Apache's Cautious Stance Will Prove Beneficial Over The Long Run

IBERIA Capital’s Eric Fox mentioned that Apache Corporation (NYSE: APA)'s cautious stance during the down cycle helped the company achieve its goal of balance sheet preservation, while preparing it for the upcoming recovery.

Fox maintains a Sector Perform rating on the company, while raising the price target from $53 to $60.

The analyst noted, however, that investors were likely to “gravitate to more reliable and lower risk large cap growth stories if this scenario is realized.”

Liquidity And Cash Flow

Fox stated that Apache’s liquidity consisted of 1 billion in cash and $3.5 billion in undrawn capacity from a Senior Unsecured Credit Facility.

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“Refinancing requirements are light over the next few years with only a $550 mm bond issue coming due in 2018,” the analyst said.

Fox expects the balance sheet to improve through the remainder of 2016, with cash rising to $1.4 billion by the year end.

According to the IBERIA Capital report, “APA is projected to spend within its cash flow in 2016 and generate a slight surplus in 2017.”

The CFPS estimates for 2016 and 2017 have been increased from $4.13 to $5.56 and from $5.82 to $7.87, respectively.