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Increased debt loads for Apache and Continental Resources

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Apache Corporation’s long-term debt increases 127% over five years

We’ve been looking at whether falling energy prices have started to affect the debt structures of energy upstream and integrated companies. Let’s look now at the increased debt loads for Apache Corporation (APA) and Continental Resources (CLR).

Apache Corporation (APA) is a Texas-based independent oil and gas exploration and production company. Its operating assets are based primarily in the Permian Basin, the Anadarko Basin in western Oklahoma, the Texas Panhandle, the Gulf Coast areas of the United States, and Western Canada.

From 4Q09 to 4Q14, Apache Corporation’s (APA) long-term debt increased 127%. Long-term debt is typically borrowing with a repayment term of more than one year. From 4Q13 to 4Q14, its net debt, or long-term and short-term debt less cash reserves, increased 34% to $10.4 billion.

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Net debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio currently stands at 1.48x. Net debt-to-EBITDA is a measurement of leverage and indicates a company’s ability to repay debt. The lower the ratio, the better it is for the financial health of a company. EBITDA is also a measure of profit.

Apache’s debt-to-capitalization currently stands at ~28%, an increase of 25% from 4Q09. Total capital includes the company’s debt and shareholders’ equity. A higher ratio indicates the company’s reduced financial flexibility and increased risk of insolvency.

Continental Resources’ long-term debt goes up more than ten times

Continental Resources (CLR) is an Oklahoma-based oil and gas explorer and producer. Its operations are spread in the northern, southern, and eastern regions of the United States.

From 4Q09 to 4Q14, Continental Resources’ (CLR) long-term debt increased more than ten times. Long-term debt is typically borrowing with a repayment term of more than one year. From 4Q13 to 4Q14, its net debt, or long-term and short-term debt less cash reserves, increased 27% to $5.9 billion.

Continental Resources’ (CLR) net debt-to-EBITDA ratio currently stands at 1.89x. Its debt-to-capitalization currently stands at ~54% and has increased from 33% recorded in 4Q09.

CLR accounts for 1.6% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

Debt structures for Encana Corporation (ECA) and EOG Resources (EOG) have also undergone changes in the past five years, as these companies have issued and repaid debt. Read the following section to know more of the details.

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