Magnolia Oil & Gas Corporation (NYSE:MGY) Q2 2023 Earnings Call Transcript

Chris Stavros : Well, you mentioned an interesting point about around the underperformance, and I look at this, too. It doesn’t — I understand the valuation and all, and I get that. We have quite a bit of cash on the balance sheet, and I don’t say that to say, well, we’re going to use the cash tomorrow to do something large or out of place, you won’t find us doing that. It’s just not — I don’t think it’s in our DNA. But this is not — this shouldn’t be perceived as a rainy day fund. The cash is designed and was built up in a period of much higher product prices, and I’ve referred to it as the winnings and you don’t want to squander the winnings, you just want to allocate it appropriately to generate higher returns. While it might be interesting to look at $600 million, $700 million of cash on the balance sheet, it’s interesting but that’s it.

It doesn’t do anything much for you unless you start to deploy it in a way that can generate better returns. So it’s frankly a bit capital inefficient, and I know that’s not lost on you and the audience. And so my goal would be to try to find something that we could do with it that’s better than just polishing it on the balance sheet. So that’s the plan. I’d like to find some other opportunities that make sense for us and fit within our skill set and that we can manage and operate and improve the business. And that’s the plan.

Tim Rezvan : Thanks. Appreciate all the answers.

Chris Stavros : Okay, thanks.

Operator: Pardon me. We are going to take a question from Paul Diamond from Citigroup. Paul, good morning.

Paul Diamond : Hi, good morning. Thanks for taking my call. Just a quick one for me. Regarding your inflationary view, I guess — what — how do you benchmark that? I guess, what should we think about as the narrative that you guys saw coming earlier this year really playing out. Do you guys have it in mind? Or is it more just seeing — comparing the cost side to the aggregate pricing side.

Chris Stavros : Well, we look at benchmarks for OCTG items, for steel prices, for rig activity, and we try to gauge ourselves based on how we’re doing relative to market pricing, et cetera. So we look at this pretty often and pretty carefully and pretty diligently. So we think — we believe we’re capturing a lot of what we’re able to capture and maybe more so sooner than what others have done. And I think that speaks to the first mover actions that we took much earlier this year. And I think we’ll continue to see a bit more in the back half of the year, and we’ll see where it takes us for 2024. But I think we’ve done a decent job sort of benchmarking ourselves on larger-scale market items, materials.

Paul Diamond : Understood. Thanks for the clarity. I’ll leave it there.

Operator: And the conference has now concluded. We all thank you for attending today’s presentation. You may now disconnect. Have a good day.