Industry Overview - The Zacks Oil and Gas - Exploration and Production - United States industry is facing challenges due to lower crude prices influenced by geopolitical factors and an oversupply of natural gas [1][3][5] - The industry is currently ranked 186 out of 245 Zacks industries, placing it in the bottom 24% [8][10] - The industry's earnings estimates for 2025 have decreased by 41.6% over the past year, indicating a negative outlook [10] Key Trends - Easing geopolitical tensions have led to a reduction in oil prices, with WTI crude trading around $65, impacting companies reliant on higher prices for new investments [3][4] - OPEC forecasts a significant increase in global oil demand to 123 million barrels per day by 2050, necessitating an investment of $18.2 trillion in the oil and gas sector [4] - Natural gas production in the U.S. has reached record levels, with storage exceeding seasonal norms by 6%, which may limit price increases [5] - The International Energy Agency (IEA) predicts a slowdown in global oil demand growth post-2026 due to the rise of electric vehicles and cleaner energy policies [6][7] Company Highlights - **W&T Offshore (WTI)**: A leading oil and natural gas explorer with a market capitalization of nearly $270 million, known for its disciplined operations and positive cash flow for 28 consecutive quarters [18][19] - **EQT Corporation (EQT)**: The largest natural gas producer in the U.S. with a market cap of approximately $35 billion, expected EPS growth rate of 46.3% over the next three to five years [21][22] - **APA Corporation (APA)**: Engaged in exploration and production with a market cap of around $7 billion, known for its successful drilling in Suriname and the Permian Basin [23][24] - **Civitas Resources (CIVI)**: Focused on the DJ Basin and Permian Basin, with a market cap of about $2.8 billion, recognized for strong well returns and shareholder returns [26][27] Valuation Metrics - The industry is currently trading at an EV/EBITDA ratio of 11.28X, significantly lower than the S&P 500's 17.71X, but above the sector's 4.86X [15]

Company Performance - APA closed at $19.47, reflecting a -3.18% change from the previous day, underperforming the S&P 500's gain of 0.14% [1] - Over the past month, APA shares have decreased by 4.28%, while the Oils-Energy sector gained 2.89% and the S&P 500 increased by 3.97% [1] Upcoming Earnings - APA's earnings report is scheduled for August 6, 2025, with an expected EPS of $0.54, indicating a 53.85% decline year-over-year [2] - Revenue is anticipated to be $2.04 billion, representing a 27.01% decrease from the same quarter last year [2] Full Year Projections - Zacks Consensus Estimates project full-year earnings of $2.95 per share and revenue of $8.8 billion, reflecting changes of -21.75% and -9.63% respectively from the prior year [3] Analyst Estimates and Rankings - Recent changes to analyst estimates for APA indicate a dynamic business outlook, with positive revisions suggesting optimism [3] - The Zacks Rank system, which includes estimate changes, currently ranks APA at 3 (Hold) [5] Valuation Metrics - APA's Forward P/E ratio is 6.81, which is below the industry average of 11.44 [6] - The company has a PEG ratio of 6.49, compared to the industry average of 1.59 [7] Industry Context - The Oil and Gas - Exploration and Production - United States industry, which includes APA, has a Zacks Industry Rank of 190, placing it in the bottom 24% of over 250 industries [8]

Core Insights - APA Corporation has curtailed natural gas and NGL production in response to declining U.S. natural gas prices, reducing output by approximately 10 million cubic feet per day and 750 barrels per day respectively [1][9] - The company anticipates a significant drop in realized prices for natural gas and NGL in the second quarter, expecting $1 per thousand cubic feet and $19.80 per barrel, marking declines of about 50% and 29% from the previous quarter [2][9] - APA completed the sale of its New Mexico assets for $575 million, which resulted in a production decrease of around 1,800 barrels of oil equivalent per day, reflecting the company's strategy to streamline its portfolio [3][9] - The company's actions indicate a focus on capital discipline and asset optimization amid ongoing price volatility in the energy sector [4] Production and Pricing - U.S. natural gas prices faced pressure due to rising supply and subdued demand, leading to APA's production cuts [2] - The anticipated realized price for oil in the second quarter is $64.85 per barrel domestically, while international markets show stronger prices at $66.20 per barrel [2] Strategic Moves - The divestment of non-core assets is part of APA's strategy to concentrate capital in areas with higher returns [3] - The company's dual approach of cutting low-margin volumes and monetizing assets demonstrates its intent to remain resilient in changing market conditions [4]

Core Insights - APA Corporation provided supplemental information regarding its second-quarter 2025 financial and operational results, indicating that actual results may vary based on various factors not identified in the release [1] Financial Performance - Estimated average realized prices for the second quarter of 2025 are as follows: - Oil in the United States: $64.85 per barrel - NGL in the United States: $19.80 per barrel - Natural Gas in the United States: $1.00 per Mcf - Oil internationally: $66.20 per barrel - NGL internationally: $41.60 per barrel - Natural Gas internationally: $4.00 per Mcf [2] - The company reported a net gain on oil and gas purchases and sales (before tax) of approximately $158 million, which includes the impact of realized gain/loss from commodity derivatives [2] Production Update - APA curtailed approximately 10 million cubic feet per day (MMcf/d) of U.S. natural gas production and 750 barrels per day of U.S. natural gas liquids production in response to weak or negative Waha hub prices [3] Asset Sale Update - In May, APA announced an agreement to divest assets in New Mexico, which closed in June, resulting in a reduction of approximately 1.8 million barrels of oil equivalent per day (MBoe/d) in second-quarter U.S. production, with 33% being oil [4] - The total net proceeds from the asset sale, after customary closing adjustments and transaction costs, were approximately $575 million [4] Share Information - The estimated weighted-average basic common shares for the second quarter is 361 million [5] Upcoming Events - APA will host a conference call to discuss its second-quarter 2025 results on August 7 at 10 a.m. Central time, which will be webcast from the company's website [6]

Core Viewpoint - Investors are looking to enhance passive income through dividend-paying stocks that are currently undervalued, with Devon Energy, APA, and McDonald's being highlighted as notable options in July. Group 1: Devon Energy - Devon Energy's stock has declined by 31% over the past year, influenced by negative sentiment towards energy stocks and increased OPEC production [3] - The company offers a quarterly fixed dividend of $0.24, translating to an annual yield of over 3%, and is projected to generate $1.9 billion in free cash flow in 2025 even with oil prices at $50 per barrel [4] - Devon is expected to maintain cash flow for share buybacks of $200 million to $300 million per quarter and may consider a variable dividend, making it attractive for passive income investors [5] Group 2: APA - APA's stock has dropped 15% year-to-date, contrasting with a nearly 7% rise in the S&P 500, but it offers a forward dividend yield of 5.1% [6] - As a pure-play exploration and production company, APA is highly sensitive to energy price fluctuations, which have negatively impacted its stock [7] - The company is successfully reducing expenses, expecting a $150 million decrease in development capital and a $50 million reduction in exploration capital, with Q1 2025 free cash flow at $126 million compared to $99 million in Q1 2024 [9] Group 3: McDonald's - McDonald's has increased its dividend for 48 consecutive years and generates significantly more free cash flow than its dividend obligations, ensuring sustainability [11] - The franchise model allows McDonald's to operate capital-light, reducing variance in results and maintaining strong free cash flow even during downturns [13][14] - Despite a nearly 10% pullback from its all-time high, McDonald's maintains a reasonable valuation with a dividend yield of 2.4%, although it faces challenges in expanding its market presence [15][16][17]

Core Viewpoint - The analysis expresses interest in APA Corporation's Suriname offshore project while maintaining skepticism about the company's near-term performance [1]. Company Analysis - The analyst has a beneficial long position in APA shares, indicating confidence in the company's potential [2]. - The analysis is based on the analyst's professional background in the Nuclear Power industry, which aids in evaluating energy-related equities [1]. Investment Strategy - The focus is on income-producing equities and rental real estate properties for cash flow and long-term appreciation [1].

Company Overview - APA Corporation is an independent energy company focused on the exploration, development, and production of natural gas and oil [1] - The company operates primarily under three major segments, with the United States being the most significant in terms of production [1] Investment Focus - The company targets value opportunities linked to commodity production, emphasizing sustained free cash flows, low leverage, and sustainable debt [1] - It seeks to identify companies in distress with high recovery potential, particularly in sectors like oil & gas, metals, and mining [1] - The focus is also on companies in emerging markets that demonstrate high margins and medium to long-term investment opportunities [1] Shareholder Value - The company maintains a pro-shareholder attitude, emphasizing solid and sustained buyback programs and dividend distributions over time [1]

Core Viewpoint - APA Corporation has made significant progress in sustainability efforts, focusing on environmental stewardship, social responsibility, and corporate governance throughout 2024 [1][2]. Sustainability Reporting - APA Corporation released two key sustainability documents: "Our Approach to Sustainability" and the "2025 Sustainability Progress Report," which outlines 2024 goals, highlights, key performance data, and new goals for 2025 [1]. Environmental Initiatives - The company exceeded its goal of eliminating at least 1 million tonnes of annualized carbon dioxide equivalent (CO2e) emissions between 2021 and 2024, achieving a total reduction of 1.24 million tonnes through over 50 global projects [3]. - APA aims to minimize freshwater usage by recycling produced water and sourcing alternatives, with 97% of global water use being produced water and brackish, nonfresh water [3]. Safety and Community Engagement - APA achieved its lowest global Total Recordable Incident Rate (TRIR) in company history at 0.16, exceeding all corporate safety targets in 2024 [3]. - The company invested 44% of its operating area's budgets with local suppliers and contractors to enhance community well-being, address energy poverty, and promote conservation [3].

In the latest close session, APA (APA) was down 1.45% at $18.29. The stock's change was less than the S&P 500's daily gain of 0.52%. Elsewhere, the Dow gained 0.63%, while the tech-heavy Nasdaq added 0.48%. The stock of oil and natural gas producer has risen by 9.11% in the past month, leading the Oils-Energy sector's gain of 3.92% and the S&P 500's gain of 4.27%.The investment community will be paying close attention to the earnings performance of APA in its upcoming release. On that day, APA is projected ...

Industry Overview - The Zacks Oil and Gas Exploration and Production - United States industry presents a strong long-term investment case due to rich shale reserves, advanced extraction technologies, and sustained global energy demand [1] - Techniques like hydraulic fracturing and horizontal drilling have significantly increased U.S. oil and natural gas production, positioning the country as a leader in global exports [1][2] Geopolitical and Economic Factors - U.S. E&P companies benefit from strategic geopolitical advantages and growing LNG export opportunities, enhancing energy security [2] - Emphasis on capital discipline and shareholder-focused strategies has improved free cash flow, supporting consistent earnings generation [2] Company Profiles Occidental Petroleum Corporation (OXY) - Occidental Petroleum offers a compelling investment opportunity with a diverse asset base and strong free cash flow generation [3] - The company focuses on low-carbon initiatives and maintains resilient production and earnings, supported by disciplined capital allocation and debt reduction efforts [3] APA Corporation (APA) - APA Corporation shows promising growth prospects with a diversified reserve base and positive exploration results, particularly in Alaska [4] - The acquisition of Callon enhances its Permian Basin footprint, while the GranMorgu project boosts its offshore potential [4] Financial Performance - The Zacks Consensus Estimate for APA's earnings per share in 2025 and 2026 has increased by 3.08% and 2.53%, respectively [6] - APA outperforms OXY with a 23.22% return on equity (ROE) and a 5.39% dividend yield, compared to OXY's 16.6% ROE and 2.25% dividend yield [7][10][11] Valuation Metrics - APA is currently trading at a lower EV/EBITDA valuation of 2.68X compared to OXY's 4.97X, indicating a more attractive valuation [14] - Both companies have higher debt-to-capital ratios than the S&P 500, with APA at 45.17% and OXY at 42.17% [13] Price Performance - APA's shares have gained 9.1% over the last month, outperforming OXY's 4.5% increase and the S&P 500's 4.4% return [16] Conclusion - APA Corporation is positioned as a better investment choice in the oil and energy sector due to its superior return on equity, lower valuation, rising earnings estimates, and higher dividend yield [20][21]