Magnolia Oil & Gas (NYSE:MGY) detailed what management described as another year of “strong, consistent performance” during its fourth-quarter 2025 earnings call, citing higher-than-expected well results, continued cost reductions, and sustained shareholder returns despite elevated commodity-price volatility.
Production growth and operational efficiency
Chairman, President and CEO Chris Stavros said the company’s 2025 results reflected the benefits of its “capital-efficient business model,” with production, efficiency metrics, and unit costs all moving in a favorable direction.
In the fourth quarter, Magnolia set a company production record at nearly 104,000 BOE/d and 40,700 barrels of oil per day, both up 3% sequentially. CFO Brian Corales added that fourth-quarter production increased 11% year-over-year to 103,800 BOE/d.
Management attributed part of the outperformance to stronger-than-expected well productivity earlier in 2025, which enabled Magnolia to defer some well completions into 2026 while still delivering higher production growth. The company also highlighted drilling and completion efficiency gains in Giddings, including an 8% increase in average drilled feet per day and a 6% improvement in completed feet per day during 2025.
In response to analyst questions about why recent Giddings wells appeared to outperform type curves, Stavros said he could not point to a specific completion-design change and instead credited “drilling into some very good rock” and improved well placement over time.
Financial results, margins, and free cash flow
Magnolia reported fourth-quarter adjusted net income of approximately $71 million, or $0.38 per diluted share, and adjusted EBITDA of $216 million. Drilling and completion capital for the quarter was about $117 million, which management noted was 54% of adjusted EBITDA.
For full-year 2025, the company posted adjusted EBITDA of $906 million, with drilling and completion (D&C) capital representing 51% of EBITDA. Stavros also said pre-tax operating margins averaged 33% for the year despite “a more than 15% annual decline” in oil price realizations. Corales noted that fourth-quarter revenue per BOE declined 13% quarter-over-quarter due to lower oil prices, while total adjusted cash operating costs (including G&A) were $10.64 per BOE. Fourth-quarter operating income margin was $9.85 per BOE, or 30% of revenue, with the margin decline driven by commodity prices, partially offset by lower depreciation and amortization expense.
The company said its low reinvestment rate supported free cash flow of more than $425 million in 2025.
Shareholder returns, dividend, and balance sheet
Management emphasized capital returns as a core feature of the strategy. Stavros said Magnolia returned about 75% of 2025 free cash flow to shareholders through dividends and share repurchases.
- Share repurchases: Approximately 8.9 million shares repurchased in 2025, reducing diluted share count by roughly 4.5%, according to Stavros. Corales said the diluted share count fell 4% year-over-year and averaged 188 million shares in the fourth quarter (down more than 2 million shares sequentially).
- Authorization update: The board approved a 10 million share increase to the repurchase authorization, leaving 12.9 million shares remaining under the current authorization, directed toward repurchasing Class A shares in the open market.
- Dividend: Corales said the company recently announced a 10% dividend increase to $0.16 per share quarterly, with the next dividend payable March 2. The annualized payout rate is $0.66 per share.
On liquidity, Corales said Magnolia ended 2025 with $267 million of cash. The company has $400 million of senior notes maturing in 2032 and an undrawn $450 million revolving credit facility, resulting in total liquidity of about $717 million.
Asked about how tactical Magnolia may be with buybacks amid stock volatility, Stavros described a “programmatic” component—what he characterized as a minimal commitment of about 1%—alongside discretion to “lean in or not” during periods where the stock appears disconnected from business fundamentals.
Reserves, well costs, and capital efficiency
Magnolia highlighted reserve additions and low finding and development costs. Corales said proved developed reserves were 167 million BOE at year-end 2025. Excluding acquisitions and price-related revisions, the company added 50 million BOE of proved developed reserves during the year. Total D&C capital was $461 million in 2025, resulting in organic proved developed finding and development costs of $9.25 per BOE; the three-year average from 2023 to 2025 was $9.85 per BOE.
On well costs, Stavros said a “standard Giddings well” had been around $1,100 per foot a year-plus ago and has trended down toward roughly $1,000 per foot, with typical wells in the 8,000 to 8,500-foot range. He added that service costs appeared “flat to slightly down” heading into 2026, and the company had locked in some costs with key providers through most of the first half of the year.
Stavros also credited operational consistency—rigs, crews, and equipment used over multi-year periods—for contributing to efficiency gains, saying the approach improves understanding of the field and drilling challenges over time.
2026 outlook: moderate growth, flat capital, and no hedges
Looking ahead, management reiterated its commitment to moderate growth while keeping capital spending roughly flat year-over-year. The company guided to 2026 D&C and facility capital of $440 million to $480 million, including non-operated capital similar to 2025. First-quarter D&C capital is expected to be about $125 million, which Corales said should be the highest quarterly spending rate of the year.
For production, Corales guided to first-quarter 2026 total production of about 102,000 BOE/d, including an estimated 1,500 BOE/d impact from winter weather in January. Full-year 2026 total production growth is expected to be approximately 5%.
Other guidance items included:
- Oil differentials: Approximately a $3 per barrel discount to Magellan East Houston.
- Hedging: Magnolia remains completely unhedged for oil and natural gas.
- Share count: Fully diluted shares expected to be about 187 million in the first quarter of 2026, about 4% lower than the first quarter of 2025.
- Taxes: Effective tax rate expected to be about 21%, “with all of this being deferred,” according to Corales.
Stavros said the company does not plan to add another rig, even in higher price scenarios. Instead, he said upside commodity pricing would primarily flow through to shareholders via buybacks, dividends, and potentially opportunistic acquisitions. He also expressed a preference for acquisitions with undeveloped upside rather than “PDP-heavy” packages, which he said are more likely to be priced at full value or higher.
Regarding the capital range, Stavros told analysts he did not see much in the current environment that would push spending to the upper end, adding that stronger well performance could again allow the company to defer spending and generate more free cash flow.
About Magnolia Oil & Gas (NYSE:MGY)
Magnolia Oil & Gas Corp (NYSE: MGY) is an independent exploration and production company focused on the acquisition, development and optimization of onshore oil and gas assets in South Texas. Headquartered in Houston, the company concentrates its efforts on the Eagle Ford Shale, where it holds significant working interests in key producing counties.
The company’s core operations center on horizontal drilling and multi-stage completions designed to extract light crude oil, natural gas and natural gas liquids (NGLs).
