Investopedia: Apache A Good Bet In Oil And Gas Sector

Investors often learn to appreciate conservatively run companies during tough times, but that same conservatism can seem like a drag when times are good. Maybe that is why Apache (NYSE:APA) never quite seems to get its due during the good times in the energy industry. Although this oil and natural gas production and exploration company has proved itself over many cycles, investors always seem to forget this name in lieu of spicier ideas during the boom years ... only to come back to it when the boom names have gone "boom" and wrecked themselves with debt or extended their operations too far. 

A Messy End to the Year  
That said, Apache management did itself no favors at end 2010; fourth-quarter results for this company are quite a bit messier than the many other E&P earnings report. Revenue did rise 35% in the fourth quarter, fueled in part by a 24% increase in production, but profitability is where things get messy. Net income looked to be up about 18%, so the company's baseline profitability seemed to track top-line growth. That said, issues like the timing of acquisitions, undeclared incentive compensation, and equity tied to uncompleted transactions made things a lot more confusing. Moreover, lease operating expenses did jump pretty significantly from the third quarter, rising almost 55%.

The fourth quarter is also when E&P companies discuss their reserve situation. Apache replaced 344% of its production this year (far better than Statoil (NYSE:STO) recently announced, for instance), but organic reserve replacement was a more sedate 102%. Costs also continue to rise here as well.

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