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Atlantic Equities Upgrades Apache To Overweight Amid Alpine High Discovery

Atlantic Equities thinks Apache Corporation APA 1.27% stands to gain from a fresh shale play citing high profile areas like Marcellus and SCOOP/STACK in Oklahoma. The brokerage pointed out that the company leased more than 300,000 acres at a cheap cost of $1,300 per acre over a two-year period.

Analyst Barry MacCarthy said most of them were pleasantly surprised by the new policy and that the Permian Basin's potentials to become a crucial player in the shale segment. The analyst has upgraded shares from Neutral to Overweight and boosted the target price from $41 to $70.

In a note, the brokerage said, "Apache has unveiled a "world class resource play", the Alpine High, in the Texas Permian Basin. It has a commanding 307,000 net acres, at a very modest $1,300/acre leasing cost in the southwest Permian, an area previously ignored by the industry. Activity is focused on the Woodford/ Barnett intervals in which natural gas (60%) and NGLs (28%) dominate production."

MacCarthy also expects upside potential from other sources, pointing out that Alpine High's value could get a boost from longer horizontal well sections and closer well spacing. He thinks that oil-prone areas indicated solid potentials, which have yet to be added into the company's resource projections.

During the recent investor day, Apache indicated its pre-tax return of 30 – 200 percent based on a "net value of $2 - $15 million per well in a $40" per barrel of oil and "$2.5 per MMBtu gas price environment."

DateFirmActionFromTo
Sep 2016Wolfe ResearchUpgradesUnderperformPeer Perform
Sep 2016JefferiesMaintainsUnderperform
Sep 2016Atlantic EquitiesUpgradesNeutralOverweight

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