- A discovery off the coast of Suriname before the oil market fell apart
- Total held up better
- Apache has recovered from the low- Gaps on the chart
It seems like ages ago when the price of nearby NYMEX crude oil futures rallied to $65.65 per barrel on the back of hostilities between the US and Iran in Iraq at the start of this year. Around that time, shares of Apache Corporation (APA) soared on the back of a significant offshore oil discovery where APA had a joint venture with Total SA (TOT).
The petroleum world changed dramatically in February. The spread of COVID-19 around the world created a global pandemic that evaporated the demand for energy. At the same time, OPEC and the Russians abandoned production quotas, and a tidal wave of crude oil sent the price to the lowest level in history. Shares of APA and TOT fell to the lowest prices in decades in March.
The excitement over the oil discovery turned into price carnage for APA and TOT along with other oil-related companies. While both have made comebacks since the March lows, they remain appreciably lower than the levels at the start of 2020.
A discovery off the coast of Suriname before the oil market fell apart
In early January, the discovery of a massive offshore oilfield on the coast of Suriname sent the shares of APA flying to the upside.
The chart shows that APA shares gapped higher on January 7 and reached a peak of $33.77 on January 14. The stock reached the highest level since April 2019 when it ran out of upside steam. In February, the price action filled the upside void on the chart before oil and APA shares crashed.
On March 18, APA traded to its lowest level since 1988 when the shares traded to $3.80 or 88.7% below the January peak.
Total held up better
Shares of TOT did not gap higher in early January. While the French oil company’s shares tanked during the risk-off period and evaporation of energy demand in March, the stock did a lot better than APA on a percentage basis.
After rising to a high for 2020 at $56.91 on January 6, TOT fell to its lowest level since 1997 at $22.13 on March 16. TOT fell by 61.1% from the 2020 peak to the March low. At the $35.85 level on May 22, the stock was 62% above the March low, but still over $20 per share under the high for this year.
Apache has recovered from the low- Gaps on the chart
On May 22, APA was at just over the $12 per share level, over three times higher than the March bottom in the stock.
Technically, the gap on the chart from $13.70 on March 9 to $20.22 on March 6 is a target on the upside for APA shares. The stock already made some inroads into the void when it traded to a high of $14.05 on April 30.
APA faces credit issues, which could weigh on the share price. Last week, Moody’s downgraded the company’s rating to Ba1 with a negative outlook. APA has a market cap of around $4.6 billion at just over $12 per share. Both APA and TOT have made comebacks since the March low that took the prices of both company’s shares to the lowest levels in decades. Meanwhile, the price of crude oil has made significant upside progress and was trading at over $33 per barrel at the end of last week. APA, TOT, and the oil market need demand to rise, inventories to fall, and optimism to continue for higher prices over the coming weeks.
Price action tends to fill gaps on charts, but that will depend on a continuation of the oil market recovery for Apache Corporation.
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APA shares were trading at $12.23 per share on Wednesday morning, down $0.48 (-3.78%). Year-to-date, APA has declined -51.70%, versus a -6.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Andrew Hecht
Andy spent nearly 35 years on Wall Street and is a sought-after commodity and futures trader, an options expert and analyst. In addition to working with StockNews, he is a top ranked author on Seeking Alpha. Learn more about Andy’s background, along with links to his most recent articles. More…
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