Magnolia Oil & Gas (NYSE:MGY) is a small-cap Oil & Gas exploration and production company in the Texas’ Eagle Ford. Eagle Ford is part of the rich petroleum region which has driven Texas to the Top of the North American energy industry.
Magnolia’s production beat estimates in Q-1, reaching 68.4-K bbl of Crude Oil equivalent per day. If that total, 55% was Crude Oil.
Yes, the weakness in petroleum prices hurt Magnolia during the Quarter, and forced a net loss of 0.11/share. MGY stock is down 35% since February.
Company CEO Steve Chazen cast a vote of confidence last week when he spend $300-K buying up a bloc of 50,000/shares in his company. Mr. Chazen has been making periodic purchases of Magnolia shares for the last 2 yrs.
Looking at the forward production estimates the company is generating plenty of cash.
Assuming $260-M in capital expenditures this year, MGY should generate $50-M of FCF in Y 2020 assuming NYMEX 33 Crude Oil/2.10 Nat Gas. Assuming approximately $250-M in capital spending next year and NYMEX 45 Crude Oil/2.65 Nat Gas, the company should generate $130-M of FCF in Y 2021
These FCF assumptions to justify a Buy rating and a 11.50 price target.
Magnolia shares are priced at 5.59, and the average price target of 6.38 MGY’s Moderate Buy consensus rating includes 6 Buys and 3 Holds set in the last month. Not including our early Buy call Monday.
There is Key resistance at 6.17, and lite resistance 13.10. Our technical outlook is Neutral with a view to a Bullish bias mid term.
Magnolia Oil & Gas Corporation engages in the acquisition, development, exploration, and production of Crude Oil, Nat Gas, and LGN in the US.
The company’s properties are located primarily in Karnes County and the Giddings Field in South Texas principally comprising the Eagle Ford Shale and the Austin Chalk formation.
As of 31 December 2019 its assets consisted of a total leasehold position of 450,854 net acres, including 22,088 net acres in Karnes, Gonzales, DeWitt, and Atascosa counties, Texas; 428,766 net acres in the Giddings Field, and 1,141 net wells with a total production capacity of 66.8-K bbl of Crude Oil equivalent per day. The company is HQ’d in Houston, Texas.
Have a healthy week, Keep the Faith!