APA has lifted its 2026 free cash flow outlook by US$600 million to approximately US$2.9 billion, while setting a lower US$2 billion net debt target. Strong Permian production and debt reduction give the oil and gas producer more room for buybacks, dividends and its next investment cycle.
- US$699 million of third-quarter free cash flow
- 2026 free cash flow outlook lifted to approximately US$2.9 billion
- Net debt target lowered to US$2 billion
- US$537 million returned to shareholders in the quarter
- Preliminary 2027 upstream capital budget of US$2.5 billion
APA Corporation (NASDAQ:APA) is generating enough cash to pursue three goals at once: reduce debt, return money to shareholders and increase investment in its next growth projects. The US oil and gas producer lifted its 2026 free cash flow outlook by US$600 million to approximately US$2.9 billion after third-quarter production exceeded guidance and higher commodity prices improved the outlook.
The quarter produced US$699 million in free cash flow, US$1.38 billion in net cash from operating activities and US$1.86 billion in adjusted EBITDAX, a non-GAAP measure. GAAP net income attributable to common stock was US$698 million, or US$2.00 a diluted share, while adjusted earnings came in at US$676 million, or US$1.94 a share.
Permian output beats guidance as production profile strengthens
Reported production averaged approximately 450,000 barrels of oil equivalent per day, although APA’s adjusted figure was 381,000 BOE per day after excluding Egypt’s noncontrolling interest and tax barrels. US oil production reached 128,000 barrels per day, 4,000 barrels above guidance, with the company citing high uptime, earlier turn-in-lines and strong new-well performance in the Permian Basin.
APA increased its full-year US oil production expectation to 124,000 barrels per day, above its initial 120,000 to 122,000 barrels per day range. The company expects fourth-quarter US oil production to moderate as the timing of turn-in-lines and seasonal weather effects influence the reported result. In Egypt, gross production was broadly stable at 206,000 BOE per day, while gas production rose above guidance and average gas realisations increased to US$4.34 per Mcf from US$4.23 in the second quarter.
Debt reduction creates room for buybacks and investment
APA repaid US$451 million of debt during the quarter and US$1.2 billion year to date. Total debt has fallen by US$2.8 billion since the end of 2024, cutting annualised interest expense by more than US$180 million. Net debt stood at US$3.22 billion at September 30, down from US$3.98 billion at the end of 2025.
The company returned US$537 million to shareholders during the quarter, including US$450 million in share repurchases. Through October, it had bought back 17.8 million shares during 2026, including 4.5 million shares at an average US$47.32. APA says it expects to return at least 60% of 2026 free cash flow to shareholders while continuing to reduce debt, and has lowered its net debt target from US$3 billion to US$2 billion.
2027 budget points to a larger Suriname investment cycle
APA’s preliminary 2027 upstream capital budget is US$2.5 billion, US$400 million above the implied 2026 level. Exploration and the GranMorgu development are expected to account for about 60% of that year-over-year increase, with the remainder directed towards higher Permian activity and anticipated service-cost inflation. APA expects US and Egypt production to be broadly similar year on year.
The trade-off is clear even if the numbers remain favourable: more cash is available today, but a larger slice of next year’s capital budget is being directed towards projects whose returns depend on execution and commodity conditions. GranMorgu is still targeted for first oil in mid-2028, while the company expects stronger fourth-quarter cash generation to support further repurchases alongside debt reduction.
Bottom Line?
APA’s improved cash outlook strengthens the case for simultaneous buybacks and deleveraging, but the next test is whether higher 2027 spending can advance GranMorgu without diluting that balance-sheet progress.
Questions in the middle?
- How much of the projected US$2.9 billion in 2026 free cash flow will ultimately fund buybacks rather than debt reduction?
- Can Permian efficiency gains offset the higher service costs and expanded capital requirements built into the 2027 budget?
- Will GranMorgu remain on track for first oil in mid-2028 as its share of APA’s investment programme increases?