Apache Corp. (APA) reported better-than-expected third-quarter results, driven by increased volumes, particularly in its Egyptian operations. Earnings per share, excluding one-time items, came in at $1.58, slightly above the Zacks Consensus Estimate of $1.56. 

However, on a year-over-year basis, Apache’s adjusted earnings per share plunged more than 50%, while revenue was down 30.7% to $2.3 billion. The negative comparison from the year-ago quarter was due to significantly lower commodity prices. 

Healthy Volume Growth 

The production of oil and natural gas averaged 607,118 oil-equivalent barrels per day (BOE/d) (49% liquids), up approximately 19% year-over-year. Oil and natural gas liquids (NGLs) production was up roughly 18% to 297,997 barrels per day (Bbl/d), while natural gas production increased nearly 20% year-over-year to 1,854.7 million cubic feet per day (MMcf/d). 

Realized Prices Down 

The average realized crude oil price during the September quarter was $64.89 per barrel, representing a decrease of 35.8% from the corresponding period of the previous year. The average realized natural gas price during the third quarter of 2009 was $3.46 per thousand cubic feet (Mcf), down 53.4% from the year-ago period. 

Lease Operating Expenses 

Lease operating expenses totaled $445.5 million, down 8.7% from the $488.2 reported in the year-ago quarter. 

Balance Sheet 

At the end of the third quarter, Apache had approximately $1.4 billion in cash. The company had a long-term debt of $5.0 billion, representing debt-to-capitalization ratio of 24.6%. 

Outlook 

We remain impressed with Apache’s solid project pipeline that provides it with a robust production-growth profile. In this regard, management said that the company is going forward with two development projects in Australia that is expected to add 40,000 barrels of oil per day to its worldwide output from the first half of 2010. 

However, we believe that the current unfavorable macro backdrop offsets most, if not all, of the positives. As such, we see the stock performing in line with the broader market and maintain our Neutral rating.
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