Apache Corporation (APA), a U.S. energy firm, will lay off nearly 5% of its global workforce this week, as per a company spokesperson. The relentless decline in oil has compelled the firm to take this decision.
The pricing environment of oil has been anemic for more than six months. In fact, the price of crude has plunged more than 57% since June last year. This is primarily owing to plentiful supply of the commodity against lackluster global demand.
More importantly, crude price is not expected to recover any time soon. Investment bank, The Goldman Sachs Group Inc. (GS) declared this week that it expects WTI to trade at $40.50 a barrel in the second quarter of 2015, significantly lower than its previous projection of $70 per barrel.
In this prolonged weak crude pricing scenario, the oil exploration and production companies are not making sufficient money. In such an unfavorable business environment, a survival strategy is often headcount reduction to lower operational cost. Apache too is resorting to the same measure.
Founded in 1954, Houston, TX-based Apache is an independent energy company engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids. Approximately 68% of the company’s proved reserves and 58% of its production comes from North America, where its operations are focused in the Gulf of Mexico, the Gulf Coast, East Texas, the Permian basin, the Anadarko basin and the Western Sedimentary basin of Canada.
Apache currently carries a Zacks Rank #5 (Strong Sell), implying that the stock will significantly underperform the broader U.S. equity market over the next one to three months.
Meanwhile, better-ranked players in the energy sector include Seadrill Partners LLC (SDLP) and Cheniere Energy Partners LP (CQP). Both the stocks sport a Zacks Rank #1 (Strong Buy).
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