Well, that high didn't last. 

Late last year, Apache Corporation (NYSE:APA) announced a massive oil and gas find in a sleepy part of West Texas, which it dubbed "Alpine High." Its stock immediately went higher, too. But now, with the company about to report first-quarter earnings on May 4, shares are below their pre-Alpine High levels. Here's what investors should expect.

Red oil barrels.

Apache estimates that its Alpine High acreage sits on approximately 3 billion barrels of oil. Image source: Getty Images.

Alpine update

Alpine High is sure to be front and center in the company's earnings report. Apache has been developing the site and building out the necessary infrastructure, and should be able to present detailed news on how things are progressing.

In particular, investors will want to know how wells drilled at the site are performing and how recent test results are holding up to the initial indicators. Hopefully, the data is meeting management's expectations and verifying how rich a play Alpine High is projected to be. Take note of any hedging by the company about the success of the project: If hedging is happening already, it's definitely not a good sign for the long term.

Not that I expect it to hedge. In a February presentation, CEO John Christmann announced that the company has discovered more "landing zones" -- depths at which to begin lateral drilling -- in recent months and that the projected location count has "gone up significantly" since the company's initial disclosure in September. All of this sounds like good news.

But it's not just about what's under the ground -- it's about how fast Apache can start getting it out from under there. Apache's production numbers aren't going to improve until Alpine High's oil and gas start coming to market in earnest. Management expected that to start happening in mid-2017, but smart investors will want assurances that that's still the case.

Low numbers

Apache will probably report disappointing numbers this quarter. Management has been projecting weak first-quarter numbers for quite some time. The first Alpine High pipeline connection isn't expected until midyear. And in February, Christmann said, "[W]hen we start to bring things on [in the] back half of this year, I think everybody will be surprised at some of the results and things we start bringing on."

Raising lofty expectations for the third and fourth quarters of 2017 is a circumspect way of telling investors not to expect too much during the first and second quarters. But the company has also said so directly.

In its fourth-quarter 2016 earnings release, the company cited scheduled downtime for annual maintenance in the North Sea, scheduled downtime for plant maintenance in Canada, and reduced investment in lower-margin North American onshore projects as reasons production would drop in the first half of 2017. In a March presentation, Christmann got even more specific, projecting that the company's quarterly production output would fall from the 421 million barrels of oil equivalent it recorded per day in fourth-quarter 2016 to just 372 million BOE/d in second-quarter 2017, before rising again to 425 million BOE/d by fourth-quarter 2017. 

So don't panic if the numbers -- especially the production numbers -- are low this quarter. It's all part of management's master plan.

One man's trash

The last thing to look out for isn't going to be in the earnings report at all: how the stock price reacts to the company's earnings news.

If underwhelming numbers cause the stock -- already trading below $50 per share -- to drop further, this could be an excellent buying opportunity for patient investors. Of course, investing in any oil and gas producer is a bet on the long-term stability (and, hopefully, growth) of oil prices, which have averaged just above $50 a barrel so far this year. But if the opportunity presents itself to buy Apache at a significant discount to what its price was prior to its Alpine High announcement, that's something investors should seriously consider.

On the other hand, Apache could exceed expectations. That would also be good for investors because it would indicate that production levels may not drop as low as predicted in the second quarter. It would also probably cause the share price to rise, which would make the company less of a bargain. 

Investor takeaway

Apache is looking like a bargain right now, but it will be an even bigger one if the share price drops as a result of weak first-quarter numbers. Management has been preparing shareholders for a lackluster couple of quarters, though, so any upside surprise might send the stock higher. 

But smart shareholders should also closely watch management's projections for the second half of the year to make sure that management can deliver on the big payday it's promised shareholders.

John Bromels has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.