Company: MGY
Filing Date: 2025-02-19
Form Type: 10-K
Source: 0001698990-25-000006
Chunk: 38

Company: Magnolia Oil & Gas Corp
Filing Date: 2025-02-19
Form: 10-K
Item: Item 1A
Chunk 38
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 the areas in which Magnolia operates;

•the proximity, capacity, cost, and availability of gathering, transportation, and processing facilities;

•localized and global supply, demand fundamentals, and transportation availability;

•the cost of exploring for, developing, producing, and transporting reserves;

•weather conditions and natural disasters;

•inflation rates;

•technological advances affecting energy consumption;

•the price and availability of alternative fuels;

•expectations about future commodity prices; and

•other events that impact global market demand.

Lower commodity prices may reduce Magnolia’s cash flow and borrowing ability and cause the Company to shut in wells or curtail production. If Magnolia is unable to obtain needed capital or financing on satisfactory terms, its ability to acquire and develop future reserves could be adversely affected. Also, using lower prices in estimating proved reserves may result in a reduction in proved reserves volumes due to economic limits. In addition, sustained periods with lower oil and natural gas prices may adversely affect drilling economics and Magnolia’s ability to raise capital, which may require it to re-evaluate and postpone or eliminate its development program, and result in the reduction of some proved undeveloped reserves and related standardized measure. If Magnolia is required to curtail its drilling program, Magnolia may be unable to hold leases that are scheduled to expire, which may further reduce reserves. As a result, a substantial or extended decline in commodity prices may materially and adversely affect Magnolia’s future business, financial condition, results of operations, liquidity, and ability to finance planned capital expenditures.

Inflation may adversely affect Magnolia’s business, results of operations, and financial condition.

Magnolia is in an industry that has experienced inflationary pressures on operating costs - namely fuel, steel (i.e., wellbore tubulars and facilities manufactured using steel), labor, and drilling and completion services. Although for many years, inflation in the 

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United States had been relatively low, there was a significant increase in inflation beginning in the second half of 2021, which has continued into 2024, due to a substantial increase in money supply, a stimulative fiscal policy, the Russia-Ukraine war, and worldwide supply chain disruptions. According to the Bureau of Labor Statistics, inflation rose to a peak of 9.1% in June 2022, and has since decreased to 2.9% as of December 2024. While supply chain disruptions and inflation have not materially affected Magnolia’s operating results to date, if Magnolia is unable to work with its