APA Corp. beat production guidance throughout its portfolio assets in the Permian Basin, Egypt and in Suriname, reduced net debt by more than $850 million and returned some $140 million to shareholders through its dividends and buybacks during the second quarter.
The company plans to generate $200 million in savings this year, and reach a savings run rate of $300 million by the end of the year. APA expects to lift its run rate (the metric that extrapolates savings over a given timeframe to a full year) to $350 million at some point in 2026.
“We remain firmly committed to shareholder returns and balance sheet strengthening through debt reduction,” CEO John Christmann said during an Aug. 7 call with investors.
APA’s second-quarter earnings beat consensus Wall Street estimates by 13%, and its 15% net debt reduction following New Mexico asset sales made for a strong performance, said David Deckelbaum, TD Cowen managing director. The bank increased its price target on the stock to $20/share from $18/share.
Production volumes across the portfolio generally exceeded guidance while remaining on plan for companywide capital investment.
In the Permian Basin, oil production exceeded guidance, primarily driven by faster turn-in lines enabled by efficient field execution. Capital investment came in slightly above guidance, largely due to the ongoing capture of efficiency gains across drilling and completions.
“Put simply, we are delivering more activity with fewer rigs and frac crews,” Christmann said.
Ongoing efficiency
During the first quarter, executives anticipated that efficiency gains would maintain flat Permian oil production with six and a half rigs instead of eight. Additional steps taken during the quarter are delivering flat go-forward oil production with six drilling rigs, he said.
“(Drilling and completions) costs per foot are now among the lowest in the Midland Basin and in line with offset peers in the Delaware Basin,” he said. “Our teams are committed to finding new ways to further improve efficiencies across the basin.”
Internationally, APA exceeded quarterly gas production guidance in Egypt with the performance of recent discoveries and increasing use of existing infrastructure. Christmann said that oil production in Egypt declined modestly when the company shifted rig activity toward increased gas development to capture improving gas realizations.
“Our capital efficiency in Egypt is benefiting from small refinements across our drilling and infrastructure programs, which collectively result in meaningful time and cost savings,” Christmann said. “For example, on the drilling side, on average, we are delivering wells more than two days faster compared to last year.”
And North Sea production is ahead of guidance, “a testament to the continued optimization of field operations and maximizing run time as we manage these late-life assets. Our focus remains on safety, operating efficiency and cost management as we prepare for decommissioning.”
APA reported that in Suriname, the GranMorgu development continues to advance toward first oil in mid-2028. Christmann said partner TotalEnergies secured drilling contracts at attractive rates.
Also during the second quarter, APA announced a discovery and successful flow test at the Sockeye prospect in Alaska. The Sockeye-2 well found about 25 feet of net oil pay in blocky sand with amplitude supported across 25,000 to 30,000 acres.
Generating savings
Across the portfolio, APA expects to generate at least $200 million in savings this year—a significant increase from its prior estimate of $130 million—and plans to exit the year with a $300 million savings run rate.
“We are now on a path to achieve our $350 million run rate target sometime in 2026 versus year-end 2027,” Christmann said.
Analyst Phillips Johnston at Capital One Securities noted the efficiency gains, which pushed APA’s stock up more than 8% to an outperform daytime high price of $20.38/share by market close. APA’s stock price was $19.76 at mid-morning on Aug. 8.
“Big free cash flow and production beats for the quarter coupled with efficiency gains that have accelerated APA’s cost reduction run-rate expectations by more than one year are driving today’s outperformance,” Johnston wrote in a note to investors Aug. 7.
