Magnolia Oil & Gas (MGY) Valuation Update - May 11

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Magnolia Oil & Gas (MGY) Valuation Update - May 11

Post by dan_s »

I have updated my forecast/valuation model for MGY based on their Q1 actual results and their updated guidance.

My current valuation increases by $1.50 to $30.00 per share.

At the time of this post MGY was trading at $19.01 per share.

TipRanks: "In the last 3 months, 8 ranked analysts set 12-month price targets for MGY. The average price target among the analysts is $29.64." Three analysts have updated their price targets since MGY announced Q1 results on May 3.
> On May 5 Neal Dingmann at Truist Financial rated MGY a Buy with a price target of $33.00 < Neal has a 5-Star rating by TipRanks.
> On May 4 Zach Parham at J.P. Morgan rated MGY a Hold with a price target of $28.00
> On May 4 Gabriele Sorbara at Siebert Williams Shank & Co rated MGY a Buy with a price target of $29.00

This is what I like about MGY:
> It is now virtually DEBT FREE since current assets exceeds total liabilities. < Cash was $667.3 million on 3-31-2023.
> The Company should generate free cash flow over $100 million per quarter this year.
> Revenues are heavily weighted to oil sales.
> Their two rig drilling program should deliver 6% to 7% year-over-year production growth for many years, fully funded by operating cash flow.
> They have lots of "Running Room", with over 1,000 development drilling locations in the Giddings Field.
> MGY is aggressively buying back shares. < This is the primary reason for my valuation increase.
> They pay a small dividend of $0.115/qtr with current focus on the stock buyback. < Per share results continue to improve.
> NONE of MGY's production is currently hedged. < Good or Bad depending on your outlook for oil & gas prices.

Due to the pristine balance sheet, MGY gets an A+ safety rating. A good choice of those of you bullish on oil prices.
Dan Steffens
Energy Prospectus Group
Posts: 545
Joined: Thu Nov 21, 2013 2:46 pm

Re: Magnolia Oil & Gas (MGY) Valuation Update - May 11

Post by ChuckGeb »

On MGY's call they discussed that they were slowing development until the service providers gave them a concession on pricing. In that one would think the service providers so not want to pull equipment from the field, look for surprise to the upside later in year.
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