Q1 2026 Magnolia Oil & Gas Corp Earnings Call

May 7, 2026

Operator: Good morning, everyone, and thank you for participating in Magnolia Oil & Gas Corporation's Q1 2026 earnings conference call. My name is Danielle, and I will be your moderator for today's call. At this time, all participants will be placed in a listen-only mode as our call is being recorded. I would now turn the call over to Magnolia's management for the prepared remarks, which will be followed by a brief question and answer session.

Operator: Good morning, everyone, and thank you for participating in Magnolia Oil & Gas Corporation's Q1 2026 Earnings Conference Call. My name is Danielle, and I will be your moderator for today's call. At this time, all participants will be placed in a listen-only mode as our call is being recorded. I would now turn the call over to Magnolia's management for the prepared remarks, which will be followed by a brief question and answer session.

Speaker #2: all participants will be placed in a listen-only mode as our call is being recorded. I would now turn the call over to Magnolia's management for the prepared remarks, which will be followed by a brief question-and-answer session. you, Danielle, and good morning, everyone.

Tom: Thank you, Danielle, and good morning, everyone. Welcome to Magnolia Oil & Gas' Q1 earnings conference call. Participating on the call today are Christopher Stavros, Magnolia's Chairman, 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. 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.

[Company Representative] (Magnolia Oil & Gas): Thank you, Danielle, and good morning, everyone. Welcome to Magnolia Oil & Gas' Q1 earnings conference call. Participating on the call today are Christopher Stavros, Magnolia's Chairman, 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.

Speaker #2: call. Participating on the call session. Thank today are Chris Stavros, Magnolia's chairman, president, and chief executive officer; and Brian Corales, senior vice president and chief financial officer.

Speaker #2: 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.

Speaker #2: 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.

[Company Representative] (Magnolia Oil & Gas): 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 Q1 2026 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. Christopher Stavros.

Speaker #2: 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 2026 earnings press release as well as the conference call slides from the investor section of the company's website at www.magnoliaoilgas.com.

Tom: You can download Magnolia's Q1 2026 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. Christopher Stavros.

Speaker #2: I will now turn the call over to Mr. Chris Stavros.

Speaker #3: Thank you, Tom, and good morning, everyone. Thank you for all for joining us today for a discussion on our first quarter 2026 financial and operating results.

Christopher Stavros: Thank you, Tom. Good morning, everyone. Thank you for all for joining us today for a discussion on our Q1 2026 financial and operating results. I plan to briefly speak on our Q1 results, which provided a strong start to the year and consistent performance across our financial and operating metrics. I'll then highlight what turned out to be an active quarter for bolt-on oil and gas property acquisitions for Magnolia, adding to our working interest and royalty interest in both of our operating areas by closing several deals during the quarter. I'll finish up by speaking to Magnolia's 2026 capital and operating plan, which is well-positioned during this period of product price volatility, driving incremental free cash flow and improving our financial flexibility. Brian will then review our financial results in greater detail and provide some additional guidance before we take your questions.

Chris Stavros: Thank you, Tom. Good morning, everyone. Thank you for all for joining us today for a discussion on our Q1 2026 financial and operating results. I plan to briefly speak on our Q1 results, which provided a strong start to the year and consistent performance across our financial and operating metrics. I'll then highlight what turned out to be an active quarter for bolt-on oil and gas property acquisitions for Magnolia, adding to our working interest and royalty interest in both of our operating areas by closing several deals during the quarter. I'll finish up by speaking to Magnolia's 2026 capital and operating plan, which is well-positioned during this period of product price volatility, driving incremental free cash flow and improving our financial flexibility. Brian will then review our financial results in greater detail and provide some additional guidance before we take your questions.

Speaker #3: I plan to briefly speak on our first quarter results, which provided a strong start to the year and consistent performance across our financial and operating metrics.

Speaker #3: I'll then highlight what turned out to be an active quarter for Oltan Oil & Gas Property Acquisitions from Magnolia, adding to our working interest and royalty interest in both of our operating areas by closing several deals during the quarter.

Speaker #3: I'll finish up by speaking to Magnolia's 2026 capital and operating plan, which is well positioned during this period of product price volatility, driving incremental free cash flow and improving our financial flexibility.

Speaker #3: Brian will then review our financial results in greater detail and provide some additional guidance before we take your questions. Starting with slide 3 in our quarterly investor presentation, Magnolia delivered another strong and consistent quarter of execution across our financial and operating metrics and centered around our disciplined business model characterized by a low reinvestment rate, high operating margins, and moderate production growth.

Christopher Stavros: Starting with slide 3 in our quarterly investor presentation, Magnolia delivered another strong and consistent quarter of execution across our financial and operating metrics and centered around our disciplined business model, characterized by a low reinvestment rate, high operating margins, and moderate production growth. For Q1 2026, total company production volumes grew by 6% year-over-year to 102.6 thousand barrels oil equivalent per day, with oil production growing by 4% and averaging 40.7 thousand barrels per day. Production in Giddings was the primary growth driver for the company, with total Giddings production increasing 9% year-over-year and oil production showing growth of 8% over the same period. Giddings production volumes were a record for the company in the quarter. Giddings production currently accounts for approximately 82% of Magnolia's total company volumes.

Chris Stavros: Starting with slide 3 in our quarterly investor presentation, Magnolia delivered another strong and consistent quarter of execution across our financial and operating metrics and centered around our disciplined business model, characterized by a low reinvestment rate, high operating margins, and moderate production growth. For Q1 2026, total company production volumes grew by 6% year-over-year to 102.6 thousand barrels oil equivalent per day, with oil production growing by 4% and averaging 40.7 thousand barrels per day. Production in Giddings was the primary growth driver for the company, with total Giddings production increasing 9% year-over-year and oil production showing growth of 8% over the same period. Giddings production volumes were a record for the company in the quarter. Giddings production currently accounts for approximately 82% of Magnolia's total company volumes.

Speaker #3: For the first quarter 2026, total company production volumes grew by 6% year over year to 102.6 thousand barrels of oil equivalent per day, with oil production growing by 4% and averaging 40.7 thousand barrels per day.

Speaker #3: Production in Giddings was the primary growth driver for the company, with total Giddings production increasing 9% year over year and oil production showing growth of 8% over the same period.

Speaker #3: Gittings production volumes were a record for the company in the quarter. Gittings production currently accounts for approximately 82% of Magnolia's total company volumes. The quarter was equally solid around our financial metrics supported by growth in our oil and gas production, and higher oil prices for which production or production is entirely unhedged.

Christopher Stavros: The quarter was equally solid around our financial metrics, supported by growth in our oil and gas production and higher oil prices for which our production is entirely unhedged. Our Q1 net income was approximately $101 million or $0.54 per diluted share, with adjusted EBITDAX coming in at $253 million. Drilling completion capital for the period was roughly $129 million, providing a reinvestment rate of 51% of our adjusted EBITDAX. Pre-tax operating margins averaged 36% for the quarter. Our low reinvestment rate and high operating margins demonstrate our capital spending discipline, proactive cost management, and further capture of operational efficiencies.

Chris Stavros: The quarter was equally solid around our financial metrics, supported by growth in our oil and gas production and higher oil prices for which our production is entirely unhedged. Our Q1 net income was approximately $101 million or $0.54 per diluted share, with adjusted EBITDAX coming in at $253 million. Drilling completion capital for the period was roughly $129 million, providing a reinvestment rate of 51% of our adjusted EBITDAX. Pre-tax operating margins averaged 36% for the quarter. Our low reinvestment rate and high operating margins demonstrate our capital spending discipline, proactive cost management, and further capture of operational efficiencies.

Speaker #3: Our first quarter net income was approximately 101 million or 54 cents per diluted share, with adjusted EBITDAX coming in at 253 million dollars. During the completion capital for the period was roughly 129 million dollars, providing a reinvestment rate of 51% of our adjusted EBITDAX.

Speaker #3: Pre-tax operating margins averaged 36% for the quarter. Our low reinvestment rate and high operating margins demonstrate our capital spending discipline, proactive cost management, and further capture of operational efficiencies.

Speaker #3: Magnolia generated approximately 146 million dollars of free cash flow during the first quarter and returned 83 million dollars to our shareholders through accommodation of our base dividend on our share of purchase program, where we bought back just over 1% of Magnolia's outstanding shares during the period.

Christopher Stavros: Magnolia generated approximately $146 million of free cash flow during Q1 and returned $83 million to our shareholders through a combination of our base dividend on our share repurchase program, where we bought back just over 1% of Magnolia's outstanding shares during the period. Additionally, EnerVest, Magnolia's original private equity shareholder, completed the sale of their remaining ownership position during Q1. This action simplifies our capital structure through the elimination of any remaining Class B shares outstanding at the end of Q1. As shown on slide 4, Q1 turned out to be a busy period for acquisitions as we completed the purchase of several small bolt-on oil and gas property acquisitions in both our Karnes area and Giddings, totaling $155 million.

Chris Stavros: Magnolia generated approximately $146 million of free cash flow during Q1 and returned $83 million to our shareholders through a combination of our base dividend on our share repurchase program, where we bought back just over 1% of Magnolia's outstanding shares during the period. Additionally, EnerVest, Magnolia's original private equity shareholder, completed the sale of their remaining ownership position during Q1. This action simplifies our capital structure through the elimination of any remaining Class B shares outstanding at the end of Q1. As shown on slide 4, Q1 turned out to be a busy period for acquisitions as we completed the purchase of several small bolt-on oil and gas property acquisitions in both our Karnes area and Giddings, totaling $155 million.

Speaker #3: Additionally, Enervest Magnolia's original private equity shareholder completed the sale of their remaining ownership position during the quarter. This action simplifies our capital structure through the elimination of any remaining Class B shares outstanding at the end of the first quarter.

Speaker #3: As shown on slide 4, the first quarter turned out to be a busy period for acquisitions as we completed the purchase of several small Bolton Oil & Gas Property acquisitions in both our Carnes area and in gittings totaling 155 million dollars.

Speaker #3: These transactions were closed in the latter part of the first quarter, include roughly 6,200 net acres and approximately 500 POE per day, of low-decline PDP about 45% oil and with significant undeveloped upside opportunities located in highly productive areas where we currently operate and understand well.

Christopher Stavros: These transactions, which closed in the latter part of the first quarter, include roughly 6,200 net acres and approximately 500 BOE per day of low decline PDP, about 45% oil, and with significant undeveloped upside opportunities located in highly productive areas where we currently operate and understand well. In our Karnes area, the acquired acreage creates a sizable and largely contiguous 10,000 gross acre block of primarily undeveloped and highly attractive acreage in the core of the Eagle Ford trend across both Karnes and Gonzales counties. The acquired tracts increase our working interest in the area to approximately 93%, with an average NRI of around 80%. At our current development pace in the Karnes area, this acquisition adds multiple years of development locations and blocks up a large contiguous position in both Karnes and Gonzales counties, allowing for longer lateral development.

Chris Stavros: These transactions, which closed in the latter part of the Q1, include roughly 6,200 net acres and approximately 500 BOE per day of low decline PDP, about 45% oil, and with significant undeveloped upside opportunities located in highly productive areas where we currently operate and understand well. In our Karnes area, the acquired acreage creates a sizable and largely contiguous 10,000 gross acre block of primarily undeveloped and highly attractive acreage in the core of the Eagle Ford trend across both Karnes and Gonzales counties. The acquired tracts increase our working interest in the area to approximately 93%, with an average NRI of around 80%. At our current development pace in the Karnes area, this acquisition adds multiple years of development locations and blocks up a large contiguous position in both Karnes and Gonzales counties, allowing for longer lateral development.

Speaker #3: In our Carnes area, the acquired acreage creates a sizable and largely contiguous 10,000 gross acre block of primarily undeveloped and highly attractive acreage in the core of the Eagle Ford Trend across both Carnes and Gonzales counties.

Speaker #3: The acquired tracts increase our working interest in the area to approximately 93%, with an average NRI of around 80%. At our current development pace in the Carnes area, this acquisition adds multiple years of development locations and blocks up a large contiguous position in both Carnes and Gonzales counties, allowing for longer lateral development.

Speaker #3: In gittings, our successful ground game continues to increase our working interest and royalty interest by acquiring new acreage in and around our current operated position.

Christopher Stavros: In Giddings, our successful ground game continues to increase our working interest and royalty interest by acquiring new acreage in and around our current operated position. The Giddings transactions increased our interest in approximately 45,000 gross acres in addition to adding some new contiguous acreage, furthering our strategy of buying more of what we already own. Each of these transactions leverage the deep technical knowledge we've gained from our drilling and completion activities in the field while meaningfully extending our already robust inventory of high return drilling locations, increasing our working interest in existing assets, and adding valuable duration to our overall resource portfolio. This further demonstrates our ability to deploy a portion of Magnolia's excess free cash flow into high-quality targeted opportunities.

Chris Stavros: In Giddings, our successful ground game continues to increase our working interest and royalty interest by acquiring new acreage in and around our current operated position. The Giddings transactions increased our interest in approximately 45,000 gross acres in addition to adding some new contiguous acreage, furthering our strategy of buying more of what we already own. Each of these transactions leverage the deep technical knowledge we've gained from our drilling and completion activities in the field while meaningfully extending our already robust inventory of high return drilling locations, increasing our working interest in existing assets, and adding valuable duration to our overall resource portfolio. This further demonstrates our ability to deploy a portion of Magnolia's excess free cash flow into high-quality targeted opportunities.

Speaker #3: The gittings transactions increased our interest in approximately 45,000 gross acres in addition to adding some new contiguous acreage, furthering our strategy of buying more of what we already own.

Speaker #3: Each of these transactions leveraged the deep technical knowledge we've gained from our drilling and completion activities in the field while meaningfully extending our already robust inventory of high-return drilling locations increasing our working interest in existing assets and adding valuable duration to our overall resource portfolio.

Speaker #3: This further demonstrates our ability to deploy a portion of Magnolia's excess free cash flow into high-quality targeted opportunities. Our goal in pursuing these is intended to not simply replace produce reserves but to expand our long-term opportunity set and reinforce the sustainability of our strong financial returns.

Christopher Stavros: Our goal in pursuing these is intended to not simply replace produced reserves, but to expand our long-term opportunity set and reinforce the sustainability of our strong financial returns. We continue to actively seek out additional asset acquisition opportunities that improve our business using our technical experience in developing the Austin Chalk and Eagle Ford formations in South Texas that provide us with a clear competitive advantage. As I often mention, Magnolia's primary goal is to be the most efficient operator of our best-in-class oil and gas assets to generate the highest return on those assets while spending the least amount of capital on drilling and completing wells. Magnolia's high-quality assets and the strategy of discipline around capital spending should continue to serve us well during periods of product price volatility.

Chris Stavros: Our goal in pursuing these is intended to not simply replace produced reserves, but to expand our long-term opportunity set and reinforce the sustainability of our strong financial returns. We continue to actively seek out additional asset acquisition opportunities that improve our business using our technical experience in developing the Austin Chalk and Eagle Ford formations in South Texas that provide us with a clear competitive advantage. As I often mention, Magnolia's primary goal is to be the most efficient operator of our best-in-class oil and gas assets to generate the highest return on those assets while spending the least amount of capital on drilling and completing wells. Magnolia's high-quality assets and the strategy of discipline around capital spending should continue to serve us well during periods of product price volatility.

Speaker #3: We continue to actively seek out additional asset acquisition opportunities that improve our business using our technical experience in developing the Austin Shock and Eagle Ford formations in South Texas that provide us with a clear competitive advantage.

Speaker #3: As I often mentioned, Magnolia's primary goals are to be the most efficient operator of our best-in-class oil and gas assets to generate the highest return on those assets while spending the least amount of capital on drilling and completing wells.

Speaker #3: Magnolia's high-quality assets and the strategy of discipline around capital spending should continue to serve us well during periods of product price volatility. Our capital allocation priorities, which include a low reinvestment rate and returning a significant amount of our free cash flow to shareholders, remain unchanged.

Christopher Stavros: Our capital allocation priorities, which include a low reinvestment rate and returning a significant amount of our free cash flow to shareholders, remain unchanged. We are maintaining our original activity plan of running 2 rigs and 1 completion crew, which is expected to deliver total production growth of approximately 5% in 2026, and within the same range of drilling and completion capital we outlined earlier this year. Some of this year's activity is expected to occur on the recently acquired acreage. Oil price differentials have narrowed significantly in recent weeks, which should provide us with higher oil price realizations in the Q2 and similar to the Magellan East Houston benchmark, which is currently higher than the price of WTI. Beyond the benefit of higher oil prices, Magnolia is well-positioned for success through the consistent execution of our business model.

Chris Stavros: Our capital allocation priorities, which include a low reinvestment rate and returning a significant amount of our free cash flow to shareholders, remain unchanged. We are maintaining our original activity plan of running 2 rigs and 1 completion crew, which is expected to deliver total production growth of approximately 5% in 2026, and within the same range of drilling and completion capital we outlined earlier this year. Some of this year's activity is expected to occur on the recently acquired acreage.

Speaker #3: We are maintaining our original activity plan of running two rigs and one completion crew, which is expected to deliver total production growth of approximately 5% in 2026, and within the same range of drilling and completion capital, we outlined earlier this year.

Speaker #3: Some of this year's activity is expected to occur on the recently acquired acreage. Well-priced differentials have narrowed significantly in recent weeks, which should provide us with higher oil price realizations in the second quarter and similar to the Magellan East Houston benchmark which is currently higher than the price of WTI.

Chris Stavros: Oil price differentials have narrowed significantly in recent weeks, which should provide us with higher oil price realizations in the Q2 and similar to the Magellan East Houston benchmark, which is currently higher than the price of WTI. Beyond the benefit of higher oil prices, Magnolia is well-positioned for success through the consistent execution of our business model. The absence of commodity hedges on all our production is expected to translate into higher earnings and free cash flow in the current quarter, adding to our significant financial flexibility. I'll now turn the call over to Brian to provide further details on the quarter and some additional guidance.

Speaker #3: Beyond the benefit of higher oil prices, Magnolia's well-positioned for success through the consistent execution of our business model. The absence of commodity hedges on all our production is expected to translate into higher earnings and free cash flow in the current quarter adding to our significant financial flexibility.

Christopher Stavros: The absence of commodity hedges on all our production is expected to translate into higher earnings and free cash flow in the current quarter, adding to our significant financial flexibility. I'll now turn the call over to Brian to provide further details on the quarter and some additional guidance.

Speaker #3: I'll now turn the call over to Brian to provide further details on the quarter and some additional guidance.

Speaker #4: 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.

Brian Corales: Thanks, Chris. Good morning, everyone. I will review some items from our Q1 results and refer to the presentation slides found on our website. I will also provide some additional guidance for Q2 2026 before turning it over for questions. Beginning on slide 6, Magnolia delivered an excellent quarter as we continue to execute on our differentiated business model. During Q1, we generated net income of $101 million or $0.54 per diluted share. Our adjusted EBITDAX for the quarter was $253 million, with total capital associated with drilling completions and associated facilities of $129 million, representing 51% of our adjusted EBITDAX.

Speaker #4: I'll also provide some additional guidance for the second quarter of 2026 before turning it over for questions. Beginning on slide 6, Magnolia delivered an excellent quarter as we continue to execute on our differentiated business model.

Speaker #4: During the first quarter, we generated an income of $101 million or 54 cents per diluted share. Our adjusted EBITDAX for the quarter was 253 million with total capital associated with drilling completions and associated facilities of $129 million representing 51% of our adjusted EBITDAX.

Speaker #4: First quarter production volumes grew 6% year over year, to 102.6 thousand barrels of oil equivalent a day. While generating free cash flow of $146 million.

Brian Corales: Q1 production volumes grew 6% year-over-year to 102.6 thousand barrels of oil equivalent a day, while generating free cash flow of $146 million. Looking at the quarterly cash flow waterfall chart on slide 7, we started the quarter with $267 million of cash. Cash flow from operations before changes in working capital was $247 million, with working capital changes and other small items impacting cash by $23 million. During the quarter, we paid dividends of $31 million and allocated $53 million towards share repurchases. We incurred $128 million on drilling completions and associated facilities and leasehold and added $155 million on small bolt-on acquisitions comprised of additional acreage, working interest, and royalties. We ended the quarter with $124 million of cash.

Speaker #4: Looking at the quarterly cash flow waterfall chart on slide 7, we started the quarter with $267 million of cash. Cash flow from operations before changes in working capital was $247 million with working capital changes and other small items impacting cash by $23 million.

Speaker #4: During the quarter, we paid dividends of $31 million and allocated $53 million toward share repurchases. We incurred $128 million on drilling completions and associated facilities and leasehold.

Speaker #4: And added $155 million of small bolt-on acquisitions. Comprised of additional acreage working interest and royalties. We ended the quarter with $124 million of cash.

Speaker #4: Looking at slide 8, this chart illustrates the progress in reducing our total outstanding shares since we began a repurchase program in the second half of '19.

Brian Corales: Looking at slide 8, this chart illustrates the progress in reducing our total outstanding shares since we began a repurchase program in H2 2019. Since that time, we have repurchased 83.7 million shares, leading to a change in weighted average diluted shares outstanding of 28% net of issuances. Magnolia's weighted average diluted share count declined by approximately 2 million shares sequentially, averaging 185.9 million shares during Q1. We currently have 11.6 million shares remaining under our repurchase authorization, which are specifically directed toward open market repurchases. Turning to slide 9. Our dividend has grown substantially over the past few years, including a 10% increase announced in early 2026 to $0.165 per share on a quarterly basis.

Speaker #4: Since that time, we have repurchased 83.7 million shares, leading to a change in weighted average diluted shares outstanding of 28% net of issuances. Magnolia's weighted average diluted share count declined by approximately 2 million shares sequentially, averaging 185.9 million shares during the first quarter.

Speaker #4: We currently have 11.6 million shares remaining under our repurchase authorization which are specifically directed toward open market repurchases. Turning to slide 9, our dividend has grown substantially over the past few years including a 10% increase announced in early 2026 to 16.5 cents per share on our quarterly basis.

Speaker #4: Our next quarterly dividend is payable on June 1st and provides an annualized dividend payout rate of 66 cents 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.

Brian Corales: Our next quarterly dividend is payable on 1 June and provides an annualized dividend payout rate of $0.66 per share. Our plan for annualized dividend growth is an important part of Magnolia's investment proposition, 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 continues to have a very strong balance sheet. We ended the quarter with $124 million of cash. Our $400 million of senior notes does not mature until 2032. Including our Q1 ending cash balance of $124 million in our undrawn $450 million revolving credit facility, our total liquidity is approximately $574 million. Our condensed balance sheet as of 31 March is shown on slide 10.

Speaker #4: Reducing our outstanding shares and increasing the dividend payout capacity of the company. Magnolia continues to have a very strong balance sheet and we ended the quarter with $124 million of cash.

Speaker #4: Our $400 million of senior notes does not mature until 2032. Including our first quarter ending cash balance of $124 million and our undrawn $450 million revolving credit facility, our total liquidity is approximately $574 million.

Speaker #4: Our condensed balance sheet as of March 31st is shown on slide 10. Turning to slide 11 and looking at a per unit cash cost and operating income margins.

Brian Corales: Turning to slide eleven and looking at a per unit cash cost and operating income margins. Total revenue per BOE declined approximately 4% year-over-year due to the decline in NGL and natural gas prices, partially offset by a small increase in oil price. Our total adjusted cash operating costs, including G&A, were $11.57 per BOE in Q1 2026, and our operating income margin for Q1 was $13.84 per BOE, or 36% of our total revenue. Turning to guidance. Q1 D&C capital are expected to be between $120 million and $125 million, and we are reiterating our full year budget we outlined in February of $440 million to $480 million.

Speaker #4: Total revenue per BOE declined approximately 4% year over year due to the decline in NGO and natural gas prices, partially offset by a small increase in oil price.

Speaker #4: Our total adjusted cash operating costs, including G&A, were $11.57 per BOE in the first quarter of '26, and our operating income margin for the first quarter was $13.84 per BOE.

Speaker #4: We're 36% of our total revenue. Turning to guidance, first quarter D&C capital are expected to be expected to be between $120 and $125 million and we are reiterating our full year budget we outlined in February of $440 to $480 million.

Speaker #4: In addition, we are reiterating our full year 2026 outlook for total production growth of approximately 5%. Total production for the second quarter is estimated to be approximately $105,000 barrels a day.

Brian Corales: In addition, we are reiterating our full year 2026 outlook for total production growth of approximately 5%. Total production for Q2 is estimated to be approximately 105,000 barrels a day.

Speaker #4: Oil realizations have improved and we are anticipating prices for the second quarter to be similar to Magellan East Houston benchmark pricing. Magnolia remains completely unhedged for all its oil and natural gas production and benefiting from the improvements to oil prices.

Christopher Stavros: Oil realizations have improved. We are anticipating prices for Q2 to be similar to Magellan East Houston benchmark pricing. Magnolia remains completely unhedged for all its oil and natural gas production and benefiting from the improvements to oil prices. The fully diluted share count for Q2 2026 is expected to be 185 million shares, which is 4% lower than Q2 2025 levels. We expect our effective tax rate to be approximately 21% and our cash taxes for 2026 to be in the mid-single-digit range. We are now ready to take your questions.

Brian Corales: Oil realizations have improved. We are anticipating prices for Q2 to be similar to Magellan East Houston benchmark pricing. Magnolia remains completely unhedged for all its oil and natural gas production and benefiting from the improvements to oil prices. The fully diluted share count for Q2 2026 is expected to be 185 million shares, which is 4% lower than Q2 2025 levels. We expect our effective tax rate to be approximately 21% and our cash taxes for 2026 to be in the mid-single-digit range. We are now ready to take your questions.

Speaker #4: The fully diluted share count for the second quarter of 2026 is expected to be 185 million shares, which is 4% lower than second quarter 2025 levels.

Speaker #4: We expect our effective tax rate to be approximately 21% and our cash taxes for 2026 to be in the mid-single digit range. We are now ready to take your questions.

Speaker #1: 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.

Operator: We will now begin the question-and-answer session. The first question comes from Neal Dingmann from William Blair. Please go ahead.

Speaker #1: If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. The first question comes from Neal Dingmann from William Blair.

Speaker #1: Please go ahead.

Neal Dingmann: Morning, guys. Nice quarter. My, Chris, my first question just on the very interesting recent bolt-ons that you all have done. Specifically, could you talk about, I don't know, maybe any color, how much you're able to just on the Karnes side, able to add and wondering by doing this, does this change upcoming activity plans specifically in that play?

Speaker #5: My Chris, my first question just on the very interesting recent bolt-ons. That you all have done. Specifically, could you talk about, I don't know, maybe any color how much you were able to just on the corn side able to add and wondering by doing this, does this change upcoming activity plans specifically in that play?

Speaker #3: Yeah, good morning, Neal. Thanks. I think the important takeaway for me, and for us, on the corn transaction specifically, is that we were able to pull this together.

Christopher Stavros: Good morning, Neal. Thanks. I know, I think the important takeaway for me and for us on the Karnes transaction specifically is that we were able to, you know, pull this together. It was really sort of a tactical commercial transaction that was a bit unique. We were able to pull this together, creating this 10,000 acre contiguous block of acreage. It's largely undeveloped, very high working interest, advantageous NRI, located in a very good area. The undeveloped contiguous nature of the acreage really does provide us with, you know, multiple years of drilling. I know, I could probably count it on my hand in terms of, you know, what it adds to us as far as years and beyond.

Chris Stavros: Good morning, Neal. Thanks. I know, I think the important takeaway for me and for us on the Karnes transaction specifically is that we were able to, you know, pull this together. It was really sort of a tactical commercial transaction that was a bit unique. We were able to pull this together, creating this 10,000 acre contiguous block of acreage. It's largely undeveloped, very high working interest, advantageous NRI, located in a very good area. The undeveloped contiguous nature of the acreage really does provide us with, you know, multiple years of drilling. I know, I could probably count it on my hand in terms of, you know, what it adds to us as far as years and beyond.

Speaker #3: It was really sort of a tactical commercial transaction that was a bit unique. We were able to pull this together creating this 10,000-acre contiguous block of acreage largely undeveloped.

Speaker #3: Very high working interest. Advantageous to NRI. Located in a very good area. The undeveloped contiguous nature of the acreage really does provide us with multiple years of drilling I could probably count it on my hand in terms of what it adds to us as far as years.

Speaker #3: And beyond. It's sort of a blank canvas the way I would describe it. And allows us to optimally develop the asset. So regarding our plans going forward, it's not going to change our overall allocation around activity or capital or proportional view.

Christopher Stavros: It's sort of a blank canvas, the way I would describe it, and allows us to optimally develop the asset. Regarding our plans going forward, it's not gonna change our overall allocation around activity or capital or proportional view. But it's gonna be easily worked into our drilling program, and I would imagine sooner rather than later.

Chris Stavros: It's sort of a blank canvas, the way I would describe it, and allows us to optimally develop the asset. Regarding our plans going forward, it's not gonna change our overall allocation around activity or capital or proportional view. But it's gonna be easily worked into our drilling program, and I would imagine sooner rather than later.

Speaker #3: But it's going to be easily worked into our drilling program. And I would imagine sooner rather than later.

Speaker #5: Perfect. And then just my second question on getting to development. So specifically, could you speak to maybe just talk a bit about what the average pad size and well cost is in that play?

Neal Dingmann: Perfect. Then, just my second question on Giddings development. Specifically, could you speak to maybe just talk a bit about what the average pad size and well cost is in that play? Again, what I'm after here is wondering, you know, would you consider now that you're in full development in that play and, you know, if so, how do the economics today compare to, you know, a couple of years ago when, you know, you were newer in the play and you were certainly doing more testing and kind of drilling, you know what I call more one-off wells?

Speaker #5: And again, what I'm after here is wondering, would you consider now that you're in full development in that play and if so, how did the economics today compare to a couple of years ago when you were newer in the play and you were certainly doing more testing and kind of drilling what I'd call more one-off wells?

Speaker #3: Yeah. On the pad size, we've been pretty close to optimizing that, I would tell you. I mean, occasionally some of the pads are a little higher, but a little or a little lower.

Christopher Stavros: Yeah. On the pad size, we're pretty close to optimizing that, I would tell you. I mean, occasionally some of the pads are a little higher, but little or a little lower. I mean, on average, there are 3 to 4 well pads, and that's over the full development of that, you know, 240,000 acre development area that we talk to or speak of. Like I said, occasionally there could be a 5-well pad or a 6-well pad or a 3-well pad or a 2-well pad, but on average, about 3 to 4 is sort of optimal. As far as the economics, they're better than they were earlier because we've gotten more capitally efficient. You know, we know the play better.

Chris Stavros: Yeah. On the pad size, we're pretty close to optimizing that, I would tell you. I mean, occasionally some of the pads are a little higher, but little or a little lower. I mean, on average, there are 3 to 4 well pads, and that's over the full development of that, you know, 240,000 acre development area that we talk to or speak of. Like I said, occasionally there could be a 5-well pad or a 6-well pad or a 3-well pad or a 2-well pad, but on average, about 3 to 4 is sort of optimal. As far as the economics, they're better than they were earlier because we've gotten more capitally efficient. You know, we know the play better. We've, you know, tightened some things up. We're drilling faster. We're completing faster. You know, we continue to do that. I think the economics are broadly better.

Speaker #3: I mean, on average, they're three to four well pads. And that's over the full development of that 240,000-acre development area that we talked to or speak of.

Speaker #3: Like I said, occasionally there could be a five well pad or a six well pad or a three well pad or a two well pad.

Speaker #3: But on average, about three to four is sort of optimal. As far as the economics, they're better. They were earlier because we've gotten more capital efficient.

Speaker #3: And we know the play better. We've tightened some things up. We're drilling faster. We're completing faster. We continue to do that. So I think the economics are broadly better.

Christopher Stavros: We've, you know, tightened some things up. We're drilling faster. We're completing faster. You know, we continue to do that. I think the economics are broadly better.

Speaker #5: Thank you so much.

Neal Dingmann: Thank you so much.

Speaker #3: Sure.

Christopher Stavros: Sure.

Chris Stavros: Sure.

Speaker #1: The next question comes from Philip Jungworth from BMO. Please go ahead.

Operator: The next question comes from Phillip Jungwirth from BMO. Please go ahead.

Phillip Jungwirth: Thanks. Good morning. Coming back to the Karnes bolt-on, having this large 10,000 acre undeveloped contiguous block, I was just wondering if you could talk about how you see the development scheme here, whether it's wells per DSU, lateral lengths, or the zones you can target, just given that there's generally a lot of resource in this area.

Speaker #6: Thanks. Good morning. Coming back to the corn's bolt-on, having this large 10,000-acre undeveloped contiguous block, I was just wondering if you could talk about how you see the development scheme here, whether it's wells per DSU, lateral lengths, or the zones you can target just given that there's generally a lot of resource in this area.

Speaker #3: Yeah. We're getting around the wells per DSU. I mean, we're still not quite there yet. But I mean, the laterals will be sort of approaching 10,000 feet in some cases.

Christopher Stavros: Yeah. We're getting around the, you know, the wells per DSU. I mean, we're still not quite there yet. I mean, the laterals will be, you know, sort of approaching 10,000 feet in some cases, and beyond. That's substantially more than what we've typically been able to do in the Karnes area generally.

Chris Stavros: Yeah. We're getting around the, you know, the wells per DSU. I mean, we're still not quite there yet. I mean, the laterals will be, you know, sort of approaching 10,000 feet in some cases, and beyond. That's substantially more than what we've typically been able to do in the Karnes area generally.

Speaker #3: And beyond. So that's substantially more than what we've typically been able to do in the corn's area generally.

Speaker #6: Okay. Great. And then you noticed yeah, active quarter for A&D. And then you did notice in the release that you'll actively be looking to seek out additional acquisition opportunities just to improve the business, leverage technical expertise.

Phillip Jungwirth: Okay. Great. You noticed active quarter for A&D, you noted in the release that you'll actively be looking to seek out additional acquisition opportunities just to improve the business leverage technical expertise. Just given that you've grown the company significantly over the years, is there kind of an upper limit on transaction size? Just remind us on balance sheet parameters.

Speaker #6: Just given that you've grown the company significantly over the years, is there kind of an upper limit on transaction size and just remind us on balance sheet parameters?

Speaker #6: If you would consider larger size transactions.

Phillip Jungwirth: If you would consider larger sized transactions.

Speaker #3: I mean, it really depends what's out there. We do look at everything. But the plan is not to shock and awe. It's not about that.

Christopher Stavros: I mean, it really depends what's out there. You know, we do look at everything, the plan is not to shock and awe. It's not about that. You know, you're not gonna wake up one day, and that's my objective really is to run a public company, we're trying to build trust and, you know, faith within our shareholder base in terms of what we're doing. You won't find us looking at out of basin deals. All of what we look at is really what we understand and within our ability to manage and in and around our neighborhood. We should know it well. The size really sort of depends on what's out there and as things become available.

Chris Stavros: I mean, it really depends what's out there. You know, we do look at everything, the plan is not to shock and awe. It's not about that. You know, you're not gonna wake up one day, and that's my objective really is to run a public company, we're trying to build trust and, you know, faith within our shareholder base in terms of what we're doing.

Speaker #3: So you're not going to wake up one day and that's my objective really is to run a public company. So we're trying to build trust and faith within our shareholder base in terms of what we're doing.

Speaker #3: So you won't find us looking at out of base and yields. All of what we look at is really what we understand and within our ability to manage.

Chris Stavros: You won't find us looking at out of basin deals. All of what we look at is really what we understand and within our ability to manage and in and around our neighborhood. We should know it well. The size really sort of depends on what's out there and as things become available. As you'd imagine, with pricing doing what it's done, you know, there's probably more things that are available or out there, but it just sort of really depends what it looks like and how it fits into our possibility of where the art of the possible, if you will.

Speaker #3: And in and around our neighborhood. So we should know it well. So the size really sort of depends. On what's out there and as things become available.

Speaker #3: As you'd imagine, with pricing doing what it's done, there's probably more things that are available or out there. But it sort of really depends what it looks like and how it fits into our possibility of where we are in the possible, if you will.

Christopher Stavros: As you'd imagine, with pricing doing what it's done, you know, there's probably more things that are available or out there, but it just sort of really depends what it looks like and how it fits into our possibility of where the art of the possible, if you will.

Speaker #6: Makes sense. Thanks.

Phillip Jungwirth: Makes sense. Thanks.

Speaker #3: Thank you.

Christopher Stavros: Thank you.

Chris Stavros: Thank you.

Speaker #1: The next question comes from Peyton Dorn from UBS. Please go ahead.

Operator: The next question comes from Peyton Dorne from UBS. Please go ahead.

Speaker #5: Hey, guys. Thanks a lot for getting me on. You're obviously keeping the budget a little unchanged here. And I know the preference isn't to add any rigs or crews kind of writ large.

Peyton Dorne: Hey, guys. Thanks a lot for getting me on. You know, you're obviously keeping the budget a little unchanged here, and I know the preference isn't to add any rigs or crews kind of writ large. I'm just curious of the opportunity to maybe accelerate some workovers or some timings of the tails across the asset base just to kind of take advantage of the higher oil prices that we've seen year to date. Thanks.

Speaker #5: I'm just curious about the opportunity to maybe accelerate some workovers or some timings of the tails across the asset base just to kind of take advantage of the higher oil prices that we've seen year to date.

Speaker #5: Thanks.

Speaker #3: Yeah. No, we could certainly consider some of those things whether it's a little bit more appraisal or maybe even an exploration well. And the math or arithmetic on drilling faster or adding more activity current oil price is certainly not lost on me, I get it.

Christopher Stavros: Yeah. No, we could certainly consider some of those things, whether it's a little bit more appraisal or maybe even an exploration well. You know, the math or arithmetic on drilling faster or adding more activity, you know, current oil price is certainly not lost on me. I get it. Look, I've been doing this for a long time. You know, I view this more as a marathon, not a sprint, so you never know what's right around the bend. With every barrel we accelerate and pull forward, it simply means I have to replace that barrel that much quicker, and it creates a little bit of added tension in terms of the higher rate of decline that we face.

Chris Stavros: Yeah. No, we could certainly consider some of those things, whether it's a little bit more appraisal or maybe even an exploration well. You know, the math or arithmetic on drilling faster or adding more activity, you know, current oil price is certainly not lost on me. I get it. Look, I've been doing this for a long time. You know, I view this more as a marathon, not a sprint, so you never know what's right around the bend. With every barrel we accelerate and pull forward, it simply means I have to replace that barrel that much quicker, and it creates a little bit of added tension in terms of the higher rate of decline that we face.

Speaker #3: But look, I've been doing this for a long time. I view this more as a marathon, not a sprint. So you never know what's right around the bend.

Speaker #3: With every barrel we accelerate, pull forward, it simply means I have to replace that barrel that much quicker. And it creates a little bit of added tension in terms of the higher rate of decline that we face.

Christopher Stavros: You know, we are, you know, we're planning to grow about 5% this year, which is probably a little higher than most. We have a reasonable chance of surprising a little higher because of good well performance. I'll probably take the over on that one. If we were to add anything new, I think almost as you said, it would probably be a little bit more on the appraisal work side. Yeah, maybe workovers, but you know, sort of less, less incremental, or maybe even an exploration well. Again, I wouldn't, it's not a dramatic shift or change because of the price per se. However, you know, at current oil prices, it also wouldn't surprise me to see a little bit more non-op activity as well.

Chris Stavros: You know, we are, you know, we're planning to grow about 5% this year, which is probably a little higher than most. We have a reasonable chance of surprising a little higher because of good well performance. I'll probably take the over on that one. If we were to add anything new, I think almost as you said, it would probably be a little bit more on the appraisal work side. Yeah, maybe workovers, but you know, sort of less, less incremental, or maybe even an exploration well. Again, I wouldn't, it's not a dramatic shift or change because of the price per se. However, you know, at current oil prices, it also wouldn't surprise me to see a little bit more non-op activity as well.

Speaker #3: We are we're planning to grow about 5% this year, which is probably a little higher than most. We have a reasonable chance of surprising a little higher because a good well performance I'll probably take the over on that one.

Speaker #3: If we were to add anything new, I think almost as you said, it would probably be a little bit more on the appraisal work side.

Speaker #3: Yeah, maybe workovers, but sort of less incremental. Or maybe even an exploration well. But again, I wouldn't say it's a dramatic shift or change because of the price, per se.

Speaker #3: However, at current oil prices, it also wouldn't surprise me to see a little bit more non-op activity as well.

Speaker #5: Okay, great. We'll look for all those. And then, just in the recent acquisition and then some of the past transactions, you guys kind of highlighted the pickup of some royalty interest across the leasehold.

Peyton Dorne: Okay, great. We'll look for all those. Just knowing the recent acquisition and then some of the past transactions, you guys kinda highlighted the pickup of some royalty inter-royalty interest across the leasehold. I wonder if you could just kinda quantify the total royalty acreage that you have right now. Kind of do you see acquisitions of royalties or mineral interests kind of becoming a larger part of the acquisition strategy on maybe a go-forward basis? Thank you.

Speaker #5: I wonder if you could just kind of quantify the total royalty acreage that you have right now and kind of do you see acquisitions of royalties or mineral interest kind of becoming a larger part of the acquisition strategy on maybe a go forward basis?

Speaker #5: Thank you.

Speaker #3: Yeah. I mean, I'll let Brian answer on that as well. But honestly, if you're speaking to something where acquiring royalties is really more sort of an event that leads to something to either monetize it in a financial opportunity.

Christopher Stavros: Yeah. I mean, I'll let Brian answer on that as well. Honestly, if you're speaking to something where, you know, acquiring royalties is really more a, you know, sort of an event that leads to something to either monetize it in a financial opportunity, the answer is not really. This is just enhancing our own economics. I.

Chris Stavros: Yeah. I mean, I'll let Brian answer on that as well. Honestly, if you're speaking to something where, you know, acquiring royalties is really more a, you know, sort of an event that leads to something to either monetize it in a financial opportunity, the answer is not really. This is just enhancing our own economics. I.

Speaker #3: The answer is not really. This is just enhancing our own economics. But.

Speaker #5: Yeah, I mean, we do have relatively high NRI, especially at Giddings. It's definitely—we'll call it 5,000-plus a day in terms of production.

Brian Corales: Yeah. I mean, we do have relatively high NRI, especially at Giddings. You know, it's definitely, you know, we'll call it, you know, 5-plus thousand a day in terms of production. That's straight from royalties. That really enhances our margin. You know, the ultimate goal is, you know, to control as much as you can and have the highest margins you can. You know, whether it's royalties or higher working interest, we wanna own more of what we have.

Speaker #5: That's straight from royalties. But that really enhances our margin. And the ultimate goal is to control as much as you can and have the highest margins you can.

Speaker #5: And whether it's royalties or higher working interest, we want to own more of what we have. That's helpful. Makes sense. I mean, an economic perspective for sure.

Peyton Dorne: That's helpful. Makes sense from an economic perspective for sure. Thanks for having me on.

Speaker #5: Thanks for having me on.

Speaker #3: Thanks.

Christopher Stavros: Thanks.

Chris Stavros: Thanks.

Speaker #1: The next question comes from Carlos Escalante from Wolf Research. Please go ahead.

Operator: The next question comes from Carlos Escalante from Wolfe Research. Please go ahead.

Speaker #7: Hey, good morning, Brian. Chris and Tom. I wanted to circle back on the deal. I know that you had a lot of questions this morning.

Carlos Escalante: Hey, good morning, Brian, Chris, and Tom. I wanted to circle back on the deal. I know that you had a lot of questions this morning, but just curious to hear your perspective on how you thought this deal cleared at this price is because you typically don't see M&A at peak oil prices if you believe this is the peak or we're close to some kind of peak. If acreage of this quality is clearing at this prices, what does that say about the broader bid ask in Karnes and also Giddings? How deep is the pipeline of similar opportunities relative to when we last talked to you last quarter, considering the move in commodity pricing?

Speaker #7: But just curious to hear your perspective on how you thought this deal cleared at this prices because you typically don't see M&A at peak oil prices if you believe this is the peak or we're close to some kind of peak.

Speaker #7: So, if acreage of this quality is clearing at these prices, what does that say about the broader bid-ask in Karnes, and also Giddings?

Speaker #7: And how deep is the pipeline of similar opportunities relative to when we last talked to you last quarter considering the moving commodity pricing?

Speaker #3: Yeah. Good morning, Carlos. And thanks for the question. I never said that it cleared at current prices. So we were in conversations around this for a period of time.

Christopher Stavros: Morning, Carlos, and thanks for the question. I never said that it cleared at current prices. We were in conversations around this for a period of time and, you know, sometimes better to be fortunate than good. What I would tell you about, you know, the bid-ask, as you can imagine, like I said earlier, it's clearly easier if you're a seller to sort of come to market now with the hope or belief that, you know, you'll find willing acquirers of assets. There's lots of things out there. You ask anyone, there's plentiful. It's really a I don't wanna say a seller's market so much.

Chris Stavros: Morning, Carlos, and thanks for the question. I never said that it cleared at current prices. We were in conversations around this for a period of time and, you know, sometimes better to be fortunate than good. What I would tell you about, you know, the bid-ask, as you can imagine, like I said earlier, it's clearly easier if you're a seller to sort of come to market now with the hope or belief that, you know, you'll find willing acquirers of assets. There's lots of things out there. You ask anyone, there's plentiful. It's really a I don't wanna say a seller's market so much.

Speaker #3: And sometimes better to be fortunate than good. So what I would tell you about the bid ask as you can imagine, like I said earlier, it's clearly easier if you're a seller to sort of come to market now with the hope or belief that you'll find willing acquirers of assets.

Speaker #3: So there's lots of things out there. And you ask anyone. There's plentiful. It's really a I don't want to say a seller's market so much.

Speaker #3: Maybe that's not the best way to put it. But they're just in terms of availability or opportunities that are coming, whether they're in processes or one-off opportunities.

Christopher Stavros: Maybe that's not the best way to put it, but just in terms of availability or opportunities, that are coming, whether they're in processes or one-off opportunities. There's a lot to be had if you want it. You know, the way I think about it is it's gotta make sense. You know, when we look at anything for Magnolia, this needs to support our business model, and have characteristics that look similar to what we already are, and frankly, improve us. You know, that I always joke a little bit. I mean, the objective of any acquisition is to make you better, not worse. There can be these unique one-off opportunities, irrespective of the price that it may clear at that still work for some, depending.

Chris Stavros: Maybe that's not the best way to put it, but just in terms of availability or opportunities, that are coming, whether they're in processes or one-off opportunities. There's a lot to be had if you want it. You know, the way I think about it is it's gotta make sense. You know, when we look at anything for Magnolia, this needs to support our business model, and have characteristics that look similar to what we already are, and frankly, improve us. You know, that I always joke a little bit. I mean, the objective of any acquisition is to make you better, not worse. There can be these unique one-off opportunities, irrespective of the price that it may clear at that still work for some, depending.

Speaker #3: There's a lot to be had if you want it. The way I think about it is it's got to make sense. When we look at anything for Magnolia, this needs to support our business model.

Speaker #3: And how characteristics that look similar to what we already are and frankly improve us that I always joke a little bit. I mean, the objective of any acquisition is to make you better, not worse.

Speaker #3: And so there can be these unique one-off opportunities irrespective of the price that it may clear at that still work for some, depending.

Speaker #7: Yeah. And my question was precisely to get at the motivation behind the deal. But it sounds like you had been working on it. And I think that does much of the work for the answer.

Carlos Escalante: Yeah. My question was precisely to get at the motivation behind the deal, but it sounds like you had been working on it, and I think that does much of the work for the answer. On my follow-up, my question really is on your realizations as a whole. I know I've pushed you guys around, asking you this question for quite some time now, but I'm looking for some sort of a validation that H2 of this year when we bring so much Permian gas to market that may be connected to part of the sell points you guys sell your gas in won't be affected. You've had some very thoughtful commentary around that before.

Speaker #7: On my follow-up, my question really is on your realizations as a whole. I know I've pushed you guys around asking you this question for quite some time now.

Speaker #7: But I'm looking for some sort of validation that the second half of this year when we bring so much Permian gas to market, that maybe connected to part of the sell points you guys sell your gas in won't be affected and you've had some very thoughtful commentary around that before.

Speaker #7: But as we get close to those pipelines coming to market, I wonder if you have any new perspectives on what the dynamics will be on the natural gas front.

Carlos Escalante: As we get close to those pipelines coming to market, I wonder if you have any new perspectives on what the dynamics will be on the natural gas front.

Speaker #3: The new perspective is really gained through the experience of the old perspective or the old outcome, which oftentimes will get these exact questions on infrastructure that comes on that could create changes in realizations or free up supply in some fashion.

Christopher Stavros: The new perspective is really gained through the experience of the old perspective or the old outcome, which, you know, oftentimes we'll get these exact questions on infrastructure that comes on that could create changes in realizations or free up supply in some fashion, specific to what you're talking about. You know, as an example, last year when Matterhorn came on, you know, that was the question, there was a concern that that would have an impact, yet it did not. You know, you're seeing what's going on in Waha most recently and, you know, it's here we are. I don't know the true answer, but my experience suggests that it may not be all that different than what occurred a year ago, irrespective of what's happening right now.

Chris Stavros: The new perspective is really gained through the experience of the old perspective or the old outcome, which, you know, oftentimes we'll get these exact questions on infrastructure that comes on that could create changes in realizations or free up supply in some fashion, specific to what you're talking about. You know, as an example, last year when Matterhorn came on, you know, that was the question, there was a concern that that would have an impact, yet it did not. You know, you're seeing what's going on in Waha most recently and, you know, it's here we are. I don't know the true answer, but my experience suggests that it may not be all that different than what occurred a year ago, irrespective of what's happening right now.

Speaker #3: Specific to what you're talking about, as an example, last year when Matterhorn came on, that was the question. And there was a concern that that would have an impact yet it did not.

Speaker #3: And you're seeing what's going on in Oaha most recently. And here we are. So I don't know the true answer. But my experience, Jess, that it may not be all that different than what occurred a year ago irrespective of what's happening right now.

Speaker #5: Carlos.

Brian Corales: Carlos, I'd also add, I mean, both oil and gas, we sell our products at the market, you know, on the water. We're very close to where our products are sold. The tolling fees are less, and they're attractive pricing. You're seeing that in the oil market today. You're seeing that, you know, at Ship Channel. We're happy with the markets that we sell.

Speaker #7: Got it.

Speaker #5: I'd also add, I mean, both oil and gas we sell our products at the market. On the water, we're very close to where our products are sold.

Speaker #5: The tolling fees are less. And they're attractive pricing. And so you're seeing that in the oil market today. You're seeing that at ship channel.

Speaker #5: And so we're happy with the markets that we sell.

Speaker #7: Always appreciate the call. Thank you guys for turning back.

Carlos Escalante: Always appreciate the call. Thank you, guys. Turning back.

Speaker #3: Thanks.

Christopher Stavros: Thanks.

Chris Stavros: Thanks.

Speaker #1: As a reminder, if you have a question, please press star one. The next question comes from Neal Mehta from Goldman Sachs. Please go ahead.

Operator: As a reminder, if you have a question, please press star 1. The next question comes from Neil Mehta from Goldman Sachs. Please go ahead.

Speaker #8: Yeah. Good morning, Chris and team. Just first question is just around capital returns or shareholder returns, specifically the repurchase. You guys knocked out another 2 million shares in the first quarter.

Neil Mehta: Yeah, good morning, Chris and team. Just first question is just around shareholder returns, specifically the repurchase. You guys knocked out another 2 million shares in Q1. Just your perspective on the buyback here and how it fits into the tools you have to create shareholder value.

Speaker #8: And so just your perspective on the buyback here and how it fits into the tills you have to create shareholder value.

Speaker #3: Yeah. It's always been part of the model as far and frankly, it's compounding effects are enormously beneficial in terms of helping us with the dividend growth and growth per share in the dividend, if you will, by sort of reducing the actual cash outlays while you grow the dividend on a higher per share rate.

Christopher Stavros: Yeah. It's always been part of the model. frankly, its compounding effects are enormously beneficial in terms of helping us with the dividend growth and growth per share in the dividend, if you will, by, you know, sort of reducing the actual cash outlays while you grow the dividend on a higher per share rate. Look, it's part of the same old ABCs of what we do on our model. frankly, I see it as part of a consistent plan for us. I don't see that going away. I think it's at a size that is appropriate for what we are and what we're capable of doing and delivering consistently. Our shareholders like it.

Chris Stavros: Yeah. It's always been part of the model. frankly, its compounding effects are enormously beneficial in terms of helping us with the dividend growth and growth per share in the dividend, if you will, by, you know, sort of reducing the actual cash outlays while you grow the dividend on a higher per share rate. Look, it's part of the same old ABCs of what we do on our model. frankly, I see it as part of a consistent plan for us. I don't see that going away. I think it's at a size that is appropriate for what we are and what we're capable of doing and delivering consistently. Our shareholders like it. It rewards the remaining holders, of which I am one, and I enjoy it too. I think it's a, it's a good way to create shareholder value over time.

Speaker #3: Look, it's part of the same old ABCs of what we do on our model. And it frankly, I see it as part of a consistent plan for us.

Speaker #3: I don't see that going away. I think it's set aside at a size that is appropriate for what we are and what we're capable of doing and delivering consistently.

Speaker #3: So our shareholders like it. It rewards the remaining holders, of which I am one. And I enjoy it too. And so I think it's a good way to create shareholder value over time.

Christopher Stavros: It rewards the remaining holders, of which I am one, and I enjoy it too. I think it's a, it's a good way to create shareholder value over time.

Speaker #8: Got it. And that's the follow-up. It's just the dividend. I think you guys talk about at least 1% of the stock getting bought back every quarter over the long term.

Neil Mehta: That's the follow-up. It's just the dividend. I think, you know, you guys talk about at least 1% of the stock getting bought back every quarter over the long term. You also talk about a 10% long-term dividend growth rate. You know, how do you feel about that double-digit level and is there potential for upside if we end up in a higher for longer environment and given the strength of the balance sheet?

Speaker #8: But then you also talk about a 10% long-term dividend growth rate. How do you feel about that double-digit level and is there potential for upside if we end up in a higher for longer environment?

Speaker #8: And given the strength of the balance sheet.

Speaker #3: Yeah. Try to catch myself on really creating these targets the target is somewhat artificial in a way. But it's really designed to speak to what the business is capable of doing.

Christopher Stavros: I try to catch myself on really creating these targets. The target is somewhat artificial in a way, but it's really designed to speak to what the business is capable of doing. If the business grows mid-single digits, which I would define as 4% or 5%, 6%, and then you're buying back, you know, 1% of your shares per quarter, you know, it's built into sort of the investment proposition of what we're doing. The dividend growth is an outcome of what I just said around the volume growth and the share repurchases. It sort of just falls out of the model.

Chris Stavros: I try to catch myself on really creating these targets. The target is somewhat artificial in a way, but it's really designed to speak to what the business is capable of doing. If the business grows mid-single digits, which I would define as 4% or 5%, 6%, and then you're buying back, you know, 1% of your shares per quarter, you know, it's built into sort of the investment proposition of what we're doing. The dividend growth is an outcome of what I just said around the volume growth and the share repurchases. It sort of just falls out of the model.

Speaker #3: So if the business grows mid-single digits, which I would define as 4, 5, 6 percent, and then you're buying back 1% of your shares per quarter, the it's built into sort of the investment proposition of what we're doing.

Speaker #3: So the dividend growth is an outcome of what I just said. Around the volume growth and the share repurchases. So it's sort of just falls out of the model.

Speaker #8: Makes sense, Chris. Thanks.

Neil Mehta: Makes sense, Chris. Thanks.

Speaker #3: Thank you.

Christopher Stavros: Thank you.

Chris Stavros: Thank you.

Operator: This concludes our question and answer session. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.