APA NASDAQ: APA reported first-quarter 2026 results highlighted by higher-than-guided Permian oil production, strong execution across its portfolio, and nearly $0.5 billion in free cash flow, while management reiterated a focus on capital discipline and balance sheet improvement amid heightened geopolitical and commodity-price volatility.
First-quarter financial results and free cash flow
APA posted GAAP consolidated net income of $446 million, or $1.26 per diluted share, for the first quarter. Adjusted net income was $489 million, or $1.38 per diluted share, after excluding items outside of core earnings, including $37 million of after-tax unrealized derivative losses, the operator said.
The company generated $477 million of free cash flow in the quarter, returning $88 million to shareholders, according to management’s prepared remarks.
CEO John Christmann said operational performance enabled APA to deliver “capital spend and operating costs below guidance despite inflationary pressures,” and he emphasized that the company is prioritizing free cash flow generation “over incremental activity” in the current higher-price environment.
Operational update: Permian, Egypt, and portfolio priorities
Christmann said APA has “significantly improved capital efficiency” in the Permian while delivering “resilient oil production volumes” with fewer rigs and lower capital intensity. He added that improved execution is driving “cost leadership across key operational categories.” During the quarter, Permian oil production came in above guidance due to operational efficiencies and uptime improvements, while natural gas volumes were curtailed because of weak Waha pricing.
In Egypt, Christmann said APA strengthened base production reliability through “targeted water flood investments,” a more efficient workover program, and increased uptime, helping to moderate effective base decline rates. He also said the company is expanding gas development activity “to build a more durable total production foundation,” and pointed to continued success in the gas program, including on newly acquired acreage, as supporting APA’s 2026 targets.
President Steve Riney provided additional detail on Egypt activity, saying the company is “basically splitting rig counts 50/50 between gas and oil.” Riney said that in a mid-cycle price environment APA is “agnostic basically between gas and oil,” and he noted that while the company is receiving an average of $4.25 for gas, “the actual marginal price on new gas is higher than that.” Christmann added that Egypt “need[s] gas,” stating the volumes APA provides are “saving about two LNG cargos a month on the gas side.”
Riney also addressed Egypt oil trends, saying the company has previously described a slight long-term decline in gross oil volumes. After a period of roughly flat performance around 121,000 barrels per day (adjusted for a small concession exit), he said APA expects the next three quarters to be “something closer to flat around 118,000 barrels of oil a day,” representing about a 2.5% to 3% decline from the prior four-quarter average.
Guidance updates and key drivers
Looking ahead, Christmann said APA is raising its full-year U.S. oil production outlook to 122,000 barrels per day, citing confidence in continued strong performance. In Egypt, APA lowered adjusted volume guidance despite gross production running above prior expectations, which management attributed to production-sharing contract (PSC) impacts from higher commodity prices.
CFO Ben Rodgers said the company’s second-quarter U.S. production outlook assumes continued natural gas curtailments through the end of the quarter based on the current forward strip for Waha pricing, but that no price-related curtailments are assumed in U.S. BOE guidance for the second half of the year.
Rodgers also explained that the expected decline in Egypt adjusted total production in the second quarter is largely a PSC accounting impact rather than underlying operational performance. He said about two-thirds of the quarter-over-quarter decline is related to higher Brent prices, noting that while higher prices increase profitability, they can reduce adjusted volumes under the PSC cost recovery mechanism. The remainder, he said, reflects successful recovery of backlog costs from APA’s 2021 PSC modernization, which was completed in the first quarter.
APA maintained its full-year upstream capital guidance at $2.1 billion, with Rodgers expecting about 55% of spending to occur in the first half of the year due to U.S. activity cadence. He added that most Permian turn-in lines are anticipated in the second and third quarters, which management expects will help sustain oil volumes in the second half of 2026.
On costs, management kept LOE guidance unchanged at $15.25 for the full year. Rodgers said first-quarter LOE came in below guidance due primarily to U.S. cost savings and some timing effects, while inflationary pressure—particularly diesel in Egypt—is expected to be offset by additional savings, predominantly in the U.S.
Balance sheet, capital returns, and cost reductions
APA ended the first quarter with about $4.1 billion in net debt, up slightly from $4.0 billion at the end of 2025. Rodgers attributed the increase primarily to working capital use driven by higher receivables following a late-quarter oil price rise and the payout of incentive compensation accrued through 2025.
Rodgers said the company repaid $634 million of near-term bond maturities year-to-date, including $555 million in April, contributing to interest savings of more than $60 million versus last year. He said APA expects annual interest expense to be about $150 million lower on a run-rate basis at the end of 2026 compared to 2024, and noted the company has no debt maturities until December 2029.
Christmann reiterated APA’s stated goal to reach a $3 billion net debt target that was set nine months earlier and said the company will continue balancing debt reduction with shareholder returns. Responding to a question about buybacks, management said it will remain committed to its capital returns framework but will evaluate the mix of debt paydown, dividends, and repurchases given recent market volatility. Christmann said APA has commodity exposure across WTI, Brent, LNG, and Waha basis, supporting a “very robust free cash flow” outlook for the remainder of the year.
On decommissioning, Riney noted APA raised guidance for decommissioning spend by $20 million, clarifying it reflects increased planned activity—specifically additional platform wells in the Gulf of Mexico—rather than higher costs for previously planned work.
Rodgers said APA remains on track to achieve $450 million in cumulative run-rate savings by the end of 2026 across capital, LOE, and G&A, and he added that including interest savings, run-rate cash costs are expected to be $600 million lower exiting 2026 compared to 2024.
Gas marketing outlook, Suriname development, and exploration plans
Rodgers said APA’s oil and gas trading portfolio is expected to generate about $1.1 billion of pre-tax cash flow in 2026 based on current strip pricing, inclusive of commodity hedges. In response to analyst questions, management said a significant portion of the 2026 contribution is tied to pipeline transport, with about $300 million tied to LNG for the year. Rodgers said the forward curve implies basis differentials may tighten into 2027 as additional takeaway capacity comes online, but added that elevated LNG pricing carries into next year; he said APA’s current strip implies just above $400 million of expected pre-tax cash flow in 2027. He also said the company has hedges on basis for 2026 and is monitoring hedging opportunities for 2027 on both LNG and basis exposure.
International oil realizations were also discussed. Management said Dated Brent pricing for North Sea and Egypt cargoes has at times been at a premium to screen Brent futures, estimating the Dated Brent premium at roughly $8-$10 in the second quarter, compressing through the year, and about $5-$10 on the current strip. APA also cited an estimated $2-$5 premium on WTI realized pricing for Midland barrels relative to screen pricing when factoring in spot dynamics.
On longer-cycle growth, Christmann said the GranMorgu development in Suriname remains on track for first oil in mid-2028 and is expected to provide high-margin organic oil growth. He also said APA and its partner are excited about additional exploration in Block 58, noting that appraisal at Krabdagu “de-risked an entire exploration play” from a seismic perspective and that the company plans to drill exploration wells once rigs return to the area, potentially extending plateau production or supporting incremental infrastructure.
In Alaska, Christmann said APA paused drilling during the winter to reprocess seismic data and integrate results from Sockeye and King Street. He said the updated seismic suggests Sockeye was not drilled “even in the thickest place,” and that APA plans to return this winter with a two-well program consisting of an exploration well and an appraisal well.
Rodgers said exploration spending remained modest in 2026 guidance at about $70 million, including roughly $20 million for ice roads in Alaska and about $50 million for exploration in Suriname, but indicated exploration spending could increase in 2027 as Alaska wells are drilled and Suriname activity expands.
In closing remarks, Christmann said APA is “well-positioned to sustain production volumes across the Permian and Egypt” over the next several years, while continuing to emphasize free cash flow generation, cost reductions, and progress toward its net debt target.
About APA NASDAQ: APA
APA Corporation NASDAQ: APA is an independent exploration and production company engaged in the acquisition, development and production of oil and natural gas resources. The company operates through three core regions: the United States, Egypt and the North Sea. Through its integrated approach, APA combines geological and geophysical expertise with technical innovation to identify and develop hydrocarbons in both onshore and offshore settings.
In the United States, APA's largest position is in the Permian Basin of West Texas and southeastern New Mexico, where it holds substantial acreage dedicated to oil-focused drilling and production.
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