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Will Apache (APA) Q1 Earnings Beat on Higher Permian Output?

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Zacks Equity Research
·4 min read
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Apache Corporation APA is scheduled to release first-quarter 2020 results on Wednesday May 6, after the closing bell.

The Zacks Consensus Estimate for the to-be-reported quarter’s loss is 25 cents per share and for revenues is $1.36 billion.

Against this backdrop, let’s delve into the factors that might have impacted the company’s performance in the March quarter.

Factors at Play

Apache boasts a large geographically diversified reserve base with multi-year trends in reserve replacement. The company’s high-quality drilling inventory with greater resource potential might have enabled it to deliver a decent per share growth rate in the first quarter. This, in turn, is expected to have lent its portfolio a solid competitive edge.

In the last reported quarter, Apache posted impressive earnings results, courtesy of record Permian production, a trend that most likely continued in the first quarter as well.  The Zacks Consensus Estimate for first-quarter Permian output stands at 281,000 barrels of oil equivalent per day (Boe/d), indicating a 13.33% rise from the year-ago reported figure of 247,939 Boe/d.

Moreover, on last earnings call, management had expected Garten two well at Block 9/18a Area-W in the UK North Sea, which came online in the first quarter, to boost production in the period.

The Zacks Estimate for first-quarter output is pegged at 486,000 Boe/d, implying improved results from the prior three quarters’ reported figures. It also indicates an 11.2% rise from the year-ago quarter’s reported number of 437,000 Boe/d.

What Does Our Model Say?

Our proven Zacks model predicts an earnings beat for Apache this season. The right combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Apache has an Earnings ESP of +1.33%.

Zacks Rank: Apache carries a Zacks Rank #3, which increases the predictive power of ESP.

Highlights of Q4 Earnings

In the last reported quarter, Apache posted earnings per share — excluding one-time items — of 8 cents. The Zacks Consensus Estimate was of a loss of 4 cents. This outperformance is led by record Permian production.

However, the bottom line plunged 74.2% from the year-ago quarter’s earnings of 31 cents due to increased operating expenses.

Revenues of $1.7 billion were 4% lower than the fourth-quarter 2018 sales of $1.77 billion but the top line beat the Zacks Consensus Estimate of $1.6 billion, attributable to expanded production volumes. Precisely, this Houston, TX-based upstream explorer’s output of 487,202 Boe/d grew from the year-ago reported figure of 482,298 Boe/d.

As far as its earnings surprises are concerned, this oil and gas producer’s bottom line beat the Zacks Consensus Estimate in three of the trailing four quarters, missing the mark on one occasion, the average positive surprise being 119.68%. This is depicted in the graph below:

Apache Corporation Price and EPS Surprise

Apache Corporation Price and EPS Surprise
Apache Corporation Price and EPS Surprise

Apache Corporation price-eps-surprise | Apache Corporation Quote

Other Stocks to Consider

Here are some other stocks worth considering from the energy space as our model shows that these have the perfect combination of elements to also beat on earnings this reporting cycle:

Devon Energy Corporation DVN has an Earnings ESP of +6.38% and a Zacks Rank of 3. The firm is scheduled to release earnings on May 5.

Comstock Resources, Inc. CRK has an Earnings ESP of +2.63% and is a #3 Ranked stock. The company is scheduled to release earnings on May 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

Laredo Petroleum, Inc. LPI has an Earnings ESP of +2.50% and is Zacks #3 Ranked. The firm is scheduled to release earnings on May 6.

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