APACHE CORP. $56(New York symbol APA; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 378.5 million; Market cap: $21.2 billion; Price-to-sales ratio: 3.8; Dividend yield: 1.8%; TSINetwork Rating: Average; www.apachecorp.com) produces crude oil and natural gas from projects in North America (57% of total production), Egypt (30%) and the North Sea (13%).
As part of its plan to focus on less-risky projects, Apache sold $6.2 billion of its assets in 2015. These sales included its Australian oil and natural gas properties, as well as its interests in two liquefied natural gas developments: a 13% stake in Australia’s Wheatstone project and 50% of a proposed terminal in Kitimat, B.C.
As a result, the company’s production in the three months ended March 31, 2016, fell 2.2%, to 479,549 barrels a day (52% oil, 48% gas) from 490,561 a year earlier. In addition, its average realized selling price for oil fell 34.2%, while gas prices dropped 26.6%.
Due to these factors, the company’s revenue in the quarter declined 35.5%, to $1.05 billion from $1.63 billion. If you exclude a writedown of its reserves, Apache lost $152 million, or $0.40 a share. A year earlier, it lost $167 million, or $0.44. Cash flow per share fell 51.7%, to $1.15 from $2.38.
The company used the cash from last year’s asset sales to pay down its debt. As a result, its long-term debt of $8.7 billion is a manageable 41% of its market cap. Moreover, it has to pay back only $700 million in loans through 2020. It ended the quarter with cash of $1.0 billion.
In response to weak oil prices, Apache plans to spend $1.4 billion to $1.8 billion on exploration and upgrades in 2016. That’s less than half the $3.6 billion it spent in 2015.
Due to these cuts, the company’s full-year production will likely fall to between 438,000 and 458,000 barrels a day. As well, Apache will probably lose $2.05 a share in 2016. However, it will probably generate cash flow of $6.25 a share. That should let it keep paying its $1.00 dividend, which yields 1.8%.
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