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Why Is Magnolia Oil & Gas Corp (MGY) Down 7.7% Since Last Earnings Report?

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It has been about a month since the last earnings report for Magnolia Oil & Gas Corp (MGY - Free Report) . Shares have lost about 7.7% 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 Q4 Earnings Top on Strong Production

Magnolia Oil & Gas Corporation reported fourth-quarter 2020 adjusted net income per share of 15 cents, beating the Zacks Consensus Estimate of 10 cents and ahead of the year-ago period profit of 5 cents.

The outperformance can be primarily attributed to better-than-anticipated production volumes. Precisely, the South Texas-focused company’s average daily output of 60,617 boe surpassed the Zacks Consensus Estimate of 58,812 boe.

Total revenues came in at $149.2 million, ahead of the Zacks Consensus Estimate of $141 million. However, the top line fell 35% from the year-ago level of $229.7 million due to lower oil prices.

Production & Prices

Magnolia’s oil and gas production reported a year-over-year decrease of 11.3% to 60,617 boe per day (comprising 70% liquids). In particular, oil volumes at 28,756 barrels per day were down 18.6% from the level achieved in fourth-quarter 2019.

The average realized crude oil price during the fourth quarter was $40.34 per barrel, reflecting a 30.2% decline from the year-ago realization of $57.82. However, the average realized natural gas liquids price was $15.75 per barrel, up 2.9% from the year-ago period, while natural gas prices increased 7.1% year over year to $2.26 per thousand cubic feet. Overall, the company fetched $26.76 per boe compared with $36.54 a year ago.

Balance Sheet & Capital Expenditure

As of Dec 31, Magnolia had approximately $192.6 million in cash and cash equivalents. The oil explorer’s long-term debt of $391.1 million represented a debt-to-capitalization of 31.8%. In the reported quarter, the company spent around $40 million on its capital program.

Guidance

Magnolia plans to spend around 50% to 60% of its adjusted EBITDAX (earnings before interest, tax, depreciation, amortization and exploration expense) for 2021 for drilling and completion activities. The company also guided toward 5% to 8% annual production growth this year.

 

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 60% 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 lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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. It comes with little surprise Magnolia Oil & Gas Corp has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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