Apache Corp. (APA) reported in-line fourth-quarter results, driven by increased volumes, particularly in its Egyptian operations. Earnings per share, excluding one-time items, came in at $2.10, behind the Zacks Consensus Estimate of $2.23. On a year-over-year basis, Apache’s adjusted earnings per share increased more than threefold on revenues of $2.7 billion, which increased 64%. 

Operational Performance The production of oil and natural gas averaged 585,877 oil-equivalent barrels per day (BOE/d) − 51% of which was liquids − up nearly 7% year over year. Production of oil and natural gas liquids (NGLs) was up 8.3% to 300,557 barrels per day (Bbl/d), while natural gas production increased approximately 5.4% year over year to 1,711.9 million cubic feet per day (MMcf/d). 

The average realized crude oil price during the reported quarter was $74.55 per barrel, representing an increase of 75% from the corresponding period of the previous year. Average NGL prices increased 113% from the year-earlier level to $45.45 per barrel. The average realized natural gas price was $4.60 per thousand cubic feet (Mcf), up 19.8% from the year-ago period. 

Lease operating expenses totaled $440.2 million, up 10.8% from the year-ago quarter. 

Balance Sheet 

At the end of the first quarter, Apache had approximately $2.1 billion in cash. The company had a long-term debt of $4.95 billion, representing a debt-to-capitalization ratio of 22.8%. 

Outlook



Apache’s upstream growth momentum continues organically as well as through acquisition. The reported quarter production increase was on the back of the successful commencement of two Australian fields − Van Gogh and Pyrenees. On the acquisition front, the company has recently bought Mariner Energy (a successful deepwater explorer) and additional Gulf Shelf assets from Devon Energy Corp. (DVN). 

In the exploration and production space, we like Apache for its balanced exposure to natural gas and crude oil and multi-year trends in reserve replacement and production growth. We are currently Neutral on Apache’s shares.
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