Magnolia Oil & Gas (MGY) Valuation Update - Oct 17

[dan_s]

TipRanks: "On 10/16/2023 Truist Securities analyst Neal Dingmann raised the price target on Magnolia Oil & Gas Corp. (NYSE: MGY) to $30.00 (from $29.00) while maintaining a Buy rating. In the last 3 months, 9 ranked analysts set 12-month price targets for MGY. The average price target among the analysts is $27.83."

None of MGY's production is hedged.

I have updated my forecast valuation model for lower oil price for Q4 ($85) that is offset by higher ngas prices in Q3 and Q4. For now, my valuation stays at $30.

MGY pays a decent dividend that should be increased in 2024 and they seem to have 10% or more annual production growth locked in for several years. It has a super strong balance sheet and lots of running room. The Giddings Acquisition should close in November, adding ~5,000 Boepd (70% oil) and more high-quality development drilling inventory.

[ChuckGeb]

Magnolia had $677 million cash at 6/30/23. Their guided CAPEX for 2023 is $400-425 million. Their 48,000 acre bolt on requires $260 million cash to close. They are running two rigs and are unhedged. I wouldn't be surprised to see them add another rig soon. Don't know if they would do that before 2024 but at today's prices it would be a great move. While they don't typically publish well info I would expect their wells pay out in less than a year. I know from several of my clients receiving royalty checks from wells in the Giddings Field that these wells typically come on at strong rates and produce at a high level for a year then declining significantly. Thus it would make sense to get more wells online now. They obviously don't have any debt issues.

[dan_s]

Increasing dividends and the Company's aggressive stock buyback should push my stock valuation higher. This is a rock-solid company.