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AC

APA Corp (APA)·Q2 2025 Earnings Summary

Executive Summary

  • APA delivered an operationally strong quarter with adjusted EPS of $0.87, beating S&P Global consensus by roughly 39 cents, and revenue of $2.18B, ahead of estimates; GAAP EPS was $1.67, benefiting from a $219M after-tax divestiture gain . Estimates marked with asterisks are from S&P Global: $0.485* EPS, $2.081B* revenue [GetEstimates].
  • Capital efficiency improved materially: Permian rig count reduced from eight to six while holding oil volumes flat; 2025 realized savings target raised to $200M (from $130M) and year-end run-rate lifted to $300M (from $225M), with the long-term run-rate target of $350M pulled forward into 2026 .
  • Portfolio catalysts strengthened: Egypt secured presidential approval for ~2M net acres (+35% footprint), Egypt gas program outperformed (guidance raised), and Suriname GranMorgu 2025 capital increased to $275M on milestone timing with first oil still targeted mid-2028 .
  • Balance sheet progress was notable: net debt reduced by >$850M in Q2, APA set a long-term net debt target of $3B, and returned ~$140M to shareholders via dividends and buybacks in the quarter .

What Went Well and What Went Wrong

  • What Went Well

    • Permian efficiency: “We are currently delivering flat go-forward oil production with six drilling rigs” and breakeven oil prices reduced to low $40s WTI on average (high 30s Midland, low 50s Delaware) .
    • Egypt momentum: Exceeded quarterly gas production guidance; secured presidential approval for ~2M acres, with gas realizations improving under revised price agreement; guidance for gross gas volumes raised for next two quarters .
    • Cost reduction acceleration: 2025 realized savings raised to $200M, year-end run-rate to $300M; $350M run-rate now targeted in 2026 vs prior YE2027, with upside beyond .

  • What Went Wrong

    • U.S. oil volumes modestly declined Q/Q due to asset sale and operational timing; U.S. gas curtailed in response to weak Waha pricing (10 MMcf/d gas, 750 bpd NGLs curtailed in Q2) .
    • LOE visibility: Permian LOE progress is early; Q2 LOE was above guide vs Q1 but trending lower (July lowest month YTD), suggesting benefits will be more visible in 2H25/2026 .
    • Facility logistics constrained some well productivity readings in the Delaware/Midland (e.g., Wild Jenny, Silverbelly) until debottlenecking and power/compression were delivered, impacting perceived short-term well performance .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Total Revenues ($USD Billions)$2.421*$2.636 $2.178
GAAP Diluted EPS ($)$0.96 $0.96 $1.67
Adjusted EPS ($)$0.79 $1.06 $0.87
Adjusted EBITDAX ($USD Billions)$1.550 $1.485 $1.299
Net Income Attributable to Common ($USD Millions)$354 $347 $603

Estimates comparison (S&P Global; asterisks denote S&P values):

MetricConsensus (Q2 2025)Actual (Q2 2025)Surprise
EPS Normalized ($)$0.485*$0.87 +$0.385 (beat)
Revenue ($USD Billions)$2.081*$2.178 +$0.097B (beat)
EBITDA ($USD Billions)$1.164*$1.378 +$0.214B (beat)

Values retrieved from S&P Global for consensus metrics.

Segment/KPI details:

KPIQ4 2024Q1 2025Q2 2025
Total BOE/d (reported)488,308 468,978 465,078
Adjusted BOE/d (ex Egypt NCI & tax barrels)418,347 398,384 394,041
U.S. BOE/d313,227 298,319 289,902
Egypt BOE/d (reported)139,947 139,041 143,818
North Sea BOE/d35,134 31,618 31,358
Free Cash Flow ($USD Millions)n/a$126 $134
Net Debt ($USD Billions)$5.419 (Dec-24) $5.301 (Mar-25) $4.444 (Jun-25)

Price realization highlights:

  • Avg U.S. oil price: $80.54 (Q2’24) → $72.45 (Q1’25) → $64.84 (Q2’25) .
  • Egypt gas price: $2.92 (Q2’24) → $3.19 (Q1’25) → $3.48 (Q2’25), reflecting revised pricing and mix .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Permian rigs to hold oil flat20256.5 rigs 6 rigs Lowered
Permian development capital2025-$150M vs prior plan (Q1 update) Additional $130M reduction tied to efficiencies Lowered further
Egypt gross gas volumesH2 2025Prior guide (Q1) Raised for next two quarters Raised
2025 realized savings (controllable spend)2025$130M $200M Raised
Year-end run-rate savingsYE 2025$225M $300M Raised
Long-term savings run-rate target2026–2027$350M by YE2027 $350M in 2026 Accelerated
Suriname GranMorgu capital2025~$200M (Q4 outline) $275M (milestone timing); costs unchanged Raised (timing)
Trading pretax income2025$575M (May update) $650M Raised
U.S. oil volumes2025125–127 kbpd 125–127 kbpd maintained Maintained
Net debt targetLTNot specified$3B long-term target New target

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Permian capital efficiency & rig cadenceMove from 11→8 rigs; breakevens lowered; hold U.S. oil 125–127 kbpd Hold oil flat with 6 rigs; DSU-level optimization; tighter spacing/smaller fracs; breakeven low 40s WTI Accelerating efficiency; sustaining lower spend
Egypt gas program & pricingNew gas price agreement; increased H1 focus; 12 rigs; expected realized gas price $3.40–$3.50 in ’25 Exceeded gas guidance; raised H2 guidance; award of ~2M acres; infrastructure leverage and debottlenecking Positive momentum; scaling opportunity
Cost reductions (Capital, LOE, G&A)Program to reach $350M by YE2027; quick wins in overhead $200M 2025 realized; $300M YE run-rate; $350M pulled forward to 2026; detailed LOE projects Ahead of schedule; scope broadening
Suriname Block 58 (GranMorgu)FID; ~$200M ’25 capital; first oil mid-2028 ’25 capital to $275M on milestone timing; first oil mid-2028 reiterated On track; faster milestone payments
Trading (LNG/basis)~$600M ’25 expectation; ~$500M in ’24 $650M ’25 pretax guidance; favorable LNG spreads into 2026 Tailwind strengthening
Taxes (U.S./UK)UK EPL impact discussed U.S. bonus depreciation; CAMT IDCs from 2026; UK current tax falls in ’26 Lower tax outlook medium term

Management Commentary

  • “We are currently delivering flat go-forward oil production with six drilling rigs…Our D&C cost per foot are now among the lowest in the Midland Basin…” — John Christmann (CEO) .
  • “Adjusted net income for the second quarter was $313 million or $0.87 per share…APA generated $134 million of free cash flow…reduced net debt by over $850 million.” — Ben Rodgers (CFO) .
  • “We now anticipate capturing at least $200 million in savings in 2025…plan to exit the year at an impressive $300 million annual savings run rate…$350 million run rate target sometime in 2026.” — John Christmann (CEO) .
  • “Full year guidance reflects $650 million in pretax income from our trading operations…forward curve for 2026 shows favorable LNG pricing and spreads.” — Ben Rodgers (CFO) .
  • “Secured presidential approval for the direct award of approximately 2 million additional acres [in Egypt], unlocking a material amount of prospective oil and gas resource.” — Release language .

Q&A Highlights

  • Debt target timeline: Management set a long-term net debt target of $3B and expects achievement in ~3–5 years organically at mid-cycle pricing, with flexibility based on commodity prices .
  • Permian sustainability capex: Sustaining U.S. capital proxy is lower in 2H25; holding oil flat at 6 rigs and ~120-capital cadence into 2026 per annualized Q2–Q4 run-rate .
  • Egypt program scale & infrastructure: Organizational capacity supports expansion; processing capacity ~800 MMcf/d with field gathering/compression the bottleneck; leveraging third-party facilities where possible .
  • Facility constraints clarity: Wild Jenny and Silverbelly facilities constrained early well performance until debottlenecked/power delivered; unconstrained flow expected by year-end .
  • Tax outlook: U.S. bonus depreciation reduces current tax in 2025; CAMT IDCs from 2026; UK current tax expected to be minimal from 2026 as asset moves into tax loss .

Estimates Context

  • Q2 2025 results beat S&P Global consensus on EPS, revenue, and EBITDA: EPS normalized $0.87 vs $0.485*; revenue $2.178B vs $2.081B*; EBITDA $1.378B vs $1.164B* .
  • Drivers of beat: Permian efficiency (faster turn-in-lines, lower D&C costs), Egypt gas outperformance and improved realizations, and stronger trading income outlook .
  • Estimate revision implications: Upward revisions likely to H2 gas volumes/realizations in Egypt and to cost-savings run-rate cadence; EBITDA trajectory benefits from both operational efficiencies and trading .

Values retrieved from S&P Global for consensus metrics.

Key Takeaways for Investors

  • Execution inflection: Structural efficiency gains enable lower rig count while holding Permian oil flat, materially improving capital productivity and breakevens—supporting higher free cash conversion .
  • Cost program ahead of plan: 2025 realized savings lifted to $200M and YE run-rate increased to $300M; $350M run-rate now targeted in 2026, expanding medium-term FCF per share .
  • Egypt optionality: ~2M acres awarded and gas program outperformance with improved pricing underpin volume/FCF upside into H2 and 2026; watch infrastructure investments and mix evolution .
  • Balance sheet tailwinds: >$850M net debt reduction in Q2; long-term $3B net debt target adds discipline, reducing volatility and supporting investment-grade profile .
  • Suriname steady progress: 2025 capital timing step-up without total cost change; first oil mid-2028 maintained, offering substantial portfolio diversification and future FCF growth .
  • Trading uplift: Raised pretax income guidance to $650M with favorable LNG spreads into 2026—an underappreciated earnings driver and near-term catalyst .
  • Near-term trading implications: Post-beat momentum and accelerated cost savings should support upward estimate revisions and sentiment improvement; focus on facility debottlenecks and LOE progression to sustain margin trajectory .