APA Corporation (APA) Earnings & Analysis

Latest quarter

APA’s third-quarter revenue exceeded the consensus, as did adjusted earnings of $1.94 per diluted share, compared with a consensus of $1.44. Revenue was $2.8 billion, up from $2.0 billion a year earlier. The company reported net income attributable to common stock of $698 million, or $2.00 per diluted share, versus $205 million, or $0.57 per diluted share, a year earlier.

APA attributed the increase in net income primarily to higher oil revenue from stronger realized crude prices. Its filing shows that crude oil revenue reached $1.9 billion as higher prices outweighed lower sales volumes. Natural gas and NGL revenue also increased, helped by higher realized prices.

The company reported an operating margin of 42.7%, compared with 25.3% a year earlier. CFO Ben Rodgers said APA generated $699 million of free cash flow in the quarter.

APA’s filing shows U.S. daily production rose 5 percent from a year earlier, while Egypt’s net production fell 12 percent. The company attributed the Egypt decline in part to higher price realizations and lower cost recovery volumes under its production-sharing contract.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO John Christmann said U.S. oil production averaged 128 thousand barrels per day, exceeding guidance because of high uptime, earlier well turn-ins and new-well performance. In Egypt, he said gross gas production exceeded guidance, but adjusted production was slightly below it because higher oil prices affected the production-sharing contract.

Christmann said the Suriname carry agreement allows APA to fund 10% of GranMorgu’s development capital while retaining a 40% working interest. He said the project remained on budget and on schedule for first oil in mid-2028, although some third-quarter spending shifted into the fourth quarter with equipment deliveries and rig upgrades.

Discussing gas trading, CFO Ben Rodgers said “contributions will vary with market conditions.” At the pricing used for the outlook, he expected $950 million of pretax cash flow from the portfolio next year, including basis hedges. In response to an analyst’s question, Rodgers said more recent prices implied a figure in the mid- to high 800s and that additional pipelines were contributing to a smaller Permian portion of the portfolio.

Analysts also asked about Egypt workovers and operating-cost projects. President Stephen Riney said APA was running “23% more jobs per workover rig” than in the recent past and had reduced the backlog. He said Permian projects intended to save about $40 million in lease operating expense on a run-rate basis were being delivered as expected.

On the balance sheet, Rodgers said APA had established a new $2 billion net debt target. He told analysts it could be reached by the end of the decade at mid-cycle pricing, or sooner if prices were higher. Rodgers also said North Sea decommissioning had begun and would continue for years.

Guidance

Christmann raised APA’s full-year U.S. oil production guidance to 124 thousand barrels per day from an initial 120 thousand to 122 thousand barrels per day, citing drilling and completion efficiency gains. Rodgers raised the 2026 free cash flow outlook by $600 million to $2.9 billion, citing higher expected U.S. and Egypt production and stronger commodity prices.

Rodgers said APA increased full-year upstream capital guidance by $30 million to $2.1 billion for additional Permian activity. The company also increased its full-year lease operating expense guidance by $25 million to $1,525 million, primarily for higher stock-based compensation allocated to that expense.