APA · Q4 2025 Earnings

Cautious

APA Corporation

Reported February 25, 2026

30-second summary

Q4 oil came in 7% above APA's own raised guide (132 kbbl/d US oil vs. 123 kbbl/d guided), and management lifted the YE2026 run-rate cost savings target to $450M from $350M — the third consecutive beat-and-raise on the cost program. But the headline number to underwrite is the FY2026 adjusted production guide of 371 kbbl/d, which implies a material step-down from FY2025's ~387 kbbl/d, with US oil itself guided to 120–122 kbbl/d versus a 132 kbbl/d Q4 exit. Upstream capex was cut 10% to $2.1B, framing 2026 as a margin and efficiency story rather than a volume story.

Headline numbers

EPS

Q4 FY2025

$0.91

Revenue

Q4 FY2025

$1.99B

-26.5% YoY

Free cash flow

Q4 FY2025

$0.42B

Key financials

Q4 FY2025

Metric	Q4 FY2025	YoY
Revenue	$1.99B	-26.5%
EPS	$0.91	—
Free cash flow	$0.42B	—

Guidance

Apache raised FY2026 controllable spend savings target to $450M run-rate (from $350M FY2025), reduced upstream capex 10% to $2.1B, and guided modestly lower FY2026 adjusted production to 371,000 BOE/day while pivoting Egypt toward higher-margin gas-focused drilling.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
U.S. Oil Production	Q4 FY2025	123,000 barrels per day	132,000 barrels per day	+9,000 barrels per day above guide	Beat
Controllable Spend Savings (Run-Rate)	FY 2025	$350 million by year-end 2025	$350 million achieved	in-line	Met

New guidance

Metric	Period	Guide	YoY
Adjusted Production	FY 2026	371,000 BOE per day	—
U.S. Oil Production	FY 2026	120,000 to 122,000 barrels per day	—
Egypt Gas Production Growth	FY 2026	13% to 15% YoY growth	13% to 15%
Egypt Adjusted Production	FY 2026	72,000 BOE per day	—
Total Upstream Capital	FY 2026	$2.1 billion	—
Permian Development Capital	FY 2026	$1.2 billion plus $100 million additional investment	—
Controllable Spend Savings Target	FY 2026	$450 million run-rate	—

Other KPIs

Q4 FY2025

Segment	Q4 FY2025
Total Adjusted Production	387,000 BOE/day
U.S. Oil Production	132,000 barrels/day
Adjusted EBITDAX	$1,200 million
Net Debt	$3,977 million
Permian Inventory	~10 years of economic inventory
Proved Reserves	1,056 million BOE
Controllable Spend Savings (Run-Rate)	$350 million achieved; targeting $450 million by end-2026
Shareholder Returns	$640 million (63.6% of FCF)

Management tone

Q1: defensive cost-out → Q2: cost-out as structural advantage with $3B debt target → Q3: cost-out accelerated, forward narrative pivots to flexibility and hedged cash flow → Q4: cost-out raised again, production explicitly reset lower for 2026.

The Permian narrative has now completed its multi-quarter compression from growth story to margin story. Q1 framed six rigs with DUC accumulation as pre-funding 2026 growth; Q2 reframed denser spacing as inventory expansion ("a fantastic outcome"); Q3 dropped to five rigs holding ~120 kbbl/d with flexibility to moderate; Q4 codifies 120–122 kbbl/d as the FY2026 base — below the 132 kbbl/d Q4 exit. Management's own framing in Q&A made the discontinuity explicit: Q4 outperformance was "roughly one-third each" weather, tie-ins, and runtime — none of which extrapolate cleanly. The Permian is now being run for $40–50M of annual LOE savings and sub-$41 breakevens, not for volume.

Egypt continues its narrative inversion from oil decline to gas growth. Two quarters ago the Western Desert acreage was framed emphatically; in Q3 the language cooled to "early" and "could be impactful." Q4 commits capital and operational structure to the thesis: a 30-year regional reassessment, 2M acres of new acreage, reprocessed seismic, dedicated gas teams, and a +13–15% FY2026 gas growth guide. "Egypt is now poised for growth in both BOE volumes and free cash flow" — but adjusted production is guided flat at 72 kBOE/d, meaning the gas growth is offsetting oil decline rather than adding to it.

The cost program is the one part of the story that keeps over-delivering. The original 2027 $350M target was pulled into YE2025 two years early; YE2026 is now $450M ($100M above last quarter's high-end framing of $400–450M). Combined with the 10% capex cut and the $100M LOE-reduction sub-investment, management is explicitly engineering for FCF per barrel rather than barrels — a posture that makes sense at $60 WTI but caps upside in any commodity recovery.

The overall posture has shifted from Q2's "momentum is palpable" to a 2026 plan that prioritizes capital discipline, hedged cash flow, and lower production. The narrative is no longer about operational leverage on the way up.

Q&A highlights

Doug Leggett · Wolf Research

Seeking breakdown of $100M Permian base capital spend on LOE projects, nature of spend, payback mechanics, and LOE impact. Also asking for color on exploration programs in Egypt, Alaska, and Suriname, including prospectivity of potential game-changer targets in Alaska.

Management explained $100M capital spend focused on compression, facilities consolidation, and artificial lift across the basin, targeting $40-50M in annual LOE savings (3-5 year payback). Described $70M exploration budget: $20M Alaska ice road prep, $50M Suriname Block 58 late-year drilling. Egypt exploration activity progressing with focus on gas discoveries following new pricing framework. Alaska program includes seismic reprocessing and planning for likely two wells in early 2027 (Sockeye appraisal plus exploration well). Tracy Henderson confirmed robust prospect inventory and focus on maturing Sockeye analogs.

$100M capital investment expected to drive $3-3.5M/month LOE reduction by late 2026$40-50M ongoing annual LOE savings from base capital projects6-24 month payback on LOE projects$70M total exploration budget: $20M Alaska, $50M Suriname Block 58

John Freeman · Raymond James

Request for post-mortem analysis of Q4 Permian oil production beat, breaking down impact of improved runtime, incremental completion activity, and weather versus guidance. Follow-up on D&C per foot progress and breakdown of 130 completions between Midland and Delaware Basin.

Management attributed Q4 beat roughly equally (one-third each) to: virtually no weather downtime in Q4, early well tie-ins that cleaned up faster than expected, and phenomenal improvement in underlying runtime. Noted that Q1 2026 already experienced 3,000 bpd weather downtime. Declined to provide detailed D&C breakdown by basin but confirmed continued cost progress, with shallow wells achieving under $500/foot in Midland and under $700/foot in Delaware in late 2025. Offered to discuss further in offline call.

Q4 production beat attributed roughly 1/3 each to: zero weather downtime, accelerated well tie-ins, improved runtime3,000 bpd weather-related downtime already in Q1 2026Late 2025 shallow well costs: under $500/foot Midland, under $700/foot DelawareD&C costs continuing to improve through 2026

Neil Dingman · William Blair

Request for detail on Permian inventory sensitivity, particularly around gassy assets. Follow-up on Suriname capital allocation: is $230M strictly Grand Morgue FPSO, or does it include development drilling, and clarification on rig count.

Management clarified that inventory analysis covers oil locations only; gas inventory will be analyzed separately. Explained conservative 1,700-location economic inventory definition requiring 10% minimum rate of return, high-confidence type curves, and inclusion of central facilities burden. Highlighted 40-50% of 1,700-location technical upside is shallow Delaware (Avalon, First/Second Bone Springs) with breakeven economics at $41 WTI. Confirmed $230M Suriname capital covers entire Grand Morgue development including FPSO, umbilicals, and development drilling. Multiple rigs planned for late 2026 onward.

1,700 gross locations in economic inventory (oil only)1,700 locations in technical upside inventory40-50% of technical upside in shallow Delaware BasinShallow Bone Spring wells breakeven at $41 WTI at current cost structure

Bob Brackett · Bernstein Research

Discussion of Egypt exploration philosophy for gas across 7.5M acres, specifically whether company is 'fishing from the pier' near existing pipelines or willing to pursue distant high-risk/high-reward prospects farther from infrastructure.

Management explained 30-year Western Desert history and shift to gas exploration post-November 2024 pricing framework. Described taking regional approach to reprocess seismic and identify gas-prone structures historically avoided. Added 2M acres new acreage. Tracy Henderson confirmed reprocessed seismic, dedicated gas teams, and building longer-term gas inventory. Approach positioned as combining known near-field opportunities with systematic regional assessment of deeper gas-prone structures.

30-year Western Desert exploration history provides dataset for regional reassessmentNovember 2024 new gas pricing framework enables economic evaluation of previously uneconomic gas2M acres of new acreage addedReprocessed seismic data and dedicated exploration teams focused on gas inventory

Scott Hanold · RBC Capital Markets

Quantification of appraisal/testing spend within $1.3B Permian budget and clarification on whether such testing represents incremental future spend or if Permian capex will normalize lower post-delineation work. Follow-up on Uruguay wing strategy and farm-down plans.

Management described steady diet of appraisal and delineation testing as ongoing part of basin development strategy, not temporary. Cited Barnett four-well test flowing back and multiple other tests ongoing, with more planned for 2026. Indicated this continuous testing approach will persist as the nature of the basin. On Uruguay, noted data room open with industry interest, pursuing farm-down with well potentially in 2027 but possibly late 2026.

Continuous appraisal and delineation testing planned as steady-state activityBarnett four-well test flowing back in 2026Multiple spacing tests in Midland and Delaware planned for 2026Appraisal spend integral to annual Permian capex, not temporary

Answers to last quarter's watch list

Trading income guide re-rated at February 2026 formal guidance — The press release does not break out a discrete FY2026 trading portfolio income figure separate from upstream guidance, and the prior $630M FY2025 framing was not revisited in the materials. Status: Not resolved

Permian 2026 oil production: does five rigs hold ~120 kbbl/d? — Resolved directly: FY2026 US oil guide is 120–122 kbbl/d, confirming the five-rig program holds approximately 120 kbbl/d. But this is meaningfully below the 132 kbbl/d Q4 exit rate, so the "operational flexibility to moderate" language from Q3 has been exercised — production is being held flat to the prior framing, not to the better-than-expected 2H25 actuals. Status: Resolved negatively

YE2026 cost-out run-rate beats again — Resolved decisively to the upside. The YE2026 run-rate target is now $450M, $100M above the $350M YE2025 base and at the top end of last quarter's $400–450M implied range. Third consecutive beat-and-raise on the program. Status: Resolved positively

2026 hedging coverage expansion at year-end — The press release does not disclose updated FY2026 commodity or transport hedge coverage beyond what was set at Q3. Status: Continue monitoring

Egypt gas exploration drill-bit results — No specific drill-bit results disclosed, but the strategic commitment hardened: 2M acres of new acreage, +13–15% FY2026 gas growth guide, dedicated gas teams, and reprocessed regional seismic. Q&A framed Egypt gas as a systematic multi-year inventory build rather than a near-term catalyst. Status: Continue monitoring

What to watch into next quarter

Whether US oil production tracks the 120–122 kbbl/d FY2026 guide or shows further sequential decline from the Q4 132 kbbl/d exit — the 3,000 bpd Q1 weather hit management disclosed in Q&A sets up a low Q1 print that will need to be parsed carefully against the full-year cadence.

Whether the YE2026 $450M cost-out target gets raised again at Q1 — a fourth consecutive beat-and-raise would force a re-rate of structural margin assumptions.

Cadence of net debt paydown toward the $3B long-term target from Q4's $3.98B base, particularly whether the 63.6% Q4 FCF return rate is sustained or moderated to accelerate deleveraging.

Egypt gas production trajectory against the +13–15% FY2026 guide — first-quarter directional read will indicate whether the gas pivot is on schedule or backloaded.

Suriname Block 58 exploration well outcomes from the $50M late-2026 program, and any farm-down progress on Uruguay that would offset 2027 capital commitments.

Whether shallow Delaware Bone Springs four-well spacing test results validate moving the 1,700-location technical upside inventory into the economic bucket — this is the most underappreciated optionality in the Permian story.

Sources

APA Corporation Q4 FY2025 Earnings Release, SEC Form 8-K Exhibit 99.1 — https://www.sec.gov/Archives/edgar/data/1841666/000184166626000012/exhibit9914q25earningsrele.htm
APA Corporation Q4 FY2025 Earnings Call Q&A (Christman, Riney, Henderson, and analyst exchanges)
APA Corporation Q3 FY2025 and Q2 FY2025 Earnings briefs (Tapebrief prior coverage)

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