APA Q3 Free Cash Flow Doubles, Net Debt Target Cut to $2 Billion

APA Corporation said third-quarter 2026 free cash flow more than doubled from a year earlier as operating cash generation increased and upstream investment declined, supporting further debt repayment and shareholder returns. The oil and gas producer also set a $2 billion net debt target and projected full-year free cash flow of $2.9 billion based on October 28 strip pricing.

Free cash flow, a non-GAAP measure, rose to $699 million from $339 million in the third quarter of 2025. Net cash provided by operating activities was $1.38 billion, compared with $1.46 billion a year earlier, while cash flow before changes in operating assets and liabilities increased to $1.45 billion from $1.19 billion.

Adjusted EBITDAX climbed to $1.86 billion from $1.35 billion in the prior-year quarter. Third-quarter upstream capital investment, excluding Egypt noncontrolling interests, fell to $466 million from $542 million, with U.S. Lower 48 spending declining to $282 million from $379 million in each of the first two quarters of 2026.

Production and cost performance

APA reported third-quarter adjusted production of 381,000 barrels of oil equivalent per day, excluding noncontrolling-interest and tax barrels. U.S. oil output exceeded the company’s guidance by 4,000 barrels per day, prompting APA to raise its full-year U.S. oil production guidance to 124,000 barrels per day. The company expects total full-year adjusted production of 364,000 boe/d, including adjusted oil production of 180,000 barrels per day.

The Permian business remains central to APA’s cash generation. The company expects U.S. upstream operations to produce more than $2 billion of free cash flow in 2026 while sustaining oil output above 120,000 barrels per day. Estimated U.S. capital investment has fallen to $1.3 billion from an acquisition- and divestiture-adjusted $2.1 billion in 2024, reflecting lower drilling and completion costs and improved operating efficiency.

APA attributed its Permian cost reductions to integration benefits from the Callon acquisition, changes in frac design, broader use of simulfrac operations and drilling and casing improvements. The company said increased Delaware Basin activity planned for 2027 is expected to support additional efficiencies and cost savings.

In Egypt, gross production averaged about 206,000 boe/d in the third quarter, broadly consistent with the second quarter. Gross natural gas production reached approximately 542 million cubic feet per day, 7 million cubic feet per day above guidance. Adjusted Egypt production was 63,902 boe/d, up from 61,416 boe/d in the second quarter.

APA expects Egypt to generate more than $700 million of free cash flow in 2026 on capital investment of about $500 million. Power projects connecting wells to overhead transmission lines have reduced diesel consumption, with the company estimating cumulative savings of more than $100 million from 2024 through 2026. Additional power projects are planned for 2027.

Debt reduction and shareholder returns

APA retired about $450 million of debt during the third quarter, bringing net debt to $3.22 billion at September 30 from $3.98 billion at the end of 2025. The company has repaid $1.2 billion of debt in 2026 and $2.8 billion since the end of 2024, generating more than $180 million of annualized interest savings.

The company reduced its net debt target to $2 billion from $3 billion and said it expects to achieve the new target by the end of 2026. A separate capital-returns estimate showed year-end net debt of approximately $3 billion when including the pending Savant acquisition and potential working-capital effects.

APA continues to target returning at least 60% of annual free cash flow to shareholders. It had repurchased 17.8 million shares through October 30 and expects roughly $650 million of additional repurchases in November and December. Total 2026 shareholder returns are projected to exceed $1.7 billion, based on the company’s $2.9 billion free-cash-flow estimate.

The balance sheet carried $3.3 billion of total debt at quarter-end, with a net leverage ratio of 0.5 times last-12-month adjusted EBITDAX. APA reported $4.1 billion of liquidity and less than $200 million of debt maturities over the next five years.

Gas trading and long-term development

APA expects third-party oil and gas purchases and sales to generate $1.08 billion of pre-tax cash flow in 2026. Including equity gas production, its U.S. gas trading and production portfolio is projected to contribute $1.23 billion this year and $1.11 billion in 2027. The portfolio includes LNG sales and firm transportation capacity linking Permian gas purchases with Gulf Coast markets.

In Suriname, the GranMorgu development remains on schedule and within budget, with first oil expected in mid-2028. The project has estimated recoverable resources of more than 750 million barrels of oil and planned production capacity of 220,000 barrels per day. APA holds a 40% working interest, while its carry agreement with TotalEnergies reduces its effective capital exposure by having TotalEnergies fund 75% of APA’s appraisal and development spending.

2027 investment outlook

APA’s preliminary 2027 upstream capital budget is $2.5 billion, including $1.5 billion for the U.S., $500 million for Egypt, $250 million for GranMorgu development and $250 million for exploration. The total is about 10% below adjusted 2024 spending, despite increased investment in GranMorgu and exploration.

Management expects the program to deliver U.S. and Egypt production similar to 2026 levels, advance GranMorgu toward first oil and fund five exploration and appraisal wells. Planned activity includes Suriname prospects, appraisal and exploration in Alaska, and an offshore Uruguay well with Eni, which is expected to fund most of the late-2027 well cost.

For the fourth quarter, APA forecasts adjusted production of 364,000 boe/d and upstream capital investment of $525 million. Full-year upstream investment is expected to total $2.1 billion.

The outlook depends on commodity prices, operating execution and the company’s ability to meet production, capital-spending, cost-saving and debt-reduction goals. APA also identified regulatory and tax changes, trade policies, sanctions, geopolitical risks, government approvals, infrastructure requirements and completion of the pending Alaska acquisition as potential sources of uncertainty.