MAGNOLIA OIL & GAS CORPORATION FORWARD-LOOKING STATEMENTS
This report includes "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All statements other than statements of
historical facts included or incorporated by reference in this report,
including, without limitation, statements regarding the Company's future
financial position, business strategy, budgets, projected revenues, projected
costs, and plans and objectives of management for future operations, are
forward-looking statements. Such forward-looking statements are based on the
beliefs of management, as well as assumptions made by, and information currently
available to, the Company's management. In addition, forward-looking statements
generally can be identified by the use of forward-looking terminology such as
"may," "will," "could," "expect," "intend," "project," "estimate," "anticipate,"
"plan," "believe," or "continue" or similar terminology. Although Magnolia
believes that the expectations reflected in such forward-looking statements are
reasonable, the Company can give no assurance that such expectations will prove
to have been correct. Important factors that could cause actual results to
differ materially from the Company's expectations include, but are not limited
to, Magnolia's assumptions about:
•the length, scope and severity of the recent coronavirus disease 2019
("COVID-19") pandemic, including the effects of related public health concerns
and the impact of actions taken by governmental authorities and other third
parties in response to the pandemic and its impact on commodity prices, supply
and demand considerations, and storage capacity;
•the market prices of oil, natural gas, natural gas liquids ("NGLs"), and other products or services;
•the supply and demand for oil, natural gas, NGLs, and other products or services;
•production and reserve levels;
•drilling risks;
•economic and competitive conditions;
•the availability of capital resources;
•capital expenditures and other contractual obligations;
•weather conditions;
•inflation rates;
•the availability of goods and services;
•legislative, regulatory, or policy changes;
•cyber attacks;
•occurrence of property acquisitions or divestitures;
•the integration of acquisitions; and
•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 this Quarterly Report on Form 10-Q and in the Company's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2019 filed with theSEC onFebruary 26, 2020 .
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.
16
--------------------------------------------------------------------------------Overview
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 that operates in one reportable segment located inthe United States . The Company's oil and natural gas properties are located primarily inKarnes County and the Giddings Field inSouth Texas , where the Company primarily targets theEagle Ford Shale and the 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. Magnolia's business model prioritizes free cash flow, financial stability, and prudent capital allocation, and is designed to withstand challenging environments such as the one the Company is currently experiencing.
COVID-19 Pandemic and Market Conditions Update
InMarch 2020 , theWorld Health Organization declared the COVID-19 outbreak a pandemic. Governments have tried to slow the spread of the virus by imposing social distancing guidelines, travel restrictions, and stay-at-home orders, which have caused a significant decrease in activity in the global economy and the demand for oil and natural gas. The implications of the decrease in global demand for oil, coupled with the general oversupply, may have further negative effects on the Company's business, such as production curtailment, reduced storage capacity, and reductions to its operating plans. During the second quarter of 2020, and thus far during the third quarter of 2020, there have been continued and, in certain cases, increasing outbreaks of COVID-19 inthe United States , particularly inTexas , where the Company conducts substantially all of its operations. Demand and pricing may again decline due to the resurgence of the outbreak across theU.S. and other locations across the world and the related social distancing guidelines, travel restrictions, and stay-at-home orders. The extent of the additional impact on the industry and Magnolia's business cannot be reasonably predicted at this time. Magnolia's business, like many oil and natural gas producers, has been, and is expected to continue to be, negatively affected by the crisis described above, which is ongoing and evolving. Magnolia's revenues have significantly declined as a result of the sharp decline in commodity prices. As ofJune 30, 2020 , the Company has not entered into any hedging arrangements with respect to the commodity price risk to which the Company is exposed. The prices ultimately realized for oil, natural gas, and NGLs are based on a number of variables, including prevailing index prices attributable to the Company's production and certain differentials to those index prices. Magnolia is unable to reasonably predict when, or to what extent, commodity prices and the overall markets and global economy will stabilize, and the pace of any subsequent recovery for the oil and gas industry. Further, the ultimate impact that these events will have on Magnolia's business, liquidity, financial condition, and results of operations is highly uncertain and dependent on numerous evolving factors that cannot be predicted, including the duration of the pandemic. Magnolia has taken steps and continues to actively work to mitigate the evolving challenges and growing impact of both the COVID-19 pandemic and the industry downturn on its operations, financial condition, and people. Magnolia's business model prioritizes free cash flow, financial stability, and prudent capital allocation, and is designed to withstand challenging environments. The Company's ongoing plan is to spend within cash flow on drilling and completing wells while maintaining low leverage. Magnolia did not bring any operated wells online during the second quarter and reduced its rig count to one rig in theGiddings Assets. However, given the trajectory in commodity prices, management continues to assess the possibility of bringing wells online during the remainder of 2020. The Company is well positioned to reduce or increase operations given the significant flexibility within its capital program, as its operated drilling rig is on a short-term contract and the Company has no long-term service obligations. Moreover, Magnolia does not have any contractual drilling obligations and nearly all the Company's acreage is held by production. In response to the COVID-19 pandemic and industry downturn, Magnolia has initiated a corporate-wide cost reduction program to help decrease costs throughout every aspect of the Company. The Company has made reductions in general and administrative expense by reducing corporate salaries, renegotiating the fee under the Services Agreement, and working with many of its other vendors and suppliers to reduce the cost of their services. Magnolia believes these measures, taken together with its significant liquidity and lack of near term debt maturities, will provide additional flexibility in navigating the current volatile environment; however, given the tremendous uncertainty and turmoil, there is no certainty that the measures Magnolia takes will be sufficient. As a producer of oil and natural gas, Magnolia is recognized as an essential business and has continued to operate while taking steps to protect the health and safety of its workers. Magnolia and its contractors have implemented protocols to reduce the risk of an outbreak within its operations, and these protocols have not reduced production or efficiency in a significant manner. The Company has implemented remote working procedures for a significant portion of its workforce for health and safety reasons and/or to comply with applicable national, state, and/or local government requirements. As a result, the Company relies on such persons having sufficient access to its information technology systems, including through telecommunication hardware, software, and networks. Magnolia's board of directors is monitoring the unfolding COVID-19 pandemic very closely as well as the effect of working 17 -------------------------------------------------------------------------------- remotely on internal controls over financial reporting and IT security. Magnolia has been able to maintain a consistent level of effectiveness through these arrangements, including maintaining day-to-day operations, financial reporting systems, and internal control over financial reporting.
Business Overview
As ofJune 30, 2020 , Magnolia's assets inSouth Texas included 43,031 gross (23,559 net) acres inKarnes ,Gonzales ,DeWitt , andAtascosa Counties,Texas , and 630,422 gross (428,531 net) acres in the Giddings Field. As ofJune 30, 2020 , Magnolia held an interest in approximately 1,800 gross (1,172 net) wells, with total production of 66.3 thousand barrels of oil equivalent per day ("Mboe/d") for the six months endedJune 30, 2020 . In the second quarter of 2020, Magnolia operated a one-rig program for the Giddings Assets. Magnolia recognized a net loss attributable to Class A Common Stock of$1.2 billion , or$7.46 per diluted common share, for the six months endedJune 30, 2020 . Magnolia recognized a net loss of$1.9 billion , which includes noncontrolling interest of$0.7 billion related to the Magnolia LLC Units (and corresponding Class B Common Stock) held by certain affiliates ofEnerVest for the six months endedJune 30, 2020 . As a result of the sharp decline in commodity prices during the six months endedJune 30, 2020 , Magnolia recorded impairments of$1.9 billion related to proved and unproved properties. Proved property impairment of$1.4 billion is included in "Impairment of oil and natural gas properties" and unproved property impairment of$0.6 billion is included in "Exploration expense" on the Company's consolidated statement of operations for the six months endedJune 30, 2020 . OnAugust 5, 2019 , the Company's board of directors authorized a share repurchase program of up to 10 million shares of Class A Common Stock. The program does not require purchases to be made within a particular timeframe. As ofJune 30, 2020 , the Company had repurchased 2.0 million shares under the plan at a cost of$16.8 million , 1.0 million of which were repurchased in the first quarter of 2020 at a cost of$6.5 million . No shares were repurchased in the second quarter of 2020. Results of Operations
Factors Affecting the Comparability of the Historical Financial Results
Magnolia's historical financial condition and results of operations for the periods presented may not be comparable, either from period to period or going forward, as a result of the following factors:
•During the first quarter of 2020, the Company incurred impairments of
•OnFebruary 21, 2020 , the Company completed the acquisition of certain non-operated oil and natural gas assets located inKarnes andDeWitt Counties,Texas , for approximately$72.0 million in cash, subject to customary closing adjustments; •OnMay 31, 2019 , the Company completed the acquisition of certain oil and natural gas assets located in the Company's Karnes County Assets for approximately$36.3 million in cash and approximately 3.1 million shares of the Company's Class A Common Stock; and •OnFebruary 5, 2019 , Magnolia Operating formed a joint venture,Highlander Oil & Gas Holdings LLC ("Highlander"), to complete the acquisition of a 72% working interest in theEocene-Tuscaloosa Zone , Ultra Deep Structure gas well located inSt. Martin Parish, Louisiana (the "Highlander Well"), in whichMGY Louisiana LLC , a wholly owned subsidiary of Magnolia Operating, holds approximately 85% of the units, with the remaining 15% attributable to noncontrolling interest. As a result of the factors listed above, the historical results of operations and period-to-period comparisons of these results and certain financial data may not be comparable or indicative of future results. 18 --------------------------------------------------------------------------------
Three Months Ended
Oil, Natural Gas and NGL Sales Revenues. The following table provides the
components of Magnolia's revenues for the periods indicated, as well as each
period's respective average prices and production volumes. This table shows
production on a boe basis in which natural gas is converted to an equivalent
barrel of oil based on a ratio of six Mcf to one barrel. This ratio may not be
reflective of the current price ratio between the two products.
Three Months Ended
(In thousands, except per unit data) June 30, 2020 June 30, 2019
Production:
Oil (MBbls) 3,089 3,189
Natural gas (MMcf) 9,763 10,057
NGLs (MBbls) 1,122 1,060
Total (Mboe) 5,838 5,925
Average daily production:
Oil (Bbls/d) 33,940 35,044
Natural gas (Mcf/d) 107,289 110,516
NGLs (Bbls/d) 12,324 11,648
Total (boe/d) 64,146 65,111
Revenues:
Oil revenues $ 60,790 $ 204,513
Natural gas revenues 13,168 22,590
Natural gas liquids revenues 8,881 15,855
Total revenues $ 82,839 $ 242,958
Average Price:
Oil (per barrel) $ 19.68 $ 64.13
Natural gas (per Mcf) 1.35 2.25
NGLs (per barrel) 7.92 14.96
Oil revenues were 73% and 84% of the Company's total revenues for the three
months ended June 30, 2020 and 2019, respectively. Oil production was 53% and
54% of total production volume for the three months ended June 30, 2020 and
2019, respectively. The oil revenues for the three months ended June 30, 2020
were $143.7 million lower than the three months ended June 30, 2019 . A 69%
decrease in average prices reduced second quarter 2020 revenues by
$141.7 million compared to the same period in the prior year, while a 3%
decrease in oil production reduced revenues by $2.0 million .
Natural gas revenues were 16% and 9% of the Company's total revenues for the
three months ended June 30, 2020 and 2019, respectively. Natural gas production
was 28% of total production volume for each of the three months ended June 30,
2020 and 2019. Natural gas revenues for the three months ended June 30, 2020
were $9.4 million lower than the three months ended June 30, 2019 . A 40%
decrease in average prices reduced second quarter 2020 revenues by $9.0 million
compared to the same period in the prior year, while a 3% decrease in natural
gas production reduced revenues by $0.4 million .
NGL revenues were 11% and 7% of the Company's total revenues for the three
months ended June 30, 2020 and 2019, respectively. NGL production was 19% and
18% of total production volume for the three months ended June 30, 2020 and June
30, 2019 , respectively. NGL revenues for the three months ended June 30, 2020
were $7.0 million lower than the three months ended June 30, 2019 . A 47%
decrease in average prices reduced second quarter 2020 revenues by $7.5 million
compared to the same period in the prior year, while a 6% increase in NGL
production increased revenues by $0.5 million .
19
--------------------------------------------------------------------------------Operating Expenses and Other Income (Expense). The following table summarizes the Company's operating expenses and other income (expense) for the periods indicated.
Three Months Ended
(In thousands, except per unit data) June 30, 2020 June 30, 2019 Operating Expenses: Lease operating expenses$ 18,310 $
24,895
Gathering, transportation, and processing 6,788 7,431 Taxes other than income 5,525 13,091 Exploration expenses 6,462 3,617 Asset retirement obligations accretion 1,464
1,373
Depreciation, depletion and amortization 50,870
126,102
Amortization of intangible assets 3,626
3,626
General and administrative expenses 15,729
19,106
Transaction related costs -
85
Total operating costs and expenses$ 108,774 $
199,326
Other Income (Expense): Income from equity method investee $ 611 $ 128 Interest expense, net (7,256) (7,299) Other expense, net 13 (13) Total other expense$ (6,632) $ (7,184) Average Operating Costs per boe: Lease operating expenses$ 3.14 $
4.20
Gathering, transportation, and processing 1.16 1.25 Taxes other than income 0.95 2.21 Exploration expense 1.11 0.61 Impairment of oil and natural gas properties -
-
Asset retirement obligation accretion 0.25
0.23
Depreciation, depletion and amortization 8.71
21.28
Amortization of intangible assets 0.62
0.61
General and administrative expenses 2.69 3.22 Transaction related costs - 0.01 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 endedJune 30, 2020 were$6.6 million , or$1.06 per boe, lower than the three months endedJune 30, 2019 primarily due to the suspension of completion activity and reduction of operating expenses associated with bringing new wells online. Gathering, transportation, and processing costs are costs incurred to deliver oil, natural gas, and NGLs to the market. These expenses can vary based on the volume of oil, natural gas, and NGLs produced as well as the cost of commodity processing. The gathering, transportation, and processing costs for the three months endedJune 30, 2020 were$0.6 million , or$0.09 per boe, lower than the three months endedJune 30, 2019 primarily due to lower gas prices and production from the Giddings Assets. Taxes other than income include production and ad valorem taxes. These taxes are based on rates primarily established by state and local taxing authorities. Production taxes are based on the market value of production. Ad valorem taxes are based on the fair market value of the mineral interests or business assets. Taxes other than income were$7.6 million , or$1.26 per boe, lower for the three months endedJune 30, 2020 compared to the three months endedJune 30, 2019 primarily due to a decrease in revenues following the recent decline in commodity prices. Exploration expenses are geological and geophysical costs that include unproved property impairments, seismic surveying costs, costs of expired or abandoned leases, and delay rentals. The exploration costs for the three months endedJune 30, 2020 were$2.8 million higher than the three months endedJune 30, 2019 and$0.50 higher on a boe basis. This increase is primarily due to 20 --------------------------------------------------------------------------------
higher leasehold abandonment expenses related to the Company's unproved natural gas properties offset by lower seismic surveying costs.
Depreciation, depletion and amortization ("DD&A") during the three months ended
June 30, 2020 was $75.2 million lower than the three months ended June 30, 2019 .
The DD&A rate per boe for the three months ended June 30, 2020 was $12.57 lower
than the three months ended June 30, 2019 . The decrease is primarily the result
of lower asset property balances associated with proved property impairments
recorded in the first quarter of 2020.
General and administrative ("G&A") expenses during the three months ended
June 30, 2020 were $3.4 million lower than the three months ended June 30, 2019
primarily as a result of lower employee compensation and other corporate cost
cutting initiatives.
Six Months Ended
Oil, Natural Gas and NGL Sales Revenues. The following table provides the
components of Magnolia's revenues for the periods indicated, as well as each
period's respective average prices and production volumes. This table shows
production on a boe basis in which natural gas is converted to an equivalent
barrel of oil based on a ratio of six Mcf to one barrel. This ratio may not be
reflective of the current price ratio between the two products.
Six Months Ended
(In thousands, except per unit data) June 30, 2020 June 30, 2019
Production:
Oil (MBbls) 6,479 6,095
Natural gas (MMcf) 19,817 19,820
NGLs (MBbls) 2,276 2,144
Total (Mboe) 12,058 11,542
Average daily production:
Oil (Bbls/d) 35,600 33,674
Natural gas (Mcf/d) 108,882 109,503
NGLs (Bbls/d) 12,506 11,845
Total (boe/d) 66,253 63,770
Revenues:
Oil revenues $ 215,476 $ 376,167
Natural gas revenues 29,343 49,965
Natural gas liquids revenues 19,385 35,499
Total revenues $ 264,204 $ 461,631
Average Price:
Oil (per barrel) $ 33.26 $ 61.72
Natural gas (per Mcf) 1.48 2.52
NGLs (per barrel) 8.52 16.56
Oil revenues were 82% and 81% of the Company's total revenues for the six months
ended June 30, 2020 and 2019, respectively. Oil production was 54% and 53% of
total production volume for the six months ended June 30, 2020 and 2019,
respectively. Oil revenues for the six months ended June 30, 2020 were $160.7
million lower than the six months ended June 30, 2019 . A 46% decrease in average
prices reduced revenues for the six months ended June 30, 2020 by $173.5 million
compared to the same period in the prior year, while a 6% increase in oil
production increased revenue $12.8 million .
Natural gas revenues were 11% of the Company's total revenues for each of the
six months ended June 30, 2020 and 2019. Natural gas production was 27% and 29%
of total production volume for the six months ended June 30, 2020 and 2019,
respectively. Natural gas revenues for the six months ended June 30, 2020 were
$20.6 million lower than the six months ended June 30, 2019 which resulted from
a 41% decrease in average prices for the six months ended June 30, 2020 compared
to the same period in the prior year.
21
--------------------------------------------------------------------------------
NGL revenues were 7% and 8% of the Company's total revenues for the six months
ended June 30, 2020 and 2019, respectively. NGL production was 19% of total
production volume for each of the six months ended June 30, 2020 and June 30,
2019 . NGL revenues for the six months ended were June 30, 2020 $16.1 million
lower than the six months ended June 30, 2019 . A 49% decrease in average prices
reduced revenues for the six months ended June 30, 2020 by $17.2 million as
compared to the same period in the prior year, while a 6% increase in NGL
production increased revenue $1.1 million .
Operating Expenses and Other Income (Expense). The following table summarizes the Company's operating expenses and other income (expense) for the periods indicated.
Six Months Ended
(In thousands, except per unit data) June 30, 2020 June 30, 2019
Operating Expenses:
Lease operating expenses $ 42,473 $ 46,413
Gathering, transportation, and processing 14,807 16,746 Taxes other than income 15,543 27,492 Exploration expenses 562,888 6,093 Impairment of oil and natural gas properties 1,381,258
-
Asset retirement obligations accretion 2,902
2,701
Depreciation, depletion and amortization 193,542
242,048
Amortization of intangible assets 7,253
7,253
General and administrative expenses 33,809
35,302
Transaction related costs -
438
Total operating costs and expenses$ 2,254,475 $
384,486
Other Income (Expense): Income from equity method investee 1,052 516 Interest expense, net (14,012) (14,715) Other expense, net (460) (11) Total other expense$ (13,420) $ (14,210) Average Operating Costs per boe: Lease operating expenses$ 3.52 $
4.02
Gathering, transportation, and processing 1.23 1.45 Taxes other than income 1.29 2.38 Exploration expense 46.68 0.53 Impairment of oil and natural gas properties 114.55
-
Asset retirement obligation accretion 0.24
0.23
Depreciation, depletion and amortization 16.05
20.97
Amortization of intangible assets 0.60
0.63
General and administrative expenses 2.80 3.06 Transaction related costs - 0.04 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 six months endedJune 30, 2020 were$3.9 million , or$0.50 per boe, lower than the six months endedJune 30, 2019 primarily due to the suspension of completion activity and reduction of operating expenses associated with bringing new wells online. Gathering, transportation, and processing costs are costs incurred to deliver oil, natural gas, and NGLs to the market. These expenses can vary based on the volume of oil, natural gas, and NGLs produced as well as the cost of commodity processing. The gathering, transportation, and processing costs for the six months endedJune 30, 2020 were$1.9 million , or$0.22 per boe, lower than the six months endedJune 30, 2019 primarily due to lower gas production and prices from the Karnes County Assets and Giddings Assets. 22 -------------------------------------------------------------------------------- Taxes other than income include production and ad valorem taxes. These taxes are based on rates primarily established by state and local taxing authorities. Production taxes are based on the market value of production. Ad valorem taxes are based on the fair market value of the mineral interests or business assets. Taxes other than income and related cost per boe were$11.9 million , or$1.09 per boe, lower for the six months endedJune 30, 2020 compared to the six months endedJune 30, 2019 primarily due to a decrease in revenues following the recent decline in commodity prices. Exploration expenses are geological and geophysical costs that include unproved property impairments, seismic surveying costs, costs of expired or abandoned leases, and delay rentals. The exploration costs for the six months endedJune 30, 2020 were$556.8 million higher than the six months endedJune 30, 2019 and$46.15 higher on a boe basis primarily as a result of an impairment related to Magnolia's unproved oil and natural gas properties due to the sharp decline in commodity prices primarily driven by the COVID-19 pandemic and oversupply by producers relating to oil price and production controls. For more information, please see Note 5 "Fair Value Measurements" to the Company's consolidated financial statements included in this Quarterly Report on Form 10-Q. For the six months endedJune 30, 2020 , Magnolia recognized$1.4 billion of impairment included in "Impairment of oil and natural gas properties" in the consolidated statement of operations related to its proved oil and natural gas properties. The impairment was driven by the sharp decline in commodity prices. For more information, please see Note 5 " Fair Value Measurements " to the Company's consolidated financial statements included in this Quarterly Report on Form 10-Q. DD&A during the six months endedJune 30, 2020 was$48.5 million lower than the six months endedJune 30, 2019 . The DD&A rate per boe for the six months endedJune 30, 2020 was$4.92 lower than the six months endedJune 30, 2019 . The decrease is primarily the result of lower asset property balances associated with proved property impairments recorded in the first quarter of 2020. G&A expenses during the six months endedJune 30, 2020 were$1.5 million lower than the six months endedJune 30, 2019 primarily as a result of lower employee compensation and other corporate cost cutting initiatives. Interest expense, net, incurred for the six months endedJune 30, 2020 and 2019 is due to interest and amortization of debt issuance costs related to the Company's 2026 Senior Notes and the RBL Facility. The interest expense, net, incurred during the six months endedJune 30, 2020 was$0.7 million lower than the six months endedJune 30, 2019 due to higher interest income.
Liquidity and Capital Resources
Magnolia's primary source of liquidity and capital has been its cash flows from operations. The Company's primary uses of cash have been for acquisitions of oil and natural gas properties and related assets, development of the Company's oil and natural gas properties, and general working capital needs. The Company may also utilize borrowings under other various financing sources available to Magnolia, including its RBL Facility and the issuance of equity or debt securities through public offerings or private placements, to fund Magnolia's acquisitions and long-term liquidity needs. Magnolia's ability to complete future offerings of equity or debt securities and the timing of these offerings will depend upon various factors, including prevailing market conditions and the Company's financial condition. The Company anticipates its current cash balance, cash flows from operations, and its available sources of liquidity to be sufficient to meet the Company's cash requirements. However, as the impact of recent declines in worldwide crude oil and natural gas prices and the impact of COVID-19 on the economy evolves, the Company will continue to assess its liquidity needs. In the event of a sustained market deterioration, Magnolia may need additional liquidity, which would require the Company to evaluate available alternatives and take appropriate actions. As ofJune 30, 2020 , the Company had$400.0 million of principal debt related to the 2026 Senior Notes outstanding and no outstanding borrowings related to the RBL Facility. As ofJune 30, 2020 , the Company had$566.9 million of liquidity comprised of the$450.0 million of borrowing base capacity of the RBL Facility and$116.9 million of cash and cash equivalents.
Cash and Cash Equivalents
AtJune 30, 2020 , Magnolia had$116.9 million of cash and cash equivalents. The Company's cash and cash equivalents are maintained with various financial institutions inthe United States . Deposits with these institutions may exceed the amount of insurance provided on such deposits. However, the Company regularly monitors the financial stability of its financial institutions and believes that the Company is not exposed to any significant default risk. 23 --------------------------------------------------------------------------------
Sources and Uses of Cash and Cash Equivalents
The following table presents the sources and uses of the Company's cash for the
periods presented:
Six Months Ended
(In thousands) June 30, 2020 June 30, 2019
Sources of cash and cash equivalents
Net cash provided by operating activities $ 165,842 $ 309,391
Other - 11,551
$ 165,842 $ 320,942
Uses of cash and cash equivalents
Acquisitions, other $ (69,782) $ (91,903)
Additions to oil and natural gas properties (129,651) (263,064)
Changes in working capital associated with additions to oil and natural gas properties
(24,381) (4,245)
Class A Common Stock repurchase (6,483) -
Other (1,328) (779)
(231,625) (359,991)
Decrease in cash and cash equivalents $
(65,783)
Sources of Cash and Cash Equivalents
Net Cash Provided by Operating Activities
Operating cash flows are the Company's primary source of liquidity and are impacted, in the short term and long term, by oil and natural gas prices. The factors that determine operating cash flows are largely the same as those that affect net earnings or net losses, with the exception of certain non-cash expenses such as DD&A, the non-cash portion of exploration expense, impairment of oil and natural gas properties, asset retirement obligation accretion, and deferred income tax expense. Net cash provided by operating activities totaled$165.8 million and$309.4 million for the six months endedJune 30, 2020 and 2019, respectively. During the six months endedJune 30, 2020 , cash provided by operating activities was negatively impacted by the sharp decline of oil and natural gas prices and payment of liabilities, partially offset by positive impacts from the timing of collections, and lower production tax payments.
Uses of Cash and Cash Equivalents
Acquisitions
During the six months endedJune 30, 2020 , the Company completed various leasehold and property acquisitions, primarily comprised of a$72.0 million acquisition of certain non-operated oil and natural gas assets located inKarnes andDeWitt Counties,Texas . During the six months endedJune 30, 2019 , the Company incurred$91.9 million of acquisition costs, primarily related to the formation of the Highlander joint venture.
Additions to
The following table sets forth the Company's capital expenditures for the three
and six months ended
Three Months Ended Six Months Ended
(In thousands) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019
Drilling and completion $ 27,272
988 1,341 1,768 7,270
Total capital expenditures $ 28,260 As ofJune 30, 2020 , Magnolia was running a one-rig program for theGiddings Assets. The activity during the six months endedJune 30, 2020 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. 24 --------------------------------------------------------------------------------
Capital Requirements
Repurchase of Class A Common Stock
OnAugust 5, 2019 , the Company's board of directors authorized a share repurchase program of up to 10 million shares of Class A Common Stock. The program does not require purchases to be made within a particular timeframe and whether the Company undertakes these additional repurchases is ultimately subject to numerous considerations, market conditions, and other factors. During the first quarter of 2020, the Company repurchased 1.0 million shares for a total cost of approximately$6.5 million . No shares were repurchased during the second quarter of 2020.
Off-Balance Sheet Arrangements
As of
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