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Magnolia Oil & Gas Corp (MGY) Up 4.4% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Magnolia Oil & Gas Corp (MGY). Shares have added about 4.4% 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 catalysts.

Magnolia Q3 Earnings & Revenues Beat Estimates

Magnolia reported a third-quarter adjusted net income of $1.29 per share, beating the Zacks Consensus Estimate of $1.18 and also improving from the year-ago quarter’s bottom line of 67 cents.

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The outperformance and the 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 21%.

South Texas-focused Magnolia’s total average daily output of 81,529 barrels of oil equivalent per day (boe/d) was up from the year-ago quarter’s figure of 67,385 boe/d. Moreover, the same beat the Zacks Consensus Estimate of 75,180 boe/d.

Total revenues came in at $482.96 million, ahead of the Zacks Consensus Estimate of $455 million. Moreover, the top line rose 69.4% from the year-ago level of $285 million.

Magnolia declared a regular quarterly 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 Dec 1, 2022, to shareholders of record as of Nov 7, 2022.

Production & Prices

As mentioned earlier, Magnolia’s oil and gas production reported a year-over-year increase of a little more than 21% to 81,529 boe/d (comprising 70.3% of liquids). Oil volumes at 36,751 barrels per day (bpd) were up 18.6% from the level achieved in the third quarter of 2021. Moreover, the same outperformed the Zacks Consensus Estimate of 34,270 bpd.

The average realized crude oil price in the third quarter was $93.83 per barrel, reflecting a 36.7% rise from the year-ago period’s realization of $68.62. The average realized natural gas liquid price was $34.66 per barrel, up 9.7% from the year-ago period’s tally.

Meanwhile, natural gas prices surged by about 95.6% year over year to $7.49 per thousand cubic feet. Overall, MGY fetched $64.4 per barrel of oil equivalent compared with $45.97 a year ago.

Balance Sheet & Capital Expenditure

As of Sep 30, Magnolia had $689.5 million of cash and cash equivalents. The oil explorer had long-term debt of $389.8 million. In the reported quarter, Magnolia spent $114.5 million on its capital program.

The company had property, plant and equipment worth $1.37 billion on its books.

Guidance

Magnolia plans to spend around $125 to $140 million on drilling and completion activities in the fourth quarter of 2022.

The total output in the fourth quarter of 2022 is expected in the 77,000-79,000 boe/d range.

MGY expects its production volumes to exit the year at a higher rate than seen in the third quarter, including the high level of activity.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

Currently, Magnolia Oil & Gas Corp has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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

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, Antero Resources (AR), a stock from the same industry, has gained 3.1%. The company reported its results for the quarter ended September 2022 more than a month ago.

Antero Resources reported revenues of $2.06 billion in the last reported quarter, representing a year-over-year change of +286.3%. EPS of $1.63 for the same period compares with $0.19 a year ago.

Antero Resources is expected to post earnings of $1.46 per share for the current quarter, representing a year-over-year change of +217.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -3.6%.

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

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