Magnolia Oil & Gas (MGY) Valuation Update - May 1
Posted: Thu May 01, 2025 1:09 pm
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.
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.