APA Earnings: Production Beat Plus Progress on Suriname

APA’s third-quarter results were slightly above our expectations, as production was 412,000 barrels of oil equivalent a day, a bit better than our 407,000 boe/d forecast. This was primarily attributable to strength in the Permian as well as the North Sea. After refreshing our model for the latest oil and gas prices as well as third-quarter results, our fair value estimate moves up to $56 per share from $55, while our no-moat rating is unchanged. We continue to think that Suriname’s potential is mispriced by investors and that APA remains very undervalued.

2024 looks to be a very good year for APA. There will be a full year of contributions from APA’s 15-year contract with Cheniere, which started Aug. 1 and added $90 million in cash flow in a partial quarter of contributions. APA expects $375 million in 2024 contributions from this contract. Suriname is also projected to obtain a final investment decision by the end of 2024, with first oil expected by 2028. However, APA is already proceeding with plans for front-end engineering and design on a 200,000 b/d floating production storage and offloading vessel, which suggests a potential acceleration of first oil to 2027. During the call, management commented on the substantial potential for Block 58, where Total is the operator, but it sounds as if further exploration there will be later than 2024.