On August 6, APA Corporation (NASDAQ:APA) held its second-quarter earnings call, and one number stood out from the rest. The oil and gas producer is now holding its Permian oil production steady with four drilling rigs, half the eight it once estimated it would need. Adjusted production of 347,000 barrels of oil equivalent per day beat management's own guidance, free cash flow kept climbing, and the balance sheet is healing faster than planned. That combination is the story of the quarter.
APA raised its full-year US oil guidance to 123,000 barrels per day, up from an original 120,000, while holding its capital budget at $1.3 billion despite higher diesel and other input costs. Management also lifted its cost-savings target to $500 million in annualized run-rate savings by year-end, up from the $450 million goal it set at the start of the year.
That flexibility is showing up in cash flow. Free cash flow hit $738 million in the second quarter, pushing the first half of 2026 past $1.2 billion, which topped what APA generated in each of the past three full years. The company returned $189 million of that to shareholders through dividends and the repurchase of 2.8 million shares at an average price of $35.26, continuing a streak of returning at least 60% of free cash flow to investors every year since 2021.
The balance sheet is moving just as fast. Net debt stood at $3.3 billion at quarter-end after APA repaid $752 million of bonds in the first half, including $673 million in the second quarter alone, cutting total debt by $2.3 billion since the end of 2024 and lowering annualized interest expense by roughly $175 million. Management now expects to hit its $3 billion net debt target in 2027, well ahead of the three- to four-year window it laid out when the goal was first announced.
Further out, APA is building option value beyond its core Permian and Egypt ****** ets. It agreed to acquire Savant Alaska for $70 million, picking up an airstrip, a dock, and a pipeline connection into the Trans Alaska system to support two exploration wells planned for 2027. In Uruguay, ENI signed on as a partner in Block 6, funding a significant share of the first exploration well while APA keeps 60% ownership. In Suriname, the GranMorgu project remains on budget for first oil in mid-2028.
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APA raised its full-year US oil guidance to 123,000 barrels per day, up from an original 120,000, while holding its capital budget at $1.3 billion despite higher diesel and other input costs. Management also lifted its cost-savings target to $500 million in annualized run-rate savings by year-end, up from the $450 million goal it set at the start of the year.
That flexibility is showing up in cash flow. Free cash flow hit $738 million in the second quarter, pushing the first half of 2026 past $1.2 billion, which topped what APA generated in each of the past three full years. The company returned $189 million of that to shareholders through dividends and the repurchase of 2.8 million shares at an average price of $35.26, continuing a streak of returning at least 60% of free cash flow to investors every year since 2021.
The balance sheet is moving just as fast. Net debt stood at $3.3 billion at quarter-end after APA repaid $752 million of bonds in the first half, including $673 million in the second quarter alone, cutting total debt by $2.3 billion since the end of 2024 and lowering annualized interest expense by roughly $175 million. Management now expects to hit its $3 billion net debt target in 2027, well ahead of the three- to four-year window it laid out when the goal was first announced.
Further out, APA is building option value beyond its core Permian and Egypt ****** ets. It agreed to acquire Savant Alaska for $70 million, picking up an airstrip, a dock, and a pipeline connection into the Trans Alaska system to support two exploration wells planned for 2027. In Uruguay, ENI signed on as a partner in Block 6, funding a significant share of the first exploration well while APA keeps 60% ownership. In Suriname, the GranMorgu project remains on budget for first oil in mid-2028.
#billion
2 months ago
