Earnings Beat at Apache, Selling Gulf Stakes - Analyst Blog

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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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: APA , ATHL , FCX , REXX

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