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Why Is Magnolia Oil & Gas Corp (MGY) Down 6.8% Since Last Earnings Report?

A month has gone by since the last earnings report for Magnolia Oil & Gas Corp (MGY). Shares have lost about 6.8% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Magnolia Q3 Earnings Beat Estimates, Revenue In Line

Magnolia Oil & Gas reported a third-quarter 2023 adjusted net income of 54 cents per share, which beat the Zacks Consensus Estimate of 53 cents. The outperformance can be primarily attributed to a 1.4% increase in production volumes year over year. The bottom line, however, deteriorated from the year-ago quarter’s level of $1.29 due to a decline in commodity prices.

Total revenues came in at $316 million, in line with the Zacks Consensus Estimate. The top line declined 34.6% from $483 million recorded in the year-ago period.

South Texas-focused 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 Dec 1, 2023, to shareholders of record as of Nov 10, 2023. The company repurchased 2.5 million of its Class A common shares for $56.8 million in the reported quarter.

Production & Prices

The average daily total output of 82,651 barrels of oil equivalent per day (boe/d) increased from the year-ago quarter’s figure of 81,529 boe/d. The figure also beat our estimate of 81,971 boe/d.

Oil and gas production increased a little more than 1.4% year over year. Oil volumes totaled 32,867 barrels per day (bpd), down 10.6% from that reported in the third quarter of 2022. The figure missed our estimate of 36,012 bpd.  

The average realized crude oil price was $80.6 per barrel, indicating a 14.1% decline from the year-ago period’s level of $93.8. The average realized natural gas liquids price was $20.7 per barrel, implying a 40.4% deterioration from the year-ago period’s figure. Natural gas price decreased 74.9% year over year to $1.9 per thousand cubic feet. MGY recorded $41.5 per boe compared with $64.5 a year ago.

Balance Sheet & Capital Expenditure

As of Sep 30, Magnolia had cash and cash equivalents of $618.5 million and long-term debt of $392.2 million. The total debt-to-total capital was 17.5%.

The company spent $104.3 million on its capital program in the reported quarter. Operating expenses decreased to $167.5 million from $171.2 million in the year-ago period.

Guidance

The company expects the diluted share count for the fourth quarter to be approximately 207 million.

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

It expects total drilling & completions capital expenditures to be $430 million and $100 million for 2023 and the fourth quarter, respectively.

The company plans to raise its guidance for full-year production growth to 8%.




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 5.41% due to these changes.

VGM Scores

Currently, Magnolia Oil & Gas Corp has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, 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 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 belongs to the Zacks Oil and Gas - Exploration and Production - United States industry. Another stock from the same industry, Gulfport Energy (GPOR), has gained 2.6% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

Gulfport reported revenues of $266.67 million in the last reported quarter, representing a year-over-year change of +39.5%. EPS of -$1.30 for the same period compares with $3.69 a year ago.

For the current quarter, Gulfport is expected to post earnings of $4.97 per share, indicating a change of +56.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.1% over the last 30 days.

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

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