Magnolia Oil & Gas Corp (MGY)

Cash conversion cycle

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Days of inventory on hand (DOH)	days	—	—	—	—	—
Days of sales outstanding (DSO)	days	41.02	56.43	36.78	50.69	55.00
Number of days of payables	days	692.33	869.13	978.43	521.33	256.43
Cash conversion cycle	days	-651.31	-812.70	-941.65	-470.63	-201.44

December 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= — + 41.02 – 692.33
= -651.31

The cash conversion cycle of Magnolia Oil & Gas Corp has shown a notable trend over the past five years. Starting at a negative 201.44 days as of December 31, 2020, the company's cash conversion cycle has significantly deepened, reaching a low of -941.65 days as of December 31, 2022. This trend indicates that Magnolia Oil & Gas Corp is efficiently managing its cash flow in relation to its operating cycle.

While the negative cash conversion cycle implies that the company is able to generate cash faster than it pays for its production costs and expenses, the deepening of this cycle may suggest an increasing efficiency in managing working capital. However, it is important to note that such an extended negative cash conversion cycle may also indicate aggressive accounts payable management practices or perhaps a significant lag between payment to suppliers and collection of receivables.

The decrease in the cash conversion cycle from 2022 to 2024, where it stood at -651.31 days, may indicate improvements in the company's working capital management. It is essential for Magnolia Oil & Gas Corp to continually monitor its cash conversion cycle to ensure that it strikes the right balance between maximizing cash flows and maintaining healthy relationships with suppliers and customers.