A Patchy Quarter for Apache

Top-notch independent oil producer Apache (NYSE: APA  ) posted second-quarter results that fell a bit below mean expectations. I don't think this should concern investors, though. Trading out a proven performer like Apache over a couple of pennies per share just isn't Foolish.

Second-quarter revenue climbed 42% as the company coupled double-digit energy price increases with a mid-single-digit production increase. Earnings climbed 54% on a year-over-year basis, while operating cash flow through the first six months has grown 53%.

On the production front, total energy production climbed 6% to 470,000 barrels of oil equivalent per day, with about half of that production coming from gas. Average oil production was up 8% for the quarter, and gas production climbed 4%.

Given today's high energy prices, Apache is working hard to increase its production levels around the world. As management said, when energy prices are low, you look for growth by buying assets. But when prices are high, you look for growth at the drill bit -- drill as many wells, and pump as much out of them, as you can. To that end, Apache completed 712 wells in the first half of the year -- nearly 41% more than the comparable year-ago number.

As Foolish investors might suspect, rising energy prices aren't a perfect windfall for energy companies. As prices rise, so do expenses: Service companies can charge more for their services, and workers suddenly see themselves in a seller's market. Nevertheless, Apache is still operating quite profitably.

One of the things I really appreciate about Apache is that they've been here before. Apache has weathered the ups and downs of the energy markets, and they have an enviable record of solid performance in all cycles. That sort of detail isn't going to matter to the hyperactive trader looking to buy and sell with every tick of the crude oil futures, but it should count for investors considering Apache as a long-term holding.

I'm not going to pretend that Apache is a neglected diamond in the energy market. Investor enthusiasm for any and all energy stocks has taken these shares along for the ride. But while the easy money may have already been made, this could still be a sound pick for more patient investors.

More light, sweet Foolishness:

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).


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