Are you currently a shareholder in Apache (APA)? Then I would say hold your shares for long-term. If on the other hand you are interested and warming up to owning shares in the company, then you should start now to initiate a good position around the upcoming release of earnings. Although in the previous quarter, Apache recorded decline in earnings and revenue even as its production level continually increased. For your information, Apache has maintained a steady increase in production of liquids and the prices of commodities overseas have been to the firm's favor. It would also interest you to know that this firm, during the opening of a CNG fueling station in Louisiana, sealed some terms of agreement on production and supply though not related to the event in any way.
Although the company was able to pull through some headwinds that delayed development in Alaska and is also faced with growing competitions with its global assets, it is not lagging behind as far as getting ready to rake in the profits are concerned, especially when there is a final rebound on the prices of natural gas and oil prices finally become stable. Although when it comes to the oil and gas stocks, there are certain firms that can be compared to Apache. These firms are, in no particular order, Chevron (CVX), Devon Energy (DVN), EOG Resources (EOG) and the last but not the least, Noble Energy (NBL).
Apache and Devon Energy share the same price of 10.5 times earnings while Noble Energy and EOG Resources are well over 22 times earnings. With Apache's price standing at 2.03 times sales and 1.1 times its book value, the company's price-to-book ratio is rated as the lowest amongst the other firms but this is apart from Chevron that has a 0.9 price-to-sales ratio which is completely lower than that of Apache. Presently, Apache's ratio stands at 0.9 while its debt-to-equity ratio stands around 0.33. The company has an operating margin of 37.3% and ROE around 11.9%. The profit margin is around 19.5% and EPS around $8.35 which shows an increase of 35.6% in comparison to the previous season's EPS with an expected additional increase of up to 8.1% come 2013.
Over the past five years, a significant increase of 15.2% have been recorded in Apache's sales and this only comes second to EOG with its 20.8% increase in sales. Among the listed firms, Apache's 2.1 short ratio and 1.4% float short are listed among the lowest although it has a beta score of around 1.3 which is the highest among the listed firms. Apache has a relative volume that is close to 0.75 and an average trading volume of around 2.6 million. Although its stock has been trading at a 1.3% deficit YTD and was down 0.3% the whole of last month, there has been a 7% increase in the firm's stock since the last release of its earnings.
If you have read the recent earnings release of Apache, you will see that its revenues are a total of $3.95 billion which is a decrease from $4.355 billion, YOY. The revenue for the first half of 2012 was a total of $8.41 billion which is an increase from $8.23 billion, YOY. Its report for second quarter operating expenses was a total of $3.16 billion which is also an increase from $1.25 billion, YOY. For the second quarter net income, it was a total of $356 million, a decrease from $1.25 billion, YOY. The company's operating cash flow for the second quarter was put at $2.8 billion at an increase of 2%, YOY while there was an 8% decrease in the second quarter on its global average realized price for crude oil. Also in the second quarter, the averaged realized prices for natural gas in North America experienced a decrease of 35%, YOY.
Reports also indicated that more than half of the firm's second quarter production was made up of liquids and accounted for more than 80% of its oil and gas revenues in the second quarter. About 46% of its total production came from international operations and outside North America, the firm realized higher prices for its gas and oil since it realized around $4.08 per mcf for natural gas outside North America and $3.17 per mcf in North America; the difference is very clear. It was also reported that 37% of the firm's natural gas production was sourced from its international operations. In comparison to the previous season, the firm expects around 6% to 9% increases in its overall full year production for 2012. Apache's daily production was also reported to average around 774 mboe per day within the second quarter.
In the second quarter also, there was an increase of 2% in natural gas production and 5% in liquid production, YOY and this was as a result of a 14% increase in international production, YOY. In the Permian region, the firm realized an increase of 40%, YOY; with liquids making up more than 70% of the production. By the time the second quarter ended, Apache had achieved 80% success in the drilling of 68 wells which included 16 exploratory wells and also had 28 rigs operating in Egypt. This actually led to Egypt, in the second quarter, accounting for 26% of oil and gas revenues and 29% of crude oil revenue. Apache has taken its play to another level by reaching a supply agreement, worth $100 million, with Subsea 7 for the Julimar natural gas project in Western Australia.
Under the terms of the agreement, Apache will make supplies of pre-commissioning services, installation and transportation to Subsea 7 with effect from the second half of 2014. It would also interest you to know that Apache has not less than a 65% stake in the Julimar and Brunello projects in Australia, which happens to be the firm's largest discoveries in that country. The firm also has a stake in the Chevron's Wheatstone project located in Western Australia. What about the 30 year production agreement it signed with Staatsolie, a Suriname national oil company? Mention will also be made of the Vaca Muerta Shale in Argentina where the firm has invested in 450,000 acres. The list just goes on and on.
With all these and more, which you are sure to find out with ardent research, it would not be an exaggeration to say that Apache is the stock every investor in the oil and gas sector should buy come 2013.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.