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Apache (APA) Q1 Earnings Beat on Permian Prowess, Sales Lag

Zacks Equity Research

Apache Corporation APA reported mixed first-quarter 2019 results, wherein earnings topped the Zacks Consensus estimates by a whisker, but sales missed the same.

The upstream explorer reported earnings per share — excluding one-time items — of 10 cents, surpassing the Zacks Consensus Estimate by a penny on the back of record Permian output. The bottom line, however, declined from the year-ago level of 32 cents owing to lower commodity price realizations.

Revenues of $1,635 million marginally missed the Zacks Consensus Estimate of $1,638 million. The top line also declined 6.4% from the year-ago period. 

Apache Corporation Price, Consensus and EPS Surprise

Apache Corporation Price, Consensus and EPS Surprise | Apache Corporation Quote

Production & Selling Prices

Production of oil and natural gas averaged 502,877 oil-equivalent barrels per day (BOE/d) —comprising 63% liquids — up 14% from a year ago. While ramped-up operations in the Alpine High region of the Permian Basin certainly aided Apache’s output levels, the company’s considerable acreage in Egypt and North Sea also stepped up the production rate in the quarter under review.

The U.S. output (accounting for 58% of the total production) rose 25% year over year to 291,693 BOE/d. The company’s international operations increased 2% y/y to 211,184 BOE/d. Apache’s production of oil and natural gas liquids (NGLs) was 316,759 barrels per day, while natural gas output came in at 1,116,707 thousand cubic feet per day.

In the company's Permian Basin acreage, average production volumes hit a record of 247,939 BOE/d, improving from 182,972 BOE/d recorded in first-quarter 2018. The results were aided by operational progress and the continued ramp up at its Alpine High discovery.

The average realized crude oil price during the first quarter was $57.70 per barrel, 10% lower than the year-ago realization. The average realized natural gas price also declined to $2.34 per thousand cubic feet from $2.82 in the year-ago period.

Total Costs & Financials

Lease operating expenses totaled $365 million, up 4.5% from the year-ago quarter. Moreover, total operating expenses increased 8.1% from the corresponding period of 2018 to $1.4 billion, primarily on the back of higher depreciation and general/administrative costs.

As of Mar 31, the oil giant had approximately $327 million in cash and cash equivalents. The company had a long-term debt of $8.1 billion, representing a debt-to-capitalization ratio of 53.6%. During the quarter under review, Apache generated $598 million of cash from operating activities, while shelling out $597 million on capital expenditures.

Guidance Intact

Apache reiterated its guidance for 2019 capital spending at $2.4 billion. The company also maintained its 6-10% worldwide production exit rate growth in 2019, 12-16% in the United States and 5% in the Permian Basin.

Zacks Rank and Other Key Picks

Currently, Apache has a Zacks Rank #2 (Buy).

Investors interested in the same industry can also consider Anadarko Petroleum Corporation APC, Devon Energy Corporation DVN and Murphy Oil Corporation MUR, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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