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APA Meets on Q2 Earnings, Buys Assets, Lowers Output View

·6-min read

U.S. energy explorer APA Corporation APA reported second-quarter 2022 adjusted earnings of $2.37 per share, meeting the Zacks Consensus Estimate and up significantly from the year-earlier quarter’s income of 70 cents.

The quarterly numbers reflect sharply higher commodity prices, partly offset by lower-than-expected production and a rise in costs. Precisely, the average daily output came in at 384,627 barrels of oil equivalent per day (BOE/d), falling short of the consensus mark of 392,000 BOE/d.

Revenues of $3 billion outpaced the Zacks Consensus Estimate of $2.8 billion million and improved 73.5% from the year-ago quarter’s sales of $1.8 billion.

As promised, the company is using the excess cash from a supportive environment to reward them with dividends and buybacks. APA bought back 7 million shares at $41.59 apiece during the second quarter. Since APA started the program last October, 52.3 million shares have been repurchased in total, till Jul 31, at an average price of $31.19. The company also shelled out $43 million in dividend payment.

During the earnings release, APA further informed that it purchased certain properties in the Texas Delaware Basin for $505 million that will add 12,000-14,000 BOE/d to its production through the rest of this year.

APA Corporation Price, Consensus and EPS Surprise

APA Corporation Price, Consensus and EPS Surprise
APA Corporation Price, Consensus and EPS Surprise

APA Corporation price-consensus-eps-surprise-chart | APA Corporation Quote

 

Production & Selling Prices

Production of oil and natural gas averaged 384,627 BOE/d, which comprises 63% liquids. The figure decreased 2.7% from the year-ago quarter.

U.S. output (accounting for 52% of the total) fell 17.1% year over year to 200,269 BOE/d but production from the company’s international operations increased some 20% to 184,358 BOE/d. APA’s oil and natural gas liquids (NGLs) production was 243,513 barrels per day (Bbl/d). Natural gas output totaled 846,685 thousand cubic feet per day (Mcf/d).

The average realized crude oil price during the second quarter was $113.79 per barrel, up 71.4% from the year-ago realization of $66.40. The number also came in line with the Zacks Consensus Estimate. Meanwhile, the average realized natural gas price jumped to $5.65 per thousand cubic feet (Mcf) from $2.99 in the year-ago period and beat the consensus mark of $5.59.

 

Costs & Financial Position

APA’s second-quarter lease operating expenses totaled $359 million, up 15.4% from the year-ago period. Moreover, a a doubling of costs on oil and gas purchased meant that total operating expenses rose 23.5% from the corresponding period of 2021 to $1.6 billion.

During the quarter under review, APA generated $1.5 billion of cash from operating activities while it incurred $428 million in upstream capital expenditures. The Zacks Rank #3 (Hold) company reported an adjusted operating cash flow of $1.4 billion in the second quarter. It also registered free cash flow of $814 million during the period, surging from $406 million a year.

You can see the complete list of today’s Zacks #1 Rank stocks here.

As of Jun 30, APA had approximately $282 million in cash and cash equivalents, and $5.2 billion in long-term debt. The debt-to-capitalization ratio of the company was 89.8.

Guidance

APA expects adjusted production to average 304,000-310,000 BOE/d in Q3 and 315,000-319,000 BOE/d in 2022 (lower than the previous guidance of 323,000 BOE/d on a scaled-down view of Egypt, well completion delays in Egypt and the Permian, to go with minor divestitures). Of this, oil volumes are likely to be 138,000-140,000 Bbl/d and 143,000-145,000 Bbl/d for Q3 and 2022, respectively. Meanwhile, the company kept its upstream capital expenditure unchanged at $1.7 billion. APA has committed to return at least 60% of free cash flow to its shareholders. The company has guided for some $3 billion in free cash flow in 2022

Some Key E&P Earnings So Far

While we have discussed APA’s second-quarter results in detail, let’s see how some other exploration and production companies have fared in this earnings season.

ConocoPhillips COP reported second-quarter adjusted earnings per share of $3.91, beating the Zacks Consensus Estimate of $3.78. Further, COP’s bottom line significantly improved from the prior-year quarter’s $1.27 per share. One of the world’s largest independent oil and gas producers based in Houston, TX, ConocoPhillips’ strong quarterly results have been aided by increased oil-equivalent production volumes and realized commodity prices.

ConocoPhillips revised higher its expected 2022 return of capital to shareholders. The new guidance is $15 billion versus the prior projection of $10 billion. COP’s incremental returns to stockholders will get distributed through share repurchases and variable returns of cash tiers.

Another upstream giant EOG Resources EOG reported second-quarter adjusted earnings per share of $2.74, missing the Zacks Consensus Estimate of $2.99. EOG’s weaker-than-expected earnings were attributed to higher lease and well expenses, as well as transportation costs. However, the bottom line jumped from the year-ago quarter’s earnings of $1.73 due to increased volumes and prices.

For the quarter under review, EOG Resources’ production increased 11% year over year, while it generated $1.3 billion in free cash flow. Committed to shareholder returns, EOG announced a special dividend of $1.50 per share.

Finally, we have Pioneer Natural Resources Company PXD, which reported second-quarter earnings of $9.36 per share (excluding one-time items), beating the Zacks Consensus Estimate of $8.81. The bottom line surged from the year-ago quarter’s profit of $2.55 per share. PXD’s robust bottom line can be attributed to higher production volumes and commodity price realizations.

Pioneer Natural announced a dividend payment of $8.57 per share of common stock, which includes a variable dividend of $7.47 per share and a base dividend of $1.10. This suggests a 16.1% increase from the prior dividend of $7.38 per share.


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