On Thursday, Roth/MKM made a slight adjustment to the price target for Apache Corp (NASDAQ:APA), reducing it to $39.00 from the previous $40.00, while still endorsing the stock with a Buy rating. The adjustment follows the announcement of a potential oil discovery by Apache Corp at the King Street #1 well in Alaska, where high-quality oil was encountered in two separate zones.
The company's exploration efforts, however, faced a setback with two other Alaskan wells. These wells did not complete drilling before the seasonal spring break-up and now must await the next winter to finalize results. Despite this delay, Apache Corp is noted for trading at a discount compared to its peers.
The firm highlighted that Apache Corp's current trading multiple is at 3.1x its 2025 DACF estimate, assuming a West Texas Intermediate (WTI) oil price of $80 per barrel. This valuation is lower than that of its industry counterparts. Additionally, Apache Corp is recognized for its strong financial outlook, with a projected 16% free cash flow yield based on the 2025 estimates provided by the firm.
Apache Corp's recent oil discovery in Alaska and its financial metrics suggest a potentially undervalued position in the market, as indicated by its trading multiple and free cash flow yield relative to peers. The company's stock continues to be seen favorably by Roth/MKM, as reflected in the maintained Buy rating despite the minor price target reduction.
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