APA (NASDAQ:APA) outlined a strategy centered on cash-generating operations in the Permian Basin and Egypt, cost reductions and a global exploration portfolio that management believes can support future production growth.
Speaking at the EnerCom conference, Chief Financial Officer Ben Rodgers said the company’s 2026 capital budget is $2.1 billion, with most spending directed toward development activities in the Permian and Egypt. APA also plans to devote roughly 10% to 15% of annual capital spending to exploration over time, though that proportion is lower this year and is expected to rise next year, he said.
Cost cuts and cash flow
Rodgers said APA achieved its original target of $350 million in annualized controllable cost savings—including capital, lease operating expense and general and administrative costs—by the end of 2025, a year ahead of its target date. The company subsequently increased its savings goal, and now expects to exit 2026 with $500 million in structural annualized cost reductions.
In addition, APA expects annualized interest expense to be about $175 million lower, resulting in roughly $700 million of lower cash costs as it enters 2027, according to Rodgers.
The company generated $1.2 billion in free cash flow during the first half of the year and used $750 million of that amount to reduce debt, he said. APA expects to end the year with debt near $3 billion, compared with nearly $9 billion when Rodgers joined the company about eight and a half years ago.
APA maintains a framework to return at least 60% of annual free cash flow to shareholders, a policy Rodgers said has been in place since 2021.
Permian and Egypt remain the foundation
The Permian Basin and Egypt are APA’s primary sources of stable free cash flow, Rodgers said. APA has operated in Egypt for more than three decades and is the country’s largest oil producer, largest onshore acreage holder and largest U.S. investor, according to the CFO.
In the Permian, APA now expects 2026 production of 123,000 barrels per day while holding its capital plan at approximately $1.3 billion. The outlook has increased several times since the company’s initial November forecast of 120,000 barrels per day, Rodgers said, citing improved capital efficiency and well productivity.
The company has also outlined 10 years of economic drilling inventory in the Permian and expects continued appraisal work to potentially expand that inventory. In Egypt, APA is pursuing additional oil and gas exploration across its approximately 7 million-acre position in the Western Desert. Rodgers said a renegotiated Egyptian gas-price agreement has improved the company’s incentive to explore for and develop gas, with about half of its gas volumes receiving the new price over the past 18 months.
Separately, APA’s gas-trading operations—including Permian takeaway pipelines and an LNG contract with Cheniere—are expected to generate $950 million of cash flow net to APA this year, Rodgers said. That compares with just under $700 million last year and about $500 million in the prior year.
Suriname oil project targets 2028 start
APA expects more than 5% oil compound annual growth over the next three years, supported primarily by the Gran Morgu development offshore Suriname. First oil is expected in mid-2028.
The project is operated by TotalEnergies, APA’s 50/50 partner in Block 58. Rodgers said the development is expected to use a floating production, storage and offloading vessel with capacity of 220,000 barrels per day. APA estimates the project’s post-final investment decision breakeven at $30 per barrel.
APA entered Suriname in 2015, drilled its first Block 58 exploration well in 2019 and announced a discovery in 2020. The companies reached a final investment decision on Gran Morgu in October 2024. Rodgers said APA and TotalEnergies expect to drill at least two additional exploration wells in Block 58 next year, with potential for further exploration in subsequent years.
Alaska and Uruguay exploration plans
APA is also advancing exploration activities in Alaska and offshore Uruguay. In Alaska, the company plans a two-well program in 2027, including an appraisal well at the Sockeye discovery and an exploration well at Chinook. Ice-road construction is scheduled to begin in November and December, with drilling expected to start in January and February, Rodgers said.
APA recently acquired Savant on Alaska’s North Slope, adding infrastructure that includes 40,000 barrels per day of crude-processing capacity and an 80,000-barrel-per-day crude pipeline connected to the Trans-Alaska Pipeline System, as well as gravel pads, a dock and an airstrip.
In Uruguay, APA plans to operate an offshore exploration well in the second half of next year in the OFF-6 block. APA holds a 60% interest and Eni holds 40%, although Eni will carry most of the well’s costs under their agreement, Rodgers said. APA also holds a 50% interest in Uruguay’s OFF-4 block alongside Shell.
Rodgers said APA believes years of lower industrywide exploration spending could create future supply constraints, while the company expects global demand for oil and gas to remain durable. The company intends to use cash flow from its established operations to fund exploration rather than relying solely on acquisitions to replenish reserves and production.
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.
