A month has gone by since the last earnings report for Apache (APA - Free Report) . Shares have lost about 2.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Apache 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.
Apache Q3 Earnings Beat on Oil Prices, Volumes
Apache reported third-quarter earnings per share – excluding one-time items – of 63 cents, ahead of the Zacks Consensus Estimate of 43 cents and improved significantly from year-ago adjusted profit of 4 cents. The outperformance stems from higher oil realizations and strong volumes from the key Permian Basin region.
Revenues of $2 billion were above the Zacks Consensus Estimate of $1.9 billion and was 25.9% above the third-quarter 2017 sales of $1.6 billion.
Production Growth, Higher Crude Selling Prices
The production of oil and natural gas averaged 476,255 oil-equivalent barrels per day (BOE/d) (64% liquids), up 6% from last year. Apache’s production for oil and natural gas liquids (NGLs) was 305,436 barrels per day (Bbl/d), while natural gas output came in at 1,024,918 thousand cubic feet per day (Mcf/d).
In the company's Permian Basin acreage, average production volumes improved to a record 222,259 BOE/d from 201,832 in the third quarter of 2017. Results were helped by operational progress and the continued ramp up at the company’s Alpine High discovery. For the fourth quarter, the company forecasts its Permian resources to continue the high-return growth.
The average realized crude oil price during the third quarter was $69.12 per barrel, representing an increase of 40.1% from the year-ago realization of $49.34. However, the average realized natural gas price during the September quarter of 2018 was $2.56 per thousand cubic feet (Mcf), down 6.9% from the year-ago period.
Apache increased its 2018 annual production guidance in the United States to 262,000 BOE/dfrom 260,000BOE/d. The expected improvement in this year’s volume was prompted by robust execution and well performance in the third quarter.
Balance Sheet, Capital Spending & Lease Operating Expenses
As of Sep 30, 2018, the oil giant, with a market capitalization of more than $14 billion, had approximately $593 million in cash and cash equivalents. The company had long-term debt of $8.1 billion, representing a debt-to-capitalization ratio of 51.4%.
Apache’s third-quarter lease operating expenses totaled $382 million, up 8.2% from the year-ago quarter. Moreover, total operating expenses increased 6.4% from the corresponding period of 2017 to $1.6 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -19.6% due to these changes.
At this time, Apache 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 B on the value side, putting it in the top 40% 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Apache has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.