APA Corp (APA.O) has reported earnings that slightly missed analysts’ expectations for Q3. The company posted an adjusted Q3 profit of $1 per share, falling short of the average estimate of $1.01. This Q3 profit miss was mainly attributed to lower oil prices and a decline in natural gas output.
Despite the lower oil prices, APA Corp saw a solid increase in its oil production. The company’s daily output rose by 23.4%, reaching 256,306 barrels per day (bopd). However, natural gas production was down by 4%, averaging 786 million cubic feet per day (MMcfpd) in the quarter.
The drop in oil prices was a significant factor in the Q3 profit miss. An unexpected interest rate cut by the Federal Reserve raised concerns about the U.S. economy and global demand for oil. As a result, oil prices fell by 9.4%, with the average price dropping to $78.06 per barrel during the quarter.
In response to the lower oil prices, APA Corp had to curtail production. The company reduced natural gas output by approximately 103 MMcfpd in Q3, continuing the trend of production cuts for the third consecutive quarter of fiscal 2024. These production curtailments further impacted the company's Q3 profit.
In light of the weak Q3 profit results and the softer oil price outlook, APA Corp has lowered its capital expenditure forecast for 2025. The revised forecast now ranges between $2.5 billion and $2.6 billion, down from the original estimate of $2.7 billion. The company’s decision to lower its capital forecast reflects the impact of the oil price decline on its business.
Despite this reduction, APA Corp remains committed to upstream capital investment. The company plans to allocate approximately $645 million in upstream capital investment during the fourth quarter, which will support key projects in Suriname, Alaska, and Egypt.
Despite the Q3 profit miss, APA Corp is continuing to invest in high-potential regions. Last month, the company, in partnership with TotalEnergies (TTEF.PA), made a positive investment decision for Suriname’s Block 58. This $10.5 billion oil and gas project is expected to significantly boost Suriname’s offshore production and offer long-term profit potential for APA Corp.
The focus on expanding operations in Suriname, combined with ongoing investments in Alaska and Egypt, is a key part of APA Corp’s strategy to recover from lower oil prices and enhance future profit growth.
In response to the Q3 profit miss, APA Corp is focusing on its long-term growth strategy. With significant upstream capital investment scheduled for the upcoming quarters, the company is positioning itself to navigate oil price volatility while driving future profit growth. Projects like Suriname’s Block 58, alongside investments in Alaska and Egypt, are integral to this strategy.
APA Corp’s Q3 profit results highlight the challenges posed by lower oil prices and production cuts. However, the company’s adjustments to its capital forecast and its focus on strategic investments in global projects demonstrate its resilience. As the energy market continues to evolve, APA Corp’s investments in Suriname, Alaska, and Egypt will be crucial in driving long-term growth and maximizing future profit potential.
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