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Apache Downgraded To Neutral At Citi, Cuts 2017 Rig Count Addition Estimate

Apache Corporation APA reported better-than-expected bottom line results for 2Q16, with total production beating the estimate. Citi’s Robert S. Morris downgraded the rating for the company from Buy to Neutral, while lowering the price target from $55 to $53.

Guidance

“While remaining cautious on the outlook for oil prices, Apache stated that 2016 capital outlays should now be at the high-end of its prior $1.4-1.8bn guidance,” Morris mentioned.

Following the full year North American production guidance being raised during the previous quarter, Apache’s outlook remains unchanged for now.

Rig Count

The company added one rig in the Midland Basin in July, taking the total rig count to five in the Permian. However, there are no plans of any more rigs being added in 2H16, despite Apache’s plans to “accelerate strategic testing initiatives.”

In fact, Morris pointed out that “the company now plans to keep two platform rigs in the North Sea rather than dropping all four platform rigs here.”

Estimates Revised

The production estimate for 2016 has been raised to reflect higher international volumes but marginally lower domestic output.

“We are lowering our outlook for activity in 2017 as we believe mgmt. will remain conservative and, like this year, start out with activity pegged to $40-45/Bbl oil prices,” the analyst stated.

The North American rig ramp estimate and 2017 production estimate have been reduced.

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DateFirmActionFromTo
Aug 2016CitigroupDowngradesBuyNeutral
Aug 2016BarclaysDowngradesOverweightEqual-weight
Aug 2016UBSMaintainsNeutral

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