Magnolia Oil & Gas (MGY) Valuation Update - May 1

[dan_s]

At the time of this post MGY was trading at $20.97

Magnolia's Q1 2025 results beat my forecast and they have raised their production guidance for 2025.

I have lowered my valuation by $1 to $27/share.
> GT&P expense and production taxes came in higher than expected
> Current income taxes also came in above my forecast
> Plus, I added more of a "cushion" to my Q3 and Q4 forecasts in case oil prices don't rebound as soon as I expect them too. MGY does not have any of its future production hedged, so it does have more commodity price risk than most of the other Sweet 16 companies.

TipRanks: "In the last 3 months, 12 ranked analysts set 12-month price targets for MGY. The average price target among the analysts is $25.33." < The 12 price targets range from $19 to $31 per share. Most recent update is from Roth MKM on 4/30/2025 which rates MGY as a BUY with a price target of $25.

What I like about MGY:
> Solid balance sheet, very clean with zero debt problems.
> Lots of high-quality "Running Room" in South Texas that has plenty of pipeline access and much higher natural gas prices than the Permian Basin companies.
> Production mix of 42% crude oil, 30% natural gas and 28% NGLs. Higher gas and NGL prices keep operating cash flow close to what it was last year despite lower oil prices.
> Free cash flow positive, allowing it to pay a decent dividend and fund stock buybacks.
> Recent well results and lower than expected declines on older wells caused them to raise production guidance to ~8% YOY.
> Operational Update all positive.

We will be publishing an update profile on MGY next week.