2021 Magnolia Oil & Gas Sustainability Report
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2021 Magnolia Oil & Gas Sustainability Report
INTRODUCTION
Dear Stakeholders
ABOUT MAGNOLIA OUR MISSION
Build a winning company that safeguards workers and
the environment, enhances careers, strengthens local
Magnolia Oil & Gas is a
We’re proud to issue Magnolia’s communities, and increases value for all stakeholders.
inaugural sustainability report.
OUR VALUES DRIVE OUR CULTURE
Magnolia is an independent oil and
gas company with operations located publicly traded oil and Safety: Be Safe.
primarily in South Texas. Our business
model focuses on capital discipline, a strong balance gas exploration and • We take proactive measures to protect everyone on
all our worksites. No shortcuts.
sheet, and significant free cash flow, while generating
moderate organic growth. We’re well positioned to production company • We take health and safety personally. It’s the right
thing to do.
deliver sustained value for our investors while
operating our business in a safe and environmentally with operations Integrity: Act with Integrity.
• We’re honest and principled in interactions with all
responsible manner.
primarily in South Texas our stakeholders.
• We do the right thing in all cases.
2020 was a transformational year for Magnolia Oil &
Gas. We significantly increased the size of our team
in the core of the Eagle Ownership: Think Like an Owner.
• We think and act as owners. We take responsibility
and the scope of operations under our direct control.
We recognize that with growth comes increased
Ford Shale and Austin and fully commit to our mission.
• We focus on what matters and execute our strategy
responsibility to share information about our business
and our priorities in the areas of safety,
Chalk formations. with discipline to create value for investors.
Teamwork. Work as a Team.
environmental stewardship, workforce diversity,
• We value and use our diverse expertise,
community outreach, and corporate governance.
experiences, and ideas. Our success depends on it.
• We engage, energize, and inspire each other to
This report is an important first step in that process. It
provides an overview of Magnolia and our culture $3.1 deliver top performance.
and highlights the actions we’ve taken and the results
Magnolia Market Cap ($ billions) OUR VISION
we’ve achieved in several ESG-related areas. We’ll
build on it going forward to keep you informed about Be an investment of choice with a broad shareholder
our efforts to maintain a sustainable company and
responsibly develop oil and natural gas resources. 112.3 base, an employer of choice with a winning culture,
and an operator of choice with best-in-class assets.
2020 Proved Reserves (MMboe) OUR BUSINESS STRATEGY
We appreciate your interest in Magnolia Oil & Gas
Corporation. • Generate significant free cash flow after capital
61.8 •
expenditures
Deliver consistent organic production growth
• Maintain a conservative leverage profile
2020 Production (Mboe/d)
• Achieve high, full-cycle operating margins
CHAIRMAN, PRESIDENT, AND CHIEF EXECUTIVE OFFICER • Prudently reinvest our free cash flow to enhance
STEVE CHAZEN
per share value.
MAGNOLIA OIL & GAS | 2021 Sustainability Report 1
ENVIRONMENTAL
MINIMIZING FLARING
Safeguarding the We plan ahead to reduce the need to flare natural gas from our locations.
•
Environment: By •
We flare less than 1% of our total net production.
We do not conduct routine flaring as the activity is currently defined by the World Bank.
• We schedule infrastructure construction to align with our development plans. This ensures pipelines and other
Design facilities are available to transport natural gas from our sites and eliminates the need to flare stranded gas.
REDUCING FUGITIVE EMISSIONS
At Magnolia, we believe safeguarding the air, We design and operate our vent and flare systems to minimize fugitive emissions
water, and land where we operate is not only the from storage tanks.
right thing to do, but important to our ability to • We integrate Vapor Recovery Towers and Units into our tank battery designs to capture
sustain our business. flash gas and tank vapors.
• We established an internal team to use optical gas-imaging cameras to identify and
That’s why we build environmental protection into eliminate natural gas leaks from equipment. Since the team was established, we’ve
our operations by design. Whether that means doubled the frequency of our surveys, and cut time to repair in half.
adding safety margin to regulatory requirements
when pressure testing wellbore casings or using MANAGING WATER RESOURCES
optical gas-imaging technologies to eliminate fugitive
Our operations are primarily located in South Texas in the core of the Eagle Ford Shale and Austin Chalk
emissions, our programs are designed to safeguard
formations and do not produce large volumes of water after initial production.
the environment while also improving efficiency,
lowering costs, and reducing risk.
• We contract with reputable third parties to gather and dispose of most of our waste or produced water in an
environmentally-sensitive manner.
• We operate two intermediate-depth saltwater disposal wells. The volumes of water we inject into these wells are
well below our permitted quantities.
PROTECTING GROUNDWATER
We design our wells to minimize the possibility of well failure and ensure groundwater is protected. We
exceed regulatory requirements for integrity testing of critical wellbore protections.
• We set protective casings at all levels of the wellbore below the base of usable-quality water. We cement these
casings in place as a protective shield to preserve aquifers where we operate.
• We routinely add additional safety margin to regulatory requirements when pressure testing these casing strings.
WORKING WITH STAKEHOLDERS
As part of our development process, we work closely with all stakeholders to limit disturbances in the areas
where we conduct operations.
• We work closely with surface landowners when considering locations for new drilling sites.
• We use pad drilling to drill multiple wells from a single surface location, which reduces our physical footprint,
minimizes surface impacts, and allows us to more efficiently produce hydrocarbons.
• We work with midstream companies and landowners to determine the placement of any new pipelines that
need to be constructed to serve our operations.
MAGNOLIA OIL & GAS | 2021 Sustainability Report 2
SOCIAL
SAFETY WORKFORCE COMMUNITY
Magnolia Safe A Winning Team Magnolia Gives
At Magnolia, safety is a core value. Our HSE culture Magnolia’s workforce is made up of individuals from Meeting Local Needs. Our field operations teams
and processes support that value through safe work a variety of diverse backgrounds and career paths. make donations on Magnolia’s behalf to support
practices, training and recognition, contractor We value and use our broad expertise, experiences, organizations where we have operations as part of
management, and emergency preparedness. and ideas and recognize that our success depends Magnolia’s Field Giving Program. Donations support
on it. One of Magnolia’s key priorities is to hire the local food banks, volunteer fire departments, and
Employee Training. Our training programs ensure most qualified individuals while fostering workforce other non-profits.
employees have the skills they need to perform their diversity.
jobs effectively and safely. We deliver training during
new hire orientation, through monthly in-person Total Company
safety meetings, and via computer-based training
sessions. We track training in our Learning
Management System.
24% 32%
Good Catch Program. The Magnolia Good Catch FEMALE MINORITIES
Program recognizes employees who identify
improvements to HSE or operational processes or
find ways to increase effectiveness or efficiency. Houston-Based Employees
Contractor Management. Our field leaders onboard
new vendors, monitor and review their safety
performance and general contract compliance, and
38% 36%
provide coaching, if needed. We conduct biannual MINORITIES
FEMALE Employee-Directed Contributions. In support of our
contractor meetings to discuss best practices and
drive to strengthen local communities, Magnolia
identify improvement opportunities.
makes a $1,000 donation annually on each
Field-Based Employees employee’s behalf to the charitable organization of
Emergency Preparedness. We maintain field level
their choice. In 2020, we contributed to health and
and corporate emergency response plans. We
human services organizations, faith-based groups,
conduct drills to test those plans and improve our
educational institutions, and others.
capabilities. We also use automated communication
systems to improve incident response time. 8% 27%
FEMALE MINORITIES 2020 QUANTITATIVE RESULTS: COMMUNITY
Workforce Health & Safety. In 2020, both our
Total dollars given: More than $105,000
employee total recordable incident rate and fatality
Number of organizations supported: More than 100
rate were zero.
MAGNOLIA OIL & GAS | 2021 Sustainability Report 3
GOVERNANCE
Guidance with
VALUING DIVERSITY AND INDEPENDENCE BOARD COMMITTEE MEMBERSHIP
At Magnolia, we value and use our diverse expertise, Stephen I. Chazen Chairman of the Board
Integrity experiences, and ideas. This same spirit extends to
our board. We maintain a diverse board made up of Arcilia C. Acosta (I)
In line with our value of integrity, Magnolia is individuals with different professional experiences
Angela M. Busch (I)
committed to strong corporate governance and backgrounds, including gender, race or
principles and practices. ethnicity, age, and other factors. These individuals Edward P. Djerejian1 (I)
bring expertise in exploration and production,
finance and accounting, public company leadership, John B. Walker Director
Our Board of Directors manages and directs our
business affairs in the best interests of our government, academia, strategic planning, and
operations to their roles on our board. Dan F. Smith2 (I)
stakeholders, including our shareholders, with a focus
on our long-term health and success as an James R. Larson2 (I)
organization. Our Corporate Governance Guidelines
Audit Compensation Nominating and Governance
describe the policies and practices the Board follows
as they pursue that goal. These guidelines, along with
71% 29% Committee Chairperson
our Code of Business Conduct and Ethics and the 1 Lead Independent Director
charters of our standing committees, provide a clear 2 Audit Committee Financial Expert
framework for our commitments and are available on 5 of our 7 Board members 2 of our 7 Board members Note: All Committee members are independent.
our website. are independent are women
CODE OF BUSINESS CONDUCT AND ETHICS STANDING COMMITTEES OF MAGNOLIA’S BOARD EXECUTIVE COMPENSATION
Our Code of Business Conduct and Ethics provides Audit. Oversees our accounting and financial
guidance to help our employees, leaders, and reporting processes and our compliance with legal • In 2020, the ratio of our Chief Executive Officer’s
directors make right decisions in line with the highest and regulatory requirements as well as audits of our compensation to our median employee’s
ethical standards and comply with all applicable laws financial statements and the integrity of those compensation was 1.48 to 1, meaning that for
and regulations that govern our business. statements. Has general oversight over risk every $1 earned by our median employee, our
management, including cybersecurity risk. Chairman, President, and Chief Executive Officer
Our Code covers topics ranging from conflicts of earned $1.48. For more information on how we
interest and insider trading to anti-corruption and Compensation. Oversees our compensation policies calculated our CEO pay ratio, please refer to that
anti-retaliation. We require all employees to commit and practices, approves the compensation of our section of our most recent proxy statement.
to the principles in the Code, acknowledge they CEO and other named executive officers, and
understand it, and agree to comply with it. approves our incentive compensation and equity • Our Chairman, President, and CEO owns
compensation policies and programs. approximately 7 million shares of Magnolia (3% of
If an employee or member of the public observes an the shares outstanding), promoting alignment with
act or behavior that they believe compromises our Nominating and Corporate Governance. Reviews our shareholders.
commitment to ethical business practices, they can our overall corporate governance and recommends
report it on a confidential and anonymous basis by improvements to our Board. Identifies and screens • More than 99% of our stockholders approved a
calling 844-490-4679. individuals to fill Board vacancies and maintains say-on-pay proposal at our 2021 Annual Meeting of
Corporate Governance Guidelines. Stockholders.
MAGNOLIA OIL & GAS | 2021 Sustainability Report 4QUANTITATIVE RESULTS
Quantitative Results: SASB Disclosures
We provide quantitative results for our performance in various environmental, social, governance areas. We report our results based on the Sustainability Accounting Standards
Board (SASB) standards for Oil and Gas – Exploration & Production. This data captures performance from across our operations for the calendar year ended December 31, 2020.
TOPIC DEFINITION UNIT OF MEASURE 2020
Gross scope 1 GHG emissions Metric tons CO2-e(t) 313,429
Gross scope 1 GHG intensity rate Metric tons CO2-e(t)/production (Mboe) 15
Gross scope 1 methane emissions as a percentage of GHG emissions Percent Metric tons on a CO2-e basis 30
Gross scope 1 GHG emissions from flared hydrocarbons Metric tons CO2-e 52,927
GREENHOUSE GAS EMISSIONS
Gross scope 1 GHG emissions from other combustion Metric tons CO2-e 162,267
Gross scope 1 GHG emissions from process emissions Metric tons CO2-e 477
Gross scope 1 GHG emissions from other vented emissions Metric tons CO2-e 55,364
Gross scope 1 GHG emissions from other fugitive emissions Metric tons CO2-e 39,350
Total fresh water withdrawn Thousand cubic meters (m3) 1,137
Percentage of total fresh water withdrawn in regions with high or extremely high
Percentage (%) 0
baseline water stress
WATER MANAGEMENT
Total fresh water consumed Thousand cubic meters (m3) 1,137
Percentage of total fresh water consumed in regions with high or extremely high
Percentage (%) 0
baseline water stress
Number of hydrocarbon spills Number 22
Aggregate volume of hydrocarbon spills Barrels 372
BIODIVERSITY IMPACTS
Aggregate volume of hydrocarbon spills in the Artic Barrels 0
Aggregate volume of hydrocarbon spills impacting shorelines with ESI rankings 8-10 Barrels 0
Number of work-related injuries and
Total recordable incident rate (TRIR)* 0
WORKFORCE HEALTH & SAFETY illnesses per 200,000 workhours
Fatality rate Rate 0
Percentage of (1) proved and (2) probable reserves in
BUSINESS ETHICS &
countries that have the 20 lowest rankings in Transparency Percentage (%) 0
TRANSPARENCY
International’s Corruption Perception Index
SECURITY, HUMAN RIGHTS & Percentage of (1) proved and (2) probable reserves in or near areas of conflict Percentage (%) 0
RIGHTS OF INDIGENOUS
PEOPLES Percentage of (1) proved and (2) probable reserves in or near indigenous land Percentage (%) 0
Total permanent, full-time employees Number 136
Women, as a % of workforce Percentage (%) 24
WORKFORCE
Minorities, as a % of workforce Percentage (%) 32
Percent of workforce represented by Union Percentage (%) 0
Note: Quantitative results do not include data for Highlander. * TRIR includes Magnolia employees and EnerVest employees dedicated to Magnolia’s assets.
MAGNOLIA OIL & GAS | 2021 Sustainability Report 5FORWARD-LOOKING STATEMENTS Cautionary Note Regarding Forward-Looking Statements The information in this report includes forward- Magnolia cautions you that these forward-looking Should one or more of the risks or uncertainties looking statements within the meaning of Section statements are subject to all of the risks and described in this report occur, or should underlying 27A of the Securities Act of 1933, as amended, and uncertainties, most of which are difficult to predict assumptions prove incorrect, actual results and plans Section 21E of the Securities Exchange Act of 1934, and many of which are beyond the control of could differ materially from those expressed in any as amended. All statements, other than statements of Magnolia, incident to the development, production, forward-looking statements. Additional information present or historical fact included in this report, gathering and sale of oil, natural gas and natural gas concerning these and other factors that may impact regarding Magnolia’s strategy, future operations, liquids. In addition, Magnolia cautions you that the the operations and projections discussed herein can financial position, estimated revenues, and losses, forward-looking statements contained in this report be found in Magnolia’s filings with the SEC, including projected costs, prospects, plans and objectives of are subject to the following factors: (i) the length, its Annual Report on Form 10-K for the fiscal year management are forward-looking statements. When scope and severity of the ongoing coronavirus ended December 31, 2020. Magnolia’s SEC filings used in this report, the words could, should, will, may, disease 2019 (“COVID-19”) pandemic, including the are available publicly on the SEC’s website at believe, anticipate, intend, estimate, expect, project, effects of related public health concerns and the www.sec.gov. the negative of such terms and other similar impact of continued actions taken by governmental expressions are intended to identify forward-looking authorities and other third parties in response to the statements, although not all forward-looking pandemic and its impact on commodity prices as well statements contain such identifying words. These as supply and demand considerations; (ii) the forward-looking statements are based on outcome of any legal proceedings that may be management’s current expectations and assumptions instituted against Magnolia; (iii) Magnolia’s ability to about future events and are based on currently realize the anticipated benefits of its acquisitions, available information as to the outcome and timing of which may be affected by, among other things, future events. Except as otherwise required by competition and the ability of Magnolia to grow and applicable law, Magnolia disclaims any duty to manage growth profitably; (iv) changes in applicable update any forward-looking statements, all of which laws or regulations; and (v) the possibility that are expressly qualified by the statements in this Magnolia may be adversely affected by other section, to reflect events or circumstances after the economic, business, and/or competitive factors. date of this report. MAGNOLIA OIL & GAS | 2021 Sustainability Report 6
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