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Apache Officially Says Goodbye To LNG, Still Has Near-Term Australian Upside
- Apache is officially exiting the Wheatstone LNG and Kitimat LNG projects.
- Before factoring in taxes, the company will generate $3.7 billion from the sale.
- This removes two major burdens on the company, allowing Apache to focus on shale.
- Apache still is active in Australia, and has the Coniston Development Project to support near-term oil production growth.
Update: Apache's Sale Of LNG Assets Should Strengthen Its Balance SheetIAEResearch • Yesterday, 10:35 AM
- Apache announced the sale of its LNG assets in Australia for an estimated $3.7 billion.
- The sale is in line with the company's restructuring plans to sell non-core assets and focus on U.S. shale assets.
- These transactions were expected as the company had announced the restructuring plan.
- I maintain that the company should focus on strengthening its balance sheet and curtail investments in shale assets.
- APA is not suitable for Defensive Investors or Enterprising Investors following the ModernGraham approach.
- According to the ModernGraham valuation model, the company is undervalued at the present time.
- The market is implying only 0.63% earnings growth over the next 7-10 years, considerably lower than the rate the company has seen in recent years.
Apache Corporation: Focus On Shale Might Not Be The Best Decision Right Now
- The company has sold non-core assets in Southern Louisiana and Anadarko Basin in order to focus on shale assets.
- OPEC's decision to maintain the current production levels will put pressure on the U.S. shale producers as the crude prices will remain low.
- Some U.S. shale producers might not be able to breakeven at current price levels.
- Apache Corporation should conserve its cash in order to expand its operations when the market makes a recovery.
Apache Adds Canyon Lime Oil To Its Growth Portfolio
- Apache added 30,000 net acres to its position in the emerging Canyon Lime oil play.
- Through additional acreage, seismic mapping, and drilling activity, Apache was able to double its expected drilling inventory in the Canyon Lime to 800.
- The average Canyon Lime well yields a 50% crude and 20% NGLs production mix.
- Now Apache sees at least 300 million BOE of potentially recoverable resources in the area, including 150 million barrels of crude.
Update: Apache Sells Off $1.4 Billion In Assets To Fund Future Growth
- Apache is selling off $1.4 billion worth of assets, including producing acreage in Louisiana and the Anadarko Basin.
- Apache can put the extra cash to good use by funding its ramp up in the Canyon Lime and Eastern Eagle Ford plays.
- Apache continues to high grade its asset portfolio, making it a better value growth play for investors.
Earnings Review: Doubling Down, Apache Is Investing More In Emerging Shale PlaysCallum Turcan • Fri, Nov. 14
- Apache has doubled its rig count in the Canyon Lime, and plans to bring several wells online in the emerging play this year and next.
- Based off of management's comments, it looks like Apache expanded its position in the Canyon Lime.
- On November 20, Apache will provide a big update on its North American operations.
- Apache is outperforming its own guidance in the Eagle Ford.
- In the Eastern Eagle Ford, Apache is adding three new rigs to its operations to speed up the development of the area.
Breaking It Down: Apache Corporation's Q3 2014 Earnings Call
- Apache came below earnings estimates, but beat on sales.
- Management is positioning the company to expand its North American onshore operations.
- The company may spin off some of its international and LNG assets.
- APA met earnings consensus.
- We still have a bullish thesis on the stock given the possibility of freeing up cash flow.
- We didn’t see the sell-off coming but note it has a number of things that can be done to unlock value.
- When Apache updates its shareholders, investors should take a look at its progress in the Canyon Lime oil play.
- If Apache's upcoming wells produce solid results in the Canyon Lime, it will be able to add a new oil play to its growth portfolio.
- Additional upside will be generated by developing the eastern most portion of the Eagle Ford play, which is in the oil window of the prolific shale formation.
Is A Rebound Expected For Apache In The Near Term?
- At the moment, independent company outlooks are outweighed by the global oil price war.
- In such a situation, company’s operations are not the sole indicator of future earnings potential.
- No unexpected increase is anticipated in dividends, as well as share repurchases.
- Apache's discoveries in Australia could foreshadow more discoveries next year.
- Australian production and exploration isn't without its problems, which can delay projects and hold back returns for investors.
- Overall Australia will significantly add to Apache's production base.
- Apache is bringing the shale revolution to Egypt through horizontal drilling.
- Discoveries in Egypt will support long term production growth and push up its free cash flow from its operations.
- The Wolfcamp horizons could be Apache's key to unlocking billions of barrels of hydrocarbons.
- A shift to horizontal drilling is leading Apache's Permian output higher.
- A new asset base could justify a higher valuation for Apache.
- The Eagle Ford is back on the growth portfolio's menu.
- Apache Corp is restructuring its portfolio of oil producing assets located worldwide. Its operations in North America produced healthy growth compared to its operations in other parts of the world.
- Apache has struggled to produce stable financial results in ten years so the company has shifted its focus to North American oil production that has good growth potential.
- Consensus target price reveals upside at the current price level. Investors seeking exposure in the oil and gas sector should consider investing in Apache.
Australia's Largest Oil Discovery For 20 Years Is A Massive Scoop For Apache Corp
- The Caning Basin, just off Western Australia coast, is estimated to hold a mammoth 300 million barrels of oil.
- Australia was responsible for $1.2 billion of APA’s total revenue in the year 2013.
- The discovery would help enhance the lure of an ‘international portfolio’ for buyers.
- Apache has made the largest discovery in 20 years off the coast of Western Australia from where around 300 million barrels of oil could be extracted.
- Since 2013, Apache has divested $10 billion of its properties which reduced the year-over-year production level in this quarter.
- The company’s net earnings dropped around 50% in the second quarter due to negative revenue growth losses on derivative instruments and squeezing margins.
- As Apache’s revenue growth is highly dependent upon oil and gas prices, it is not expected that the revenues will experience any improvements in the future.
Apache Corp: Shifting To Onshore Production For Good Reason
- Market doesn't favor E&P firms that shift assets.
- Apache has underperformed the market leaders in the last 3 years.
- Apache's Permian and Central Basin assets have enormous resource potential.
- The company has been pursuing its long-term strategy of divesting its international portfolio of assets. It has sold $10 billion worth of assets from all around the world.
- Recently the company has revealed its intention to exit completely from the Wheatstone and Kitimat LNG projects.
- Some analysts believe that it will sharpen the company’s focus on North American Shale production. Others tend to think differently.
- However, much is dependent upon the company’s use of these proceeds.
- Jana Partners has a $1 billion position in the oil and gas giant, and is looking to unlock shareholder value.
- Jana wants Apache to become a domestic oil and gas company.
- Apache could also try to sell itself to one of the major oil and gas players, given its robust U.S. oil and gas portfolio.
- Based on next year's estimates of $7.22, which drops the P/E down to 14, which is 5 points lower than the industry average.
- Apache management continues to make the best out of a bad situation. But expectations have been raised.
- On the basis of growing free cash flow and debt-adjusted production growth, these shares can command a fair-market value of $115, which still represents 13% premium.
Today, 8:51 AM
Tue, Dec. 16, 8:39 AM
- Apache (NYSE:APA) was not in breach of contract in a lawsuit brought by W&T Offshore (NYSE:WTI), a federal jury found late yesterday.
- W&T filed a claim in 2011 accusing APA of breaking the terms of a processing contract and inaccurately recording how much processed oil W&T was owed.
- APA has now filed a counter suit, accusing W&T of breaching the parties' joint operating agreement by refusing to pay its 49% share of plugging and abandonment costs for three offshore wells in the Gulf of Mexico.
Mon, Dec. 15, 8:27 AM
- Apache (NYSE:APA) agrees to sell its stakes in two liquefied natural gas projects, Wheatstone LNG in Australia and Kitimat LNG in Canada, along with accompanying upstream oil and gas reserves, to Woodside Petroleum (OTCPK:WOPEF, OTCPK:WOPEY) for $2.75B.
- APA says it also will be reimbursed for its net spending on the two projects between June 30 this year and the closing date, which it estimates at $1B.
- The sale includes APA's 13% interest in the Wheatstone LNG project and a 65% interest in the WA-49-L block in Australia, as well as its 50% stake in the Kitimat LNG project and related upstream acreage in the Horn River and Liard natural gas basins in British Columbia.
- This summer, activist investor Jana Partners began calling on APA to sell off its international holdings to focus its drilling operations on the U.S.
- APA +1% premarket.
Mon, Dec. 8, 3:37 PM
- Energy stocks are hammered again as oil prices tumble to fresh five-year lows, and Oasis Petroleum (OAS -16.1%), Emerald Oil (EOX -12.7%), Cobalt International Energy (CIE -10.1%) and Canadian Natural Resource (CNQ -4.8%) are slammed more than most as they suffered analyst downgrades today.
- SunTrust's Ryan Otaman cuts OAS and EOX to Neutral from Buy to account for their large debt loads, while Citi's Robert Morris lowers CIE and CNQ to Neutral from Buy.
- However, Morris thinks at least some stocks warrant upgrades after precipitous declines, raising Antero Resources (AR -9.1%), Apache (APA -6.1%) and Newfield Exploration (NFX -8.3%) even while acknowledging they probably will not bottom until oil does - a common view among analysts such as Raymond James' Marshall Adkins, who writes that "trying to figure out appropriate oilfield service valuations under a collapsing oil price environments is an exercise in futility."
Fri, Dec. 5, 5:38 PM
- The Eagle Ford shale formation in south Texas produced its billionth barrel of oil some time last month, according to analysts at research firm Wood Mackenzie.
- Eagle Ford now accounts for 16% of total U.S. oil production, and the firm forecasts E&P spending of $30.8B in the region next year, ~22% of the total $139.3B expected in U.S. onshore spending.
- Eagle Ford is widely considered the most profitable U.S. shale field, and many analysts speculate the break-even price for production to remain profitable is ~$50/bbl in much of the play.
- Top Eagle Ford producers include EOG, CHK, APC, MRO, BHP, APC, APA, BP, COG, CRZO, CWEI, CRK, COP, XOM, FST, GDP, HES, MTDR, MUR, NFX, PVA, PXD, ROSE, RDS.A, RDS.B, SN, SM, STO, SFY, TLM, ZAZA
Tue, Dec. 2, 5:21 PM
- Apache (NYSE:APA) reportedly could run into trouble attracting suitable bids for its Western Australia domestic gas operation and a stake in the Wheatstone LNG operation, under pressure from its own investors to refocus on the U.S. shale business amid collapsing oil prices.
- APA has not commented on the sales process, although some insiders have expressed surprise a deal with supposed bid frontrunner Woodside Petroleum has not yet been announced, according to The West Australian.
- Earlier: Apache, Bill Barrett, Laredo Petroleum lose ground as Mizuho downgrades
Tue, Dec. 2, 3:13 PM
- Apache (APA -1%), Bill Barrett (BBG -5.6%) and Laredo Petroleum (LPI -4.9%) are downgraded to Neutral from Buy at Mizuho, as the firm lowers its crude oil price deck and views OPEC's decision not to cut production as a structural shift in crude oil markets.
- Although the current excess supply/weak demand situation will be resolved gradually, market fundamentals will increasingly drive crude prices in a ~$70/bbl world, the firm says; in the E&P space, it prefers APC, MRO, FANG, RSPP and RICE.
Thu, Nov. 20, 11:59 AM
- With crude at $75/bbl - the price Goldman Sachs says will be the average in next year's Q1 - 19 U.S. shale regions including parts of the Eaglebine and Eagle Ford in Texas are no longer profitable, according to data compiled by Bloomberg.
- At least a dozen companies including Continental Resources (NYSE:CLR) and SandRidge (NYSE:SD) said on conference calls in the past month that they would reduce capital spending plans because of lower prices; Apache (NYSE:APA) said today it would cut spending in North America by 25% while still increasing production 8%-12% vs. an annual average of 29% since 2009.
- By contrast, the biggest-producing fields - North Dakota's Bakken and the Permian and Eagle Ford in Texas - pump a combined 4.7M bbl/day, and those regions remain economic at $55-$65/bbl.
- ETFs: XLE, ERX, VDE, OIH, XOP, FCG, ERY, DIG, GASL, DUG, XES, IYE, IEO, IEZ, GASX, PXE, FENY, PXJ, RYE, FXN, DDG
Thu, Nov. 20, 8:51 AM
- Apache (NYSE:APA) agrees to sell oil and gas assets in mature fields in southern Louisiana and the Anadarko Basin in Texas and Oklahoma for ~$1.4B in two separate transactions with unnamed buyers.
- APA says proceeds from the deals will be used mostly to fund its leasehold acquisition program, which has added more than 300K acres YTD in key growth plays.
- Also, APA forecasts its North American onshore production will increase 8%-12%, and sees capital spending for production projects reaching ~$4B.
- Says it has substantially increased its drilling inventory in the Eagle Ford and Canyon Lime plays of Texas to more than 3K and 800 locations, respectively.
Fri, Nov. 14, 4:56 PM
- New developments and the expansion of older oil fields are expected to lift deepwater Gulf of Mexico production 18% Y/Y to 1.9M boe/day in 2016, the first new production peak seen since 2009, according to Wood Mackenzie’s latest outlook.
- However, production is expected to plateau for the remainder of the decade following the 2016 peak due to the depletion of legacy fields and a limited number of new projects coming onstream.
- Among top Gulf producers: RDS.A, RDS.B, BP, CVX, BHP, APC, APA, HES, E, EXXI.
Fri, Nov. 7, 5:55 PM
- Signs are building that falling oil prices are curtailing record drilling in the U.S., as oil rigs fell by 14 to 1,568 this week, the lowest level since Aug. 22, according to Baker Hughes' (NYSE:BHI) latest monthly tally.
- The oil rig count will drop to 1,325 by the middle of next year after reaching a peak of 1,609 on Oct. 10, energy data company Genscape forecasts, as drillers from Apache (NYSE:APA) to Continental Resources (NYSE:CLR) have said this week they are reducing rigs in some oil plays.
Thu, Nov. 6, 9:19 AM
- Apache (NYSE:APA) -2.1% premarket after Q3 earnings fell 41% Y/Y; unadjusted losses, which included writedowns of its oil and gas assets due to lower commodities prices, totaled $1.24B vs. a year-earlier profit of $306M.
- Overall revenues fell 4% Y/Y to $3.74B, as oil and gas production revenues were $3.46B vs. $4.28B last year; average selling prices for oil fell 13%.
- Total global daily production volume increased 6% to 562K boe/day, excluding the impact of divestitures; liquids represented 60% of overall production.
- North American onshore regions increased liquids production to 211K bbl/day, up 15% Y/Y when adjusted for asset sales; the Permian region achieved record production of 162K boe/day, up 23%.
- Says it is evaluating its international assets and may spin off some or all of its assets through the capital markets.
Thu, Nov. 6, 8:04 AM
Wed, Nov. 5, 5:30 PM
- AAON, AAP, AAWW, AEE, AES, AINV, AKRX, AMCX, AMRC, AMSC, AOL, APA, AZN, BBG, BCE, BCRX, BDBD, BKCC, BR, CDW, CECE, CECO, CNK, CNQ, COTY, CPN, CRZO, CVC, CYNI, DNOW, DTV, ERJ, FSYS, FUN, FUR, GEO, GLP, GNRC, GOLD, HAIN, HII, HNR, HSC, HSIC, HSP, HZNP, IT, KATE, KERX, KLIC, LIN, LMIA, LPI, MITL, MPEL, MWIV, NAVB, NRF, NTWK, NXTM, ONE, OWW, PBH, PDCE, PERI, PHMD, PKD, PMC, PNK, POZN, PRFT, PRGO, PRIM, PTCT, RDNT, RGEN, SATS, SCMP, SFUN, SFY, SGM, SLH, SNI, SNMX, SRPT, TAP, TCPC, TDC, TEDU, THS, TK, TNDM, TPH, TU, VC, VIVO, WAC, WD, WEN, WIN, ZEUS
Thu, Oct. 16, 3:05 PM
- InterOil (NYSE:IOC) +4.4% after gaining 2.1% yesterday.
- The Australian said today IOC may be a target for Woodside Petroleum (OTCPK:WOPEF, OTCPK:WOPEY).
- Other possible targets include Ophir Energy (OTCPK:OPGYF, OTC:OPHRY) or Apache's (NYSE:APA) stake in the Kitimat LNG project in Alaska.
- October 14 looks like a possible short-term bottom in IOC.
Tue, Oct. 14, 5:53 PM
- Apache (NYSE:APA) says CFO Alfonso Leon has resigned to pursue other opportunities just eight months after he was appointed to the job; general counsel Anthony Lannie will serve as interim CFO as the company searches for a permanent successor.
- APA says the resignation is not related to any issues regarding financial disclosures, accounting or legal matters.
- Chairman and CEO Steven Farris says APA continues to evaluate options for its international assets and liquefied natural gas projects.
APA vs. ETF Alternatives
Apache Corporation is an independent energy company that explores, develops and produces natural gas, crude oil and natural gas liquids.It has interests in six countries: the U.S., Canada, Egypt, Australia, the U.K. North Sea (North Sea), and Argentina.
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