Magnolia Oil & Gas (NYSE:MGY) reported higher third-quarter production and adjusted earnings as it began integrating its WildFire acquisition, and said it expects to capture cost savings from the deal faster than previously anticipated.
The oil and gas producer reported adjusted net income of approximately $166 million, or $0.71 per diluted share, up 114% from a year earlier. Adjusted EBITDAX was $392 million, and adjusted free cash flow was $224 million. The results included 20 days of WildFire ownership following the transaction’s September 10 closing.
Total production rose 17% year over year to 117,300 barrels of oil equivalent per day. Oil production increased 24% to 49,100 barrels per day. Drilling and completion capital totaled $147 million, below earlier guidance and equal to 38% of adjusted EBITDAX.
WildFire Integration and Savings
Chairman, President and CEO Chris Stavros said Magnolia expects to realize at least one-third of its more than $100 million in estimated annual run-rate synergies from WildFire by the end of 2026. The company expects to capture at least three-quarters by mid-2027.
Identified drilling and completion savings amount to at least $1 million per well, Stavros said. He cited procurement benefits, faster drilling, a shift to multi-well pads and lower sand costs from Magnolia’s ownership of a sand mine. The company is running four rigs and two completion crews and has replaced some equipment to improve efficiency.
Stavros said early results from a handful of Austin Chalk wells on former WildFire acreage were encouraging and had increased management’s confidence in the potential drilling inventory. Magnolia plans to continue delineating the formation across its 1.25 million net acres in Giddings.
For 2027, the company expects approximately 65% of its targeted drilling activity to focus on the Austin Chalk and 35% on the Eagle Ford. Stavros said developed wells on the legacy WildFire acreage are expected to be split roughly evenly between the two formations.
Debt Reduction and Shareholder Returns
Magnolia ended the quarter with approximately $1.9 billion in net debt, a reduction of $100 million from the WildFire closing. Stavros said the company had reached its goal of net debt below one times forecast 2027 EBITDAX more than a year ahead of its original plan.
At current commodity prices, Magnolia expects to repay its revolving credit facility in early 2027. Senior Vice President and Chief Financial Officer Brian Corales said the revolver balance was $435 million. The company added oil collars with floor prices of $70 to $75 per barrel to support debt repayment if prices fall; Corales said Magnolia does not expect to add further hedges.
Magnolia returned approximately $103 million to shareholders during the quarter, including $43 million in dividends and $60 million in share repurchases. It bought back 2.3 million shares. The board also increased the repurchase authorization by 15 million shares, leaving 22.6 million available.
Asked whether the expanded authorization could allow Magnolia to buy shares issued in connection with WildFire if they come to market, Stavros said he could not predict what those holders would do. He said the authorization gives Magnolia flexibility to make larger purchases if opportunities arise.
The quarterly dividend is $0.18 per share after increases earlier in 2026 and in July. Corales said the next dividend is payable December 1.
Fourth-Quarter and 2027 Outlook
For the fourth quarter, Magnolia expects production of 159,000 to 161,000 barrels of oil equivalent per day, with oil accounting for 49% to 50%. Drilling and completion spending is forecast at approximately $235 million.
The company reaffirmed its preliminary 2027 capital budget of $900 million to $950 million and its forecast for organic growth of 4% to 5% in both total and oil production. Corales estimated maintenance capital at approximately $800 million.
Stavros said the budget incorporates an expectation of mid-single-digit oilfield service cost inflation. He pointed to equipment changes, lower sand costs and the use of a dual-fuel completion fleet among the measures intended to mitigate cost pressures.
During the quarter, Magnolia also sold non-core Western Eagle Ford assets for $47.5 million and received 616 net acres as additional consideration. Stavros said the sale reduced a distraction and allowed the company to focus on its Giddings position and the WildFire integration.
About Magnolia Oil & Gas (NYSE:MGY)
Magnolia Oil & Gas Corporation (NYSE: MGY) is an independent oil and natural gas exploration and production company focused on developing assets in South Texas. Its operations are concentrated in the Eagle Ford Shale and Austin Chalk formations, where it owns and operates a substantial acreage position.
The company produces crude oil, condensate, natural gas liquids and natural gas. Magnolia uses horizontal drilling and hydraulic fracturing technologies to develop unconventional reserves, with activity primarily centered in the Karnes and Giddings areas of South Texas.
Magnolia Oil & Gas was formed in 2017 through a business combination involving Silver Run Acquisition Corporation II and certain oil and gas assets previously associated with TGP Investments.
