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Why Is APA (APA) Down 0.4% Since Last Earnings Report?

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A month has gone by since the last earnings report for APA (APA - Free Report) . Shares have lost about 0.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is APA due for a breakout? 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 Q3 Earnings Miss Even as Callon Buyout Drives Production

APA reported third-quarter 2024 adjusted earnings of $1 per share, missing the Zacks Consensus Estimate of $1.03 and deteriorating from the year-ago adjusted figure of $1.33. The underperformance primarily reflects lower commodity prices and higher costs.

Revenues of $2.5 billion were up 10% from the year-ago quarter’s sales and came ahead of the Zacks Consensus Estimate by 11.7% on the back of contribution from the Callon Petroleum acquisition and higher-than-expected production. 

Meanwhile, APA continues to reward shareholders with dividends and buybacks. APA bought back 1.5 million shares at $28.72 apiece during the second quarter. The company also shelled out $92 million in dividend payments.

Meanwhile, APA continues to reward shareholders with dividends and buybacks. APA bought back 102,305 shares at $29.32 apiece during the third quarter. The company also shelled out $92 million in dividend payments

Production & Selling Prices

Production of oil and natural gas averaged 467,480 BOE/d, which comprises 72% liquids. The figure was up 13.4% from the year-ago quarter and surpassed our expectation of 450,458  BOE/d.

U.S. output (accounting for 64% of the total) jumped 33.3% year over year to 300,709 BOE/d but production from the company’s international operations decreased 10.6% to 166,771 BOE/d. APA’s oil and natural gas liquids (NGLs) production was 336,323 barrels per day (Bbl/d). Natural gas output totaled 786,944 thousand cubic feet per day (Mcf/d).

The average realized crude oil price during the third quarter was $78.06 per barrel, down 9.4% from the year-ago realization of $86.15. However, the number came above our projection of $73.90. Meanwhile, the average realized natural gas price fell to $1.43 per thousand cubic feet (Mcf) from $3.12 in the year-ago period and missed our estimate of $1.80.

Costs & Financial Position

APA’s third-quarter lease operating expenses totaled $418 million, up 6.1% from $394 million in the year-ago period. Moreover, a significant increase in the cost of oil/gas equipment, higher depreciation outgo and an asset impairment charge meant that total operating expenses almost doubled from the corresponding period of 2023 to $2.9 billion. Our model put the figure at $1.7 billion.

During the quarter under review, APA generated $1.3 billion of cash from operating activities while it incurred $698 million in upstream capital expenditures. The company reported an adjusted operating cash flow of $1.1 billion. It also registered a free cash flow of $219 million compared to $307 million a year ago.

As of Sept. 30, APA had approximately $64 million in cash and cash equivalents and $6.4 billion in long-term debt, representing a debt-to-capitalization of 50.8%.

Guidance

APA expects adjusted production to average 415,000 BOE/d in Q4 and 384000 BOE/d in 2024. Of this, oil volumes are likely to be 218,000 Bbl/d during the October-December period and 198,000 Bbl/d for the full year. The company pegged its upstream capital expenditure for the year at $2.75 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, APA has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. 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 C. 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 has been net zero. 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, Antero Resources (AR - Free Report) , a stock from the same industry, has gained 10.8%. The company reported its results for the quarter ended September 2024 more than a month ago.

Antero Resources reported revenues of $1.06 billion in the last reported quarter, representing a year-over-year change of -6.2%. EPS of -$0.12 for the same period compares with $0.08 a year ago.

Antero Resources is expected to post earnings of $0.41 per share for the current quarter, representing a year-over-year change of +86.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.2%.

Antero Resources has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.


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