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Apache CEO Predicts Strong Earnings Surprise
The sharp rise in natural gas and oil prices and production have sent Apache Corp.'s earnings skyrocketing, and the CEO said last week that the Houston-based independent would easily beat Wall Street estimates.
Analysts have predicted earnings per share of $4.86, but CEO Raymond Plank said the company expects to earn $5.50 per share, about 20% higher than predicted.
"As we enter September, I'm told oil is at 123,000 bbl/d, 7,000 above July, while gas is at 950 MMcf/d, up 185 MMcf/d from the second quarter. One BCF per day seems just around the corner," said Plank. The September figures are up from second quarter production of 112,500 oil bbl/d, 765 MMcf/d, and liquids of 6,100 bbl/d. That's a long haul from 1992, the year Apache moved to Houston, with production of 33,000 oil bbl/d, 262 MMcf/d, and 1,500 bbl/d of liquids.
Plank, appearing at the Lehman Brothers CEO conference in New York City, credited the company's production growth to its acquisition strategy.
In July, the company announced it was acquiring Occidental Petroleum Corp.'s offshore oil and gas interests in the Gulf of Mexico for $385 million (see NGI, July 24). In June, Apache acquired long-lived producing properties in the Permian Basin and South Texas for more than $300 million in a definitive agreement with Collins & Ware Inc., based in Midland, TX (see NGI, June 19). And last October, Apache made a definitive agreement to acquire producing properties and other assets in Alberta, British Columbia and Saskatchewan with proved reserves of 87.5 MMBoe from Shell Canada Ltd. for C$770 million (see NGI, Oct. 11, 1999).
Cash flow for 2000 may exceed $13 a share, based on commodity strip prices at the end of August, Plank said. "Given our built-in production growth for next year and indicated prices well above year-2000 levels, Apache's strong financial outlook puts a $100 share price within reach."
Plank said Apache's expected earnings doubled the $2.31 average earnings per share of nine comparable exploration and production companies. The sample includes Anadarko, Burlington Resources, Devon, EOG Resources, Noble Affiliates, Ocean Energy, Pioneer Resources, Unocal and Triton Energy. "If Apache enjoyed a similar multiple, our share price at yearend would approximate $90."
Carolyn Davis, Houston
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