Written by: Salma Al-Saqqa
Magnolia Oil & Gas (NYSE: MGY) announced strong results for the third quarter of 2026, supported by the integration of acquired Wildfire assets and improved commodity prices. Adjusted net income rose by 114% year-over-year to approximately $166 million, while total production increased by 17%, recording 117,300 barrels of oil equivalent per day.
Strong Third Quarter Financial Results
The company recorded an adjusted net income of $166 million or $0.71 per diluted share, compared to $77.5 million in the same period last year. Adjusted EBITDAX was $392 million, and adjusted free cash flow was $224 million. The results included 20 days of ownership of Wildfire assets following the completion of the deal on September 10.
Oil production rose by 24% to reach 49,100 barrels per day. Drilling and completion expenditures amounted to $147 million, which is lower than previous guidance and represents 38% of adjusted EBITDAX.
Integrating Wildfire Assets and Achieving Savings
Chris Stavros, Chairman and CEO, stated that the company expects to achieve one-third of the estimated annual savings of more than $100 million from the Wildfire deal by the end of 2026, and three-quarters by mid-2027. The company identified drilling and completion savings of at least $1 million per well, benefiting from procurement advantages, drilling speed, the transition to multi-well pads, and lower sand costs thanks to sand mine ownership.
The company currently operates four rigs and two completion crews, and has replaced some equipment to improve efficiency. Early results from a few Austin Chalk wells in the former Wildfire acreage showed encouraging results, boosting management's confidence in the potential drilling inventory. Magnolia plans to continue delineation across 1.25 million net acres in Guidings.
Reducing Debt and Shareholder Returns
The company ended the quarter with a net debt of $1.9 billion, a decrease of $100 million since the completion of the Wildfire deal. Stavros mentioned that the company achieved its goal of reducing net debt to less than one times expected 2027 EBITDAX more than a year ahead of the original plan. At current commodity prices, Magnolia expects to repay the revolving credit facility in early 2027. The revolving facility balance was $435 million according to CFO Brian Corallis.
The company added oil option contracts with floor prices between $70 and $75 per barrel to support debt repayment if prices fall, and does not expect to add more hedges. Magnolia returned approximately $103 million to shareholders during the quarter, including $43 million in dividends and $60 million in share repurchases (2.3 million shares). The Board of Directors increased the repurchase authorization by 15 million shares, leaving 22.6 million shares available.
Fourth Quarter and 2027 Outlook
For the fourth quarter, Magnolia expects production between 159,000 and 161,000 barrels of oil equivalent per day, with oil representing 49% to 50%. Drilling and completion expenditures are estimated at approximately $235 million. The company confirmed its initial 2027 capital budget between $900 and $950 million, and organic growth expectations of 4% to 5% in both total and oil production. Corallis estimated maintenance capital at approximately $800 million.
Stavros noted that the budget includes an expectation of field service cost inflation in the mid-single digits, pointing to equipment changes, lower sand costs, and the use of a dual-fuel completion fleet as measures to mitigate cost pressures. During the quarter, Magnolia sold non-core Western Eagle Ford assets for $47.5 million and acquired 616 net acres as an additional replacement, which reduced distraction and allowed for focus on the Guidings location and Wildfire integration.
About Magnolia Oil & Gas
Magnolia Oil & Gas 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 significant acreage. The company produces crude oil, condensates, natural gas liquids, and natural gas. Magnolia utilizes horizontal drilling and hydraulic fracturing technologies to develop unconventional reserves, with activity primarily concentrated in the Karnes and Guidings areas of South Texas. The company was founded in 2017 through a merger that included Silver Run Second Acquisition and former oil and gas assets associated with TGP investments.
