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Apache Earnings Miss, Targets $4B Asset Sale

APA SM EPL

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U.S. energy firm Apache Corp. (APA - Analyst Report) reported weak first-quarter 2013 results, mainly due to deteriorating oil and gas realizations, partially offset by increased liquids volume.

Earnings per share – excluding one-time items – came in at $2.02, below the Zacks Consensus Estimate of $2.22 and significantly down from the year-ago period adjusted profit of $3.00. Revenues of $4,076.0 million were down 10.1% from the first quarter of 2012 and were also lower than the Zacks Consensus Estimate of $4,291.0 million.

Operational Performance

The production of oil and natural gas averaged 781,819 oil-equivalent barrels per day (BOE/d) (53% liquids), up approximately 1.6% year over year. Apache’s production for oil and natural gas liquids (NGLs) was up roughly 9.3% at 415,792 barrels per day (Bbl/d), while natural gas production of 2,196.2 million cubic feet per day (MMcf/d) was down 5.8% from the first-quarter 2012 level.

Apache’s upstream growth momentum is retained organically as well as through acquisitions as it continues to explore the extensive, multi-year inventory of drillable locations in the Permian and Anadarko basins of North America.

The average realized crude oil price during the first quarter was $101.72 per barrel, representing a decrease of 8.5% from the corresponding period of the previous year. The average realized natural gas price during the Mar quarter of 2013 was $3.72 per thousand cubic feet (Mcf), down 2.6% from the year-ago period.

Apache’s lease operating expenses totaled $771.0 million, up 14.6% from $673.0 million in the year-ago quarter.

Balance Sheet & Capital Spending

As of Mar 31, 2013, Apache had approximately $248.0 million in cash and cash equivalents. The company had a long-term debt of $11,485.0 million, representing a debt-to-capitalization ratio of 26.4%.

During the three months ended Mar 31, 2013, Apache’s capital investments (excluding acquisitions) totaled $2,571.0 million.

Targets $4 Billion from Sale of Assets

Apache plans to generate $4 billion from selling assets – those that do not fit into the company’s long-term growth plan – by year-end 2013. Of the total proceeds, the oil and gas explorer intends to utilize the initial $2 billion to pare borrowings and improve financial flexibility, while the remaining $2 billion will go towards buying back 30 million shares.

Zacks Rank

Apache currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

However, there are certain domestic upstream energy operators like EPL Oil & Gas Inc. (EPL - Snapshot Report), McMoRan Exploration Co. and SM Energy Co. (SM - Analyst Report) that offer tremendous value and are worth buying now. All these companies sport a Zacks Rank #1 (Strong Buy).

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