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Apache (APA) to Report Q3 Earnings: What's in the Cards?

Zacks Equity Research

Apache Corporation APA is set to report third-quarter 2019 results on Wednesday Oct 30, after the closing bell.

The current Zacks Consensus Estimate for the to-be-reported quarter is pegged at a loss of 29 cents on revenues of $1,432 million.

The Zacks Consensus Estimate for third-quarter earnings has been revised downward 190% in the past 30 days. Given this backdrop, let’s delve into the factors that might have influenced the company’s performance in the September quarter.

Factors at Play

The Zacks Consensus Estimate for third-quarter output is pegged at 441,000 barrels of oil equivalent per day (Boe/d), indicating a 7.4% decline from the year-ago level of 476,000 Boe/d.

The company is struggling with delays in the Midland/Delaware Basins as well as pertaining to natural gas production from the Alpine High play considering the extremely modest prices of the commodity available at the Waha hub in West Texas. In fact, Apache was forced to lower volumes from the play.

The Zacks Estimate for third-quarter natural gas production in the Permian Basin is pegged at 513 million cubic feet per day (MMcf/d), implying a 0.8% fall from the year-ago reported figure of 517 MMcf/d.

On last earnings call, management expected third-quarter Permian Basin crude production within 94,000-98,000 BOE/d. The company further projected fourth-quarter production between 100,000 BOE/d and 105,000 BOE/d. For Alpine High specifically, Apache anticipated third-quarter volumes in the range of 70,000-75,000 BOE/d, taking into account the impact of planned natural gas production deferrals.

Rising stock inventories, intensifying trade tensions and slowdown of global economy are expected to have weighed on oil, gas and natural gas liquids prices in the quarter. This downside might in turn, reflect on Apache’s overall results.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Apache this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But this is not the case here.

Earnings ESP: Apache has an Earnings ESP of +0.44%, which represents the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Apache currently has a Zacks Rank #4 (Sell).

Highlights of Q2 Earnings & Surprise History:

Apache reported second-quarter 2019 earnings per share (excluding one-time items) of 11 cents, ahead of the Zacks Consensus Estimate of 4 cents. This outperformance stems from robust international production.

However, Apache’s bottom line witnessed a fall from the year-ago quarter’s adjusted earnings of 50 cents due to lower commodity price realizations.

Meanwhile, revenues of $1.6 billion were 1.4% above the Zacks Consensus Estimate but 16.9% lower than the second-quarter 2018 sales figure of $1.9 billion.

As far as earnings surprises are concerned, this U.S. energy company’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average being 64.16%. This is depicted in the graph below:

Apache Corporation Price and EPS Surprise

Apache Corporation Price and EPS Surprise

Apache Corporation price-eps-surprise | Apache Corporation Quote

Stocks to Consider

While earnings beat looks uncertain for Apache, here are some companies from the energy space worth considering on the basis of our model, which shows that these have the right combination of elements to beat on earnings in the upcoming quarterly reports:

Concho Resources Inc. CXO has an Earnings ESP of +1.91% and a Zacks Rank #3. This independent oil and gas explorer and producer is scheduled to release earnings on Oct 29.You can see the complete list of today’s Zacks #1 Rank stocks here.

Gulfport Energy Corporation GPOR has an Earnings ESP of +3.57% and a Zacks Rank of 3. This Oklahoma-based company engaged in the acquisition, exploration, development and production of oil and natural gas properties in the United States is scheduled to release earnings on Oct 31.

National Oilwell Varco, Inc. NOV has an Earnings ESP of +16.00% and is a #3 Ranked stock. This manufacturer and designer of equipment used in onshore and offshore oil and gas drilling is scheduled to release earnings on Oct 28.


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