APA delivered strong Q2 with production above guidance, lower capital intensity, and cost savings, raising full-year Permian oil guidance while maintaining capex. The company is ahead on balance sheet targets, expecting to reach $3B net debt in 2027, and highlighted progress in Alaska and Uruguay exploration. Permian oil production guidance raised to 123k b/d for 2026, while capex held at $1.3B; rig count reduced to 4.5 from 8 post-Cowan integration.
APA delivered strong Q2 with production above guidance, lower capital intensity, and cost savings, raising full-year Permian oil guidance while maintaining capex. The company is ahead on balance sheet targets, expecting to reach $3B net debt in 2027, and highlighted progress in Alaska and Uruguay exploration. Permian oil production guidance raised to 123k b/d for 2026, while capex held at $1.3B; rig count reduced to 4.5 from 8 post-Cowan integration.
APA delivered strong Q2 with production above guidance, lower capital intensity, and cost savings, raising full-year Permian oil guidance while maintaining capex. The company is ahead on balance sheet targets, expecting to reach $3B net debt in 2027, and highlighted progress in…
Management raised full-year savings target to $500 million run-rate, lowered LOE guidance by $25 million to $1.5 billion, and reduced Permian rig count to four while keeping capital at $1.3 billion. They maintain about $500 million net to APA annual capital in Egypt, with…
Reported gross margin was 1.08%, reinforcing the quarter's better-than-guided profitability.
Egypt gas production growing, with half now under revised pricing; gross oil guidance trimmed to 118k b/d, but BOE production unchanged.
Management's tone is firmly positive, driven by strong operational execution, rising production guidance, lower capital intensity, meaningful cost savings, and a strengthened balance sheet, positioning APA for accelerated free cash flow growth.
Management raised full-year savings target to $500 million run-rate, lowered LOE guidance by $25 million to $1.5 billion, and reduced Permian rig count to four while keeping capital at $1.3 billion. They maintain about $500 million net to APA annual capital in Egypt, with exploration spend stepping up in 2027 across Alaska, Suriname, and Uruguay.
Management emphasized 'momentum' and structural improvements, highlighting cost savings, higher production at lower capital, and early achievement of balance sheet targets.
“Since then, improvements in drilling, completions, and base management has significantly lowered capital intensity. As a result of these structural efficiency gains and our strong operational execution, We now expect to operate four rigs f…”
“Egypt has followed a similar trajectory, although the drivers have been different. Since signing the revised gas pricing agreement in 2024, we have maintained annual capital at roughly $500 million net to APA while progressively allocating…”
“And so it really, really is work to our advantage. And quite frankly, without that, we wouldn't be in the position we're in today.”
“So that's driven our interest and a lot of the industry interest into Uruguay. And, you know, what we're looking at is basically the conjugate margin geology that's worked on both sides of the margin up and down West African Latin America.”
“These results also reflect underlying efficiency gains and cost savings, particularly in the U.S., which have offset inflationary pressures such as global diesel costs.”
“As a reminder, changes in WAHA pricing have very little impact on APA's consolidated free cash flow because our unhedged transportation portfolio is closely matched by our Permian equity gas production.”
| Metric | Period | Range | Midpoint | Status |
|---|---|---|---|---|
| Capex | FY2026 | $1.3B | $1.3B | MAINTAINED |
| Free cash flow | FY2026 | $2.3B | $2.3B | GUIDED |
| UnitsPERMIAN_OIL | FY2026 | $123K | $123K | RAISED |
| UnitsEGYPT_GROSS_OIL | FY2026 | $118K | $118K | LOWERED |
| UnitsEGYPT_GROSS_GAS | FY2026 | $535M | $535M | MAINTAINED |
Suriname's Gran Morgue FID is on track for mid-2028, with Total taking lead; APA benefits from a large carry, preserving its balance sheet capacity. — Confirms deepwater project momentum and potential for additional exploration success in Block 58, underpinning long-term FPSO and subsea equipment demand for service providers.
“You know, we've got two blocks. Block six, which we had 100%. We now have 60% in that and we are really, really thrilled to welcome E&I as our partner.”
Okay, I understand. Thanks, John. My follow-up, if I may take advantage of Tracy being on the call or whoever wants to take this, but the E&I deal, ANCAP has given quite a lot of detail on the prospectivity of the whole area. E&I is obviously one of the top, if not the top, global explorer in the last several years. And I guess my question is simply this. There's one well in the deep water, John, Rhea, that you know well. It looks to us that it didn't go deep enough. Can you characterize what the exploration optionality is in Uruguay and what happens beyond the first well?
Well, you know, we've got two blocks. Block six, which we had 100%. We now have 60% in that and we are really, really thrilled to welcome E&I as our partner. It was a very competitive process and, you know, it really speaks to the quality of our position in Uruguay and how, you know, prospective that block is, but also a credit to our exploration team and the work that we've done, you know, now with Suriname bringing in Total and we're less than two years away from, you know, first oil there with Grand Morgue and now bringing E&I into, you know, block six in Uruguay. So we're thrilled to have them here. I'll let Tracy jump in. Obviously the, you know, the one well was too we believe was not drilled deep enough. Our objectives will be much deeper, but I'll let Tracy talk a little bit about the geology and what the concepts are and what we've got there.
APA reduced Permian rig count from 8 to 4.5 while raising oil production guidance, indicating much higher capital efficiency than peers. — Suggests Permian-wide efficiency gains may be underappreciated; rivals may need to adjust their own capital plans to remain competitive.
… sheet. We expect to achieve this again in 2026. Moving to our full-year outlook, our updated guidance reflects a broader improvement in the capital efficiency and durability of our two core assets. As a reminder, following the Cowan integration, we initially estimated that sustaining Permian oil production around 120,000 barrels per day would require eight rigs and roughly $1.7 billion of capital. Since then, improvements in drilling, completions, and base management has significantly lowered capital intensity. As a result of these structural efficiency gains and our strong operational execution, We now expect to operate four rigs for the remainder of the year, while raising our full-year oil production guidance to 123,000 barrels per day. This is a significant increase relative to our original guidance of 120,000 barrels per day, while our capital budget remains unchanged at $1.3 billion despite certain inflationary pressures. Egypt has followed a similar trajectory, although the drivers have been different. Since signing the revised gas pricing agreement in 2024, we have maintained annual capital at roughly $500 million net to APA while progressively allocating a greater …
Egypt gas production is growing faster than expected, with half of output now under revised pricing, boosting cash flows from the region. — Re-rates Egyptian assets for APA and signals improved upstream economics in the Western Desert, potentially influencing regional valuations and service demand.
… estimated that sustaining Permian oil production around 120,000 barrels per day would require eight rigs and roughly $1.7 billion of capital. Since then, improvements in drilling, completions, and base management has significantly lowered capital intensity. As a result of these structural efficiency gains and our strong operational execution, We now expect to operate four rigs for the remainder of the year, while raising our full-year oil production guidance to 123,000 barrels per day. This is a significant increase relative to our original guidance of 120,000 barrels per day, while our capital budget remains unchanged at $1.3 billion despite certain inflationary pressures. Egypt has followed a similar trajectory, although the drivers have been different. Since signing the revised gas pricing agreement in 2024, we have maintained annual capital at roughly $500 million net to APA while progressively allocating a greater share of this investment towards attractive gas opportunities. Even with this shift, gross oil production has continued along a modest and predictable decline trajectory, while gas production has grown meaningfully. Supported by a refocused exploration program,
Suriname's Gran Morgue FID is on track for mid-2028, with Total taking lead; APA benefits from a large carry, preserving its balance sheet capacity. — Confirms deepwater project momentum and potential for additional exploration success in Block 58, underpinning long-term FPSO and subsea equipment demand for service providers.
And then, you know, John, you mentioned you're two years away from the startup of the Grant Moore Group project, and that's clearly a key differentiator for your growth profile into the future. Knowing you have this around the corner, how does this impact the development of the existing asset base and capital allocation strategy? Do you want to hold things steady with the existing production base? How do you think about different options there?
I think, Josh, it's a great question. First of all, things are on track with Grand Morgue. We've said mid-28 first oil. and Total came out and said potentially first or second quarter of 28, so we're going to stick with mid-28. What it's positioned us to where if we can just maintain volumes in our core assets of Permian and Egypt, well, then you've got growth coming through our exploration program and through Suriname. I think a couple of things. The big thing there is the way we structured our joint venture with Total. We're benefiting from a large carry in Suriname today, which has enabled us to continue to fund our programs domestically and internationally with Egypt and Permian. But it's also let us continue to make progress on the balance sheet and deliver on the returns framework while we're funding our such a large-scale capital project. And so it really, really is work to our advantage. And quite frankly, without that, we wouldn't be in the position we're in today. So it's really set us up to run those businesses like we would like to run those. We worked on adding durability and inventory life to Permian, where we can run flat for more than 10 years. which is kind of what we laid out earlier this year. We're obviously exceeding that with volumes and capital efficiency that we continue to have come through. And then obviously gas has changed our picture in Egypt as well. So we've been, you know, growing our BOEs, gross BOEs in Egypt. So, you know, it puts us in a really, really unique place today with our exploration program where we can allocate to the projects and let the projects get the capital they need and we're not having to constrain everything. all along bringing Suriname along. So, you know, it puts us in a really, really good place to continue doing what we're doing. And, you know, we're thrilled to be in the place we're in today.
Uruguay's OFF6 block is viewed as a frontier with untested deeper Cretaceous play, attracting top-tier partner E&I for a large-scale exploration well. — Success could open a new deepwater basin, benefiting regional exploration and long-cycle service chains; failure would reinforce the high-risk nature of frontier drilling.
Okay, I understand. Thanks, John. My follow-up, if I may take advantage of Tracy being on the call or whoever wants to take this, but the E&I deal, ANCAP has given quite a lot of detail on the prospectivity of the whole area. E&I is obviously one of the top, if not the top, global explorer in the last several years. And I guess my question is simply this. There's one well in the deep water, John, Rhea, that you know well. It looks to us that it didn't go deep enough. Can you characterize what the exploration optionality is in Uruguay and what happens beyond the first well?
Sure. Hi, Doug. I think one of the critical drivers for entry into Uruguay was the recent discoveries on the Namibian side in the Orange Basin in Africa, which really proved source rock on the African side of the margin that before had not been proven. So that's driven our interest and a lot of the industry interest into Uruguay. And, you know, what we're looking at is basically the conjugate margin geology that's worked on both sides of the margin up and down West African Latin America. Now, having proven source rock on the African side, we're looking to step over and test that on the conjugate margin on the Uruguay side. And so really it was that source rock data that drove interest that we're going to test on the Uruguay side. The interesting thing, as you pointed out, there's really only one well in the deep water in Uruguay, and that is the Raya well. And you're correct in your statement that we don't believe it tested nearly deeply enough. It's quite a shallow well relative to where the source rock is. And what has worked on the African side is your reservoirs are very close to source. we're going to be testing the same concept where we see reservoirs very close to source and much deeper than the Raya well tested. So with the exploration well, we'll be looking at that source rock, but also testing deposition, migration, and trap and seal on the site. So it'll be a very, very big well. We've got a really high quality 3D seismic data set over the prospects in block six and block four that we are looking at extending it in block four. But we've seen some terrific prospectivity on the 3D, very large prospects. And as John said, we'll look at testing that in late 2027. Great.
APA's cost savings are more than offsetting diesel inflation, indicating actual deflation in controllable service costs. — Suggests oilfield service pricing may be softening in certain basins, potentially pressuring service margins despite broader commodity inflation.
… cash flow during the second quarter and returned $189 million to shareholders through dividends and share repurchases. Underpinning these results was strong execution across production, capital, and operating costs. Some of the cost variance was timing related, particularly in the North Sea where the lifting schedule for our crude oil sales shifted a portion of LOE from late second quarter into early third quarter. However, These results also reflect underlying efficiency gains and cost savings, particularly in the U.S., which have offset inflationary pressures such as global diesel costs. Through the first six months of 2026, we've generated more than $1.2 billion in free cash flow, which is more than we produced during each of the past three years. While higher prices have played a role, we are also benefiting from structural improvements we've made across the business over the past two years. Through sustained cost reductions, capital efficiency gains, and portfolio high grading, we've materially enhanced the cash generating capability of the company. As a result, a greater share of every dollar of revenue is converted into free cash flow, strengthening our capacity to …
Gas trading book provides a natural hedge against Waha price volatility, stabilizing consolidated cash flows. — Reduces exposure to Permian gas takeaway constraints, potentially a competitive advantage vs peers; stable cash flows support buybacks and balance sheet targets.
… demonstrates that the efficiency improvements we've implemented over the past two years are delivering durable margin and free cash flow benefits. Shifting now to our gas trading portfolio, which remains a unique source of cash flow and an important competitive advantage for APA. Based on current STRIP, we expect to generate approximately $950 million of pre-tax cash flow in 2026, inclusive of our basis hedges. As a reminder, changes in WAHA pricing have very little impact on APA's consolidated free cash flow because our unhedged transportation portfolio is closely matched by our Permian equity gas production. Higher WAHA prices increase gas production revenue but reduce income from our transportation portfolio by a similar amount, while lower Waha prices have the opposite effect. Taken together, our strong operating performance, structural cost improvements, and differentiated gas trading portfolio position us to generate approximately $2.3 billion of free cash flow this year at current strip pricing. This enables us to continue strengthening the balance sheet while returning meaningful capital to shareholders. Turning to the balance sheet, we repaid $752 million of bond debt …