Is Apache Corporation a Solid Investment?

No, oil and gas exploration company Apache Inc. (APA), is not directly tied to ancestral Native American lands in the American southwest - though I guess all U.S. lands are ancestral Native American lands. Nor, as far as I can determine, is the Apache tribe involved in management in any way. Instead, the name was picked using the first letters of the last names of Truman Anderson, Raymond Plank and Charles Arnao, the three founders of the company in 1954. Helen Johnson, an early employee, was awarded a $25 United States savings bond for suggesting “che” be added, thus the “Apache” name. Raymond Plank has just retired this year after 54 years of service.

Apache Corporation has grown rapidly in the 54 years since its founding and is now a $26 billion (market cap) international oil and gas exploration, production and development company. The company reached the $100 million earnings mark in 1996 and $1 billion mark in 2003. Since 1999 Apache has had a steady string of acquisitions. The acquisitions are continuing. In April of this year agreement was reached with Marathon (MRO) to acquire 9 Permian Basin oil and gas fields. This company seems to do acquisitions quite well.

Apache is active in seven regions around the world: the Gulf Coast (onshore and offshore), USA Central, Canada, Egypt, Australia, the North Sea and Australia. On the companies’ web site there is a map showing the seven regions it operates in (see it here). By clicking on the captions on the map you get a summary and details of what the company is doing in that particular region.

Competitors include Exxon Mobil (XOM), BP plc (BP), and Anadarko Petroleum (APC) among others.

Apache, as of December 31 2008, had estimated proved reserves of 1,081 million barrels of crude oil, condensate and natural gas liquids along with 7.9 trillion cubic feet of natural gas. Reserves are located in mid-continent USA (25%), Canada (22%), Gulf of Mexico area (14%), Egypt (14%), Australia (12%), North Sea (8%) and Argentina (5%). Apache claims it replaced 122% of production in 2008.

Apache had a $5.25/share loss the first quarter of 2009. (Call Transcript) In the Earnings Transcript release Tom Banks, President of Corporate Planning and Investor Relations, said “Loss was the result of the continuing deterioration in north American gas prices at the end of 2008 which recorded 1.98 billion non-cash after tax reduction in the carrying value of oil and gas properties” Also, revenue growth is down 48.7% year over year due to lower oil and gas prices (Yahoo Finance). From what I have read Apache is regarded as a conservatively run company and should weather the current downturn better than some of its competitors. Total cash is $1.38 billion and total debt $4.91 billion (Yahoo Finance).

I like to read annual reports. The annual report always puts a positive spin on things, of course, but it does give you a feel as to where company enthusiasms lie. The reports are usually available on the company website under “Investor” sections. Unfortunately, the Apache website said the 2008 annual report was not yet available and when I clicked on the links to the 2007, 2006 and 2005 reports I got a “page not found” message. Having done some web design I know it is very simple to create pdf links, so I'm not sure what is going on here.

Apache seems to be a good, solid company in which to invest. Oil and gas reserves are tangible assets that will hold value, if not appreciate, in today’s climate of currency devaluations. Unlike gold, oil and gas have actual uses (think of your car). Oil, currently near $60 a barrel and natural gas still only marginally higher than 52 week lows, may drop if the current market upswing is just a bear market rally as many, including myself, think. On the other hand, if you think that all “real” assets are on a tear due to currency debasements, now may be the time to invest in seemingly solid companies such as Apache which is selling for a little over 1/2 its 52 week high.

Disclosure: Long APA

Comments

[user41653:]

Where are Those Good Green jobs , ??? my Nephew graduated a year ago from college ,finaly got a job . He works for a out fit that installs solar panels , there s about a dozen people working there , they work part time usually not enough work most weeks to work full time , they get $9 a hour when they work , No benifits thats it .
Now I guess thats a Ok job for a 23 year old living at home , with no rent or food bills to pay all he pays is his gas and car insurance. But theres NO Future in that job at least no financial future and its not like hes learning a trade he said after a week on the job he as good at it as any of the older guys . Is this what Obama is talking about ?? When he talks about green jobs , ?One of his task force was on TV this morning talking about jobs for people insulating homes , they consider those "green jobs " I wouldnt guess theres much of a future in a job like that either . So were exactly Where are ALL these MILLIONS of GOOD GREEN JOBS going to come from ??? Will they Pay $50K Year , thats just a living wage these days , Well they Have Benifits , Retirement programs I guess We know the answer dont we.
Turns out All Those Good Green Jobs well there Kinda like Hope and Change sound great but really don't happen much in the REAL WORLD

May 20 12:30 PM

[Bull Run:]

Bruce; I was always a big fan of Apache. They remind me of what a real oil company is all about, finding oil. The Big oil comp.seem more like institutional investors, waiting for the next big find, then take percentages as Et Al's. Apache is like a retro through-back, my kind of oil company.

May 20 01:04 PM

[WayneS:]

When I graduated in 1978, I got one of those good green jobs. For $5/hour, I killed kangaroo rats, making flat skins, putting their organs in labeled vials, and putting their carcasses in boxes with flesh-eating insects. I also worked on gasohol, that's when we used to put alcohol into gasoline, until 5 years later we found it was inefficient and polluting. I then worked on coal gasification. We made methane out of CO2 and H2, but it was more important to keep the CO2 in the atmosphere to protect against the coming iceage.
In 1980, I got a job with a Major Oil Company working on projects to protect the environment, protect water aquifers, and provide added safety to workers. Since retiring, I have been offered a dozen green energy jobs, but they are only interested in making money. Tell your nephew if he is interested in protecting the environment, get a job with an oil or gas company


On May 20 12:30 PM user41653 wrote:

> Where are Those Good Green jobs , ??? my Nephew graduated a year
> ago from college ,finaly got a job .

May 20 04:10 PM