What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-06 compared with 2026-05-07 · 70 added, 54 removed, 158 unchanged (44% of the section changed)

22 unchanged sentences

• the occurrence of property acquisitions or divestitures;

• the integration of acquisitions;

• the actual consummation of the WildFire Acquisition and the expected timetable for completion thereof, the results, effects and benefits of the WildFire Acquisition, future opportunities for the Company, other plans and expectations with respect to the WildFire Acquisition, and the anticipated impact of the WildFire Acquisition on the Company’s results of operations, financial position, growth opportunities and competitive position;

• the integration of acquisitions, including the WildFire Acquisition;

• the securities or capital markets and related risks such as general credit, liquidity, market, and interest-rate risks.

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.

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, 2025 (the “2025 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 this Quarterly Report on Form 10-Q and 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, 2025 (the “2025 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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Commodity prices continue to experience volatility driven by geopolitical conflict, evolving global supply-demand dynamics, and macroeconomic uncertainty.

Most notably, the escalation of military conflict involving Iran has materially disrupted global energy markets, including significantly constraining the movement of global crude oil and refined product exports through the Strait of Hormuz.

Most notably, the military conflict involving Iran has materially disrupted global energy markets, including significantly constraining the movement of global crude oil and refined product exports through the Strait of Hormuz.

These developments, together with the ongoing Russia-Ukraine conflict, OPEC and OPEC+ production decisions, and changes in sanctions and trade restrictions affecting major oil-producing countries such as Russia, Iran, and Venezuela, have increased the risk of supply interruptions and contributed to substantial price volatility and uncertainty in global energy markets.

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Business Overview

As of March 31, 2026, Magnolia’s assets in South Texas included 60,187 gross (39,935 net) acres in the Karnes area, and 741,586 gross (561,950 net) acres in the Giddings area.

As of March 31, 2026, Magnolia held an interest in approximately 2,890 gross (1,960 net) wells, with total production of 102.6 thousand barrels of oil equivalent per day for the three months ended March 31, 2026.

Magnolia recognized net income attributable to Class A Common Stock of $99.8 million, or $0.54 per diluted common share, for the three months ended March 31, 2026.

Magnolia recognized net income of $100.8 million, which includes noncontrolling interest of $1.0 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, 2026.

During the three months ended March 31, 2026, the Company declared and paid cash dividends and distributions totaling $31.4 million.

As of March 31, 2026, the Company’s board of directors had authorized a share repurchase program of up to 60.0 million shares of Class A Common Stock.

As of June 30, 2026, Magnolia’s assets in South Texas included 60,187 gross (40,135 net) acres in the Karnes area, and 742,202 gross (562,544 net) acres in the Giddings area.

As of June 30, 2026, Magnolia held an interest in approximately 2,920 gross (1,983 net) wells, with total production of 106.1 thousand and 104.3 thousand barrels of oil equivalent per day for the three and six months ended June 30, 2026, respectively.

Magnolia recognized net income attributable to Class A Common Stock of $181.8 million and $281.6 million, or $0.97 and $1.51 per diluted common share, for the three and six months ended June 30, 2026, respectively.

Magnolia recognized net income of $181.8 million for the three months ended June 30, 2026.

Magnolia recognized net income of $282.6 million, which includes noncontrolling interest of $1.0 million related to the Magnolia LLC Units (and corresponding shares of Class B Common Stock) held by certain affiliates of EnerVest, Ltd., for the six months ended June 30, 2026.

During the six months ended June 30, 2026, the Company declared and paid cash dividends and distributions totaling $62.2 million.

As of June 30, 2026, the Company’s board of directors had authorized a share repurchase program of up to 60.0 million shares of Class A Common Stock.

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

The Company had repurchased 48.4 million shares under the program at a cost of $945.4 million and had 11.6 million shares of Class A Common Stock remaining under its share repurchase authorization as of March 31, 2026.

As of March 31, 2026, Magnolia owned 100.0% of the interest in Magnolia LLC.

The Company had repurchased 50.1 million shares under the program at a cost of $994.7 million and had 9.9 million shares of Class A Common Stock remaining under its share repurchase authorization as of June 30, 2026.

As of June 30, 2026, Magnolia owned 100.0% of the interest in Magnolia LLC.

Results of Operations

Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025

Three and Six Months Ended June 30, 2026 Compared to the Three and Six Months Ended June 30, 2025

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

(In thousands, except per unit data) March 31, 2026 March 31, 2025

Three Months Ended Six Months Ended

(In thousands, except per unit data) June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025

Oil (MBbls) 3,809 3,639 7,470 7,156

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NGLs (per barrel) 23.25 19.94 20.93 20.97

Oil revenues for the three months ended March 31, 2026 were $11.8 million higher than the three months ended March 31, 2025.

A 4% increase in oil production increased first quarter 2026 revenues by $10.1 million compared to the same period in the prior year, and a 1% increase in average prices increased revenues by $1.7 million.

Natural gas revenues for the three months ended March 31, 2026 were $0.4 million higher than the three months ended March 31, 2025.

A 5% increase in natural gas production increased first quarter 2026 revenues by $2.7 million compared to the same period in the prior year, partially offset by a 4% decrease in average prices that decreased revenues by $2.3 million.

NGL revenues for the three months ended March 31, 2026 were $4.0 million lower than the three months ended March 31, 2025.

A 16% decrease in average prices decreased first quarter 2026 revenues by $8.6 million compared to the same period in the prior year, partially offset by a 10% increase in NGL production that increased revenues by $4.6 million.

Oil revenues for the three months ended June 30, 2026 were $147.4 million higher than the three months ended June 30, 2025.

A 58% increase in average prices increased second quarter 2026 revenues by $130.8 million compared to the same period in the prior year, and a 5% increase in oil production increased revenues by $16.6 million.

Oil revenues for the six months ended June 30, 2026 were $159.2 million higher than for the six months ended June 30, 2025.

A 28% increase in average prices increased revenues for the six months ended June 30, 2026 by $132.7 million compared to the same period in the prior year, and a 4% increase in oil production increased revenues by $26.5 million.

Natural gas revenues for the three months ended June 30, 2026 were $3.2 million lower than the three months ended June 30, 2025.

A 14% decrease in average prices decreased second quarter 2026 revenues by $6.2 million compared to the same period in the prior year, partially offset by an 8% increase in natural gas production that increased revenues by $3.0 million.

Natural gas revenues for the six months ended June 30, 2026 were $2.7 million lower than the six months ended June 30, 2025.

A 9% decrease in average prices decreased revenues for the six months ended June 30, 2026 by $8.5 million compared to the same period in the prior year, partially offset by a 7% increase in natural gas production that increased revenues by $5.8 million.

NGL revenues for the three months ended June 30, 2026 were $15.6 million higher than the three months ended June 30, 2025.

A 17% increase in average prices increased second quarter 2026 revenues by $8.3 million compared to the same period in the prior year, and a 13% increase in NGL production increased revenues by $7.3 million.

NGL revenues for the six months ended June 30, 2026 were $11.6 million higher than the six months ended June 30, 2025, almost entirely due to an increase in NGL production.

Operating Expenses and Other Expense

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

Three Months Ended

(In thousands, except per unit data) March 31, 2026 March 31, 2025

Three Months Ended Six Months Ended

(In thousands, except per unit data) June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025

Operating Expenses:

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General and administrative expenses 29,151 23,278 60,595 47,867

Transaction related costs 3,200 — 3,200 —

Total operating expenses $ 239,310 $ 211,167 $ 470,057 $ 425,646

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General and administrative expenses 3.02 2.60 3.21 2.72

Transaction related costs 0.33 — 0.17 —

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 March 31, 2026 were $0.7 million higher, and $0.25 per boe lower, than the three months ended March 31, 2025.

The increase was due to an increase in surface repair and maintenance and compression associated with higher well count.

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

Lease operating expenses for the three months ended June 30, 2026 were $4.8 million, or $0.13 per boe, higher than the three months ended June 30, 2025.

Lease operating expenses for the six months ended June 30, 2026 were $5.5 million higher, and $0.05 per boe lower, than the six months ended June 30, 2025.

The increase in both periods were due to higher workover activity and an increase in surface repair and maintenance and compression associated with higher well count.

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 March 31, 2026 were $3.3 million, or $0.25 per boe, higher, than the three months ended March 31, 2025 driven by higher production and changes to certain gathering and processing contracts, which resulted in a higher portion of Magnolia’s GTP costs being recognized as expense versus a reduction to Magnolia’s natural gas revenues.

The GTP costs for the three months ended June 30, 2026 were $0.7 million higher, and $0.06 per boe lower, than the three months ended June 30, 2025.

The GTP costs for the six months ended June 30, 2026 were $4.0 million, or $0.10 per boe, higher, than the six months ended June 30, 2025.

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

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 March 31, 2026 were $3.7 million, or $0.53 per boe, lower than the three months ended March 31, 2025.

The decrease in taxes other than income was primarily due to a decrease in ad valorem taxes as a result of lower market valuations and a decrease in production taxes as a result of severance tax refunds.

Depreciation, depletion and amortization (“DD&A”) during the three months ended March 31, 2026 was $7.5 million, or $0.10 per boe, higher than the three months ended March 31, 2025.

Taxes other than income for the three months ended June 30, 2026 were $4.0 million, or $0.26 per boe, higher than the three months ended June 30, 2025.

Taxes other than income for the six months ended June 30, 2026 were $0.2 million higher, and $0.14 per boe lower, than the six months ended June 30, 2025.

The increase in taxes other than income was primarily due to an increase in production taxes due to higher oil prices, partially offset by severance tax refunds and a decrease in ad valorem taxes as a result of lower market valuations.

Depreciation, depletion and amortization (“DD&A”) during the three months ended June 30, 2026 was $9.4 million, or $0.09 per boe, higher than the three months ended June 30, 2025.

DD&A for the six months ended June 30, 2026 was $16.9 million, or $0.09 per boe, higher than the six months ended June 30, 2025.

The increase in DD&A was primarily due to higher production.

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The table below reflects the Company’s G&A for the periods indicated:

Three Months Ended

(In thousands) March 31, 2026 March 31, 2025

Three Months Ended Six Months Ended

(In thousands) June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025

General and administrative expenses $ 20,336 $ 16,848 $ 40,496 $ 35,545

1 unchanged sentence

Total general and administrative expenses $ 29,151 $ 23,278 $ 60,595 $ 47,867

G&A during the three months ended March 31, 2026 were $6.9 million, or $0.58 per boe, higher, than the three months ended March 31, 2025.

G&A during the three months ended June 30, 2026 were $5.9 million, or $0.42 per boe, higher, than the three months ended June 30, 2025.

G&A expenses during the six months ended June 30, 2026 were $12.7 million, or $0.49 per boe, higher than the six months ended June 30, 2025.

The increase in G&A was primarily due to increased stock based compensation expense as a result of higher grant date fair values, accelerated vesting of certain awards, and changes in expected payouts for the Company’s performance share unit awards.

Other increases in G&A were primarily due to increased professional service fees, payroll costs, and rent expense.

Transaction related costs incurred during the three and six months ended June 30, 2026 relate to the WildFire Acquisition.

Income Tax Expense

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

Three Months Ended

(In thousands) March 31, 2026 March 31, 2025

Three Months Ended Six Months Ended

(In thousands) June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025

Current income tax expense $ 2,430 $ 4,126 $ 6,428 $ 16,922

1 unchanged sentence

Income tax expense $ 50,626 $ 20,938 $ 71,514 $ 46,075

For the three months ended March 31, 2026, income tax expense was $4.2 million lower than the three months ended March 31, 2025 driven by an $8.8 million decrease in current income tax expense and offset by a $4.6 million increase in deferred income tax expense.

The decrease in total tax expense was primarily due to a decrease in income before income taxes and an increase in the discrete impact from stock based compensation that vested during the three months ended March 31, 2026 compared to March 31, 2025.

For the three months ended June 30, 2026, income tax expense was $29.7 million higher than the three months ended June 30, 2025 driven by a $31.4 million increase in deferred income tax expense and offset by a $1.7 million decrease in current income tax expense.

Income tax expense during the six months ended June 30, 2026 was $25.4 million higher compared to the six months ended June 30, 2025, driven by a $35.9 million increase in deferred income tax expense and offset by a $10.5 million decrease in current income tax expense.

The increase in total tax expense was primarily due to an increase in income before income taxes.

Accelerated deductions as a result of the passage of the One Big Beautiful Bill Act resulted in lower current tax expense and higher deferred tax expense.

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

As of March 31, 2026, the Company had $574.4 million of liquidity comprised of the $450.0 million of borrowing capacity under the RBL Facility, and $124.4 million of cash and cash equivalents.

As of June 30, 2026, 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, 2026, the Company had $745.9 million of liquidity comprised of the $450.0 million of borrowing capacity under the RBL Facility, and $295.9 million of cash and cash equivalents.

Cash and Cash Equivalents

At March 31, 2026, Magnolia had $124.4 million of cash and cash equivalents.

At June 30, 2026, Magnolia had $295.9 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:

Three Months Ended

(In thousands) March 31, 2026 March 31, 2025

Six Months Ended

(In thousands) June 30, 2026 June 30, 2025

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, asset retirement obligations accretion, and deferred taxes.

Net cash provided by operating activities totaled $197.6 million and $224.5 million for the three months ended March 31, 2026 and 2025, respectively.

During the three months ended March 31, 2026, cash provided by operating activities decreased due to lower realized NGL prices and the timing of receipts and payments, partially offset by increased production and the receipt of tax refunds.

Net cash provided by operating activities totaled $581.6 million and $423.2 million for the six months ended June 30, 2026 and 2025, respectively.

During the six months ended June 30, 2026, cash provided by operating activities primarily increased due to higher oil prices and increased production.

Uses of Cash and Cash Equivalents

The Company made individually insignificant bolt-on acquisitions totaling $155.0 million and $24.1 million during the three months ended March 31, 2026 and 2025, respectively.

The Company made individually insignificant bolt-on acquisitions totaling $156.2 million and $39.7 million during the six months ended June 30, 2026 and 2025, respectively.

Additions to Oil and Natural Gas Properties

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

Three Months Ended

(In thousands) March 31, 2026 March 31, 2025

Three Months Ended Six Months Ended

(In thousands) June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025

Drilling and completion $ 124,964 $ 95,247 $ 253,651 $ 225,686

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Total capital expenditures $ 125,129 $ 100,287 $ 253,557 $ 231,455

During the first quarter of 2026, Magnolia operated two rigs.

The activity during the first quarter of 2026 was largely driven by the number of operated and non-operated drilling rigs.

During the second quarter of 2026, Magnolia operated two 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 March 31, 2026, the Company’s board of directors had authorized a share repurchase program of up to 60.0 million shares of Class A Common Stock.

As of June 30, 2026, the Company’s board of directors had authorized a share repurchase program of up to 60.0 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 three months ended March 31, 2026 and 2025, the Company repurchased 1.2 million and 2.2 million shares for a total cost of approximately $32.1 million and $52.0 million, respectively.

During the three months ended March 31, 2025, Magnolia LLC repurchased and subsequently canceled 0.7 million Magnolia LLC Units with an equal number of shares of corresponding Class B Common Stock for $19.8 million of cash consideration.

As of March 31, 2026, Magnolia owned 100.0% of the interest in Magnolia LLC.

During the three months ended March 31, 2026, the Company declared and paid cash dividends to holders of its Class A Common Stock totaling $30.5 million.

During each of the six months ended June 30, 2026 and 2025, the Company repurchased 3.0 million and 4.4 million shares for a total cost of approximately $81.4 million and $100.7 million, respectively.

During the six months ended June 30, 2026, Magnolia LLC repurchased and subsequently canceled 0.7 million Magnolia LLC Units with an equal number of shares of corresponding Class B Common Stock for $19.8 million of cash consideration.

As of June 30, 2026, Magnolia owned 100.0% of the interest in Magnolia LLC.

During the six months ended June 30, 2026, the Company declared and paid cash dividends to holders of its Class A Common Stock totaling $61.2 million.

Additionally, $0.9 million was distributed to the Magnolia LLC Unit Holders.

During the three months ended March 31, 2025, the Company declared and paid cash dividends to holders of its Class A Common Stock totaling $28.9 million.

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.

Additionally, $1.7 million was distributed to the Magnolia LLC Unit Holders.

1 unchanged sentence

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