It has been about a month since the last earnings report for Magnolia Oil & Gas Corp (MGY). Shares have lost about 7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Magnolia Oil & Gas Corp due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Magnolia Q1 Earnings Beat Estimates
Magnolia Oil & Gas reported first-quarter 2024 adjusted net income of 49 cents per share, which beat the Zacks Consensus Estimate of 44 cents. The outperformance can be primarily attributed to a healthy increase in production volumes and higher oil prices year over year. However, the bottom line deteriorated from the year-ago quarter’s level of 56 cents due to higher year-over-year operating expenses.
Total revenues came in at $319.4 million, which beat the Zacks Consensus Estimate of $308 million. The top line also improved 3.6% from $308.4 million recorded in the year-ago period.
In the first quarter, the independent oil and natural gas company recorded $210.9 million in net cash from operating activities and achieved a free cash flow of $117.1 million. Magnolia’s adjusted operating income was 39% of revenues.
On May 2, South Texas-focused Magnolia declared a cash dividend of 13 cents per share of Class A common stock and a cash distribution of 13 cents per Class B unit, payable on Jun 3, to shareholders of record as of May 13.
The company bought back 2.4 million shares of its Class A Common Stock for $52.4 million during the first quarter. Magnolia still has 6.9 million Class A Common shares available under its existing repurchase authorization, designated specifically for open market share buybacks.
During the first quarter, MGY allocated $79.2 million, representing 68% of its free cash flow to its shareholders through a blend of share repurchases and dividends. The company has not utilized its $450 million revolving credit facility, has no debt repayments due until 2026, and presently has no aims to augment its bonded indebtedness.
Production & Prices
The average daily total output of 84,784 barrels of oil equivalent per day (boe/d) increased from the year-ago quarter’s figure of 79,342 boe/d. However, the figure surpassed our estimate of 84,500 boe/d.
Oil and gas production increased 6.9% year over year. Oil volumes totaled 37,531 barrels per day (bpd), up 4.9% from the year-ago quarter. Additionally, the figure exceeded our estimate of 37,000 bpd. On the other hand, natural gas volumes reached 151,086 thousand cubic feet per day (Mcf/d), up 7.5% from the first quarter of 2023. The figure also exceeded our expectations of 142,000 Mcf/d.
The average realized crude oil price was $75.89 per barrel, indicating a 2.2% increase from the year-ago period’s level of $74.24. The average realized natural gas liquids price was $19.49 per barrel, implying a 14.9% deterioration from the year-ago period’s figure. Natural gas prices decreased 30.5% year over year to $1.53 per thousand cubic feet. MGY recorded an average sales price per boe of $41.40 compared with $43.18 a year ago.
Balance Sheet & Capital Expenditure
As of Mar 31, Magnolia had cash and cash equivalents of $399.3 million and long-term debt of $393.5 million. The total debt-to-total capital was 17.2%.
The company spent $119 million on its capital program in the reported quarter. Operating expenses increased to $194.9 million from $181.4 million in the year-ago period.
Guidance
Magnolia reiterated its earlier guidance regarding plans to allocate between $450 million and $480 million for drilling and completion (D&C) capital expenditures in 2024.
The company anticipates achieving total production growth in the high single digits compared to 2023, with oil production expanding at a comparable pace.
The company anticipates second-quarter D&C capital expenditures to be between $120 million to $125 million, which will be the highest quarterly rate of spending in 2024. Total production for the second quarter is expected to be approximately 89 Mboe/d.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, Magnolia Oil & Gas Corp has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 upward for the stock, and the magnitude of these revisions looks promising. 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, CNX Resources Corporation. (CNX), a stock from the same industry, has gained 9.7%. The company reported its results for the quarter ended March 2024 more than a month ago.
CNX Resources reported revenues of $381 million in the last reported quarter, representing a year-over-year change of -3.5%. EPS of $0.45 for the same period compares with $0.56 a year ago.
For the current quarter, CNX Resources is expected to post earnings of $0.31 per share, indicating a change of +6.9% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
CNX Resources has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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