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Earnings Beat at Apache, Selling Gulf Stakes

Nilanjan Choudhury

U.S. energy firm Apache Corp. (APA) reported better-than-expected first quarter results amid higher natural gas prices. Earnings per share – excluding one-time items – came in at $1.78, well above the Zacks Consensus Estimate of $1.61.

However, Apache’s performance deteriorated from the year-ago adjusted profit of $2.00 per share, as asset sales reduced production.

Revenues of $3,675.0 million were down 6.9% from the year-ago quarter but were higher than the Zacks Consensus Estimate of $3,621.0 million.

Operational Performance

The production of oil and natural gas averaged 639,804 oil-equivalent barrels per day (BOE/d) (58% liquids), down approximately 13.4% year over year. Apache’s production for oil and natural gas liquids (NGLs) was down roughly 7.9% at 371,701 barrels per day (Bbl/d), while natural gas production of 1,608.6 million cubic feet per day (MMcf/d) was down 19.9% from the first quarter 2013 level.

The average realized crude oil price during the first quarter was $101.03 per barrel, representing a decrease of 1.4% from the year-ago realization of $102.42. However, the average realized natural gas price during the Mar quarter of 2013 was $4.46 per thousand cubic feet (Mcf), up 18.3% from the year-ago period.

Apache’s lease operating expenses totaled $597.0 million, down 17.3% from $722.0 million in the year-ago quarter.

Balance Sheet & Capital Spending

As of Mar 31, 2014, Apache had approximately $1,643.0 million in cash and cash equivalents. The company had a long-term debt of $9,673.0 million, representing a debt-to-capitalization ratio of 22.6%.

During the three months ended Mar 31, 2014, Apache’s capital investments (excluding acquisitions) totaled $2,897.0 million.

To Sell Stakes in Gulf to Freeport

In another announcement, Apache said that it will offload its interests in deepwater Gulf of Mexico projects to mineral explorer Freeport-McMoRan Copper & Gold Inc.’s (FCX) oil and gas subsidiary for $1.4 billion. The to-be-sold properties include the Lucius and Heidelberg development projects, together with 11 exploration blocks. The decision is in accordance with the Houston-based oil and gas explorer’s plan to exit business that do not fit into the company’s long-term growth plan, apart from paring borrowings and fund buybacks.  

Zacks Rank & Stock Picks

Apache currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at Athlon Energy Inc. (ATHL) and Rex Energy Corp. (REXX) as good buying opportunities. These U.S. upstream energy operators – sporting a Zacks Rank #1 (Strong Buy) – have solid secular growth stories with potential to rise significantly from current levels.

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