APA (NASDAQ:APA) executives said 2025 marked a “highly successful year” driven by faster-than-planned cost reductions, steady operational execution across its core assets, and more than $1 billion in free cash flow generation, according to the company’s fourth-quarter and full-year 2025 results conference call.
CEO John Christmann said the company entered 2025 aiming to reduce controllable spend by $350 million on a run-rate basis by the end of 2027, but achieved that target earlier than expected and now expects to exit 2026 with a $450 million run-rate. He added that the company returned roughly $640 million to shareholders in 2025 and ended the year with net debt below $4 billion.
2025 financial results and free cash flow
APA generated $425 million of free cash flow in the fourth quarter and returned $154 million to shareholders. For the full year, Rodgers said free cash flow topped $1 billion and the company returned 63% of that amount to shareholders through dividends and share repurchases.
Rodgers also said APA reduced net debt by about $1.4 billion from year-end 2024 to just under $4 billion at year-end 2025, citing free cash flow, asset sales, and payments from Egypt. Interest expense was about $80 million lower than in 2024.
On reserves, Rodgers said proved reserves increased about 9% year over year to more than 1 billion barrels of oil equivalent, and the company’s all-in reserve replacement ratio exceeded 160% in 2025. Management attributed the reserve growth to execution in the Permian and Egypt, despite a 13% year-over-year decline in SEC oil prices.
Cost reduction progress and 2026 spend outlook
Management emphasized cost reductions as a central theme. Rodgers said APA captured more than $300 million of savings in 2025 and exited the year at a $350 million run-rate. For 2026, he expects controllable spend to decline by another $200 million, though he noted only about half reflects incremental savings, with the rest driven by lower Permian activity compared with 2025.
Rodgers said guidance reflects lower 2026 capital, G&A, and LOE versus 2025 “with the exception of LOE,” explaining that expected operating savings are being offset by “market-related headwinds,” primarily in the Permian and North Sea. As a result, APA expects 2026 LOE to be slightly above 2025.
Permian: inventory characterization, efficiency gains, and 2026 capital
President Steve Riney described the Permian Basin as APA’s “foundational asset,” and said the company’s recent work has centered on portfolio high-grading, cost structure improvements, and refining its development approach. Riney said the Callon acquisition, along with exits from non-core assets such as the conventional Central Basin Platform and a fragmented New Mexico position, helped concentrate the company’s footprint. APA now holds about 450,000 net acres across the Midland and Texas-Delaware basins, with more than 95% held by production, he said.
On costs, Riney said 2025 improvements in drilling, completions, equipping, and facilities costs contributed to better capital efficiency. He cited average drilling and completion costs of $595 per lateral foot in the Midland Basin and $750 per foot in the Delaware Basin, as presented in the company’s supplemental materials. During Q&A, management added that late in 2025 it achieved periods where Midland costs were under $500 per lateral foot and Delaware costs were under $700 per foot for certain shallow wells.
Riney also detailed APA’s framework for classifying Permian locations:
- Economic inventory: operated locations expected to generate at least a 10% rate of return; currently about 1,700 locations.
- Technical upside: locations believed likely to progress into economic inventory with further delineation and efficiency gains; also about 1,700 locations.
- Prospective leads: opportunities not yet characterized and not included in technical upside.
Riney said economic inventory estimates are conservative because they assume no future efficiency gains and require high confidence in production forecasts. He added that the distinction between economic inventory and technical upside is driven more by technical maturity than by economics. Riney said APA believes it can sustain oil production at current levels for at least the next 10 years and sees “meaningful potential” to extend that timeframe.
Management also discussed technical upside work in the shallow Delaware Basin. Riney said roughly two-thirds of technical upside is in the Delaware Basin, with much of it in shallow landing zones such as the Avalon and First and Second Bone Spring. He noted the company plans a four-well appraisal test later in 2026 and said that, if successful, the test could move roughly a year’s worth of drilling activity into economic inventory. In response to a separate question, Riney confirmed that could equate to approximately 130 locations.
For 2026, Christmann outlined a $1.3 billion U.S. capital program intended to keep Permian oil production relatively flat year over year at about 120,000 to 122,000 barrels per day, despite weather-related downtime in the first quarter. Rodgers said Permian development capital is expected to be about $1.2 billion, plus roughly $100 million of base capital projects aimed at reducing LOE and improving uptime.
In Q&A, Rodgers said the $100 million includes projects such as compression, facilities consolidation, and artificial lift. He said APA expects to exit 2026 with a monthly LOE run-rate about $3 million to $3.5 million lower than it otherwise would have been, translating to about $40 million to $50 million of annualized savings—consistent with a one- to two-year payback.
Egypt, Suriname, and exploration plans
In Egypt, Christmann said activity under a new gas pricing framework drove “meaningful production growth” and supports a multi-year gas strategy. He said gross gas volumes are expected to continue growing year over year in 2026 and guided to approximately 540 million to 550 million cubic feet per day. Rodgers noted fourth-quarter gross gas production of 501 million cubic feet per day came in below guidance due to temporary pipeline disruptions late in the quarter, which he said were remediated.
Christmann said gross oil production in Egypt is expected to decline slightly as activity becomes more gas-weighted, although he also pointed to waterflood work that helped stabilize gross oil volumes over the past three quarters. During Q&A, Christmann said the company has shifted gas rigs to about 50% from 25% earlier, while still prioritizing oil, and noted some gas fields include condensate.
Rodgers said APA elected to withdraw from a “small non-core concession” in Egypt that was outside the merged concession area established in 2021 and did not benefit from the new gas pricing framework. He said the concession did not generate free cash flow, but exiting will reduce oil and gas volumes.
In Suriname, Christmann reiterated the company is advancing the GranMorgu development with a targeted mid-2028 first oil date and plans to allocate about $230 million of capital in 2026. Management clarified in Q&A that the $230 million is for the GranMorgu development project broadly, including items such as the FPSO and other development components, and that development drilling is expected to begin as part of the overall project timeline.
On exploration, APA budgeted about $70 million in 2026 for high-impact opportunities, including a return to exploration drilling in Suriname’s Block 58 in the fourth quarter and readiness work in Alaska ahead of an early 2027 drilling season. Christmann said about $20 million of the exploration budget is related to Alaska preparation work such as ice roads, with the remaining roughly $50 million largely tied to the Suriname well. In Alaska, management said it is reprocessing seismic and expects an active winter season in early 2027 that could include an appraisal at the Sockeye discovery and an exploration well.
Separately, Rodgers said the company’s oil and gas trading portfolio is expected to generate about $650 million of pre-tax income in 2026 based on strip pricing, and that cumulative pre-tax income from trading activities from 2020 through the end of 2026 is expected to be nearly $2 billion.
In closing remarks, Christmann said APA’s progress reflects a “fundamental transformation” over the past several years, citing a lower cost structure, a stronger balance sheet, and continued investment in exploration. He said the company sees a “clear line of sight to incremental free cash flow from Suriname beginning in 2028.”
About APA (NASDAQ:APA)
APA Corporation (NASDAQ: APA) is an independent exploration and production company engaged in the acquisition, development and production of oil and natural gas resources. The company operates through three core regions: the United States, Egypt and the North Sea. Through its integrated approach, APA combines geological and geophysical expertise with technical innovation to identify and develop hydrocarbons in both onshore and offshore settings.
In the United States, APA’s largest position is in the Permian Basin of West Texas and southeastern New Mexico, where it holds substantial acreage dedicated to oil-focused drilling and production.
