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Can Commodity Price Surge Drive Strong Q1 Earnings for APA?

Zacks Equity Research
·5-min read

APA Corporation APA is set to release first-quarter results on May 4. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of $2.10 per share on revenues of $2.6 billion.

Let’s delve into the factors that might have influenced this upstream operator’s results in the March quarter. But it’s worth taking a look at APA’s previous-quarter performance first.

Highlights of Q4 Earnings & Surprise History

In the last-reported quarter, the independent oil and gas explorer missed the consensus mark on lower-than-expected production and a rise in costs. APA had reported adjusted earnings per share of $1.29, below the Zacks Consensus Estimate of $1.42. However, revenues of $2.3 billion generated by the firm came in above the Zacks Consensus Estimate by 9.5% on the back of sharply higher commodity prices.

APA Corporation beat the Zacks Consensus Estimate for earnings in three of the last four quarters, resulting in an earnings surprise of 13.4%, on average. This is depicted in the graph below:

APA Corporation Price and EPS Surprise

APA Corporation Price and EPS Surprise
APA Corporation Price and EPS Surprise

APA Corporation price-eps-surprise | APA Corporation Quote

Trend in Estimate Revision

The Zacks Consensus Estimate for the first-quarter bottom line has been revised 2.4% upward in the past seven days. The estimated figure indicates a 130.8% jump year over year. The Zacks Consensus Estimate for revenues, meanwhile, suggests a 22.5% increase from the year-ago period.

Factors to Consider

APA is expected to have benefited from the surge in oil and natural gas realizations. As a reflection of this price boost, the Zacks Consensus Estimate for first-quarter average sales price for crude and natural gas is pegged at $91 per barrel and $4.24 per thousand cubic feet, respectively, up from a year earlier when the company had fetched $59.62 and $4.14. The year-over-year improvement in realizations has most likely buoyed APA’s revenues and cash flows.

The company is also expected to have reaped the reward of higher production during the quarter. APA continues to churn out an impressive output from its assets in the United States, Egypt and the North Sea. Consequently, the consensus mark for APA’s volume is pegged at 409,000 barrels of oil-equivalent per day (BOE/d), rising from the prior-year quarter’s level of 3824018 BOE/d.

On a somewhat bearish note, the increase in APA’s costs might have dented the company’s to-be-reported bottom line. The company’s fourth-quarter lease operating expenses totaled $350 million, up 30% from the year-ago period. Moreover, total operating expenses rose 43% from the corresponding period of 2020 to $1.7 billion. The upward cost trajectory is likely to have continued in the first quarter due to cost inflation.

What Does Our Model Say?

The proven Zacks model does not conclusively show that APA is likely to beat estimates in the first quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: APA has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $2.10 per share each.

Zacks Rank: APA currently carries a Zacks Rank #2, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult this earnings season.

Stocks to Consider

While an earnings beat looks uncertain for APA, here are some firms from the energy space that you may want to consider on the basis of our model:

EOG Resources, Inc. EOG has an Earnings ESP of +0.89% and a Zacks Rank #1. The firm is scheduled to release earnings on May 5.

You can see the complete list of today’s Zacks #1 Rank stocks here.

For 2022, EOG has a projected earnings growth rate of 88.5%. Valued at around $68.4 billion, EOG has increased around 64.6% in a year.

Rattler Midstream LP RTLR has an Earnings ESP of +1.96% and a Zacks Rank #2. The firm is scheduled to release earnings on May 3.

For 2022, RTLR has a projected earnings growth rate of 34.9%. Valued at around $2 billion, Rattler Midstream has increased around 30.4% in a year.

Calumet Specialty Products Partners, L.P. CLMT has an Earnings ESP of +31.53% and is Zacks #2 Ranked. The firm is scheduled to release earnings on May 6.

CLMT is valued at around $1.1 billion. For 2022, the partnership has a projected earnings growth rate of 70.3%. Calumet has gained around 131.5% in a year.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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APA Corporation (APA) : Free Stock Analysis Report

EOG Resources, Inc. (EOG) : Free Stock Analysis Report

Calumet Specialty Products Partners, L.P. (CLMT) : Free Stock Analysis Report

Rattler Midstream LP (RTLR) : Free Stock Analysis Report

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Zacks Investment Research