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Apache stock tumbles after Q2 earnings miss eclipses Alpine High optimism

A miss on earnings for Apache Corp. overshadowed sunny production predictions by the CEO on the subsequent call, leading the company's shares to a one-year low on the New York Stock Exchange on Aug. 3.

The Houston-based oil and gas driller reported an adjusted second-quarter loss of $79 million, or 21 cents per share, the day before. That was below S&P Capital IQ's consensus normalized EPS estimate of a 2-cent loss, sending the company's stock down more than $4 on Aug. 3, to a 52-week low of $43.24 before closing at $44.06. Shares rebounded slightly early Aug. 4, trading around $44 in late morning.

But CEO John Christmann IV said the company's production is on a "growth trajectory" after slowing in the second quarter amid oil prices. "We expect continued production volume increases at Alpine High and in the Midland Basin, as well as our international regions during the second half of 2017," he said on the company's Aug. 3 earnings call. Christmann said Apache assembled its capital program for 2017 with the expectation of $50-per-barrel oil, meaning its programs and objectives have remained untouched.

The Apache CEO said the new Alpine High play in West Texas, which was announced in 2016, is starting to come online and is producing volumes ahead of expectations. As the play is developed further, he said, oil production from the Alpine High will ramp up.

"We achieved first production at Alpine High in early May and exceeded our June 30 target of 50 million cubic feet per day of processed gas. Currently, our net sales gas exceeds 60 million cubic feet per day, and we anticipate this will increase to more than 100 million cubic feet per day by the end of September," he said. "Due to the timing of infrastructure build-out and gas takeaway, the majority of our Alpine High production thus far has come from our northernmost acreage. The drilling in this area has primarily been lease-retention-focused, and these wells are generally deeper and thus have a lower liquids content. The liquids ratio should increase as we drill and connect more wells in other areas of the play and as we commission additional processing facilities."

Apache reported operating 35 rigs around the world in the second quarter, including 17 in the Permian Basin, where two-thirds of the company's CapEx for the quarter was spent. The company's focus continues to home in on the Permian and Alpine High, as evidenced by the divestiture of assets in Canada during the quarter.

Apache reported production of 244,000 barrels of oil equivalent per day, down 3% from the first quarter, but Christmann said oil production will also be on the increase moving forward.

"Production is now growing in the U.S. as our Permian teams deliver strong drilling results in the Delaware and Midland basins," he said.