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Why Is APA (APA) Up 8.5% Since Last Earnings Report?

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It has been about a month since the last earnings report for APA (APA - Free Report) . Shares have added about 8.5% in that time frame, outperforming the S&P 500.

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

APA Q1 Earnings and Sales Top Estimates, Rise Y/Y

U.S. energy explorer APA reported first-quarter 2021 earnings per share — excluding one-time items — of 91 cents, beating the Zacks Consensus Estimate of 74 cents. However, the year-earlier quarter reported a loss of 13 cents per share. The outperformance reflects better-than-expected production and tightening of costs. Precisely, the average daily U.S. output came in at 210,091 barrels of oil-equivalent per day (BOE/d), beating the Zacks Consensus Estimate of 208,000 BOE/d.

Revenues of $1.87 billion outpaced the Zacks Consensus Estimate of $1.53 billion million and also rose 46.1% from the year-ago quarter’s sales of $1.28 billion.

Production & Selling Prices

Production of oil and natural gas averaged 382,401 BOE/d, which comprises 64% liquids. The figure dropped 18% from the year-ago quarter.

The U.S. output (accounting for 55% of the total) fell 26% year over year to 210,091 BOE/d while production from the company’s international operations decreased 7% to 172,310 BOE/d. APA’s oil and natural gas liquids (NGLs) production was 243,150 barrels per day (Bbl/d). Natural gas output totaled 835,506 thousand cubic feet per day (Mcf/d).

The average realized crude oil price during the first quarter was $59.62 per barrel, up 23.4% from the year-ago realization of $48.31. However, the number fell short of the Zacks Consensus Estimate of $60. Meanwhile, the average realized natural gas price increased to $4.14 per thousand cubic feet (Mcf) from $1.47 in the year-ago period and also topped the Zacks Consensus Estimate of $4.11.

Costs & Financial Position

APA’s first-quarter lease operating expenses totaled $264 million, down 21.2% from the year-ago period. Moreover, total operating expenses plunged 74.8% from the corresponding period of 2020 to $1.47 billion. Apart from a significant drop in lease operating expenses, the improvement came on the back of lower depreciation and amortization expenses and the absence of the year-ago quarter’s impairment charges.

During the quarter under review, APA generated $671 million of cash from operating activities. On the flip side, it spent $243 million on upstream capital expenditures. The company reported an adjusted operating cash flow of $846 million in the first quarter.

As of Mar 31, APA had approximately $538 million worth cash and cash equivalents, and $8.05 billion of long-term debt.

Guidance

Looking forward, the company reiterates its 2021 outlook and expects to generate at least $1 billion as free cash flow this year, majority of which will be used to pay down its net debt.

For the second quarter of 2021, APA projects production of oil and natural gas at 340,000 BOE/d.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -20.26% due to these changes.

VGM Scores

Currently, APA has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Outlook

Estimates have been trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, APA has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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