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Magnolia Oil & Gas Corp (MGY) Up 1.5% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Magnolia Oil & Gas Corp (MGY). Shares have added about 1.5% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Magnolia Oil & Gas Corp due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Magnolia Q1 Earnings Beat Estimates, Revenues Miss

Magnolia reported first-quarter 2023 adjusted net income of 56 cents per share, which beat the Zacks Consensus Estimate of 53 cents. The outperformance can be primarily attributed to a healthy 10.5% increase in production volumes year over year. The bottom line deteriorated from the year-ago quarter’s level of 90 cents due to a decline in commodity prices.

Total revenues came in at $308.38 million, which missed the Zacks Consensus Estimate of $323 million. The top line declined 18.4% from $377.84 million recorded in the year-ago period.

Magnolia declared a cash dividend of 11.5 cents per share of Class A common stock and a cash distribution of 11.5 cents per Class B unit, payable on Jun 1, 2023, to shareholders of record as of May 11, 2023. The company repurchased 2.4 million of its Class A common shares for $51.3 million in the reported quarter.

Production & Prices

Average daily total output of 79,342 barrels of oil equivalent per day (boe/d) was up from the year-ago quarter’s figure of 71,835 boe/d. Oil and gas production increased a little more than 10.5% year over year. Oil volumes came in at 35,788 barrels per day (bpd), up 14.4% from that reported in the first quarter of 2022. The same beat the Zacks Consensus Estimate of 35,726 bpd.  

The average realized crude oil price was $74.24 per barrel, indicating a 20.4% decline from the year-ago period’s level of $93.28. The average realized natural gas liquids price was $22.90 per barrel, implying a 38% deterioration from the year-ago period’s figure. Natural gas prices decreased 551.9% year over year to $2.20 per thousand cubic feet. MGY recorded $43.1 per barrel of oil equivalent (boe) compared with $58.4 a year ago.

Balance Sheet & Capital Expenditure

As of Mar 31, Magnolia had $667.3 million of cash and cash equivalents, and long-term debt of $391 million. The total debt-to-total capital was 18.1%.

The company spent $139.7 million on its capital program in the reported quarter. Operating expenses increased to $181.4 million from $142 million in the year-ago period.

Guidance

Magnolia plans to spend somewhere around $100 million on drilling and completion (D&C) activities in the second quarter of 2023. It also expects to spend in the range of $440-$460 million on D&C activities for the full year.

The company projects the diluted share count for the second quarter to be approximately 212 million.

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MGY plans to offer a $3.00 per barrel discount to Magellan East Houston, leaving it unhedged for all oil and natural gas production.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -12.72% due to these changes.

VGM Scores

Currently, Magnolia Oil & Gas Corp has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Magnolia Oil & Gas Corp has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Magnolia Oil & Gas Corp is part of the Zacks Oil and Gas - Exploration and Production - United States industry. Over the past month, Southwestern Energy (SWN), a stock from the same industry, has gained 2.6%. The company reported its results for the quarter ended March 2023 more than a month ago.

Southwestern Energy reported revenues of $2.12 billion in the last reported quarter, representing a year-over-year change of -28%. EPS of $0.31 for the same period compares with $0.40 a year ago.

For the current quarter, Southwestern Energy is expected to post earnings of $0.10 per share, indicating a change of -69.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -15.4% over the last 30 days.

Southwestern Energy has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.

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