MGY was trading at $22.91 when this was posted. If you think oil & gas prices are going a lot higher in 2024 (like I do) then MGY is one you should look at since it does not hedge. Plus it is virtually debt free.
I have updated my forecast/valuation model for Q2 results and their updated guidance. My valuation stays at $29/share.
Q2 production was "gassier" than my forecast, but lower cash operating expenses offset the production mix.
Clean balance sheet, steady production growth, pays a dividend and aggressive stock buyback combine to deserve a higher valuation multiple.
TipRanks: "In the last 3 months, 7 ranked analysts set 12-month price targets for MGY. The average price target among the analysts is $26.33." < Only one analyst, Gabriele Sorbara at Siebert Williams Shank & Co (rated 4.5 Star by TipRanks) has updated his price target to $28.00.
Magnolia Oil & Gas (MGY) Valuation Update - Aug 3
Magnolia Oil & Gas (MGY) Valuation Update - Aug 3
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Magnolia Oil & Gas (MGY) Valuation Update - Aug 3
Production up, costs down, rising oil prices!. What's not to like? I like the management and low debt, buying back at least 1% of outstanding stock each quarter. $40 million acreage buy in new area of Giddings Field. I think this one will be a long term core position for me.
Second Quarter 2023 Highlights:
Magnolia reported second quarter 2023 net income attributable to Class A Common Stock of $91.5 million, or $0.48 per diluted share. Second quarter 2023 total net income was $104.6 million and total adjusted net income(1) was $97.2 million. Diluted weighted average total shares outstanding decreased by 5% to 211.4 million(2) compared to second quarter 2022.
Adjusted EBITDAX(1) was $203.3 million during the second quarter of 2023. Total drilling and completions (“D&C”) capital during the second quarter was $86.1 million, accounting for only 42% of our adjusted EBITDAX and well-below our earlier guidance for capital of $100 million. The lower-than-expected capital outlays were due to a combination of lower oilfield services and materials costs.
Total adjusted cash operating costs for the second quarter of 2023 declined by 18% sequentially to $10.33 per boe, which included a 17% sequential reduction in our lease operating expenses to $4.87 per boe. The improvement in costs is a result of lower workover activity and the benefit of a reduction in oilfield services costs.
Net cash provided by operating activities was $201.8 million during the second quarter of 2023 and the Company generated free cash flow(1) of $93.3 million. Magnolia generated operating income as a percentage of revenue of 43% during the quarter.
Total production in the second quarter of 2023 grew 10% compared to the prior-year second quarter and 3% sequentially to 81.9 thousand barrels of oil equivalent per day (“Mboe/d”). Production exceeded our guidance due to better well performance from our Giddings asset. Production at Giddings and Other was 57.5 Mboe/d, providing overall growth of 30% compared to last year’s second quarter, including oil production growth of 35%.
Magnolia successfully closed on a small bolt-on acquisition in Giddings, outside of our core development area.
The Company repurchased 2.3 million of its Class A Common Stock during the second quarter for $44.8 million. Earlier this week, Magnolia’s Board of Directors increased the existing share repurchase authorization by an additional 10 million shares, bringing the total remaining authorization to 14.2 million Class A Common Stock. This authorization is specifically allocated toward open market share repurchases.
As previously announced, the Board of Directors declared a cash dividend of $0.115 per share of Class A common stock, and a cash distribution of $0.115 per Class B unit, payable on September 1, 2023 to shareholders of record as of August 10, 2023.
Magnolia returned $69.4 million(4) to shareholders during the second quarter through a combination of share repurchases and dividends while ending the period with $676.6 million of cash on the balance sheet. The Company remains undrawn on its $450.0 million revolving credit facility, has no debt maturities until 2026 and has no plan to increase its debt levels.
Second Quarter 2023 Highlights:
Magnolia reported second quarter 2023 net income attributable to Class A Common Stock of $91.5 million, or $0.48 per diluted share. Second quarter 2023 total net income was $104.6 million and total adjusted net income(1) was $97.2 million. Diluted weighted average total shares outstanding decreased by 5% to 211.4 million(2) compared to second quarter 2022.
Adjusted EBITDAX(1) was $203.3 million during the second quarter of 2023. Total drilling and completions (“D&C”) capital during the second quarter was $86.1 million, accounting for only 42% of our adjusted EBITDAX and well-below our earlier guidance for capital of $100 million. The lower-than-expected capital outlays were due to a combination of lower oilfield services and materials costs.
Total adjusted cash operating costs for the second quarter of 2023 declined by 18% sequentially to $10.33 per boe, which included a 17% sequential reduction in our lease operating expenses to $4.87 per boe. The improvement in costs is a result of lower workover activity and the benefit of a reduction in oilfield services costs.
Net cash provided by operating activities was $201.8 million during the second quarter of 2023 and the Company generated free cash flow(1) of $93.3 million. Magnolia generated operating income as a percentage of revenue of 43% during the quarter.
Total production in the second quarter of 2023 grew 10% compared to the prior-year second quarter and 3% sequentially to 81.9 thousand barrels of oil equivalent per day (“Mboe/d”). Production exceeded our guidance due to better well performance from our Giddings asset. Production at Giddings and Other was 57.5 Mboe/d, providing overall growth of 30% compared to last year’s second quarter, including oil production growth of 35%.
Magnolia successfully closed on a small bolt-on acquisition in Giddings, outside of our core development area.
The Company repurchased 2.3 million of its Class A Common Stock during the second quarter for $44.8 million. Earlier this week, Magnolia’s Board of Directors increased the existing share repurchase authorization by an additional 10 million shares, bringing the total remaining authorization to 14.2 million Class A Common Stock. This authorization is specifically allocated toward open market share repurchases.
As previously announced, the Board of Directors declared a cash dividend of $0.115 per share of Class A common stock, and a cash distribution of $0.115 per Class B unit, payable on September 1, 2023 to shareholders of record as of August 10, 2023.
Magnolia returned $69.4 million(4) to shareholders during the second quarter through a combination of share repurchases and dividends while ending the period with $676.6 million of cash on the balance sheet. The Company remains undrawn on its $450.0 million revolving credit facility, has no debt maturities until 2026 and has no plan to increase its debt levels.