The case for & against
Bull & Bear analysis
APA Corporation (NASDAQ: APA) is a leading independent oil and gas exploration and production company primarily engaged in the development of its assets in the Permian Basin and international projects including significant interests in Egypt. The company’s competitive positioning is underscored by its operational efficiency and strategic alignment with rising oil prices, which enhance its profitability. As part of the broader energy transition theme, APA plays a crucial role in hydrocarbon production while also exploring opportunities to diversify its portfolio into natural gas.
Bull says
- ↑Earnings yield of 2.44% and dividend yield of 1.2%.
- ↑Q2 EPS of $1.89 surpassed estimates by 58.8%.
- ↑Free cash flow of $738M, with $673M used for debt repayment.
- ↑Permian output guidance raised to 123,000 bpd.
- ↑Full-year FCF forecast at $2.3B under current oil assumptions.
- ↑High oil price sensitivity and positive momentum factors; Benchmark target raised to $46 with Egypt gas upside.
Bear says
- ↓Consensus EPS cut by 11%, indicating weak growth prospects.
- ↓Q2 revenue of $2.37B missed forecasts by 8.9%, rising cost base.
- ↓Profitability metrics under pressure amid margin headwinds.
- ↓Leverage concerns persist despite accelerated debt repayment.
- ↓High oil price volatility risks swings in revenue and FCF.
- ↓Negative factor signals on profitability and analyst revisions may cap upside.
Investment themes with APA
Full-cycle oil exploration, refining, and distribution
Upstream hydrocarbon extraction fueling energy markets
Producers and distributors of natural gas
Companies paying above-average dividends
Earnings Call · Q3 2023 · Mgmt. Guidance
Transcript signals
Bull points
- For the third quarter, under Generally Accepted Accounting Principles, APA reported consolidated net income of $459 million, or $1.49 per diluted common share.
- Excluding these and other smaller items, adjusted net income for the third quarter was $410 million or $1.33 per share.
- Through dividends and share repurchases, we returned 32% of this amount to shareholders during the quarter.
Bear points
- we anticipated G&A expense would be significantly higher than our underlying run rate of cost, which is around $100 million. For the quarter, reported G&A was $139 million, mostly because of APA stock price appreciation and the mark-to-market impact on previously accrued share-based compensation.
- North Sea taxes also came in above guidance in the quarter by $46 million. This was the result of an incremental cargo lifting late in the quarter, which was not anticipated at the time we provided 3Q guidance in August.
- we continue to recognize the need for further progress on debt reduction.