Magnolia to Dial Back Spending for Rest of 2020
In response to the sharp decline in product prices, Magnolia Oil & Gas Corp. revealed plans to adjust its drilling and completion activity this year. As a result, it plans to drop its one operated rig in the Karnes area at the end of the first quarter. If the current environment persists, Magnolia expects to cease its remaining operated activity across its asset base, the company said in a written statement.
Magnolia still plans to spend about 60 percent of its adjusted EBITDAX on drilling and completing wells. Management also expects its capital outlays to be half last year’s levels.
Magnolia’s first quarter production is expected to be at least 66 Mboe/d, above its earlier guidance, with oil production consisting of at least 53 percent of total volumes. While capital spending will be heavier during the first quarter, Magnolia expects to generate free cash during the period. Spending is expected to fall sharply during the remainder of this year.
While some non-operated well activity could be curtailed in the existing environment, Magnolia expects that its participation in non-operated activity will continue to the extent these programs are supported by strong economics.
Separately, earlier this week it was announced that Steve Chazen, President, CEO and Chairman of Magnolia, was elected to Occidental Petroleum’s board as Chairman.
“As I rejoin the Oxy Board, I hope to use my experience to help guide its management though this challenging environment,” Chazen said in a written statement. “My objective is to administer steps to preserve as many non-executive jobs as possible, while overseeing actions that help enhance Oxy’s stock market value. Under no circumstances, will I become an employee or executive officer of Occidental. My full-time efforts have and will continue to be focused on helping Magnolia navigate the current downturn and position the company to emerge from a position of strength once the environment improves.”
Chazen added, “We will continue to manage our business prudently as conditions evolve, and I remain confident that our strategy and business model provide us with the flexibility to respond effectively. I am highly aligned with our shareholders, as I own more than 6.8 million Magnolia shares outright.”
Magnolia is a publicly traded exploration and production company with operations primarily in South Texas in the core of the Eagle Ford Shale and Austin Chalk formations.
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