On Thursday, Scotiabank maintained its Sector Perform rating and a stock price target of $30.00 for Apache Corp (NASDAQ:APA), following the company's announcement of a significant asset sale. The assets in question, consisting mainly of non-core Permian holdings, were detailed to have a production capability of 21 million barrels of oil equivalent per day (mboe/d), with a notable 57% oil slating.
Apache Corp disclosed the sale of these assets, located in the Central Basin Platform, New Mexico Shelf, and the Northwest Shelf, on Wednesday. The company plans to use the proceeds from this transaction primarily for debt reduction, in line with its post-Capital Plan Enterprises (CPE) strategy. This move is seen as a strategic step to streamline Apache's portfolio and focus on more competitive projects.
The sale is also viewed as a positive step for Apache's financial health, as it aligns with the company's objective to accelerate deleveraging. The divested assets, characterized by legacy vertical Central Basin wells, were considered less likely to compete internally for capital within Apache's broader portfolio.
Furthermore, Apache has provided guidance for its total U.S. production in the fourth quarter of 2024, estimating it at 307 mboe/d. This forecast is based on the assumption that the transaction will close around mid-October, as per Scotiabank's modeling assumptions. The guidance reflects the company's production expectations following the asset divestiture.
In other recent news, Apache Corp. has made significant strides in their financial strategy. The company recently sold non-core assets in the Permian Basin for $950 million, a move that analysts from TD Cowen, Truist Securities, and Scotiabank view positively. This sale is expected to reduce Apache's debt and streamline operations, allowing the company to focus on its most profitable projects.
Truist Securities maintained its Buy rating for Apache Corp, despite a revised price target of $45, while TD Cowen maintained its Hold rating with a price target of $36.00, and Scotiabank reaffirmed its Sector Perform rating with a steady price target of $30.00.
Apache Corp has also been strategically curtailing the production of gas and gas liquids due to unfavorable pricing, while also repurchasing 1.5 million shares within the quarter as part of its ongoing efforts to manage its share count and return value to shareholders.
These are among the recent developments for Apache Corp, marking a period of strategic moves and financial adjustments aimed at improving the company's financial health.
InvestingPro Insights
As Apache Corp (NASDAQ:APA) navigates through its significant asset sale and focuses on debt reduction, key financial metrics and market sentiment can offer additional context to investors. According to real-time data from InvestingPro, Apache's market capitalization stands at $8.71 billion, with a notably low price-to-earnings (P/E) ratio of 2.61. This value-oriented P/E ratio suggests that the stock may be undervalued relative to its earnings potential. The company's revenue for the last twelve months as of Q2 2024 is reported at $8.91 billion, with a gross profit margin of a robust 71.39%, indicating strong profitability at the core operational level.
InvestingPro Tips highlight that the stock has been experiencing volatility, with a significant price drop over the last week and month, trading near its 52-week low. This could be an opportune moment for value investors to consider Apache, especially given that the company has maintained dividend payments for an impressive 54 consecutive years, currently offering a dividend yield of 4.24%. Analysts also predict that the company will remain profitable this year, which aligns with the company's strategic plans post-asset sale.
For investors looking for more in-depth analysis, there are additional InvestingPro Tips available, which can be explored to gain a comprehensive understanding of Apache Corp's financial health and market position.
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