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Apache (APA) Up 53.2% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Apache (APA - Free Report) . Shares have added about 53.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Apache due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Apache Posts Narrower-Than-Expected Q3 Loss, Sales Beat Estimates

Apache reported third-quarter 2020 loss per share — excluding one-time items — of 16 cents, narrower than the Zacks Consensus Estimate of a loss of 37 cents and also the year-ago quarter’s loss of 29 cents. This better-than-expected result is led by higher-than-anticipated production volumes. Precisely, the average daily output came in at 445,241 barrels of oil-equivalent per day (BOE/d), beating the Zacks Consensus Estimate of 424,000 BOE/d.

Also, revenues of $1.12 billion outpaced the Zacks Consensus Estimate of $980 million but the same fell 24.2% from the year-ago quarter’s sales of $1.48 billion due to weak year-over-year oil price realizations.

Production & Selling Prices

Production of oil and natural gas averaged 445,241 BOE/d, which comprises 65% liquids. The figure slid 1% from the year-ago quarter due to an unimpressive contribution from the United States.

The U.S. output (accounting for 65.6% of the total) dipped 3% year over year to 258,058 BOE/d while the company’s international operations increased 8% to 135,471 BOE/d. Apache’s oil and natural gas liquids (NGLs) production was 255,780 barrels per day (Bbl/d). Natural gas output totaled 826,490 thousand cubic feet per day (Mcf/d).

The average realized crude oil price during the third quarter was $40.88 per barrel, down 30.2% from the year-ago realization of $58.60. However, the number came ahead of the Zacks Consensus Estimate of $40.21. Meanwhile, the average realized natural gas price increased to $1.90 per thousand cubic feet (Mcf) from $1.66 in the year-ago period and also topped of the Zacks Consensus Estimate of $1.82.

Costs & Financial Position

Apache’s third-quarter lease operating expenses totaled $259 million, down 26% from the year-ago period. Moreover, total operating expenses declined 27.9% from the corresponding period of 2019 to $1.07 billion. This upside was mainly owing to lower depreciation & amortization expenses and decreased general and administration costs.

During the quarter under review, Apache generated $304 million of cash from operating activities while it invested $141 million in capital expenditures. The company reported an adjusted operating cash flow of $401 million in the third quarter.

As of Sep 30, this oil giant had approximately $162 million of cash and cash equivalents. Meanwhile, Apache had a long-term debt of $8.2 billion.

Guidance

This Houston, TX-based explorer and producer projects its 2021 annual capital view to be nearly $1 billion, depending on $40 per barrel WTI oil and $2.75 Henry Hub natural gas price with capital allocation priorities similar to 2020.

Further, the company expects its DUC completion program to improve its Permian oil production to the level of fourth-quarter 2020 readings. However, Egypt and the North Sea volumes are anticipated to experience moderate declines.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 9.33% due to these changes.

VGM Scores

At this time, Apache has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Apache has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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