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APA Meets on Q2 Earnings, Buys Assets, Lowers Output View

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U.S. energy explorer APA Corporation (APA - Free Report) reported second-quarter 2022 adjusted earnings of $2.37 per share, meeting the Zacks Consensus Estimate and up significantly from the year-earlier quarter’s income of 70 cents.

The quarterly numbers reflect sharply higher commodity prices, partly offset by lower-than-expected production and a rise in costs. Precisely, the average daily output came in at 384,627 barrels of oil equivalent per day (BOE/d), falling short of the consensus mark of 392,000 BOE/d.

Revenues of $3 billion outpaced the Zacks Consensus Estimate of $2.8 billion million and improved 73.5% from the year-ago quarter’s sales of $1.8 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 million shares at $41.59 apiece during the second quarter. Since APA started the program last October, 52.3 million shares have been repurchased in total, till Jul 31, at an average price of $31.19. The company also shelled out $43 million in dividend payment.

During the earnings release, APA further informed that it purchased certain properties in the Texas Delaware Basin for $505 million that will add 12,000-14,000 BOE/d to its production through the rest of this year.
 

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 384,627 BOE/d, which comprises 63% liquids. The figure decreased 2.7% from the year-ago quarter.

U.S. output (accounting for 52% of the total) fell 17.1% year over year to 200,269 BOE/d but production from the company’s international operations increased some 20% to 184,358 BOE/d. APA’s oil and natural gas liquids (NGLs) production was 243,513 barrels per day (Bbl/d). Natural gas output totaled 846,685 thousand cubic feet per day (Mcf/d).

The average realized crude oil price during the second quarter was $113.79 per barrel, up 71.4% from the year-ago realization of $66.40. The number also came in line with the Zacks Consensus Estimate. Meanwhile, the average realized natural gas price jumped to $5.65 per thousand cubic feet (Mcf) from $2.99 in the year-ago period and beat the consensus mark of $5.59.

 

Costs & Financial Position

APA’s second-quarter lease operating expenses totaled $359 million, up 15.4% from the year-ago period. Moreover, a a doubling of costs on oil and gas purchased meant that total operating expenses rose 23.5% from the corresponding period of 2021 to $1.6 billion.

During the quarter under review, APA generated $1.5 billion of cash from operating activities while it incurred $428 million in upstream capital expenditures. The Zacks Rank #3 (Hold) company reported an adjusted operating cash flow of $1.4 billion in the second quarter. It also registered free cash flow of $814 million during the period, surging from $406 million a year.

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

As of Jun 30, APA had approximately $282 million in cash and cash equivalents, and $5.2 billion in long-term debt. The debt-to-capitalization ratio of the company was 89.8.

Guidance

APA expects adjusted production to average 304,000-310,000 BOE/d in Q3 and 315,000-319,000 BOE/d in 2022 (lower than the previous guidance of 323,000 BOE/d on a scaled-down view of Egypt, well completion delays in Egypt and the Permian, to go with minor divestitures). Of this, oil volumes are likely to be 138,000-140,000 Bbl/d and 143,000-145,000 Bbl/d for Q3 and 2022, respectively. Meanwhile, the company kept its upstream capital expenditure unchanged at $1.7 billion. APA has committed to return at least 60% of free cash flow to its shareholders. The company has guided for some $3 billion in free cash flow in 2022

Some Key E&P Earnings So Far

While we have discussed APA’s second-quarter results in detail, let’s see how some other exploration and production companies have fared in this earnings season.

ConocoPhillips (COP - Free Report) reported second-quarter adjusted earnings per share of $3.91, beating the Zacks Consensus Estimate of $3.78. Further, COP’s bottom line significantly improved from the prior-year quarter’s $1.27 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 $15 billion versus the prior projection of $10 billion. COP’s incremental returns to stockholders will get distributed through share repurchases and variable returns of cash tiers.

Another upstream giant EOG Resources (EOG - Free Report) reported second-quarter adjusted earnings per share of $2.74, missing the Zacks Consensus Estimate of $2.99. EOG’s weaker-than-expected earnings were attributed to higher lease and well expenses, as well as transportation costs. However, the bottom line jumped from the year-ago quarter’s earnings of $1.73 due to increased volumes and prices.

For the quarter under review, EOG Resources’ production increased 11% year over year, while it generated $1.3 billion in free cash flow. Committed to shareholder returns, EOG announced a special dividend of $1.50 per share.

Finally, we have Pioneer Natural Resources Company (PXD - Free Report) , which reported second-quarter earnings of $9.36 per share (excluding one-time items), beating the Zacks Consensus Estimate of $8.81. The bottom line surged from the year-ago quarter’s profit of $2.55 per share. PXD’s robust bottom line can be attributed to higher production volumes and commodity price realizations.

Pioneer Natural announced a dividend payment of $8.57 per share of common stock, which includes a variable dividend of $7.47 per share and a base dividend of $1.10. This suggests a 16.1% increase from the prior dividend of $7.38 per share.