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Factors Likely to Decide Apache's (APA) Fate in Q4 Earnings

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Apache Corporation (APA - Free Report) is scheduled to release fourth-quarter 2020 results on Wednesday Feb 24, after the closing bell.

The Zacks Consensus Estimate for the to-be-reported quarter’s loss is 8 cents per share and for revenues is $1.05 billion.

Against this backdrop, let’s delve into the factors that might have impacted the company’s performance in the December quarter.

Factors at Play

Apache boasts a large geographically diversified reserve base with multi-year trends in reserve replacement. The company’s high-quality drilling inventory with greater resource potential might have enabled it to deliver a decent per share growth rate in the fourth quarter. This, in turn, is expected to have lent its portfolio a solid competitive edge.

In the last reported quarter, Apache’s average realized natural gas price increased to $1.90 per thousand cubic feet (Mcf) from $1.66 in the year-ago period. This uptrend is likely to have continued in the fourth quarter too. Notably, the Zacks Consensus Estimate for fourth-quarter average realized natural gas price stands at $2.19 per Mcf, indicating a 6.8% rise from the year-ago reported figure of $2.05 per Mcf.

However, the average realized crude oil price during the third quarter was $40.88 per barrel, down 30.2% from the year-ago realization of $58.6, a trend that most likely continued in the fourth quarter as well. Precisely, the Zacks Consensus Estimate for fourth-quarter average crude price realization stands at $40.94, indicating a 31.8% fall from the year-ago reported figure of $60.

Also, Apache’s production of oil and natural gas averaged 445,241 barrels of oil-equivalent per day (BOE/d) in the third quarter, which comprises 65% liquids. The figure slid 1% from the year-ago quarter due to an unimpressive contribution from the United States. This trend is most likely to have continued in the fourth quarter as well. Notably, the Zacks Consensus Estimate for fourth-quarteraverage daily output is pegged at 411,000 BOE/d, indicating a 15.6% fall from the year-ago reported figure of 487,202BOE/d.

What Does Our Model Say?

Our proven model does not conclusively predict an earnings beat for Apache this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Apache has an Earnings ESP of -9.29%.

Zacks Rank: Apache carries a Zacks Rank #2, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Highlights of Q3 Earnings & Surprise Record

For the last reported quarter, Apache posted a 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. 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.

As far as earnings surprises are concerned, this oil and gas producer’s bottom line beat the Zacks Consensus Estimate in all the trailing four quarters, the average being 109.67%. This is depicted in the graph below:

Apache Corporation Price and EPS Surprise

Apache Corporation Price and EPS Surprise

Apache Corporation price-eps-surprise | Apache Corporation Quote

Stocks to Consider

While earnings outperformance looks uncertain for Apache, here are some firms worth considering from the energy space, which according to our model have the perfect combination of ingredients to deliver a positive surprise this reporting cycle:

PDC Energy, Inc. (PDCE - Free Report) has an Earnings ESP of +11.97% and is a #1 Ranked stock, currently. The firm is scheduled to release earnings on Feb 24.

Diamondback Energy, Inc. (FANG - Free Report) has an Earnings ESP of +08.58% and is Zacks #2 Ranked, currently. The company is scheduled to release earnings on Feb 22.

Cheniere Energy, Inc. (LNG - Free Report) has an Earnings ESP of +14.71% and a Zacks Rank #3, currently. The company is scheduled to release earnings on Feb 24.

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