Apache (APA) Posts Q4 Earnings Beat On Oil Price, Cost Cuts

U.S. energy firm Apache Corporation (NYSE:APA) reported fourth-quarter earnings per share – excluding one-time items – of 33 cents, ahead of the Zacks Consensus Estimate of 21 cents. The bottom line also turned around from the year-ago adjusted loss of 6 cents. The outperformance stems from higher oil realizations, and lower cost.

Revenues of $1,586 million were above the Zacks Consensus Estimate of $1,540 million and was 9.3% above the fourth-quarter 2016 sales of $1,451 million.

Operational Performance

The production of oil and natural gas (excluding divested assets and non-controlling interests) averaged 362,251 oil-equivalent barrels per day (BOE/d) (68% liquids), essentially flat from last year. Apache’s production for oil and natural gas liquids (NGLs) was 246,672 barrels per day (Bbl/d), while natural gas output came in at 693,477 thousand cubic feet per day (Mcf/d).

The company aims to grow production by 7-13% in the next year.

The average realized crude oil price during the fourth quarter was $58.36 per barrel, representing an increase of 23.1% from the year-ago realization of $47.39. Moreover, the average realized natural gas price during the December quarter of 2017 was $2.90 per thousand cubic feet (Mcf), up 1.8% from the year-ago period.

Balance Sheet, Capital Spending & Lease Operating Expenses

As of Dec 31, 2017, Apache had approximately $1,668 million in cash and cash equivalents. The company had a long-term debt of $7,934 million, representing a debt-to-capitalization ratio of 51.7%.

During the oil rout, Apache– like many other oil and gas players including ConocoPhillips (NYSE:COP) and Marathon Oil Corp. (NYSE:MRO) – aligned its spending plans with the low-price environment.

But Apache has since then increase its capital investment after achieving cost rationalization. With returns-focused growth in mind, Apache shelled out $3,089 million in 2017, representing a 75% increase over its 2016 spend. Keeping with the company’s planned shift in strategic objective, Apache’s oil and gas capital investments are set to total $3000 million during this year.

Apache’s fourth quarter lease operating expenses totaled $334 million, down 10.9% from the year-ago quarter. Moreover, total costs and expenses fell 16.4% from the fourth quarter of 2016 to $1,308 million.

Zacks Rank & Stock Picks

Apache currently retains a Zacks Rank #3 (Hold).

A better-ranked player from the same space would be Concho Resources Inc. (NYSE:CXO) that sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Based in Midland, TX, Concho Resources is an independent oil and gas exploration and production company with producing properties mainly in the Permian Basin of southeast New Mexico and west Texas. It has a 100% track of outperforming estimates over the last four quarters at an average rate of 48.89%.

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