Report
Valens Research

APA - Embedded Expectations Analysis - 2019 05 14

Apache Corporation (APA:USA) currently trades below recent averages relative to UAFRS-based (Uniform) Assets, with a 0.7x Uniform P/B, implying muted expectations for the firm. Meanwhile, management has concerns about operational performance, the cash generation potential at Alpine High, and the progress of international wells being brought online.

Specifically, management may lack confidence in their ability to sustain earnings and operational performance across all regions and achieve growth targets, and may lack confidence in the potential of Kinder Morgan's GCX pipeline. Moreover, they may be concerned about their ability to execute future asset sales and attract capital to SCOOP/STACK. In addition, they may be concerned about their move to pad development at Alpine High, and may be exaggerating the cash generating potential of Alpine High's cryo units and their ability to generate efficiencies as lateral lengths and drilled well counts increase. Finally, they may be concerned about the progress of international wells being brought online, and the timing of capital spend related to Suriname and exploration activity.
Underlying
APA Corp.

Apache is an independent energy company that explores for, develops, and produces natural gas, crude oil, and natural gas liquids. The company had exploration and production operations in United States, Egypt, and offshore United Kingdom in the North Sea. The company also has exploration interests in Suriname. The company markets its United States crude oil production to main oil companies, marketing, and transportation companies, and refiners based on a West Texas Intermediate price or other regional pricing indices. The company has two international regions: The Egypt includes onshore conventional assets in Egypt's Western Desert. The North Sea region includes offshore assets based in United Kingdom.

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Valens Research

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