Apache (APA) Up 7% Since Earnings Report: Can It Continue?

A month has passed since the company’s last earnings report Apache Corporation (APA. Shares are up about 7% in that time.

Will the recent positive trend continue leading up to its next earnings release, or should APA pull back? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to better understand the important catalysts.

Results for the fourth quarter of 2017

Apache reported fourth-quarter earnings per share – excluding one-time items – of 33 cents, which beat the Zacks Consensus Estimate of 21 cents. Net income also reversed from a year-ago adjusted loss of 6 cents. The improved performance is driven by higher crude oil realizations and lower costs.

Revenues of $1,586 million surpassed the Zacks Consensus Estimate of $1,540 million and were 9.3% higher than fourth-quarter 2016 sales of $1,451 million.

Operational efficiency

Oil and natural gas production (excluding divestitures and noncontrolling interests) averaged 362,251 barrels of oil equivalent per day (BOE/d) (68% liquids), essentially unchanged from a year ago. Apache oil and natural gas liquids (NGL) production was 246,672 barrels per day (Bbl/d), while natural gas production was 693,477 thousand cubic feet per day (Mcf/d).

The company plans to increase production by 7-13% next year.

The average realized price of crude oil in the fourth quarter was USD 58.36 per barrel, an increase of 23.1% compared to the realized price in the same period last year, which was USD 47.39. Additionally, the average realized natural gas price for the December 2017 quarter was $2.90 per thousand cubic feet (Mcf), an increase of 1.8% compared to the same period last year.

Balance sheet, capital expenditure and leasing operating costs

As of December 31, 2017, Apache had approximately $1,668 million in cash and cash equivalents. The company had long-term debt of $7,934 million, representing a debt-to-capitalization ratio of 51.7%.

In the face of the oil crisis, Apache adjusted its spending plans to low prices.

However, Apache has since increased its capital investment after achieving cost rationalization. With a view to growth focused on returns, Apache spent $3,089 million in 2017, a 75% increase over 2016. In line with the company’s planned shift in strategic goals, Apache’s capital investment in oil and gas is expected to reach $3 billion this year.

Apache leasing operating expenses totaled $334 million in the fourth quarter, a 10.9% decrease compared to the same quarter last year. Additionally, total costs and expenses decreased 16.4% compared to the fourth quarter of 2016 to $1,308 million.

How have estimates changed since then?

Over the past month, investors have witnessed an upward trend in new estimates. There have been three higher revisions compared to two lower ones this quarter.

Apache Corporation Price and Consensus

Apache Corporation Price and Consensus | Apache Corporation quote

VGM Results

APA currently has an average Growth Score of C. Its Momentum score is doing slightly better, at B. The stock also receives a B rating on the Value side, putting it in the top 40% for this investment strategy.

Overall, the stock has a Total VGM Score of B. If you’re not focused on one strategy, this score should interest you.

Based on our ratings, these stocks are equally suitable for both value and momentum investors, while growth investors may want to look elsewhere.

Perspectives

Stock estimates are trending upwards, and the scale of these revisions looks promising. Interestingly, APA has a Zacks Rank #3 (Hold). We expect a turnaround in the line over the next few months.

Want the latest recommendations from Zacks Investment Research? Today you can download the top 7 stocks for the next 30 days. Click to get this free report

Apache Corporation (APA): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research