Magnolia Oil & Gas closes $4.1B WildFire deal
Magnolia Oil & Gas closed its $4.1 billion WildFire acquisition, adding significant reserves, equity issuance and new debt to its capital structure.
Rhea-AI Filing Summary
Magnolia Oil & Gas Corporation (MGY) completed its previously announced acquisition of WildFire Intermediate Holdings LLC on September 10, 2026. Total consideration is approximately $4.1 billion, including $2.57 billion in cash, 32,203,000 Class A shares and the assumption of $600 million of 7.500% Senior Notes due 2029.
Immediately after closing, WildFire entities were merged into Magnolia Oil & Gas Operating LLC, which assumed the 2029 Notes under a supplemental indenture, and Magnolia Midstream LLC became a guarantor of Magnolia’s 2032 and 2034 senior notes. A Registration Rights Agreement grants WildFire’s seller shelf, demand and piggy-back registration rights for the equity consideration, subject to a 30‑day lock-up.
Unaudited pro forma data show Magnolia shareholders owning about 88% of the combined equity and WildFire’s owner about 12%. As of December 31, 2025, pro forma proved reserves would total 481.4 MMboe, and the standardized measure of discounted future net cash flows would be about $6.59 billion versus $2.52 billion for Magnolia standalone.
Positive
- Pro forma standardized measure of discounted future net cash flows rises to $6.59 billion, up from $2.52 billion for Magnolia alone, reflecting a much larger reserve base.
- Pro forma proved reserves reach 481.4 MMboe, combining Magnolia’s 210.2 MMboe with WildFire’s 271.2 MMboe, materially expanding the company’s resource portfolio.
Negative
- Pro forma long-term debt increases to about $2.16 billion from Magnolia’s historical $393.6 million, reflecting new borrowings and assumed WildFire notes.
- Cash consideration of about $2.57–2.65 billion is funded with equity proceeds, revolver borrowings and new 6.625% senior notes, meaning higher leverage and interest expense.
Filing Explained
The closing issued 32,203,000 shares and used equity proceeds plus borrowings; the seller’s resale registration remains a separate future mechanism.
At the September 10 closing, Magnolia had issued
The seller’s resale rights are separate from that issuance: Magnolia agreed to register resale of those shares, while the seller is subject to a
The pro forma
The preliminary purchase-price allocation and related pro forma amounts remain subject to post-closing adjustments and final valuation of the acquired assets and assumed liabilities.
8-K Event Classification
Key Figures
Key Terms
Registration Rights Agreement regulatory
Senior Notes due 2029 financial
Supplemental Indenture regulatory
asset retirement obligations financial
costless collars financial
Standardized measure of discounted future net cash flows financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What did MGY pay to acquire WildFire Intermediate Holdings?
How is Magnolia (MGY) financing the WildFire acquisition cash portion?
How does the acquisition affect MGY’s ownership structure?
What happens to WildFire’s 7.500% Senior Notes due 2029 after the deal?
How did WildFire perform financially before the acquisition?
What are the combined reserves of Magnolia (MGY) and WildFire after the deal?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
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| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Securities registered pursuant to section 12(b) of the Act.
Introductory Note
As previously disclosed on July 20, 2026, Magnolia Oil & Gas Corporation, a Delaware corporation (“Magnolia”), and Magnolia Oil & Gas Operating LLC, a Delaware limited liability company (“Buyer”), entered into a purchase and sale agreement (the “Purchase Agreement”) with WildFire Energy I LLC, a Delaware limited liability company (“Seller”), pursuant to which Buyer agreed to purchase from Seller 100% of the issued and outstanding limited liability company interests (the “Acquisition”) of WildFire Intermediate Holdings, LLC (“Target”).
As consideration for the Acquisition and the transactions contemplated by the Purchase Agreement, the purchase price was comprised of (i) cash in the amount of $2,570 million, subject to final customary adjustments (the “Cash Consideration”), (ii) 32,203,000 shares of Magnolia’s Class A common stock (“common stock”), par value $0.0001 (the “Equity Consideration”) and (iii) the assumption of the 2029 Notes (as defined below).
The Acquisition closed on September 10, 2026 (the “Closing Date”). Immediately after the Acquisition closed, Target and certain subsidiaries of Target merged into Buyer and Buyer assumed the obligations under the 2029 Notes pursuant to the Supplemental Indenture (as defined below).
| Item 1.01 | Entry into a Material Definitive Agreement. |
The information set forth in the “Introductory Note” of this Current Report is hereby incorporated by reference into this Item 1.01.
Target Notes and Supplemental Indenture
2029 Notes
On September 26, 2024, Target issued $600.0 million aggregate principal amount of 7.500% Senior Notes due 2029 (the “2029 Notes”), pursuant to an indenture, dated as of September 26, 2024 (as amended or supplemented from time to time, the “Indenture”), among Target, the guarantors party thereto, and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”).
The 2029 Notes are the general unsecured, senior obligations of the Buyer. The 2029 Notes are guaranteed on a senior unsecured basis by the guarantors party thereto and may be guaranteed by certain future subsidiaries of the Buyer.
The 2029 Notes will mature on October 15, 2029. The 2029 Notes bear interest at the rate of 7.500% per annum, payable semi-annually in arrears on each April 15 and October 15.
At any time prior to October 15, 2026, the Buyer may redeem up to 40% of the aggregate principal amount of the 2029 Notes, with an amount of cash not greater than the net cash proceeds of certain equity offerings at a redemption price equal to 107.500% of the principal amount of the 2029 Notes redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, if at least 60% of the aggregate principal amount of the 2029 Notes originally issued under the Indenture on the issue date remains outstanding immediately after such redemption and the redemption occurs within 180 days of the closing date of such equity offering.
On or after October 15, 2026, the Buyer may redeem the 2029 Notes, in whole or in part, at the redemption prices set forth in the Indenture, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption.
If the Buyer experiences certain kinds of changes of control, each holder of the 2029 Notes may require the Buyer to repurchase all or a portion of its 2029 Notes for cash at a price equal to 101% of the aggregate principal amount of such 2029 Notes, plus accrued and unpaid interest, if any, to the date of repurchase.
| 1 |
The Indenture contains covenants that, among other things and subject to certain exceptions and qualifications, limit the ability of the Buyer and of its restricted subsidiaries to: (i) incur or guarantee additional indebtedness or issue certain types of preferred stock; (ii) pay dividends on capital stock or redeem, repurchase or retire its capital stock or subordinated indebtedness; (iii) transfer or sell assets; (iv) make investments; (v) create certain liens; (vi) enter into agreements that restrict dividends or other payments from its restricted subsidiaries to the Buyer or any of their restricted subsidiaries; (vii) consolidate, merge or transfer all or substantially all of its assets; (viii) engage in transactions with affiliates; and (ix) create unrestricted subsidiaries.
Upon an Event of Default (as defined in the Indenture), the Trustee or holders of at least 25% in aggregate principal amount of the 2029 Notes then outstanding may declare the principal of and accrued and unpaid interest on the 2029 Notes to be due and payable immediately.
WFE Supplemental Indenture
On the Closing Date, the Buyer entered into that certain First Supplemental Indenture (the “WFE Supplemental Indenture”) to the Indenture, among Buyer, the guarantor party thereto and the Trustee pursuant to which (i) the Buyer assumed the obligations of the Target under the Indenture and the 2029 Notes issued pursuant thereto and (ii) a subsidiary guarantor of the Buyer became party to the Indenture and provided a guarantee thereof.
The foregoing descriptions of the Indenture and WFE Supplemental Indenture are summaries only and are qualified in their entirety by reference to the Indenture and WFE Supplemental Indenture, copies of which are attached as Exhibit 4.1 and Exhibit 4.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.
2032 Notes and 2034 Notes
In connection with the Acquisition, on the Closing Date, the Buyer caused its subsidiary, Magnolia Midstream LLC, a Delaware limited liability company (“Magnolia Midstream”), to enter into the (i) First Supplemental Indenture with Regions Bank to add Magnolia Midstream as a guarantor to the Buyer’s 6.875% Senior Notes due 2032 (the “2032 Notes”) and (ii) First Supplemental Indenture (collectively, the “MGY Supplemental Indentures”) with Regions Bank to add Magnolia Midstream as a guarantor to the Buyer’s 6.625% Senior Notes due 2034 (the “2034 Notes”).
The foregoing descriptions of the MGY Supplemental Indentures are summaries only and are qualified in their entirety by reference to each MGY Supplemental Indenture, copies of which are attached as Exhibit 4.3 and Exhibit 4.4, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.
Registration Rights Agreement
In connection with the closing of the Acquisition, Magnolia and Seller entered into a registration rights agreement (the “Registration Rights Agreement”). Pursuant to the terms of the Registration Rights Agreement, Magnolia will register under the Securities Act of 1933, as amended (the “Securities Act”), the resale of any shares of common stock to be issued as the Equity Consideration. The Registration Rights Agreement provides for certain underwritten demand, “piggy-back” and shelf registration rights, subject to certain customary limitations. Additionally, Seller has agreed to a 30-day lock-up period with respect to shares constituting the Equity Consideration. Magnolia has also agreed to pay certain expenses of Seller incurred in connection with the exercise of its rights under the Registration Rights Agreement and indemnify Seller for certain securities law matters in connection with any registration statement filed pursuant thereto.
The foregoing description of the Registration Rights Agreement is a summary only and is qualified in its entirety by reference to the Registration Rights Agreement, a copy of which is attached as Exhibit 4.5 to this Current Report on Form 8-K and is incorporated herein by reference.
| 2 |
| Item 2.01 | Completion of Acquisition or Disposition of Assets. |
The information set forth in the “Introductory Note” and Item 1.01 of this Current Report is hereby incorporated by reference into this Item 2.01.
As discussed in the Introductory Note, on September 10, 2026, the Acquisition was completed upon the terms and subject to the conditions of the Purchase Agreement. As consideration for the Acquisition and the transactions contemplated by the Purchase Agreement, the purchase price was comprised of (i) Cash Consideration of $2,570 million, subject to final customary adjustments, (ii) Equity Consideration of 32,203,000 shares of common stock and (iii) the assumption of the 2029 Notes.
The foregoing description of the Purchase Agreement is a summary only and is qualified in its entirety by reference to the Purchase Agreement, a copy of which is attached as Exhibit 2.1 to this Current Report on Form 8-K and is incorporated herein by reference.
| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information set forth in the “Introductory Note” and Item 1.01 of this Current Report is hereby incorporated by reference into this Item 2.03.
| Item 3.02 | Unregistered Sales of Equity Securities. |
The information set forth in the “Introductory Note” and Item 1.01 of this Current Report regarding the Equity Consideration is hereby incorporated by reference into this Item 3.02. The issuance of shares of common stock was completed in reliance upon the exemption from the registration requirements of the Securities Act, provided by Section 4(a)(2) thereof as a transaction by an issuer not involving any public offering.
| Item 7.01 | Regulation FD Disclosure. |
On September 10, 2026, Magnolia issued a press release announcing the closing of the Acquisition. The full text of the press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.
The information furnished pursuant to this Item 7.01 (including Exhibit 99.1) shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any filings under the Securities Act, unless specifically identified therein as being incorporated therein by reference. You should not assume that the information contained herein or the accompanying exhibits is accurate as of any date other than the date of each such document. Our business, financial condition, results of operations, prospects and assumptions that were utilized may have changed since those dates.
| Item 9.01 | Financial Statements and Exhibits. |
(a) Financial statements of businesses acquired.
The audited financial statements of Seller as of and for the years ended December 31, 2025 and 2024 are attached hereto as Exhibits 99.2 and are incorporated herein by reference. The unaudited condensed financial statements of Seller as of and for the three and six months ended June 30, 2026 and 2025 are filed herewith and attached hereto as Exhibits 99.3 and are incorporated herein by reference.
(b) Pro forma financial information.
The unaudited pro forma combined financial information of Magnolia as of and for the six months ended June 30, 2026 and for the year ended December 31, 2025 is filed herewith and attached hereto as Exhibit 99.4 and is incorporated herein by reference.
| 3 |
(d) Exhibits.
| Exhibit Number | Description | |
| 2.1 | Purchase and Sale Agreement, dated as of July 19, 2026 by and among Magnolia Oil & Gas Corporation and Magnolia Oil & Gas Operating LLC, as buyers, and WildFire Energy I LLC, as seller (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 20, 2026). | |
| 4.1 | Indenture, dated as of September 26, 2024, among WildFire Intermediate Holdings, LLC, each of the guarantors party thereto and U.S. Bank Trust Company, National Association. | |
| 4.2 | First Supplemental Indenture, dated as of September 10, 2026, among Magnolia Oil & Gas Operating LLC, the guarantor party thereto and U.S. Bank Trust Company, National Association. | |
| 4.3 | First Supplemental Indenture, dated as of September 10, 2026, among Magnolia Midstream LLC and Regions Bank. | |
| 4.4 | First Supplemental Indenture, dated as of September 10, 2026, among Magnolia Midstream LLC and Regions Bank. | |
| 4.5 | Registration Rights Agreement, dated as of September 10, 2026, by and among Magnolia Oil & Gas Corporation and WildFire Energy I LLC. | |
| 23.1 | Consent of Grant Thornton LLP, independent auditors for Seller, dated September 14, 2026. | |
| 99.1 | Press Release issued September 10, 2026. | |
| 99.2 | Audited Financial Statements of Seller as of and for the years ended December 31, 2025 and 2024 (incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 20, 2026). | |
| 99.3 | Unaudited Condensed Financial Statements of Seller as of and for the three and six months ended June 30, 2026 and 2025. | |
| 99.4 | Unaudited Pro Forma Financial Information of Magnolia as of and for the six months ended June 30, 2026 and for the year ended December 31, 2025. | |
| 104 | Cover Page Interactive Data File (formatted as inline XBRL). |
| 4 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: September 14, 2026 | MAGNOLIA OIL & GAS CORPORATION | |
| By: | /s/ Timothy D. Yang | |
| Name: | Timothy D. Yang | |
| Title: | Executive Vice President, Chief Legal and Commercial Officer, Corporate Secretary and Land | |
Exhibit 99.1
Magnolia Oil & Gas Completes Acquisition of WildFire Energy
Houston, TX, September 10, 2026 – Magnolia Oil & Gas Corporation (NYSE: MGY) announced today that it has completed its previously announced acquisition of WildFire Energy.
About Magnolia Oil & Gas
Magnolia (MGY) is a publicly traded oil and gas exploration and production company with operations primarily concentrated in South Texas in the core of the Eagle Ford Shale and Austin Chalk formations. Magnolia focuses on generating value for shareholders by delivering steady, moderate annual production growth resulting from its disciplined and efficient philosophy toward capital spending. The Company strives to generate high pre-tax operating margins and consistent free cash flow allowing for strong cash returns to our shareholders. For more information, visit www.magnoliaoilgas.com.
Contacts
Investors
Tom Fitter
713-331-4802
tfitter@mgyoil.com
Media
Christina Kuhl
713-314-4849
ckuhl@mgyoil.com
Exhibit 99.3
WildFire Energy I LLC
Condensed Consolidated Interim Financial Statements
For the quarterly period ended June 30, 2026 and 2025
(Unaudited)
Unaudited Condensed Consolidated Interim Financial Statements:
| Condensed Consolidated Interim Balance Sheets | 3 |
| Condensed Consolidated Interim Statements of Operations | 4 |
| Condensed Consolidated Interim Statements of Unit Holders’ Equity | 5 |
| Condensed Consolidated Interim Statements of Cash Flows | 6 |
| Notes to Condensed Consolidated Interim Financial Statements: | 7 |
| 1. Organization and Significant Accounting Policies | 7 |
| 2. Revenue Recognition | 8 |
| 3. Acquisitions and Divestitures | 8 |
| 4. Oil and Natural Gas Properties | 8 |
| 5. Long–Term Debt | 8 |
| 6. Asset Retirement Obligations | 10 |
| 7. Fair Value Measurements | 10 |
| 8. Derivative Financial Instruments | 12 |
| 9. Commitments and Contingencies | 13 |
| 10. Income Taxes | 13 |
| 11. Defined Contribution Plan | 14 |
| 12. Incentive Units | 14 |
| 13. Related Party Transactions | 14 |
| 14. Supplemental Disclosures | 15 |
| 15. Subsequent Events | 16 |
WildFire Energy I LLC
Condensed Consolidated Interim Balance Sheets
(Unaudited, in thousands)
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 30,762 | $ | 2,364 | ||||
| Accounts receivable, net | 151,797 | 96,751 | ||||||
| Inventory | 5,840 | 8,019 | ||||||
| Short-term derivative instruments | 6,103 | 65,083 | ||||||
| Debt issuance cost | 7,246 | 7,212 | ||||||
| Prepaids and other current assets | 5,786 | 6,194 | ||||||
| Total current assets | 207,534 | 185,623 | ||||||
| Oil and natural gas properties, successful efforts method: | ||||||||
| Proved oil and natural gas properties | 4,587,625 | 4,411,357 | ||||||
| Unproved oil and natural gas properties | 11,417 | 11,033 | ||||||
| Other property and equipment | 93,303 | 91,004 | ||||||
| Accumulated depreciation, depletion and impairment | (2,095,208 | ) | (1,957,022 | ) | ||||
| Total property and equipment, net | 2,597,137 | 2,556,372 | ||||||
| Other non-current assets | ||||||||
| Debt issuance costs | 12,467 | 15,984 | ||||||
| Long-term derivative instruments | 4,078 | 48,339 | ||||||
| Right of use lease asset | 5,351 | 6,369 | ||||||
| Other non-current assets | 152 | 152 | ||||||
| TOTAL ASSETS | $ | 2,826,719 | $ | 2,812,839 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 14,417 | $ | 15,158 | ||||
| Revenues and royalties payable | 124,732 | 85,099 | ||||||
| Accrued liabilities | 96,448 | 83,875 | ||||||
| Short-term derivative instruments | 32,159 | — | ||||||
| Asset retirement obligations | 4,462 | 4,462 | ||||||
| Income tax payable | 1,367 | 207 | ||||||
| Current portion of long-term debt | 42,707 | 59,042 | ||||||
| Other current liabilities | 2,475 | 2,390 | ||||||
| Total current liabilities | 318,767 | 250,233 | ||||||
| Non-current liabilities: | ||||||||
| Long-term debt, net | 590,768 | 700,755 | ||||||
| Long-term derivative instruments | 824 | 1,197 | ||||||
| Asset retirement obligations | 126,974 | 122,185 | ||||||
| Deferred income tax | 6,750 | 7,874 | ||||||
| Operating lease liability | 6,976 | 8,024 | ||||||
| Total non-current liabilities | 732,292 | 840,035 | ||||||
| Commitments and Contingencies (Note 9) | ||||||||
| Unit holders’ equity | ||||||||
| Unit holder contributions | 751,574 | 751,574 | ||||||
| Retained earnings | 1,024,086 | 970,997 | ||||||
| Total unit holders’ equity | 1,775,660 | 1,722,571 | ||||||
| TOTAL LIABILITIES AND UNIT HOLDERS’ EQUITY | $ | 2,826,719 | $ | 2,812,839 | ||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| 3 |
WildFire Energy I LLC
Condensed Consolidated Interim Statements of Operations
(Unaudited, in thousands)
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| REVENUES | ||||||||||||||||
| Oil | $ | 334,467 | $ | 196,869 | $ | 583,535 | $ | 413,000 | ||||||||
| Natural gas | 8,016 | 6,689 | 14,909 | 15,469 | ||||||||||||
| NGLs | 13,676 | 9,379 | 22,707 | 20,217 | ||||||||||||
| Other operating revenues | 9,268 | 10,094 | 21,127 | 18,771 | ||||||||||||
| Total operating revenues | 365,427 | 223,031 | 642,278 | 467,457 | ||||||||||||
| OPERATING COSTS AND EXPENSES | ||||||||||||||||
| Lease operating expenses | 33,304 | 29,628 | 62,127 | 60,176 | ||||||||||||
| Gathering, processing and transportation expense | 87 | 84 | 195 | 198 | ||||||||||||
| Taxes other than income | 23,872 | 18,183 | 43,731 | 37,526 | ||||||||||||
| Other operating expenses | 4,554 | 5,705 | 11,031 | 8,548 | ||||||||||||
| Depreciation, depletion, amortization and accretion | 71,950 | 64,470 | 142,970 | 127,508 | ||||||||||||
| Exploration expenses | 485 | 2,599 | 488 | 3,032 | ||||||||||||
| Transaction costs | 1,783 | 40 | 1,783 | 40 | ||||||||||||
| General and administrative expenses | 6,747 | 6,788 | 14,298 | 13,203 | ||||||||||||
| Total operating costs and expenses | 142,782 | 127,497 | 276,623 | 250,231 | ||||||||||||
| Income from operations | 222,645 | 95,534 | 365,655 | 217,226 | ||||||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Gain (loss) on derivative instruments | 43,867 | 94,032 | (229,169 | ) | 94,158 | |||||||||||
| Interest expense | (16,541 | ) | (21,350 | ) | (34,731 | ) | (43,548 | ) | ||||||||
| Other income | 525 | 103 | 619 | 383 | ||||||||||||
| Total other income (expense) | 27,851 | 72,785 | (263,281 | ) | 50,993 | |||||||||||
| Income before income taxes | 250,496 | 168,319 | 102,374 | 268,219 | ||||||||||||
| Income tax expense | (1,440 | ) | (1,363 | ) | (285 | ) | (2,244 | ) | ||||||||
| Net income | $ | 249,056 | $ | 166,956 | $ | 102,089 | $ | 265,975 | ||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| 4 |
WildFire Energy I LLC
Condensed Consolidated Interim Statements of Unit Holders’ Equity
(Unaudited, in thousands)
| Unit holders’ contributions | Retained earnings | Total unit holders’ equity | ||||||||||
| Balance, December 31, 2025 | 751,574 | 970,997 | 1,722,571 | |||||||||
| Unit holders’ contributions | - | - | - | |||||||||
| Unit holders’ distributions | - | (49,000 | ) | (49,000 | ) | |||||||
| Net loss | - | (146,967 | ) | (146,967 | ) | |||||||
| Balance, March 31, 2026 | 751,574 | 775,030 | 1,526,604 | |||||||||
| Unit holders’ contributions | - | - | - | |||||||||
| Unit holders’ distributions | - | - | - | |||||||||
| Net income | - | 249,056 | 249,056 | |||||||||
| Balance, June 30, 2026 | 751,574 | 1,024,086 | 1,775,660 | |||||||||
| Unit holders’ contributions | Retained earnings | Total unit holders’ equity | ||||||||||
| Balance, December 31, 2024 | $ | 751,574 | $ | 665,395 | $ | 1,416,969 | ||||||
| Unit holders’ contributions | — | — | — | |||||||||
| Unit holders’ distributions | — | (39,200 | ) | (39,200 | ) | |||||||
| Net income | — | 99,019 | 99,019 | |||||||||
| Balance, March 31, 2025 | 751,574 | 725,214 | 1,476,788 | |||||||||
| Unit holders’ contributions | — | — | — | |||||||||
| Unit holders’ distributions | — | (39,200 | ) | (39,200 | ) | |||||||
| Net income | — | 166,956 | 166,956 | |||||||||
| Balance, June 30, 2025 | 751,574 | 852,970 | 1,604,544 | |||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| 5 |
WildFire Energy I LLC
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited, in thousands)
| Six months ended | ||||||||
| June 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 102,089 | $ | 265,975 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation, depletion, amortization and accretion | 142,970 | 127,508 | ||||||
| Write-off expired oil and natural gas leases | 3 | 1,516 | ||||||
| (Gain) loss on derivative instruments | 229,169 | (94,158 | ) | |||||
| Net cash paid in settlement of commodity derivatives contracts | (74,096 | ) | (458 | ) | ||||
| Settlements paid for asset retirement obligations | (883 | ) | (811 | ) | ||||
| Lease amortization | 9 | 161 | ||||||
| Amortization of debt issuance costs | 4,915 | 7,302 | ||||||
| Amortization of deferred acquisition payment | 2,476 | 4,396 | ||||||
| Deferred income tax | (1,124 | ) | 1,389 | |||||
| Changes in assets and liabilities: | ||||||||
| Increase in accounts receivable | (61,344 | ) | (13,086 | ) | ||||
| Decrease (increase) in prepaid expenses | 327 | (1,954 | ) | |||||
| Decrease in inventory | 2,180 | 1,644 | ||||||
| Increase in accounts payable | 44,276 | 15,822 | ||||||
| Decrease in accrued liabilities | (16,766 | ) | (20,197 | ) | ||||
| Net cash provided by operating activities | 374,201 | 295,049 | ||||||
| Cash flows from investing activities: | ||||||||
| Leasehold acquisition | (1,059 | ) | (265 | ) | ||||
| Proved property acquisition | (474 | ) | (15,174 | ) | ||||
| Drilling and development capital expenditures | (162,818 | ) | (128,760 | ) | ||||
| Other property and equipment expenditures | (2,387 | ) | (1,743 | ) | ||||
| Sales of property and equipment | 38 | — | ||||||
| Net cash used in investing activities | (166,700 | ) | (145,942 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Advances on revolving credit facility | 511,000 | 404,000 | ||||||
| Payments on revolving credit facility | (581,000 | ) | (424,000 | ) | ||||
| Payment of deferred acquisition costs | (60,000 | ) | (60,000 | ) | ||||
| Cash paid for deferred financing costs | (103 | ) | (122 | ) | ||||
| Unit holders’ distributions | (49,000 | ) | (78,400 | ) | ||||
| Net cash used in financing activities | (179,103 | ) | (158,522 | ) | ||||
| Net increase (decrease) in cash | 28,398 | (9,415 | ) | |||||
| Cash at beginning of period | 2,364 | 12,009 | ||||||
| Cash at end of period | $ | 30,762 | $ | 2,594 | ||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| 6 |
WildFire Energy I LLC
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
1. Organization and Significant Accounting Policies
Organization
WildFire Energy I LLC, a Delaware limited liability company (“WildFire” and together with its consolidated subsidiaries, the “Company”) is an independent energy company focused on the acquisition, exploration and production of oil and natural gas properties in the United States, primarily targeting the Eagle Ford, Woodbine and Austin Chalk formation in East Texas, through the application of modern technology and production optimization. The Company’s operations are primarily in the upstream segment of the oil and natural gas industry.
As a holding company, WildFire has no operations and conducts all of its business through its consolidated direct wholly owned subsidiary, WildFire Intermediate Holdings LLC, and its consolidated indirect wholly owned subsidiary WildFire Energy Operating LLC.
Basis of Presentation
The unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting. Accordingly, certain disclosures normally included in our annual audited financial statements have been omitted. The condensed consolidated interim financial statements and related notes included in this report should be read in conjunction with the consolidated financial statements and related notes included in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2025. Except as disclosed herein, there have been no material changes to the information disclosed in the notes to the audited consolidated financial statements as of and for the year ended December 31, 2025.
The condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries after elimination of intercompany transactions and balances. WildFire’s sole material assets consist of ownership interests in its consolidated wholly owned subsidiary, WildFire Intermediate Holdings LLC, and there is no material difference of the operations, cash flows, material assets or liabilities between WildFire and WildFire Intermediate Holdings, LLC.
The accompanying unaudited condensed consolidated interim financial statements, in management’s opinion, reflect all necessary adjustments for the fair presentation of its financial positions, results of operations and cash flows for the periods presented. Such adjustments are of a normal, recurring nature. The consolidated balance sheet as of December 31, 2025, was derived from the audited consolidated financial statements.
Recent Accounting Pronouncements
In March 2024, the FASB issued ASU 2024-01, Compensation-Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards, which provides illustrative guidance to help entities determine whether profits interest and similar awards should be accounted for as share-based payment arrangements within the scope of ASC 718, Compensation-Stock Compensation. The Company adopted this standard on January 1, 2026. The adoption of this guidance did not have a material impact on the Company’s financial statements or disclosures, as the Company’s existing accounting for incentive units is consistent with the clarified scope.
In November 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which centralizes and clarifies interim disclosure requirements under GAAP. The Update provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to report events occurring since the most recent annual period that have a material impact on the entity, regardless of whether such disclosures are specifically listed in Topic 270. Additionally, the amendments clarify the form and content of interim financial statements to ensure reporting consistency. For the Company, the amendments are effective for interim reporting periods within annual reporting periods beginning after December 15, 2028, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this guidance on its financial statement disclosures.
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2. Revenue Recognition
The Company’s revenues are comprised of revenue from customers and include the sale of oil, natural gas, NGLs and other operating revenues. The Company believes that the disaggregation of revenue into these four major categories, as presented in the condensed consolidated interim statements of operations, appropriately depicts the nature of each revenue stream. The Company’s “Accounts receivable, net” balance consist mainly of trade receivables from oil and natural gas sales, joint interest billing due from owners, trade receivables from sand mine operations and other receivables. Trade receivables from oil and natural gas sales totaled $143.3 million as of June 30, 2026 and $85.1 million as of December 31, 2025. For further detail regarding the Company’s revenue recognition policies, refer to Note 1 - Organization and Summary of Significant Accounting Policies included in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2025.
3. Acquisitions and Divestitures
2026 Bolt-on Asset Acquisitions
During the six months ended June 30, 2026, WildFire completed two acquisitions of oil and natural gas acreage for a total combined purchase price of approximately $0.7 million. These transactions were accounted for as asset acquisitions in accordance with ASC Topic 805, Business Combinations.
2025 Bolt-on Asset Acquisitions
During 2025, WildFire completed five bolt-on acquisitions of oil and natural gas properties for a cumulative adjusted purchase price of approximately $4.1 million. These transactions were recorded as asset acquisitions in accordance with ASC Topic 805, Business Combinations.
4. Oil and Natural Gas Properties
For the three and six months ended June 30, 2026, depletion expense for oil and gas producing property and related equipment were $68.7 million and $136.6 million, respectively. For the three and six months ended June 30, 2025, depletion expense for oil and gas producing property and related equipment were $61.7 million and $122.0 million, respectively.
5. Long–Term Debt
Long term debt consisted of the following as of June 30, 2026 and December 31, 2025 (in thousands):
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Current portion of deferred acquisition costs | $ | 42,707 | $ | 59,042 | ||||
| Current portion of long-term debt | $ | 42,707 | $ | 59,042 | ||||
| Revolving credit facility | $ | — | $ | 70,000 | ||||
| 7.50% Senior Notes due 2029, net, 8.03% effective rate | 590,768 | 589,567 | ||||||
| Deferred acquisition costs, 7.26% effective rate | — | 41,188 | ||||||
| Long-term debt | $ | 590,768 | $ | 700,755 | ||||
| Total debt | $ | 633,475 | $ | 759,797 | ||||
Total interest expense incurred for the three and six months ended June 30, 2026 were $16.5 million and $34.7 million, respectively, net of capitalized interest of $0.5 million and $0.9 million, respectively. Total interest expense incurred for the three and six months ended June 30, 2025 were $21.4 million and $43.5 million, respectively, net of capitalized interest of $0.7 million and $1.2 million, respectively.
Wildfire Revolving Credit Facility
The Company has a credit agreement with a syndicate of banks that provides for a secured revolving credit facility, maturing on March 19, 2029 (the “Credit Agreement”). As of June 30, 2026, the Credit Agreement had a borrowing base and an elected commitment of $1.5 billion. As of June 30, 2026, the Company had no borrowings outstanding and $1.5 billion in available borrowing capacity under the revolving credit facility.
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The Credit Agreement contains restrictive covenants and requires the Company to maintain compliance with certain financial ratios. The Company was in compliance with the Credit Agreement’s covenants and the applicable financial ratios as of June 30, 2026 and December 31, 2025. Refer to Note 7 - Long-Term Debt included in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2025 for more details on the Company’s Credit Agreement.
For the three and six months ended June 30, 2026, interest expense and commitment fees incurred on the revolving credit facility were $4.3 million and $9.3 million, respectively, net of capitalized interest of $0.5 million and $0.9 million, respectively. These amounts include amortization of deferred financing costs of $1.8 million and $3.6 million for the three and six months ended June 30, 2026, respectively. For the three and six months ended June 30, 2026, the weighted average interest rate on borrowings under the revolving credit facility averaged 5.98% and 8.08% per annum, respectively, which excluded commitment fees and amortization of deferred financing costs.
For the three and six months ended June 30, 2025, interest expense and commitment fees incurred on the revolving credit facility were $9.7 million and $17.9 million, respectively, net of capitalized interest of $0.7 million and $1.2 million, respectively. These amounts include amortization of deferred financing costs of $4.3 million and $7.3 million for the three and six months ended June 30, 2025, respectively. For the three and six months ended June 30, 2025, the weighted average interest rate on borrowings under the revolving credit facility averaged 6.94% and 6.95% per annum, respectively, which excluded commitment fees and amortization of deferred financing costs.
7.5% Unsecured Senior Notes due 2029
On September 26, 2024, WildFire issued $600 million aggregate principal amount of unsecured 7.5% senior notes, maturing on October 15, 2029 (the “Notes”) for net proceeds of $588.0 million, after deducting commissions and transaction costs (the “Notes Offering”).
In connection with the completion of the Notes Offering, WildFire, entered into an indenture, dated as of September 26, 2024 (the “Indenture”), among WildFire, its subsidiaries (“Guarantors”), and U.S. Bank Trust Company, National Association, as Trustee.
In connection with the offering, the Company incurred commissions and transaction costs of approximately $13.3 million. These costs are capitalized and amortized using the effective interest rate method over the term of the Notes and are included in the condensed consolidated interim statements of operations. The unamortized portion of these deferred financing costs is included as a reduction to the carrying value of the Notes. Refer to Note 7 - Long-Term Debt included in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2025 for more details on the Company’s unsecured senior notes.
For the three and six months ended June 30, 2026, total interest expense associated with the notes, including the amortization of commissions and issuance costs, were $11.9 million and $23.7 million, respectively. For the three and six months ended June 30, 2025, total interest expense associated with the notes, including the amortization of commissions and issuance costs, were $10.7 million and $22.5 million, respectively.
Deferred Acquisition Costs
In connection to the Chesapeake Acquisition, the Company recognized a debt obligation for deferred payments of $60 million due on each of March 1 of 2024, 2025 and 2026, and $45 million due on March 1, 2027. These payments were recorded at their present value, upon the acquisition close date. The present value of the deferred payments was calculated using an appropriate discount rate, reflecting the time value of money. Subsequent to the initial recognition, the balances are being accreted to their face value using the effective interest method, and an interest expense is recognized in the statement of operations. Any changes in the carrying amount of the debt due to accretion are recognized as interest expense in the period incurred. For the three and six months ended June 30, 2026, interest expense incurred on the deferred acquisition costs were $0.8 million and $2.5 million, respectively. For the three and six months ended June 30, 2025, interest expense incurred on the deferred acquisition costs were $1.7 million, and $4.4 million, respectively.
Pursuant to the terms of the Chesapeake Acquisition agreement, the remaining scheduled payments will accelerate and become immediately due upon a change in control. In connection with the definitive purchase and sale agreement entered into by the Company, the remaining $45 million deferred payment is expected to accelerate upon the close of the transaction. See Note 15 - Subsequent Events for further details regarding the pending purchase and sale agreement.
| 9 |
6. Asset Retirement Obligations
The Company’s asset retirement obligations represent the present value of estimated future costs associated with the plugging and abandonment of oil and natural gas wells, removal of equipment and facilities from leased acreage, and land restoration in accordance with applicable local, state and federal laws. The Company determines its asset retirement obligation amounts by calculating the present value of the estimated future cash outflows associated with its plug and abandonment obligations. The associated asset retirement costs are capitalized as part of the carrying amount of proved properties. Subsequent to initial measurement, asset retirement obligations are required to be accreted each period. The following table provides a reconciliation of the Company’s asset retirement obligations (in thousands):
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Asset retirement obligation, January 1 | $ | 126,647 | $ | 109,388 | ||||
| Liabilities incurred for new wells and facilities construction | 954 | 9,565 | ||||||
| Liabilities incurred for acquired wells | — | 2,358 | ||||||
| Reduction due to plugged and abandoned wells | (882 | ) | (1,635 | ) | ||||
| Reduction due to sold wells | (17 | ) | (62 | ) | ||||
| Revision of estimates | — | (1,298 | ) | |||||
| Accretion | 4,734 | 8,331 | ||||||
| Asset retirement obligation, end of period | $ | 131,436 | $ | 126,647 | ||||
7. Fair Value Measurements
The Company categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows:
Level 1 – Unadjusted, quoted Prices in active markets for Identical assets or liabilities at the measurement date.
Level 2 – Inputs, other than quoted prices within Level 1, that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
Level 3 – Valuations that require inputs that are both unobservable and significant to the fair value measurement. Valuation under Level 3 generally involves a significant degree of judgment from management.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The Company reflects transfers between the three levels at the beginning of the reporting period in which the availability of observable inputs no longer justifies classification in the original level. There were no transfers between fair value hierarchy levels during the six months ended June 30, 2026.
Fair Value on a Recurring Basis
Derivative Financial Instruments
Derivative financial instruments are carried at fair value and measured on a recurring basis. The derivative financial instruments consist primarily of fixed price and basis swap agreements with a limited amount of Henry Hub gas collars. The Company’s commodity price hedges are valued based on discounted future cash flow models that are primarily based on published forward commodity price curves. These inputs are designated as Level 2 within the valuation hierarchy.
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The fair values of derivative instruments in asset positions include measures of counterparty nonperformance risk, and the fair values of derivative instruments in liability positions include measures of the Company’s nonperformance risk. These measurements were not material to the condensed consolidated interim financial statements. The following table summarizes the fair value of the Company’s financial assets and liabilities, by level within the fair value hierarchy (in thousands):
| June 30, 2026 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Financial assets | ||||||||||||||||
| Derivative asset - current | $ | — | $ | 6,103 | $ | — | $ | 6,103 | ||||||||
| Derivative asset - non-current | — | 4,078 | — | 4,078 | ||||||||||||
| Total financial assets | — | 10,181 | — | 10,181 | ||||||||||||
| Financial liabilities | ||||||||||||||||
| Derivative liability - current | — | 32,159 | — | 32,159 | ||||||||||||
| Derivative liability - non-current | — | 824 | — | 824 | ||||||||||||
| Total financial liabilities | $ | — | $ | 32,983 | $ | — | $ | 32,983 | ||||||||
| December 31, 2025 | ||||||||||||||||
| Financial assets | ||||||||||||||||
| Derivative asset - current | $ | — | $ | 65,083 | $ | — | $ | 65,083 | ||||||||
| Derivative asset - non-current | — | 48,339 | — | 48,339 | ||||||||||||
| Total financial assets | — | 113,422 | — | 113,422 | ||||||||||||
| Financial liabilities | ||||||||||||||||
| Derivative liability - current | — | — | — | — | ||||||||||||
| Derivative liability - non-current | — | 1,197 | — | 1,197 | ||||||||||||
| Total financial liabilities | $ | — | $ | 1,197 | $ | — | $ | 1,197 | ||||||||
Commodity derivative instrument models consider various assumptions, including quoted forward prices for commodities, time value and volatility. These assumptions are observable in the marketplace throughout the full term of the contract, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace, and are therefore designated as Level 2 within the valuation hierarchy. The discount rates used in the fair values of these instruments include a measure of either the Company’s or the counterparty’s nonperformance risk, as appropriate. The Company utilizes its counterparty’s valuations to assess the reasonableness of its own valuations.
Fair Value on a Nonrecurring Basis
The Company applies the provisions of the fair value measurement standard on a non-recurring basis to its non-financial assets and liabilities, including oil and natural gas properties, business combination and asset retirement obligations. These assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value estimation when acquisitions occur or asset retirement obligations are recorded. These are considered Level 3 valuations. See further discussion in Note 3, “Acquisitions and Divestitures”.
Asset retirement obligations are recorded at fair value in the period in which the liability is incurred. Fair value is determined by calculating the present value of estimated future cash flows related to the liability. To estimate the future asset retirement obligation, management must make judgments and estimates regarding the timing and existence of a liability and what constitutes sufficient restoration under the current regulatory requirements. Fair value calculations inherently involve numerous assumptions and judgments such as the ultimate costs, inflation factors, credit-adjusted discount rates, timing of settlement and changes in the legal, regulatory, environmental and political environments.
Items Not Recorded at Fair Value
The carrying amounts reported on the condensed interim consolidated balance sheets for cash, accounts receivable, prepaid expenses, other current assets, accounts payable, revenues and royalties payable, accrued expenses and other current liabilities approximate their fair values.
The Company has not elected to account for its debt instruments at fair value. Borrowing under the revolving credit facility bear interest at floating market rates, therefore the carrying amount and fair value were approximately equal as of June 30, 2026 and December 31, 2025. The 7.5% Unsecured Senior Notes due 2029 had a carrying value of $590.8 million, net of $9.2 million in deferred financing costs, and an estimated fair value of $615.3 million as of June 30, 2026.
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8. Derivative Financial Instruments
The Company is exposed to certain risks relating to its ongoing business operations and uses derivative instruments to manage its commodity price risk.
Commodity Derivative Instruments
The Company may periodically use derivative instruments, such as fixed price swaps, basis swaps, costless collars, and other similar agreements to achieve a more predictable cash flow by reducing its exposure to commodity price volatility. Commodity derivative contracts are thereby used to ensure adequate cash flow to fund the Company’s capital programs and to manage returns on acquisitions and drilling programs. While the use of these instruments limits the downside risk of adverse price changes, their use may also limit future revenues from favorable price changes. The Company does not enter into derivative contracts for speculative or trading purposes. A description of the Company’s derivative financial instruments is provided below:
Fixed price swaps. Derivative instruments designed to establish a fixed price for anticipated future oil and natural gas production.
Basis swaps. Derivative instruments designed to guarantee a price differential for natural gas from a specified delivery point.
Costless collars. Derivative instruments designed to limit the range of natural gas price fluctuations by establishing a floor and a ceiling price, allowing the Company to benefit from favorable market movements while protecting against adverse price declines.
In January 2026, the Company restructured certain of its 2028 crude oil derivative contracts by entering into offsetting purchase contracts and simultaneously executing new crude oil swap contracts for the 2026 calendar year. This transaction was designed to monetize the fair value of the 2028 positions to support 2026 cash flows. The restructuring was completed on a cashless basis and did not result in an other-than-insignificant financing element at inception under ASC 815. Accordingly, the restructured contracts continue to be recognized at fair value on the condensed consolidated interim balance sheets, with changes in fair value recognized in earnings and all associated cash settlements classified within operating activities in the condensed consolidated interim statements of cash flows.
The derivative instruments below are not formally designated for hedge accounting treatment. The Company had the following open crude oil and natural gas derivative contracts as of June 30, 2026:
| 2026 | 2027 | 2028 | 2029 | |||||||||||||
| Crude Oil Derivative Contracts: | ||||||||||||||||
| Fixed price swap contracts | ||||||||||||||||
| Volume (Bbl) | 4,707,175 | 5,810,016 | — | — | ||||||||||||
| Weighted-average fixed price | $ | 64.18 | $ | 65.02 | $ | — | $ | — | ||||||||
| Natural Gas Derivative Contracts: | ||||||||||||||||
| Fixed price swap contracts | ||||||||||||||||
| Volume (MMBtu) | 4,148,609 | 8,399,138 | 4,006,761 | 1,719,975 | ||||||||||||
| Weighted-average fixed price | $ | 4.05 | $ | 3.81 | $ | 3.67 | $ | 3.77 | ||||||||
| Basis swap | ||||||||||||||||
| Volume (MMBtu) | 4,630,959 | 8,445,454 | 3,298,473 | — | ||||||||||||
| Weighted-average fixed price | $ | (0.37 | ) | $ | (0.35 | ) | $ | (0.27 | ) | $ | — | |||||
| Costless Collars | ||||||||||||||||
| Volume (MMBtu) | 95,655 | 46,317 | — | — | ||||||||||||
| Bought Floor | $ | 2.90 | $ | 2.90 | $ | — | $ | — | ||||||||
| Sold Ceiling | $ | 4.85 | $ | 4.85 | $ | — | $ | — | ||||||||
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Balance Sheet Presentation
The Company’s commodity derivatives are measured at fair value and are included in the accompanying condensed consolidated balance sheets as a derivative asset or liability. The Company had a net derivative liability of $22.8 million as of June 30, 2026, and a net derivative asset of $112.2 million as of December 31, 2025. The following table summarizes both: (i) the gross fair value of derivative instruments by the appropriate balance sheet classification when the derivative instruments are subject to netting arrangements and qualify for net presentation in the balance sheet and (ii) the net recorded fair value as reflected on the balance sheet as of June 30, 2026 and December 31, 2025 (in thousands). There was no cash collateral received or pledged associated with our derivative instruments since the counterparties to our derivative contracts are lenders under our collective credit agreements.
| Asset Derivatives | Liability Derivatives | |||||||||||||||||
| June 30, | December 31, | June 30, | December 31, | |||||||||||||||
| Type | Balance Sheet Location | 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Commodity contracts | Short-term derivative instruments | $ | 6,896 | $ | 65,586 | $ | 32,952 | $ | 503 | |||||||||
| Netting arrangements | Short-term derivative instruments | (793 | ) | (503 | ) | (793 | ) | (503 | ) | |||||||||
| Net recorded fair value | $ | 6,103 | $ | 65,083 | $ | 32,159 | $ | — | ||||||||||
| Commodity contracts | Long-term derivative instruments | $ | 5,981 | $ | 49,878 | $ | 2,727 | $ | 2,736 | |||||||||
| Netting arrangements | Long-term derivative instruments | (1,903 | ) | (1,539 | ) | (1,903 | ) | (1,539 | ) | |||||||||
| Net recorded fair value | $ | 4,078 | $ | 48,339 | $ | 824 | $ | 1,197 | ||||||||||
None of the Company’s derivative instruments contain credit-risk-related contingent features. The counterparties to the Company’s derivative contracts are high credit-quality financial institutions that are lenders under the Company’s credit agreement. The Company uses only credit agreement participants to hedge with, since these institutions are secured equally with the holders of the Company’s bank debt, which eliminates the potential need to post collateral when the Company is in a derivative liability position.
Gain & (Loss) on Derivatives
All gains and losses, including changes in the derivative instruments’ fair values, are included as a component of “Other income (expense)” in the condensed consolidated statements of operations. The following table details the gains and losses related to derivative instruments for the three and six months ended June 30, 2026 and 2025 (in thousands):
| Three months ended | Six months ended | |||||||||||||||||
| June 30, | June 30, | |||||||||||||||||
| Statement of Operations Location | 2026 | 2025 | 2026 | 2025 | ||||||||||||||
| Realized cash settlement gains (losses) | Gain (loss) on derivative instruments | $ | (72,925 | ) | $ | 9,918 | $ | (94,142 | ) | $ | 180 | |||||||
| Unrealized mark-to-market derivative gains | Gain (loss) on derivative instruments | $ | 116,792 | $ | 84,114 | $ | (135,027 | ) | $ | 93,978 | ||||||||
9. Commitments and Contingencies
Legal
From time to time, the Company may be involved in various legal proceedings and claims in the ordinary course of business. In management’s opinion, the outcome of any such currently pending legal action will not have a material adverse effect on our financial positions or results of operations.
Environmental and Governmental Regulation
Many aspects of the oil and natural gas industry are extensively regulated by federal, state, and local governments in the area in which the Company has operations. Regulations govern such things as drilling permits, environmental protection and pollution control, spacing of wells, the unitization and pooling of properties, reports concerning operations, royalty rates, and various other matters, including taxation. Oil and natural gas industry legislation and administrative regulations are periodically changed for a variety of political, economic, and other reasons. As of June 30, 2026 and December 31, 2025, the Company has not been fined or cited for any violations of governmental regulations that would have a material adverse effect upon its financial condition.
10. Income Taxes
The Company has calculated a state income tax expense of $1.4 million and $0.3 million for the three and six months ended June 30, 2026, respectively, which included a deferred income tax expense of $0.8 million and a benefit of $1.1 million, respectively. For the three and six months ended June 30, 2025, the Company calculated income tax expense of $1.4 million and $2.2 million, respectively, which included a deferred income tax expense of $0.9 million and $1.4 million, respectively.
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The Company had no significant uncertain tax positions and has not recorded any liabilities as of June 30, 2026. As of June 30, 2026, the Company made no provision for interest or penalties related to uncertain tax positions.
There are currently no federal or state income tax examinations under way and tax returns for the periods ended December 31, 2019 through the current year are still open to examination.
11. Defined Contribution Plan
The Company sponsors a 401(k) defined contribution plan for the benefit of all employees at the date of hire. The plan allows employees to make contributions of their annual compensation up to the annual limits established by the federal government. The Company makes contributions of 6% of an employee’s compensation up to annual limits established by the federal government and employees are fully vested in the employer contribution upon receipt. The Company contributed $0.2 million and $0.4 million for the three and six months ended June 30, 2026, respectively, and $0.2 million and $0.3 million for the three and six months ended June 30, 2025, respectively. These amounts were recorded as “General and administrative, net” on the accompanying condensed consolidated interim statements of operations.
12. Incentive Units
The Limited Liability Company Agreement (the “Company Agreement”) allows for the sharing of gain upon monetization either through a return of capital contributions, plus multiples of capital, through recapitalization, sale or merger or through a return of capital to the unit holders through other means.
The Company’s Agreement allows for the sharing of gain upon monetization through Series B units (“incentive units”). From time to time, the Board of Directors has and may issue incentive units in consideration of services rendered by employees. The payout is generally dependent upon monetization achieved by the incentive unit holders’, with payments in the form of cash.
The amount of participation by incentive unit holders can vary depending upon the level of monetization achieved by the unit holders. The incentive units are being accounted for as liability-classified awards as achievement of the payout conditions are required for settlement of such awards by transferring cash to the incentive unit holder. Compensation cost is recognized only if the performance condition is probable of being satisfied at each reporting date.
For the three months ended June 30, 2026, the Board of Directors did not authorize any cash distributions to unitholders, while cash distributions authorized as a return of contributed capital were $49.0 million for the six months ended June 30, 2026. For the three and six months ended June 30, 2025, authorized cash distributions were $39.2 million and $78.4 million, respectively. In connection with these distributions, the Board of Directors authorized special advance distributions to incentive unitholders of $1.0 million for the six months ended June 30, 2026, and $0.8 million and $1.6 million for the three and six months ended June 30, 2025, respectively, which were recorded as compensation expense.
13. Related Party Transactions
The Company has not identified any related party transactions during the six months ended June 30, 2026 and 2025.
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14. Supplemental Disclosures
Accounts Receivable
The following table summarizes the Company’s accounts receivable as of June 30, 2026 and December 31, 2025 (in thousands):
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Accrued oil and natural gas sales, net | $ | 143,298 | $ | 85,112 | ||||
| Joint interest billing | 1,703 | 1,890 | ||||||
| Receivables from sand mine operations | 6,179 | 2,940 | ||||||
| Receivables from midstream operations | 102 | 103 | ||||||
| Accrued derivative contract settlement | 704 | 7,002 | ||||||
| Other receivables | 173 | 66 | ||||||
| Allowance for credit losses | (362 | ) | (362 | ) | ||||
| Accounts receivable, net | $ | 151,797 | $ | 96,751 | ||||
The following table reflects the Company’s beginning and ending balances of its accounts receivables from purchasers of its oil, natural gas and NGLs for the six months ended June 30, 2026 and the year ended December 31, 2025 (in thousands):
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Beginning balance of accounts receivable from purchasers of oil, natural gas and NGLs | $ | 85,112 | $ | 104,508 | ||||
| Ending balance of accounts receivable from purchasers of oil, natural gas and NGLs | $ | 143,298 | $ | 85,112 | ||||
Revenue and Royalties Payable
The following table summarizes the Company’s revenues held in suspense and royalties payable as of June 30, 2026 and December 31, 2025 (in thousands):
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Revenue held in suspense | $ | 71,577 | $ | 55,488 | ||||
| Revenue and royalties payable | 53,105 | 29,414 | ||||||
| Severance tax payable | 50 | 197 | ||||||
| Total revenue and royalties payable | $ | 124,732 | $ | 85,099 | ||||
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Accrued Liabilities
The following table summarizes the Company’s current accrued liabilities as of June 30, 2026 and December 31, 2025 (in thousands):
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Accrued capital expenditures | $ | 45,287 | $ | 29,696 | ||||
| Accrued lease operating expenses | 6,285 | 6,217 | ||||||
| Accrued interest | 10,722 | 10,126 | ||||||
| Accrued ad valorem taxes | 15,654 | 31,530 | ||||||
| Accrued general and administrative expense | 1,239 | 407 | ||||||
| Accrued sand mine operating expenses | 1,653 | 1,474 | ||||||
| Accrued derivative contract settlement | 14,424 | 676 | ||||||
| Accrued payroll expenses | 839 | 2,628 | ||||||
| Other | 345 | 1,121 | ||||||
| Total accrued liabilities | $ | 96,448 | $ | 83,875 | ||||
Supplemental Cash Flow Information
The following table provides supplemental disclosures of cash flow information for the six months ended June 30, 2026 and 2025 (in thousands):
| For the six months ended | ||||||||
| June 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash paid for: | ||||||||
| Interest, net of capitalized interest | $ | (26,743 | ) | $ | (34,550 | ) | ||
| Capitalized interest | (875 | ) | (1,214 | ) | ||||
| Interest paid | $ | (27,618 | ) | $ | (35,764 | ) | ||
| Income taxes | $ | (249 | ) | $ | (1,596 | ) | ||
| Non-cash investing activities: | ||||||||
| Change in accrued capital expenditures | $ | 15,591 | $ | 11,048 | ||||
| Additions to right of use assets | $ | 110 | $ | 3,240 | ||||
15. Subsequent Events
The Company evaluated subsequent events occurring after June 30, 2026 through September 14, 2026, the date our condensed consolidated interim financial statements were available for issuance.
On July 19, 2026, WildFire Energy I LLC (“Seller”) entered into a Purchase and Sale Agreement (the “Sale Agreement”) with Magnolia Oil and Gas Corporation (“Buyer”), pursuant to which Buyer agreed to purchase from Seller 100% of the issued and outstanding limited liability company interests (the “Acquired Interests”) of WildFire Intermediate Holdings, LLC (“Target”), for approximately $4.06 billion inclusive of the Target’s debt and subject to customary purchase price adjustments.
| 16 |
Exhibit 99.4
Magnolia Oil & Gas Operating LLC
Unaudited Pro Forma Condensed Combined Financial Information
On September 10, 2026, Magnolia Oil & Gas Corporation, a Delaware corporation (“Magnolia” or the “Company”), and Magnolia Oil & Gas Operating LLC, a Delaware limited liability company (“Buyer”), completed the previously announced purchase and sale agreement (the “Agreement” or the “Transaction”) with WildFire Energy I LLC, a Delaware limited liability company (“Seller”), pursuant to which Buyer agreed to purchase from Seller 100% of the issued and outstanding limited liability company interests (the “Acquisition”) of WildFire Intermediate Holdings, LLC (“WildFire”).
Total consideration, estimated as of August 31, 2026, is approximately $4.1 billion, subject to customary closing and post-closing adjustments. Consideration consists of 32.2 million shares of Magnolia common stock, par value $0.0001 per share (“Class A Common Stock”), and $2.7 billion in cash paid to WildFire, as well as the assumption of $600 million of WildFire’s outstanding 7.500% Senior Notes due 2029. The cash consideration paid to WildFire consists of (i) $271.8 million of cash on hand, (ii) $1.2 billion from the Class A Common Stock offering, net of offering expenses (“Equity Offering”), (iii) $661.8 million drawn under Magnolia’s revolving credit facility, net of debt issuance costs, and (iv) $490.6 million from the issuance of new 6.625% senior notes, net of debt issuance costs ((iii) and (iv) together “Debt Financing”). On a pro forma basis and giving effect to the Transaction, Magnolia shareholders will own approximately 88% of the Company’s outstanding equity, and WildFire will own approximately 12%.
The acquisition of WildFire has been assumed to be accounted for as a business combination in accordance with Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”). The assets acquired and liabilities assumed were recorded at their respective fair values as of the closing date. Any transaction costs were assumed to be expensed as incurred in accordance with ASC 805. The unaudited pro forma condensed combined financial statements presented herein have been prepared to reflect the transaction accounting adjustments to Magnolia’s historical condensed consolidated financial information.
The Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2026 gives effect to the Transaction, together with Equity Offering and Debt Financing, as if it had been completed on June 30, 2026. The Unaudited Pro Forma Condensed Combined Statements of Operations for the six months ended June 30, 2026 and the year ended December 31, 2025 gives effect to the Transaction as if it had been completed on January 1, 2025. The unaudited pro forma condensed combined financial information has been compiled in a manner consistent with the accounting policies adopted by Magnolia.
These pro forma adjustments are described in more detail in the accompanying notes to the unaudited pro forma condensed combined financial statements. Additional assumptions and estimates underlying the pro forma adjustments are also described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed combined financial statements.
| 1 |
The unaudited pro forma condensed combined financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or the consolidated financial position of Magnolia would have been had the Transaction occurred on the dates noted above, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position. Future results may vary significantly from the results reflected because of various factors. In Magnolia’s opinion, all adjustments that are necessary to present fairly the unaudited pro forma condensed combined financial information have been made.
The unaudited pro forma condensed combined financial information does not reflect the benefits of potential cost savings or the costs that may be necessary to achieve such savings, opportunities to increase revenue generation or other factors that may result from the Transaction and, accordingly, does not attempt to predict or suggest future results.
The unaudited pro forma financial statements have been developed from and should be read in conjunction with:
| · | The audited consolidated financial statements and accompanying notes of Magnolia contained in Magnolia’s Annual Reports on Form 10-K for the years ended December 31, 2025 and 2024; |
| · | The unaudited consolidated financial statements and accompanying condensed notes contained in Magnolia’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2026; |
| · | The audited consolidated financial statements and related notes of WildFire for the years ended December 31, 2025 and 2024, which are included elsewhere in this filing; and |
| · | The unaudited consolidated financial statements and related notes of WildFire for the quarterly period ended June 30, 2026, which are included elsewhere in this filing. |
| 2 |
Magnolia Oil & Gas Operating, LLC
Unaudited Pro Forma Condensed Combined Balance Sheet
As of June 30, 2026
| Transaction Accounting Adjustments | ||||||||||||||||||||||
| Historical | Conforming and | WildFire | Debt | Pro Forma | ||||||||||||||||||
| Magnolia | WildFire | Reclassifications | Acquisition | Financing | Combined | |||||||||||||||||
| ASSETS | ||||||||||||||||||||||
| CURRENT ASSETS: | ||||||||||||||||||||||
| Cash and cash equivalents | $ | 295,938 | $ | 30,762 | $ | — | $ | 1,265,000 | (g) | $ | 674,211 | (i) | $ | 54,928 | ||||||||
| (2,650,000 | )(g) | 500,000 | (i) | |||||||||||||||||||
| (39,211 | )(g) | (21,772 | )(i) | |||||||||||||||||||
| Trade receivables | 159,465 | — | 150,094 | (a) | (152 | )(k) | — | 309,407 | ||||||||||||||
| Account receivable, net | — | 151,797 | (151,797 | )(a) | — | — | — | |||||||||||||||
| Joint interest receivables | 29,742 | — | 1,703 | (a) | — | — | 31,445 | |||||||||||||||
| Income tax receivable | — | — | — | — | — | — | ||||||||||||||||
| Inventory | — | 5,840 | (5,840 | )(a) | — | — | — | |||||||||||||||
| Short-term derivative instruments | — | 6,103 | — | — | — | 6,103 | ||||||||||||||||
| Debt issuance costs | — | 7,246 | — | (7,246 | )(f) | — | — | |||||||||||||||
| Prepaid and other current assets | — | 5,786 | (5,786 | )(a) | — | — | — | |||||||||||||||
| Other current assets | 3,443 | — | 5,840 | (a) | — | — | 15,069 | |||||||||||||||
| 5,786 | (a) | |||||||||||||||||||||
| Total current assets | 488,588 | 207,534 | — | (1,431,609 | ) | 1,152,439 | 416,952 | |||||||||||||||
| PROPERTY, PLANT AND EQUIPMENT | ||||||||||||||||||||||
| Oil and natural gas properties | 5,359,857 | — | 11,417 | (a) | (11,417 | )(b) | — | 9,622,351 | ||||||||||||||
| 4,587,625 | (a) | (4,587,625 | )(b) | |||||||||||||||||||
| — | 4,154,742 | (c) | ||||||||||||||||||||
| — | 107,752 | (d) | ||||||||||||||||||||
| Unproved oil and natural gas properties | — | 11,417 | (11,417 | )(a) | — | — | — | |||||||||||||||
| Proved oil and natural gas properties | — | 4,587,625 | (4,587,625 | )(a) | — | — | — | |||||||||||||||
| Other property and equipment | — | 93,303 | (93,303 | )(a) | — | — | — | |||||||||||||||
| Other | 23,056 | — | 93,303 | (a) | (11,355 | )(j) | — | 52,494 | ||||||||||||||
| (52,510 | )(b) | |||||||||||||||||||||
| Accumulated depreciation, depletion and impairment | — | (2,095,208 | ) | 2,095,208 | (a) | — | — | — | ||||||||||||||
| Accumulated depreciation, depletion and amortization | (2,783,748 | ) | — | (2,095,208 | )(a) | 2,095,208 | (b) | — | (2,783,748 | ) | ||||||||||||
| Total property, plant and equipment, net | 2,599,165 | 2,597,137 | — | 1,694,795 | — | 6,891,097 | ||||||||||||||||
| OTHER ASSETS | ||||||||||||||||||||||
| Debt issuance cost | — | 12,467 | — | (12,467 | )(f) | — | — | |||||||||||||||
| Long-term derivative instruments | — | 4,078 | — | — | — | 4,078 | ||||||||||||||||
| Right of use lease assets | — | 5,351 | (5,351 | )(a) | — | — | — | |||||||||||||||
| Other long-term assets | 52,831 | 152 | 5,351 | (a) | — | 12,413 | (i) | 70,747 | ||||||||||||||
| TOTAL ASSETS | $ | 3,140,584 | $ | 2,826,719 | $ | — | $ | 250,719 | $ | 1,164,852 | $ | 7,382,874 | ||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||||||||||
| CURRENT LIABILITIES | ||||||||||||||||||||||
| Accounts payable | $ | 173,062 | $ | 14,417 | $ | 124,732 | (a) | $ | (152 | )(k) | $ | — | $ | 312,059 | ||||||||
| Accrued liabilities | — | 96,448 | (96,448 | )(a) | — | — | — | |||||||||||||||
| Revenues and royalties payable | — | 124,732 | (124,732 | )(a) | — | — | — | |||||||||||||||
| Short-term derivative instruments | — | 32,159 | — | — | — | 32,159 | ||||||||||||||||
| Asset retirement obligations | — | 4,462 | (4,462 | )(a) | — | — | — | |||||||||||||||
| Current portion of long-term debt | — | 42,707 | — | (42,707 | )(h) | — | — | |||||||||||||||
| Income tax payable | — | 1,367 | (1,367 | )(a) | — | — | — | |||||||||||||||
| Other current liabilities | 135,489 | 2,475 | 96,448 | (a) | 54,000 | (e) | — | 294,241 | ||||||||||||||
| 1,367 | (a) | |||||||||||||||||||||
| 4,462 | (a) | |||||||||||||||||||||
| Total current liabilities | 308,551 | 318,767 | — | 11,141 | — | 638,459 | ||||||||||||||||
| LONG-TERM LIABILITIES | ||||||||||||||||||||||
| Long-term debt, net | 393,636 | 590,768 | — | — | 500,000 | (i) | 2,158,488 | |||||||||||||||
| 9,232 | (f) | 674,211 | (i) | |||||||||||||||||||
| — | (9,359 | )(i) | ||||||||||||||||||||
| Long-term derivative instruments | — | 824 | — | — | — | 824 | ||||||||||||||||
| Asset retirement obligations, net of current | 189,293 | 126,974 | — | (23,684 | )(d) | — | 292,583 | |||||||||||||||
| Deferred tax liabilities | 65,109 | — | 6,750 | (a) | (6,750 | )(l) | — | 65,109 | ||||||||||||||
| Deferred income tax | — | 6,750 | (6,750 | )(a) | — | — | — | |||||||||||||||
| Operating lease liability | — | 6,976 | (6,976 | )(a) | — | — | — | |||||||||||||||
| Other long-term liabilities | 37,118 | — | 6,976 | (a) | — | — | 44,094 | |||||||||||||||
| Total long-term liabilities | 685,156 | 732,292 | — | (21,202 | ) | 1,164,852 | 2,561,098 | |||||||||||||||
| EQUITY | ||||||||||||||||||||||
| Unit holder contributions | — | 751,574 | — | (751,574 | )(b) | — | — | |||||||||||||||
| Class A Common Stock | 24 | — | — | 8 | (g) | — | 32 | |||||||||||||||
| Additional paid-in capital | 1,971,371 | — | — | 2,129,643 | (g) | — | 4,061,803 | |||||||||||||||
| (39,211 | )(g) | |||||||||||||||||||||
| Treasury stock, at cost | (1,010,065 | ) | — | — | — | — | (1,010,065 | ) | ||||||||||||||
| Retained earnings | 1,187,102 | 1,024,086 | — | (1,001,891 | )(b) | — | 1,133,102 | |||||||||||||||
| (54,000 | )(e) | |||||||||||||||||||||
| (7,246 | )(f) | |||||||||||||||||||||
| (12,467 | )(f) | |||||||||||||||||||||
| (9,232 | )(f) | |||||||||||||||||||||
| 6,750 | (l) | |||||||||||||||||||||
| Accumulated other comprehensive loss | (1,555 | ) | — | — | — | — | (1,555 | ) | ||||||||||||||
| Total equity | 2,146,877 | 1,775,660 | — | 260,780 | — | 4,183,317 | ||||||||||||||||
| TOTAL LIABILITIES AND EQUITY | $ | 3,140,584 | $ | 2,826,719 | $ | — | $ | 250,719 | $ | 1,164,852 | $ | 7,382,874 | ||||||||||
See Accompanying Notes to the Unaudited Pro Forma Condensed Financial Statements.
| 3 |
Magnolia Oil & Gas Operating, LLC
Unaudited Pro Forma Condensed Combined Statements of Operations
For the Six Months Ended June 30, 2026
| Transaction Accounting Adjustments | ||||||||||||||||||||||
| Historical | Conforming and | WildFire | Debt | Pro Forma | ||||||||||||||||||
| Magnolia | WildFire | Reclassifications | Acquisition | Financing | Combined | |||||||||||||||||
| REVENUES | ||||||||||||||||||||||
| Oil revenues | $ | 631,088 | $ | 583,535 | $ | — | $ | — | $ | — | $ | 1,214,623 | ||||||||||
| Natural gas revenues | 91,469 | 14,909 | — | — | — | 106,378 | ||||||||||||||||
| Natural gas liquids revenues | 114,765 | 22,707 | — | — | — | 137,472 | ||||||||||||||||
| Other operating revenues | — | 21,127 | — | (6,108 | )(g) | — | 15,019 | |||||||||||||||
| Total revenues | 837,322 | 642,278 | — | (6,108 | ) | — | 1,473,492 | |||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||
| Lease operating expense | 96,160 | 62,127 | — | — | — | 158,287 | ||||||||||||||||
| Gathering, transportation and processing | 35,410 | 195 | — | — | — | 35,605 | ||||||||||||||||
| Taxes other than income | 39,144 | 43,731 | — | — | — | 82,875 | ||||||||||||||||
| Exploration expenses | 1,955 | 488 | (485 | )(a) | — | — | 1,958 | |||||||||||||||
| Asset retirement obligations accretion | 3,719 | — | 4,734 | (a) | (1,461 | )(b) | — | 6,992 | ||||||||||||||
| Depreciation, depletion and amortization | 229,874 | — | 138,236 | (a) | 8,267 | (b) | — | 376,377 | ||||||||||||||
| Depreciation, depletion, amortization and accretion | — | 142,970 | (142,970 | )(a) | — | — | — | |||||||||||||||
| General and administrative expenses | 60,595 | 14,298 | — | — | — | 74,893 | ||||||||||||||||
| Transaction costs | 3,200 | 1,783 | (4,983 | )(f) | — | |||||||||||||||||
| Other operating expenses | — | 11,031 | — | — | — | 11,031 | ||||||||||||||||
| Total operating expenses | 470,057 | 276,623 | (485 | ) | 1,823 | — | 748,018 | |||||||||||||||
| OPERATING INCOME | 367,265 | 365,655 | 485 | (7,931 | ) | — | 725,474 | |||||||||||||||
| OTHERE EXPENSE | ||||||||||||||||||||||
| Interest expense, net | (12,724 | ) | (34,731 | ) | — | 12,231 | (h) | (23,597 | )(c) | (76,777 | ) | |||||||||||
| (16,252 | )(c) | |||||||||||||||||||||
| (1,704 | )(c) | |||||||||||||||||||||
| Other income (expense), net | (415 | ) | 619 | (485 | )(a) | — | — | (281 | ) | |||||||||||||
| Gain (loss) on derivative instruments | — | (229,169 | ) | — | — | — | (229,169 | ) | ||||||||||||||
| Total other expense, net | (13,139 | ) | (263,281 | ) | (485 | ) | 12,231 | (41,553 | ) | (306,227 | ) | |||||||||||
| INCOME (LOSS) BEFORE INCOME TAXES | 354,126 | 102,374 | — | 4,300 | (41,553 | ) | 419,247 | |||||||||||||||
| Income tax expense (benefit) | 71,514 | 285 | — | 903 | (d) | (8,726 | )(d) | 63,976 | ||||||||||||||
| NET INCOME (LOSS) | 282,612 | 102,089 | — | 3,397 | (32,827 | ) | 355,271 | |||||||||||||||
| Less: Net income attributable to noncontrolling interest | 1,011 | — | — | — | — | 1,011 | ||||||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON STOCK | 281,601 | 102,089 | — | 3,397 | (32,827 | ) | 354,260 | |||||||||||||||
| NET INCOME (LOSS) PER SHARE OF CLASS A COMMON STOCK | ||||||||||||||||||||||
| Basic | $ | 1.51 | $ | (0.21 | )(e) | $ | 1.30 | |||||||||||||||
| Diluted | $ | 1.51 | $ | (0.21 | )(e) | $ | 1.30 | |||||||||||||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||||||||||||
| Basic | 183,924 | 85,466 | (e) | 269,390 | ||||||||||||||||||
| Diluted | 183,936 | 85,466 | (e) | 269,402 | ||||||||||||||||||
See Accompanying Notes to the Unaudited Pro Forma Condensed Financial Statements.
| 4 |
| Magnolia Oil & Gas Operating, LLC | |||||||||||||||||
| Unaudited Pro Forma Condensed Combined Statements of Operations | |||||||||||||||||
| For the Year Ended December 31, 2025 | |||||||||||||||||
| Transaction Accounting Adjustments | ||||||||||||||||||||||
| Historical | Conforming and | WildFire | Debt | Pro Forma | ||||||||||||||||||
| Magnolia | WildFire | Reclassifications | Acquisition | Financing | Combined | |||||||||||||||||
| REVENUES | ||||||||||||||||||||||
| Oil revenues | $ | 918,027 | $ | 795,358 | $ | — | $ | — | $ | — | $ | 1,713,385 | ||||||||||
| Natural gas revenues | 190,252 | 30,018 | — | — | — | 220,270 | ||||||||||||||||
| Natural gas liquids revenues | 203,566 | 39,564 | — | — | — | 243,130 | ||||||||||||||||
| Other operating revenues | — | 33,187 | — | (10,901 | )(g) | — | 22,286 | |||||||||||||||
| Total revenues | 1,311,845 | 898,127 | — | (10,901 | ) | — | 2,199,071 | |||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||
| Lease operating expense | 186,559 | 119,245 | — | — | — | 305,804 | ||||||||||||||||
| Gathering, transportation and processing | 67,096 | 303 | — | — | — | 67,399 | ||||||||||||||||
| Taxes other than income | 76,452 | 70,501 | — | — | — | 146,953 | ||||||||||||||||
| Exploration expenses | 962 | 6,061 | (1,986 | )(a) | — | — | 5,037 | |||||||||||||||
| Asset retirement obligations accretion | 6,800 | — | 8,331 | (a) | (1,784 | )(b) | — | 13,347 | ||||||||||||||
| Depreciation, depletion and amortization | 437,757 | — | 267,032 | (a) | 1,474 | (b) | — | 706,263 | ||||||||||||||
| Depreciation, depletion, amortization and accretion | — | 275,363 | (275,363 | )(a) | — | — | — | |||||||||||||||
| General and administrative expenses | 97,038 | 29,088 | — | — | — | 126,126 | ||||||||||||||||
| Transaction costs | — | 102 | — | 57,200 | (f) | — | 57,302 | |||||||||||||||
| Other operating expenses | — | 15,506 | — | — | — | 15,506 | ||||||||||||||||
| Total operating expenses | 872,664 | 516,169 | (1,986 | ) | 56,890 | — | 1,443,737 | |||||||||||||||
| OPERATING INCOME | 439,181 | 381,958 | 1,986 | (67,791 | ) | — | 755,334 | |||||||||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||||||||
| Interest expense, net | (21,617 | ) | (82,700 | ) | — | 37,700 | (h) | (47,195 | )(c) | (149,682 | ) | |||||||||||
| (32,505 | )(c) | |||||||||||||||||||||
| (3,365 | )(c) | |||||||||||||||||||||
| Other income (expense), net | (153 | ) | 287 | (1,986 | )(a) | — | — | (1,852 | ) | |||||||||||||
| Gain on derivative instruments | — | 166,816 | — | — | — | 166,816 | ||||||||||||||||
| Total other income (expense), net | (21,770 | ) | 84,403 | (1,986 | ) | 37,700 | (83,065 | ) | 15,282 | |||||||||||||
| INCOME BEFORE INCOME TAXES | 417,411 | 466,361 | — | (30,091 | ) | (83,065 | ) | 770,616 | ||||||||||||||
| Income tax expense | 80,132 | 3,959 | — | (6,319 | )(d) | (17,444 | )(d) | 60,328 | ||||||||||||||
| NET INCOME | 337,279 | 462,402 | — | (23,772 | ) | (65,621 | ) | 710,288 | ||||||||||||||
| Less: Net income attributable to noncontrolling interest | 12,027 | — | — | — | — | 12,027 | ||||||||||||||||
| NET INCOME ATTRIBUTABLE TO CLASS A COMMON STOCK | 325,252 | 462,402 | — | (23,772 | ) | (65,621 | ) | 698,261 | ||||||||||||||
| NET INCOME PER SHARE OF CLASS A COMMON STOCK | ||||||||||||||||||||||
| Basic | $ | 1.73 | $ | 0.82 | (e) | $ | 2.55 | |||||||||||||||
| Diluted | $ | 1.73 | $ | 0.82 | (e) | $ | 2.55 | |||||||||||||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||||||||||||
| Basic | 185,581 | 85,466 | (e) | 271,047 | ||||||||||||||||||
| Diluted | 185,593 | 85,466 | (e) | 271,059 | ||||||||||||||||||
See Accompanying Notes to the Unaudited Pro Forma Condensed Financial Statements.
| 5 |
Magnolia Oil & Gas Operating LLC
Notes to Unaudited Pro Forma Condensed Combined Financial Information
| 1. | Basis of Presentation |
The accompanying unaudited pro forma condensed combined financial statements were prepared based on the historical consolidated financial statements of Magnolia and the historical consolidated financial statements of WildFire. The Transaction has been assumed to be accounted for as a business combination in accordance with ASC 805. The assets acquired and liabilities assumed are estimated at their respective fair values as of June 30, 2026. Any transaction costs were assumed to be expensed as incurred in accordance with ASC 805.
The Unaudited Pro Forma Condensed Combined Statements of Operations for the six months ended June 30, 2026 and the year ended December 31, 2025 were prepared assuming the Transaction occurred on January 1, 2025. The Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2026 was prepared as if the Transaction had occurred June 30, 2026. These pro forma adjustments are described in more detail in the accompanying notes to the unaudited pro forma condensed combined financial statements.
The unaudited pro forma condensed combined financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or the consolidated financial position of Magnolia would have been had the Transaction occurred on the dates noted above, nor are they indicative of future consolidated results of operations or consolidated financial position. Future results may vary significantly from the results reflected in the unaudited pro forma condensed combined financial statement of operations. In Magnolia’s opinion, all adjustments that are necessary to present fairly the unaudited pro forma condensed combined financial information have been made.
| 2. | Consideration and Purchase Price Allocation |
The preliminary allocation of the total purchase price is based upon management’s estimates of, and assumptions related to, the fair value of assets to be acquired and liabilities to be assumed as of June 30, 2026 using currently available information and market data. Because the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates and is therefore incomplete, the final purchase price allocation and the resulting effect on financial position and results of operations may differ significantly from the pro forma amounts included herein. The purchase price allocation will be finalized after closing has occurred, post-close adjustments are determined, and the final valuation of assets acquired and liabilities assumed has been completed.
The preliminary purchase price allocation is subject to change due to several factors, including but not limited to:
| · | Changes in the value of shares of Class A Common Stock of Magnolia up to the close date, which could significantly change the preliminary amount of consideration transferred used in these unaudited pro forma condensed combined financial statements; |
| 6 |
| · | Changes to Magnolia’s assessment as to whether, under ASC 805, the Transaction represents a business combination or asset acquisition, along with changes in estimated direct transaction costs, which could significantly change the preliminary allocation of value to assets acquired and liabilities assumed in these unaudited pro forma condensed combined financial statements; |
| · | Changes in the identified oil and gas properties, specifically related to unevaluated properties not being depleted, which could significantly change the amount of pro forma depletion expense used in these unaudited pro forma condensed combined financial statements; and |
| · | Changes in the estimated fair value of assets acquired and liabilities assumed as of the closing date, which could result from changes in future oil and natural gas commodity prices, reserve estimates, interest rates, as well as other factors, which could significantly change the preliminary values assigned to the assets acquired in these unaudited pro forma condensed combined financial statements. |
The estimated consideration transferred and the fair value of assets acquired and liabilities assumed by Magnolia, as of June 30, 2026, are as follows (in thousands, except shares):
| Consideration: | ||||
| Cash Consideration | $ | 2,650,000 | ||
| Shares of Magnolia Class A Common Stock to be issued | 32,203,000 | |||
| Magnolia Class A Common Stock price at August 31, 2026 | $ | 26.85 | ||
| Common Stock consideration | $ | 864,651 | ||
| Total consideration | $ | 3,514,651 | ||
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| Fair value of assets acquired: | ||||
| Cash and cash equivalents | $ | 30,762 | ||
| Trade receivables | 149,942 | |||
| Joint interest receivables | 1,703 | |||
| Derivative instruments | 10,181 | |||
| Other current assets | 11,626 | |||
| Oil and natural gas properties | 4,262,494 | |||
| Other | 29,438 | |||
| Other long-term assets | 5,503 | |||
| Amounts attributable to assets acquired | $ | 4,501,649 | ||
| Fair value of liabilities assumed: | ||||
| Accounts payable | $ | 138,997 | ||
| Derivative instruments | 32,983 | |||
| Other current liabilities | 100,290 | |||
| Asset retirement obligations | 107,752 | |||
| Long-term debt, net | 600,000 | |||
| Other long-term liabilities | 6,976 | |||
| Amounts attributable to liabilities assumed | $ | 986,998 | ||
| Total identifiable net assets | $ | 3,514,651 | ||
Magnolia believes that up to a 30 percent fluctuation in the market price of its Class A Common Stock is reasonably possible based upon historical price fluctuations. The following table shows the effect of changes in Magnolia’s Class A Common Stock price and the resulting impact on total consideration (in thousands):
| Change in Price of Magnolia Common Shares | Magnolia Common Share Price | Estimated Total Consideration | |||||||
| Increase of 20% | $ | 32.22 | $ | 3,687,581 | |||||
| Increase of 30% | $ | 34.91 | $ | 3,774,046 | |||||
| Decrease of 20% | $ | 21.48 | $ | 3,341,720 | |||||
| Decrease of 30% | $ | 18.80 | $ | 3,255,255 | |||||
The fair value measurements of assets acquired and liabilities assumed are based on inputs that are not observable in the market and therefore represent Level 3 inputs. The fair value of oil and gas properties and asset retirement obligations were measured using the discounted cash flow technique of valuation.
Significant unobservable inputs included future commodity prices adjusted for differentials, projections of estimated quantities of recoverable reserves, forecasted production based on decline curve analysis, estimated timing and amount of future operating and development costs, and a weighted average cost of capital.
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| 3. | Adjustments to Unaudited Pro Forma Condensed Consolidated Balance Sheet and Unaudited Pro Forma Condensed Consolidated Statements of Operations |
The unaudited pro forma condensed combined financial information has been compiled in a manner consistent with the accounting policies adopted by Magnolia. Actual results may differ materially from the assumptions and estimates contained herein.
The pro forma adjustments are based on currently available information and certain estimates and assumptions that Magnolia believes provide a reasonable basis for presenting the significant effects of the Transaction. General descriptions of the pro forma adjustments are provided below.
Unaudited Pro Forma Condensed Combined Balance Sheet
The following adjustments were made in the preparation of the Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2026:
| (a) | Adjustments necessary to reclassify various assets and liabilities to conform to the presentation of Magnolia. |
| · | Current assets: Reclassifications of (i) accounts receivable of $151.8 million to trade receivables of $150.1 million and joint interest receivables of $1.7 million, and (ii) $5.8 million of prepaid expenses and $5.8 million of inventory to other current assets. |
| · | Property, plant and equipment: Reclassification of (i) $11.4 million of unproved oil and gas properties and $4.6 billion of proved oil and gas properties to oil and natural gas properties, (ii) $2.1 billion of accumulated depreciation, depletion and impairment to accumulated depreciation, depletion and amortization, and (iii) $93.3 million of other property and equipment to other. |
| · | Long-term assets: Reclassification of $5.4 million of right of use lease assets to other long-term assets. |
| · | Current liabilities: Reclassification of $124.7 million of revenue and royalties payable to accounts payable, and reclassification of (i) $96.4 million of accrued liabilities, (ii) $4.5 million of asset retirement obligations and (iii) $1.4 million of income tax payable to other current liabilities. |
| · | Long-term liabilities: Reclassification of (i) $6.8 million of deferred income tax to deferred tax liabilities and (ii) $7.0 million of operating lease liability to other long-term liabilities. |
| (b) | Adjustments necessary to remove the historical book basis of proved oil and natural gas properties, unproved oil and natural gas properties, accumulated depreciation, depletion, and impairment, the gross value of WildFire’s pipeline that was included in the estimated fair value of oil and natural gas properties, fixed assets not assumed by Magnolia, as well as the historical book basis of unit holders’ equity of WildFire. |
| (c) | Adjustments necessary to reflect the estimated fair value of proved and unproved oil and natural gas properties. The fair value of proved oil and natural gas properties was estimated using a discounted cash flow approach and strip oil and natural gas prices as of August 31, 2026. |
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| (d) | Adjustments necessary to reflect the estimated fair value of asset retirement obligations assumed as of June 30, 2026. |
| (e) | Adjustment necessary to reflect estimated direct costs for the acquisition of WildFire expected to be incurred subsequent to June 30, 2026. These estimated direct costs will be incurred during the latter part of 2026 and have been retrospectively reflected in the Unaudited Pro Forma Condensed Combined Balance Sheet as though incurred and payable at June 30, 2026. |
| (f) | The outstanding debt of WildFire includes $28.9 million of unamortized debt issuance costs, which will be written off by Magnolia and is shown as a charge against retained earnings. |
| (g) | Adjustment necessary to reflect the issuance to WildFire of 32,203,000 Class A Common Shares of Magnolia, based on the August 31, 2026 closing price of Magnolia of $26.85 per Common Share, or $864.7 million. In July 2026, the Company also received approximately $1.2 billion in net proceeds, after deducting approximately $39.2 million of underwriting discounts, commissions and offering expenses from a Class A Common Stock equity offering of 53,263,158 Common Shares at $23.75, as part of funding the acquisition. Total cash consideration payable to WildFire is $2.7 billion, reconciled as follows (in thousands). |
| Source | Amount | |||
| Cash on hand | $ | 271,772 | ||
| Class A share equity offering | 1,225,789 | |||
| Borrowings under revolver | 661,798 | |||
| Issuance of 6.625% senior notes | 490,641 | |||
| Total cash consideration | $ | 2,650,000 | ||
| (h) | Adjustment necessary to reflect previously recorded acquisition deferred payments of WildFire that will not be transferred over to the buyer as part of the transaction. |
| (i) | Adjustment necessary to reflect (i) the issuance of $500.0 million of 6.625% senior notes and (ii) $674.2 million draw on the Company’s revolver to help fund the acquisition. As part of the debt financing, the Company had debt issuance costs of $12.4 million and $9.4 million related to the revolver draw and the 6.625% senior notes, respectively. |
| (j) | Adjustment to reflect the estimated fair value of the sand mine acquired from WildFire. |
| (k) | Adjustment necessary to reflect the removal of sand accounts receivable on the books of WildFire as they relate to sand sales made to Magnolia. |
| (l) | Adjustment necessary to reflect deferred tax liabilities of WildFire that will not be transferred over to Magnolia as part of the transaction. |
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Unaudited Pro Forma Condensed Consolidated Statements of Operations
The following adjustments were made in the preparation of the Unaudited Pro Forma Condensed Combined Statements of Operations for the six months ended June 30, 2026 and the year ended December 31, 2025:
| (a) | Adjustments necessary to reclassify various income and expenses to conform to the presentation of Magnolia. |
| · | June 30, 2026 |
| i. | Operating Expenses: Reclassification of $143.0 million of depreciation, depletion, amortization and accretion of which $4.7 million was reclassed to asset retirement obligation accretion and $138.2 million was reclassed to depreciation, depletion and amortization. Reclassification of $0.5 million loss on ARO plug and abandonment from exploration expenses to other income (expense), net. |
| · | December 31, 2025 |
| i. | Operating Expenses: Reclassification of $275.4 million of depreciation, depletion, amortization and accretion of which $8.3 million was reclassed to asset retirement obligation accretion and $267.0 million was reclassed to depreciation, depletion and amortization. Reclassification of $2.0 million loss on ARO plug and abandonment from exploration expenses to other income (expense), net. |
| (b) | Adjustments necessary to reflect depreciation, depletion, and amortization expense resulting from the change in basis of property and equipment acquired and accretion expense from new asset retirement obligations recognized as a result of the acquisition of WildFire. The depletion adjustment was calculated using the unit-of-production method under the successful efforts method of accounting. |
| (c) | Adjustment necessary to reflect (i) the addition of estimated interest expense in the period presented with respect to the revolver borrowings of $674.2 million and the new $500.0 million 6.625% Senior Notes, and (ii) the amortization of debt issuance costs associated with the revolver borrowing and the new 6.625% Senior Notes. The interest rate utilized on the revolver borrowings was 7.0% per annum. A one-eighth point change in interest rates as of June 30, 2026 would change variable rate interest expense by $0.4 million and $0.8 million, respectively, for the six months ended June 30, 2026 and year ended December 31, 2025. |
| (d) | Adjustment necessary to reflect estimated income taxes from the operations of WildFire. Income taxes were estimated by applying the statutory rate of 21.0% to the transaction accounting adjustments. |
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| (e) | The following table reconciles historical and pro forma basic and diluted earnings per share for the period indicated: |
| For the Six Months Ended June 30, 2026 | For the Year Ended December 31, 2025 | |||||||||||||||
| (in thousands, except per share data) | Historical | Pro Forma | Historical | Pro Forma | ||||||||||||
| Basic: | ||||||||||||||||
| Net income (loss) attributable to Class A Common Stock | $ | 281,601 | $ | 354,260 | $ | 325,252 | $ | 698,261 | ||||||||
| Less: Dividends and net income allocated to participating securities | 4,069 | 3,793 | 4,457 | 6,929 | ||||||||||||
| Net income (loss), net of participating securities | $ | 277,532 | $ | 350,467 | $ | 320,795 | $ | 691,332 | ||||||||
| Weighted average number of common shares outstanding during the period - basic | 183,924 | 269,390 | 185,581 | 271,047 | ||||||||||||
| Net income (loss) per share of Class A Common Stock - basic | $ | 1.51 | $ | 1.30 | $ | 1.73 | $ | 2.55 | ||||||||
| Diluted: | ||||||||||||||||
| Net income (loss) attributable to Class A Common Stock | $ | 281,601 | $ | 354,260 | $ | 325,252 | $ | 698,261 | ||||||||
| Less: Dividends and net income allocated to participating securities | 4,069 | 3,793 | 4,457 | 6,929 | ||||||||||||
| Net income (loss), net of participating securities | $ | 277,532 | $ | 350,467 | $ | 320,795 | $ | 691,332 | ||||||||
| Weighted average number of common shares outstanding during the period - basic | 183,924 | 269,390 | 185,581 | 271,047 | ||||||||||||
| Add: Dilutive effect stock based compensation and other | 12 | 12 | 12 | 12 | ||||||||||||
| Weighted average number of common shares outstanding during the period - diluted | 183,936 | 269,402 | 185,593 | 271,059 | ||||||||||||
| Net income (loss) per share of Class A Common Stock - diluted | $ | 1.51 | $ | 1.30 | $ | 1.73 | $ | 2.55 | ||||||||
| (f) | Adjustment necessary to reflect estimated direct costs expected to be incurred subsequent to June 30, 2026 for the acquisition of WildFire. These estimated direct costs will be incurred during the latter part of 2026 and have been retrospectively reflected in the Unaudited Pro Forma Condensed Combined Statement of Operations as though incurred for the year ended December 31, 2025. |
| (g) | Adjustment necessary to eliminate WildFire sand sales made to Magnolia during the six months ended June 30, 2026 and year ended December 31, 2025 of $6.1 million and $10.9 million, respectively. |
| (h) | Adjustment necessary to reflect the removal of interest associated with WildFire’s revolver that was paid off by WildFire prior to closing. |
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| 4. | Supplemental Unaudited Pro Forma Combined Oil and Natural Gas Reserves and Standardized Measure Information |
The following tables set forth information with respect to the historical and pro forma combined estimated oil and natural gas reserves as of December 31, 2025 for Magnolia and WildFire. The reserve information of Magnolia has been prepared by Miller and Lents, independent petroleum engineers. WildFire reserve information has been prepared by Netherland, Sewell & Associates, Inc., independent petroleum engineers. The following unaudited pro forma combined proved reserve information is not necessarily indicative of the results that might have occurred had the Transaction taken place on January 1, 2025, nor is it intended to be a projection of future results. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Periodic revisions or removals of estimated reserves and future cash flows may be necessary as a result of a number of factors, including reservoir performance, new drilling, crude oil and natural gas prices, changes in costs, technological advances, new geological or geophysical data, changes in business strategies, or other economic factors. Accordingly, proved reserve estimates may differ significantly from the quantities of crude oil and natural gas ultimately recovered. For both Magnolia and WildFire, the reserve estimates shown below were determined using the average first day of the month price for each of the preceding 12-months for oil and natural gas for the year ended December 31, 2025.
We anticipate WildFire’s total proved undeveloped reserves to be updated due to the timing associated with Magnolia’s current development plan, which will result in WildFire’s proved undeveloped reserves being reduced to reflect a one-year development plan. The combined company will re-evaluate WildFire’s reserves subsequent to the transaction.
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| ESTIMATED OIL AND NATURAL GAS RESERVES | ||||||||||||
| As of December 31, 2025 | ||||||||||||
| Magnolia | WildFire | Pro Forma Combined | ||||||||||
| Natural Gas (Bcf) | ||||||||||||
| Balance December 31, 2024 | 336.8 | 174.3 | 511.1 | |||||||||
| Revisions of previous estimates | 46.0 | (6.9 | ) | 39.1 | ||||||||
| Purchases of reserves in place | 5.9 | 0.2 | 6.1 | |||||||||
| Extensions | 84.3 | 52.1 | 136.4 | |||||||||
| Production | (68.9 | ) | (14.3 | ) | (83.2 | ) | ||||||
| Balance December 31, 2025 | 404.1 | 205.4 | 609.5 | |||||||||
| Natural Gas Liquids (MMBbls) | ||||||||||||
| Balance December 31, 2024 | 58.3 | 34.7 | 93.0 | |||||||||
| Revisions of previous estimates | 0.1 | (1.3 | ) | (1.2 | ) | |||||||
| Purchases of reserves in place | 0.9 | — | 0.9 | |||||||||
| Extensions | 14.1 | 9.7 | 23.8 | |||||||||
| Production | (10.4 | ) | (2.6 | ) | (13.0 | ) | ||||||
| Balance December 31, 2025 | 63.0 | 40.5 | 103.5 | |||||||||
| Crude Oil (MMBbls) | ||||||||||||
| Balance December 31, 2024 | 77.2 | 190.9 | 268.1 | |||||||||
| Revisions of previous estimates | (0.9 | ) | (14.0 | ) | (14.9 | ) | ||||||
| Purchases of reserves in place | 1.2 | 0.1 | 1.3 | |||||||||
| Extensions | 16.8 | 31.8 | 48.6 | |||||||||
| Production | (14.5 | ) | (12.4 | ) | (26.9 | ) | ||||||
| Balance December 31, 2025 | 79.8 | 196.4 | 276.2 | |||||||||
| Total (MMboe) | ||||||||||||
| Balance December 31, 2024 | 191.7 | 254.6 | 446.3 | |||||||||
| Revisions of previous estimates | 6.9 | (16.5 | ) | (9.6 | ) | |||||||
| Purchases of reserves in place | 3.1 | 0.2 | 3.3 | |||||||||
| Extensions | 44.9 | 50.3 | 95.2 | |||||||||
| Production | (36.4 | ) | (17.4 | ) | (53.8 | ) | ||||||
| Balance December 31, 2025 | 210.2 | 271.2 | 481.4 | |||||||||
| ESTIMATED OIL AND NATURAL GAS RESERVES | ||||||||||||
| As of December 31, 2025 | ||||||||||||
| Magnolia | WildFire | Pro Forma Combined | ||||||||||
| Proved Developed Reserves: | ||||||||||||
| Crude Oil (MMBbls) | 64.6 | 100.3 | 164.9 | |||||||||
| Natural Gas (Bcf) | 317.3 | 109.0 | 426.3 | |||||||||
| Natural Gas Liquids (MMBbls) | 49.1 | 21.3 | 70.4 | |||||||||
| Total (MMboe) | 166.6 | 139.8 | 306.4 | |||||||||
| Proved Undeveloped Reserves: | ||||||||||||
| Crude Oil (MMBbls) | 15.2 | 96.1 | 111.3 | |||||||||
| Natural Gas (Bcf) | 86.8 | 96.4 | 183.2 | |||||||||
| Natural Gas Liquids (MMBbls) | 13.9 | 19.2 | 33.1 | |||||||||
| Total (MMboe) | 43.6 | 131.4 | 175.0 | |||||||||
The following table presents the Standardized Measure of Discounted Future Net Cash Flows (as defined by FASB Accounting Standards Codification 932) relating to the proved crude oil and natural gas reserves of Magnolia and of WildFire on a pro forma combined basis as of December 31, 2025. The Pro Forma Combined Standardized Measure shown below represents estimates only and should not be construed as the market value of either Magnolia’s crude oil and natural gas reserves or the crude oil and natural gas reserves attributable to WildFire (in thousands).
| 14 |
| STANDARDIZED MEASURE OF DISCOUNTED FUTURE CASH FLOWS | ||||||||||||
| As of December 31, 2025 | Pro Forma | |||||||||||
| Magnolia | WildFire | Combined | ||||||||||
| Future cash inflows | $ | 7,408,319 | $ | 14,187,714 | $ | 21,596,033 | ||||||
| Future production costs | (2,632,470 | ) | (4,244,624 | ) | (6,877,094 | ) | ||||||
| Future development costs | (372,764 | ) | (2,040,812 | ) | (2,413,576 | ) | ||||||
| Future income tax expenses | (688,729 | ) | (74,486 | ) | (763,215 | ) | ||||||
| Future net cash flows | 3,714,356 | 7,827,792 | 11,542,148 | |||||||||
| 10% discount to reflect timing of cash flows | (1,195,826 | ) | (3,759,423 | ) | (4,955,249 | ) | ||||||
| Standardized measure of discounted future net cash flows | $ | 2,518,530 | $ | 4,068,369 | $ | 6,586,899 | ||||||
The reserve estimates presented above were derived from the historical reserve information of Magnolia and WildFire included in this registration statement. Future development timing, development expenditures, operating costs, reservoir performance as well as commodity prices will affect the reserve volumes attributable to the combined company, which will likely result in material revisions to total proved developed and undeveloped reserves. For example, we anticipate the WildFire’s total proved undeveloped reserves to be updated due to the timing associated with Magnolia’s current development plan, which will result in WildFire’s proved undeveloped reserves being reduced to reflect a one-year development plan. The combined company will re-evaluate these reserves subsequent to the transaction.
The following table sets forth the changes in the Standardized Measure of discounted future net cash flows attributable to estimated net proved crude oil and natural gas reserves of Magnolia and WildFire on a pro forma combined basis for the year ending December 31, 2025 (in thousands):
| CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS | ||||||||||||
| For the Year Ended December 31, 2025 | Pro Forma | |||||||||||
| Magnolia | WildFire | Combined | ||||||||||
| Standardized measure of discounted future net cash flows, beginning of period | $ | 2,581,807 | $ | 4,619,717 | $ | 7,201,524 | ||||||
| Sales of oil, natural gas, and NGLs produced during the period, net of production costs | (981,738 | ) | (675,158 | ) | (1,656,896 | ) | ||||||
| Purchases of reserves in place | 37,491 | 8,478 | 45,969 | |||||||||
| Extensions | 692,547 | 568,645 | 1,261,192 | |||||||||
| Changes in estimated future development costs | (7,667 | ) | 473,677 | 466,010 | ||||||||
| Net change in prices and production costs | (614,037 | ) | (959,978 | ) | (1,574,015 | ) | ||||||
| Previously estimated development costs incurred during the period | 221,064 | (186,202 | ) | 34,862 | ||||||||
| Revisions in quantity estimates | 129,520 | (324,325 | ) | (194,805 | ) | |||||||
| Accretion of discount | 307,682 | 466,101 | 773,783 | |||||||||
| Net change in income taxes | 19,090 | 2,101 | 21,191 | |||||||||
| Net change in timing of production and other | 132,771 | 75,313 | 208,084 | |||||||||
| Standardized measure of discounted future net cash flows, end of period | $ | 2,518,530 | $ | 4,068,369 | $ | 6,586,899 | ||||||
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