Share buybacks often provide significant support for a stock. This is what Apache (APA -1.34%) is hoping for. The company, whose first-quarter report beat analysts' estimates, recently increased its share buyback by 10 million shares, bringing the total purchase authorization to 40 million shares. Will this move bring upside for Apache shares, which have so far struggled to outperform the market in 2014?

Recent asset sale supports buyback
Earlier in May, Apache announced that it was going to sell non-operated interests in the Lucius and Heidelberg development projects as well as 11 deepwater exploration blocks to Freeport-McMoRan Copper & Gold (FCX -2.41%) for $1.4 billion. Apache stated that it is moving out of its deepwater operations in order to focus on other segments. At the same time, this move fits well into Freeport-McMoRan's strategy of increasing its Gulf of Mexico presence. In order to finance the deal, Freeport-McMoRan sold its Eagle Ford assets to EnCana (OVV -1.40%) for $3.1 billion.

So far, Apache has repurchased 24.3 million of its shares for approximately $2.1 billion. This means that the company has yet to buy 15.7 million shares, which is roughly 4% of its float. With the recent sale of its Gulf of Mexico assets, Apache has sufficient funds to contemplate its buyback program, as it has more than $1.6 billion of cash on the balance sheet. Importantly, Apache expects that its exploration and production capital spending will be within its cash flow for the year.

However, the company must also spend money on its liquid natural gas projects, so its cash position could decrease by year-end. Apache's investment in the Wheatstone project is expected to be $1.4 billion, while the investment for the Kitimat project is yet to be determined. Apache stated that it was trying to right-size its participation in Kitimat and that its spending on the project could reach $600 million in 2014. Given a projected $2 billion spend on liquid natural gas projects, one could expect more Gulf of Mexico asset sales from Apache this year.

Move to onshore continues
Meanwhile, Apache continues to increase production across its U.S. onshore assets. The company expects that North American onshore liquids production growth will be between 15% and 18% this year. Back in 2013, Apache grew its North America liquids production by 34%. This year, the company is devoting 64% of its $8.5 billion exploration and production capital to North America onshore, with almost half of that sum going to Permian basin assets.

This makes perfect sense, as Permian assets have been performing well for Apache. First-quarter production in the Permian increased by nearly 15,000 barrels of oil equivalent a day, or 12% quarter over quarter. Spending money on better-performing assets seems to be a wise strategy. Apache's asset-sale program slowed production growth in the near term. However, the robust growth from onshore assets is likely to provide overall growth in the future.

Bottom line
Apache's buyback program is positive for its shares. Importantly, the company has necessary funds to execute the program without going to the debt markets. There is still upside for Apache shares, which trade at just 13 times the company's future earnings.