Shares of energy company Apache (NASDAQ:APA) rose dramatically at the open of trading on July 30, by roughly 20%. The stock fell back to about a 13% gain by 10 a.m. EDT, but by 11 a.m., Apache was back up to a roughly 20% advance. Clearly there's some volatility in the shares today.
The big story was earnings, which is a little counterintuitive. The energy sector is deeply out of favor today because oil is in the midst of a painful supply/demand imbalance. Effectively, COVID-19-related economic shutdowns have led to way more oil being produced than is getting used, with the excess largely ending up in storage. It was so bad that oil actually traded below zero for a brief moment in time, meaning drillers were paying customers to take the fuel off their hands. It is going to take time for this imbalance to get fixed, suggesting that oil prices will remain low. So it shouldn't be much of a surprise to find that Apache posted an adjusted loss of $0.74 per share in the second quarter, well below the $0.11-per-share profit it earned in the same period of 2019.
But these are difficult times and analysts were actually expecting much worse, with the consensus estimate sitting at an adjusted loss of $1.01 per share. So while Apache had a dismal quarter it was actually pretty good relative to what Wall Street thought would happen. The stock rallied on the news. It didn't hurt any, either, that the company announced a third major discovery in a key development project, with plans for further exploratory drilling at a fourth site. That's a long-term positive that hints at a brighter future, assuming oil prices move higher over time.
Apache did not have a good quarter, but it appears to be muddling through the current energy industry downturn better than Wall Street had expected. That's good news, and investors reacted accordingly. However, the supply/demand imbalance is far from fixed, so the only thing investors can really expect with any certainty from here is likely to be more volatility.