Magnolia Oil & Gas Corporation (NYSE: MGY) (“Magnolia” or “the Company”) announced today that the Company has entered into a definitive purchase agreement to acquire certain oil and gas producing properties including leasehold and mineral interests in Giddings for $300 million, subject to customary purchase price adjustments. The cash outlay at closing is estimated to be approximately $260 million, adjusted for the free cash flow generated by the assets between the effective date of July 1, 2023, and the anticipated closing date in the fourth quarter of 2023. The consideration will be funded with cash on hand, which was $677 million as of June 30, 2023. The seller may also receive up to a maximum of $40 million in additional contingent cash consideration through December 2025 based on future commodity prices.

Transaction Highlights:

• Enhances Giddings Asset Quality and Scale – Acquisition adds approximately 48,000 net acres in Giddings (96% operated, 91% working interest), enhancing Magnolia’s already significant depth of development opportunities. Combined with a smaller acquisition that closed in July 2023, Magnolia’s position in Giddings now totals over 500,000 net acres, driving further efficiencies of scale.
• High-Margin Production – Magnolia expects production of approximately 5,000 Boe/d (greater than 70% oil) at closing. Similar to the Company’s current Giddings position, the acquired assets provide high cash operating margins through access to premium Gulf Coast pricing and low per-unit operating costs.
• Immediately Accretive to Key Financial Metrics – Magnolia expects immediate accretion to key per share financial metrics including cash flow, free cash flow and earnings, in addition to enhancing corporate margins and reinvestment rates. The acquired assets are attractively valued at 2.9x estimated 2024 EBITDA and are expected to generate a free cash flow yield of more than 20% during 2024 at current strip prices.
• Supplements Existing High-Return Inventory – Attractive development locations in both the Eagle Ford and Austin Chalk formations are expected to be seamlessly folded into Magnolia’s ongoing Giddings development program beginning in 2024, allowing the asset to sustain its high margin production and free cash flow generation.
• Attractive Use of Cash with Best-in-Class Balance Sheet – Expected cash outlay at closing of approximately $260 million to be funded with abundant cash on hand driving superior financial returns. This demonstrates Magnolia’s ability to utilize its strong balance sheet and prudently allocate surplus capital to improve the overall business and enhance per share value.

Magnolia President and CEO Chris Stavros stated, “We continue to leverage our accumulated knowledge and advanced understanding of Giddings by adding bolt-on oil and gas properties to expand our portfolio of high-quality opportunities and improve the overall business. Today’s transaction is a natural strategic fit for Magnolia and meets both the financial and operational characteristics we look for in a bolt-on acquisition that can be easily integrated into our Giddings development program. Magnolia’s acreage in Giddings now totals more than half a million net acres, with a development area of more than 150,000 net acres. Our business model is reinforced by capital discipline and provides for significant free cash flow generation through the cycle. This acquisition allows us to opportunistically deploy some of our additional cash into assets that generate high financial returns, increase our dividend per share payout capacity, and enhance value for our shareholders.”

About Magnolia Oil & Gas

Magnolia is a publicly traded oil and gas exploration and production company with operations primarily in South Texas in the core of the Eagle Ford Shale and Austin Chalk formations. Magnolia focuses on generating value for shareholders by delivering steady, moderate annual production growth resulting from its disciplined and efficient philosophy toward capital spending. The Company strives to generate high pre-tax margins, and consistent free cash flow allowing for strong cash returns to our shareholders. For more information, visit www.magnoliaoilgas.com.

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