Apache Net Income Dives 73%

Apache Corp. (NYSE: APA) reported second-quarter adjusted earnings per share (EPS) of $2.07 on $3.97 billion in revenue before markets opened this morning. Adjusted EPS was 36% lower than last year’s $3.22, and revenue is down 8.5% from last year’s second-quarter total of $4.34 billion. The results compare to the Thomson Reuters consensus estimates for EPS of $2.53 and $4.34 billion in revenue.

The company’s chairman and CEO had this to say:

Apache has assembled an inventory of 67,000 drillable locations in liquids-rich onshore U.S. plays, and now is the time to drill wells. Rigs are running — 36 in the Permian Basin, up from 26 at the end of 2011, and 24 in the Anadarko Basin, up from seven at year-end. The impact of our accelerated drilling program is beginning to take hold. … Apache is gaining momentum, and we project rising production throughout the second half.

The company had no comments related to guidance in its press release. The company did announce that a second horizontal well in the North Sea is now producing 8,500 barrels a day of crude, bringing the company’s production from the U.K. sector of the field to 12,900 barrels a day.

That’s fine, but 4,400 new barrels a day does not make up for a lousy quarter. On an unadjusted basis, Apache’s EPS for the quarter was a miserable $0.86, compared with $3.17 in the same period a year ago. That’s a drop of 73%. Capital spending rose by more than $700 million in the quarter to $2.5 billion. Apache also spent $3.3 billion on acquisitions in the quarter. As the CEO said, now it is time to start drilling.

Crude oil volume in the quarter rose to about 348,000 barrels a day from 339,000 barrels a day in the same period a year ago. Natural gas volumes also rose, to 2.32 billion cubic feet a day from 2.27 billion cubic feet a day. The problem was realized pricing. The company’s realized price fell from $106.31 a barrel last year to $97.66 a barrel this year. Natural gas pricing dropped by 35% year over year.

Shares are down 2.4% in premarket trading this morning to $84.75. The current 52-week range is $73.04 to $124.05. Thomson Reuters had a consensus analyst price target of $115.65 before today’s results were announced.

Paul Ausick