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Why Is Apache (APA) Down 10.4% Since the Last Earnings Report?

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About a month has gone by since the last earnings report for Apache Corporation (APA - Free Report) . Shares have lost about 10.4% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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 catalysts.

Second-Quarter 2017 Results

Apache reported second-quarter loss per share – excluding one-time items – of $0.21 against the Zacks Consensus Estimate for breakeven earnings. The underperformance stems from a dip in output due to a conservative capital budget over the past two years. However, the bottom line improved from the year-ago loss of $0.26 amid higher realizations.

Revenues of $1,384 million were below the Zacks Consensus Estimate of $1,419 million but managed to beat the second-quarter 2016 sales of $1,382 million.

Operational Performance

The production of oil and natural gas (excluding divested assets and non-controlling interests) averaged 387,562 oil-equivalent barrels per day (BOE/d) (65% liquids), down 16% from last year. Apache’s production for oil and natural gas liquids (NGLs) was 250,251 barrels per day (Bbl/d), while natural gas output came in at 823.9 million cubic feet per day (MMcf/d).

The average realized crude oil price during the second quarter was $46.89 per barrel, representing an increase of 9% from the year-ago realization of $43.14. Moreover, the average realized natural gas price during the Jun quarter of 2017 was $2.60 per thousand cubic feet (Mcf), up 27% from the year-ago period.

Balance Sheet, Capital Spending & Lease Operating Expenses

As of Jun 30, 2017, Apache had approximately $1,667 million in cash and cash equivalents. The company had a long-term debt of $8,329 million, representing a debt-to-capitalization ratio of 54.7%.

During the oil rout, Apache– like many other oil and gas players – aligned its spending plans with the low-price environment.

But Apache is now looking to increase its capital investment after achieving cost rationalization. With returns-focused growth in mind, Apache announced a 2017 capital budget of $3.1 billion, representing a 60% increase over its 2016 spend. Keeping with the company’s planned shift in strategic objective, Apache’s oil and gas capital investments totaled $738 million during the Apr-Jun period, 85% higher than the $400 million incurred a year ago.

Apache’s second quarter lease operating expenses totaled $372 million, up 4% from the year-ago quarter. However, total costs and expenses fell 17% from the second quarter of 2016 to $1,375 million.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been five revisions lower for the current quarter. While looking back an additional 30 days, we can see even more downward momentum.

Apache Corporation Price and Consensus

 

Apache Corporation Price and Consensus | Apache Corporation Quote

VGM Scores

At this time, Apache's stock has a nice Growth Score of B, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 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.

Our style scores indicate that the stock is more suitable for growth investors than value investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.




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