Apache Corp hold rating reaffirmed, stock target steady on pricing challenge

Published 10/10/2024, 15:30
Apache Corp hold rating reaffirmed, stock target steady on pricing challenge

On Thursday, TD Cowen maintained its Hold rating on Apache Corp (NASDAQ:APA) shares with a consistent price target of $36.00. The decision follows a review of Apache's recent supplemental 8-K filing, which detailed adjustments in natural gas production due to pricing Elevidys.

The company reported a reduction in natural gas output by 103 million cubic feet per day (MMcf/d) and a cut in natural gas liquids (NGLs) production by 10 thousand barrels of oil equivalent per day (Mboe/d). These reductions exceed the previously issued July guidance, which estimated a curtailment of 90 MMcf/d of natural gas and 7.5 Mboe/d of NGLs.

The pricing of gas has been affected, as reflected by the domestic rate of $0.15 per thousand cubic feet (Mcf), prompting the company to adjust its production. The analyst noted that these changes are in line with the known weakness in gas pricing and have influenced the company's operational strategy.

In addition to the production curtailments, Apache Corp also repurchased 0.1 million of its shares within the quarter at an average price of $29.32. This share repurchase is part of the company's efforts to manage its capital allocation in response to the current market conditions.

The updated model from TD Cowen takes into account these recent developments, reaffirming the firm's stance on Apache Corp's stock. The Hold rating suggests that the firm advises investors to maintain their current position in the stock, without advocating for additional buying or selling at this time.

In other recent news, APA Corporation has reported significant financial gains and curtailments in Q3 2024, including a $3 million realized gain on commodity derivatives and a substantial $178 million gain on natural gas transactions with Cheniere.

The company also announced the sale of non-core assets in the Permian Basin for $950 million. APA Corporation and TotalEnergies (EPA:TTEF) have committed to a sizable $10.5 billion investment in Suriname's Block 58 offshore oil project, expected to produce over 750 million barrels of oil starting in 2028.

Analyst firms Truist Securities and Wolfe Research have upgraded their price targets for APA Corporation, citing operational opportunities in Suriname, the Permian region, and Egypt. In contrast, Mizuho maintained an underperform rating, noting the higher costs of the Suriname project. RBC Capital maintained its Sector Perform rating on Apache shares, with a steady price target of $34.00, following Apache's pre-earnings supplemental release.

Apache's recent financial update highlighted improved revenue streams from oil and natural gas liquids (NGL) sales, exceeding the company's guidance and analyst projections. However, the company's stock buyback activity was notably lower than anticipated, with only $3 million reported in stock repurchases. These recent developments reflect the ongoing changes and strategic decisions within APA Corporation.

InvestingPro Insights

Recent data from InvestingPro sheds additional light on Apache Corp's (NASDAQ:APA) financial position and market performance. Despite the production curtailments mentioned in the article, APA maintains a strong profitability profile with a P/E ratio of 2.91, significantly lower than many industry peers. This low P/E ratio suggests that the stock may be undervalued relative to its earnings.

InvestingPro Tips highlight that APA has maintained dividend payments for 54 consecutive years, demonstrating a commitment to shareholder returns even in challenging market conditions. This is particularly relevant given the current natural gas pricing issues the company faces. Moreover, analysts predict the company will remain profitable this year, which aligns with the operational adjustments described in the article.

The company's dividend yield stands at 3.8%, which may be attractive to income-focused investors in the current market environment. However, it is worth noting that the stock's price movements have been quite volatile, as indicated by another InvestingPro Tip, which investors should consider when evaluating APA's risk profile.

For readers interested in a more comprehensive analysis, InvestingPro offers 11 additional tips for APA, providing a deeper understanding of the company's financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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