Bloomberg explained it best when they wrote that: "the more Apache tries to grow, the more it shrinks."
It is a harsh statement, but also bears some truth.
Since 2010 Chief Executive Officer Steve Farris has spent more than $16 billion buying drilling prospects around the world, with the promise that output would be expanded by 29% before the end of 2016. However, due to well disruptions, earnings misses, and civil unrest in Egypt, doubts have been raised about the quality of its purchases.
Back in 2010 Apache (NYSE: APA) was ranked as the largest US energy company focussing on oil and gas exploration, yet now it is the least valued explorer amongst peers. It share price has fallen 19% since those days, whilst the S&P 500 oil and gas index has risen 11%; and at just 8.8 times estimated profits the stock trades at less than a third of the average ratio in the index.
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Investors in the sector are generally cold on Apache, and analysts tend to advise a hold position.
Ted Harper, a fund manager at Frost Investment Advisors, thinks that "they have the capability and the wherewithal to turn that around, but they need to begin to demonstrate that fact."
Phillip Weiss, an analyst at Argus Research, believes that "they've got some good potential, but I need to see a little bit more delivery before I'm willing to get more positive on Apache."
The senior vice president of global communications at Apache, Robert Dye, is confident that they are in a good position for growth in the future, explaining that; "we have spent a lot on acquisitions and we're now in a position where we're going to be harvesting, if you will, those acquisitions. We're stepping up our drilling programs in North America, in particular in the Permian Basin and in western Oklahoma."
By. James Burgess of Oilprice.com
James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also… More