Apache Corp. repositions strategy and finds favor in the market

Market Realist

Apache Corp’s Australian oil discovery didn't impact stock much (Part 5 of 6)

(Continued from Part 4)

Apache repositions its strategy

Apache Corp. (APA) released its earnings for the second quarter on July 31.

Revenues for the quarter were $3.5 billion. It was almost in line with Wall Street analysts’ estimate of $3.6 billion. On a year-over-year basis (or YoY), revenues were down 18% for the quarter.

Adjusted net income, excluding special items, was $644 million for the quarter. This beat analysts’ estimates of $632 million. It was ~21 % lower YoY.

Adjusted earnings per share (or EPS) was $1.67. It beat analysts’ estimates by $0.03.

Lower earnings due to asset divestitures

APA noted that earnings were lower than last year. The lower earnings were because of several asset divestitures in the Gulf of Mexico, Canada, Argentina, and a non-controlling interest in Egypt.

The company took additional steps in the second quarter to trim its international operations and focus more on North American operations. This is consistent with APA’s ongoing “repositioning strategy.”

APA has divested assets worth up to $10 billion in the past year.

Operational performance

Total second quarter production was 636,000 barrels of oil equivalent per day (or boe/d). Pro forma production averaged 550,356 boe/d after adjusting for recent sales. This excluded the non-controlling interest in Egypt.

Liquids production was 59% of the total production. This is in line with the company’s objective to achieve increased liquids production. North America liquids production increased 18% on a pro forma basis.

The company noted that North America’s Permian Basin drove earnings for the company. APA also noted that it’s on track to achieve 15%–18% North American liquids production growth. It expects to grow 2%–4% sequentially in the third and fourth quarter.

Market reaction

Although APA’s revenue was 18% lower YoY, APA stock still saw positive market movement after the earnings release.

Prices closed at $102.66 on July 31—the day of the release. This was 1.5% higher than the previous market close of $101.29.

Markets seem to be in agreement with APA’s strategy to divest its international assets and bring its focus back to North America.

Key stocks and ETFs

APA is a part of several energy exchange-traded funds (or ETFs) including the Energy Select Sector SPDR ETF (XLE), the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), the Vanguard Energy ETF (VDE), and the iShares U.S. Energy ETF (IYE).

The next part in the series will compare APA to its peers.

Continue to Part 6

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