Stockholders' Equity

12 Months Ended

Dec. 31, 2021

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

Class A Common Stock

At December 31, 2021, there were 193.4 million shares issued and 179.3 million shares outstanding of Class A Common Stock. The holders of Class A Common Stock and Class B Common Stock vote together as a single class on all matters and are entitled one vote for each share held.

There is no cumulative voting with respect to the election of directors, which results in the holders of more than 50% of the shares being able to elect all of the directors, subject to voting obligations under the Stockholder Agreement. In the event of a liquidation, dissolution, or winding up of Magnolia Oil & Gas Corporation, the holders of the Class A Common Stock are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having preference over the common stock. The holders of the Class A Common Stock have no preemptive or other subscription rights, and there are no sinking fund provisions applicable to such shares.

Class B Common Stock

At December 31, 2021, there were 49.3 million shares issued and outstanding of Class B Common Stock. Holders of Class B Common Stock vote together as a single class with holders of Class A Common Stock on all matters properly submitted to a vote of the stockholders. The holders of Class B Common Stock generally have the right to exchange all or a portion of their Class B Common Stock, together with an equal number of Magnolia LLC Units, for the same number of shares of Class A Common Stock or, at Magnolia LLC’s option, an equivalent amount of cash. Upon the future redemption or exchange of Magnolia LLC Units held by any holder of Class B Common Stock, a corresponding number of shares of Class B Common Stock held by such holder of Class B Common Stock will be canceled. In the event of a liquidation, dissolution, or winding up of Magnolia LLC, the holders of the Class B Common Stock, through their ownership of Magnolia LLC Units, are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of units of Magnolia LLC, if any, having preference over the common units. The holders of the Class B Common Stock have no preemptive or other subscription rights, and there are no sinking fund provisions applicable to such shares.

Warrants

On June 7, 2019, the Company commenced an exchange offer (the “Offer”) and consent solicitation (the “Consent Solicitation”), pursuant to which the Company (1) offered to holders of its warrants the opportunity to receive 0.29 shares of Class A Common Stock in exchange for each warrant validly tendered and (2) solicited the consent from the holders of its warrants to approve an amendment to the Company’s existing warrant agreement, by and between the Company and Continental Stock Transfer & Trust Company, to amend the agreement to provide the Company with the right to require any holder of the Company’s warrants to exchange their warrants for Class A Common Stock at an exchange ratio of 0.261 shares of Class A Common Stock for each whole warrant (the “Warrant Amendment”). Pursuant to the Offer, certain of the Company’s warrant holders, including directors and executive officers, agreed to tender their warrants and provide the corresponding consent to the Warrants Amendment in the Consent Solicitation by entering into a tender and support agreement with the Company on June 7, 2019.

The Offer and Consent Solicitation expired on July 5, 2019. In connection with the closing of the Offer on July 10, 2019 and the subsequent exercise of the Company’s right to exchange all remaining warrants on July 25, 2019, the Company issued an aggregate of 9.2 million shares of Class A Common Stock in exchange for all of its 31.7 million warrants outstanding, which consisted of 21.7 million public warrants and 10.0 million private placement warrants.

As the fair value of the warrants exchanged in the Offer was less than the fair value of the Class A Common Stock issued, the Company recorded a non-cash deemed dividend of $2.8 million for the incremental value provided to the warrant holders. The fair value of warrants and the Class A Common Stock was determined using unadjusted quoted prices in an active market, a Level 1 fair value input. The Company capitalized $2.2 million of expenses related to the Offer within “Additional paid-in capital” on the Company’s consolidated balance sheet.

Share Repurchase Program

As of December 31, 2021, the Company’s board of directors had authorized a share repurchase program of up to 20.0 million shares of Class A Common Stock, and, in February 2022, the Company’s board of directors increased the share repurchase authorization by an additional 10.0 million shares of Class A Common Stock which increases total authorization to 30.0 million shares. In addition, the Company may repurchase shares pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Securities Act of 1934, which would permit the Company to repurchase shares at times that may otherwise be prohibited under the Company's insider trading policy. The share repurchase program does not require purchases to be made within a particular timeframe. As of December 31, 2021, the Company had repurchased 14.2 million shares under the plan at a total cost of $164.6 million.

Dividends and Distributions

Distribution

On August 2, 2021, Magnolia LLC declared a cash distribution of $0.08 per Magnolia LLC Unit totaling $19.0 million, of which $14.2 million was distributed to the Company and $4.8 million was distributed to the Magnolia LLC Unit Holders. The distribution to the Magnolia LLC Unit Holders was recorded as a reduction of noncontrolling interest on the Company’s consolidated balance sheet as of December 31, 2021.

Cash Dividend

On August 2, 2021, the Company’s board of directors declared a semi-annual interim cash dividend of $0.08 per share of Class A Common Stock totaling approximately $14.2 million. The dividend was paid on September 1, 2021 to shareholders of record as of the close of business on August 12, 2021. Dividends in excess of retained earnings are recorded as a reduction of additional paid-in capital. The $14.2 million dividend declared during the third quarter of 2021 was recorded as a reduction of additional paid-in capital on the Company’s consolidated balance sheet as of December 31, 2021.

Noncontrolling Interest

Noncontrolling interest in Magnolia’s consolidated subsidiaries includes amounts attributable to Magnolia LLC Units that were issued to the Magnolia LLC Unit Holders in connection with the Business Combination. The noncontrolling interest percentage is affected by various equity transactions such as issuances of Class A Common Stock, the exchange of Class B Common Stock (and corresponding Magnolia LLC Units) for Class A Common Stock, or the cancellation of Class B Common Stock (and corresponding Magnolia LLC Units).

During the year ended December 31, 2021, outside of the share repurchase program, Magnolia LLC repurchased and subsequently canceled 13.0 million Magnolia LLC Units with an equal number of shares of corresponding Class B Common Stock for $171.7 million of cash consideration. During the year ended December 31, 2019, Magnolia LLC repurchased and subsequently canceled 6.0 million Magnolia LLC Units with an equal number of shares of corresponding Class B Common Stock for $69.1 million of cash consideration. Magnolia funded these repurchases of Class B Common Stock with cash on hand.

During the year ended December 31, 2021, the Magnolia LLC Unit Holders also redeemed 23.5 million Magnolia LLC Units (and a corresponding number of shares of Class B Common Stock) for an equivalent number of shares of Class A Common Stock and subsequently sold these shares to the public. Magnolia did not receive any proceeds from the sale of shares of Class A Common Stock by the Magnolia LLC Unit Holders. As of December 31, 2021, Magnolia owned approximately 78.4% of the interest in Magnolia LLC and the noncontrolling interest was 21.6%.

In the first quarter of 2019, Magnolia Operating formed Highlander as a joint venture, where MGY Louisiana LLC, a wholly owned subsidiary of Magnolia Operating, holds approximately 84.7% of the units in Highlander, with the remaining 15.3% attributable to noncontrolling interest.