Magnolia Oil & Gas Corp (MGY) Up 3.6% 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 3.6% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important drivers.

Magnolia Q2 Earnings Lag Estimates, Revenues Beat

Magnolia reported a second-quarter adjusted net income of $1.10 per share, lagging the Zacks Consensus Estimate of $1.18 but improving from the year-ago quarter’s bottom line of 56 cents.

This year-over-year improvement in the bottom line can be primarily attributed to a surge in commodity prices and a healthy increase in year-over-year production volumes by about 14%. South Texas-focused Magnolia’s average daily total output of 74,200 barrels of oil equivalent per day (boe/d) was up from the year-ago quarter’s figure of 64,946 boe/d. Moreover, it beat the Zacks Consensus Estimate of 73,081 boe/d.
Total revenues came in at $484.65 million, ahead of the Zacks Consensus Estimate of $459 million. Moreover, the top line rose 92.3% from the year-ago level of $252 million.

In good news for investors, Magnolia declared a cash dividend of 10 cents per share of the Class A common stock and a cash distribution of 10 cents per Class B unit, payable on Sep 1, 2022 to shareholders of record as of Aug 12, 2022. The announcement represents a 40-cent-per-share annualized rate, which is a 43% increase in Magnolia’s dividend compared to the 28-cent-per-share distribution for full-year 2021. Moreover, beginning with this distribution, MGY will move to a quarterly dividend payout from a semi-annual distribution schedule.

Production & Prices

As mentioned earlier, Magnolia’s oil and gas production reported a year-over-year increase of a little more than 14% to 74,200 boe/d (comprising 69% of liquids). Oil volumes at 33,178 barrels per day (bpd) were up 4% from the level achieved in the second quarter of 2021. Moreover, the same outperformed the Zacks Consensus Estimate of 31,823 bpd.

The average realized crude oil price in the second quarter was $110.22 per barrel, reflecting a 69.5% rise from the year-ago period’s realization of $65.01. The average realized natural gas liquid price was $40.17 per barrel, up 80.5% from the year-ago period’s tally, while natural gas prices surged by about 104.5% year over year to $6.85 per thousand cubic feet. Overall, MGY fetched $71.78 per barrel of oil equivalent compared with $42.64 a year ago.

Balance Sheet & Capital Expenditure

As of Jun 30, Magnolia had $501.9 million of cash and cash equivalents. The oil explorer has long-term debt of $389.2 million. In the reported quarter, Magnolia spent $122 million on its capital program.

The company had property, plant and equipment worth $1.3 billion on its books.

Guidance

Magnolia plans to spend somewhere around $105 to $115 million on drilling and completion activities in the third quarter of 2022.

The total output in the third quarter of 2022 is expected in the 74,000-76,000 boe/d range.

Based on continued strong well performances and additional non-operated activities increasing in the Eagle Ford contributing to higher production and capital, MGY now anticipates full-year 2022 production to grow by 12 compared with 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

The consensus estimate has shifted 6.71% due to these changes.

VGM Scores

Currently, Magnolia Oil & Gas Corp has a strong Growth Score of A, 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 A. 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, Range Resources (RRC), a stock from the same industry, has gained 3.4%. The company reported its results for the quarter ended June 2022 more than a month ago.

Range Resources reported revenues of $1.06 billion in the last reported quarter, representing a year-over-year change of +143.2%. EPS of $1.27 for the same period compares with $0.24 a year ago.

For the current quarter, Range Resources is expected to post earnings of $1.37 per share, indicating a change of +163.5% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.7% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Range Resources. Also, the stock has a VGM Score of A.

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