Among the 32 analysts tracking Apache (APA), 28% recommended a “buy,” 47% recommended a “hold,” and 25% recommended a “sell.” On January 30, Stifel and Jefferies reduced the target price to $39 and $26. On the same day, Morgan Stanley (MS) increased its target price for Apache by $2 to $27. On January 16, Barclays started its coverage on Apache with a target price of $29. On February 26, Apache closed at $33.09.
Apache’s first-quarter outlook
Apache is scheduled to announce its fourth-quarter earnings results on February 27. Based on analysts’ consensus estimates, the company’s adjusted EPS could fall 61.9% on a sequential basis.
So far in the first quarter, the average Brent and WTI crude oil prices have fallen 9.4% and 10.6% sequentially. On February 26, the WTI Cushing-Midland spread was at a discount of $0.07—a positive development for Permian Basin oil producers like Apache. In August, the spread was as high as $18. The Permian Basin accounts for 46.7% of Apache’s total oil production based on the latest quarterly filings.
On February 26, the Brent-WTI spread was at $9.7. Last week, the Brent-WTI spread was near its four-month high. The expansion in the spread is usually a disadvantage for US oil producers selling in the US market. Apache’s International operation accounts for 46.5% of its total oil production.
Brent prices are set to largely outperform WTI prices in the first quarter due to less international oil supply, which will likely favor upstream stocks like ConocoPhillips (COP). ConocoPhillips and Apache are among the S&P 500’s (SPY) upstream holdings.
The natural gas prices at the Waha Hub have risen 1.1% in the first quarter compared to the previous quarter. Due to a decline in the natural gas prices at the Waha Hub on a sequential basis in the fourth quarter, Apache might have a lower realization from natural gas sales in the United States.