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On Monday, Evercore ISI made adjustments to its financial outlook for Apache Corp . (NASDAQ:APA), reducing the price target from $30.00 to $25.00 while maintaining an In Line rating for the company’s stock. The firm’s analysis considered the energy and production sector’s (E&P) highly volatile operational environment, which has been influenced by procyclical strategies amplifying shareholder volatility.
The review highlighted Apache’s significant Permian acquisition, which has strengthened and validated their unconventional program, particularly after divestitures in the Central Basin Platform (CBP). With current EBITDA of $6.56 billion and a P/E ratio of 9.11x, the company maintains strong operational metrics. Evercore ISI noted that Apache’s approach in 2024 towards potential liabilities, such as the North Sea Asset Retirement Obligation (ARO) and Fieldwood issues, was more direct and realistic. The firm expects Apache to focus on its Permian and Egypt operations, coupled with a robust self-help strategy including cost reductions, particularly in general and administrative expenses. Notably, InvestingPro data reveals the company has maintained dividend payments for 55 consecutive years, currently offering a 4.83% yield.
The analysts expressed confidence in the new cost-conscious approach reportedly permeating Apache’s organization. They recognized the company’s 2025 outlook as a candid assessment of what could be expected from the portfolio under a status quo scenario. Additionally, they pointed to the potential reduction in the cost of capital and an increase in equity value as external factors that could affect the company’s future performance.
Evercore ISI also announced a transition in lead coverage of Apache, with Chris Baker taking over from Stephen Richardson. Despite the lowered price target, the firm reiterated its In Line rating, indicating a neutral stance on Apache’s stock performance. The analysts concluded that while Apache has set a solid baseline, it may face challenges in differentiating itself from its peers until its strategies have been in place for several quarters.
In other recent news, APA Corporation reported its fourth-quarter 2024 earnings, revealing an adjusted earnings per share (EPS) of $0.79, which fell short of analysts’ expectations of $0.9767. The company’s revenue also missed projections, totaling $2.19 billion against an expected $2.28 billion. Despite these shortfalls, APA generated $420 million in free cash flow, marking its highest quarterly cash flow for the year. In a move to address financial challenges, APA announced a significant cost-cutting initiative targeting $350 million in savings by 2027.
Additionally, CFRA analyst Stewart Glickman adjusted APA’s stock rating from "Strong Sell" to "Sell," maintaining a price target of $19.00. This change reflects APA’s cost-saving measures and a gas price agreement in Egypt that could improve production volumes. The analyst also increased the 2025 EPS forecast by $0.27 to $3.52 and introduced a 2026 EPS estimate of $3.34. APA’s production guidance for 2025 indicates a 3% year-over-year increase to 396,000 barrels of oil equivalent per day, despite plans to reduce capital expenditure by 17%.
These developments come as APA Corporation continues to focus on strategic initiatives, including gas production in Egypt and cost reductions, to navigate current market challenges and drive future growth.
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