UK markets open in 19 minutes

APA Corporation (0HGC.L)

LSE - LSE Delayed price. Currency in USD
Add to watchlist
27.02+1.47 (+5.73%)
At close: 06:57PM GMT
Sign in to post a message.
  • R
    Robin
    Great to see APA back above $27.00. But the plunge down and now the partial recovery (i..e, still not yet at $30) is all about the general macro move and nothing specific to APA anyways. Energy stocks never should have sold off given FCF yields are so crazy high. APA may not be as active in buy-backs now only because they blew most of their load in October. But come January they can reload again to full extent. And they will have more U.K. gas production in January to add to FCF. Seeing U.K. gas prices remain at these nosebleed levels clearly a big short-term positive.
  • g
    ganderwing
    Did anyone else see the CEO of Pioneer this morning on squawk box? He was awesome. He seemed very confident that oil will be well above $100 by spring. He said they are returning 70% to shareholders for an 11% div. Thats crazy! When asked about Elizibeth Warrens comment that US oil companies have a responsibility to produce more vs giving it all away to shareholders, he laughed and said "NO, the president called OPEC, I don't remember getting that phone call, so no. The tide is turning and folks are waking up to the fact that underinvestment is going to create a longterm supply issue which is only good for us.
  • J
    Jimmy
    I would like to acknowledge the many posters who have said my Apache model has helped them in their investment decisions on Apache. I will try to keep the model current to help you to find the right time to invest in Apache. There is not the time to invest.
  • R
    Robin
    U.K. gas prices down a bit to 22.30 GBP/therm. That's like US$29/mmbtu. So do not just look at plunge in N.A. gas of late.
  • R
    Robin
    New fiscal terms in Egypt is a REALLY BIG DEAL. However, because it is noise/complicated and esoteric it is not getting the appropriate investor reaction because it is hard to grind into sound-bites. Sure, people understand the new terms means better profitability and APA says with the new terms Egypt returns as the highest IRR play within its portfolio. Think about it people! Egypt is a better asset than likely any U.S. shale play - APA should be trading at a premium valuation to its peers not the huge discount currently.

    A few years ago Egypt was APA's highest IRR play with lots of activity. What changed to make it "lower IRR" and why the new terms make it "back to highest".

    In the U.S. E&Ps pay royalties, typically around 20% and then pay income taxes if they have pre-tax income after costs, D&A and interest.

    In Egypt it is a production sharing contract (PSC) that has nuances. A typical PSC has a "cost pool" and a "profit pool". I do not know APA's terms, but a typical cost pool may be 35% and profit pool may be 25%. So let's say the oil price was $80/b and your total costs were $10/b. You are allowed to reclaim your costs up to 40%. Since your cost is $20 and your allowable cost pool is $28 ($80 X 40%). The government gets the $8 difference (though in many cases the E&P gets some of the excess as an incentive to keep costs low). As costs were below the cost pool maximum then the profit pool is then 25% X ($80-$32) or $12/b. So out of $80 the E&P gets its $20/b cost back plus its share of the profit of $12/b for a total of $32/b, while the government gets $38/b.

    When you find prolific oil reservoirs (again, the best oil finds in Egypt are way better than any shale play in the U.S.) you can make higher IRR than U.S. shale even with the government taking more than half of the revenue of a barrel. However, there are always really good, good, OK, and so-so reservoirs in any oil basin. With the old fiscal terms, APA can only develop really good and good. After decades in Egypt it has found many OK and so-so-reservoirs, which are uneconomic only because the government takes too high a cut - then everyone loses because it never gets developed. The new policy is a win-win! But changing terms (more so increasing cost pool percentage to take into account higher cost developments) becomes a win-win as reservoirs that otherwise have been stranded can now be developed. Even on existing reservoirs APA can enhance recoveries by adopting EOR. But EOR strategies (like CO2 and polymer floods) have high operating costs and the old fiscal terms made it uneconomic - but now that can be economically done. APA has accumulated a massive amount of "stranded" oil plays as well as held back many EOR opportunities - now all of that can be unleashed. All low hanging fruit - Extremely low risk development. This is a really big deal!
  • A
    Alpine
    “This is the culmination of nearly two years of work with Egypt’s Ministry of Petroleum and Mineral Resources and EGPC to modernize the economic and operational terms of our PSC. The changes will return Egypt to being the most attractive investment opportunity in APA’s entire global portfolio,” said John J. Christmann IV, APA’s CEO and president. “In anticipation of the approval, we had already increased our drilling rig count to 11 in 2021. Upon final approval, our investment activity will continue to grow into 2022, returning Egypt to a growing production profile and helping to advance the country’s position as a regional energy hub.”
  • R
    Robin
    Here is a question? "When has anybody at any time say $65/bbl WTI was anything but a good price"? In the last 5 years (with much of that with WTI under $60/bbl and often around $50/bbl) if anybody said WTI would be $65/bbl they would all say "great price". So now it is "down to $65/bbl" it is somehow a bad price. Also consider well break-evens are much lower now than years ago due to increased efficiency - so margins are explosive. Giants like XOM and CVX have strong 5-year outlooks for earnings, free cash flow and div/buybacks all based on $55/bbl. We have been both spoiled with very high oil prices recently, but also at the same time the market priced stocks based on $55/bbl because the market did not believe over $60/bbl was sustainable. Well now we will see what the long-term will really be. Also everyone moaning the collapse of NYMEX gas prices. Moaning because it is only $4.20/mmbtu. Hello? Most gas producers dream of a $3.00/mmbtu price long-term. APA and other energy stocks are stupid cheap. APA will have free cash flow per share around $5/share (plus or minue $1.00 depending on how oil/gas/NGL prices settle in). The good thing is they can all do something about it! Divvys and share buybacks galore.
  • R
    Robin
    It is hard to believe that unless Brent is solidly back above $70/bbl by Thursday that OPEC will go through with planned 400,000 bbls/d increase for January. And if OPEC delays the hike that drop in supply is much greater than the drop in demand today vs. last week due to regional air travel restrictions. Supply is a real world event. Thoughts of demand being much lower "later" is just the market musing (nobody knows for sure if demand will take a big hit or not). If we get no supply increase and a small demand hit (which could be totally offset by higher vehicle miles driven) then oil prices ZOOM back to highs in the coming weeks/months.
  • A
    Alpine
    CEO said at least 60% of FCF will be returned to shareholders either through stock repurchases or dividends, or both.
    By the end of Q4, share repurchases May total 30 million and Q1, 2022 may bring the total to 40 million shares.

    Assuming those shares will be cancelled, outstanding shares would be reduced to 338 Million.

    Based on yahoofinance, institutions own 337 million shares, bringing institutional ownership to ~100% by end of Q1.

    That should end the share buyback program, leaving 60% of free cash flow payable in the form of dividends to shareholders.

    I am personally estimating 2022 free cash flow in excess of $3 billion, Which would leave $1.8 billion to be paid out to 338 million shares, or $5.35/sh dividends (7+% yield on $78). Since SHORTS have to pay dividends, this could get interesting.
  • R
    Robin
    Important to note that the drop in oil prices is all psychological. There has been negligible change in demand (just lower airflights from southern Africa). If this "scare" causes US.E&Ps to bring down 2022 CAPEX budgets (just as all are formulating 2022 budgets) that will be a real impact on 2022 oil supply. And OPEC+ has great cover to delay its January production increase (or possibly agree to increase 400,000 bbls/d only for Q1 as opposed to each moth in Q1 - and the reason would also be many members cannot even meet their quotas so gives them more time to bring back production - which would need them to ramp-up CAPEX now). If South Africa variant proves to be not a big deal after all we would be set-up in Q1 to have less supply, but not change in demand and create a more distressed supply deficit and oil prices can go even higher than otherwise. U.K. gas prices hit $30/mmbtu again - which is $180/BOE. Some brokerage analysts with $100-$120/bbl oil may even prove to be conservative come spring/2022.
  • F
    Foster
    Does anyone know what the basic hedge positions are for APA? Oil at what price for how long, etc. How much of production is hedged and of course the same for Nat Gas. I do not own APA yet, but I am seriously thinking about swapping a percentage of my OVV for APA. OVV has been a disaster for me and they are hedged at low prices all the way through 2022. No upside in sight. I just don't want to swap bad hedges from OVV to APA. Oddly enough, these two companies are almost identical in size regarding sales and production, market cap and debt. It does appear that APA has much more going on with future plays.
  • A
    Alpine
    APA Corporation Announces Egyptian Parliament’s Approval of Modernized Production Sharing Contract
    Nov 30, 2021
  • A
    Alpine
    Q4 Free Cash Flow should be approximately $800 million. 60% of that ($400-$425
    Million) will probably go towards stock repurchases of 15 - 16 million shares in addition to stated dividend.
    Q1, 2022 FCF should be around $900 million. Looks like APA has a “backstop” at around $27 on share price, so any Quarter that average share price is materially higher than $27 will probably trigger a Special Dividend of at least 60% of FCF. $2.5 Billion 2022 FCF could trigger a Special Dividend of $1.5 Million ($4.31 per share), which could become an annual occurrence. That could yield 8% annually on $54 stock price. APA and Zacks are already predicting at least $2.0 Billion FCF for 2022 and consensus estimates are routinely too low.
  • P
    Patient
    Egyptian agreement: uplift in underlying valuation likely >$5 a share
  • R
    Robin
    Well, Powell and Omnicron caused panic reversal. This should be another psychological selloff of the markets - Nobody should be surprised that a first case arrived in U.S. And Fauci made one rational comment - travel restrictions only to slow down cases to give time for remedies - nobody expected Omnicron would not show up - Just nervous Nellies. I am on record to say that if Brent is not above $70/bbl by end of the day OPEC will pause production increase - So we will see. APA's new Egypt terms substantially improves profits - and so glad they doubled the rigs there prior to final approval so can hit the ground running for 2022. APA knowing how huge FCF will be can allow them to be aggressive in buybacks - The pullback in oil/NYMEX a little downer, but at least UK gas prices crazy high. And Q1 they have more UK gas and way better Egypt. Makes their debt even more manageable. They can return 60% in Q1 as they should try to return 90% in Q4 at these bargain basement prices.
  • R
    Robin
    I did add a bit at near the close on that market nosedive. Earlier I fretted I did not add yesterday. So bought a little more today AFTER the Egypt news. Stocks can always gyrate short term, but I know FCF strong and now stronger that will lift share price over time. Share buyback massively accretive especially when bought down here.
  • B
    Boss Shorty
    Remember all CEO's say their company's share are "under-priced and do not reflect the true value"
    Ever hear of a CEO to say his company's shares are "over-priced" ??
    Do not fall into that trap of believing everything the CEO and CFO say about the company.
  • F
    FakeIR
    so the faker here called Jimmy and IJMO has posted this yesterday and deleted all other posts

    Today Dec 1st after the great Egypt news , the PPS has just gone up over USD 27.16 and up 5.5% at present

    Maestro IJMO today

    ItsJustMyOpinion 50 minutes ago
    Waiting for Jimmy's assessment on the latest news and how that will affect the model. Not convinced it will have any impact in the near future.

    and the day before

    I see the shares going to USD 24

    You all know just how good he is at reading APA.!!!....must be an ex employee.
  • J
    Jimmy
    The model is based on quantitative and qualitative factors (and a history matching technique - similar to reservoir modeling)
  • R
    Robin
    UK gas heading back to highs. Up 5% to US$32/mmbtu today. Gazprom not adding to supply and noise on Ukraine/Russia may mean Putin does not supply more in a sort of; "Who needs who more?" I mean what can Europe threaten Russia with? Russia can bring Europe to its knees. All the more reason North Sea E&Ps are a solution to the problem. Q1 for APA gonna be massive with new 20,000 mmbtu North Sea well to add to its existing 36,000 mmbtu. I hope APA plans to drill new gas targets in 2022 after years of only focussing on oil targets. I am sure APA has identified many gas targets in the past decade that they did not bother to develop because it did not make economic sense before.