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U.S.energy firm Apache Corp. (APA - Analyst Report) is scheduled to report its first-quarter 2013 results on Thursday, May 9, before the market opens.

In the fourth quarter of 2012, Apache delivered a negative 1.30% earnings surprise due to deteriorating oil and gas realizations. In fact, Apache hasdelivered negative earnings surprises in each of the last 4 quarters, with an average miss of 6.73%. Let’s see how things are shaping up prior to this announcement.

Factors to Consider this Quarter

The operating scenario for exploration and production (E&P) companies will remain critical in the near-to-medium term. Apache is also susceptible to oil and gas prices, which are inherently volatile and subject to complex market forces.

Apache’s long-term production and reserve growth primarily depend on its acquire-and-exploit model. Apache may find it difficult to complete accretive transactions in the future, which could negatively impact its growth rate.

Additionally, operations in the Gulf of Mexico remain prone to various natural calamities such as hurricanes and also face the risk of pipeline damages and oilfield service cost inflation. Lower-than-expected production from the region will likely impact Apache’s overall performance.

Moreover, the Zacks Consensus Estimate for the first quarter moved down by 4 cents to $2.20 per share over the last 30 days as the tendency for a downward revision was more obvious.

Earnings Whispers?

Our proven model does not conclusively show that Apache is likely to beat the Zacks Consensus Estimate in the first quarter. That is because a stock needs to have both a positive earnings Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. But this is not the case here as elaborated below.

Negative Zacks ESP: This is because the Most Accurate estimate stands at $2.18 while the Zacks Consensus Estimate is higher at $2.20. This results in a difference of -0.91%.

Zacks Rank #3 (Hold): Apache’s Zacks Rank #3, however, increases the forecasting power of ESP. That said we also need to have a positive ESP to be confident of an earnings surprise call.

We caution against stocks with Zacks Rank #4 and 5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some E&P firms you might want to consider on the basis of our model. These have the right combination of elements to post an earnings beat this quarter:

Memorial Production Partners LP (MEMP - Snapshot Report) has an earnings ESP of +10.64% and a Zacks Rank #3 (Hold).

EV Energy Partners LP (EVEP - Snapshot Report) has an earnings ESP of +10.0% and a Zacks Rank #3 (Hold).

Atlas Resource Partners LP (ARP - Snapshot Report) has an earnings ESP of +8.70% and Zacks Rank #3 (Hold).

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