Magnolia Closes WildFire Deal, Targets 0.5x Leverage
Fourth-quarter production is guided to 159–161 Mboe/d, the first full quarter after the WildFire close, with net debt at about $1.9 billion.
Magnolia Oil & Gas Corporation (MGY) closed its acquisition of WildFire Energy in late July 2026, creating a combined Eagle Ford and Austin Chalk operator in South Texas and more than doubling its Giddings acreage. Chairman, President and CEO Chris Stavros said the company is integrating the assets on track and that the deal is intended to build a premier Eagle Ford and Austin Chalk operator with a larger, contiguous South Texas base.
The combination is meant to lift free cash flow, improve financial returns, and expand the capacity to return capital through a growing dividend and share repurchases of at least 1 percent of outstanding shares per quarter. The company anticipates the combined business generating mid-single-digit organic annual growth of 4 to 5 percent for both oil volumes and total production, above its peer average, with a drilling and completions reinvestment rate well below 55 percent of adjusted EBITDAX.
Estimated third-quarter 2026 production is 116 to 118 Mboe/d, about 42 percent oil, after the WildFire close and the impact of divested non-core properties. That compares with 106.1 Mboe/d of average daily production in the second quarter. Fourth-quarter 2026 production, the first full quarter pro forma for the acquisition, is expected at 159 to 161 Mboe/d, with oil at 49 to 50 percent, reflecting the divested volumes.
Drilling and completions capital is expected at $155 to $165 million in the third quarter, versus $125.0 million in the second quarter, and is estimated at approximately $235 million in the fourth quarter. For 2027, production is estimated to grow 4 to 5 percent for both oil and total production off a second-quarter 2026 pro forma base of about 78 Mbo/d oil and 158 Mboe/d after the non-core sales. D&C spending is currently estimated at $900 to $950 million in 2027, incorporating a modest amount of oil field service inflation.
During the third quarter, Magnolia sold non-core assets in Dimmit and Zavala counties for $47.5 million plus 616 net acres in Gonzales County. The acreage sits inside a contiguous block of primarily undeveloped land the company consolidated in the first quarter of 2026 and lifts average operated working interest in that Karnes-area block to 98 percent. The divested properties included about 1.4 Mboe/d, roughly 84 percent oil, of next-twelve-month production.
Net debt ended the third quarter at approximately $1.9 billion, lower than expected due to strong cash flow and proceeds from the non-core sale. At current strip prices, leverage is below 1.0x net debt to 2027E EBITDA, more than a year sooner than the original plan. The target remains 0.5x net debt to EBITDA or below.
The company purchased about 2.3 million shares in the third quarter after being restricted for a portion of the period. Total shares outstanding at quarter-end were approximately 267 million, versus 184.6 million diluted weighted average shares in the second quarter. It also implemented additional costless oil collars so more than half of oil production is hedged through the second quarter of 2027, supplementing swaps inherited from WildFire. Magnolia spent about $14 million on 3D seismic over newly acquired acreage, to be reflected as exploration expense in the third quarter.
One-time transaction and integration-related costs are expected at about $65 to $75 million in the third quarter. The company expects to realize at least one-third of estimated more than $100 million annual run-rate synergies by year-end 2026.
Fourth-quarter 2026 guidance includes LOE of $5.80 to $6.20 a Boe, gathering, processing and transportation of $1.80 to $2.10 a Boe, DD&A of $14.00 to $15.00 a Boe, production and ad valorem taxes of 5.5 to 6.5 percent, interest expense of $35 to $40 million, an effective tax rate of about 21 percent, a cash tax rate of 0 to 2 percent, and pre-hedge oil realization of $(2.00) to MEH. Magnolia will host a conference call on November 5 to discuss third-quarter results.