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Why Is APA (APA) Up 23.6% 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 23.6% 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 its most recent earnings report in order to get a better handle on the important catalysts.

APA Q2 Earnings Meet Estimates

APA 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.

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 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.

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








 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -5.33% due to these changes.

VGM Scores

At this time, APA has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 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.

Performance of an Industry Player

APA is part of the Zacks Oil and Gas - Exploration and Production - United States industry. Over the past month, Devon Energy (DVN - Free Report) , a stock from the same industry, has gained 25.1%. The company reported its results for the quarter ended June 2022 more than a month ago.

Devon Energy reported revenues of $5.63 billion in the last reported quarter, representing a year-over-year change of +132.8%. EPS of $2.59 for the same period compares with $0.60 a year ago.

Devon Energy is expected to post earnings of $2.24 per share for the current quarter, representing a year-over-year change of +107.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -4.6%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Devon Energy. Also, the stock has a VGM Score of A.


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