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AC

APA Corp (APA)·Q3 2025 Earnings Summary

Executive Summary

  • APA delivered adjusted EPS of $0.93, a clear beat versus Wall Street consensus of $0.79, on revenues of $2.12B modestly above consensus of $2.11B; adjusted EBITDAX of $1.35B underscored strong cost execution even as S&P Global EBITDA tracked slightly below consensus ($1.18B vs $1.20B)* .
  • Management accelerated cost-reduction milestones, targeting $350M run-rate controllable spend savings by YE 2025 (two years sooner), raised 2025 realized savings to $300M (from $200M), and reduced net debt by ~$431M in the quarter to ~$$4.0B .
  • Q4 guidance was raised for U.S. oil production to 123 kbpd and for Egypt gross gas growth; Q4 upstream capital remains ~$440M (unchanged), supporting free cash flow preservation into 2026 .
  • CFO expects “little to no U.S. taxes” in 2025–2026 following CAMT guidance changes—an incremental free cash flow tailwind and a stock-reaction catalyst, alongside continued Egypt gas outperformance and visible balance sheet deleveraging .

What Went Well and What Went Wrong

  • What Went Well

    • Exceeded production guidance in all regions; U.S. oil production reached 121 kbpd on strong Permian execution; adjusted production was 387 mboe/d .
    • Accelerated cost program: “We expect to achieve $350 million in run-rate controllable spend savings by year-end 2025, two years sooner than initially anticipated,” with added $50–$100M targeted by YE 2026 .
    • Balance sheet progress: “Reduced net debt by approximately $430 million,” returned $154M to shareholders (dividends and buybacks); FCF was $339M .
    • CFO: “We now expect to owe little to no U.S. taxes in 2025 and 2026,” boosting after-tax cash generation .

  • What Went Wrong

    • Derivative mark-to-market: $148M unrealized derivative loss in Q3 weighed on GAAP EPS ($0.57) even as adjusted EPS was strong .
    • Waha basis dislocation led to curtailments (~20 MMcf/d gas and ~1.4 kbpd NGLs), and LOE savings at the corporate level lagged 2025 hopes, with North Sea/Permian initiatives offsetting over time .
    • YoY revenue decline on commodity backdrop: Total revenues fell to $2.12B vs $2.53B in Q3’24; GAAP EPS improved from (-$0.60) to $0.57, but net income margin compression vs Q2’25 reflects price/derivative dynamics .
    • ARO/decommissioning spend increased by $20M for 2025; 2026 after-tax ARO/DCOM cash impact expected to be ~$55M higher YoY, albeit manageable .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Total Revenues ($USD Billions)$2.53 $2.64 $2.18 $2.12
GAAP Diluted EPS ($USD)-$0.60 $0.96 $1.67 $0.57
Adjusted EPS ($USD)$1.00 $1.06 $0.87 $0.93
Margin MetricQ3 2024Q1 2025Q2 2025Q3 2025
Net Income Margin % (Net Income/Total Revenues)-8.8% [-$223 / $2.53B] 13.2% [$347 / $2.64B] 27.7% [$603 / $2.18B] 9.7% [$205 / $2.12B]
Adjusted EBITDAX Margin % (Adj. EBITDAX/Total Revenues)61.5% [$1.56B / $2.53B] 56.3% [$1.49B / $2.64B] 59.7% [$1.30B / $2.18B] 63.6% [$1.35B / $2.12B]
Product Revenue Breakdown ($USD Millions)Q3 2024Q1 2025Q2 2025Q3 2025
Oil Revenues$1,797 $1,600 $1,381 $1,470
Natural Gas Revenues$103 $233 $184 $192
NGL Revenues$158 $206 $153 $142
Operational KPIsQ1 2025Q2 2025Q3 2025
Reported Production (mboe/d)469 465 464
Adjusted Production (mboe/d)398 394 387
U.S. Oil (kbpd)125 124 121
Egypt Gross Gas (MMcf/d)457 479 508
Free Cash Flow ($USD Millions)$126 $134 $339
Net Debt ($USD Millions)$5,301 $4,444 $4,013
Upstream Capital Investment ($USD Millions)$710 $648 $542

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
U.S. Oil ProductionQ4 2025Not disclosed123,000 bpd Raised
Egypt Gross Gas ProductionQ4 2025Not disclosedIncreased growth vs prior plan Raised
Upstream Capital InvestmentQ4 2025~$440M (Q2 prior guide) ~$440M Maintained
Run-Rate Controllable Spend SavingsYE 2025$350M by YE 2027 (earlier plan) $350M by YE 2025 Accelerated
2025 Realized SavingsFY 2025$200M $300M Raised
U.S. Taxes (CAMT)FY 2025–2026Higher than current expectation“Little to no U.S. taxes” in 2025–2026 Lowered
ARO/DCOM SpendFY 2025Prior plan+$20M vs prior 2025 plan Raised
ARO/DCOM After-Tax Cash ImpactFY 2026Prior view+$55M YoY after-tax impact Raised
Dividend per ShareQ3 / Q2$0.25 $0.25 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current PeriodTrend
Cost Reduction ProgramQ1/Q2 raised realized/run-rate savings; reduced Permian rig count and capital $350M run-rate by YE 2025; +$50–$100M by YE 2026; strong capital and G&A momentum Accelerating
Egypt Gas Program & PricingIncreased gas drilling; rising realized gas price trajectory Gross gas up; new price applies to all new volumes; parity to $75–$80 Brent economics; payments normalized Strengthening
Permian Capital Efficiency & InventoryReduced rigs from 8→6; drilling speed gains Holding ~120 kbpd oil with 5–6 rigs; continued D&C cost progress; inventory reassessment underway Improving
TaxesCAMT/OBBB benefits outlined mid-year Expect “little to no U.S. taxes” in 2025–2026 Positive tailwind
ARO/DecommissioningNorth Sea program shape communicated; 2025 Gulf of Mexico higher 2025 +$20M; 2026 after-tax +$55M; North Sea program not accelerated Managed increase
Suriname Block 58FID and schedule reaffirmed; 2025 capital update First oil remains mid-2028; ~$250M 2026 development capital; progress on schedule On track

Management Commentary

  • CEO: “Our strong third-quarter results demonstrate our continued focus on operational execution, disciplined cost management, and the delivery of our strategic priorities… We believe the progress we have achieved in 2025 is sustainable and provides great momentum for the future.”
  • CEO on cost program: “We have now established a sustainably lower cost structure, improving the quality of our investment opportunities while strengthening the resiliency of our portfolio.”
  • CFO: “We now expect to owe little to no U.S. taxes in 2025 and 2026… APA generated $339 million of free cash flow and returned $154 million to investors… Net debt was reduced by approximately $430 million.”
  • CEO (Egypt gas): “Everything that we bring on new gas gets new gas price… we are excited about the inventory… we are going to grow year over year.”

Q&A Highlights

  • Capital Flexibility & 2026 Plan: Management can moderate Permian activity (rigs/DUCs) to preserve FCF, yet sustain ~120 kbpd Permian oil with ~5–6 rigs; development capital ~10% lower YoY in 2026 with added LOE-reduction projects .
  • Egypt Cash Flow Transition: Legacy accelerated cost recovery (~$45M/qtr gross) rolls off after Q1’26; net to APA’s 2/3 interest, free cash flow impact $20M/qtr ($60M for three quarters of 2026), with offsets from capital/LOE efficiencies and gas growth .
  • Hedging & Marketing: Expanded 2026 gas transport hedges (~1/3 of position, ~$140M cash locked), targeting certainty on differentials; 2025 trading income expected at ~$630M pre-tax .
  • ARO/DCOM: 2025 ARO/DCOM raised +$20M; 2026 after-tax impact up ~$55M YoY; North Sea program largely well-abandonment first, then facilities/subsea later; not accelerated .
  • Exploration Cadence: 2026 exploration spending relatively light; Alaska appraisal steps next winter; Uruguay data room ongoing; Alpine High DUC completions timed for Waha strength and acreage retention .

Estimates Context

MetricQ1 2025 Consensus*Q1 2025 ActualQ2 2025 Consensus*Q2 2025 ActualQ3 2025 Consensus*Q3 2025 Actual
EPS ($)0.821*1.06 0.485*0.87 0.791*0.93
Revenue ($USD Billions)2.196*2.64 2.081*2.18 2.107*2.12
EBITDA ($USD Billions)1.349*1.421*1.164*1.378*1.200*1.182*
  • EPS and revenue beat in all three quarters; Q3 EBITDA tracked slightly below consensus using S&P methodology*, while APA’s adjusted EBITDAX was $1.35B .
  • Target Price Consensus Mean: $25.30*; # of EPS estimates for Q3: 23; # of Revenue estimates for Q3: 7*.

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • The quarter was a clean beat on EPS and a slight revenue beat; strong EBITDAX and cost execution are offsetting commodity volatility and derivative headwinds .
  • Accelerated cost programs and lower U.S. cash taxes strengthen 2026 FCF visibility; net debt continues to decline toward a long-term $3B target .
  • Egypt gas is a structural growth engine with attractive fixed pricing and normalized receivables—expect continued gross gas growth and rising blended realizations .
  • Permian capital efficiency supports flat ~120 kbpd oil at 5–6 rigs with additional LOE-reduction investments; 2026 development capital planned ~10% lower YoY .
  • ARO/DCOM spend is rising but manageable with a 40% tax benefit in the U.K.; after-tax impact +$55M YoY in 2026, balanced by FCF levers .
  • Near-term catalysts: Q4 U.S. oil and Egypt gas guidance raises, CAMT-driven tax tailwind, further cost-savings updates, and Suriname development milestones .
  • Medium-term thesis: Durable FCF through cycle given portfolio diversification (Permian/Egypt/North Sea/Suriname), disciplined capital, and structural cost advantages—supporting deleveraging and shareholder returns .