APA Q2 Earnings Top as Callon Acquisition Drives Production

U.S. energy operator APA Corporation APA reported second-quarter 2024 adjusted earnings of $1.17 cents per share, beating the Zacks Consensus Estimate of 95 cents and improving from the year-ago adjusted figure of 85 cents. The outperformance primarily reflects higher-than-expected production owing to the contribution from the Callon Petroleum acquisition that was closed on Apr 1.

Revenues of $2.8 billion were up 42.4% from the year-ago quarter's sales and came ahead of the Zacks Consensus Estimate by 20.7%.

Meanwhile, APA continues to reward shareholders with dividends and buybacks. APA bought back 1.5 million shares at $28.72 apiece during the second quarter. The company also shelled out $92 million in dividend payments.

Costs & Financial Position

APA's second-quarter lease operating expenses totaled $460 million, up 27.4% from $361 million in the year-ago period. Moreover, a significant increase in the cost of oil/gas equipment and higher depreciation outgo meant that total operating expenses rose 47.8% from the corresponding period of 2023 to $1.9 billion. Our model put the figure at $2 billion.

During the quarter under review, APA generated $877 million of cash from operating activities while it incurred $839 million in upstream capital expenditures. The Zacks Rank #3 (Hold) company reported an adjusted operating cash flow of $1.1 billion. It also registered a free cash flow of $103 million compared to $94 million a year ago.

As of Jun 30, APA had approximately $160 million in cash and cash equivalents and $6.7 billion in long-term debt.

Guidance

APA expects adjusted production to average 388,000 BOE/d in Q3 and 387000 BOE/d in 2024. Of this, oil volumes are likely to be 208,000 Bbl/d during the July-September period and 199,000 Bbl/d for the full year. The company pegged its upstream capital expenditure for the year at $2.7 billion or more.

Some Key E&P Earnings

While we have discussed APA's second-quarter results in detail, let's see how some other upstream companies have fared this earnings season.

ConocoPhillips COP, one of the world's largest independent oil and gas producers, reported second-quarter 2024 adjusted earnings per share of $1.98, missing the Zacks Consensus Estimate of $2.06. The bottom line, however, improved from the prior-year quarter's $1.84 per share. ConocoPhillips' higher costs and expenses led to a weaker-than-expected bottom line. The negatives were partially offset by strong oil equivalent production volumes — up 7.8% year over year.

As of Jun 30, 2024, ConocoPhillips had $4.3 billion in cash and cash equivalents. COP's total long-term debt was $17 billion, while it had a short-term debt of $1.3 billion. Capital expenditure and investments totaled $3 billion. Net cash provided by operating activities was $4.9 billion.

Natural gas producer EQT Corporation EQT reported second-quarter 2024 adjusted loss from continuing operations of 8 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 20 cents. The bottom line also improved from the year-ago quarter's reported loss of 17 cents. EQT's better-than-expected profits were driven by higher sales volumes, which increased to 508 billion cubic feet equivalent (Bcfe) from the year-ago quarter's 471 Bcfe.

EQT's adjusted operating cash flow was $405 million in the quarter, up from $340.8 million a year ago. Free cash flow in the quarter was a negative $171.1 million compared with a negative $129.3 million in the second quarter of 2023. Total capital expenditure for the company amounted to $576 million, rising from $470 million a year ago. As of Jun 30, 2024, EQT had $29.9 million in cash and cash equivalents. Net debt was $4.9 billion.

Northern Oil and Gas NOG, another U.S. energy operator, reported second-quarter 2024 adjusted earnings per share of $1.46, which beat the Zacks Consensus Estimate of $1.20. The outperformance reflects strong production. However, the bottom line declined from the year-ago adjusted profit of $1.49 due to weaker natural gas prices and a 41.4% increase in operating expenses.

NOG's management announced its intention to get approval from the board of directors for a 5% increase in the quarterly dividend, raising it by 2 cents to 42 cents per share for the third quarter. The board of directors has also approved a new $150 million share repurchase authorization.

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