APA (NASDAQ:APA) raised its 2026 free cash flow outlook to $2.9 billion and set a new target to reduce net debt to $2 billion, as stronger production and commodity prices supported third-quarter results and shareholder returns.
The oil and gas producer reported net income attributable to common stock of $698 million, or $2 per diluted share, for the third quarter. Excluding an unrealized derivative gain and other items, adjusted net income was $676 million, or $1.94 per diluted share, CFO Ben Rodgers said.
Free cash flow totaled $699 million in the quarter and exceeded $1.9 billion for the first nine months of the year. The updated full-year forecast is $600 million higher than APA’s August outlook, reflecting higher expected production in the U.S. and Egypt and stronger commodity prices, Rodgers said.
Shareholder returns and debt reduction
APA repurchased 10.5 million shares for approximately $450 million during the third quarter. Including $87 million in dividends, the company returned $537 million to shareholders. Through October, it had repurchased $762 million of shares this year, reducing its outstanding share count by about 5% since the end of 2025.
At current strip pricing, APA expects approximately $650 million in additional share repurchases by year-end. Rodgers said the buybacks and dividends are consistent with the company’s commitment to return at least 60% of annual free cash flow to shareholders.
The company retired approximately $450 million of debt in the third quarter and ended the period with $3.3 billion in total debt and $3.2 billion in net debt. APA expects to reach its existing $3 billion net debt target in the near future and has established a new $2 billion target.
Rodgers said the new target could be reached by the end of the decade at mid-cycle commodity prices, or sooner if prices are higher. He said further debt reduction would lower fixed obligations and preserve flexibility for potential developments and shareholder returns.
APA also expects decommissioning spending of nearly $300 million this year and a similar amount next year, Rodgers said. The company is managing asset retirement obligations in the North Sea and a contingent liability in the Gulf of America.
Production beats and spending outlook
U.S. oil production averaged 128,000 barrels per day in the third quarter, above guidance, while total U.S. production averaged 294,000 barrels of oil equivalent per day. CEO John Christmann attributed the oil result to high uptime, earlier well turn-in-lines and strong new well performance.
APA raised its full-year U.S. oil production guidance to 124,000 barrels per day, above its initial range of 120,000 to 122,000 barrels per day. Christmann said fourth-quarter oil production is expected to moderate because of well timing and seasonal weather impacts.
In Egypt, gross production was relatively flat from the second quarter at 206,000 barrels of oil equivalent per day. Gross gas production of 542 million cubic feet per day exceeded guidance, while adjusted production of approximately 64,000 barrels of oil equivalent per day was slightly below guidance, primarily because higher oil prices affected the production-sharing contract calculation.
APA increased its 2026 upstream capital guidance by $30 million to $2.1 billion, reflecting additional Permian activity. Its preliminary 2027 upstream capital estimate is approximately $2.5 billion, with exploration and development of the GranMorgu project in Suriname accounting for roughly 60% of the increase. The company expects similar year-over-year production in the U.S. and Egypt.
President Steve Riney said APA currently has three rigs operating in the Midland Basin and one in the Delaware Basin and plans to add two around the turn of the year. The company expects to shift a greater share of activity toward the Delaware over time.
Suriname and exploration plans
GranMorgu remains on budget and on schedule for first oil in mid-2028, Christmann said. Under APA’s carry agreement with partner TotalEnergies, APA funds 10% of development capital while retaining a 40% working interest.
APA and TotalEnergies plan two exploration wells in Suriname in 2027 to target resources that could extend GranMorgu’s production plateau or potentially support a second development. Christmann said the prospects are within the existing development area and the wells will be cost recoverable under the current project.
In Alaska, APA plans to appraise its Sockeye discovery with the Hungry Horse well and test the separate Chinook prospect. Tracey Henderson, executive vice president of exploration, said hydrocarbons found in roughly equivalent geological zones at King Street were encouraging, but cautioned against drawing a direct connection to Chinook before drilling it.
APA also expects to begin drilling its OFF-6 exploration well offshore Uruguay with Eni in late 2027. Christmann said APA will hold 60% of the block and Eni 40%, with Eni covering most of the well costs.
Cost savings and gas trading
Rodgers said APA expects to reach $500 million in annualized operating and overhead savings by the end of 2026. Combined with more than $180 million in annualized interest savings already achieved, that would bring total annualized savings to approximately $680 million compared with the company’s cost structure as it exited 2024.
The company’s gas trading portfolio is expected to generate approximately $1.1 billion in pretax cash flow in 2026 and $950 million in 2027 at the strip prices used for its forecast, including basis hedges. Rodgers cautioned that contributions will vary with market conditions.
About APA (NASDAQ:APA)
APA Corporation is an independent energy company engaged in the exploration, development and production of oil, natural gas and natural gas liquids. The company’s activities include identifying hydrocarbon resources, drilling and completing wells, operating producing properties, and managing related infrastructure.
APA’s principal producing areas include the Permian Basin in the United States and Egypt’s Western Desert, where it operates through joint ventures with the Egyptian General Petroleum Corporation.
