APA Corp (NASDAQ: APA)

Sector: Energy Industry: Oil & Gas E&P CIK: 0001841666
Market Cap 9.20 Bn
P/B 0.52
P/E 3.56
P/S 0.87
ROIC (Qtr) 13.20
Div Yield % 3.11
Rev 1y % (Qtr) -20.55
Total Debt (Qtr) 4.49 Bn
Debt/Equity (Qtr) 0.75
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About

APA Corporation, also known as APA Corp, is an independent energy company operating in the oil and gas industry. Its main business activities involve exploring for, developing, and producing natural gas, crude oil, and NGLs in three primary geographic areas: the United States, Egypt, and offshore the United Kingdom in the North Sea. APA Corp's operations are spread across various regions, with the United States being its primary focus. The company is one of the largest acreage holders in Egypt's Western Desert, with significant operations offshore...

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Investment thesis

Bull case

  • Strong operating cash flow of 4.77B provides robust 1.06x coverage of total debt 4.49B, indicating excellent debt servicing capability and financial flexibility.
  • Healthy cash reserves of 475M provide 2.23x coverage of short-term debt 213M, demonstrating strong liquidity position and minimal refinancing risk.
  • Strong tangible asset base of 17.70B provides 3.94x coverage of total debt 4.49B, indicating robust asset backing and low credit risk.
  • Operating cash flow of 4.77B provides exceptional 17.23x coverage of minority interest expenses 277M, showing strong core operations.
  • Operating cash flow of 4.77B provides exceptional 32.69x coverage of interest expenses 146M, showing strong debt service capability.

Bear case

  • Operating cash flow of 4.77B barely covers its investment activities of (1.50B), with a coverage ratio of -3.19, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 4.77B provides thin coverage of dividend payments of (364M) with a -13.11 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 475M provide limited coverage of acquisition spending of 1.48B, which is 0.32x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Operating earnings of 2.67B show weak coverage of depreciation charges of 2.39B, with a 1.12 ratio indicating high capital intensity and potential reinvestment needs.
  • Free cash flow of 1.90B represents just -1.10x of debt issuance (1.73B), suggesting concerning reliance on leverage rather than internal cash generation for growth.

Peer comparison

Companies in the Oil & Gas E&P
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 COP Conocophillips 136.62 Bn 17.10 2.22 23.44 Bn
2 CNQ Canadian Natural Resources Ltd 85.21 Bn 17.67 3.04 12.51 Bn
3 EOG Eog Resources Inc 66.33 Bn -60.48 8.67 8.13 Bn
4 FANG Diamondback Energy, Inc. 49.64 Bn -2,818.83 314.47 16.24 Bn
5 OXY Occidental Petroleum Corp /De/ 37.18 Bn 15.36 2.56 22.88 Bn
6 WDS Woodside Energy Group Ltd 34.64 Bn 11.73 2.51 -
7 TPL Texas Pacific Land Corp 29.74 Bn 126.16 78.66 0.02 Bn
8 DVN Devon Energy Corp/De 18.80 Bn 3.24 1.91 8.55 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.69 1.02
EV to Cash from Ops. EV/CFO 2.04 18.21
EV to Debt EV to Debt 2.70 54.57
EV to EBIT EV/EBIT 2.51 29.98
EV to EBITDA EV/EBITDA 1.63 19.64
EV to Free Cash Flow [EV/FCF] EV/FCF 8.67 39.33
EV to Market Cap EV to Market Cap 1.32 1.57
EV to Revenue EV/Rev 1.15 11.47
Price to Book Value [P/B] P/B 0.52 2.97
Price to Earnings [P/E] P/E 3.56 -25.98
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 4.15 26.80
Dividend Payout Ratio % Div Payout % (Qtr) 23.90 31.86
Dividend per Basic Share Div per Share (Qtr) 1.00 0.78
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 18.76 1.05
Interest Coverage Int. cover (Qtr) 18.29 -4.97
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -1.92 -533.65
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 642.19 52.06
Dividend Growth (1y) % Div 1y % (Qtr) 0.00 -5.45
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -44.10 6.14
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 34.69 105.89
EBIT Growth (1y) % EBIT 1y % (Qtr) 67.57 75.94
EBT Growth (1y) % EBT 1y % (Qtr) 103.46 17.44
EPS Growth (1y) % EPS 1y % (Qtr) -40.79 3.07
FCF Growth (1y) % FCF 1y % (Qtr) 138.47 -43.36
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -3.84 149.32
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.55 0.33
Cash Payout Ratio Cash Payout (Qtr) 0.05 0.07
Cash Ratio Cash Ratio (Qtr) 0.19 1.32
Current Ratio Curr Ratio (Qtr) 0.78 2.37
Debt to Equity Ratio Debt/Equity (Qtr) 0.75 0.34
Interest Cover Ratio Int Coverage (Qtr) 18.29 -4.97
Times Interest Earned Times Interest Earned (Qtr) 18.29 -4.97
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 51.90 16.19
EBIT Margin % EBIT Margin % (Qtr) 27.41 -16.83
EBT Margin % EBT Margin % (Qtr) 25.91 -24.06
Gross Margin % Gross Margin % (Qtr) 36.50 58.92
Net Profit Margin % Net Margin % (Qtr) 15.50 -28.75