Houston based independent energy company APA (formerly Apache Corp) reported better than expected third-quarter net earnings of $422 million, after reporting a loss in the same period a year earlier. Adjusted earnings were $1.97 per share, topping Wall Street expectations of $1.92 per share. APA posted revenue of $2.87 billion in the period, topping forecasts for $2.61 billion. $APA stock was sharply higher at $46.89, +2.67 or +6.0%. The oil and gas company followed strong quarters from major oil shale players Exxon and Chevron.
Apache Corp (NYSE: $APA) Reported Earnings After Close Wednesday
APA Q3 2022 Earnings
- Earnings: $422 million in Q3 vs. -$113 million in the same period last year.
- EPS: $1.28 in Q3 vs. -$0.30 in the same period last year. E
- Excluding items, adjusted earnings of $651 million or $1.97 per share for the period. Analysts projected $1.78 per share
- Revenue: $2.87 billion in Q3 vs. $1.65 billion in the same period last year
- Net cash from operating activities of $1.104 billion, adjusted EBITDAX of $1.690 billion, and free cash flow of $609 million for the quarter.
- APA has pledged to return a minimum of 60% of free cash flow to shareholders via dividends and share repurchases. Since announcing the policy in 4Q21, it has returned 76% of FCF or $1.5 billion to shareholders.
- Repurchased 10 million shares of APA common stock during the quarter at an average price of $33.85
- Announced a doubling of the quarterly dividend to an annualized rate of $1.00 per share.
- Announced first oil discovery on Block 53 offshore Suriname at Baja; and
- Achieved 2022 ESG goal to reduce routine upstream flaring in Egypt by 40%.
Stock Market Reaction
- 52wk High 51.46
- High today $47.23
- 47.17 +2.93 (6.62%) After Hours
- 47.17 +19.11 (68.10%) YTD
- 47.17 +19.54 (70.72%) Over year
- 47.17 +5.49 (13.17%) Over 5 years
“APA’s diversified and unhedged portfolio delivered another strong quarter, generating $609 million of free cash flow,” said John J. Christmann IV, APA’s CEO and president. “Global production was in line with expectations, as excellent Permian Basin performance offset weakness in North Sea production that was heavily impacted by unplanned downtime.
- Production of 382,000 barrels of oil equivalent (BOE) per day; adjusted production, which
excludes Egypt noncontrolling interest and tax barrels, was 310,000 BOE per day;
- Production in the U.S. exceeded expectations, driven by strong performance across the Permian Basin; Midland/Delaware areas & recently acquired properties in Texas Delaware
- Southern Midland Basin: Averaged 2 rigs; placed 10 gross wells on production in 3Q22. Anticipate placing 1 well on production in 4Q22
- Delaware Basin: Averaged 2 rigs; placed 14 gross wells on production in 3Q22. Completed tuck-in acquisition in July of properties in Loving & Reeves counties No wells expected to be placed online during 4Q22 Drilling first pad at Alpine High since 2019
- Austin Chalk: Averaged 1 rig; placed no new wells on production in 3Q22 Plan to bring 3 wells online in 4Q22; released rig in September
- Brought online 22 wells in 3Q22 versus expectation of 20 wells for the quarter
- Expect ~30 well connections for 4Q22 as spud-to-online cycle times have improved
- Drilling success rate of 78% (25 of 32 wells) in 3Q22
- Siwa R NW-1X discovery encountered 85 feet of net pay & tested at 5,100 BOPD
- Bolt 12-2X discovery encountered 80 feet of net pay; testing underway
- Nu-20 development target encountered 62 feet of net pay & brought online at 2,000 BOPD
- Gross oil production momentum building in 4Q22
- Delivered 2022 routine upstream flaring reduction goal in Egypt
- New projects reducing routine upstream flaring by 40
North Sea Update
- 3Q22 production impacted by unplanned downtime at Beryl & Forties (~7 Mboe/d impact vs original guidance)
- Garten-3 (100% WI) commenced production in late 3Q22 following recovery from Beryl facility downtime
- Drilling delays on BKSW development well shifted initial production from 4Q22 into 1H23
- Significant uptick in 4Q22 production post 3Q22 turnarounds
Block 58 (APA 50% WI)
• Five exploration discoveries since Jan. 2020
• Maersk Valiant drilling second appraisal well at the Sapakara South field (TTE operated)
• Noble Gerry De Souza drilling the Awari exploration prospect (TTE operated)
Block 53 (APA 45% WI)
• Announced first exploration discovery in Block 53 at the Baja well
o Encountered 34 meters (112 feet) of net oil pay in a single interval; fluid analysis indicates light oil with a gas-oil ratio of ~2,000 scf/bbl
Alpine High natural gas issues
A major issue for APA has been Alpine High (Waha) natural gas is far from markets and competes with “must-be-produced” associated gas, which is produced with oil.
The Waha-Henry Hub differential is widening again as associated gas production increases as oil drilling increases, again hitting gas processing and pipeline takeaway limits.
Permian gas production was 11.5 BCF/D in 2018, is now 22 BCF/D and is projected to be as much as 27 BCF/D by the end of 2024. US natural gas production is at record highs.
Apache Corporation is an oil and gas exploration and production company with operations in the United States, Egypt and the United Kingdom and exploration activities offshore Suriname. Apache posts announcements, operational updates, investor information and all press releases on its website, www.apachecorp.com.
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