Q1 2024 Magnolia Oil & Gas Corp Earnings Call

Megan: Good morning, everyone, and thank you for participating in Magnolia Oil & Gas Corporation's first quarter 2024 earnings conference call. My name is Megan, and I will be your moderator for today's call. At this time, all participants will be placed in a listen-only mode as their call is being recorded. I will now turn the call over to Magnolia's management for their prepared remarks, which will be followed by a brief question and answer session.

Good morning, everyone and thank you for participating in Magnolia oil and gas Corporation's first quarter 'twenty 'twenty four earnings conference call. My name is Megan and I will be your moderator for today's call. At this time, all participants will be placed in a listen only mode.

Call is being recorded.

Megan: I will now turn the call over to Magnolia management for their prepared remarks, which will be followed by a brief question and answer session.

Tom: Thank you, Megan. And good morning, everyone.

Speaker Change: Thank you Megan and good morning, everyone welcome to Magnolia oil and gas as first quarter earnings Conference call.

Tom: Welcome to Magnolia Oil & Gas's first quarter earnings conference call. Participating on the call today are Chris Stavros, Magnolia's President and Chief Executive Officer, and Brian Corales, Senior Vice President and Chief Financial Officer. 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.

On the call today are Chris <unk>, President and Chief Executive Officer, and Brian <unk>, Senior Vice President and Chief Financial Officer. As a reminder, today's conference call contains certain projections and other forward looking statements within the meaning of the federal Securities laws.

Tom: 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 2 of the conference call slide presentation with the supplemental data on our website. You can download Magnolia's first quarter of 2024 earnings press release, as well as the conference call slides, from the investor section of the company's website at www.magnoliaoilgas.com. I will now turn the call over to Mr. Chris Stavros. Thank you, Tom, and good morning, everyone.

Tom: Payments are subject to risks and uncertainties that may cause actual versus 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 FCC.

Speaker Change: A full safe harbor can be found on slide two of the conference call slide presentation with us.

Implemented data on our website you can download Magnolia its first quarter 2024 earnings press release as well as the conference call slides from the investors section of the company's website at Www Dot Magnolia oil and gas Dot com.

Christopher G. Stavros: I'll now turn the call over to Mr. Chris Stablish.

Christopher G. Stavros: Thank you, Tom, and good morning, everyone. We appreciate you joining us today for a discussion of our first quarter 2024 financial and operating results. I will provide some comments on our first quarter, noting the progress of our development plan so far this year, discuss an important bolt-on acquisition that we recently completed, and highlight some actions we're taking at the field level to reduce our cash operating costs. Brian will then review our first quarter financial results in greater detail and provide some additional guidance before we take your questions.

Christopher G. Stavros: Thank you Tom and good morning, everyone. We appreciate you joining us today for a discussion of our first quarter 2024 financial and operating results I will provide some comments on our first quarter, noting the progress of our development plan. So far this year.

Christopher G. Stavros: That's an important bolt on acquisition that we recently completed and highlight some actions we're taking at the field level to reduce our cash operating cost Brian will then review our first quarter financial results in greater detail and provide some additional guidance before we take your questions.

Christopher G. Stavros: Starting on slide three of the investor presentation, Magnolia delivered a strong first quarter with total adjusted net income of $101 million. In keeping with our consistent business model, we continued our capital-efficient DNC program by spending $119 million, or 52% of adjusted EBITDAX, while generating $117 million of free cash flow. As part of our goal to return a significant portion of our free cash flow to our shareholders, we returned 68% of our free cash to our ongoing share repurchase program and our recently increased dividend payment.

Christopher G. Stavros: Starting on slide three of the Investor presentation, Magnolia delivered a strong first quarter with total adjusted net income up $101 million.

Christopher G. Stavros: Keeping with our consistent business model, we continued our capital efficient D&C program spending of $119 million or 52% of adjusted EBITDAX, while generating $117 million of free cash flow.

Christopher G. Stavros: It's part of our goal to return a significant portion of our free cash flow to our shareholders should be returned 68% of our free cash through our ongoing share repurchase program and our recently increased dividend payment.

Christopher G. Stavros: Total company production was toward the top end of our guidance at 84.8 thousand barrels of oil equivalent per day, representing year-over-year production growth of seven percent. Production at Giddings was 61.4 thousand BOE per day, providing overall growth of 17% compared to last year's first quarter, including oil production growth of 16%. Total company oil production during the quarter was ahead of expectations, coming in at 37.5 thousand barrels of oil per day, benefiting from strong oil performance, activity in Carnes, and solid performance from the assets we acquired late last year.

Christopher G. Stavros: Total company production was toward the top end of our guidance at $84 8000 barrels of oil equivalent per day, representing year over year production growth of 7%.

Christopher G. Stavros: Production at Giddings was 61, 4000 Boe per day, providing overall growth of 17% compared to last year's first quarter, including oil production growth of 16%.

Christopher G. Stavros: Total company oil production during the quarter was ahead of expectations coming in at 37 5000 barrels of oil per day benefiting from strong well performance activity in karnes and solve.

Christopher G. Stavros: Good performance from the assets, we acquired late last year.

Christopher G. Stavros: We had planned for this year's program to be a little oilier than last year, and our first quarter production provides some early evidence of that plan. Last week, we closed on a very meaningful bolt-on acquisition of oil and gas properties in the heart of our Giddings acreage. These assets acquired from a private operator for $125 billion have similar attractive operational financial characteristics to our core acreage position at Gidding. As I've often mentioned, a key part of our strategy is to use some of the excess cash generated by the business.

Christopher G. Stavros: We had planned for this year's program to be a little oil you had done last year on our first quarter production provide some early evidence that plant.

Christopher G. Stavros: Last week, we closed on a very meaningful bolt on acquisition.

Oil and gas properties in the heart of our Giddings acreage USAA.

Christopher G. Stavros: These assets were acquired from a private operator for $125 million have similar attractive operational financial characteristics to our core acreage position in giddings.

Christopher G. Stavros: As I've often mentioned a key part of our strategy is to use some of the excess cash generated by the business to seek out attractive bolt on acquisition opportunities with the goal of making Magnolia better not by simply replacing the oil and gas that has produced a to improve the future opportunity set of our overall business and enhance the capability and sustainability of our.

Christopher G. Stavros: Seek out attractive bolt-on acquisition opportunities with the goal of making Magnolia better, not by simply replacing the oil and gas that is produced but to improve the future opportunity set of our overall business and enhance the capability and sustainability of our high returns. This latest bolt-on acquisition adds new, high-quality acreage that is continuous to our existing core footprint in Giddings, while also increasing our working interest in some of our current acreage.

Christopher G. Stavros: High returns.

Christopher G. Stavros: This latest bolt on acquisition adds new high quality acreage is contiguous to our existing core footprint in giddings, while also increasing our working interest in some of our current acreage.

Christopher G. Stavros: The transaction leverages the significant knowledge we have gained through operating in this field and extends our deep inventory of high-return development opportunities and earnings from both new locations and incremental working interests. As shown on slide four, the majority of the properties are located in the core of Giddings, with acreage in Washington, Lee, and Fayette counties, representing an additional 27,000 net acres, spanning over 80,000 total gross acres. The properties include a relatively small amount of base production of approximately 1000 BOE per day and about 35% oil, with Magnolia operating most of the volume.

Christopher G. Stavros: <unk> Leverages the significant knowledge, we have gained through operating in this field and extends our deep inventory of high return development opportunities opportunities in giddings from both new locations and incremental working interest.

Christopher G. Stavros: As shown on slide four the majority of the properties are located in the core giddings with acreage in Washington, Lee Fayette counties, representing an additional 27000 net acres spanning over 80000 total gross acres.

Christopher G. Stavros: The properties include a relatively small amount of base production of approximately 1000 Boe per day.

Christopher G. Stavros: And about 35% oil with Magnolia operating most of the volumes.

Christopher G. Stavros: This is an ideal acquisition for Magnolia which significantly enhances our position in Giddings and strengthens the company moving forward. Magnolia continues to operate two drilling rigs and one completion group, with the majority of this year's activity planned in Gideon. Our full year 2024 guidance for DNC spending remains unchanged and is expected to be in the range of $450 to $480 million.

Christopher G. Stavros: This is an ideal acquisition for Magnolia, which significantly enhances our position in giddings and strengthened the company moving forward.

Christopher G. Stavros: I can only continues to operate two drilling rigs and one completion crew, but the majority of this year's activity planned in giddings.

Christopher G. Stavros: Our full year 2024 guidance, our D&C spending remains unchanged and is expected to be in the range of $450 million to $480 million.

Christopher G. Stavros: Following on last year's success in reducing our well cost by nearly 20%, our drilling and completions have gotten off to a strong start in 2024, and we continue to drive further operating efficiency. While this year's program includes drilling somewhat longer laterals, we have realized considerable recent improvement in reducing our drilling days per well. Lower well costs combined with improved operating efficiencies will allow for more wells to be drilled, completed, and brought online during 2024, helping to support Magnolia's overall high margin growth.

Christopher G. Stavros: Following on last year's success in reducing our well cost by nearly 20% our drilling and completions have got off to a strong start in 2024, and we continue to drive further operating efficiencies.

Christopher G. Stavros: This year's program includes drilling somewhat longer laterals, we have realized considerable recent improvement in reducing our drilling days per well.

Christopher G. Stavros: Our well costs combined with improved operating efficiencies allow for more wells to be drilled completed and turned in line during 2020 for helping to support <unk> overall high margin growth.

Christopher G. Stavros: As I mentioned earlier, we expect this year's development program to be oilier than last year, and a strong first quarter oil volume should support the plan. Additionally, we anticipate that this year's oil production should remain resilient as a portion of our activity will focus on some of the oilier assets acquired last year. Some of our drilling activity leans away from natural gas early in the year due to very weak prices, and we expect that our natural gas production should reassert its growth as the year progresses with the view that gas prices will see some recovery later in the year.

Christopher G. Stavros: As I mentioned earlier, we expect this year's development program to be oily or than last year on a strong first quarter oil volumes support the plan.

Christopher G. Stavros: We anticipate that this year's oil production should remain resilient as a portion of our activity will focus on some of the oil your assets acquired last year.

Christopher G. Stavros: Some of our drilling activity leaned away from natural cash early in the year due to very weak prices and we expect that our natural gas production should reinsure that grow as the year progresses, but the view of the gas prices would see some recovery later in the year.

Christopher G. Stavros: Lastly, our operations and supply chain teams have initiated a field level optimization and cost reduction program throughout our assets. Part of these efforts will employ improved field management systems that will increase efficiencies and optimize processes across the field, targeting such areas such as contract labor utilization, surface repair and maintenance, and procurement, just to name a few, while capturing synergies from the acquired assets. These and other initiatives to lower our cash costs are expected to deliver a 5 to 10% reduction in our cash LOE per BOE during the second half of the year compared to the first quarter.

Christopher G. Stavros: Lastly, our operations and supply chain teams have initiated a field level optimization and cost reduction program throughout our assets.

Christopher G. Stavros: Part of these efforts will employ improved field management systems that will increase efficiencies and optimize processes across the field and targeting such areas such as contract labor utilization surface repair and maintenance and procurement disconnects you are capturing synergies from the acquired assets.

Christopher G. Stavros: These and other initiatives to lower our cash costs are expected to deliver a 5% to 10% reduction in our cash Elouise Boe.

Christopher G. Stavros: During the second half of the year compared to the first quarter.

Christopher G. Stavros: As Magnolia has grown and learned while operating our assets over the past six years, we believe this is an appropriate time in our evolution to embark on this program. Our goal is to improve on our track record for generating high operating margins while providing additional free cash flow to either return to our shareholders or efficiently reinvest in the business, and these actions should help us achieve these objectives. I'll now turn the call over to Brian to provide more details on our first quarter financial and operating results.

Christopher G. Stavros: I think nobody has grown and learned while operating our assets over the past six years. We believe this is an appropriate time in our evolution to embark on this program.

Brian: Our goal is to improve on our track record for generating high operating margins, while providing additional free cash flow to return to our shareholders or efficiently reinvest in the business and these actions should help us achieve these objectives.

Christopher G. Stavros: I'll now turn the call over to Brian to provide more details on our first quarter financial and operating results.

Brian Michael Corales: Thanks Chris and good morning everyone. I will review some items from our first quarter results and refer to the presentation slides found on our website. I will also provide some additional guidance for the second quarter of 2024 and the remainder of the year before turning it over for questions. Beginning on slide five, and as Chris discussed, Magnolia had a solid first quarter across the board. During the quarter, we generated total gap net income attributed to Class A common stock of $85 million, with total adjusted net income of $101 million, or 49 cents per diluted share.

Brian: Thanks, Chris and good morning, everyone I'll review some items from our first quarter results and refer to the presentation slides found on our website also provide some additional guidance for the second quarter of 2024, and the remainder of the year before turning it over for questions.

Brian Michael Corales: Beginning on slide five and as Chris discussed.

Christopher G. Stavros: <unk> had a solid first quarter across the board during the quarter. We generated total GAAP net income attributable to class a common stock of $85 million with total adjusted net income of $101 million or <unk> 49 per diluted share our adjusted EBITDAX for the quarter was 228 million with total capital associated with drilling completions and associated facilities.

Brian Michael Corales: Our adjusted EBITDAX for the quarter was $228 million, with total capital associated with drilling, completions, and associated facilities of $119 million, or 52% of our adjusted EBITDAX, and almost 10% below our guidance. First quarter total production volumes grew 7% year-over-year to 84.8 thousand barrels of oil equivalent per day, and our diluted share count fell by 5% year-over-year to 204.3 million shares. Looking at the quarterly cash flow waterfall chart on slide 6, we started the year with $401 million of cash. Cash flow from operations before changes in working capital for the first quarter was $218 million, with working capital changes and other small items increasing cash by $6 million.

Christopher G. Stavros: 119 million or 50, or 52% of our adjusted EBITDAX and almost 10%, 10% below our guidance.

Christopher G. Stavros: First quarter total production volumes grew 7% year over year to $84 8000 barrels of oil equivalent per day, and our diluted share count fell by 5% year over year to $204 3 million shares.

Christopher G. Stavros: Looking at the quarterly cash flow waterfall chart on slide six we started the year with $401 million of cash cash flow from operations before changes in working capital for the first quarter was $218 million with working capital changes and other small items, increasing cash by $6 million, we spent $27 million on bolt on acquisitions, primarily in getting.

Brian Michael Corales: We spent $27 million on bolt-on acquisitions, primarily in Giddings, paid dividends of $27 million, and allocated $51 million towards share repurchase. Total capital was $121 million, and we ended the quarter with $399 million of cash, relatively flat from year-end 2023 levels. Looking at slide seven, this chart illustrates the progress in reducing our total outstanding shares since we began our share repurchase program in the second half of 2019. Since that time, we have repurchased 64.3 million shares, leading to a change in diluted shares outstanding of over 20% net of issuance and supports our goal of improving our per share metric.

Christopher G. Stavros: <unk> paid dividends of $27 million and allocated $51 billion towards share repurchases total capital was $121 million and we ended the quarter with $399 million of cash and relatively flat from year end 2023 levels.

Christopher G. Stavros: Looking at Slide seven this chart illustrates the progress in reducing our total outstanding shares since we began our share repurchase program in the second half of 19 since that time, we've repurchased $64 3 million shares leading to a change in diluted shares outstanding of over 20% net of issuances and supports our goal of improving our per share metrics.

Brian Michael Corales: Magnolia's weighted average fully diluted share count declined by more than 2 million shares sequentially, averaging 204.3 million shares during the first quarter. We have 6.9 million shares remaining under our current share repurchase authorization, which is specifically directed toward repurchasing Class A shares in the open market. Turning to slide 8, our dividend has grown substantially over the past few years, including a 13% increase announced earlier this year to $0.13 per share on a quarterly basis.

Brian Michael Corales: Orix Magnolia is weighted average fully diluted share count declined by more than 2 million shares sequentially, averaging $204 3 million shares during the first quarter, we have $6 9 million shares remaining under our current share repurchase authorization, which are specifically directed towards repurchasing class a shares in the open market.

Brian Michael Corales: Turning to slide eight our dividend has grown substantially over the past few years, including a 13% increase announced earlier this year to <unk> 13 per share on a quarterly basis. Our next quarterly dividend is payable on June 3rd and provides an annualized dividend payout rate of 52 per share are planned for annualized dividend growth.

Brian Michael Corales: Our next quarterly dividend is payable on June 3rd and provides an annualized dividend payout rate of $0.52 per share. Our plan for annualized dividend growth is an important part of Magnolia's investment proposition and supported by our overall strategy of achieving moderate annual production growth, reducing our outstanding shares, and increasing the dividend payout capacity of the company. Magnolia benefits from a very strong balance sheet, and we ended the quarter with approximately zero net debt and $399 million in cash.

Christopher G. Stavros: As an important part of my noise investment proposition and supported by our overall strategy of achieving moderate annual production growth, reducing our outstanding shares and increasing the dividend payout capacity of the company.

Brian Michael Corales: <unk> benefits from a very strong balance sheet and we ended the quarter with approximately zero net debt and $399 million of cash our $400 million of principal that is reflected in our senior notes.

Brian Michael Corales: Our $400 million of principal debt is reflected in our senior notes, which do not mature until 2026. Including our first quarter ending cash balance of $399 million and our undrawn $450 million revolving credit facility, our total liquidity is approximately $850 million. Our condensed balance sheet as of March 31st is shown on slide 9. Turning to slide 10, and looking at our per-unit cash costs and operating income margins, total revenue per BOE declined year-over-year due to a decrease in natural gas and NGL prices when compared to the first quarter of 2020. 23.

Christopher G. Stavros: Notes, which do not mature until 2026, including our first quarter, ending cash balance of $399 million and our undrawn $450 million revolving credit facility. Our total liquidity is approximately $850 million, our condensed balance sheet as of March 31st as shown on slide nine.

Christopher G. Stavros: Turning to slide 10, and looking at our per unit cash costs and operating income margins total revenue per BOE declined year over year due to decrease in natural gas and NGL prices when compared to the first quarter of 2023, our total adjusted cash operating costs, including G&A were $11 86 per Boe in the first quarter of 'twenty four.

Brian Michael Corales: Our total adjusted cash operating costs, including G&A, were $11.86 per BOE in the first quarter of 24, a decrease of $0.79 per BOE or 6% compared to year-ago levels. The year-over-year decrease is primarily due to lower production taxes in GT&P. Our operating income margin for the first quarter was $16.15 per BOE, or 39% of our total revenue. The year-over-year decrease in our pre-tax operating margin was driven by a decrease in commodity prices and higher D&A risk.

Brian Michael Corales: Or a decrease of <unk> 79 per Boe or 6% compared to year ago levels. The year over year decrease was primarily due to lower production taxes and GTP.

Brian Michael Corales: Our operating income margin for the first quarter was $16 15 per Boe or 39% of our total revenue the year over year decrease in our pretax operating margin was driven by the decrease in commodity prices and higher DD&A rate.

Brian Michael Corales: Turning to guidance, we are reiterating our expected 2024 DNC capital spending to be in the range of $450 to $480 million, which includes an estimate of non-operated capital that is about the same as 2023. Total production and oil production are still expected to grow in high single digits on an annual basis. For the second quarter, our D&C and associated facilities capital expenditures are expected to be approximately $120 to $125 million, with total production for the second quarter estimated to be approximately 89,000 barrels equivalent a day.

Brian Michael Corales: Turning to guidance, we are reiterating our expected 2020 for D&C capital spending to be in the range of $450 million to $480 million, which includes an estimate of non operated capital that is about the same as 2023 levels total production and oil production are still expected to grow.

Brian Michael Corales: High single digits on an annual basis for the second quarter, our D&C and associated facilities capital expenditures are expected to be approximately $120 million to $125 million with total production for the second quarter estimated to be approximately 89.

Brian Michael Corales: Million million barrel, sorry, 89000 barrels equivalent a day.

Brian Michael Corales: Oil price differentials are anticipated to be approximately a $3 per barrel discount to Magellan East Houston, and Magnolia remains completely unhatched for all of its oil and natural gas production. The fully diluted share count for the second quarter of 2024 is expected to be approximately 203 million shares, which is 4% lower than the second quarter of 2023 levels. We expect our effective tax rate to be approximately 21%, and with increased oil prices, our cash tax rate is expected to be approximately 9% to 10% for 2020. We're now ready to take your questions. We will now begin the question and answer session.

Brian Michael Corales: Oil production oil price differentials are anticipated to be approximately a $3 per barrel discount to Magellan East Houston, and Magnolia remains completely unhedged for all of its oil and natural gas production.

Brian Michael Corales: The fully diluted share count for the second quarter of 2024 is expected to be approximately 203 million shares which is 4% lower than second quarter of 2023 levels. We expect our effective tax rate to be approximately 21% and with increased oil prices. Our cash tax rate is expected to be approximately 9% to 10% for 2002.

Brian Michael Corales: <unk>.

Speaker Change: We are now ready to take your questions.

Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Neal Dingmann with Truist. Please go ahead.

Brian Michael Corales: We will now begin the question and answer session.

Christopher G. Stavros: A question you May press star.

Neal David Dingmann: And then one on your telephone keypad.

Neal David Dingmann: You are using a speakerphone please pick up your handset before pressing the keys.

Christopher G. Stavros: Anytime Youre question has been addressed and you would like to withdraw your question. Please press Star then two.

Operator: Time, we will pause momentarily to assemble our roster.

Operator: Okay.

Operator: Okay.

Operator: Our first question comes from Neal Dingmann with curious please go ahead.

Neal David Dingmann: We've always talked about the returns and breakeven. I'm just wondering, could you talk about the latest breakeven? The latest break even when you look at Gettings right now? I'm just wondering, could you talk about that? How that break even maybe compares to Carnes or Chris, just maybe how you're thinking about the returns there these days versus, you know, even a year ago.

Neal David Dingmann: We've always talked about the returns of breakeven I'm just wondering could you talk about the latest breakeven.

Neal David Dingmann: The latest breakeven when you look at Giddings right now I'm just wondering could you talk about all.

Neal David Dingmann: All that breakeven maybe compares the karnes or Chris just maybe how you're thinking about the returns there these days versus a year ago.

Christopher G. Stavros: Yeah, morning, Neal. Thank you.

Speaker Change: Yeah. Good morning, Neil Thank you.

Christopher G. Stavros: Yeah, you know, I certainly wish gas prices were a little bit better. But, frankly, all in oil, all in all, you know, the Giddings Well has better full cycle returns than the Wells. We drill and complete in cars. I mean, that's just the basic frank thoughts around it. The Giddings wells are certainly in our core area, and, you know, most of the wells we drill often pay out in a year or less. And we've talked about this quite often.

Christopher G. Stavros: Yeah.

Speaker Change: I certainly wish gas prices were a little bit better.

Christopher G. Stavros: Frankly, all in oil all in all.

Christopher G. Stavros: The Giddings wells.

Christopher G. Stavros: Better full cycle returns than than the wells.

Christopher G. Stavros: We drill and complete and cars I mean thats desk just.

Christopher G. Stavros: The basic frac thoughts around it.

Christopher G. Stavros: He has been getting as well certainly in our core area.

Christopher G. Stavros: And.

Christopher G. Stavros: Most of the wells, we drill off and pay out in a year or less and we've talked about this quite often.

Christopher G. Stavros: The Giddings Well returns are very high, even in this environment, so you wouldn't necessarily do anything necessarily differently in terms of oil. You know, skewing or slanting more activity to Carnes, per se, just to sort of capture the return. And the Giddings Wells also have a shallower rate of decline, so I think it benefits us all, all in all.

Christopher G. Stavros: If they produce more oil over their life than a typical car as well so.

Christopher G. Stavros: <unk> well returns are very high and even in this environment and so you wouldn't do anything necessarily differently in terms of.

Christopher G. Stavros: Scaling our slanting more activity into karnes.

Christopher G. Stavros: Say, just just to sort of capture return.

Christopher G. Stavros: <unk> also have a shallower decline so I think it benefits us all at all.

Christopher G. Stavros: And Chris, how much have you brought down the break evens as you're improving your operational efficiency? Well, you know...

Speaker Change: Hey, Chris how much have you brought down the breakeven does your you know.

Christopher G. Stavros: Your operational efficiencies have continued.

Christopher G. Stavros: Well, you know, our well costs have come down quite a bit. And much of that was captured through our efforts last year, by working with our service providers, Material Vendor, and as I said before, we probably brought well costs down, you know, about 20%. And some of that is continuing into this year. So, you know, the well costs are currently probably... 1100 a foot, more or less, and probably coming down a little bit further. We've made some inroads, as I said, too, on drilling faster. So things are just working out real well on that side.

Chris: Well, you know, our well costs have come down quite a bit and much of that was captured through our efforts last year.

Christopher G. Stavros: By working with.

Christopher G. Stavros: Our our service providers material better.

Christopher G. Stavros: Set.

Christopher G. Stavros: Said this before we would probably drop well costs down about 20%.

Christopher G. Stavros: Some of that is continuing into this year.

Christopher G. Stavros: So the well costs are currently probably.

Christopher G. Stavros: 1100, a foot.

Christopher G. Stavros: Or lash and.

Christopher G. Stavros: Probably coming down a little bit further.

Christopher G. Stavros: We've made some inroads as I said to our onshore.

Christopher G. Stavros: Drilling faster.

Christopher G. Stavros: So thanks, so just working out real well on that side, so the efficiencies and the breakeven sort of continuing to come down but.

Neal David Dingmann: Great to hear. And then maybe just a quick second one on M&A. So I'd really like to comment on how the bolt-ons, you know, you're not simply just replacing oil and gas but improving the opportunity set. I'm just wondering, can you give us a bit more color on the latest $125 million deal, maybe what that did as far as terms of location or, you know, how that did improve your opportunity set there?

Speaker Change: Great to hear and then maybe just a quick second one on M&A physically I'd really like to comment on how the bolt ons and youre not simply just replace in the oil and gas, but improves in the opportunity set I'm. Just wondering if you could give us a bit more color on the latest $125 million deal, maybe what that that did as far as terms of location or how that did.

Neal David Dingmann: Prove your your opportunity set there.

Christopher G. Stavros: Yeah, sure. Yeah, we've said this for a long time.

Speaker Change: Yes sure.

Christopher G. Stavros: And, you know, I know, Steve used to say it, but it's true, the way to make money in business and the oil business is to either guess right on the commodity price or acquire attractive optionality at a low cost or maybe even for free. But when it comes to PDP deals, you're going to pay full value or strip prices for that at the very least. There's not much to that in terms of real upside.

Speaker Change: Yes, we said this for a long time.

Christopher G. Stavros: I know Steve has to say it but it's true the way to make money in the business in the oil business is theater guests right on the commodity price.

Christopher G. Stavros: Or acquire attractive optionality at a low cost or maybe even for free.

Christopher G. Stavros: When it comes to PDP deals youre going to pay full value or strip prices for that at the very least.

Christopher G. Stavros: Yeah, theres not much to that in terms of real upside I'm not looking to inherit a lot of production and have to overcome a decline rate.

Christopher G. Stavros: I'm not looking to inherit a lot of production and have to overcome a decline rate. So this particular deal, you know, this is a sort of a great fit and in terms of what we look for as far as our bulletin strategy, specifically lower PDP volumes, but very importantly, significant high-return development opportunities at a low cost and with potential upside. And so we showed this on the map, or at least tried to: a lot of new acreage and increased our working interest in existing acreage in a very, very productive area of Giddings, right next door to where we've been busy with our current development.

Christopher G. Stavros: So this particular deal in all of this is sort of a great fit and in terms of what we look for is Florida as far as our bolt on strategy and specifically lower PDP volumes, but very importantly, significant high return development opportunities at a low cost and with potential upside.

Christopher G. Stavros: We show this on the map or at least tried to.

Christopher G. Stavros: Said, a lot of new acreage and increased our working interest in existing acreage and a very very productive area of King's right next door to where we've been with our our current development.

Christopher G. Stavros: So, you know, this transaction represents a unique opportunity, and I'm very confident that it provides us with a minimum of probably a couple years of high-return net drilling location, and at our current pace of drilling and kitting. So I think there's more here than meets the eye and, frankly, more bang for the buck. Fantastic.

Christopher G. Stavros: So this transaction represents a unique opportunity and I'm very confident that it provides us with a minimum of probably a couple of years of high return net drilling locations.

Christopher G. Stavros: At our current pace of drilling and getting so I think that.

Christopher G. Stavros: There's more here than meets the eye and frankly more than more bang for the Buck.

Neal David Dingmann: Fantastic. Thanks, Chris.

Speaker Change: Fantastic Thanks, Chris.

Leo Paul Mariani: Our next question comes from Leo Mariani with Ross MKM. Please go ahead.

Neal David Dingmann: Our next question comes from Leo Mariani with Roth Capital. Please go ahead.

Leo Paul Mariani: Hey guys, wanted to start off with just focusing a little bit here on oil cuts. So oil cuts were definitely, I guess, stronger than expected in the quarter. Just wanted to kind of get a sense of

Leo Paul Mariani: Hey, guys. Once you start off with just focusing a little bit here on oil cut so oil cut was definitely stronger than expected in the quarter.

Leo Paul Mariani: Wanted to kind of get a sense.

Christopher G. Stavros: How do you see that playing out? I think it's kind of the highest quarterly oil cut you've had in a long time.

Leo Paul Mariani: How are you kind of do that.

Christopher G. Stavros: I think it's kind of the highest quarterly oil cut you had it.

Christopher G. Stavros: Class A Yeah, thanks, Leo. So, you know, for the first quarter of production, we obviously, as I said, saw good performance, strong overall well performance across the business. Strong performance from the assets that we acquired. We had some oilier Carns activity that came online during the quarter. You know this year's development plan will be oilier than last year in our first quarter volumes on oil support that. Some of the drilling, as I said, weaned away a little bit from natural gas early in the year, but that should recover and reassert itself, as I said, as the year moves forward.

Christopher G. Stavros: Couple of years here do you think that can kind of get maintain throughout the course of the year I know some of the focus a little bit more on some of the oily drilling or do you see that maybe starting to soften as we get later in the year.

Speaker Change: Yeah. Thanks, Neil so for the first quarter oil production, we obviously as I said saw good performance strong overall well performance across the business a strong.

Christopher G. Stavros: Strong performance from the assets that we acquired we had from oil to your current activity that came online during the quarter.

Christopher G. Stavros: This year's development plan will be oily and last year, our first quarter.

Christopher G. Stavros: Volumes on oil support that.

Christopher G. Stavros: Some of the drilling as I said.

Christopher G. Stavros: Weigh a little bit from natural gas early in the year.

Christopher G. Stavros: But that should recover and reassert itself as I said as the year moves forward.

Christopher G. Stavros: I also expect that this year's oil production is going to remain pretty buoyant, so a portion of our activity is going to focus on some of those oilier assets that we acquired. So rather simply, rather than simply focusing on the oil mix or percentage, I would characterize our absolute oil volumes as having the ability to remain pretty robust throughout the year. So I hope that gives you a little color. It's going to be a little lumpy as we move forward, quarter to quarter, as it typically is, but I think oil is going to be pretty good, and that was part of the plan.

Christopher G. Stavros: But I also expect that this year's oil production is going to remain pretty pretty buoyant.

Christopher G. Stavros: As a portion of our activity is going to focus on some of those who are there assets that we acquired so rather simply rather than simply focusing on the oil mix or percentage I would characterize our absolute oil volumes as having the ability to remain pretty robust throughout the year. So that gives you a little color.

Christopher G. Stavros: And it's going to be a little lumpy as we as we move forward quarter to quarter as it typically is but I think oil is going to be pretty good.

Christopher G. Stavros: And that was part of the plan.

Christopher G. Stavros: Yeah.

Christopher G. Stavros: Okay, I appreciate that. And then just going back to the acquisition that you did here, certainly sounds like you guys are pretty excited about it. I certainly noticed that you're not changing your production or capital guide.

Speaker Change: Okay I appreciate that and then just going back to the the acquisition that you did here. So it sounds like you guys are pretty excited about it certainly noticed that.

Speaker Change: Changing your production or capital guide for the year I know it add kind of a small amount of volumes, but they kind of maybe implies that you're not doing a whole lot in terms of D&C on the asset. This year, just kind of wanted to get a little better stands for you know what's your plan is it something youre going to integrate in the program.

Leo Paul Mariani: I know it adds kind of a small amount of volumes, but that kind of maybe implies that you're not doing the whole thing.

Leo Paul Mariani: Next year and in terms of drilling I know some of this is just additional interest on what you already own but presumably there is some new stuff to drill as well and then just how do you see other opportunities like this out there I guess, it's kind of your your second decent little bolt on in the last six months. So just trying to get a sense of what the plan is going forward.

Speaker Change: Yeah. Thanks.

Leo Paul Mariani: A lot packed in there.

Leo Paul Mariani: So.

Leo Paul Mariani: On the guidance.

Leo Paul Mariani: Now part of part of my job is to manage the external expectations and within our capability of delivering solid results right now things are going rather well on the drilling and completion side.

Leo Paul Mariani: The production volumes acquired from the deal represent what the assets are currently producing and central only owned it for two thirds of the year.

Leo Paul Mariani: The overall production doesn't amount to very much in and actually that's just fine because we didnt acquire these properties from the PDP, we acquired it for the high quality undeveloped opportunities, which as I said I think are quite significant in my view.

Speaker Change: Yeah, maybe just a touch of conservatism here or.

Leo Paul Mariani: On the way I think about it.

Speaker Change: A little bit of Murphy's law on me, but I prefer not to get too cute with the guidance so with that in mind.

Leo Paul Mariani: Our total production and oil production should grow in the high single digits this year or maybe even the high high single digits certainly high.

Speaker Change: Yeah and.

Leo Paul Mariani: On the acquisition itself you know it's hard to time. These things these types of opportunities. This is something.

Leo Paul Mariani: That it started evolving really last year it was unique.

Leo Paul Mariani: From a private operator, I'm not going to pretend to speak for individuals who made very personal decisions but.

Leo Paul Mariani: Started to take shape last year and it took a lot of effort and cooperation by both parties to make it happen.

Leo Paul Mariani: That's about all I have to say about the process, but.

Speaker Change: Yeah sure I hope I hope there there would be or could be.

Leo Paul Mariani: Opportunities like this one that would be great.

Speaker Change: Yes, the objective is to sorted.

Leo Paul Mariani: Do these things within our capability of managing them.

Leo Paul Mariani: Or not necessarily.

Leo Paul Mariani: Size for size.

Leo Paul Mariani: The objective is to make us better not not necessarily bigger and to St to sustain ourselves with our high margins at our.

Leo Paul Mariani: This model profile for the long term and so that's how we look at things.

Leo Paul Mariani: I think the.

Leo Paul Mariani: The acquisition itself will get folded into our broader giddings program because that's what it is hs.

Leo Paul Mariani: We will fold in some wells this year, we will fold in more wells next year. It's.

Leo Paul Mariani: It will be it will look like giddings, because that's what it is.

Leo Paul Mariani: Yeah.

Speaker Change: Okay. Thanks for the color I appreciate it.

Leo Paul Mariani: Sure.

Leo Paul Mariani: Yeah.

Leo Paul Mariani: Our next question comes from Charles Meade with Johnson Rice. Please go ahead.

Leo Paul Mariani: [inaudible]

Leo Paul Mariani: Good morning, Chris and Brian and everyone on the bedroom all of your team there Chris.

Speaker Change: Chris what I want to take a oh.

Leo Paul Mariani: Rung at the at the acquisition and I'm wondering if you could characterize force.

Leo Paul Mariani:

Leo Paul Mariani: How have developed it is in in the target zones, you're going after in and there may be.

Leo Paul Mariani: And then that might differ.

Leo Paul Mariani: You know if you have more than one target or had been on the column.

Leo Paul Mariani: You know how how.

Leo Paul Mariani: How undeveloped is it in your targets and you.

Leo Paul Mariani: And then how many net locations do you think you're bringing in.

Leo Paul Mariani: [laughter].

Leo Paul Mariani: And so some of this is just additional interest on what you already own, but presumably there's some new stuff to drill into those.

Leo Paul Mariani: Well, it's not very developed in fact, I would characterize it as frankly undeveloped [laughter] batteries that developed as you as you can imagine so there's there's low hanging fruit here, there's all upside.

Leo Paul Mariani: And I I S.

Leo Paul Mariani: About all I can say as to why.

Speaker Change: But anyway.

Leo Paul Mariani: So there's a lot of potential opportunity for ourselves here, it's unique as I said.

Leo Paul Mariani: Hum.

Leo Paul Mariani: I'm confident in.

Leo Paul Mariani: The fact that we've added a couple of years' worth at our pace of net locations.

Leo Paul Mariani: Because we we can see this and we understand it real well from subsurface perspective.

Leo Paul Mariani: And our ability to drill.

Leo Paul Mariani: Drill wells that look very similar to some of our better.

Leo Paul Mariani: Executed pads and wells and some of the core areas of getting so.

Christopher G. Stavros: Well, and then just, do you see other opportunities, you know, like this out there? I guess it's kind of your second decent little bolt-on in the last six months of just trying to get it.

Leo Paul Mariani: You've got a tiny down I'm pretty excited about the fact that we were able to pull this one off and it's it's quite good.

Christopher G. Stavros: Shai I don't know how much more I can say, but it's it's at our pace currently it's about a couple of years worth of drilling.

Speaker Change: That's a helpful data point, Thank you Brett Chris and that's it for me.

Christopher G. Stavros: Our next question comes from Oliver Huang with Tudor Pickering, Holt and company. Please go ahead.

Leo Paul Mariani: I'm just trying to get a sense of what the plan is going forward.

Speaker Change: Good morning, Chris and Brian and thanks for taking my questions.

Leo Paul Mariani: As you all continue to bolt on in the Giddings area, which you acknowledged having better relative economics to the inventory that remains of karnes generally speaking.

Leo Paul Mariani: How should we think about the mix of capital allocation between karnes and giddings versus that 28.

Speaker Change: <unk> you.

Leo Paul Mariani: They're all running this year on a go forward basis.

Christopher G. Stavros: Yeah, thanks. That's a lot packed in there.

Speaker Change: Yeah. Thanks for the question I think I think it's going to be about that more or less I don't I don't see it changing dramatically.

Christopher G. Stavros: <unk>.

Christopher G. Stavros:

Christopher G. Stavros: Otherwise I'm speaking of operated non operated in Karnes and it's a little hard for us to predict but generally that 80 20, I think sort of applies here for for a while as far as I can see right now.

Christopher G. Stavros: Um, so part of part of my job is to manage, you know, the external expectations and within our capability of delivering solid results. Right now, things are going rather well on the drilling and completion side. Um, you know, the production volumes acquired from the deal represent, you know, what the assets are currently producing, and since we'll only own them for two-thirds of the year, the overall production doesn't amount to very much.

Christopher G. Stavros: And actually, that's just fine, because we didn't acquire these properties for the PDP; we acquired them for the high-quality undeveloped opportunities, which, as I said, I think are quite significant, in my view. Um, you know, maybe there's a touch of conservatism here, or, you know... The way I think about it, you know, maybe a little bit of Murphy's Law on me, but I prefer not to get too cute with the guidance.

Speaker Change: Okay. That's helpful and maybe just to touch on the efficiencies a little bit more.

Christopher G. Stavros: So with that in mind, I think our total production and oil production should grow in the high single digits this year, or maybe even the high high single digits. Certainly high, you know, and on the acquisition itself, you know, it's hard to time these things, these types of opportunities. This is something that started evolving really last year. It was unique, from a private operator.

Christopher G. Stavros: I'm not going to pretend to speak for individuals who've made very personal decisions, but this process started to take shape last year, and it took a lot of effort and cooperation by both parties to make it happen. That's about all I have to say about the process. But yeah, sure. I hope there would be or could be opportunities like this one. That would be great. You know, the objective is to, you know, sort of, do these things within our capability of managing them; that are not necessarily, size for size sake; the objective is to make us better, not necessarily bigger, and to sustain ourselves with our high margins and our business model profile for the long term.

Christopher G. Stavros: And so that's how we look at things. I think the acquisition itself will get, you know, folded into our broader Giddings program because, you know, that's what it is. It just, you know, we'll fold in some wells this year, we'll fold in more wells next year. It's, you know, that it will be, it will look like Giddings because that's what it is.

Christopher G. Stavros: Yeah.

Christopher G. Stavros: Previously kind of mentioned, how the Frac side of things was the big driver lower well costs last year in that the drilling side is a much bigger focus for 2024, just wondering if you could maybe talk to the progress you've seen to date and also when we're kind of looking at the Q1 Capex.

Speaker Change: Coming in a little bit below your guidance, if there's any color behind if it was more well cost efficiency driven in working interest or just.

Christopher G. Stavros: More of a timing aspect.

Christopher G. Stavros: I think you're I think theres, certainly some timing to that.

Christopher G. Stavros: It's really why.

Christopher G. Stavros: The second quarter some of the capital got shifted into the second quarter, So theres always going to be a little.

Christopher G. Stavros: It's around timing.

Christopher G. Stavros: For that and frankly, we can we could see more of that it just sort of depends.

Christopher G. Stavros: I think you know that the numbers that we have.

Christopher G. Stavros: That's been borne out up to now in the first quarter and the guide for the second quarter sort of plus or minus what it looks like right now.

Christopher G. Stavros: But that's that's.

Christopher G. Stavros: Without trying to bake in potential improvements that we can continue to make if we're drilling faster.

Christopher G. Stavros: You know that that has.

Christopher G. Stavros: You know an outcome to it to some extent and so there may be more that comes in to play or into the program. This is a good thing by the way I mean, it creates more cushion for us and an optionality for the remainder of the year. So I think that that works out favorably for us.

Speaker Change: That's fine.

Christopher G. Stavros: And the weakness or the softness in.

Christopher G. Stavros: In our natural gas prices are certainly sort of continues to have an impact on.

Christopher G. Stavros: Materials pricing.

Christopher G. Stavros: Oh CTG is sort of you know still soft ish and it's probably seen.

Christopher G. Stavros: Single digit price softness into the second quarter.

Christopher G. Stavros: I'll tell ya rig and pressure pumping crew availability is ample.

Christopher G. Stavros: Operators are competing on price quality performance.

Christopher G. Stavros: And as said I think that we will see some of these small benefits get factored into those well cost numbers that I quoted earlier.

Christopher G. Stavros: Okay.

Christopher G. Stavros: Yeah.

Speaker Change: Makes sense, thanks for the time Chris.

Speaker Change: Okay. Thanks.

Leo Paul Mariani: Okay. Thanks for the call. I appreciate it. Sure.

Speaker Change: Our next question comes from Jack Zajac Farhan.

Leo Paul Mariani: Farhan with J P. Morgan. Please go ahead.

Charles Arthur Meade: Our next question comes from Charles Meade with Johnson Rice. Please go ahead.

Speaker Change: Hey, guys. Thanks for taking my question.

Charles Arthur Meade: First just wanted to ask on the cash return program, you've been pretty consistent for quite some time with the buyback.

Charles Arthur Meade: But you've got a lot of cash on the balance sheet.

Charles Arthur Meade: 0.2 that might.

Charles Arthur Meade: Accelerate the buyback could use some of that cash to buy back stock.

Charles Arthur Meade: Good morning, Chris and Brian and everyone on the Magnolia team there. Chris, I want to take another run at the acquisition, and I'm wondering if you could characterize it for us. The, you know, how developed it is in the target zones you're going after, and that may be, you know, and that might differ if you have more than one target down the column. How undeveloped is it in your targets, and how many net locations do you think you're bringing in?

Christopher G. Stavros: Uh, well, it's not very developed. In fact, I would characterize it as frankly undeveloped. It's not as undeveloped as you can imagine.

Charles Arthur Meade: It could I mean, I I like the consistency consistency of the program out of the model. So you know I I don't want to get too.

Christopher G. Stavros: Specific on on pointing out a number but it feels like in this sort of <unk>.

Christopher G. Stavros: Range of pricing.

Christopher G. Stavros: Pricing youre looking at sort of a two thirds.

Christopher G. Stavros: Return of free cash flow.

Christopher G. Stavros: Mix of share repurchases.

Christopher G. Stavros: The dividend.

Christopher G. Stavros: There may be some flexibility on the dividend on the share repurchases, rather just given a somewhat price sensitivity around that.

Christopher G. Stavros: Now we will.

Christopher G. Stavros: If the stock is sort of weak for some particular reason that we can't necessarily justify our figure out we're happy to lean in.

Christopher G. Stavros: Or not and so we'll just see how it goes I I'm not you know.

Speaker Change: Favorably inclined to just keeping a bunch of cash on the balance sheet, just because I joked about this we're not a bank.

Christopher G. Stavros: It's sort of weighs on our returns and I'd, rather put it to use to generate higher returns for cat.

Christopher G. Stavros: You know right now you know having no real net debt.

Christopher G. Stavros: Obviously, you're very comfortable and it makes people feel better but you know you don't necessarily need to have that much cash sitting around.

Christopher G. Stavros: Yeah.

Speaker Change: Got it thanks for that color.

Christopher G. Stavros: Sure.

Christopher G. Stavros: Hello can you give us a little more detail on what you're doing to reduce our LOE, maybe any thoughts on what Louis looks like into two before declining in the back half of the year.

Speaker Change: Yeah, we've we've already started on this mainly.

Christopher G. Stavros: First talking about it now, but we've already been at it here for a little bit.

Christopher G. Stavros: And so my hope is that you'll start to see some improvement even sooner than in the back half of the year and frankly into the second quarter, but I think the larger improvements gains should be more evident in the third and fourth quarters of the year.

Christopher G. Stavros: But I'm very confident that the first quarter would have been the highest cash operating cost per Boe for the year.

Christopher G. Stavros: As I said.

Christopher G. Stavros: <unk>.

Christopher G. Stavros: We will employ things like some of this field management systems that will lead to improved efficiencies and optimization across the fields.

Christopher G. Stavros: Well optimization.

Christopher G. Stavros: Contract.

Christopher G. Stavros: Labor.

Christopher G. Stavros: Surface repair maintenance procurements.

Christopher G. Stavros: So, you know, there's low hanging fruit here. It's all upside. And I That's about all I can say as to why.

Christopher G. Stavros: Synergies from from the acquired assets I mean, there's a lot of low hanging fruit that I think we can capture so.

Christopher G. Stavros: Al. This is you could call this a little bit like spring cleaning.

Christopher G. Stavros: But anyway, there's a lot of potential opportunity for ourselves here. It's unique, as I said. Um, you know, I'm confident in the fact that we added a couple of years' worth at our pace of net location because we, you know, we can see this and we understand it real well from a subsurface perspective and our ability to drill wells that look very similar to some of our better executed pads and wells in some of the core areas of Giddings, so, you know, You got to tie me down. I'm pretty excited about It's quite good. Sorry, you know, I don't know how much more I can say, but it's at our disposal.

Christopher G. Stavros: We've been at this for a while in terms of operating both giddings in karnes over the last six years.

Charles Arthur Meade: That's a helpful data point. Thank you for that, Chris, and that's it for me.

Oliver Wong: Our next question comes from Oliver Wong with the Tudor Pickering Holton Company. Please go ahead.

Oliver Huang: We've learned in ground with it but I think this is an appropriate time for us to pursue it.

Oliver Wong: We're in a portion of the cycle that I think is a little stronger and so the organization come look at areas to improve in a more thoughtful way rather than being forced to.

Oliver Huang: To make more knee jerk reactions are draconian decisions, we were in a much weaker environment. So I think it's a good time to do it.

Oliver Huang: Our field folks have embraced it and everybody is onboard and I think it's starting to work out pretty well.

Oliver Huang: Got it thanks, Chris.

Oliver Wong: Thanks.

Christopher G. Stavros: Good morning, Chris and Brian, and thanks for taking my question. As you all continue to bolt on in the Giddings area, which you've acknowledged having better relative economics to the inventory, how should we think about the mix of capital allocation between companies? That 20, split that you all are running this year on a go forward basis. Yeah, thanks for the question.

Oliver Huang: Our next question comes from no homeless with Bank of America. Please go ahead.

Christopher G. Stavros: I think I think it's going to be about that, more or less. I don't I don't see it changing dramatically. And, you know, otherwise, and I'm speaking about operated, non-operated, and Carnes and, A little hard for us to predict, but generally, that 80-20, I think, sort of applies here for a while, as far as I can see right now. That's helpful.

Speaker Change: Sorry, I was on mute I just wanted to ask a quick question here on the <unk> on the deal again, it looks like it filled in a lot of acreage gaps.

Speaker Change: Does it does this allow you guys to potentially have longer laterals than the 8500 fee that you guys are drilling this year or does it unlock potentially stranded acreage and then also are there any contingency payments associated with this deal similar to what we saw with the November the deal that closed in November.

Christopher G. Stavros: No there is no contingency payments whatsoever.

Christopher G. Stavros: The cost of the transaction as we stated.

Oliver Wong: And maybe just to touch on efficiencies a little bit more, I previously mentioned how the frack side of things was a big driver of lower well costs last year, and that the drilling side is a much bigger focus for 2024. Just wondering if you can maybe talk about the progress you've seen to date and also when we're kind of looking at Q1. CapEx is coming in a little bit below your guidance.

Christopher G. Stavros: The answer on a longer laterals and unlocking.

Oliver Wong: Additional acreage.

Speaker Change: Yes, and yes.

Oliver Wong:

Speaker Change: I'm not going to tell you that.

Oliver Wong: All the wells are locations will be longer than what we're currently drilling this year on average which will be about 8500 feet.

Oliver Wong: But certainly there bye bye.

Oliver Wong: I expect that there will be some longer for sure.

Speaker Change: We're taking a closer look at that in terms of what.

Oliver Wong: It may be able to unlock as far as.

Oliver Wong: Police lines et cetera, but.

Speaker Change: Yes, I think there's more opportunity for that.

Oliver Wong: If there's any color behind whether it was more cost efficiency driven working interest or just more of a time. I think you're I think there's certainly some timing to that, which, you know, is really why, you know, the second quarter, some of the capital got shifted into the second quarter. So there's always going to be little matters around timing for that, and frankly, you know, we could see more of that. It just sort of depends.

Speaker Change: Great and then just switching over to the to the oily or assets you guys are looking to drill later this year, how do those economics compare to core giddings today, just given how the forward curve has moved up and could you give any color on maybe when do you think those wells will come online <unk> or <unk>.

Speaker Change: Thank you.

Christopher G. Stavros: I think, you know, the numbers that we've seen borne out up to now in the first quarter in the guide for the second quarter, sort of plus or minus what it looks like right now. But that's, you know, that's without trying to bake in potential improvements that we can continue to make if we're drilling faster, you know, that that has, you know, an outcome to it to some extent.

Speaker Change: Yes, I think.

Christopher G. Stavros: And so there may be more that come in to play or into the program. This is a good thing, by the way. I mean, it creates more cushion for us and an option for the remainder of the year. So I think that that will work out favorably for us. The softness in natural gas prices certainly continues to have an impact on materials pricing. OCTG is still soft-ish and has probably seen single-digit price softness into the second quarter, rig and pressure pumping crew availability is ample, operators competing on price, quality, performance, and as I said, you know, I think that it will see some of these small benefits get factored into those well-cost numbers that I quoted earlier. Thanks for the time. Okay, thanks.

Oliver Wong: You'd probably be able to see that later this year and the datasets that are out there.

Christopher G. Stavros: There'll be some.

Christopher G. Stavros: Some data some production that you'll you'll be able to.

Benjamin Zachary Parham: Our next question comes from Zach Barham with JP Morgan. Please go ahead.

Christopher G. Stavros: Quantify.

Christopher G. Stavros: As far as the.

Benjamin Zachary Parham: The returns I mean, there it's very oily oil you're you know obviously than core.

Benjamin Zachary Parham: Core giddings or general Giddings.

Benjamin Zachary Parham: But again an important point is that these are.

Benjamin Zachary Parham: Shallower wells there are three to 4000 feet shallower than our typical getting as well so.

Benjamin Zachary Parham: The D&C costs are lower so the economics frankly are very similar to what we see in the core getting.

Benjamin Zachary Parham: Yeah.

Benjamin Zachary Parham: Yes, thanks for taking our question. First, I just wanted to ask about the cash return program. You've been pretty consistent for quite some time with the buyback, but you've got a lot of cash on the balance sheet.

Benjamin Zachary Parham: Great. Thank you and I'll hand, it back there.

Benjamin Zachary Parham: Yes.

Benjamin Zachary Parham: At some point, could it be?

Speaker Change: Our next question comes from Alibaba.

Christopher G. Stavros: It could I mean, I like the consistent consistency of the program and of the model. So, you know, I don't want to get too specific on pointing out a number, but it feels like in this sort of range of pricing, product pricing, you're looking at sort of a two-thirds Return of Free Cash Flow through a mix of share repurchases and dividend. There may be some flexibility on the dividend and on the share repurchases rather, just, you know, given our price sensitivity around that.

Speaker Change: With Goldman Sachs. Please go ahead.

Speaker Change: Hi, Good morning beam just a quick question on the cost reduction sounds like it's you're beginning with your cost reduction plan at this point and obviously.

Christopher G. Stavros: There are a lot of your peers that have been doing several things over time to reduce costs. So maybe help us understand where you will be after this initial phase on that join me versus others and so that just so that we can gauge how much room. There is to go after this.

Christopher G. Stavros: Yeah.

Christopher G. Stavros: You know, we'll... The stock is sort of weak for some particular reason that we can't necessarily justify or figure out. You know, we're happy to lean in, or not. And so we'll just sort of see how it goes.

Christopher G. Stavros: Well I think the 5% to 10% is a very good starting point, we'll sort of see how it goes.

Christopher G. Stavros: <unk> said, we havent really done a lot of this so I think there's low hanging fruit.

Christopher G. Stavros: We've been at this six years and.

Christopher G. Stavros: I'm not, you know, favorably inclined to just keep a bunch of cash on the balance sheet just because I've joked about this. We're not a bank. You know, it sort of weighs on our returns, and I'd rather put it to use to generate higher returns if we can. You know, right now, having no real net debt is obviously very comfortable, and it makes people feel better, but you don't necessarily need to have that much cash sitting around.

Christopher G. Stavros: I was joking with the guys I mean, it's almost like.

Christopher G. Stavros: Take.

Christopher G. Stavros: <unk> taken a taken a spin in the dryer, where you are.

Christopher G. Stavros: Longer than the dry or the more linked to pick up.

Christopher G. Stavros: And occasionally you gotta shake off the land.

Christopher G. Stavros: And so.

Christopher G. Stavros: You know.

Christopher G. Stavros: There's a lot of things that we can go after and we've accumulated more understanding of the assets. We've obviously drilled a lot of wells in Giddings, we have a better understanding of it off there's some I think synergies with the focus that we have within our core.

Christopher G. Stavros: And the application of some.

Christopher G. Stavros: Field management systems that will really help us out here and managing some of the processes in the field. So we'll see how things go but I am optimistic that we will start to see some early gains here.

Christopher G. Stavros: Before the back half of the year and we'll just continue to see how it goes the objective here is really to improve our operating margins at the end of the day I mean, the cash cost will come down the operating margins would pick up all else equal and provide us with better earnings and more free cash flow that's really the objective.

Christopher G. Stavros: Yeah.

Speaker Change: Awesome and then I guess, you know taking taking about a SKU like how does this plan buy into the long term sort of efficiency objectives capital efficiency objectives, and as you free up more capital how should we think about that allocation strategy.

Christopher G. Stavros: Well this is a less and less of a capital exercise as it is really more of a field exercise.

Christopher G. Stavros: At the end of the day.

Christopher G. Stavros: Both of them both of the.

Christopher G. Stavros: Actions or activities amount to money so.

Christopher G. Stavros: The capital side, just gets folded into your F&D costs in your DNA and so that at the end of the day. It's your biggest cost and so the more you can do on your well costs.

Christopher G. Stavros: We will provide.

Christopher G. Stavros: Later drilling efficiencies over time.

Christopher G. Stavros: More and more free cash flow as well requiring a lower reinvestment rate the same outcome.

Christopher G. Stavros: So there you know, they're clearly tied together, but.

Christopher G. Stavros: We will look at we will look at some things theres, probably some overlap in terms of things that we weren't able to do well on the capital side that could.

Christopher G. Stavros: That may apply in terms of what we've learned that we can apply in the field.

Speaker Change: Got it I appreciate that I'll turn it over.

Christopher G. Stavros: Our next question comes from Hamlin.

Wells Fargo: Wells Fargo. Please go ahead.

Speaker Change: Thanks for taking my questions I wanted to follow up on the investment rationale behind the new Giddings acquisition could you perhaps provide some colors some of the key valuation metrics of the acquisition. Thank you.

Christopher G. Stavros: Yeah.

Speaker Change: Yeah, well you know you do.

Christopher G. Stavros: Didn't you didn't get a whole lot of volume so I imagine if you back out you know just the <unk>.

Christopher G. Stavros: Out of the current.

Christopher G. Stavros: PDP.

Christopher G. Stavros: So youre looking at.

Christopher G. Stavros: Three to three and a half thousand acre something like that.

Christopher G. Stavros:

Speaker Change: All right.

Christopher G. Stavros: You know I I'm not.

Christopher G. Stavros: Not sure what else what else I can say I think that's pretty attractive frankly.

Benjamin Zachary Parham: Got it. Thanks for that color. And my follow-up question just on LOE, can you give us a little more detail on what you're doing to reduce LOE and maybe any thoughts on what LOE looks like in 2Q before declining in the back half of the year? Yeah, we've already started.

Speaker Change: Got you and do you have any.

Christopher G. Stavros: Yeah, we've already started on this. I mean, we were first talking about it now, but, you know, we've already been at it here for a little bit.

Benjamin Zachary Parham: Preferences regarding oil ratio for future acquisitions.

Christopher G. Stavros: And so my hope is that you'll start to see some improvement even sooner than in the back half of the year and, frankly, into the second quarter. But I think the larger gains should be more evident in the third and fourth quarters of the year. But I'm very confident that the first quarter would have been the highest cash operating cost for BOE for the year. As a set, you know... will employ things like some of the field management systems that will lead to improved efficiencies and optimization across the field, well optimization, contract, and field labor. Surface Repair Maintenance, Procurement, and Synergies from the acquired assets.

Christopher G. Stavros: Sure.

Christopher G. Stavros: I mean, there's a lot of low-hanging fruit that I think we can capture. So, you know, you could call this a little bit like spring cleaning. You know, we've been at this for a while in terms of operating both Giddings and Carnes over the last six years, and we've learned and grown with it, but I think this is an appropriate time for us to pursue it. And, you know, we're in a portion of the cycle that I think is a little stronger, and so the organization can look at areas to improve in a more thoughtful way rather than being forced to make So I think this is a good time to do it. Our field folks have embraced it, everybody's on board, and I think it's starting to work out pretty well.

Speaker Change: No I no I don't I don't I don't look at it like that I look at it you know just in terms of how it's going to improve our.

Christopher G. Stavros: Our business and financial outcome and how it sort of continues to extend the capability of.

Noah Hongness: Our next question comes from Noah Hongness with Bank of America. Please go ahead.

Christopher G. Stavros: Managing our model our business model, which as you know complete.

Noah Hongness: Completely designed around being the most efficient operator and drilling the best wells at the lowest cost to provide as much free cash flow that we can return to our shareholders.

Noah Hongness:

Noah Hongness:

Noah Hungness: Reduced the share count as we have overtime and.

Noah Hungness: We don't we're not looking at them.

Noah Hungness: Increase our debt levels are where we don't we're not sellers of stock and so we've done everything we've done.

Noah Hungness: Pretty organically here just through cash generated by the business.

Noah Hongness: That's our plan.

Noah Hungness: Thank you.

Noah Hongness: Okay.

Noah Hungness: Our next question comes from Sean Mitchell with Daniel Energy Partners. Please go ahead.

Noah Hongness: Sorry, I was on mute. I just wanted to ask a quick question on the deal again. It looks like it fills in a lot of acreage gaps. Does this potentially allow you guys to potentially have longer laterals than the 8,500 feet that you guys are drilling this year? Or does it unlock potentially stranded acreage? And then also, are there any contingency payments associated with this deal, similar to what we saw with the November, the deal that closed in November? Yeah,

Noah Hungness: Thanks for fitting me in guys, sorry, I was on mute.

Christopher G. Stavros: No, there are no contingency payments whatsoever. The cost of the transaction is as we stated. The answer on longer laterals and unlocking, Additional Acreage. Yes, and yes.

Speaker Change: Congrats on the deal deals are not easy to come by these days. So congrats you guys for getting something done.

Christopher G. Stavros: You know, I'm not going to tell you that all the wells or locations will be longer than what we're currently drilling this year on average, which will be about 8,500 feet. Um, but certainly there will, by, I expect that there will be some longer, for sure. You know, we're taking a closer look at that in terms of what it may be able to unlock as far as lease lines, etc. But yes, I think there's more opportunity for that.

Christopher G. Stavros: Several of your peers are doing re frac work and I think theres more buzz today than there has been in the Bakken and the Eagle Ford How are you guys thinking about this opportunity.

Christopher G. Stavros: If at all.

Christopher G. Stavros: Yes, it's more on the if at all category.

Speaker Change: Okay. That's fair I mean, there's lots there Josh I appreciate the question John I I I hear you.

Christopher G. Stavros: It's way way too early for us to really think about this for us in a broad way.

Christopher G. Stavros:

Christopher G. Stavros: <unk>.

Christopher G. Stavros: These are these are early science projects, frankly theres lots.

Christopher G. Stavros: That we.

Christopher G. Stavros: Ah focusing on foreign away from from things like that there's too much too many things for us to do.

Christopher G. Stavros: Do end up and drill well before we ever get to that time.

Christopher G. Stavros: And I just can't see that in our.

Christopher G. Stavros: And our mix in any substantial way for a long time.

Speaker Change: Yeah fair enough.

Speaker Change: Maybe follow up.

Christopher G. Stavros: On the bolt on or I think I, probably know the answer but what these guys running a rig or no. They.

Christopher G. Stavros: They were not to my knowledge.

Noah Hongness: Great. And then just switching over to the oilier assets you guys are looking to drill later this year, how do those economics compare to core earnings today, just given how the forward curve has moved up? And could you give any color on maybe when you think those wells will come online, 3Q or 4Q?

Christopher G. Stavros: And then of the two rigs and one Frac crew you guys have today remind.

Christopher G. Stavros: Yeah, I think, you'll probably be able to see that later this year in the data sets that are out there. I, you know, there'll be some data, some production that you'll, you'll be able to quantify.

Christopher G. Stavros: Remind me are those on spot or do you guys have those contracted.

Christopher G. Stavros: Correct.

Christopher G. Stavros: Okay.

Speaker Change: Very helpful. Thanks, guys. Okay. Thanks.

Christopher G. Stavros: Our next question comes from Paul Simon with Citi. Please go ahead.

Christopher G. Stavros: As far as returns go, I mean, they're very oily, obviously, than core gettings or general getting. But again, an important point is that these are shallower wells. They're 3,000 to 4,000 feet shallower than our typical Giddings well. So the DNC costs are lower. So the economics, frankly, are very similar to what we see in

Noah Hongness: Great, thank you, and I'll hand it back there.

Speaker Change: Oh, Thank you and good morning, all thanks for taking my call just a quick one on kind of the opportunity said Oh are you all still seem do things how should we think about that geographically is it more you know north we worked out yet.

Adi Varugh: Our next question comes from Adi Varugh with Goldman Sachs. Please go ahead.

Adi Varugh: Hi. Good morning, team.

Adi Varugh: Washington, with China, just a generalized scheduled that bolt ons are a lot more of the smaller type opportunities still available.

Adi Varugh: Well, we have we have a lot to work on in the areas that you mentioned for sure.

Adi Varugh: And Theres a lot of acreage in addition to that elsewhere other counties within the Giddings.

Adi Varugh: Field and getting proper. So we still will continue with some appraisal work to have a better understanding and better define some other areas that frankly, it's worked very well and led us to seek out new opportunities whether for bolt ons or just areas that we could drill with strong economics.

Christopher G. Stavros: Just a quick question on cost reduction. Sounds like you're beginning with your cost reduction plan at this point. And obviously, there are a lot of your peers that have been doing several things over time to reduce costs. So maybe help us understand where you will be after this initial phase on that journey versus others, so we can gauge how much room there is to go after this.

Adi Varugh: So I think it's still relatively early days he can't get to everything all at once it's some of it is just going to fall into a question of how much money. There is available to us in any given time period in any given year and the plan that we have to execute so.

Christopher G. Stavros: Well, I think, you know, the five to 10% is a very good starting point. We'll sort of see how it goes. We, you know, said we haven't really done a lot of this, so I think there's low hanging fruit. We've been at this for six years, and you know, I was joking with the guys. I mean, it's almost like taking a spin in the dryer where the longer you're in the dryer, the more lint you pick up, and occasionally, you've got to shake off the lint.

Christopher G. Stavros: There are a lot of things that we can go after, and we've accumulated more understanding of the assets. We've obviously drilled a lot of wells and getting better understanding of it. There are some synergies with the focus that we have within our core and the application of some field management systems that will really help us out here in managing some of the processes in the field. So, we'll see how things go, but I'm optimistic that we'll start to see some early gains here before the back half of the year, and we'll just continue to see how it goes.

Christopher G. Stavros: You can't do everything well, we'll get to it over time, but there's a lot that we can.

Christopher G. Stavros: A lot that we can look at over time.

Speaker Change: Understood and how do you how does it scale those opportunities are they more like small ground game type stuff or are they similar size bolt clubs one done this quarter.

Christopher G. Stavros: The objective here is really to improve our operating margins at the end of the day. I mean, the cash costs will come down, the operating margins would pick up, all else equal, and provide us with better earnings and more free cash flow. That's really the goal.

Christopher G. Stavros: There are.

Adi Varugh: And then I guess, you know, taking that as a cue, like, how does this plan tie into the long-term sort of efficiency objectives, capital efficiency objectives? And as you free up more capital, how should we think about that allocation strategy? Well, this is a lesson.

Christopher G. Stavros: Well, this isn't less of a capital exercise as it is really more of a field exercise. At the end of the day, both of the actions, or activities amount to money. So, you know, the capital side, you know, just gets folded into your F&D costs and your DDNA. And so, at the end of the day, it's your biggest cost. And so the more you can do on your well costs, will provide, you know, greater drilling efficiencies over time and, you know, more free cash flow as well, requiring a lower reinvestment rate for the same outcome.

Christopher G. Stavros: I look at this and say I mean.

Christopher G. Stavros: It would be.

Christopher G. Stavros: It would be unfair for me to say that you're going to see something like this that we just did again.

Christopher G. Stavros: Um, so they're, you know, they're clearly tied together. But, you know, we'll look at, we'll look at some things, there's probably some overlap in terms of things that we were able to do well on the capital side that could, that may apply in terms of what we've learned, that we could apply.

Adi Varugh: I quite appreciate that alternative. Our next question comes from Hanwen Zhang with Wells Fargo. Please go ahead.

Christopher G. Stavros: I'm not this specific type of transaction, but there are potentially other small fill in small.

Hanwen Zhang: Thanks for taking

Christopher G. Stavros: Yeah, well, you didn't get a whole lot of volume. So I'd imagine if you back out, you know, just the value of the current PDP, you're looking at 3,000 to 3,500 an acre, something like that. Um... I'm not, Not sure what else I can say. I think that's pretty attractive, Frank.

Christopher G. Stavros: Gotcha. And do you have any preferences regarding oil ratio for future acquisitions? Thank you. No, I know.

Hanwen Zhang: I don't I don't I don't look at it like that. I look at it, you know, just in terms of how it's going to improve our, you know, our business and and financial outcome and how it sort of continues to extend the capability of you know, managing our model, our business model, which is, you know, completely designed around being the most efficient operator and drilling, you know, the best wells at the lowest cost to provide as much free cash flow that we can return to shareholders and, Umang Choudhary, Jim Johnson, Benjamin Parham, Sean Mitchell, Magnolia Oil & Gas Corp, you know, reduce the share count as we have over time.

Hanwen Zhang: You know, we don't, we're not looking to, you know, increase our debt levels, or we're not sellers of stock. And so, you know, we've done everything we've done pretty organically here just through cash generated by the business. So I, you know, that's the plan. Thank you.

Sean W. Mitchell: Our next question comes from Sean Mitchell with Daniel Energy Partners. Please go ahead.

Sean W. Mitchell: Thanks for putting me in, guys. Sorry, I was on mute.

Hanwen Zhang: Working interests or just fill in properties to help round out areas.

Sean W. Mitchell: Congratulations on the deal. Deals are not easy to come by these days, so congratulations to you guys for getting something done. Several of your peers are doing refract work, and I think there's more buzz today than there has been in the Bakken, and Eagle Fork. What are you guys thinking about this opportunity if?

Christopher G. Stavros: Yeah, it's more in the if at all category. No, that's fair.

Christopher G. Stavros: I mean, there's lots, there's, gosh, I appreciate the question, Sean. I, I hear you. You know, it's, it's, way, way too early for us to really think about this for ourselves, you know, in a broad way. These are these are early science projects, frankly, there's lots that we are focusing on far and away from things like that. It's too much of too many things for us to do and drill before we ever get to that. I You know, I just can't see that in our..., in our mix in any substantial way for a long time.

Sean W. Mitchell: Yeah, fair enough. And maybe follow up. On the bolt-on, I think I probably know the answer, but would these guys run in a rig or not? They were not, to my knowledge.

Sean W. Mitchell: And then of the two rigs and one track crew you guys have today, Remind me, are those on spot, or do you guys have those contracted? Contract. Very helpful. Thanks, guys. Okay.

Sean W. Mitchell: Our next question comes from Paul Diamond with the City. Please go ahead.

Paul Michael Diamond: Thank you. Good morning, all. Thanks for taking my call.

Sean W. Mitchell: Areas that we like and are working well for us.

Paul Michael Diamond: Just a quick one on kind of the opportunity set you all still see in Giddings. How should we think about that geographically? Is that more, you know, north of Lee, more Fayette, east of Washington? Just kind of just a generalized scale of that, similar to the bolt-ons or a lot more of the smaller types of opportunities still available.

Christopher G. Stavros: Well, we have we have a lot to work on in the areas that you mentioned, for sure. You know, and there's a lot of acreage in addition to that elsewhere in other counties within the Giddings field and getting it right. So, you know, we will still continue with some appraisal work to have a better understanding and better define some other areas that, frankly, have worked very well and led us to seek out new opportunities, whether for bold ons or just areas that we could drill with strong economics. So I think it's, you know, still relatively early days.

Christopher G. Stavros: You can't get to everything all at once. Some of it is just going to fall into a question of how much money we have available to us in any given time period, in any given year, and the plan that we have to execute. So you can't do everything. We'll get to it over time, but there's a lot that we can..., a lot that we can look at over time.

Paul Michael Diamond: understood and how do you think the scale of these opportunities is? Are they more like small ground game type stuff? Are they similar size bolt-ons to the ones done this quarter?

Speaker Change: Understood understood the clarity there.

Christopher G. Stavros: There there are, I look at this and say, I mean, it would be unfair for me to say that, you know, you're going to see something like this that we just did again. Um, not this specific type of transaction, but there are potentially other small fill-ins, small working interests, or just fill-in properties to help round out areas that we like and are working well for us.

Paul Michael Diamond: Understood. There should be more clarity over there.

Christopher G. Stavros: Thanks.

Unknown Executive: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.