Financial Performance Of The Most Successful Companies In The Industry

Apache (ticker: APA) is an independent energy company that explores and produces

natural gas, crude oil, and natural gas liquids. The company has proved reserves of 1.9

billion barrels of oil equivalent mostly from North American regions, such as Gulf of

Mexico, the Gulf Coast of Texas and Louisiana, the Permian Basin in West Texas, the

Anadarko Basin in Oklahoma, and western Canada.

In 2004, Apache acquired more than two dozen mature US and Canadian fields from

Exxon Mobil for $347 million and Gulf of Mexico properties from Anadarko Petroleum

for $525 million (www.apachecorp.com). The table below shows the financial wealth being of the company.

Performance more

Growth of $10,000 08-19-05

Total Return%

2002

2003

2004

YTD

Stock

15.1

50.4

25.4

36.6

+/- Industry

16.5

8.3

-1.0

8.9

+/- S&P 500

37.2

21.7

14.5

34.9

Key Stats

Last Close (08-19-05) $68.80

Market Cap $Mil 22,120

Sales $Mil 5,845

Morningstar Style Box Large Core

Industry Oil & Gas

Sector Energy

Stock Type

Hard Assets

Morningstar Stock Grades

Growth

B+

Profitability

A

Financial Health

A

Key Financial Ratios:

Financial Ratio YEAR

2004 2003 2002

P/E ratio 10.0 12.1 15.1

Debt/equity 32.0% 36.0% 45.0%

ROI 22.89% 19.85% 5.91%

ROS 78.3% 75.1% 72.9%

Yield 25.40% 50.40% 15.10%

This stock has seen steadily growing revenue and remarkable earnings growth over the past three years. Apache's stock has done better than most of its peers in the oil/gas industry. Apache's revenues have grown very rapidly over the past three years.

Like its peer, Apache's earnings per share have grown at a very high rate over the past three years. Also, this stock's sustainable growth rate is quite a bit less than the rate at which its earnings per share have grown. This stock has generated market-line returns over the past 10 years, but has done better than average in the past five years. This stock has had mixed success.

Apache was picked because:

Apache's recorded revenues of $4,190.3 million during the fiscal year ended December 2003, with an increase of 63.7% over 2002. The reason for the increase was due to strong crude oil, and natural gas prices and the company's high production. Net profit was $1121.9 million for the fiscal year 2003, with an increase of 102.4% over 2002. Operating profit during fiscal year 2003 was recorded at $1922.3 million, with an increase of 114% over fiscal year 2002.

The company's strength is in strong operating performance, core North American assets, and strong reserve replacement rate. The weaknesses of the company's are in poor Argentinean operations, low free cash flow, and low utilization in China. Future opportunities are focus on OPEC's backing, rising demand for natural gas, and entry into international markets. The threats of the company's are fluctuation in commodity prices, environmental regulations, and competition from market-savvy players.

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