Apache Corporation (NYSE:APA) is one of the largest American oil exploration and production (E&P) companies, with operations in seven countries. Apache Corporation (NYSE:APA) runs about 100 oil rigs, and has done well in terms of increasing its productivity in recent years. Despite this fact, and despite the great quarter the company just reported, shares are still trading close to their 52-week low and are valued at around 8 times earnings. At a time when virtually every other company in the market seems to be making new highs daily, an underperforming oil company like this stood out, and I figured it may be worth a look.
Apache Corporation (NYSE:APA) has operations in North America as well as in Egypt, Australia, Argentina, and Chile. Apache’s North American operations account for just over half of the company’s revenue, and are mostly based on and around the Gulf of Mexico and in Canada.
The company’s largest land holding is their Egyptian operations, which include almost 10 million acres and makes them the largest landholder in Egypt’s Western Desert. Their Egyptian land holdings present tremendous exploration opportunities, but the operations in the country already make up over 20% of the company’s total production.
In all, Apache Corporation (NYSE:APA) has proved reserves of just fewer than 3 billion barrels of oil equivalent (BOE), and the company is currently producing about 750,000 BOE per day.
Apache Corporation (NYSE:APA) has made several large acquisitions over the past few years that have significantly added to the company’s global footprint. Among the most notable is the company’s acquisition of BP plc (NYSE:BP)’s operations and infrastructure in Egypt and virtually all of BP plc (NYSE:BP)’s natural gas operations in Alberta and British Columbia, for which Apache paid $6.4 billion in 2010. Last May, Apache Corporation (NYSE:APA) acquired Cordillera Energy Partners for $2.85 billion, adding over 250,000 acres in Texas and Oklahoma to the company’s holdings.
Historically, the company has done a fantastic job of integrating the assets it acquired, and it has done an excellent job of squeezing more productivity out of their mature reserves.
Valuation and alternatives
The main reason that I’m interested in Apache Corporation (NYSE:APA) is that it is laughably cheap right now. At the current price level of about $76, Apache trades for just 8.2 times last year’s earnings. The company projects productivity growth of between 6-9% annually over the next several years, which I think is rather conservative considering the company’s focus on exploring for and drilling new wells.