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APA Misses on Q1 Earnings, Ups Capex, Lowers Output View

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U.S. energy explorer APA Corporation (APA - Free Report) reported first-quarter 2022 adjusted earnings per share of $1.92, missing the Zacks Consensus Estimate of $2.08. The underperformance reflects lower-than-expected production and a rise in costs. Precisely, the average daily output came in at 404,042 barrels of oil-equivalent per day (BOE/d), falling short of the consensus mark of 408,000 BOE/d.

However, APA’s bottom line was well above the year-earlier quarter's adjusted profit of 92 cents due to sharply higher commodity prices.

Revenues of $2.7 billion outpaced the Zacks Consensus Estimate of $2.6 billion million and surged 42.7% from the year-ago quarter’s sales of $1.9 billion.

As promised, the company is using the excess cash from a supportive environment to reward them with dividends and buybacks. APA bought back 7.2 million shares at $36 apiece during the first quarter. Since APA started the program in October last year, 38.4 million shares have been repurchased in total, till Mar 31, at an average price of $28.83. The company also shelled out $43 million in dividend payment.
 

APA Corporation Price, Consensus and EPS Surprise

APA Corporation Price, Consensus and EPS Surprise

APA Corporation price-consensus-eps-surprise-chart | APA Corporation Quote

 

Production & Selling Prices

Production of oil and natural gas averaged 404,042 BOE/d, which comprises 63% liquids. The figure increased around 5.7% from the year-ago quarter.

U.S. output (accounting for 52% of the total) remained essentially unchanged year over year at 210,953 BOE/d, while production from the company’s international operations increased some 12.1% to 193,089 BOE/d. APA’s oil and natural gas liquids (NGLs) production was 253,596 barrels per day (Bbl/d). Natural gas output totaled 902,680 thousand cubic feet per day (Mcf/d).

The average realized crude oil price during the first quarter was $100.23 per barrel, up 68.1% from the year-ago realization of $59.62. The number also came in ahead of the Zacks Consensus Estimate of $91. Meanwhile, the average realized natural gas price jumped to $4.70 per thousand cubic feet (Mcf) from $4.14 in the year-ago period and beat the consensus mark of $4.24.

 

Costs & Financial Position

APA’s first-quarter lease operating expenses totaled $344 million, up 30.3% from the year-ago period. However, a 28.9% drop in costs on oil and gas purchased meant that total operating expenses rose just 3.9% from the corresponding period of 2021 to $1.5 billion.

During the quarter under review, APA generated $891 million of cash from operating activities while it incurred $361 million in upstream capital expenditures. The Zacks Rank #1 (Strong Buy) company reported an adjusted operating cash flow of $1.2 billion in the first quarter. It also made free cash flow of $675 million during the period, up from $511 million a year.

You can see the complete list of today’s Zacks #1 Rank stocks here.

As of Mar 31, APA had approximately $234 million in cash and cash equivalents, and $5.8 billion in long-term debt.

Guidance

APA expects adjusted production to average 313,000 BOE/d in Q2 and 323,000 BOE/d in 2022 (lower than the previous guidance of 328,000 BOE/d on a scaled-down view of Egypt and North Sea). Of this, oil volumes are likely to be 140,000 Bbl/d and 149,000 Bbl/d for Q2 and 2022, respectively. Meanwhile, the company bumped up its upstream capital expenditure by nearly 8% to $1.7 billion. The budget hike can be attributed to higher activity in Suriname and incremental non-operated spending in the U.S. APA has committed to return at least 60% of free cash flow to its shareholders.

Some Key E&P Earnings So Far

APA might have missed profit estimates but supportive industry fundamentals and the emerging multi-year commodity price upcycle have led to a good earnings season for certain exploration and production companies so far.

ConocoPhillips (COP - Free Report) reported first-quarter adjusted earnings per share of $3.27, beating the Zacks Consensus Estimate of $3.24. Further, COP’s bottom line significantly improved from the prior-year quarter’s 69 cents per share. One of the world’s largest independent oil and gas producers based in Houston, TX, ConocoPhillips’ strong quarterly results have been aided by increased oil-equivalent production volumes and realized commodity prices.

ConocoPhillips revised higher its expected 2022 return of capital to shareholders. The new guidance is $10 billion versus the prior projection of $8 billion. COP’s incremental returns to stockholders will get distributed through share repurchases and variable return of cash tiers.

Another upstream giant EOG Resources (EOG - Free Report) reported first-quarter adjusted earnings per share of $4.00, beating the Zacks Consensus Estimate of $3.69. The bottom line significantly improved from the year-ago quarter’s earnings of $1.62. EOG’s strong earnings were driven by higher oil equivalent production and commodity prices.

For the quarter under review, EOG Resources’ volumes increased 13.4% year over year to 883,300 BOE/d on higher U.S. output. Committed to shareholder returns, EOG announced a special dividend of $1.80 per share.

Finally, we have Pioneer Natural Resources Company , which reported first-quarter earnings of $7.74 per share (excluding one-time items), beating the Zacks Consensus Estimate of $7.32. The bottom line surged from the year-ago quarter’s profit of $1.77 per share. PXD’s robust bottom line can be attributed to higher oil-equivalent production volumes and commodity price realizations.

For the second quarter, Pioneer Natural announced a dividend payment of $7.38 per share of common stock, which includes a variable dividend of $6.60 per share and a base dividend of 78 cents. This suggests a 95.2% increase from the prior dividend of $3.78 per share.


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