were $0.2 million higher, and $0.54 per boe lower, than the six months ended June 30, 2024.

Higher production and broad cost reduction initiatives resulted in a per boe decrease and cost improvements in most expense categories including surface repair and maintenance, contract labor, equipment rentals, fluid hauling, and workover activities.

Lease operating expenses for the three months ended September 30, 2025 were $4.1 million higher, and $0.08 per boe lower, than the three months ended September 30, 2024.

Lease operating expenses for the nine months ended September 30, 2025 were $4.3 million higher, and $0.38 per boe lower, than the nine months ended September 30, 2024.

The increases in both periods were due to higher workover activity and an increase in surface repair and maintenance, contract labor, and equipment rentals associated with higher well count, offset by broad cost reduction initiatives.

The decrease in lease operating expenses per boe was due to higher production.

Gathering, transportation and processing (“GTP”) 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 GTP costs for the three months ended June 30, 2025 were $8.0 million, or $0.81 per boe, higher, than the three months ended June 30, 2024.

The GTP costs for the six months ended June 30, 2025 were $14.5 million, or $0.71 per boe, higher, than the six months ended June 30, 2024.

The increase in GTP costs in both periods was driven by higher natural gas and NGL prices as well as changes to certain gathering and processing contracts between periods, which resulted in a higher portion of Magnolia’s GTP costs to be recognized as expense versus a reduction to Magnolia’s natural gas and NGL revenues.

The GTP costs for the three months ended September 30, 2025 were $7.1 million, or $0.64 per boe, higher, than the three months ended September 30, 2024.

The GTP costs for the nine months ended September 30, 2025 were $21.5 million, or $0.69 per boe, higher, than the nine months ended September 30, 2024.

The increase in GTP costs in both periods was driven by changes to certain gathering and processing contracts, which resulted in a higher portion of Magnolia’s GTP costs to be recognized as expense versus a reduction to Magnolia’s natural gas revenues, as well as higher production and natural gas prices.

Taxes other than income include production, ad valorem, and franchise 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 June 30, 2025 were $1.0 million, or $0.32 per boe, lower, than the three months ended June 30, 2024, primarily due to a decrease in oil revenues.

Taxes other than income for the six months ended June 30, 2025 were $1.2 million higher, and $0.16 per boe lower, than the six months ended June 30, 2024, primarily due to an increase in ad valorem taxes as a result of higher market value of new wells brought online.

The per boe decrease was due to higher production.

Depreciation, depletion and amortization (“DD&A”) during the three months ended June 30, 2025 was $2.3 million higher, and $0.78 per boe lower, than the three months ended June 30, 2024.

DD&A for the six months ended June 30, 2025 was $11.1 million higher, and $0.59 per boe lower, than the six months ended June 30, 2024.

Taxes other than income for the three months ended September 30, 2025 were $2.1 million higher than the three months ended September 30, 2024.

Taxes other than income for the nine months ended September 30, 2025 were $3.3 million higher than the nine months ended September 30, 2024.

The increase in taxes other than income in both periods was primarily due to an increase in ad valorem taxes as a result of higher market value of new wells brought online.

Depreciation, depletion and amortization (“DD&A”) during the three months ended September 30, 2025 was $3.3 million higher, and $0.90 per boe lower, than the three months ended September 30, 2024.

DD&A for the nine months ended September 30, 2025 was $14.4 million higher, and $0.70 per boe lower, than the nine months ended September 30, 2024.

In both periods, higher production increased overall DD&A, and an increase in oil and natural gas reserves decreased DD&A per boe.

General and administrative expenses (“G&A”) during the three months ended June 30, 2025 were $0.4 million higher, and $0.18 per boe lower, than the three months ended June 30, 2024.

G&A expenses during the six months ended June 30, 2025 were $1.5 million higher, and $0.19 per boe lower, than the six months ended June 30, 2024.

G&A increased in both periods due to an increase in overall labor costs, including changes from the modification of stock based compensation awards in 2025, partially offset by lower professional services and certain one-time costs incurred in 2024.

G&A per boe decreased due to higher production.

Interest expense, net, during the three months ended June 30, 2025 was $2.1 million higher than the three months ended June 30, 2024.

Interest expense, net, during the six months ended June 30, 2025 was $5.0 million higher than the six months ended June 30, 2024.

General and administrative expenses (“G&A”) during the three months ended September 30, 2025 were $3.0 million, and $0.08 per boe, higher, than the three months ended September 30, 2024.

G&A expenses during the nine months ended September 30, 2025 were $4.5 million higher, and $0.10 per boe lower, than the nine months ended September 30, 2024.

G&A increased in both periods due to an increase in overall labor costs, including changes from the modification of stock based compensation awards in 2025 and higher subscription and license fees, partially offset by certain one-time costs incurred in 2024.

Interest expense, net, during the three months ended September 30, 2025 was $1.5 million higher than the three months ended September 30, 2024.

Interest expense, net, during the nine months ended September 30, 2025 was $6.5 million higher than the nine months ended September 30, 2024.

The increase in both periods was primarily driven by lower interest income realized during 2025 as a result of lower interest rates and cash balances.

Other expense, net, during the three months ended June 30, 2025 was $0.2 million compared to other income, net of $1.0 million during the three months ended June 30, 2024.

Other income, net, during the six months ended June 30, 2025 was $1.0 million compared to other expense, net of $3.3 million during the six months ended June 30, 2024.

The change year-over-year is primarily comprised of the revaluation of the contingent consideration liability associated with the prior acquisition of certain oil and gas producing properties in the Giddings area, offset by a loss on sale of other assets in 2025.

Other income (expense), net, during the three months ended September 30, 2025 was $(0.7) million compared to $7.3 million during the three months ended September 30, 2024.

The decrease in other income (expense) for the three months ended September 30, 2025 as compared to the same period in the prior year was primarily due to the revaluation of the contingent consideration and loss on asset retirement obligation settlements.

Other income (expense), net, during the nine months ended September 30, 2025 was $0.3 million compared to $4.0 million during the nine months ended September 30, 2024.

The decrease in other income (expense) for the nine months ended September 30, 2025 as compared to the same period in the prior year was primarily comprised of the loss on sale of other assets in 2025 and loss on asset retirement obligation settlements, partially offset by the revaluation of the contingent consideration.

Income Tax Expense

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

Three Months Ended Six Months Ended

(In thousands) June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024

Current income tax expense $ 4,126 $ 10,528 $ 16,922 $ 22,156

Three Months Ended Nine Months Ended

(In thousands) September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024

Current income tax expense (benefit) $ (32,288) $ (480) $ (15,367) $ 21,676

Deferred income tax expense 49,496 27,010 78,650 51,958

Income tax expense $ 17,208 $ 26,530 $ 63,283 $ 73,634

For the three months ended June 30, 2025, income tax expense was $5.8 million lower than the three months ended June 30, 2024 driven by a $6.4 million decrease in current income tax expense and offset by a $0.6 million increase in deferred income tax expense.

Income tax expense during the six months ended June 30, 2025 was $1.0 million lower compared to the six months ended June 30, 2024, driven by a $5.2 million decrease in current income tax expense and offset by a $4.2 million increase in deferred income tax expense.

For the three months ended September 30, 2025, income tax expense was $9.3 million lower than the three months ended September 30, 2024 driven by a $31.8 million decrease in current income tax expense and offset by a $22.5 million increase in deferred income tax expense.

Income tax expense during the nine months ended September 30, 2025 was $10.4 million lower compared to the nine months ended September 30, 2024, driven by a $37.0 million decrease in current income tax expense and offset by a $26.7 million increase in deferred income tax expense.

The decrease in tax expense was primarily due to a decrease in income before income taxes and additional tax credits, partially offset by an increased controlling interest.

The decrease in current tax expense and increase in deferred tax expense were primarily due to the acceleration of tax deductions from the passage of the One Big Beautiful Bill Act.

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.

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

As of June 30, 2025, the Company had $400.0 million of principal debt related to the 2032 Senior Notes outstanding and no outstanding borrowings related to the RBL Facility.

As of June 30, 2025, the Company had $701.8 million of liquidity comprised of the $450.0 million of borrowing capacity under the RBL Facility, and $251.8 million of cash and cash equivalents.

As of September 30, 2025, the Company had $400.0 million of principal debt related to the 2032 Senior Notes outstanding and no outstanding borrowings related to the RBL Facility.

As of September 30, 2025, the Company had $730.5 million of liquidity comprised of the $450.0 million of borrowing capacity under the RBL Facility, and $280.5 million of cash and cash equivalents.

Cash and Cash Equivalents

At June 30, 2025, Magnolia had $251.8 million of cash and cash equivalents.

At September 30, 2025, Magnolia had $280.5 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:

Six Months Ended

(In thousands) June 30, 2025 June 30, 2024

Nine Months Ended

(In thousands) September 30, 2025 September 30, 2024

SOURCES OF CASH AND CASH EQUIVALENTS

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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, revaluation of contingent consideration, impairment of oil and natural gas properties, asset retirement obligations accretion, and deferred taxes.

Net cash provided by operating activities totaled $423.2 million and $480.3 million for the six months ended June 30, 2025 and 2024, respectively.

During the six months ended June 30, 2025, cash provided by operating activities was negatively impacted by the timing of receipts and payments and a decrease in realized oil prices, partially offset by increased production and an increase in realized natural gas and NGL prices.

Net cash provided by operating activities totaled $670.2 million and $698.2 million for the nine months ended September 30, 2025 and 2024, respectively.

During the nine months ended September 30, 2025, cash provided by operating activities was negatively impacted by the timing of receipts and a decrease in realized oil prices, partially offset by the timing of payments, increased production, and an increase in realized natural gas prices.

Uses of Cash and Cash Equivalents

The Company made individually insignificant bolt-on acquisitions during each of the six months ended June 30, 2025 and 2024.

The Company made individually insignificant bolt-on acquisitions during each of the nine months ended September 30, 2025 and 2024.

Additions to Oil and Natural Gas Properties

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

Three Months Ended Six Months Ended

(In thousands) June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024

Three Months Ended Nine Months Ended

(In thousands) September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024

Drilling and completion $ 118,441 $ 103,057 $ 344,128 $ 345,406

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Total capital expenditures $ 119,048 $ 104,872 $ 350,503 $ 351,935

During the second quarter of 2025, Magnolia operated two rigs.

The activity during the second quarter of 2025 was largely driven by the number of operated and non-operated drilling rigs.

During the third quarter of 2025, Magnolia operated two rigs.

The activity during the third quarter of 2025 was largely driven by the number of operated and non-operated drilling rigs.

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

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Capital Requirements

As of June 30, 2025, the Company’s board of directors had authorized a share repurchase program of up to 50.0 million shares of Class A Common Stock.

As of September 30, 2025, the Company’s board of directors had authorized a share repurchase program of up to 50.0 million shares of Class A Common Stock.

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 each of the six months ended June 30, 2025 and 2024, the Company repurchased 4.4 million and 3.4 million shares for a total cost of approximately $100.7 million and $78.3 million, respectively.

During the six months ended June 30, 2024, Magnolia LLC repurchased and subsequently canceled 3.0 million Magnolia LLC Units with an equal number of shares of corresponding Class B Common Stock for $76.7 million of cash consideration.

As of June 30, 2025, Magnolia owned approximately 97.1% of the interest in Magnolia LLC and the noncontrolling interest was approximately 2.9%.

During the six months ended June 30, 2025, the Company declared and paid cash dividends to holders of its Class A Common Stock totaling $57.3 million.

During each of the nine months ended September 30, 2025 and 2024, the Company repurchased 6.5 million and 5.3 million shares for a total cost of approximately $152.1 million and $127.0 million, respectively.

During the nine months ended September 30, 2024, Magnolia LLC repurchased and subsequently canceled 3.5 million Magnolia LLC Units with an equal number of shares of corresponding Class B Common Stock for $89.7 million of cash consideration.

As of September 30, 2025, Magnolia owned approximately 97.1% of the interest in Magnolia LLC and the noncontrolling interest was approximately 2.9%.

During the nine months ended September 30, 2025, the Company declared and paid cash dividends to holders of its Class A Common Stock totaling $85.3 million.

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

During the six months ended June 30, 2024, the Company declared and paid cash dividends to holders of its Class A Common Stock totaling $47.8 million.

During the nine months ended September 30, 2024, the Company declared and paid cash dividends to holders of its Class A Common Stock totaling $72.5 million.

Additionally, $7.1 million was distributed to the Magnolia LLC Unit Holders.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis