Factors Likely to Decide Apache's (APA) Fate in Q3 Earnings

Zacks Equity Research
·4 min read

Apache Corporation APA is scheduled to release third-quarter 2020 results on Wednesday Nov 4, after the closing bell.

The Zacks Consensus Estimate for the to-be-reported quarter’s loss is 37 cents per share and for revenues is $979.79 million.

Against this backdrop, let’s delve into the factors that might have impacted the company’s performance in the September quarter.

Factors at Play

Apache boasts a large geographically diversified reserve base with multi-year trends in reserve replacement. The company’s high-quality drilling inventory with greater resource potential might have enabled it to deliver a decent per share growth rate in the third quarter. This, in turn, is expected to have lent its portfolio a solid competitive edge.

In the last reported quarter, Apache’s average realized natural gas price increased to $1.68 per thousand cubic feet (Mcf) from $1.41 in the year-ago period. This uptrend is likely to have continued in the third quarter too. Notably, the Zacks Consensus Estimate for third-quarter average realized natural gas price stands at $1.82 per Mcf, indicating a 9.6% rise from the year-ago reported figure of $1.66 per Mcf.

However, the average realized crude oil price during the second quarter was $25.77 per barrel, down 60% from the year-ago realization of $63.71, a trend that most likely continued in the third quarter as well. Precisely, the Zacks Consensus Estimate for third-quarter average crude price realization stands at $40.21, indicating a 31.8% fall from the year-ago reported figure of $59.

What Does Our Model Say?

Our proven model does not conclusively predict an earnings beat for Apache this season. The combination of a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Apache has an Earnings ESP of -11.93%.

Zacks Rank: Apache carries a Zacks Rank #3, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Highlights of Q2 Earnings & Surprise Record

In the last reported quarter, Apache posted a loss per share — excluding one-time items — of 74 cents, narrower than the Zacks Consensus Estimate of a loss of 99 cents. This better-than-expected result is led by higher-than-anticipated production volumes. Precisely, the average daily production came in at 435,448 barrels of oil-equivalent per day (BOE/d), beating the Zacks Consensus Estimate of 428,000 BOE/d.

However, the bottom line came against the year-ago quarter’s earnings of 11 cents per share due to weak oil price realizations.

Although revenues of $752 million outpaced the Zacks Consensus Estimate of $701 million, the same fell 53.1% from the year-ago quarter’s sales of $1.60 billion.

As far as earnings surprises are concerned, this oil and gas producer’s bottom line beat the Zacks Consensus Estimate in three of the trailing four quarters and missed the mark on one occasion, the average surprise being 93.63%. This is depicted in the graph below:

Apache Corporation Price and EPS Surprise

Apache Corporation Price and EPS Surprise
Apache Corporation Price and EPS Surprise

Apache Corporation price-eps-surprise | Apache Corporation Quote

Stocks to Consider

While earnings outperformance looks uncertain for Apache, here are some firms worth considering from the energy space, which according to our model have the perfect combination of ingredients to deliver a positive surprise this reporting cycle:

Marathon Oil Corporation MRO has an Earnings ESP of +1.50% and is Zacks #3 Ranked at present. The company is scheduled to release earnings on Nov 4.

NuStar Energy L.P. NS has an Earnings ESP of +2.94% and a Zacks Rank #2, presently. The firm is scheduled to release earnings on Nov 5.

Targa Resources, Inc. TRGP has an Earnings ESP of +33.33% and a Zacks Rank of 3, currently. The company is scheduled to release earnings on Nov 5.

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