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Magnolia Oil & Gas: Over $300 Million In 2021 Positive Cash Flow To Fund Share Repurchases And Dividend

Mar. 04, 2021 2:25 AM ETMagnolia Oil & Gas Corporation (MGY)5 Comments


  • Magnolia may be able to generate over $300 million in positive cash flow in 2021 at current strip prices while growing production by around 6%.
  • This could fund the repurchase of 12 million shares plus a $0.50 per share dividend.
  • Magnolia's enterprise value is around $3 billion though, which is a bit over 5.0x EBITDAX using $55 longer-term WTI oil.
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Magnolia Oil & Gas (NYSE:MGY) may be able to generate over $300 million in positive cash flow in 2021 at current strip prices, while growing production by approximately 6%. This positive cash flow may allow it to repurchase around 12 million shares during the year as well as pay a $0.50 per share dividend.

That being said, its stock doesn't appear all that cheap. Magnolia's enterprise value is close to $3 billion now, and I am neutral about its stock at its current price.

Secondary Public Offering

Magnolia announced a secondary public offering where some of EnerVest's affiliates are selling shares at approximately $10.50 each. Magnolia is also planning on repurchasing 5 million Class B shares from EnerVest's affiliates at the same price. Magnolia does not receive proceeds from the secondary public offering, and will pay approximately $52.5 million to repurchase the 5 million shares. This will reduce Magnolia's outstanding share count (combined Class A and Class B shares) from 248.6 million to 243.6 million.

EnerVest's stake in Magnolia will be reduced to 96.1 million common shares if the underwriters exercise their option to purchase additional shares in full.

2021 Outlook At $60 Oil

Magnolia may grow its production to around 65,500 BOEPD (48% oil) in 2021. This represents around 6% growth compared to 2021 levels. Magnolia expects to realize approximately $3 less than Magellan East Houston prices for its oil, which translates into around a $58.50 realized price when WTI is at $60.

This leads to a projection that Magnolia will generate approximately $899 million in revenues at current strip prices.

Type Barrels/Mcf $ Per Barrel/Mcf $ Million
Oil 11,475,600 $58.50 $671
NGLs 5,221,398 $23.00 $120
Gas 43,263,012 $2.50 $108
Total $899

Magnolia is aiming for its capital expenditures to end up around 50% to 60% of

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This article was written by

Elephant Analytics profile picture
Aaron Chow, aka Elephant Analytics has 15+ years of analytical experience and is a top rated analyst on TipRanks. Aaron previously co-founded a mobile gaming company (Absolute Games) that was acquired by PENN Entertainment. He used his analytical and modeling skills to design the in-game economic models for two mobile apps with over 30 million in combined installs. He is the author of the investing group Distressed Value Investing, which focuses on both value opportunities and distressed plays, with a significant focus on the energy sector. Learn more>>

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Comments (5)

significant inventory issues, they will be forced to buy and prices have certainly gone up now
Small Cap And Special Situations profile picture
$0.50 sounds like a much more substantial dividend than Chazen has previously indicated they might pay. Have they said something that makes you think it might be that large, or are you simply observing that the mathematics would theoretically allow it? Thanks!
@Small Cap And Special Situations It'll likely be closer to $0.20 a share all-in, but they'll probably buy back a lot shares too.
Small Cap And Special Situations profile picture
@creekview $0.20 was the number in my mind too, but apart from the verbiage in previous calls it's just a WAG.
Pete Palmer profile picture
MGY is a well run company and will capitalize on rising oil prices.
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