Q3 2022 Magnolia Oil & Gas Corp Earnings Call
Okay.
Good day and welcome to the Magnolia oil third quarter 2022 conference call.
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I would now like to turn the conference over to Brian Corollas. Please go ahead.
Thank you Marlene and good morning, everyone welcome to Magnolia oil and gas third quarter earnings Conference call. As a reminder, today's conference call contains certain projections and other forward looking statements within the meaning of the federal Securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ materially.
From those expressed or implied in these statements additional information on risk factors that could cause results to differ is available in the company's annual report on Form 10-K filed with the SEC.
A full safe harbor can be found on slide two of the conference call slide presentation with the supplemental data on our website you can download Mangala just third quarter of 2022 earnings press release as well as the conference call slides from the investors section of the company's website at Www Dot Magnolia oil gas Dot Com I will now turn the.
Call over to President and CEO Mr. Christopher.
Thanks, Brian and good morning, and thank you for joining us today. The most recent quarter was filled with some mixed emotions. We're humbled by our continued strong financial and operating results and performance.
Saddened by the recent passing of Steve Chazen, Magnolia is founder and former CEO .
I'm incredibly grateful for his guidance and counsel his steady leadership and importantly, his friendship.
While he will be deeply missed we expect his legacy to continue to live on through back not only a few years to come.
Despite our loss I am very confident that that can always best days are ahead.
<unk> original business model remains sound and the old saying here Apache It Ain't broke don't fix it.
It can be a tendency for leaders in transition feel that they must put their mark on the organization in some significant way and even if it is unnecessary. Some of this is simply human nature.
I promised myself that I would not do this.
Principals of the business model that Steve established earn Mcnally astounding over four years ago are expected to remain largely unchanged and my objective is to always do what is in the best interest of Magnolia shareholders.
We will continue our discipline around capital spending while maintaining low levels of debt.
Expect a record of achieving moderate annual production growth, while generating significant free cash flow and strong pre tax margins to continue.
Maybe the only get delivered very strong financial and operating results in the third quarter driven by record quarterly production and pre tax operating margins of 65% and despite a sequential quarterly decline in oil prices and more than $15 per barrel.
Third quarter 2022 production of 81, 5000 Boe per day increased by 21% year over year, and 10% sequentially and well above the high end of our earlier guidance.
Stronger than anticipated production was seen in both our giddings or karnes asset areas that was primarily the result of better than expected well performance continued efficiencies, primarily at giddings and swire slightly higher non op activity.
These results were achieved while spending just 30% of our adjusted EBITDAX during the quarter.
Relative to consensus estimates for the third quarter, representing an 8% beta for our production and roughly a 12% beat on many of the key financial metrics, including cash flow and earnings per share.
Magnolia as production per share grew by 31% in the third quarter compared to the same period a year ago.
Purchased 3 million shares during the quarter reduced our diluted share count by 8% from the same period last year and paid a regular quarterly dividend of 10 cents a share.
Share repurchases and dividends and I can only return 36% of the free cash flow generated during the quarter, while ending the period with nearly $700 million of cash.
We continue to gain momentum and progressing the efficiencies just getting us.
Excluding our appraisal work and drilling feet per day at Giddings has improved by approximately 30% compared to 2020 levels and is nearly double when compared to 2019.
Even more significant is that the total cost per stimulated foot for development wells drilled this year is 26% lower than wells drilled in 2019. Despite this year's inflationary environment around materials oilfield service costs.
Our improvements are directly attributable to the efficiencies that have been captured at giddings, including faster drilling and completion rates drilling longer laterals, and multi well pads and an improved understanding of the asset through our operating experience.
Close cooperation with our vendors and our ability to establish strong partnerships have saved us about $25 million on our capital and other costs. This year, helping to secure supply. Despite some of the industry shortages that have impacted both product and services set.
Said, another way the $25 million of savings amounts to about a half a million dollars per well for us are about 5%, 6% of the total well cost.
While we continue to strive for the lowest cost there is much to be sat around the importance of continuously communicating with our vendors working closely with them to plan ahead, and sending a message that our strategy is to run a consistent business plan.
This goes a long way in creating a healthy and secure partnership with critical vendors.
I would credit both our supply chain management and operating teams efforts.
I've done a terrific job around this which importantly allows us to execute on our plan.
And we believe that we can capture additional savings into next year for further initiatives.
Magnolia continues to operate two drilling rigs with one completion crew and expects to maintain a similar level of activity through next year one.
One rig will continue to drill multi well development pads in our giddings area. The second rig will drill a mix of wells in the karnes and giddings areas, including some appraisal wells at Giddings.
This level of activity should provide full year 2023 production growth of approximately 10% with our drilling and completion capital expected to be well below 55% of our EBITDAX at current product prices.
This level of production growth would represent the second consecutive year in which magnolias growth exceeded its business plan, reflecting the quality of our asset base and the continued efficiencies that we're seeing at giddings.
We're planning a very active operating program for the fourth quarter, which should provide us with significant momentum heading into 2023.
Our largest pad in giddings today, and now an eight well pad scheduled to come online during the latter part of the current quarter. This should allow our production levels to exit the year higher than our volumes seen during the third quarter and with most of the benefit to be realized during the first half of 2023.
Magnolia strong financial position provides us with ample flexibility to navigate through both product price volatility volatility and periods of economic uncertainty.
Our position of strength also allows us to patiently seek attractive opportunities to allocate our capital and free cash flow in a disciplined manner to enhance the per share value of the company.
We will continue to carry out our business model, which should result in moderate annual production growth and a consistent reduction of our total shares outstanding.
Order to fulfill our investment proposition of providing annual dividend growth of at least 10%.
We plan to revisit our dividend rate early next year and after evaluating our full year 2020 financial 2022 financial results.
Finally, I'm pleased to announce that Bryan Crouse Magnolia as VP of Investor Relations has been promoted to the position of Chief Financial Officer, Brian .
Brian has done an excellent job at Magnolia since 2018, and helping both manage and communicate the company's strategy is full of shaping our message to the broad financial community and other stakeholders.
Nobody's strong focus on its shareholders, an emphasis on generating improved stock market value over time make Brian uniquely qualified to serve as CFO .
The selection and elevation of our qualified internal candidates for the CFO role is indicative of Magnolia strong bench of talent and Archrock I'll now turn the call back over to Brian .
Thanks, Chris.
I will review some items from our third quarter and referred to the presence of presentation slides found on our website also provide some additional guidance for both the fourth quarter and our initial view on 2023 before turning it over for questions.
Beginning with slide three which shows a summary of our third quarter Magnolia continued to execute on our business model as demonstrated by our very strong financial and operating results. Once again, we had record production, which was supported by the absence of hedges, which in turn provided very strong product price realizations. We generated total net income for the quarter.
There are 287 billion and diluted GAAP earnings per share of $1 29 are.
Our adjusted EBITDAX for the quarter was 386 million and total capital associated with drilling completions and facilities was 114 billion, but just 30% of our adjusted EBITDAX.
Overall company production volumes grew 10% sequentially and 21% on a year over year basis to 81 5000 barrels of oil equivalent per day in the third quarter.
Looking at the quarterly cash flow waterfall chart on slide four we started the third quarter with $502 million of cash cash flow from operations before changes in working capital was 361 million during the period.
With working capital changes and other small items benefiting cash by $31 million, our D&C capital incurred including land acquisitions was $116 million during the quarter, we repurchased 3 million shares for $6 61 billion and ended the quarter with $690 million of cash in our balance sheet.
Looking at slide five this illustrates the progress of the reduction in our total outstanding shares since we began our repurchase program in the second half of 2019 since that time, we have reduced our total diluted share count by 50 million shares or 19% after repurchasing 3 million shares during the quarter, our weighted average fully diluted.
Share count averaged $217 8 million shares during the quarter.
We currently have nine 3 million shares remaining under our repurchase authorization, which is specifically directed towards repurchasing shares in the open market.
Turning to slide six we declared our Tencent regular quarterly dividend last week and this will be paid on December one our plan to achieve annualized dividend growth of 10% is expected to supplement that per share growth rate of the company and its aligned with our overall strategy of achieving moderate annual production growth and reducing our outstanding shares by.
At least 1% per quarter, we will revisit our dividend payment rate early next year based on our 2022 results and recast using significantly lower oil prices.
Our balance sheet remains very strong and we ended the quarter with a net cash position of approximately $300 million our $400 million of gross debt is reflected in our senior notes, which are now callable and do not mature until 2026, including our third quarter, ending cash balance of $690 million and our undrawn $450 million revolving credit facility.
Our total liquidity is greater than $1 1 billion.
Our condensed balance sheet and liquidity as of September 30 are shown on slides seven and eight.
Turning to slide nine and looking at our per unit cash costs and operating income margins. Despite the substantial increase in product prices over the past year, we have seen only a modest increase in total cost or total adjusted cash operating costs, including G&A were $13 seven per Boe in the third quarter of 2022.
An increase of $3 18 per Boe compared to year ago levels.
Half of this increase is due to higher production taxes, which are directly related to the increase in product prices. The modest per barrel cost increase is nominal compared to the more than $18 increase in our revenue per Boe.
<unk>, our DD&A rate of about $9 20 per barrel, which is generally in line with our F&D costs. Our operating income margin for the third quarter was $41 56 per Boe.
Our 65% of our total revenue simply put 75% of the revenue increase was captured in our operating income margins on a year over year basis.
We expect to have an active fourth quarter with most of the wells coming online towards the latter part of the quarter, including the largest pad. We've operated to date at Giddings, we estimate that our fourth quarter production should be in the range of 77 to 79000 barrels of equivalent per day D&C capital is expected to be approximately $125 million to $140 million.
Due to high number of well completions and higher anticipated non op activity during the quarter.
Given the high level of activity, we expect our production volumes to exit the year at a higher rate than seen during the third quarter, while also providing a benefits of production during the first half of 2023.
Oil price differentials are anticipated to be approximately a $3 per barrel discount to magellan's east Houston and closer to our historical levels levels. After realizing tighter differentials during the previous two quarters. As a reminder, magnolia remains completely unhedged for all its oil and natural gas production.
The fully diluted share count for the fourth quarter of 2022 is expected to be approximately 216 million shares which is 6% lower than fourth quarter of 2021 levels. We expect our full year 2022 cash rate to be approximately 8%.
Looking at 2023, we expect to have a similar level of operating activities. This year, we plan to operate two drilling rigs and one completion crew through next year and expect our capital spending to be well below where spinning cap of 55% of EBITDAX in the current commodity price environment. This level of activity is expected to generate.
<unk> production growth of approximately 10% for 2023, when compared to full year 2022 levels, while generating significant free cash flow, we will revisit our dividend in early 2023 after finalizing our full year 2022 financial results.
We're now ready to take your questions.
Yeah.
Yeah.
Yeah.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone song.
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Also please restrict yourself to one question and one follow up if possible you may rejoin the queue if need be.
At this time, we will pause momentarily to assemble our roster. Thank you.
Our first question comes from Leo Mariano from M. K M. Leo Please go ahead.
Hey, I wanted to ask quickly here on capital.
Are you seeing a bit of a healthy increase again here in <unk>, but it sounded like maybe that was just kind of an unusually heavy.
<unk> quarter.
As we look into next year.
Should we not assume that we should take the fourth quarter level and kind of annualize that for 'twenty. Three we think it probably won't be end up being less than that just because it looks like <unk> got a heavy.
It's a little heavier than what we had been running on average are certainly this year.
I wouldn't make much of it I mean, I think maybe said a different way Leo is that if you. If you just look at our full year 2022 capital N and probably you know say, it's going to be 10% higher in 2023 that would probably get you to approximate what we're thinking.
Right al.
At least based on what we know today and that that should more or less cover. It. So I think almost any way you slice it for the fourth quarter.
That that probably gets you something that that's you know for 2022, and then adding 10% on that is it's not unreasonable for 'twenty three.
Okay. That's helpful.
And then just wanted to ask a little bit on giddings here.
Is there any update on either the recent appraisal results that you've kind of had out there and you also kind of referred in your prepared comments <unk> seen some efficiencies.
Some of the cost down there, which I know have been somewhat offset by inflation, but can you give us a sense kind of what the well cost per lateral foot now are getting.
Yeah. So on the on the appraisal you know as we've talked about many times, we've had a pretty active appraisal program. This year and we expect that to continue into 2023. It's it's led to our you know identifying several new and frankly promising areas in giddings bubble.
Probably need a little bit more work in these areas and in order to improve some of our understanding around it. That's that's about all I can say right now, but I think you know it certainly looks good very promising.
And perhaps you know sort.
Sort of an extension of giddings that could ultimately.
Two other areas for development and time.
The well costs are where we're sort of running roughly.
1100 per lateral foot.
That probably is about right.
Okay. Thanks, guys.
Sure.
Yeah.
Our next question comes from Neal Dingmann from Truest Securities.
Please go ahead.
Good morning, all and Chris just definitely Wanna say, it's certainly bittersweet called today, but great Oh, well the company is doing.
Great remarks about yourself.
My first question, which is also on getting a little bit on the development program, maybe a little bit broader.
It seems we are getting most of the development activity continues to be kind of in that order quarter in Washington County. So I was wondering if you look at the thinking about the 23 development plan will that continue to be mostly in the broader areas or will you be able to what do you think about maybe expanding that a little bit and then just wondered on pads.
Size as well so maybe talk about the regions that you're sort of pad size.
Sure Yeah, no it will be a mix as I said in my remarks, you know what one one of the rigs will focus or be dedicated large largely in that core development area and then the second rig will do a mix of things, including ongoing appraisal work, which I think right now will be you know.
<unk> two in terms of activity for for next year as it as it was this year and then maybe Marcel will just sort of see how it goes.
The on the the pad size I mean, I wouldn't tell you that exactly that was a one off but.
I don't anticipate drilling on a regular basis eight well pads.
Up to now and more recently, we've been doing our pads that have averaged four wells and that would be more of the norm for us occasionally you sort of see that 345, well pad size.
You might see one that might be larger but more likely not.
Okay Fair enough and then maybe my second question the capital allocation specifically.
Always appreciate it Steve candor on the Congress discussing buybacks versus did so Chris I was hoping to hear how you would think about it going forward, especially you know look I think your stock has done well, but I still think it's quite discount itself. Just wondering how you think about the allocation going forward.
Yeah, it's gonna be a mix Neil as as it has always and so I don't think you're going to see significant changes I mean, clearly we've got.
Oh, good amount of cash on the balance sheet and you know that's not such a terrible thing.
You know in this uncertain economic environment.
<unk>.
Youre running a little bit better interest income now thanks to the fed and that's.
Probably pays for our Treasury Department.
Yeah.
The the mixes is probably not going to be very different I mean, what what we have as you know we've talked about quite quite regularly as you know we still have a relatively large private equity holder that you know probably plans over time to sell down and that'll continue and what we've done is try to.
Right.
Those sales by buying buying shares next to them or helping them in that process and that that has worked out just fine overtime and so we also have our open market separate open market authorization for share repurchases.
Yeah on the dividend, it's just sort of.
You now have.
A different comment maybe than than what some people would say I mean, our approach towards dividends is.
Somewhat different than than some of the other E&P companies and and you know being different is just fine whether it's them or us in some ways I feel like this is.
A sequel to a movie where youre, hoping that the sequel is at least as good as the original but usually it doesn't turn out that way.
So I feel like I've seen this movie before.
And you know this is just another sequel and the series. This time its called revenge of the E&P company dividends part five.
And maybe maybe this time it'll be different I, certainly hope so but just as a reminder, you can just go back to what we've.
Sad for a minute and remind you about our dividend philosophy, so that the principles for us around dividends that they need to be secure and sustainable in other words safe.
So dividend has to be paid out of real earnings that are generated out of the business and we look to grow our dividend based on how we execute our plan. So this growth comes out of a combination of production growth and the reduction of our outstanding shares. So we announced a 43% increase to our annual dividend earlier this year.
<unk> when we moved from a semiannual payment rate to a quarterly payment rate of 10 cents I think that's pretty good.
And we plan to revisit its dividend rate early next year as we said when we look at our full year 2022 results. So I think again it'll be a mix and you remember, Steve, but often speak about Mrs chasing fondness for dividends.
And.
By the way my wife likes dividends too.
No.
Someone asked me about this recently and I told them. She also like shoes.
Maybe they're related I don't really know, but you should expect a fairly steady annual dividend growth.
You know growth to our dividend over time and that again keys off of our successful execution of the business model.
Yeah, No I'd, just say look the objective of dividend growth is to be able to prudently grow into it and not hastily to grow out of it.
So I just I would just leave you with that and that's probably about all I have about 10 minutes from now.
No great great details on Wednesday, he brought Brian congratulations well deserved.
Thank you.
Our next question comes from Charles Meade from Johnson Rice Charles Please go ahead.
Good morning, Chris and Brian .
Chris I think maybe it's of course, a few if you could.
Help me.
I understand the the the production beat the drivers behind the production beat in <unk> with with an eye at trying to you know what.
So what is.
What is a one time thing and what's a what's maybe.
Magnolia being on a different trajectory and I'm really thinking about I mean, you can have well outperformance you get out.
The outperformance versus your schedule for <unk> lines and there is also maybe part expected non op activity. So.
Is that that framework makes sense do you have how does it how does it look to you for Q.
Yeah, No. That's a that's a fair question. It look it was they didn't have us back they're turning the knobs on on production to sort of change the outcome necessarily so.
Just to let you know I mean, it wasn't anything very different than what we what we had planned for really I think at the end of the day the wells turned out to perform better in both areas as we said better performance clearly.
We did have a little bit more non op.
And you know there's some of those efficiencies that we talked about you know very early in this year continue to sort of come through.
In the way of you know just longer laterals and it's leading to.
Sensually more net wells for us and so there was some of that I I wouldn't I wouldn't attribute it to something that I would call one off.
You know the assets are just performing better than than we thought and it may not always be that way, but it's certainly.
Turning out to be that away or has turned out to be that way.
Maybe it's a different way to say this is if we could.
It wouldn't be as noticeable or or as a visible to you. If we you know we reported once a year.
But we you know we report quarterly so what can I say I mean, we're trying to enter the outcome that we're suggesting for the fourth quarter as sort of our.
Risk assessment of how we anticipate things are gonna go combined with you know the sort of the timing as we suggested the timing of the wells coming on line.
The mix of non op and you know that and Andy just the planned activities. So it's it's our best guess at what we think is likely at this stage.
That's helpful. Chris and me, it's also perhaps maybe a good segue to my second question.
Yeah, there's an operator just to the north of you guys.
Excuse me, who who was looking to sell and you know that that hasn't been part of your strategy of making the money, but on the other hand.
You guys have had more success.
With you now.
Efficient and repeatable success in this giddings or you know eastern Eagle Ford, but everyone, who called you you've had more success than anyone else and so it seems to me that.
That asset would be more valuable in your hands than than anyone else's. So.
Can you give us a sense of.
Of what it would take for you guys to to participate in a in a sale.
The sales process there.
Yeah, well look I mean, we're we're going to continue to look at opportunities that provide us with upside optionality in terms of future <unk>.
High quality drilling locations that compete with our existing position now someone once told me that the goal of any acquisition has to make the company better not worse.
The same very wise person also told me that if you can't come up with at least four bullet points. There clearly spell out and explain why are you doing something and it's probably not a good idea.
So you know you shouldn't anticipate or if you did anticipate us doing you know large in M&A he would probably be disappointed.
So we're going to continue to pursue.
<unk> that are truly more smaller bolt on transactions that that makes sense for us and that at a sort of attractive and add to value accretive to value over time.
You know, we're gonna be real particular about this.
Got it thank you and that that that mysterious a soothsayer.
Is missed.
This is a long as well thank you guys.
Sure.
Our next question will come from Omar <unk> from Goldman Sachs.
Please go ahead.
Hi, good morning, and thank you for taking my questions.
Most of my questions have been also hopefully two quick ones from me.
First I appreciate the comments on the dividend growth wanted to revisit your thoughts around special dividend.
Giving you a net cash position of $300 million at the end of <unk>, especially if we don't see any further sell down for my interest.
And I missed.
Yeah.
Thanks for the question I mean, not a special dividend, probably I've sort of talked a lot about dividends, but a special dividend probably wouldn't be my first choice by my plan and hope would be to find a better use of the money that it would actually.
Help to benefit our share price and its as opposed to simply getting back all the money through dividends, but never say never.
We'll just have to see how things play out, but like I said it would not be my first choice.
Yeah.
Gotcha and then the follow up would there be any other opportunities, which you would look for a with that net cash balance on our balance sheet like anything which can further enhance the business like you said bolt on transactions.
Before the call and then can you remind me as well where are you on the lateral length in giddings and if there's any opportunity to do it for the enhance it next year.
Yes, I think look you know the the asset landscape, you know and in areas, where we are in and around where we are you know current conditions seem fairly I guess the word is ripe and that that's to say that you know, there's certainly a lot of things out there for sale, but we're gonna be you know real particular.
<unk>.
And suddenly we always we always look at opportunities you can describe this as professional tire kickers.
But again the best way to think about it is we'll continue to look and execute on truly smaller bolt ons to bolt on transactions of oil and gas property acquisitions.
We believe are accretive to value so.
That's <unk>.
That's the way I think about it I'm sorry your question on Giddings.
Oh the <unk>.
Biddings, it's just on the lateral length are where are you today and is there any opportunity to further enhance it next to it.
Yeah.
It's going to it it really depends sort of you know by unit by area, where we are I mean, we've made you know.
Quite a bit of.
Improvement on on lateral lengths over you know certainly over the last several years, we've I want to say, it's sort of been like increasing a 1000 feet almost per year.
And on a percentage basis I would tell you you know, there's probably a little bit more there, but I think the bigger changes have been already seen certainly on a on a percentage basis.
That's really helpful. Thank you.
Our next question comes from Tim <unk> from Keybanc capital markets.
Kim Please go ahead.
Hi, good morning, everybody into a congratulations on the promotions.
I wanted to ask a little bit on.
Disclosures that you provide.
I'm getting if you go back to 2018.
Magnolia was generally a stock that treated cheap to peers because of uncertainty on the asset and now you could argue the stock trades at a pretty healthy premium as you've de risked that area.
So I guess.
Chris you in your new role as CEO .
How do you think about the disclosure you're providing to investors and how do you think about kind of defending the premium multiple.
With this kind of big sandbox in Giddings that you have.
Yeah, Tim I mean, the valuation is gonna be valuation, there's there's probably.
The market is going to decide on that on its own frankly, but our job is to try to put up the results and make the most out of the asset that we can and our operating teams have done just an exceptional job I think.
You know when we when we first acquired Giddings.
It was sort of one of those assets that you know there there was a an amount of risk around and we viewed it as something that you know had a lot of optionality to it.
And it was producing Oh about 10000 equivalent a day and now you know giddings has more than quadrupled so.
So in a you know a fairly short period of time, so I think that.
Part of that record stands on its own it was all so far and away Gasior and you know the wells.
Is that we've drilled and completed have tended to be more oily. So we brought that that oil percentage up as well that's not to say that there are plenty of more gas prone areas throughout our acreage, which there are.
You know early days I think we wanted to put up and talk about some more specific data around well results I'm not really sure outside of what the.
The type of growth that we've put up all necessary that really is at that stage I would think that some of this speaks for itself.
And so I, you know I'm not really sure.
What more there is to say about it I suppose we certainly could I just don't know what the benefit would be.
Okay. Yeah, I guess I was just getting at with the successful delineation you know you've really proved up portions of this area, but you know Steve was hesitant to give too much granularity but.
Do you think there's a point where you can give some more color to the investment community on kind of what you've derisked and NEC and how you think about core inventory in the area. So that was good I'm not I'm not overly excited about more granularity that that to me. That's never you know are usually not led to a great outcome because there's.
You know an endless number of ways it can be sliced and diced and and so anyway, I mean, I think that with time.
There'll be more to say about our delineation program or delineation around areas that we're you know we're still appraising. So I think there'll be more information and more to talk about over time that you'll see we're just we're just not there yet.
Okay. That's fair I appreciate that.
If I could just.
Switch topics onto repurchases.
So you all were fairly aggressive in the third quarter, you know as chairs sold off.
You've committed to it looks like about a million shares per quarter, you have about 9 million left in your program.
No shares were up sharply quarter to date, you within $3 of an all time high.
Are those repurchases sort of set in stone at that $1 million per level or how do you think about the value you know I know people running internal NAV, but how do you think about that for the future.
Yes, it's yeah.
Our commitment if you will is sort of 1% per quarter, 1% of the shares outstanding and I think we've we've largely meant that every period.
And one way or another either by <unk>.
Buying intervet share shares from Ana or faster in the open market typically it's been more than the 1%.
You got to keep in mind too that.
We have a better idea.
What's going on then than you all out there and so we have maybe a different perception or understanding of value or or what magnolia and what the magnolia assets are capable of doing over time. So the market's assessment of what's going on in our assessment.
Two different things and so as we continue to sort of move on here.
It's interesting that you know the share price can move up or down on obviously, the market and product prices et cetera, but you know I look at.
Running that particular program as opportunistic and Theres plenty of opportunities given the volatility as you know.
To be involved in the market or not but you know.
We will continue to sort of run it that way.
Yeah.
Thank you.
Our next question.
Will come from Jeff J.
From Daniel Energy partners.
Jeff. Please go ahead.
Hey, guys real quick kind of pedestrian question, but thinking about the sequentially.
Sequential increase in Capex for Q4, what's the magnitude of the MAU in there. It is some of that is driven by the giddings well pad completions.
Yeah.
So if.
Just like the cabinets, it's more wells being completed and yes. The the higher spend in <unk> is largely due to an eight well pad completion and as well as some non op more so than we had originally thought so it's really both but yes. The eight wells as you know a huge impact to that.
Gotcha, So I guess I'm, just sort of looking out.
I mean, obviously you guys are.
Going back to the original question about sort of a 2023 capital.
Saying like I guess, it's 10% run rate from here.
It just looks like there's probably an extra kind of million or so in the fourth quarter and I'm just kind of wondering how that sort of.
<unk> definitely been there really it's just going to be sort of lumpy or if you can sort of bigger pods in the malls.
100% correct and so just looking at one quarter in time does not.
Correlate to the average of next year. This was our one of our most active quarters in 2022.
And that's why capital is a little bit higher than other quarters, Yeah, I wouldn't I would not take Jeff I would not take any one particular period or quarter that I mean, that's part of the.
The deal when you're running two rigs and one one completion crew, it's going to be lumpy and certainly when you throw in the mix and eight well pad.
You know things tend to stand out so I wouldn't say that this is necessarily indicative of an average quarter.
Excellent thanks, guys I appreciate it.
Sure.
Bruce.
Mark.
Our lease.
Yes, hi.
Hi.
If you would like to pose a question. Please press Star then one our next question comes from Paul Diamond from Citi.
Please go ahead Paul.
Good morning, Thank you for taking my call I Wonder if you could step back a bit from the.
More of a macro perspective, you guys have laid out.
A pretty stable kind of cadence to your drilling program next year with the two wells split between getting cards is there anything on the horizon or I guess at what point on the Horizon would you guys start to reevaluate that isn't a pricing mechanism or is that pretty much set in stone for the next 12 to 18 months.
When you say reevaluate, what what you're talking about our activity our pace of activity.
Yeah, just a shift in where the where you decided to grow or the cadence of it at a pace and is there anything you can.
Horizon Moms.
No obligations go up yeah.
No Paul I don't I don't think they're going to change markedly with respect to that I mean.
You know you look at it sort of again 35000 feet. However, you want to say it and you say, okay. We were gonna grow you know sort of up 15% this year and and.
10% next year, that's in excess of our business model and you know so again the outcome here has been it's been pretty good and we anticipate expect it to continue that to be that way and so I I don't I don't see a need to necessarily shift the plan the peso.
Activity right now at all in this environment.
Okay understood and then just a quick follow up with the just as more of a holistic ethos. How comfortable are you guys with your current cash balance is that something you have.
No problem like holding back closer to 1 billion. If I go through the next quarter or at what point or is there a point, where you guys start not wanted to deploy that to the board could either expeditious manner.
While the goal is the goal is to always try to deploy it.
As best we can in order to to drive value and returns over time, and we'll do that but.
But again, we just want to be patient and opportunistic and and you know certainly there's it's quite a bit of uncertainty right now going into next year with regard to the economy, We don't know.
That's not to say that you know.
Holding this amount of cash is the best thing to do but we'll just continue to evaluate opportunities and be patient and prudent around it.
As they come up as I said, where we're active tire kickers on opportunities, but these are more likely to be smaller than [laughter] would be necessary out of out of the use of our cash.
So that gives you any any color.
Understood. Thanks for the clarity.
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