Apache Corp stock target raised on Suriname project, rated Outperform

EditorAhmed Abdulazez Abdulkadir
Published 02-10-2024, 05:28 pm
APA
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On Wednesday, Wolfe Research adjusted its financial outlook for Apache Corp . (NASDAQ:APA), increasing the stock's price target to $39.00, up from the previous $38.00. The firm maintained its Outperform rating on the energy company's shares. The adjustment follows the confirmation of the first oil development in Suriname, which Wolfe Research believes solidifies the valuation case for Apache Corp.

The analyst from Wolfe Research highlighted that the Suriname project represents a significant portion of Apache Corp.'s current market value. With an estimated value of $9 per share attributed to the project, it suggests that the company's valuation warrants a fresh perspective. The analyst noted that while their base case had accounted for a single development, recent insights from TotalEnergies (EPA:TTEF), the operator of the project, indicate potential for a higher production plateau than initially expected.

The sanction of the Suriname project is seen as a positive development for Apache Corp., especially since approximately 75% of the company's share of development costs is expected to be covered by TotalEnergies. This strategic partnership is anticipated to contribute substantially to Apache Corp.'s value.

Wolfe Research reaffirmed its Outperform rating for Apache Corp., citing the Suriname oil development as one of several catalysts that could support a unique growth rate in the company's free cash flow (FcF) drivers. The updated evaluation of the Suriname project has led to a slight increase in the price target to $39 per share, reflecting the analyst's confidence in the company's growth prospects.

In other recent news, APA Corporation and TotalEnergies have committed to a $10.5 billion investment in the GranMorgu project on Block 58 offshore Suriname, which is expected to develop over 750 million barrels of recoverable resources, with production set to begin in 2028.

Analysts at Mizuho have maintained their underperform rating on Apache shares, citing the higher costs of the project but also noting the increased scope and resource potential. APA Corporation has also announced a dividend of 25 cents per share and sold non-core assets in the Permian Basin for $950 million, moves that analysts from TD Cowen, Truist Securities, and Scotiabank have reacted positively to.

In addition, APA Corporation extended its agreement with Palantir Technologies (NYSE:PLTR), integrating artificial intelligence capabilities into its operations for several years. Meanwhile, Diamondback (NASDAQ:FANG) Energy and Kinetik Holdings have increased their equity interest in EPIC Crude Holdings to 27.5% each, a move expected to enhance the company's growth and financial stability.

Lastly, Thermon Group Holdings (NYSE:THR) announced key leadership changes with Jan L. Schott (ETR:1SXP) and Greg Lucas stepping into the roles of Senior Vice President and Chief Financial Officer, and Vice President and Chief Accounting Officer, respectively.

InvestingPro Insights

Recent data from InvestingPro adds depth to Wolfe Research's optimistic outlook on Apache Corp. (NASDAQ:APA). The company's P/E ratio of 2.83 suggests that the stock may be undervalued relative to its earnings, potentially supporting Wolfe Research's increased price target. This low P/E ratio is particularly noteworthy given that APA has been profitable over the last twelve months, with a robust gross profit margin of 71.39% as of Q2 2024.

InvestingPro Tips highlight that APA has maintained dividend payments for 54 consecutive years, demonstrating a commitment to shareholder returns that aligns with the positive free cash flow growth prospects mentioned in the article. The current dividend yield stands at 3.9%, which may attract income-focused investors.

However, it's worth noting that 10 analysts have revised their earnings downwards for the upcoming period, which investors should consider alongside Wolfe Research's positive outlook. For a more comprehensive analysis, InvestingPro offers additional tips and insights on APA's financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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