Magnolia Oil & Gas to Buy WildFire Energy for $4.06 Billion

Magnolia Oil & Gas agreed to buy WildFire Energy for about $4.06 billion in a cash-and-stock deal that more than doubles its acreage in the Giddings field and pushes pro forma output to 159,000 barrels of oil equivalent a day. Chris Stavros, Magnolia's chairman, president and CEO, said the acquisition makes the company the largest operator in the South Texas Eagle Ford and Austin Chalk trend, with nearly 1.3 million net acres.

"The WildFire acquisition greatly enhances Magnolia's position by extending our runway of advantage to high return profitability and significant free cash flow generation," Stavros said.

The purchase adds roughly 810,000 net acres. Stavros said Magnolia's position will be almost 80% larger than the second-place operator in the play. WildFire's assets produced 53,000 boe/d in the second quarter, including 37,000 bbl/d of oil. Pro forma second-quarter production would have been 159,000 boe/d with an oil mix around 50%. Stavros said the production carries a low base decline rate of about 29%.

Proved developed reserves rise 84% to more than 300 million boe. Proved developed oil reserves increase about 155%, and the oil mix on a proved developed basis climbs to roughly 54%.

Magnolia expects at least $100 million in annual run-rate cost savings by the end of 2027, with an estimated present value of $700 million. About 60% of the savings come from drilling and completions; another 20% from field operations. Stavros said corporate G&A and field operations savings should approach their full run rate by mid-2027. Additional benefits come from longer lateral lengths, supply chain pricing, shared infrastructure and Magnolia's drilling expertise.

The deal price includes 32.2 million shares of Magnolia Class A stock issued to WildFire's owners. Magnolia will also assume $600 million of WildFire's notes due 2029. The remaining amount will come from cash on hand and a mix of debt and new equity. Magnolia secured a $2 billion borrowing base with $1.75 billion in elected commitments.

Magnolia raised its quarterly dividend 9% to $0.18 a share, its second increase this year. The company plans to keep repurchasing at least 1% of outstanding shares each quarter after closing. Stavros said Magnolia has returned about $2 billion to shareholders since inception, roughly 40% of its market value.

Debt will rise initially. Magnolia expects to reach about 1x or less net debt to EBITDA by year-end 2027, using free cash flow beyond shareholder returns. At recent strip prices, management estimates the combined business could generate more than $4.5 billion in cumulative free cash flow through 2030.

Stavros said Magnolia will initially take on WildFire's two rigs and one completion crew, effectively doubling its activity. He expects a broad mix of Austin Chalk and Eagle Ford wells, with Woodbine development possible later. WildFire's Eagle Ford wells are shallower and lower cost, which helps the capital program. Average lateral lengths have been around 8,000 to 8,500 feet, and Stavros said many future wells could reach 10,000 to 15,000 feet where acreage adjacency allows.

Magnolia inherited some hedges on WildFire's oil output that provide "a comfortable floor" into 2027, Stavros said. He added that the company may add hedges opportunistically given recent crude oil price volatility and the larger debt load.

Magnolia also reported preliminary second-quarter standalone production of 106,000 boe/d, with oil at 42,000 bbl/d. Drilling and completion capital was $125 million. Cash ended the quarter at $296 million. The company raised its full-year 2026 standalone production growth guidance to 6% from 5%.

The transaction, approved by Magnolia's board, is expected to close late in the third quarter.