United States securities and exchange commission logo
September 15, 2020
Christopher Stavros
Executive Vice President and Chief Financial Officer
Magnolia Oil & Gas Corporation
Nine Greenway Plaza, Suite 1300
Houston, Texas 77046
Re: Magnolia Oil & Gas
Corporation
Form 10-K for the
Fiscal Year Ended December 31, 2019
Filed February 26,
2020
File No. 001-38083
Dear Mr. Stavros:
We have limited our review of your filing to the financial
statements and related
disclosures and have the following comments. In some of our comments, we
may ask you to
provide us with information so we may better understand your disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 10-K for the Fiscal Year Ended December 31, 2019
Definitions of Certain Terms and Conventions Used Herein, page 1
1. The definition of
proved reserves provided on page 2 states such reserves are reasonably
certain to be
commercially recoverable in future years. This definition appears to be
inconsistent with the
definition in Rule 4-10(a)(22) of Regulation S-X. Revise your
disclosure as may be
necessary to resolve this inconsistency or tell us why a revision is
not needed.
Items 1 and 2. Business and Properties
Development of Proved Undeveloped Reserves, page 7
2. The discussion of the
downward revisions that occurred in your proved undeveloped
reserves appears to
identify three separate and unrelated factors as the cause, e.g. technical
updates, lower
commodity prices, and an updated well schedule. Expand your disclosure
to separately quantify
each material individual factor that contributed to the overall
Christopher Stavros
FirstName LastNameChristopher
Magnolia Oil & Gas Corporation Stavros
Comapany 15,
September NameMagnolia
2020 Oil & Gas Corporation
September
Page 2 15, 2020 Page 2
FirstName LastName
downward change so that the change in net reserves between periods is
fully explained.
Refer to Item 1203(b) of Regulation S-X.
Production, Pricing and Lease Operating Cost Data, page 8
3. Tell us how you considered the requirements with regard to disclosure
of production, by
final product sold, for each field that contains 15% or more of your
total proved reserves.
Refer to Item 1204(a) of Regulation S-K and Rule 4-10(a)(15) of
Regulation S-X.
4. The production figures presented on page 8 for the Predecessor during
the periods January
1, 2018 through July 30, 2018 and for the year ended December 31, 2017
appear to be
inconsistent with the comparable figures presented elsewhere in your
filing for the
Predecessor, e.g. in the reconciliation of the changes in total proved
reserves on page 77
and in the Results of Operations on page 33. Revise your disclosure as
may be necessary
to resolve this inconsistency or tell us why a revision is not needed.
This comment also
applies to the disclosure of the average sales prices for the
Predecessor presented on page
8 and 33, respectively.
Marketing and Customers, page 10
5. You disclose that two customers accounted for 43.3% and 18.5% of the
fiscal 2019
combined oil, natural gas, and NGL revenue. Please disclose the name
of any customer
with revenues that were 10% or more of your consolidated revenues and
whether the loss
of one or both customers would have a material adverse effect on the
business taken as a
whole. Please refer to Item101(c)(1)(vii) of Regulation S-K.
Notes to Consolidated and Combined Financial Statements
Affiliate Guarantors, page 66
6. It appears that the Company and certain subsidiary issuers are
guarantors of the 2026
senior notes. Please explain to us how you considered providing
condensed consolidating
financial information pursuant to Rule 3-10(d)(4) of Regulation S-X.
7. You disclose that there are restrictions on dividends, distributions,
loans, or other transfers
of funds from the subsidiary guarantors to the Company. Please
disclose the most
significant restrictions on the payments of dividends indicating their
sources, their
pertinent provisions, and the amount of retained earnings or net
income restricted or free
of restrictions. Refer to Rule 4-08(e)(1) and Rule 3-10(i)(9) of
Regulation S-X.
Supplemental Information About Oil & Natural Gas Producing Activities
(Unaudited)
Oil and Gas Reserves, page 75
8. The change in the total net quantities of proved reserves attributed
to extensions and
discoveries for the Successor during the periods July 31, 2018 through
December 31, 2018
and for the year ended December 31, 2019 appears to be greater than
the corresponding
change in the net quantities of proved undeveloped reserves from
extensions and
Christopher Stavros
FirstName LastNameChristopher
Magnolia Oil & Gas Corporation Stavros
Comapany 15,
September NameMagnolia
2020 Oil & Gas Corporation
September
Page 3 15, 2020 Page 3
FirstName LastName
discoveries, e.g. differences between the comparable figures on a
barrels of oil equivalent
basis of approximately 40% and 8% for the periods ending December 31,
2019 and 2018,
respectively. Expand the discussion of the changes in the Successor
s total proved
reserves attributed to extensions and discoveries to explain the
reason(s) for these
differences. Refer to FASB ASC 932-235-50-5.
9. The disclosure preceding the tabular presentation of the changes in
total proved reserves
on page 77 states the Predecessor s reserves are based on a five
year development plan,
whereas all of the Successor s proved undeveloped reserves, as of
December 31, 2019, are
planned to be developed within one year. Expand your disclosure to
clarify, if true, that
this is also the reason for the significant difference between the net
quantities of proved
undeveloped reserves for the Successor at the beginning of the period
July 31, 2018
through December 31, 2018, e.g. the 16.1 MMBoe at July 31, 2018,
compared to the net
quantities of proved undeveloped reserves for the Predecessor at the
end of the period
January 1, 2018 through July 30, 2018, e.g. the 76.5 MMBoe at July 30,
2018.
10. Expand your disclosure to explain the reason(s) for the significant
difference in net
quantities of proved developed reserves for the Successor at the
beginning of the period
July 31, 2018 through December 31, 2018, e.g. the 68.3 MMBoe at July
31, 2018,
compared to the net quantities of proved developed reserves for the
Predecessor at the end
of the period January 1, 2018 through July 30, 2018, e.g. the 76.5
MMBoe at July 30,
2018.
Standardized Measure of Discounted Future Net Cash Flows, page 78
11. Expand the discussion accompanying the presentation of the
standardized measure to
clarify, if true, that future cash flows take into account the
estimated abandonment costs
for your proved properties. If the abandonment costs, including such
costs related to your
proved undeveloped locations, have not been included, tell us why a
revision in the
estimated future net cash flows is not necessary. Refer to FASB ASC
932-235-50-36.
Exhibits and Financial Statement Schedules
Exhibit 99.1, page 82
12. The reserves report refers to additional supplemental information
contained in an
Appendix that is not included in the report as filed. Obtain and
file a revised report to
include the referenced supplemental information. Alternatively, remove
these references
if you do not intend to include this supplemental information.
Christopher Stavros
Magnolia Oil & Gas Corporation
September 15, 2020
Page 4
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
You may contact John Hodgin, Petroleum Engineer at (202) 551-3699 with
any questions
regarding engineering comments. You may contact Robert Babula, Senior Staff
Accountant at
(202) 551-3339, or Gus Rodriguez, Branch Chief at (202) 551-3752 with any
questions
regarding comments on the financial statements and related matters, or with any
other questions.
FirstName LastNameChristopher Stavros Sincerely,
Comapany NameMagnolia Oil & Gas Corporation
Division of
Corporation Finance
September 15, 2020 Page 4 Office of Energy &
Transportation
FirstName LastName