Magnolia Oil & Gas : May Investor Presentation

Magnolia Oil & Gas Corporation Investor Presentation - May 2021

Disclaimer

FORWARD-LOOKING STATEMENTS

The information in this presentation and the oral statements made in connection therewith include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of present or historical fact included in this presentation, regarding Magnolia Oil & Gas Corporation's ("Magnolia," "we," "us," "our" or the "Company") financial and production guidance, strategy, future operations, financial position, estimated revenues, and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this presentation, including any oral statements made in connection therewith, the words "could," "should," "will," "may," "believe," "anticipate," "intend," "estimate," "expect," "project," the negative of such terms and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management's current expectations and assumptions about future events. Except as otherwise required by applicable law, Magnolia disclaims any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this presentation. Magnolia cautions you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of Magnolia, incident to the development, production, gathering and sale of oil, natural gas and natural gas liquids. In addition, Magnolia cautions you that the forward-looking statements contained in this presentation are subject to the following factors: (i) the length, scope and severity of the ongoing coronavirus disease 2019 ("COVID-19") pandemic, including the effects of related public health concerns and the impact of continued 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; (ii) the outcome of any legal proceedings that may be instituted against Magnolia; (iii) Magnolia's ability to realize the anticipated benefits of its acquisitions, which may be affected by, among other things, competition and the ability of Magnolia to grow and manage growth profitably; (iv) changes in applicable laws or regulations; and (v) the possibility that Magnolia may be adversely affected by other economic, business, and/or competitive factors. Should one or more of the risks or uncertainties described in this presentation occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. Additional information concerning these and other factors that may impact Magnolia's operations and projections can be found in its filings with the Securities and Exchange Commission (the "SEC"), including its Annual Report on Form 10-K for the fiscal year ended December 31, 2020, which was filed with the SEC on February 23, 2021. Magnolia's SEC filings are available publicly on the SEC's website at www.sec.gov.

NON-GAAP FINANCIAL MEASURES

This presentation includes non-GAAP financial measures, including free cash flow, EBITDAX, adjusted EBITDAX, adjusted net income, adjusted earnings, adjusted cash operating costs and adjusted cash operating margin. Magnolia believes these metrics are useful because they allow Magnolia to more effectively evaluate its operating performance or its liquidity, as applicable, and compare the results of its operations from period to period and against its peers without regard to accounting methods or capital structure. Magnolia does not consider these non-GAAP measures in isolation or as an alternative to similar financial measures determined in accordance with GAAP. The computations of these non-GAAP measures may not be comparable to other similarly titled measures of other companies.

Magnolia excludes certain items from net income in arriving at adjusted net income and adjusted earnings because these amounts can vary substantially from company to company within its industry depending upon accounting methods, book values of assets and the method by which the assets were acquired. Adjusted EBITDAX, adjusted net income, and adjusted earnings should not be considered as alternatives to, or more meaningful than, net income as determined in accordance with GAAP. Certain items excluded from free cash flow, adjusted EBITDAX, adjusted net income, adjusted earnings, adjusted cash operating costs and adjusted cash operating margin are significant components in understanding and assessing a company's financial performance or its liquidity, as applicable, and should not be construed as an inference that its results will be unaffected by unusual or non-recurring terms.

As performance measures, adjusted EBITDAX, adjusted net income, adjusted earnings, adjusted cash operating costs and adjusted cash operating margin may be useful to investors in facilitating comparisons to others in the Company's industry because certain items can vary substantially in the oil and gas industry from company to company depending upon accounting methods, book value of assets, and capital structure, among other factors. Management believes excluding these items facilitates investors and analysts in evaluating and comparing the underlying operating and financial performance of our business from period to period by eliminating differences caused by the existence and timing of certain expense and income items that would not otherwise be apparent on a GAAP basis. As a liquidity measure, management believes free cash flow is useful for investors and widely accepted by those following the oil and gas industry as financial indicators of a company's ability to generate cash to internally fund drilling and completion activities, fund acquisitions, and service debt. Our presentation of adjusted EBITDAX, adjusted net income, free cash flow, adjusted earnings, adjusted cash costs and adjusted cash operating margin may not be comparable to similar measures of other companies in our industry. A free cash flow reconciliation is shown on page 20, adjusted EBITDAX reconciliation is shown on page 21 of the presentation, adjusted net income reconciliation is shown on page 22, adjusted earnings reconciliation is shown on page 23 and adjusted cash operating costs and adjusted cash operating margin reconciliations are shown on page 9.

INDUSTRY AND MARKET DATA

This presentation has been prepared by Magnolia and includes market data and other statistical information from sources believed by Magnolia to be reliable, including independent industry publications, governmental publications or other published independent sources. Some data is also based on the good faith estimates of Magnolia, which are derived from its review of internal sources as well as the independent sources described above. Although Magnolia believes these sources are reliable, it has not independently verified the information and cannot guarantee its accuracy and completeness.

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Magnolia Oil & Gas - Overview

• High-quality,low-riskpure-play South Texas operator with a core Eagle Ford and Austin Chalk position acquired at an attractive entry multiple
• Significant scale and PDP base generates material free cash flow, reduces development risk, and increases optionality
• Asset Overview:
• • ~23,500 net acres in a well-delineated,low-risk position in the core of Karnes County, representing some of the most prolific acreage in the United States with industry leading break-evens
  • ~440,000 net acres in the Giddings area, a re-emerging oil play with significant upside and what we believe to be substantial inventory
  • Both assets expected to remain self funding and within cash flow

Market Statistics
Trading Symbol (NYSE)	MGY
Share Price as of 5/10/2021	$12.21
Common Shares Outstanding (1)	243 million
Market Capitalization	$3.0 billion
Long-term Debt - Principal	$400 million

~460,000 Net Acre Position Targeting Two of the Top

Oil Plays in the U.S.

Giddings Field

Karnes County

Gonzales

Wilson

Dewitt

Source: IHS Performance Evaluator.

Industry Leading Breakevens ($/Bbl WTI)

Cash as of 3/31/2021

$178 million

Total Enterprise Value			$3.2 billion					$38	$39	$39	$45
			$32	$34	$35
		$28
Operating Statistics	Karnes	Giddings	Total
Net Acreage	23,512	436,585	460,097

1Q21 Net Production (Mboe/d) (2)	27.7	34.6	62.3	Karnes Austin	Karnes Lower	Midland	Delaware	DJ Basin	Eagle Ford	STACK	Bakken
Chalk	Eagle Ford						Source: RSEG.
(1)	Common Stock outstanding includes Class A and Class B Stock.
(2)	Giddings Includes other production not located in the Giddings Field.										3

Magnolia Oil & Gas - Financial Policy

Conservative Financial Statements with

Low Financial Leverage

(<= 1.0x EBITDAX)

Acquisitions generally expected to be

smaller bolt-ons in the vicinity of

current assets and with similar financial

characteristics

Capital Spending Plan Targeted at 50% - 60% of Annual EBITDAX

(Expected to deliver modest production growth and consistent free cash flow)

No Oil Hedging

Return-focused,long-term value creation through (i) dividend,

(ii) accretive bolt-on acquisitions, (iii) share repurchases, and (iv) debt reduction.

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Corporate Business Model and Strategy

Magnolia Value Creation Strategy

Objectives & Execution

1. Consistent organic production growth
2. High full-cycle operating margins
3. Conservative leverage profile
4. Significant free cash flow aftercapital expenditures
5. Effective reinvestment of free cash flow

2021 production guidance of 6-9% YOY growth

Targeting full cycle margins of 50%

$178 million of cash on the balance sheet and $400 million of principal debt outstanding, representing 0.4x 1Q21 annualized adjusted EBITDAX

Business model targets D&C capex of 50% - 60% of our annual EBITDAX

Closed ~$205 million of bolt-on acquisitions since 1/1/2019 while increasing our Karnes net acreage position by ~40% and repurchased

20.5 million shares of Magnolia stock. Will begin paying a dividend in 3Q21.

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