Apache Corporation APA reported fourth-quarter 2019 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 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 oil-equivalent barrels per day (BOE/d) improved form the year-ago figure of 482,298 BOE/d.
During the third-quarter earnings release, the company informed that it started a strategic operational reorganization that is expected to result in savings of at least $150 million. This strategic move is likely to be completed by Mar 31, 2020.
Production & Selling Prices
Production of oil and natural gas averaged 487,202 BOE/d, which comprises 66% liquids. The figure rose 1.01% from the year-ago quarter, backed by the impressive contribution from the Permian region.
The U.S. output (accounting for 61.3% of the total) rose 5.32% year over year to 298,567 BOE/d while the company’s international operations decreased 5.13% to 188,635 BOE/d. Apache’s production for oil and natural gas liquids (NGLs) was 320,888 barrels per day (Bbl/d). Natural gas output came in at 997,887 thousand cubic feet per day (Mcf/d).
In the company's Permian Basin acreage, production volumes improved to 288,043 BOE/d from 235,936 in the fourth quarter of 2018. Permian region output marks the highest oil production level in the company’s history at 103,000 barrels per day and the same also outpaced its guidance.
The average realized crude oil price during the fourth quarter was $60.19 per barrel, up 3.12% from the year-ago realization. The number also came above the Zacks Consensus Estimate of $59. However, the average realized natural gas price declined to $2.05 per thousand cubic feet (Mcf) from $2.57 in the year-ago period but was ahead of the Zacks Consensus Estimate of $1.94.
Apache Corporation Price, Consensus and EPS Surprise
Apache Corporation price-consensus-eps-surprise-chart | Apache Corporation Quote
Costs & Financial Position
Apache’s fourth-quarter lease operating expenses totaled $343 million, down 2.6% from the year-ago quarter. However, total operating expenses rose 124.3% from the corresponding period of 2018 to $4.7 billion. This was mainly on account of higher financing costs, rise in exploration expenses and higher costs related to asset impairment.
During the quarter under review, Apache generated $778 million of cash from operating activities while it shelled out $590 million as capital expenditures for positive free cash flow.
As of Dec 31, this oil giant had approximately $247 million in cash and cash equivalents. Apache had long-term debt of $8.2 billion, representing a debt-to-capitalization ratio of 71.5%.
In 2020, this U.S. energy firm targets $1.6-$1.9 billion investment in upstream oil and gas capital, which is 26% below the 2019-level at the midpoint. If oil prices decrease from the current rates, Apache is ready to further reduce activity and capital resource. However, at a higher price band, the priority will be to retain cash for debt reduction. The company does not anticipate increasing capex above $1.9 billion.
Zacks Rank & Key Picks
Apache has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Contango Oil & Gas Company MCF, Noble Energy Inc. NBL and Earthstone Energy, Inc. ESTE, each carrying a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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