Apache's Earnings: What You Need to Know

Photo Credit: Apache Corporation

Apache (NYSE: APA  ) is out with its second-quarter earnings. The oil and gas producer delivered net income of a billion dollars and earnings per share of $2.54. Those numbers are just some of the highlights on the quarter, so let's dig into the rest and see what they really mean.

Drilling down into the numbers
Looking past those headline numbers into adjusted earnings, Apache actually reported earnings of $801 million, or $2.01 per share. That's a bit less than the same quarter of last year where the company produced earnings of $821 million, or $2.07 per share. Those numbers smooth out one-time items, which last year included a large $480 million write-down, and this year included currency and hedging gains. Despite all those moving parts, the company was still able to produce $2.6 billion in cash from operations, which is ahead of last year's $2.4 billion.

Overall, adjusted earnings of $2.01 per share were in line with what analysts were expecting, though the company did beat on revenue. In fact, Apache saw a 10% boost in its revenue to $4.38 billion, which was well ahead of the $4.28 billion that analysts were expecting. Overall, it was a solid quarter for the company.

Production highlights
The biggest news on the quarter is that Apache saw a 42% jump over last year in its North American onshore liquids production to 175,000 barrels of oil per day. The company saw real strength in the Permian Basin where production was up 32% over the first quarter. These results have given the company enough confidence to boost its drilling activities, with 45 rigs currently running in the Permian.

The Permian really hasn't been getting the credit it deserves for driving high-margin liquids production growth in the U.S.; it's still playing second fiddle to the Bakken and Eagle Ford. However, it was one of the driving forces behind Pioneer Natural Resources' (NYSE: PXD  ) success last quarter. The strong results its seeing in the region is one reason the company recently firmed up production growth guidance this year to 14%-16%. Apache, like Pioneer, is really capitalizing on that legacy oil basin and driving solid returns for investors. 

Looking ahead
Apache is working to narrow its focus in order to increase its returns to investors. Recently, the company announced it was selling its Gulf of Mexico shelf assets for $3.75 billion and will be using those funds to buy back stock and pay down debt. It's quite clear now that the company intends to focus its efforts on North American liquids projects as well as to continue to deliver results in Egypt. Despite the uncertainty in that country, Apache was able to announce seven new Egyptian oil and gas discoveries, proving that its strategy continues to deliver results.

Final Foolish thoughts
Overall, Apache delivered a solid quarter and its efforts to refocus on areas like the Permian is setting the company up up for long-term growth. Apache is really well positioned to take advantage of the oil and gas boom in North America, while delivering solid cash flow from its international operations. However, its stock has been weighted down by its large operations in Egypt, which makes it an intriguing value given stubbornly high oil prices. 

Apache is one of the many companies benefiting from the production boom in the U.S., which is very profitable given how high oil prices are these days. So, if you're on the lookout for a couple of other intriguing energy plays to profit from this dynamic I recommend that you check out The Motley Fool's "3 Stocks for $100 Oil". For FREE access to this special report, simply click here now.


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