Magnolia Oil & Gas (MGY) Q3 Results - Feb 20

[dan_s]

Good but not great quarter. This is a very young public company that is well funded. Nice to see them sticking with their mission of growth by spending only 60% of operating cash flow on D&C capex. I will update my forecast model on Friday morning. I have updated my forecast/valuation model for MGY and posted it to the EPG website. Yesterday (2/20) KeyBanc and Northland Securities updated their price targets. They both rate it a BUY with price targets of $13.00. - Dan

Magnolia Oil & Gas Corporation ("Magnolia," "we," "our," or the "Company") (NYSE: MGY) today announced its financial and operational results for the fourth quarter and full year 2019.

2019 Accomplishments:

Total drilling and completions ("D&C") capital for 2019 was 60 percent of our adjusted EBITDAX, and in line with our business model which prioritizes free cash flow.

Generated $647.6 million net cash provided by operating activities and $222.9 million of free cash flow during 2019.

Exited 2019 with total production growth of 10 percent compared to prior year levels.

Completed bolt-on oil and gas property acquisitions of $135.7 million including 5,200 net acres further supplementing our existing core position in the Karnes County area.

Repurchased 7 million Magnolia shares for $79.4 million.

Increased our cash position at year end 2019 to $183 million from $136 million in the prior year, without incurring any additional debt.

Completed the exchange of all our outstanding public warrants which simplified our capital structure.

Further de-risked the Giddings Field asset through our appraisal and exploration program, improving our confidence and positioning us to increase activity later this year.

We replaced 142 percent of our production by adding 34.7 MMboe of total proved developed reserves, the vast majority of which were organic.

Fourth Quarter and Full Year 2019 Highlights:

Magnolia reported fourth quarter net income attributable to Class A Common Stock of $8.1 million, or $0.05 per diluted share. Total adjusted net income including noncontrolling interest was $12.5 million, or $0.05 per adjusted diluted share. < Compares to my forecast of $11.5 million net income or $0.07 per share.

Fourth quarter 2019 production averaged 68.3 thousand barrels of oil equivalent per day ("Mboe/d"), and 66.8 Mboe/d for full year 2019. Fourth quarter production increased by 10 percent compared to prior year levels. Oil production averaged 52 percent of total volumes for the fourth quarter and 53 percent for all of 2019. < Compares to my Q4 production forecast of 71,500 Boepd with oil production of 38,400 BOPD (53.7%).

Adjusted EBITDAX for full year 2019 was $696.0 million with D&C capital representing 60 percent of adjusted EBITDAX, in line with our business model. Adjusted EBITDAX was $170.8 million during the fourth quarter of 2019. D&C capital during the fourth quarter of $72.2 million represented just 42 percent of our adjusted EBITDAX and better than our earlier guidance.

Total cash operating costs including G&A were $9.80 per boe in the fourth quarter of 2019 representing a 10 percent decline compared to $10.92 per boe in the prior year period.
We repurchased 6 million shares of Class B Common Stock for $69.1 million in the fourth quarter. During 2019 we repurchased a total of 7 million shares for $79.4 million.

Cash on the balance sheet increased by $18.1 million during the quarter, ending 2019 with $182.6 million. In addition, we have an undrawn revolving credit facility with $550.0 million of capacity and liquidity of $732.6 million.

"Magnolia had numerous accomplishments during our first full calendar year as a public company, and we are well positioned both financially and operationally as we enter 2020," said Magnolia Chairman, President and CEO, Steve Chazen. "Despite the current challenging product price environment, our founding principles remain unchanged as we continue to prioritize significant free cash flow generation combined with moderate growth in our business. During 2019, we spent approximately 60 percent of our cash flow on drilling and completing wells, while growing our production 10 percent from the end of last year. Our business model continues to focus on generating free cash flow which provides us with options to allocate capital toward opportunities that are most accretive to the value of our stock. The majority of last year’s free cash flow was used for small, bolt-on oil and gas property acquisitions that both strengthened our business and increased our core Karnes area acreage position by about 30 percent. We also repurchased 7 million shares of Magnolia stock and ended 2019 with $47 million more cash than at the end of the prior year."

"A significant achievement during the past year was our improved understanding and predictability of results at our Giddings field asset. The two Giddings wells that we referenced last quarter are still performing quite well. These two wells have averaged more than 1,500 barrels per day of oil production during their first 120 days on line. During the fourth quarter we added another two new wells that have a combined rate of more than 1,100 barrels per day of oil production during their first 60 days of production. As a result of our growing confidence in Giddings, we plan to increase our drilling activity in the field later this year."