Magnolia Oil & Gas Corp. (MGY) PT Raised to $24 at JPMorgan

JPMorgan analyst Michael Glick raised the price target on Magnolia Oil & Gas Corp. (NYSE: MGY) to $24.00 (from $23.00) while maintaining a Neutral rating.

The analyst comments "JPM View: We forecast a slight cash flow/EBITDA miss on in-line operations after marking to market for 3Q commodity prices. We estimate 3Q24 CFPS of $1.10, 3% below the STe at $1.14. Our EBITDA estimate of $232 MM is 4% below the STe at $241 MM. We are modeling 3Q oil production of 38.0 MBo/d, a touch below the STe at 38.2 MBo/d, and total production of 91.3 MBoe/d, which is in-line with guidance of 91 MBoe/d and the STe at 91.2 MBoe/d. Our 3Q capex estimate of $120 MM aligns with both the STe and MGY’s guidance. With 2Q earnings, MGY achieved its LOE reduction target (5-10%) earlier than expected, and we are modeling flat LOE in 2H24 (~$5.40 per boe). We do expect GP&T to trend higher sequentially in 2H24 driven by higher natural gas prices, and we estimate GP&T of $1.18 per boe in 3Q24 (vs $1.03 per boe in 2Q). We forecast that MGY will deliver $99 MM of FCF during the quarter. We are modeling cash return of $89 MM for the quarter, inclusive of MGY’s $0.13 per share quarterly dividend and $63 MM of buybacks, as we expect that MGY bought back more shares than its 1% quarterly target. Late in the quarter, MGY repurchased 500k shares directly from Envervest, who sold ~7.5 MM shares in total (Enervest now holds only ~7.5 MM shares). We highlight positive early trends in 2024 well productivity in both Giddings and Karnes (see Figure 1- Figure 4), which could provide some modest upside to our production estimates if the trend continues. For FY25, we are modeling total volumes of 95.4 MBoe/d (+6% YoY) and oil volumes of 38.4 MBo/d (+1% YoY) as we expect MGY’s production base to trend modestly gassier over time given more Giddings development. We are modeling FY25 capex of $487 MM, which is 2% above the STe at $476 MM. We forecast that MGY will generate $364 MM of FCF in FY25, a 7.0% FCF yield. We maintain our Neutral rating and increase our Dec-25 PT to $24 (from $23) after updating for recent strip pricing."

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