SHEL - Why APA Corporation Stock Is A Bargain Now (Rating Upgrade)
2024-05-21 11:35:44 ET
Summary
- APA Corporation is an $11.5 billion market cap U.S. and international oil & gas producer with a 3.2% dividend yield. Current operations are in the U.S., Egypt, and offshore UK.
- APA’s acquisition of Callon Petroleum reinforces its Permian Basin position with oilier assets. The company has been impacted by lower natural gas prices. But gas demand, and prices, are improving.
- The company’s exploration has given it interesting optionality offshore Suriname, with production there perhaps as early as 2027.
I have previously reviewed APA Corporation ( APA ) and, a while ago, Callon Petroleum . Benefits from APA's acquisition of Callon, the upturn in the natural gas market, as well as long-term prospectivity/ optionality in Suriname and elsewhere, along with APA’s current bargain price lead me to upgrade APA Corporation from Hold to Buy.
APA (previously known and still sometime referred to as Apache) produces gas and oil from the U.S., Egypt, and—at a maintenance level--the UK’s North Sea. It is appraising discoveries in offshore Suriname (near Guyana). The company is also extending its exploratory reach to Alaska and Uruguay, which adds optionality. And APA has enhanced its U.S. onshore production profile by acquiring Callon Petroleum in a stock-for-stock deal valued at $4.5 billion. The deal closed April 1, 2024.
Callon Petroleum, an early target of activist investor Kimmeridge, produces from oil-weighted assets in both the Delaware and Midland sub-basins of the Permian....
Why APA Corporation Stock Is A Bargain Now (Rating Upgrade)