Magnolia Oil & Gas : Q2 2023 Magnolia Oil & Gas Earnings Press Presentation

Magnolia Oil & Gas

Second Quarter 2023 Earnings Presentation

August 2, 2023

Christopher Stavros - President & CEO Brian Corales - Senior Vice President & CFO

Jim Johnson - Vice President, Finance, IR & Treasurer

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, 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") 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 press release are subject to the following factors: (i) the supply and demand for oil, natural gas, NGLs, and other products or service, including the impacts of actions taken by OPEC and other state-controlled oil companies ; (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; (v) geopolitical and business conditions in key regions of the world; and (vi) the possibility that Magnolia may be adversely affected by other economic, business, and/or competitive factors, including inflation. Should one or more of the risks or uncertainties described in this press release 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 the operations and projections discussed herein can be found in Magnolia's filings with the Securities and Exchange Commission (the "SEC"), including its Annual Report on Form 10-K for the fiscal year ended December 31, 2022. 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 adjusted net income, free cash flow, EBITDAX, adjusted EBITDAX, 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 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.

Adjusted EBITDAX should not be considered an alternative to, or more meaningful than, net income as determined in accordance with GAAP. Certain items excluded from free cash flow, adjusted EBITDAX, adjusted cash operating costs and adjusted cash operating margin are significant components in understanding and assessing a company's financial performance and should not be construed as an inference that its results will be unaffected by unusual or non-recurring terms.

As performance measures, adjusted net income, adjusted EBITDAX, 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 net income, adjusted EBITDAX, free cash flow, adjusted cash operating 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 13, adjusted EBITDAX reconciliation is shown on page 14 of the presentation, adjusted net income is shown on page 15, 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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Second Quarter 2023 Key Financial Metrics

• 2Q23 total production grew 10% year over year to 81.9 Mboe/d, with D&C capital of $86 million (42% of adjusted EBITDAX(1))
• Cost reduction initiative delivering strong results, reducing capital spending guidance to $425 - $440 million; represents a 14% reduction from original 2023 guidance
• Increasing full year production growth target to 7% to 8% from strong Giddings well results
• Returned $69.4 million(2) to shareholders during 2Q23, inclusive of $44.8 million of share repurchases (2.3 million shares) and $24.6 million of dividends, while growing cash to $677 million
• Share buyback authorization was increased by 10 million shares, bringing the total remaining authorization to 14.2 million Class A Common shares

Item

Total Production (Mboe/d)

Giddings and Other Production as a % of total

Revenue ($ MM)

Adjusted EBITDAX ($ MM) (1)

Adjusted Net Income ($ MM) (1)

D&C Capex ($ MM)

Free Cash Flow ($ MM) (1)

Cash Balance ($ MM)

Weighted average diluted shares outstanding (MM) (3)

2Q23

81.9

70%

$280

$203

$97

$86

$93

$677

211.4

2Q22

74.2

59%

$485

$393

$294

$122

$251

$502

222.4

% Change

10%

11%

(42%)

(48%)

(67%)

(29%)

(63%)

35%

(5%)

(1)	Adjusted EBITDAX, Adjusted Net Income, and Free Cash Flow are non-GAAP measures. For a reconciliation of the most comparable GAAP measure see pages 14, 15 and 13.
(2)	Includes $1.1 MM of share repurchases incurred during the second quarter, but settled during the third quarter of 2023, and excludes $5.4 MM of share repurchases incurred during the first	3
	quarter, but settled during the second quarter of 2023.
(3)	Weighted average total shares outstanding include diluted weighted average shares of Class A Common Stock outstanding during the period and shares of Class B Common Stock, which are
	anti-dilutive in the calculation of weighted average number of common shares outstanding.

2Q 2023 Cash Flow Reconciliation

(In millions)

900		26
		25
800			49
204
700					87	7
600
500
400
667							677
300
200
100
0	Cash Flow (1)	Changes in (2)	Dividends(3)	Common Stock(4)	D&C and	Acquisitions	Cash
Cash
3/31/2023	from	Working		Repurchases	Facilities		6/30/2023
	Operations	Capital and			Capital
		Other

(1)	Cash flow from operations before changes in working capital.
(2)	Comprised of $26	MM of working capital changes including capital accruals.	4
(3)	Includes $22 MM of dividends paid to Class A shareholders and $3 MM of distributions to noncontrolling interest holders.
(4)	Comprised of $49	MM Class A Common Stock of which $5 MM was incurred in 1Q and settled in 2Q.

Share Repurchase Summary Through 2Q 2023

• Since the initial repurchase authorization in 3Q19, Magnolia has reduced its dilutive share count by 30.0(1) million shares of Class A common stock as well as 26.9 million shares of Class B common stock, for a total reduction of 56.9 million shares, or approximately 22% of the diluted shares outstanding as of the authorization date.
  ‒ Repurchased 2.3 million shares during 2Q23.
• Magnolia plans to continue to opportunistically repurchase at least 1% of the total shares outstanding each quarter.
• Magnolia's Board approved a 10 million share increase to the current share repurchase authorization. Including this increase, there are 14.2 million shares remaining under the current share repurchase authorization.

Share Reduction Summary (Million Shares)

(1)

(1) Class A share reduction includes 3.6 million non-compete shares that were paid in cash in lieu of stock in 2021.

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