APA - Embedded Expectations Analysis - 2020 07 07
Apache Corporation (APA:USA) currently trades at a discount to UAFRS-based (Uniform) assets, with a 0.5x Uniform P/B. At these levels, the market has expectations for profitability to remain muted, and management may be concerned about curtailed oil production, their cost savings initiatives, and cash flow preservationSpecifically, management may have lack confidence in their ability to mitigate net losses and continue to both preserve cash flow and pay down debt. In addition, they may have concerns about the duration of curtailed production in the Permian basin, the pace of oil demand recovery, and the effectiveness of their hedging strategies. Moreover, they may be exaggerating the benefits of production sharing contracts during low price environments, their ability to execute their cost savings initiatives, and their ability to meet cost savings target
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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- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
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