APA (APA) Up 12.2% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for APA (APA). Shares have added about 12.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is APA due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
APA Q4 Earnings & Sales Miss Estimates
APA reported fourth-quarter 2023 adjusted earnings of $1.15 per share, missing the Zacks Consensus Estimate of $1.38 and declining from the year-ago adjusted figure of $1.48.
The underperformance primarily reflects lower oil and natural gas prices, partly offset by strong production.
Revenues of $1.9 billion fell short of the Zacks Consensus Estimate of $2 billion and were down 20.5% from the year-ago quarter’s sales.
Meanwhile, APA continues to reward shareholders with dividends and buybacks. APA bought back 3.2 million shares at $37.64 apiece during the fourth quarter. The company also shelled out $76 million in dividend payment.
Production & Selling Prices
Production of oil and natural gas averaged 414,430 BOE/d, which comprises 67% liquids. The figure was essentially unchanged from the year-ago quarter, though it was above our expectation of 406,004 BOE/d.
U.S. output (accounting for 55% of the total) rose 5% year over year to 228,671 BOE/d but production from the company’s international operations decreased 6% to 185,759 BOE/d. APA’s oil and natural gas liquids (NGLs) production was 276,036 barrels per day (Bbl/d). Natural gas output totaled 830,366 thousand cubic feet per day (Mcf/d).
The average realized crude oil price during the fourth quarter was $81.36 per barrel, down 5.6% from the year-ago realization of $86.17. However, the number came above our projection of $76.83. Meanwhile, the average realized natural gas price fell to $2.92 per thousand cubic feet (Mcf) from $4.04 in the year-ago period but beat our estimates of $2.73.
Costs & Financial Position
APA’s fourth-quarter lease operating expenses totaled $360 million, down 4.5% from $377 million in the year-ago period. Moreover, a significant decline in the cost of oil and gas purchased meant that total operating expenses fell 14.3% from the corresponding period of 2022 to $1.4 billion. Our model also put the figure at $1.4 billion.
During the quarter under review, APA generated $1 billion of cash from operating activities while it incurred $520 million in upstream capital expenditures. The company reported an adjusted operating cash flow of $1 billion . It also registered a free cash flow of $292 million, though it dropped from $360 million a year ago.
As of Dec 31, APA had approximately $87 million in cash and cash equivalents and $5.2 billion in long-term debt. The debt-to-capitalization ratio of the company was 66.1.
Guidance
APA expects adjusted production to average 328,000-330,000 BOE/d in Q1 and 323,000-325,000 BOE/d in 2024. Of this, oil volumes are likely to be 157,000 Bbl/d during both periods. The company pegged its upstream capital expenditure for the year at $1.9-$2 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -33.37% due to these changes.
VGM Scores
At this time, APA has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, APA has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
APA is part of the Zacks Oil and Gas - Exploration and Production - United States industry. Over the past month, Magnolia Oil & Gas Corp (MGY), a stock from the same industry, has gained 13.2%. The company reported its results for the quarter ended December 2023 more than a month ago.
Magnolia Oil & Gas Corp reported revenues of $322.63 million in the last reported quarter, representing a year-over-year change of -7.6%. EPS of $0.50 for the same period compares with $0.86 a year ago.
For the current quarter, Magnolia Oil & Gas Corp is expected to post earnings of $0.43 per share, indicating a change of -23.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -4.9% over the last 30 days.
Magnolia Oil & Gas Corp has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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