Apache (APA) Q3 Earnings Top On Oil Price, Permian Strength

U.S. energy firm Apache Corporation (NYSE:APA) 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.

Zacks Rank & Stock Picks

Apache currently retains a Zacks Rank #2 (Buy).

Apart from Apache, one can also look at upstream players like Bonanza Creek Energy, Inc. (NYSE:BCEI) , Magnolia Oil & Gas Corp. (NYSE:MGY) and Murphy Oil Corp. (NYSE:MUR) . Bonanza Creek Energy carries a Zacks Rank #1 (Strong Buy), while Magnolia Oil & Gas and Murphy Oil have a Zacks Rank #2.

(You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.)

Bonanza Creek’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average positive surprise being 74.9%.

Murphy Oil’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average positive surprise being 96.5%.

Meanwhile, over 30 days, Magnolia Oil & Gas has seen the Zacks Consensus Estimate for 2018 and 2019 increase 19.1% and 8.8%, to $1.37 and $1.74 per share, respectively.

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