Commitments and Contingencies
Legal Matters
From time to time, the Company is or may become involved in litigation in the ordinary course of business.
Certain of the Magnolia LLC Unit Holders and EnerVest Energy Institutional Fund XIV-C, L.P. (collectively the “Co-Defendants”) and the Company have been named as defendants in a lawsuit where the plaintiffs claim to be entitled to a minority working interest in certain Karnes County Assets. The litigation is in the pre-trial stage. The exposure related to this litigation is currently not reasonably estimable. The Co-Defendants retain all such liability.
Matters that are probable of unfavorable outcome to Magnolia and which can be reasonably estimated are accrued. Such accruals are based on information known about the matters, Magnolia’s estimates of the outcomes of such matters and its experience in contesting, litigating and settling similar matters. The Company does not believe the outcome of any such disputes or legal actions will have a material effect on its consolidated statements of operations, balance sheet, or cash flows after consideration of recorded accruals. Actual amounts could differ materially from management’s estimates.
Environmental Matters
The Company, as an owner or lessee and operator of oil and natural gas properties, is subject to various federal, state, and local laws and regulations relating to discharge of materials into, and the protection of, the environment. These laws and regulations may, among other things, impose liability on a lessee under an oil and natural gas lease for the cost of pollution clean-up resulting from operations and subject the lessee to liability for pollution damages. In some instances, the Company may be directed to suspend or cease operations in an affected area. The Company maintains insurance coverage, which it believes is customary in the industry, although the Company is not fully insured against all environmental risks.
Commitments
At December 31, 2025, contractual obligations for long-term operating leases and purchase obligations are as follows:
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(In thousands) | Total | | 2026 | | 2027-2028 | | 2029-2030 | | 2031 & Beyond |
Purchase obligations (1) | $ | 1,487 | | | $ | 920 | | | $ | 538 | | | $ | 29 | | | $ | — | |
Operating lease obligations (2) | 66,823 | | | 20,368 | | | 15,165 | | | 6,041 | | | 25,249 | |
| Total net minimum commitments | $ | 68,310 | | | $ | 21,288 | | | $ | 15,703 | | | $ | 6,070 | | | $ | 25,249 | |
(1)Amounts represent any agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms. These include minimum commitments associated with operations- and IT-related service commitments. The costs incurred under these obligations were $1.3 million, $2.2 million, and $1.7 million for the years ended December 31, 2025, 2024, and 2023, respectively.
(2)Amounts include long-term lease payments for office space, vehicles, and equipment related to exploration, development, and production activities.
Contingencies
In November 2023, the Company acquired certain oil and gas producing properties including leasehold and mineral interests in the Giddings area. The acquisition included a maximum of $40.0 million in additional contingent cash consideration based on future commodity prices. The contingent consideration was payable in three tranches based on average NYMEX WTI prices for (i) the period beginning July 1, 2023 through December 31, 2023, (ii) the year ending December 31, 2024, and (iii) the year ending December 31, 2025. The first tranche was settled for $2.7 million in January 2024 and the second tranche was settled for $2.8 million in January 2025. The final tranche for the year ended December 31, 2025 did not require a payment.
The Company recognized a gain of $4.5 million, $4.3 million, and $7.6 million on the revaluation of the contingent consideration for the years ended December 31, 2025, 2024, and 2023, respectively. Gains on revaluation are included in “Other income (expense), net” on the Company’s consolidated statements of operations. Refer to Note 4—Fair Value Measurements for additional information.