APA buying CPE

[marc.wolin@yahoo.com]

APA buying CPE
Low premium does not bode well for these M and A. Will these other small oil cos. suffer the same fate? They are better off to produce the average themselves if they have the capital?
Marc Wolin

[Lbark]

that was my basic point. Would we be happy if VTLE did a deal like this instead of potential for huge upside to over 100+? let them run first and then do a deal. APA may add value but dead money for awhile.

[allen46]

IMO, this is a crappy deal for CPE shareholders - its half of Dan's price target. Dan, it would be helpful if you could take a quick look at APA for us - should we hold or DPE and put funds elsewhere - like CRK or EQT?

The market is certainly valuing these companies at much lower multiples than Dan does.

[marc.wolin@yahoo.com]

APA Buying CPE
If a good quality company were to purchase one of these smaller companies it would be a better deal. But how do you attract a FANG? You cannot pick your acquieror. Would a quality company be attracted to one of these smaller strained companies with no leverage? Better pray for the price of oil to go up or be ready to ride out more than one merger.
Marc Wolin

[dan_s]

My "Quick Look" is that a reasonable valuation of APA would be in the upper half of the 13 price targets that have been submitted to TipRanks, which is $36 to $60 per share. TipRanks' current price target is $46.88.

My valuation method is close to what Neal Dingmann uses. His current price target for APA is $59.00.

APA Corp. is a GOING CONCERN with a lot of upside. It generated over $764 million of operating cash flow in the 3rd quarter and should generate close to $1.2 billion of free cash flow in 2023.

APA is a large-cap with a first class technical staff. They would not buy CPE without doing EXTENSIVE DUE DILLIGENCE. If you think they got a good deal on CPE, then take the APA stock and go along for the ride.

Take 30 minutes to go through the slide presentation they spoke from this morning. You can find it on the APA website under the Investor tab.

APA 3rd Quarter Highlights
• Reported production of 412,000 barrels of oil equivalent (BOE) per day; adjusted production,
excluding Egypt noncontrolling interest and tax barrels, was 340,000 BOE per day;
• Year-over-year U.S. oil volumes increased 16% driven by operating efficiencies and strong well
performance in the Permian Basin;
• Confirmed an estimated recoverable resource of 700 million barrels of oil at Sapakara and
Krabdagu discoveries on Block 58, offshore Suriname;
• Generated net cash from operating activities of $764 million and free cash flow of $307 million
during the quarter; and
• In the first three quarters of 2023, APA returned 65% of free cash flow to shareholders through
dividends and buybacks, including the repurchase of 5.5 million shares at an average price of
$37.91.

[Lbark]

This is from Valueline on APA. 2024 CFPS 12.50; eps 7.30; book value 6.95; operating margin 71%; relative P/E 7.7 so that would equate to about 50 or so per share or 4 times cfps about the same. has revenues increasing out to 28 at 14.5%; cash flow the same and eps 19.5%.
when they did the report i am looking at it was Oct 27 and stock was 42 so has come way down. Looks like with what Dan showed and this has upside depending on the market for oil.

also, go to twitter and see josh young comment on the deal and what he thinks should be a very high premium for vtle if there is a deal. he owns vital.

[ChuckGeb]

Based on market activity today, APA shareholders don't like the deal (down 7%) while CPE is up 3%.

Long term play for APA is the Suriname discovery near XOM/Hess's Guyana field. Hoping that someone from the US with a brain assists in defending Guyana's claim to the field from challenge by the Commies in Venezuela but that likely won't come until 2025.

APA recently stopped drilling the Forties Field in the North Sea until the Brits wise up with their extortion (windfall taxes) of production from the field.

i own APA and like its prospects. I am neutral to negative on CPE in that the market has continually discounted the stock value. Hopefully the market has been discounting the quality of management of CPE and not the quality of its minerals.

[allen46]

I ended up selling my CPE. Don't like that 50% of APA production is in politically sensitive areas and they have relatively high debt. Added some CRK (which I sold many months ago but now believe it is starting to be a good time to buy NG stocks) and looking to add to EQT. Bought some BOIL on Tuesday and am already up 18% on it - should have bought more!!

[Cliff_N]

"APA's long-term debt stood at $5.45 billion at the end of 2022, according to federal filings. Meanwhile, the company's debt-to-equity ratio weighs in at 216%. For comparison, ConocoPhillips (COP) has a debt-to-equity ratio of 34%, Occidental Petroleum (OXY) 65% while Hess (HES) comes in at 108%, according to MarketSmith."

[knusser58]

APA's Balance Sheet should look a lot better after the merger.

APA's leverage (Debt/Equity) should look a lot better.
1. DEBT/EQUITY: 265% before vs 126% after (Q3 2023). This is a very large improvement.
2. Expense savings of +/- 150$mm per year will help.
3. APA will be a much larger company.
=> Great Deal for APA

Question: Why is it down this much???

Regards,
Klaus