A month has gone by since the last earnings report for APA (APA). Shares have lost about 1.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is APA due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
APA Q3 Earnings & Sales Top Estimates
APA Corporation reported third-quarter 2022 adjusted earnings of $1.97 per share, beating the Zacks Consensus Estimate of $1.92. The reported figure rose significantly from the year-earlier quarter’s income of 98 cents.
The outperformance could be attributed to higher-than-expected sales in the reported quarter. Moreover, the average daily output came in at 381,934 barrels of oil equivalent per day (BOE/d), meeting the consensus mark.
Revenues of $2.87 billion outpaced the Zacks Consensus Estimate of $2.6 billion. Revenues improved 74% from the year-ago quarter’s sales of $1.65 billion.
Since APA started the share buyback program last October, 55.2 million shares have been repurchased in total up to Sep 30 at an average price of $31.33. The company also shelled out $41 million in dividend payouts.
Production & Selling Prices
The production of oil and natural gas averaged 381,934 BOE/d. The figure decreased 1.8% from the year-ago quarter.
The U.S. output (accounting for 57.3% of the total) fell 7.9% year over year to 218,826 BOE/d, but production from the company’s international operations increased some 7.7% to 163,108 BOE/d. APA Corporation’s oil and natural gas liquid production was 65,516 barrels per day. The natural gas output totaled 826,874 thousand cubic feet per day.
The average realized crude oil price in the third quarter was $97.81 per barrel, up 36.4% from the year-ago realization of $71.72. The number marginally lagged the Zacks Consensus Estimate of $100.
Meanwhile, the average realized natural gas price jumped to $5.62 per thousand cubic feet from $3.87 in the year-ago period. However, the figure lagged the consensus mark of $6.67.
Costs & Financial Position
APA’s third-quarter lease operating expenses totaled $364 million, up 15.2% from the year-ago period. Moreover, the increased cost of oil and gas purchased meant that total operating expenses rose 11.2% from the corresponding period of 2021 to $1.7 billion.
During the quarter under review, APA generated $1.1 billion in cash from operating activities while incurring $492 million in upstream capital expenditures. The company reported adjusted operating cash flow of $1.24 billion in the third quarter. It also registered free cash flow of $609 million during the period, surging from $403 million a year ago.
As of Sep 30, APA Corporation had approximately $268 million in cash and cash equivalents, and $5.4 billion in long-term debt. The debt-to-capitalization of the company was 77.7%.
Guidance
APA’s full-year capital investment guidance remains unchanged at $1.725 billion. The company anticipates fourth-quarter adjusted production in the range of 328,000-332,000 BOE/d, up more than 5% from the third quarter. The increase is expected to be driven by higher oil production across its assets.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -10.24% due to these changes.
VGM Scores
Currently, APA has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, APA has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
APA belongs to the Zacks Oil and Gas – Exploration and Production – United States industry. Another stock from the same industry, Chesapeake Energy (CHK), has gained 3.1% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Chesapeake Energy reported revenues of $3.16 billion in the last reported quarter, representing a year-over-year change of +255.3%. EPS of $5.06 for the same period compares with $2.38 a year ago.
For the current quarter, Chesapeake Energy is expected to post earnings of $3.71 per share, indicating a change of +55.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -7.9% over the last 30 days.
Chesapeake Energy has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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