Magnolia Oil & Gas (MGY) Valuation Update - Oct 18
Posted: Tue Oct 18, 2022 9:58 am
At the time of this post MGY was trading for $22.79.
TipRanks: "In the last 3 months, 7 ranked analysts set 12-month price targets for MGY. The average price target among the analysts is $30.57. The 7 price targets range from $25 to $39."
I have decided to lower my valuation by $5 to $32. Since none of MGY's production is hedged, to adjust for the increased commodity price risk I lowered my valuation multiple from 7X to 6X annualized operating cash flow per share.
MGY has a strong balance sheet, lots of running room, it is paying a dividend and funding a stock repurchase program. To state the obvious, if oil & gas prices in 2023 match or exceed what I am using in my forecast models ($100/bbl for WTI and $6.50/mcf for HH ngas), this mid-cap has a lot more upside for us.
MGY is on pace to generate over $800 million of FCF from operations this year, a large number for a company of this size.
My updated forecast/valuation model will be posted to the EPG website this afternoon.
TipRanks: "In the last 3 months, 7 ranked analysts set 12-month price targets for MGY. The average price target among the analysts is $30.57. The 7 price targets range from $25 to $39."
I have decided to lower my valuation by $5 to $32. Since none of MGY's production is hedged, to adjust for the increased commodity price risk I lowered my valuation multiple from 7X to 6X annualized operating cash flow per share.
MGY has a strong balance sheet, lots of running room, it is paying a dividend and funding a stock repurchase program. To state the obvious, if oil & gas prices in 2023 match or exceed what I am using in my forecast models ($100/bbl for WTI and $6.50/mcf for HH ngas), this mid-cap has a lot more upside for us.
MGY is on pace to generate over $800 million of FCF from operations this year, a large number for a company of this size.
My updated forecast/valuation model will be posted to the EPG website this afternoon.