APA Corporation (APA) Bundle
Understanding APA Corporation (APA) Revenue Streams
Understanding APA Corporation’s Revenue Streams
In the first nine months of 2024, the Company reported total revenues of $7.025 billion, compared to $6.112 billion in the same period of 2023, marking a year-over-year increase of approximately 14.9%.
Breakdown of Primary Revenue Sources
The revenue streams for the Company are primarily derived from oil, natural gas, and natural gas liquids (NGL). Below is a detailed breakdown of these revenue sources for the first nine months of 2024:
| Revenue Source | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| Crude Oil | $5,136 | 73% |
| Natural Gas | $414 | 6% |
| NGL | $457 | 7% |
| Purchased Oil and Gas Sales | $1,018 | 14% |
| Total | $7,025 | 100% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate reflects a significant increase, driven by various factors:
- Crude oil revenues rose by $669 million or approximately 15% compared to the first nine months of 2023.
- Natural gas revenues decreased by $244 million due to a 35% drop in average realized prices.
- NGL revenues increased by $82 million, representing a 22% increase from the prior year.
Contribution of Different Business Segments to Overall Revenue
The contributions of different business segments to overall revenue for the first nine months of 2024 are as follows:
| Segment | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| U.S. | $4,149 | 59% |
| Egypt | $2,234 | 32% |
| North Sea | $642 | 9% |
| Total | $7,025 | 100% |
Analysis of Significant Changes in Revenue Streams
Several key changes have impacted the Company’s revenue streams:
- The acquisition of Callon Petroleum on April 1, 2024, contributed to an increase in production and revenues, particularly in crude oil.
- A strategic divestiture of non-core properties in the Permian Basin for $950 million is expected to have a future impact on revenue, although it reflects a decrease in production capacity.
- Operational challenges, including maintenance in the North Sea, led to a temporary decline in natural gas production, impacting revenues negatively.
A Deep Dive into APA Corporation (APA) Profitability
Profitability Metrics
Gross Profit Margin: For the third quarter of 2024, the gross profit margin was approximately 29.8%, compared to 36.4% in the same period of 2023. The decline was primarily due to increased operating expenses and impairments.
Operating Profit Margin: The operating profit margin for the first nine months of 2024 was 21.7%, down from 28.8% in the first nine months of 2023. This decrease is attributed to higher lease operating expenses and transaction costs associated with acquisitions.
Net Profit Margin: The net profit margin for the third quarter of 2024 was (8.8%), a significant drop from 22.8% in the third quarter of 2023. The net loss of $223 million in Q3 2024 contrasts sharply with a net income of $459 million in Q3 2023.
| Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 |
|---|---|---|---|---|
| Gross Profit Margin | 29.8% | 36.4% | 30.4% | 35.1% |
| Operating Profit Margin | 21.7% | 28.8% | 20.5% | 27.2% |
| Net Profit Margin | (8.8%) | 22.8% | 7.4% | 14.2% |
Trends in Profitability: Over the past year, profitability metrics have shown a declining trend, particularly in net profit margins due to significant impairments totaling approximately $1.1 billion in Q3 2024. Comparatively, the first nine months of 2024 saw a net income of $450 million, down from $1.1 billion in the same period of 2023.
Comparison with Industry Averages: The industry average gross profit margin for similar companies in the oil and gas sector stands at approximately 35%. The operating profit margin average is around 25%, and net profit margins typically hover around 10%. The company’s margins are trailing behind these averages, indicating potential operational inefficiencies.
Operational Efficiency Analysis: The increase in lease operating expenses to $1.216 billion in the first nine months of 2024, compared to $1.076 billion in 2023, has negatively impacted gross margins. The company’s cost management strategies are critical in addressing these rising costs.
| Expense Type | YTD 2024 ($ millions) | YTD 2023 ($ millions) | Change (%) |
|---|---|---|---|
| Lease Operating Expenses | 1,216 | 1,076 | 13% |
| Gathering, Processing, and Transmission | 328 | 245 | 34% |
| Purchased Oil and Gas Costs | 665 | 558 | 19% |
| Depreciation, Depletion, and Amortization | 1,613 | 1,117 | 44% |
Debt vs. Equity: How APA Corporation (APA) Finances Its Growth
Debt vs. Equity: How APA Corporation Finances Its Growth
As of September 30, 2024, APA Corporation reported total debt of $6.4 billion, which includes notes and debentures, credit facility and commercial paper borrowings, and finance lease obligations. The breakdown of this debt is crucial for understanding the company's financial health.
The company’s current debt consists of $2 million in finance lease obligations. In addition, as of the same date, APA had $232 million in borrowings under its USD credit agreement and £303 million in letters of credit outstanding under its GBP agreement.
Debt-to-Equity Ratio
The debt-to-equity ratio is a critical indicator of financial leverage. As of September 30, 2024, the debt-to-equity ratio for APA Corporation stood at 1.45, which indicates a significant reliance on debt financing compared to equity. This ratio is slightly higher than the industry average of approximately 1.20, suggesting that APA is more leveraged than its peers in the energy sector.
Recent Debt Issuances and Refinancing Activity
In January 2024, APA entered into a syndicated credit agreement that committed $2.0 billion for senior unsecured delayed-draw term loans. This includes $1.5 billion in loans maturing in April 2027, which were used to refinance certain indebtedness of Callon Petroleum. As of September 30, 2024, $1.0 billion in these loans remained outstanding.
Credit Ratings
APA Corporation maintained a credit rating of Baa3 from Moody's and BBB- from S&P, indicating a moderate credit risk. This rating reflects the company's solid operational performance and ability to manage its debt levels effectively.
Balancing Debt Financing and Equity Funding
APA Corporation continues to balance its financing through both debt and equity. In April 2024, APA issued approximately 70 million shares of common stock valued at around $2.4 billion in connection with the Callon acquisition. This move aimed to strengthen the balance sheet and reduce reliance on debt financing.
To provide a clearer picture of APA’s financing structure, the following table summarizes the key financial metrics related to debt and equity as of September 30, 2024:
| Metric | Amount |
|---|---|
| Total Debt | $6.4 billion |
| Current Debt | $2 million |
| Debt-to-Equity Ratio | 1.45 |
| Average Industry Debt-to-Equity Ratio | 1.20 |
| Equity Issued (April 2024) | $2.4 billion |
| Credit Rating (Moody's) | Baa3 |
| Credit Rating (S&P) | BBB- |
This comprehensive overview of APA Corporation's debt versus equity structure provides valuable insights for investors looking to understand the company's financial health and growth strategies.
Assessing APA Corporation (APA) Liquidity
Assessing APA Corporation's Liquidity
Current and Quick Ratios
As of September 30, 2024, the current ratio of APA Corporation was 0.67, while the quick ratio stood at 0.31. These ratios indicate a liquidity position that is below the generally accepted benchmark of 1.0, suggesting potential challenges in meeting short-term liabilities.
Analysis of Working Capital Trends
The working capital for the Company as of September 30, 2024, was reported at ($2.2 billion) compared to ($1.7 billion) at the end of 2023. This deterioration reflects a growing concern regarding the Company's ability to cover its current obligations with its current assets.
Cash Flow Statements Overview
The cash flow from operating activities for the first nine months of 2024 was $2.6 billion, representing a 23% increase compared to $2.1 billion in the same period of 2023. Cash used in investing activities amounted to $1.0 billion, while cash used in financing activities was $1.6 billion.
| Cash Flow Type | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Cash provided by operating activities | $2,584 | $2,099 |
| Cash used in investing activities | ($1,007) | ($1,782) |
| Cash used in financing activities | ($1,600) | ($467) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the Company's cash and cash equivalents totaled $64 million, a decrease from $87 million at the end of 2023. Total debt increased to $6.37 billion from $5.19 billion in the same timeframe. The available committed borrowing capacity under syndicated credit facilities was $2.84 billion as of September 30, 2024.
| Liquidity Indicator | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Cash and cash equivalents | $64 million | $87 million |
| Total debt | $6.37 billion | $5.19 billion |
| Total equity | $6.16 billion | $3.69 billion |
| Available borrowing capacity | $2.84 billion | $2.89 billion |
Is APA Corporation (APA) Overvalued or Undervalued?
Valuation Analysis
Price-to-Earnings (P/E) Ratio: As of September 30, 2024, the P/E ratio stands at approximately 24.4 based on a diluted earnings per share of $1.29 for the first nine months of 2024.
Price-to-Book (P/B) Ratio: The P/B ratio is calculated at approximately 1.3 based on a book value of equity of $11.197 billion and total shares outstanding.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: The EV/EBITDA ratio is estimated at 8.5, considering an enterprise value of approximately $11 billion with an EBITDA of around $1.3 billion.
Stock Price Trends
Over the last 12 months, the stock price has fluctuated between a low of $24.50 and a high of $43.50. As of the latest trading data, the stock price is around $31.00.
Dividend Yield and Payout Ratios
The company offers a quarterly dividend of $0.25 per share, resulting in an annual dividend yield of approximately 3.2%. The payout ratio based on the diluted earnings per share is approximately 19.5%.
Analyst Consensus on Stock Valuation
- Buy: 6 analysts
- Hold: 4 analysts
- Sell: 2 analysts
| Metric | Value |
|---|---|
| P/E Ratio | 24.4 |
| P/B Ratio | 1.3 |
| EV/EBITDA Ratio | 8.5 |
| 52-Week Low | $24.50 |
| 52-Week High | $43.50 |
| Current Stock Price | $31.00 |
| Quarterly Dividend | $0.25 |
| Annual Dividend Yield | 3.2% |
| Payout Ratio | 19.5% |
| Analyst Buy Recommendations | 6 |
| Analyst Hold Recommendations | 4 |
| Analyst Sell Recommendations | 2 |
Key Risks Facing APA Corporation (APA)
Key Risks Facing the Company
The financial health of the company is influenced by various internal and external risks, which can significantly impact its performance and stability. Below are the key risk factors identified:
Industry Competition
The company operates in a highly competitive environment, facing challenges from both established players and new entrants. The competition is particularly intense in the oil and gas sector, where price fluctuations can lead to drastic changes in market share and profitability. In the third quarter of 2024, the company's average realized crude oil price decreased by 9% from $86.15 per barrel to $78.06 per barrel compared to the same period in 2023 .
Regulatory Changes
Regulatory risks are prevalent in the energy sector, as changes in environmental laws and regulations can affect operational costs and project viability. The company is subject to numerous regulations that govern exploration, production, and environmental protection, which can lead to increased costs or operational restrictions.
Market Conditions
Market conditions, including global supply and demand dynamics, have a significant impact on the company's revenue. The company's natural gas revenues for the third quarter of 2024 totaled $103 million, which represents a decrease of $133 million from the same period in 2023, primarily due to a 54% decrease in average realized prices.
Operational Risks
Operational risks can arise from various factors, including equipment failures, supply chain disruptions, and workforce issues. In the first nine months of 2024, the company reported a net income of $450 million, down from $1.1 billion in the same period in 2023, largely due to $1.1 billion in impairments .
Financial Risks
Financial risks include exposure to fluctuations in commodity prices, interest rates, and foreign exchange rates. The company had outstanding borrowings under its commercial paper and U.S. dollar-denominated syndicated credit facility amounting to $562 million as of September 30, 2024 . Additionally, fixed-rate debt amounted to $4.8 billion with a weighted average interest rate of 5.34% .
Strategic Risks
Strategic risks involve the company's ability to execute its business strategy effectively. The acquisition of Callon Petroleum on April 1, 2024, valued at approximately $4.5 billion, poses integration challenges and the need to realize projected synergies .
Mitigation Strategies
The company has implemented various strategies to mitigate these risks, including diversifying its asset portfolio and maintaining a robust risk management framework. As of September 30, 2024, the company generated $2.6 billion in cash from operating activities, reflecting a 23% increase year-over-year .
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | Intense competition affecting market share and pricing | Average crude oil price decreased 9% to $78.06 |
| Regulatory Changes | Changes in laws affecting costs and operations | Potential increase in operational costs |
| Market Conditions | Global supply and demand fluctuations | Natural gas revenues decreased by $133 million |
| Operational Risks | Equipment failures and supply chain disruptions | Net income down to $450 million from $1.1 billion |
| Financial Risks | Exposure to commodity price fluctuations | Outstanding borrowings of $562 million |
| Strategic Risks | Challenges in executing business strategy | Acquisition valued at $4.5 billion |
Future Growth Prospects for APA Corporation (APA)
Future Growth Prospects for APA Corporation
Analysis of Key Growth Drivers
The company is actively pursuing growth through multiple avenues:
- Acquisitions: On April 1, 2024, the company completed its acquisition of Callon Petroleum Company in an all-stock transaction valued at approximately $4.5 billion, inclusive of Callon’s debt.
- Market Expansion: The company is enhancing its presence in the Permian Basin, with daily oil production from U.S. assets increasing by 71% compared to the previous year.
- International Operations: In Egypt, the company averaged 12 drilling rigs and drilled 15 new productive wells in Q3 2024.
Future Revenue Growth Projections and Earnings Estimates
For the first nine months of 2024, the company reported total revenues of $7.025 billion, compared to $6.112 billion in the same period in 2023. The earnings per share (EPS) estimate for 2024 is projected at $1.29 per diluted share.
Strategic Initiatives or Partnerships That May Drive Future Growth
Strategic initiatives include:
- Divestitures: The company announced the sale of non-core producing properties in the Permian Basin for $950 million, expected to close in Q4 2024.
- Operational Efficiency: Focus on improving capital efficiency in Egypt with new pricing agreements for gas volumes.
Competitive Advantages That Position the Company for Growth
The company maintains several competitive advantages:
- Operational Scale: The acquisition of Callon adds approximately 120,000 net acres in the Delaware Basin and 25,000 net acres in the Midland Basin, enhancing operational scale.
- Cash Flow Generation: Generated $2.6 billion in cash from operating activities in the first nine months of 2024, a 23% increase from the prior year.
| Metric | 2024 (Projected) | 2023 (Actual) |
|---|---|---|
| Total Revenues | $7.025 billion | $6.112 billion |
| Net Income | $450 million | $1.1 billion |
| EPS | $1.29 | $3.50 |
| Cash from Operating Activities | $2.6 billion | $2.099 billion |
| Average Daily Oil Production Increase | 71% | N/A |
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Updated on 16 Nov 2024
Resources:
- APA Corporation (APA) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of APA Corporation (APA)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View APA Corporation (APA)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.