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What’s Up with Apache Stock this Year?

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Apache’s stock performance

Apache Corp. (APA), like many energy stocks, has been on a downtrend for most of the year. APA’s stock has fallen ~23% since the beginning of this year. Its movement, as we can see, has been mirroring movements in crude oil and natural gas prices.

Crude oil prices (DBO)(UCO) have fallen 10% since the beginning of this year, while natural gas prices (UGAZ)(UNG) have fallen ~9% in the same period.

Crude oil and natural gas prices have also been driving movements in the energy sector (XLE), as the graph above shows.

XLE has fallen ~14% since the beginning of this year.

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The correlation between crude oil prices and APA’s stock is 0.75 while the correlation between natural gas prices and APA’s stock is 0.37. The correlation is an estimate of how two objects move in relation to each other. In APA’s case, while movements in both crude oil and natural gas prices should cause APA’s stock to move in the same direction, movement in crude oil prices should affect the stock more, given the higher positive correlation.

Compared to the broader market (SPY), APA’s stock has again underperformed. The S&P 500 ETF has risen ~10% since the beginning of 2017.

Key management comments and outlook for 2017

APA’s management said in the 1Q17 earnings release, “We have responded well to the challenges facing the industry over the last two years, successfully realigning our cost structure to ensure profitability at $50 oil, streamlining our asset base and significantly improving our capital efficiency, well performance and organic growth prospects.”

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