Apache (APA) Q2 Earnings and Revenues Surpass Estimates

U.S. energy firm Apache Corporation APA reported second-quarter 2019 earnings per share – excluding one-time items – of 11 cents, ahead of the Zacks Consensus Estimate of 4 cents. The outperformance stems from robust international production.

However, Apache’s bottom line witnessed a fall from the year-ago quarter’s adjusted profit of 50 cents on lower commodity price realizations.

Revenues of $1.6 billion were 1.4% above the Zacks Consensus Estimate but was 16.9% lower than the second-quarter 2018 sales of $1.9 billion.

Production & Selling Prices

Production of oil and natural gas averaged 455,023 oil-equivalent barrels per day (BOE/d) — comprising 66% liquids — down 2% from a year ago due to the impact of asset sales.

The U.S. output (accounting for 58% of the total) rose 3.3% year over year to 264,024 BOE/d but the company’s international operations decreased 8.4% to 190,999 BOE/d. Apache’s production for oil and natural gas liquids (NGLs) was 301,371 barrels per day (Bbl/d), while natural gas output came in at 921,911 thousand cubic feet per day (Mcf/d).

In the company's Permian Basin acreage, average production volumes improved to 226,318 BOE/d from 201,832 in the second quarter of 2018. The results were aided by operational progress, somewhat offset by deferred natural gas output at the company’s Alpine High discovery in response to low prices.

The average realized crude oil price during the second quarter was $63.71 per barrel, 8.1% lower than the year-ago realization. The average realized natural gas price also declined to $1.41 per thousand cubic feet (Mcf) from $2.50 in the year-ago period.

Costs, Financial Position

Apache’s second-quarter lease operating expenses totaled $389 million, up 9.3% from the year-ago quarter. Moreover, total operating expenses jumped 23.5% from the corresponding period of 2018 to $1.8 billion. This was mainly on account of costs related to asset impairment.

During the quarter under review, Apache generated $856 million of cash from operating activities, while shelling out $589 million on capital expenditures for positive free cash flow.

As of Jun 30, the oil giant had approximately $549 million in cash and cash equivalents. Apache had long-term debt of $8.2 billion, representing a debt-to-capitalization ratio of 55.5%.

Guidance

Apache reiterated its guidance for 2019 capital spending at $2.4 billion and also maintained the third and fourth-quarter volume guidance for international operations.

However, the company is struggling with delays in the Midland/Delaware Basins as well as natural gas production from the Alpine High play considering the extremely low prices of the commodity prevailing at the Waha hub in West Texas. In fact, Apache was forced to lower volumes from the play.

Consequently, the company now expects third and fourth-quarter Permian Basin crude production to be 94,000 to 98,000 BOE/d and 100,000 to 105,000 BOE/d. For Alpine High specifically, Apache sees third-quarter volumes in the range of 70,000 to 75,000 BOE/d, taking into account the impact of planned natural gas production deferrals.

Zacks Rank & Stock Picks

Apache holds a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space are TC Energy Corporation TRP, Enbridge Inc. ENB and Cheniere Energy, Inc. LNG. All the companies carry a Zacks Rank #2 (Buy).

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

Canada-based TC Energy has an excellent track of outperforming estimates over the last four quarters at an average rate of 14.8%.

Enbridge, also headquartered in Canada, has an excellent track of outperforming/meeting estimates over the last four quarters at an average rate of 18.5%.

Cheniere Energy’s expected EPS growth rate for three to five years currently stands at 31.1%, comparing favorably with the industry’s growth rate of 14.3%.

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