U.S. energy firm
Apache Corporation
(
APA
) reported weak second quarter results, mainly due to deteriorating
oil and natural gas realizations, partially offset by increased
volumes.
Earnings per share - excluding one-time items - came in at $2.07,
below the Zacks Consensus Estimate of $2.52 and the year-ago period
adjusted profit of $3.22.
Revenues of $3,972.0 million were down 8.4% from the second quarter
of 2011 and were also short of our projection of $4,287.0 million.
Operational Performance
The production of oil and natural gas averaged a record 774,486
oil-equivalent barrels per day (BOE/d) (50% liquids), up
approximately 3.5% year over year. Production for oil and natural
gas liquids (NGLs) was up roughly 5.1% at 388,486 barrels per day
(Bbl/d), while natural gas production of 2,316.0 million cubic feet
per day (MMcf/d) was 1.9% above the second quarter 2011 level.
Apache's upstream growth momentum is retained organically as well
as through acquisitions as it continues to explore the extensive,
multi-year inventory of drillable locations in the Permian,
Central, Gulf of Mexico and Canadian regions of North America.
The average realized crude oil price during the second quarter was
$97.66 per barrel, representing a decrease of 8.1% from the
corresponding period of the previous year. The average realized
natural gas price during the June quarter of 2012 was $3.51 per
thousand cubic feet (Mcf), down 22.7% from the year-ago period.
Lease operating expenses totaled $704.0 million, up 6.3% from
$662.0 million in the year-ago quarter.
Balance Sheet & Capital Spending
As of June 30, 2012, Apache had approximately $361.0 million in
cash and cash equivalents. The company had a long-term debt of
$9,670.0 million, representing a debt-to-capitalization ratio of
24.0%.
During the three months ended June 30, 2012, Apache's capital
investments (excluding acquisitions) totaled $2,494.0 million.
Rating & Recommendation
Apache - which completed the purchase of
Exxon Mobil Corporation
's (
XOM
) Beryl Field, together with other properties in the U.K. North Sea
earlier this year - currently retains a Zacks #3 Rank (short-term
Hold rating). We are also maintaining our long-term Neutral
recommendation on the stock.
We like Apache's large geographically diverse reserve base, its
balanced exposure to natural gas and crude oil, and its multi-year
trends in reserve replacement and production growth.
Despite being one of the largest domestic exploration and
production companies, Apache still boasts annual output growth in
excess of 10%. A pristine balance sheet helps the company to
capitalize on investment opportunities and strategic acquisitions,
thereby further improving growth visibility.
However, we see limited upside potential for shares, taking into
consideration Apache's sensitivity to gas/oil price volatility, its
drilling results, costs, geo-political risks and project timing
delays. As such, we expect Apache to perform in line with the
broader market.
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