Magnolia (MGY) Declines 8.5% Despite Beating on Q3 Earnings

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Shares of Magnolia Oil & Gas Corporation MGY have dropped 8.5% since the third-quarter 2021 earnings announcement on Nov 1.

The stock declined despite impressive bottom-line and top-line performances as well as an upbeat fourth-quarter production guidance, which indicates growth from the sequential quarter’s reported figure. This downtrend could be attributed to MGY’s higher capital program expenses and weaker-than-anticipated oil production.

Delving Deeper

Magnolia reported third-quarter adjusted net income per share of 67 cents, beating the Zacks Consensus Estimate of 60 cents and the year-ago quarter’s bottom line of 6 cents.

This outperformance can be primarily attributed to better-than-anticipated production volumes. South Texas-focused MGY’s average daily total output of 67,385 barrels of oil equivalent per day (boe/d) surpassed the Zacks Consensus Estimate of 66,418boe/d.

Total revenues came in at $283.58 million, ahead of the Zacks Consensus Estimate of $277 million. Moreover, the top line rose 134.2% from the year-ago level of $121.07 million.

Production & Prices

Magnolia’s oil and gas production reported a year-over-year increase of 24.1% to 67,385boe/d (comprising 69.3% liquids). Oil volumes at 30,989 barrels per day were up14.7% from the level achieved in third-quarter 2020. However, the same missed the Zacks Consensus Estimate of 31,678 barrels per day.

The average realized crude oil price during the third quarter was $68.44 per barrel, reflecting a 77.8% rise from the year-ago period’s realization of $38.5. The average realized natural gas liquids price was $31.6 per barrel, up 182.1% from the year-ago period’s tally while natural gas prices increased 137.3% year over year to $3.75 per thousand cubic feet. Overall, MGY fetched $45.74 per boe compared with $24.23 a year ago.

Balance Sheet & Capital Expenditure

As of Sep 30, Magnolia had $245.02 million of cash and cash equivalents. The oil explorer’s long-term debt of $387.5 million represented a debt-to-capitalization of 30%. In the reported quarter, MGY spent $67.2 million on its capital program.

Guidance

Magnolia plans to spend around $80 million on drilling and completion activities in the fourth quarter of this year.

Total output in the fourth quarter of 2021 is expected in the 68,000-70,000 boe/d range.

Zacks Rank & Other Key Picks

Magnolia currently sports a Zacks Rank #1 (Strong Buy). Other top-ranked players in the energy  space include EOG Resources EOG, Diamondback Energy FANG and ConocoPhillips COP, each presently flaunting a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

EOG Resources reported third-quarter 2021 adjusted earnings per share of $2.16, beating the Zacks Consensus Estimate of $2.01. Strong earnings were driven by increased production volumes and a higher realization of commodity prices.

EOG announced a quarterly dividend of 75 cents per share, indicating an 82% increase from the previous level. The dividend will be paid out on Jan 28, 2022, to its shareholders of record as of Jan 14, 2022. EOG Resources also declared a special dividend of $2 per share. Moreover, the board of directors updated its share repurchase authorization to $5 billion.

Diamondback Energy reported third-quarter 2021 adjusted earnings of $2.94 per share, which surpassed the Zacks Consensus Estimate of $2.81 and the year-ago quarter’s earnings of 62 cents. FANG’s bottom line was aided by better-than-expected production.

The board of directors declared a dividend of 50 cents per share for the third quarter, representing an 11.1% hike in its quarterly payout from the previous reading of 45 cents. The amount will be paid out on Nov 18, 2021, to its shareholders of record as of Nov 11. FANG also generated a free cash flow of $740 million in the third quarter.

ConocoPhillips reported third-quarter 2021 adjusted earnings per share of $1.77, comfortably beating the Zacks Consensus Estimate of $1.53. This outperformance is led by increased production volumes owing to the Concho acquisition and the rising realized commodity prices.

Based in Houston, TX, this one of the world’s largest independent oil and gas producers’ capital expenditures and investments totaled $1.3 billion, and dividend payments grossed $579 million. ConocoPhillips’ net cash provided by operating activities was recorded at $4.8 billion, up from the year-ago figure of $868 million. COP generated a free cash flow of $2.8 billion in the third quarter.

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