U.S. energy firm Apache Corporation APA reported third-quarter 2019 loss per share – excluding one-time items – of 29 cents, wider than the Zacks Consensus Estimate of 27 cents. In the year-ago period, the company reported adjusted profit of 63 cents. The underperformance stems from lower oil price realizations.
Revenues of $1.5 billion were 25.5% lower than the third-quarter 2018 sales of $2 billion but beat the Zacks Consensus Estimate of $1.4 billion due to higher-than-expected production. Precisely, the Houston, TX-based upstream explorer’s output of 450,644 oil-equivalent barrels per day (BOE/d) surpassed the Zacks Consensus Estimate of 441,000 BOE/d.
During the earnings release, the company further informed that it has started a strategic operational reorganization that is expected to result in savings of at least $150 million. The initiative is to be completed by Mar 31, 2020.
Apache Corporation Price, Consensus and EPS Surprise
Apache Corporation price-consensus-eps-surprise-chart | Apache Corporation Quote
Production & Selling Prices
Production of oil and natural gas averaged 450,644 BOE/d — comprising 67% liquids — down 5.4% from a year ago due to the impact of asset sales.
The U.S. output (accounting for 59% of the total) fell 2.4% year over year to 265,910 BOE/d, while the company’s international operations decreased 9.4% to 184,734 BOE/d. Apache’s production for oil and natural gas liquids (NGLs) was 302,876 barrels per day (Bbl/d). On the other hand, natural gas output came in at 886,606 thousand cubic feet per day (Mcf/d).
In the company's Permian Basin acreage, average production volumes improved to 254,432 BOE/d from 222,259 in the third quarter of 2018. The results were aided by operational progress, somewhat offset by unscheduled downtime and delays in completion schedule.
The average realized crude oil price during the third quarter was $58.60 per barrel, 15.2% lower than the year-ago realization and below the Zacks Consensus Estimate of $63. The average realized natural gas price also declined to $1.66 per thousand cubic feet (Mcf) from $2.56 in the year-ago period but was ahead of the Zacks Consensus Estimate of $1.49.
Costs, Financial Position
Apache’s third-quarter lease operating expenses totaled $350 million, down 8.4% from the year-ago quarter. Moreover, total operating expenses fell 7.2% from the corresponding period of 2018 to $1.5 billion. Apart from a tight leash on lease operating expenses, this was mainly on account of lower financing costs, decline in exploration expenses and fall in outlays related to gathering, processing and transmission, which more than offset higher costs related to asset impairment.
During the quarter under review, Apache generated $635 million of cash from operating activities, while shelling out $590 million on capital expenditures for positive free cash flow.
As of Sep 30, the oil giant had approximately $163 million in cash and cash equivalents. Apache had long-term debt of $8.2 billion, representing a debt-to-capitalization ratio of 56.4%.
Apache reiterated its guidance for 2019 capital spending at $2.4 billion. For 2020, the expects its upstream capital outlay to be around 10-20% below this year’s spending.
However, the company is struggling with completion schedule delays in the Permian Basin as well as natural gas production from the Alpine High play considering the extremely low prices of the commodity prevailing at the Waha hub in West Texas. In fact, Apache was forced to lower volumes from the play earlier in the year, which it returned during August and September.
Consequently, the company now expects fourth-quarter Permian Basin crude production to be around 100,000 BOE/d. For Alpine High specifically, Apache has lowered its production guidance by 5% from the previous projection. This takes into account Apache’s reduced drilling activity in the region and the deferment of some fourth-quarter completions into the next year.
Zacks Rank & Stock Picks
Apache holds a Zacks Rank #4 (Sell).
Meanwhile, investors interested in the energy space could look at some better options like TC Energy TRP, Phillips 66 PSX and Keane Group, Inc. FRAC that sport 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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