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Apache: Even Assigning Minimal Value To Suriname, The Stock Is Worth A Look

Mar. 09, 2021 12:43 PM ETAPA Corporation (APA)SHEL, RYDAF, RYDBF, TTE, TTFNF, XOM32 Comments


  • Apache has a significant tilt towards international development, perhaps more so than many realize.
  • Buyers today have to weigh declines in legacy areas (Egypt, North Sea) against the potential upside from Suriname.
  • Apache is a mixed bag, but at current oil prices, nearly every producer looks solid.
  • Looking for a portfolio of ideas like this one? Members of Energy Income Authority get exclusive access to our model portfolio. Learn More »

Apache Corporation (NASDAQ:APA), while at first glance it might seem to have a similar setup to other North American production companies, really has a rather unique outlook. The current international portfolio plus a large exploratory budget has production declining at a rate greater than that of nearly all peers. That all changes if / when Suriname begins to produce; a play not expected to throw off first oil until 2025. While results there have been exciting, it's tough to see a market that continues to underappreciate strong proved reserve depth getting overly optimistic on future Suriname cash flows. With so many wonderful opportunities in either North American or international markets, I struggle to have the bullishness I have here compared to other oil plays.

Apache Outlook, Domestic versus International

Apache has exploration and production ("E&P") operations in three key geographies: the United States, the North Sea, and Egypt. Additionally, it is actively exploring offshore areas in Suriname, where it has announced four positive discoveries thus far with its partner, Total (TOT). The international portfolio, while it only makes up a little more than one third of total production forecasts, actually generates closer to half of corporate revenue because of greater oil mix and better realized international pricing. I've found investors tend to think of Apache as a play on Permian shale with a little sprinkling of international; that view undersells the importance of international locales.

*Source: Apache Corporation, Q4 2020 Results Presentation, Slide 11

That international bias has also been a source of some problems, most prominently Egypt. Egypt has long been the cornerstone of Apache results. It has operated in the Western Desert there for nearly three decades and is one of the largest acreage holders in the region. Yet despite ample acreage concessions (5.2mm gross acreage) and a strong minority partner in Sinopec, its Egyptian

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This article was written by

Michael Boyd profile picture
Compelling income and growth plays in the energy sector.

Author of Energy Investing Authority

Top 1% Analyst According to TipRanks

I have a decade of experience in both the investment advisory and investment banking spaces, with stints in portfolio management, residential mortgage-backed securities, derivatives, and internal audit at various firms. Today, I am a full-time investor and "independent analyst for hire" here on Seeking Alpha.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

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