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Update: Apache Sells Off $1.4 Billion In Assets To Fund Future GrowthCallum Turcan • Yesterday, 1:17 PM
- 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.
Buy Apache: Turnaround Of The Year With 2 Major Catalysts
- Apache could be a successful turnaround story of the year.
- Apache is transitioning into a North America onshore focused E&P company on the back of massive divestitures.
- There are two major catalysts that investors should watch out for, in the near term.
- Apache has publicly announced its intent to monetize its Australian Wheatstone LNG assets.
- Apache's desire to monetize both Wheatstone LNG and Kitimat LNG projects confirms the opportunity of the North American strategy in earnest.
- A renewed focus on North American assets was a theme of recent articles, thus rationalizing their portfolio is a step toward realizing their growth strategy in North America.
Apache Holds Steady As Top Texas Oil Producer With Value
- Apache has been a remarkably steady top Texas oil producer.
- The Permian Basin is the largest recipient of Apache's capital for 2014.
- Expect increased production in 2014 as long as the economy stays stable.
- Apache's organizational form as an independent-conglomerate offers a source of longer-term value.
- Apache Corp. recently announced the authorization of an additional repurchase of 10 million common shares bringing the company’s May 2013 share repurchase plan to 40 million shares.
- The increase in returns made to shareholders reflects the confidence of Apache’s management in its strategies and the future outlook of the company.
- The company is rebalancing its portfolio by focusing on lucrative and growth-driven areas by concentrating more on the North America region as well as product-wise by focusing more on liquids.
- While Apache is currently trading at around $89.73, Barclays has recently changed its price target on Apache’s shares to $113. The firm currently has an overweight rating on the stock.
Apache: On Track To Become The Dominant Player In The East Texas Eagle Ford
- Apache recently announced it was going to double the number of rigs it operates in the East Texas Eagle Ford; it will now run 8 rigs.
- Apache has 400,000 gross acres in play through the 2007 JV deal with EnerVest and EV Energy Partners.
- Apache was one of the early pioneers in East Texas Eagle Ford in 2008; it pulled back due to the "Great Recession" and low oil prices.
- JV with EnerVest/EVEP restructured in mid-2013 to a 50/50 deal and Apache returned to the play in August, 2013. EVEP's interest nets to 7% per well.
- Five wells drilled and completed to date, 10 wells drilled and awaiting completion, 25 additional permits approved or in process. No other operator has a larger drilling program.
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.
Wed, Oct. 1, 7:55 AM
- Apache (NYSE:APA) reportedly is looking to sell a third of its oil and gas production in the Texas panhandle and western Oklahoma in, a deal that could fetch more than $2.5B.
- Reuters says APA has hired Wells Fargo to help it sell more than 100K net acres of oil and gas producing assets in the Anadarko basin, including its Stiles Ranch, Verden and Mocane Laverne properties.
Thu, Sep. 18, 10:05 AM
Tue, Sep. 16, 2:33 PM
- Apache (APA +1.2%) is seeking to raise as much as $840M from the sale of oil and gas projects in Alberta, according to a Bloomberg report.
- APA is working with Bank of Nova Scotia to sell the assets in the Provost region, which produce nearly 10K boe/year and have an annualized net operating income of $119M.
- Based on their production, APA could expect the assets to fetch $400M-$500M before factoring in the additional value of pipelines, infrastructure and real estate attached to the projects, Global Hunter analysts say; with the additions, APA may hit its target.
Wed, Aug. 20, 9:51 AM
- Woodside Petroleum (OTCPK:WOPEF, OTCPK:WOPEY) says it booked record first-half profit of $1.1B as it focuses on new exploration basins in frontier markets.
- Underlying profit, which stripped out losses linked to an asset sale in the Gulf of Mexico, jumped 33% Y/Y to $1.14B, in line with analyst forecasts.
- H1 revenues rose 24% Y/Y to $3.55B, helped by the resumption of oil output at Vincent after being idled for almost a year, combined with a full year of reliable production from the Pluto gas-export project offshore northwestern Australia.
- CEO Peter Coleman sees improved M&A opportunities; asked if Woodside would be interested in any Apache (NYSE:APA) assets in Australia, including the Wheatstone stake, the CEO said his company will “continue to look at those assets and other assets around the world.”
Mon, Aug. 18, 8:27 AM
- Apache (NYSE:APA) +2.2% premarket after announcing its first major discovery in the Canning Basin offshore western Australia may herald "a new oil province for Australia."
- The Phoenix South-1 well found oil in four locations and measurements from six samples indicate the reservoir may hold as many as 300M barrels of oil; one of the last big discoveries in Australia was in 1999 at the Enfield field, where a resource of 127M barrels was found.
- One analyst say that from the results so far, the discovery could hold up to 60M barrels of oil that actually is recoverable; the well is still being drilled deeper, so it may end up being larger.
Mon, Aug. 18, 5:30 AM
- Apache (NYSE:APA) has announced a discovery of as much as 300M barrels of crude at an exploration well off the shore of Western Australia.
- If confirmed, the reserves would mark Australia's largest oil discovery in decades.
- The country is in need of oil sources to replace fast diminishing reserves, and the discovery may reopen a frontier of oil exploration which was abandoned years ago after wells turned up dry.
Tue, Aug. 12, 9:52 AM
- An Apache (APA -0.2%) employee working in Egypt was killed last week in an apparent car jacking as he was driving on a desert road southwest of Cairo, an act that may prompt investors to push for the company to withdraw further from the politically troubled country.
- APA has sold about a third of its Egyptian business but is still one of the largest drillers in the country, and its assets are in the remote western desert where oil workers are especially vulnerable to random violence given the isolation of oil infrastructure.
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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