{"id":56289,"date":"2023-09-02T22:59:48","date_gmt":"2023-09-03T02:59:48","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/magnolia-oil-gas-increased-value-after-positive-guidance-revisions-nysemgy\/"},"modified":"2023-09-02T22:59:50","modified_gmt":"2023-09-03T02:59:50","slug":"magnolia-oil-gas-increased-value-after-positive-guidance-revisions-nysemgy","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=56289","title":{"rendered":"Magnolia Oil & Gas: Increased Value After Positive Guidance Revisions (NYSE:MGY)"},"content":{"rendered":"
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Magnolia Oil & Gas (NYSE:MGY<\/span>) made some positive revisions to its 2023 guidance, indicating stronger production growth expectations along with reduced capex expectations. As well, Magnolia’s lease operating expenses dropped below $5 per BOE in Q2 2023.<\/p>\n

These positive revisions may allow Magnolia to generate over $250 million in free cash flow in the second half of 2023 at current strip. It may also be able to achieve over $500 million in free cash flow in 2024 while growing production in the mid-single digits.<\/p>\n

I have thus increased my estimate of Magnolia’s value by $2 to $3 compared to when I looked at it in May, and now estimate its value at $26 to $27 per share at long-term $75 oil and $3.75 gas.<\/p>\n

Positive Guidance Revisions<\/h2>\n

With its Q2 2023 report, Magnolia made some positive revisions to its 2023 guidance (from its Q1 2023 guidance update). It lowered its D&C capex guidance by $15 million to $20 million, while simultaneously increasing its full-year production guidance by 1% to 2%, due to strong Giddings well performance.<\/span><\/p>\n

Magnolia now expects D&C capex to end up between $425 million to $440 million in 2023, along with production growth of 7% to 8% compared to 2022.<\/p>\n

Magnolia had previously made revisions to its original guidance, which called for 10% production growth with a $490 million to $520 million capex budget.<\/p>\n

Thus it now expects to deliver 2% to 3% less production growth than its original expectations with $65 million to $80 million less D&C capex, which is a pretty good outcome to me.<\/p>\n

Due to Magnolia’s strong results from its gassier Giddings wells though, its oil cut may decrease compared to 2022, resulting in oil production growth potentially ending up at 3% to 4%.<\/p>\n

2H 2023 Outlook<\/h2>\n

Magnolia may now average approximately 81,500 BOEPD in 2H 2023 production, which would be roughly the same (within 1%) as its Q2 2023 production and 1% higher than its 1H 2023 production.<\/p>\n

Magnolia’s oil cut has fluctuated a bit, going from 45% in Q1 2023 to 42% in Q2 2023. To be a bit conservative, I will assume a 42% oil cut for the second half of the year.<\/p>\n

Oil prices have improved significantly so that 2H 2023 WTI strip is now around $83. Magnolia expects to realize around $3 less than Magellan East Houston for its oil, and MEH is around $1.50 higher than WTI.<\/p>\n

Magnolia is thus now projected to generate $663 million in revenues during 2H 2023.<\/p>\n

<\/span><\/p>\n\n\n\n\n<\/colgroup>\n\n\n\n\n\n
Type<\/td>\nBarrels\/Mcf<\/td>\n$ Per Barrel\/Mcf<\/td>\n$ Million<\/td>\n<\/tr>\n
Oil<\/td>\n6,298,320<\/td>\n$81.50<\/td>\n$513<\/td>\n<\/tr>\n
NGLs<\/td>\n4,048,920<\/td>\n$20.50<\/td>\n$83<\/td>\n<\/tr>\n
Gas<\/td>\n27,892,560<\/td>\n$2.40<\/td>\n$67<\/td>\n<\/tr>\n
Total Revenues<\/td>\n <\/td>\n <\/td>\n$663<\/td>\n<\/tr>\n<\/table>\n

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