Apache Earnings Miss on Revenue $APA down 5%

Independent energy company Apache Corp $APA shares are down over 5% today after reporting a second quarter loss before special items and revenue lower than consensus estimates. $APA also guided lower on divested numbers. 

Independent energy company Apache Corp $APA shares are down over 5% today after reporting a second quarter loss before adjustments and revenue lower than consensus estimates. $APA also guided lower on divested numbers. North American production was 244,000 Boe per day, and Apache averaged 18 rigs and drilled and completed 36 gross-operated wells.

APA expects to benefits from a reduction of approx. $800 million in asset retirement obligations from the balance sheet from the Canadian exit.

Earnings: Net earnings $572 million, or $1.50 per share, compared to net loss of $244 million, or $0.65 per share, a year ago. Excluding items, adjusted loss was $0.21 per share vs. $0.26 per share in the year-ago period. Loss per share of 21 cents worse than consensus estimate of 1 cent. Revenue $1,384 million below consensus estimate of $1,419 million. Adjusted earnings include the effect of dry-hole costs of $0.08 per share, after tax
  
Reaction: Apache Corporation NYSE: APA morning 45.31 –2.60 (-5.43%)
 
 
Highlights:
  • Delivered second-quarter production of 460,000 barrels of oil equivalent (Boe) per day and adjusted production of 388,000 Boe per day, which excludes Egypt noncontrolling interest and tax barrels;
  • Announced the strategic exit from Canada, which streamlines the portfolio, increases leverage to the Permian and positively impacts financial metrics; revised 2017 guidance accordingly;
  • Completed first appraisal wells in the oil window of the Wolfcamp formation at Alpine High, providing further confirmation of an oil play and supporting hundreds of additional drilling locations; and
  • Demonstrated strong cost discipline despite inflationary pressures; capital and lease operating expenses (LOE) tracking at or below guidance for the full year.

Cash and EBITDAX

Net cash provided by operating activities was $751 million, compared to $455 million in the first quarter of 2017, and adjusted earnings before interest, taxes, depreciation, depletion, amortization and exploration expenses (adjusted EBITDAX) was $850 million, compared to $999 million in the first quarter of 2017.

Second-quarter Operational Summary 
During the second quarter, Apache operated an average of 35 rigs and drilled and completed 66 gross-operated wells worldwide. Highlights from Apache’s three principal areas include:

  • North America – During the quarter, North American production was 244,000 Boe per day, and Apache averaged 18 rigs and drilled and completed 36 gross-operated wells.
    • Permian Basin – Production averaged 146,000 Boe per day, and Apache operated an average of 17 rigs during the quarter.
      • Delaware Basin:
        • At Alpine High, the company averaged six rigs and announced two new parasequence well results in the oil window of the Wolfcamp, the first of which had a 4,500 foot lateral and recorded a 30-day average rate in excess of 1,000 Boe per day. Early results from mapping and testing these zones give the company confidence, at a minimum, in hundreds of additional drilling locations, with a considerable amount of acreage and numerous landing zones still to be tested.
        • The company connected to market the first segment of its natural gas trunk line and achieved first production in early May, exceeding its June 30 target of 50 million cubic feet (MMcf) per day of processed gas. Currently, net sales gas exceeds 60 MMcf per day, which is expected to increase to more than 100 MMcf per day by the end of September.
      • Midland Basin:
        • Apache averaged six rigs and focused primarily on multi-well pad drilling in the Wolfcamp and Spraberry formations. During the quarter, the company brought online the nine-well Schrock 34 pad in Glasscock County with very strong results.
  • North Sea – Apache reported average production of 55,000 Boe per day and averaged four rigs during the quarter. At Callater, the company completed its facility tieback ahead of schedule and is currently flowing back the 18x discovery well and a subsequent well at a combined, facilities-constrained rate of 19,000 Boe per day, of which approximately 70 percent is oil and natural gas liquids.
  • Egypt – On a net basis, excluding minority interest and tax barrels, Egypt production was 89,000 Boe per day. Apache averaged 13 rigs and drilled and completed 25 gross-operated wells during the quarter including two high-rate exploration wells in the Matruh Basin, which de-risked additional exploration prospects in the area. Apache expects to sign agreements soon for two new concessions, which will increase the company’s footprint in the Western Desert by 40 percent.

Guidance

For 2Q17, $APA delivered production of 460 MBOE per day, down 14% from last year. The company updated its 2017 production guidance to reflect its exit from Canada and now expects production of 457-471 MBOE/D, compared to the previous forecast of 485-503 MBOE/D. The company said its $3.1Bil 2017 budget is not impacted by the Canada exit.

To reflect the impact of the company’s exit from Canada, Apache has updated its 2017 production guidance to account for divested volumes. Guidance for certain expenses, including gathering and transportation costs and G&A expenses, has also been reduced. With regards to capital, Apache’s $3.1 billion 2017 budget is not impacted by the Canada exit since most of the capital allocated to Canada this year will have been spent by the time all transactions have closed. Further details on financial and operational guidance can be found in the Second-Quarter 2017 Financial and Operational Supplement.

“As we look to 2018, we are well prepared to manage a capital program commensurate with the prevailing price environment without stressing the balance sheet or diluting our shareholders. We are keenly focused on returns and have great confidence in the economics of our long-term investments and opportunity set. We have structured our business to adapt and thrive in a lower-for-longer price environment. Our focus on costs, maintaining a strong balance sheet and streamlining our business have positioned us to deliver returns-focused organic growth for many years to come,” said Christmann.

Source: http://investor.apachecorp.com/releasedetail.cfm?ReleaseID=1035801

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