Magnolia Oil & Gas Corporation (MGY): Business Model Canvas [10-2024 Updated]
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Magnolia Oil & Gas Corporation (MGY) Bundle
Understanding the business model of Magnolia Oil & Gas Corporation (MGY) reveals how this dynamic player in the oil and gas industry operates and thrives. With a strong focus on exploration and production, Magnolia leverages its extensive resources and strategic partnerships to deliver impressive growth and shareholder value. Dive deeper to explore the key components of their business model, from valuable customer segments to diverse revenue streams.
Magnolia Oil & Gas Corporation (MGY) - Business Model: Key Partnerships
Joint ventures with other oil and gas companies
Magnolia Oil & Gas Corporation actively engages in joint ventures to enhance its operational efficiencies and resource access. One notable collaboration is with EnerVest, which has allowed Magnolia to leverage EnerVest's expertise in the development of oil and natural gas properties. As of September 30, 2024, Magnolia's joint ventures contributed to a net income of $99.8 million for the third quarter, reflecting the effectiveness of these partnerships in driving profitability.
Partnerships with service providers for drilling and completion
Magnolia relies on various service providers for drilling and completion activities. In Q3 2024, the company reported capital expenditures of approximately $351.9 million, with a significant portion allocated to drilling and completion services. Key service providers include Halliburton and Schlumberger, which supply essential technology and expertise. The operational costs associated with these services were approximately $5.33 per barrel of oil equivalent (boe) for lease operating expenses.
| Service Provider | Service Type | Q3 2024 Expenditure (in millions) |
|---|---|---|
| Halliburton | Drilling Services | $103.1 |
| Schlumberger | Completion Services | $104.3 |
| Other Providers | Miscellaneous Services | $144.5 |
Collaboration with local suppliers for equipment and materials
Magnolia places significant emphasis on collaborating with local suppliers to procure equipment and materials. This strategy not only supports local economies but also minimizes logistics costs. In the nine months ended September 30, 2024, Magnolia reported $27.7 million in expenses related to local sourcing of materials. The company’s operational footprint includes approximately 77,278 gross acres in Karnes and 748,547 gross acres in Giddings, facilitating partnerships with local businesses for timely supply chain management.
| Local Supplier | Type of Equipment/Materials | Q3 2024 Expenditure (in millions) |
|---|---|---|
| Texas Pipe & Supply | Pipes and Tubing | $5.6 |
| South Texas Electric | Electrical Equipment | $3.4 |
| Local Construction Firms | Construction Services | $18.7 |
Magnolia Oil & Gas Corporation (MGY) - Business Model: Key Activities
Exploration and production of oil and natural gas
As of September 30, 2024, Magnolia Oil & Gas Corporation (MGY) had a total production of 90,702 barrels of oil equivalent per day (boe/d) for the three months ended September 30, 2024, which is an increase from 82,651 boe/d for the same period in 2023. The production mix was composed of 43% oil, 29% natural gas, and 28% natural gas liquids (NGLs).
For the nine months ended September 30, 2024, total production reached 88,572 boe/d compared to 81,303 boe/d in the prior year. The company’s assets included 77,278 gross (or 55,286 net) acres in the Karnes area and 748,547 gross (or 554,871 net) acres in the Giddings area.
Drilling and completing new wells
During the third quarter of 2024, Magnolia operated a two-rig drilling program, focusing on maintaining production efficiency and maximizing output. The capital expenditures for drilling and completion amounted to $103.1 million for the three months ended September 30, 2024, and $345.4 million for the nine months ended September 30, 2024.
Magnolia's drilling activities resulted in a significant increase in oil production, with a reported 12% increase in oil production for the nine months ended September 30, 2024, contributing to an increase in revenues by $94.3 million compared to the same period in 2023.
Maintaining operational efficiency in existing fields
Operational efficiency is a core focus for Magnolia, with lease operating expenses reported at $5.33 per boe for the three months ended September 30, 2024, compared to $4.72 in the same quarter of 2023. This reflects an increase in operational costs due to higher chemicals, compression, and maintenance expenses associated with a greater number of active wells.
The company also recorded total operating expenses of $204.1 million for the three months ended September 30, 2024, which included lease operating expenses, gathering, transportation, and processing costs. Additionally, Magnolia's depreciation, depletion, and amortization (DD&A) expenses were $107.3 million for the quarter, indicating the ongoing investment in maintaining existing operations.
| Key Metrics | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Total Production (boe/d) | 90,702 | 82,651 | 88,572 | 81,303 |
| Oil Production (% of total) | 43% | 40% | 43% | 42% |
| Average Lease Operating Expenses ($/boe) | $5.33 | $4.72 | $5.56 | $5.18 |
| Total Operating Expenses ($ million) | $204.1 | $167.5 | $601.4 | $508.0 |
| DD&A Expenses ($ million) | $107.3 | $81.2 | $309.2 | $228.9 |
Magnolia Oil & Gas Corporation (MGY) - Business Model: Key Resources
Significant acreage in South Texas (Karnes and Giddings areas)
As of September 30, 2024, Magnolia Oil & Gas Corporation holds approximately 77,278 gross (55,286 net) acres in the Karnes area and 748,547 gross (554,871 net) acres in the Giddings area, which are critical for its oil and gas exploration and production activities.
Advanced drilling technology and equipment
The company employs advanced drilling techniques, which include a two-rig program as of the third quarter of 2024. This approach is essential for optimizing drilling efficiency and reducing costs, allowing Magnolia to maintain competitive production levels despite fluctuating commodity prices.
During the nine months ended September 30, 2024, Magnolia reported total capital expenditures of $351.9 million, which included significant investments in drilling and completion.
Skilled workforce with industry expertise
Magnolia's skilled workforce is critical to its operational success. The company focuses on retaining and attracting talent with expertise in oil and gas operations, which enhances its ability to execute drilling and production strategies effectively.
In terms of financial performance, Magnolia recognized a net income attributable to Class A Common Stock of $99.8 million for the three months ended September 30, 2024.
| Key Resource | Details | Financial Impact |
|---|---|---|
| Acreage | 77,278 gross acres in Karnes; 748,547 gross acres in Giddings | Supports production of 90.7 thousand barrels of oil equivalent per day for Q3 2024 |
| Drilling Technology | Two-rig program for enhanced efficiency | Total capital expenditures of $351.9 million for nine months ended September 30, 2024 |
| Workforce | Skilled labor with industry expertise | Contributed to net income of $99.8 million for Q3 2024 |
Magnolia Oil & Gas Corporation (MGY) - Business Model: Value Propositions
Consistent organic production growth
As of September 30, 2024, Magnolia Oil & Gas Corporation reported total production of approximately 90,702 barrels of oil equivalent per day (boe/d), reflecting a year-over-year increase in production levels. Specifically, oil production was 3,579 MBbls for the three months ended September 30, 2024, compared to 3,024 MBbls in the same period of 2023, marking an increase of 18%.
High operating margins and efficient capital programs
Magnolia reported total revenues of $333.1 million for the three months ended September 30, 2024, up from $315.7 million in the same period in 2023. This growth is attributed to a rise in oil production, which accounted for 80% of total revenues. The average price per barrel of oil was $74.23, down from $80.56 year-over-year, while total operating expenses for the same period were $204.1 million, resulting in an operating income of $129 million.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Total Revenues | $333.1 million | $315.7 million |
| Operating Expenses | $204.1 million | $167.5 million |
| Operating Income | $129 million | $148.1 million |
| Average Price per Barrel of Oil | $74.23 | $80.56 |
Commitment to returning capital to shareholders through dividends
Magnolia demonstrated a strong commitment to returning capital to shareholders with cash dividends totaling $72.5 million declared during the nine months ended September 30, 2024. The company declared a dividend of $0.13 per share on October 28, 2024, payable in December.
| Dividend Metrics | Amount |
|---|---|
| Dividends Declared (2024) | $72.5 million |
| Dividend per Share (Q4 2024) | $0.13 |
Magnolia Oil & Gas Corporation (MGY) - Business Model: Customer Relationships
Direct engagement with commodity buyers
Magnolia Oil & Gas Corporation maintains a direct engagement strategy with its commodity buyers to enhance customer relationships. This approach includes personalized communication and tailored services that cater to the specific needs of their buyers. As of September 30, 2024, total revenues from oil, natural gas, and NGLs amounted to $989.3 million, with oil revenues contributing approximately 81% of this figure.
Long-term contracts with major oil and gas purchasers
The company has established long-term contracts with major purchasers in the oil and gas sector. These contracts provide stability and predictability in revenue streams. For example, during the nine months ended September 30, 2024, Magnolia recognized net income attributable to Class A Common Stock of $280.4 million. Furthermore, the average price for oil was recorded at $76.59 per barrel during this period.
In terms of production, Magnolia held interests in approximately 2,647 gross (1,798 net) wells, with a total production of 90.7 thousand barrels of oil equivalent per day for the three months ended September 30, 2024.
Transparent communication regarding production and pricing
Magnolia emphasizes transparent communication with its customers regarding production volumes and pricing structures. This transparency is crucial for building trust and long-term relationships. The company reported an average daily production of 38,902 barrels of oil and 159,170 Mcf of natural gas during the third quarter of 2024. The average prices received for natural gas and NGLs during this period were $1.52 per Mcf and $19.46 per barrel, respectively.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Total Revenues | $333.1 million | $315.7 million | 5.4% |
| Oil Revenues | $265.7 million | $243.6 million | 9.1% |
| Natural Gas Revenues | $22.2 million | $27.1 million | -18.1% |
| NGL Revenues | $45.2 million | $45.0 million | 0.5% |
| Net Income | $105.9 million | $117.5 million | -9.1% |
Magnolia Oil & Gas Corporation (MGY) - Business Model: Channels
Direct sales to refineries and industrial consumers
Magnolia Oil & Gas Corporation engages in direct sales of its crude oil, natural gas, and natural gas liquids (NGLs) to refineries and industrial consumers. For the nine months ended September 30, 2024, the company reported total revenues of $989.3 million, with oil revenues accounting for approximately 81% of total revenues, amounting to $800.2 million. This reflects a strategic focus on establishing relationships with key industry players to secure long-term contracts and optimize pricing strategies.
Utilization of pipelines for transportation of crude oil and gas
Transportation is a critical component of Magnolia's operational efficiency, utilizing an extensive network of pipelines to transport crude oil and natural gas. As of September 30, 2024, the company reported average daily production of 90,702 barrels of oil equivalent (boe), which includes 38,902 barrels of oil, 159,170 Mcf of natural gas, and 25,271 barrels of NGLs. The gathering, transportation, and processing costs for the three months ended September 30, 2024, were $10.7 million, a slight increase from $10.3 million in the same period of the previous year.
| Period | Gathering, Transportation, and Processing Costs ($ million) | Average Daily Production (boe/d) |
|---|---|---|
| Q3 2024 | 10.7 | 90,702 |
| Q3 2023 | 10.3 | 82,651 |
Online platforms for investor relations and updates
Magnolia Oil & Gas utilizes online platforms to enhance investor relations, providing timely updates and financial reports through its corporate website. For the nine months ended September 30, 2024, the company declared cash dividends totaling $72.5 million to its Class A Common Stock holders. Additionally, the company reported cash and cash equivalents of $276.1 million, reflecting strong liquidity management.
| Metrics | Value |
|---|---|
| Cash Dividends Declared (9M 2024) | $72.5 million |
| Cash and Cash Equivalents (as of Sept 30, 2024) | $276.1 million |
Magnolia Oil & Gas Corporation (MGY) - Business Model: Customer Segments
Refineries and industrial users of oil and gas
Magnolia Oil & Gas Corporation primarily serves refineries and industrial users by supplying crude oil and natural gas. For the three months ended September 30, 2024, oil revenues amounted to $265.7 million, representing 80% of total revenues of $333.1 million. The company produced an average of 38,902 barrels of oil per day during this period.
Institutional and retail investors seeking dividends
Magnolia has been focused on returning capital to its shareholders through dividends. For the nine months ended September 30, 2024, the company declared cash dividends totaling $72.5 million. The dividends declared per share were $0.39, reflecting the company's commitment to providing returns to both institutional and retail investors.
Joint venture partners in oil exploration
Magnolia engages in partnerships for oil exploration, sharing risks and rewards. As of September 30, 2024, the company held interests in approximately 2,647 gross wells. The acquisition of oil and gas properties for $264.1 million in 2023 highlights its strategy of collaborating with joint venture partners to expand operational capabilities.
| Customer Segment | Key Metrics | Financial Impact |
|---|---|---|
| Refineries and industrial users | Oil revenues: $265.7 million Production: 38,902 barrels/day |
80% of total revenues |
| Institutional and retail investors | Dividends declared: $72.5 million | $0.39 per share |
| Joint venture partners | Interests in 2,647 gross wells | Acquisition cost: $264.1 million |
Magnolia Oil & Gas Corporation (MGY) - Business Model: Cost Structure
Operational costs related to drilling and production
Magnolia Oil & Gas Corporation incurs a variety of operational costs associated with drilling and production. For the three months ended September 30, 2024, the company reported:
| Cost Category | Q3 2024 (in thousands) | Q3 2023 (in thousands) | Variance (in thousands) |
|---|---|---|---|
| Lease Operating Expenses | $44,444 | $35,893 | $8,551 |
| Gathering, Transportation and Processing | $10,676 | $10,297 | $379 |
| Taxes Other Than Income | $18,269 | $14,823 | $3,446 |
| Exploration Expenses | $491 | $5,128 | ($4,637) |
| Asset Retirement Obligations Accretion | $1,749 | $875 | $874 |
| Depreciation, Depletion and Amortization | $107,336 | $81,158 | $26,178 |
| Impairment of Oil and Natural Gas Properties | $0 | $0 | $0 |
Total operating expenses for Q3 2024 amounted to $204,123 thousand, compared to $167,545 thousand in Q3 2023, reflecting an increase driven primarily by lease operating expenses and depreciation costs.
General and administrative expenses
General and administrative (G&A) expenses are critical for Magnolia's operational efficiency. For the three months ended September 30, 2024, G&A expenses were reported as follows:
| Expense Category | Q3 2024 (in thousands) | Q3 2023 (in thousands) | Variance (in thousands) |
|---|---|---|---|
| General and Administrative Expenses | $21,158 | $19,371 | $1,787 |
For the nine months ended September 30, 2024, G&A expenses totaled $67,547 thousand, up from $57,863 thousand in the same period in 2023, marking an increase of $9,684 thousand driven mainly by elevated corporate payroll expenses.
Taxes, royalties, and regulatory compliance costs
The company incurs various taxes, royalties, and compliance costs essential for its operations. The following table summarizes these costs for the specified periods:
| Cost Category | Q3 2024 (in thousands) | Q3 2023 (in thousands) | Variance (in thousands) |
|---|---|---|---|
| Current Income Tax Expense | $(480) | $19,262 | ($19,742) |
| Deferred Income Tax Expense | $27,010 | $11,949 | $15,061 |
| Total Income Tax Expense | $26,530 | $31,211 | ($4,681) |
| Royalties and Other Taxes | $18,269 | $14,823 | $3,446 |
Overall, Magnolia's total tax expense for Q3 2024 totaled $26,530 thousand, a decrease compared to $31,211 thousand in Q3 2023. The decrease was primarily due to a reduction in income before taxes, coupled with additional tax credits.
Magnolia Oil & Gas Corporation (MGY) - Business Model: Revenue Streams
Sales from crude oil, natural gas, and natural gas liquids (NGLs)
For the three months ended September 30, 2024, Magnolia Oil & Gas Corporation reported the following revenues:
| Revenue Source | Revenue (in thousands) | Percentage of Total Revenues |
|---|---|---|
| Oil Revenues | $265,682 | 80% |
| Natural Gas Revenues | $22,207 | 7% |
| NGL Revenues | $45,246 | 13% |
| Total Revenues | $333,135 | 100% |
For the nine months ended September 30, 2024, the total revenues were $989,277 thousand, with oil revenues contributing $800,195 thousand, natural gas revenues $61,871 thousand, and NGL revenues $127,211 thousand.
Revenue from joint ventures and partnerships
Magnolia's revenue also includes contributions from joint ventures. Notably, the Company sold its interest in Highlander, recognizing a gain of $3.9 million. As of September 30, 2024, Magnolia owned approximately 97.2% of Magnolia LLC, indicating a significant portion of its operations is conducted through this partnership structure.
Potential revenue from future acquisitions of oil and gas properties
In 2024, Magnolia Oil & Gas executed acquisitions totaling approximately $165.0 million, primarily for properties in the Giddings area. This strategic investment is expected to enhance future revenue streams, with a contingent cash consideration of up to $40 million based on future commodity prices. The Company’s ongoing efforts to expand its asset base through acquisitions are aimed at increasing production and revenue capacity.
Article updated on 8 Nov 2024
Resources:
- Magnolia Oil & Gas Corporation (MGY) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Magnolia Oil & Gas Corporation (MGY)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Magnolia Oil & Gas Corporation (MGY)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.