Apache Corp. $91 - New York symbol APA

APACHE CORP. $91 (New York symbol APA; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 332.7 million; Market cap: $30.3 billion; WSSF Rating: Average) explores for and produces oil and natural gas, mostly in North America. It also has operations in the North Sea, Egypt, Australia and Argentina. The company’s reserves are roughly half oil and half natural gas. Apache recently agreed to sell some of its smaller properties in the United States for $194.3 million. That will help the company fund a new investment in South America. Apache recently won the right to explore for oil on the Chilean side of the Tierra del Fuego chain of islands at the southern tip of South America. Apache plans to spend $18.3 million on the initial phase. The company owns 70% of a similar project on the Argentinian side of these islands, so its familiarity with this region helps lower the risk of this investment. In the third quarter of 2007, Apache’s earnings fell 5.7%, to $1.83 a share (total $613.3 million) from $1.94 a share ($647.1 million) a year earlier. If you disregard one-time items, per-share earnings rose 22.6%, to $2.17 from $1.77. Revenue grew 8.7%, to $2.5 billion from $2.3 billion. The company should earn $9.70 a share in 2008, which gives it a p/e of 9.4. The stock also trades for 6.7 times its forecast 2008 cash flow of $13.65 a share. The $0.60 dividend yields 0.7%. Apache tends to replenish its reserves with acquisitions, which adds to its risk. Rising exploration and drilling costs are also squeezing its profit margins. That could hurt the company’s ability to take full advantage of higher energy prices. Apache is a hold.

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