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Apache Corporation: Significant Exploration Potential

Jun. 02, 2020 9:46 AM ETAPA Corporation (APA)TTE, TTFNF, XOM24 Comments


  • Apache Corporation has significant exploration potential. A significant part of its value includes the company's Suriname Basin exploration, a project which has 50+ prospects.
  • Additionally, Apache Corporation is continuing to produce respectable oil. The company anticipates 2020 production at ~410 thousand barrels/day, with a ~$50/barrel WTI and FCF.
  • Current prices are much lower. I recommend investors wait until the end of March to invest allowing some volatility to settle. Alternatively, investors can invest now and use options.
  • I do much more than just articles at The Energy Forum: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »

Apache Corporation (NASDAQ:APA) started the year looking like it was going to buck the trend in oil and gas companies on the back of major discoveries. However, the company ended up being dragged into the COVID-19 crisis among the rest of the oil majors. This is despite the company's history of "company creating" discoveries like Alpine High and its recent Suriname discovery.

Apache Corporation : Contact Us

Apache Corporation - Apache Corporation

Apache Corporation is a unique company because it's an interesting balance between companies that'd been discussed for subscribers before. Oftentimes, these companies are either small-cap high-risk, high potential reward exploration companies that are ignored by the market. Other times, these companies are majors, with significant cash flow potential in all environments.

Apache Corporation is an interesting and opportunistic mix of the two, with significant growth potential and also existing sources of production and FCF.

Apache Corporation 2019 Results

Apache Corporation had an impressive 2019. Despite what's suggested by the financial results, the result of massive capital spending, the company progressed well towards its goals.

Apache Oil Corporation 2019 Production - Apache Oil Corporation Investor Presentation

The company reported adjusted production of ~413 thousand barrels/day with costs and investments at $4.9 billion. That means the company's net expenses were $32.48/barrel. The company's net cash was respectable; however, the company's massive investment spending and difficult write downs resulted in strong negative earnings per share.

Apache Oil Corporation 2019 Spending - Apache Oil Corporation Investor Presentation

Apache Corporation, in a difficult oil environment, delivered a massive reduction in its capital budget to manage costs. The company is aiming for a 2020 upstream capital budget of $1.6-1.9 billion. With a market capitalization of less than $8 billion, that means the company is spending more than 20% of its market capitalization on growth.

In a difficult oil environment, the

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This article was written by

The Value Portfolio profile picture

The Value Portfolio specializes in building retirement portfolios and utilizes a fact-based research strategy to identify investments. This includes extensive readings of 10Ks, analyst commentary, market reports, and investor presentations. He invests real money in the stocks he recommends.

He is the leader of the investing group The Retirement Forum with features including: model portfolios, macro overviews, in-depth company analysis and retirement planning information. Learn more.

Analyst’s Disclosure: I am/we are long APA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (24)

Apache is doomed, nothing short of $60 dollar oil within the next two years can save them. Suriname discovery is a bright spot, however, their deal with Total has neutered APA's potential. Suriname assets wont start producing until at least 2028 (aggressively). In this environment, its unlikely they find a buyer willing to pay top dollar, which they would need to fend off insolvency as their RBL would be further decimated, and their bonds show that access to new capital is almost non-existent. Best case scenario for APA is bleeding out slowly in hopes for a massive reversal in oil prices.
PapaWhisky profile picture
@Mr Carry Forward

"their deal with Total has neutered APA's potential."

Total will pay 70% of the exploration and development costs while APA retains 50% ownership.

Nice neutering, if you can get it.
peace 2 u profile picture
At the moment the price is at $15.93 up 22.5% on the day. That is certainly nice.

Just a thought or two.
pat45 profile picture
bad article, little info and no conviction... I like APA, but smaller guys I like better
peace 2 u profile picture
A couple of things which I know (there a lot which I do not know) 1) I bought shares at the beginning of April and 2) I have significantly more than doubled my money.

I do not see either a cogent price for today or a target price over a period of time.

Just a thought or two.
Phil in OKC profile picture
@peace 2 u You bought exactly when the author recommended to buy. What's not to like?
was the writer on drugs or was he drunk when writing this gibberish,the jan 2021 20 calls sell now for 1.10 not 5.00,and the rest of the article is fake news
Migdriver75 profile picture
Worst article I've ever seen on Seeking Alpha
PapaWhisky profile picture

@The Value Portfolio runs a marketplace site on Seeking Alpha. Pay $30 a month and you'll be treated to bon mots like this:

"However, with value traps and low quality companies abound, it's important to have help shifting through the noise."

This article was written several months ago behind the paywall and is being let out now to gather up the few last clicks.
The Value Portfolio profile picture
The article was originally written in March of the year and syndicated to public service now. Not everything was properly updated - apologies. The fundamental thesis is still true.
Sue KJ
03 Jun. 2020
No mention of Egypt or North Sea assets, nor how these contribute to the bottom line. Show me the money
“Creating discoveries like the Alpine High” is a very accurate way to describe a $3B bust that was known to be a bust both inside and outside the company. With games like that I’ll stay far away from those guys for an investment.
Rand Walker profile picture
Glad I didn't read this before buying (then) out-of-the-money APA January $5 calls on 3/30.
Phil in OKC profile picture
@The Value Portfolio Had investors in Apache waited until the "end of March" to invest, as you recommended when you wrote this article, what would be their situation now?
The Value Portfolio profile picture
The article was originally written in March of the year and syndicated to public service now. Not everything was properly updated - apologies. The fundamental thesis is still true.

With that said, those who had invested then would be up 70%.
This 'analysis' proves the adage that figures don't lie, but liars can sure figure.
Kenneth_2003 profile picture
Where can one find this $50/bbl oil you speak of?
Oil analysts at BAML has similar opinion in regards to Suriname. Hidden gem of company
This was written in March... inaccurate WTI prices, capital spending projections, current market cap etc...
AgrettiM profile picture
Do you mean waiting till the end of June (you mentioned March)?
The Value Portfolio profile picture
The article was originally written in March of the year and syndicated to public service now. Not everything was properly updated - apologies. The fundamental thesis is still true.
PapaWhisky profile picture
"I recommend investors wait until the end of March to invest"


"My first recommendation is to not invest in Apache Corporation for the remainder of March."

when was this written ?
Maybe the author meant end of March 2021 or March 2022 or March 2120.
The Value Portfolio profile picture
The article was originally written in March of the year and syndicated to public service now. Not everything was properly updated - apologies.
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