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What Could Be Holding Back Apache Stock?

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Performance of Apache stock

Apache stock (APA) has fallen 6.6% year-over-year driven by lackluster first-quarter earnings and increasing price differentials in the Permian. On Monday, June 25, APA stock fell 3.6% along with several US stocks on mounting fears relating to impositions of new trade tariffs between US and China.

Key stock drivers

Following its first-quarter earnings release on May 2, Apache (APA) stock fell ~6%. APA’s stock dropped as a result of lower year-over-year revenues and lower-than-expected earnings. The company also noted a decline in its production volumes in the first quarter compared to the corresponding period last year.

Another key factor that’s been hindering APA stock is WTI-Midland price differentials. WTI is the benchmark crude oil priced in Cushing, Oklahoma, and Midland is the oil priced in the Permian Basin. This differential has affected several Permian producers including Apache, Concho Resources (CXO), and Parsley Energy (PE). Read Rising Permian Production Has Been Straining Price Differentials. In the first quarter, Apache’s Permian production accounted for ~79% of its total US production and ~42% of its total production (including Egypt and the North Sea). CXO and PE are pure-play Permian players.

Price realizations

Apache’s crude oil price realization average in the first quarter in the US was $61.60 per barrel. Parsley Energy (PE) saw average crude oil price realizations (without hedges) of $61.99 per barrel in the first quarter, while Concho Resources’ (CXO) crude oil price realizations including the effect of hedges were $61.29 per barrel.

In comparison, Anadarko Petroleum (APC), which has operations beyond the Permian (DJ Basin, Gulf of Mexico, and Powder River Basin), had average crude oil price realizations of $62.58 per barrel in the US. EOG Resources (EOG) saw crude oil and condensate price realizations of $64.24 per barrel in the US in the first quarter. EOG’s operations span across the Permian, DJ Basin, and the Eagle Ford.

On a year-over-year basis, APA stock has underperformed the Energy Select Sector SPDR ETF (XLE), which increased 14.5% in the same period, as well as the SPDR S&P 500 ETF (SPY), which rose 11.4% year-over-year.

Next, we will read about implied volatility trends in Apache stock.

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