APA Corp 10-Q Summary: Q2 2026
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2026, for APA Corporation (APA), an independent energy company engaged in the exploration, development, and production of crude oil, natural gas, and natural gas liquids (NGLs). APA operates primarily in the U.S. (Permian Basin), Egypt, the North Sea, and Suriname. The company is a large accelerated filer with 350.4 million shares of common stock outstanding as of July 31, 2026.
Key Financial Metrics
| Metric (in millions, except per share) | Q2 2026 | Q2 2025 | YTD 2026 | YTD 2025 |
|---|---|---|---|---|
| Total Revenues | $2,373 | $2,178 | $4,700 | $4,814 |
| Net Income (Common Stock) | $747 | $603 | $1,193 | $950 |
| Diluted EPS | $2.11 | $1.67 | $3.37 | $2.62 |
| Operating Cash Flow (YTD) | $2,260 | $2,277 | $2,260 | $2,277 |
| Capital Expenditures (YTD) | $1,111 | $1,437 | $1,111 | $1,437 |
| Total Debt | $3,743 | $4,493 | $3,743 | $4,493 |
| Cash & Equivalents | $444 | $516 | $444 | $516 |
Production Volumes (Q2 2026): Total production averaged 409,959 boe/d, a 12% decrease year-over-year. Oil production was 211,270 b/d, natural gas was 752,125 Mcf/d, and NGLs were 73,335 b/d.
Material Changes vs. Prior Period
- Revenue Drivers: Net income increased 24% in Q2 2026 compared to Q2 2025, primarily driven by a 50% increase in average realized oil prices ($98.24/bbl vs. $65.58/bbl). This offset a 10% decline in oil production volumes.
- Gas Pricing Impact: Natural gas revenues declined significantly due to a 74% drop in average realized prices ($0.60/Mcf vs. $2.28/Mcf), driven by negative pricing periods in the Permian Basin. The company curtailed gas volumes to mitigate economic impact.
- Divestitures: Unlike Q2 2025, which included a $282 million gain on the sale of New Mexico Permian assets, Q2 2026 recorded a $2 million loss on divestitures.
- Cost Management: Operating expenses decreased due to the sale of non-core assets and continued cost-reduction initiatives. The company raised its annualized savings target to $500 million by year-end 2026.
- Debt Reduction: Total debt decreased by approximately $750 million year-over-year. In the first six months of 2026, APA repaid $754 million of long-term debt principal.
Guidance, Outlook, and Risks
- Capital Allocation: APA maintains a framework to return 60% of free cash flow to shareholders via dividends and share repurchases. The quarterly dividend remains $0.25 per share. The company has $19.0 million in remaining share repurchase authorization as of June 30, 2026.
- Capital Expenditures: The company expects to invest approximately $2.1 billion in upstream capital in 2026, focusing on offsetting production declines and maintaining a safe, efficient activity level.
- Acquisitions: APA entered an agreement to acquire Savant Alaska, LLC for approximately $70 million upfront plus contingent payments, expected to close by year-end 2026.
- Key Risks:
- Commodity Volatility: Exposure to oil, gas, and NGL price fluctuations remains a primary risk, exacerbated by geopolitical tensions in the Middle East and global trade policies.
- Decommissioning Contingencies: A significant contingent liability of $847 million exists related to potential decommissioning obligations for sold Gulf of America (GOA) properties following the bankruptcy of the buyer, Fieldwood Energy.
- Legal Proceedings: Ongoing litigation includes a dispute with Santos (formerly Quadrant) regarding Australian operations and a Delaware lawsuit alleging damages from global warming.
Investor Verification Checklist
- Gas Basis Differentials: Verify the extent of Permian Basin gas curtailments and the duration of negative pricing impacts on future cash flows.
- Decommissioning Liability: Review the $847 million contingent liability for GOA assets and the status of the trust account funding decommissioning.
- Production Decline Rates: Assess the sustainability of production levels given the 12% year-over-year decline in total boe/d and the impact of asset sales.
- Debt Maturities: Confirm the schedule for remaining debt maturities and the company's ability to service debt given the current interest rate environment.
- Acquisition Integration: Monitor the closing and integration timeline for the Savant Alaska acquisition and its impact on the Alaska exploration portfolio.