Brian Acker, CAApache CorpAPATOP PICKFeb 15, 2013

As members of the US Administration expect a continuation of high energy prices for the foreseeable future, we reiterate APA as a TOP PICK.  Shipments thru the Strait of Hormuz remain challenged leaving domestic producers in a good position to see cash flows continue to improve.  Analysts have upgraded EPS projections by 12% and more could be on the way.  It trades at 18x earnings, 2.2x book and support s a 25% ROE.  We recommend trailing up the stop (from $31) to $34, looking to achieve $44 -- upside potential of 18%.  Yield 2.5%

Our PAST TOP PICK with APA has achieved its target at $43.  To remain disciplined, we recommend covering half the position at this time and trailing up the stop (from $29) to $31.  

With global energy markets in turmoil, we reiterate APA as a TOP PICK.  Recently released earnings per share were 50% above analyst expectations.  Higher than projected production, along with larger cost reductions overcame lower commodity netbacks.  The company continues to focus on aggressively retiring debt and buying back shares - which should yield higher cash reserves as oil prices rise. We recommend trailing up the stop (from $26) to $29, looking to achieve $43 — upside over 18%.  Yield 2.8%

Our PAST TOP PICK with APA has achieved its target at $23.50.  To remain disciplined, we recommend covering half the position at this time and trailing up the stop (from $16.50) to $18.00.

APA recently surprised analysts with revenues beating expectations by 26% and EPS beating by 93%.  Revenues were over $500 million higher, allowing an aggressive amount of debt to be retired.  It trades at 6x earnings, 1.2x book and supports a ROE of 26%.  We recommend trailing up the stop (from $15.00) to $16.50, looking to achieve $23.50 -- upside potential of 20%.  Yield 5.5%