Energy firm Apache Corp. (APA) reported weaker-than-expected third-quarter results, mainly due to static natural gas volumes and higher lease operating expenses. Earnings per share, excluding one-time items, came in at $2.19, below the Zacks Consensus Estimate of $2.26, while revenues of $3.0 billion missed our projection by 2.4%.
However, compared to the year-ago period, Apache’s adjusted earnings per share improved 38.6% (from $1.58 to $2.19) and quarterly revenue rose 29.2% (from $2.3 billion to $3.0 billion), driven by increased liquids volumes and higher realized prices.
Operational Performance
The production of oil and natural gas averaged 667,460 oil-equivalent barrels per day (BOE/d) (54% liquids), up approximately 9.9% year over year. Oil and natural gas liquids (NGLs) production was up roughly 20.3% to 358,475 barrels per day (Bbl/d), while natural gas production, at 1,853.9 million cubic feet per day (MMcf/d), was almost flat compared to the third quarter of 2009.
Apache’s upstream growth momentum continues organically as well as through acquisition. The reported quarter’s production increase was on the back of contribution from two Australian fields (Van Gogh and Pyrenees), as well as higher output from the recently-acquired Permian Basin and Gulf of Mexico fields.
The average realized crude oil price during the September quarter was $74.14 per barrel, representing an increase of 14.3% from the corresponding period of the previous year. The average realized natural gas price during the third quarter of 2010 was $4.01 per thousand cubic feet (Mcf), up 15.9% from the year-ago period.
Lease operating expenses totaled $506.6 million, up 13.7% from the $445.5 in the year-ago quarter.
Balance Sheet
As of September 30, 2010, Apache had approximately $1.2 billion in cash. The company had a long-term debt of $6.4 billion, representing a debt-to-capitalization ratio of 22.5%.
Our Recommendation
Apache shares currently retain a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.
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