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APA Keeps Focus on Free Cash Flow, Exploration Growth and Debt Reduction, RBC Says

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APA (APA) outlined a steady operating outlook and highlighted progress on cost reductions and exploration growth, RBC Capital Markets said in a Tuesday note.

The company remains comfortable running 12 rigs in Egypt and five rigs in the Permian, with no near-term pressure to increase production ahead of first oil from Suriname in mid-2028.

RBC said APA continues to see strong long-term inventory depth in the Permian, including more than 10 years of economic drilling inventory and about 3,400 economic-plus-technical-upside locations.

In Egypt, APA is shifting toward natural gas development, with 40% to 50% of activity now gas-weighted, while gas production is expected to grow about 13% to 14% year over year.

Suriname's GranMorgu project remains on track for first oil in mid-2028 and is expected to produce about 220,000 barrels per day, while nearby exploration prospects could further expand resources.

The company also plans a two-well Alaska program in winter 2026-2027, including one exploration well and one appraisal well, while seismic work remains the main focus this year.

In Uruguay, APA expects to drill an exploration well on Block 6 in 2027 and continues discussions with a potential partner while evaluating two offshore blocks.

RBC said APA's gas marketing business has benefited from strong LNG prices and the Waha basis environment, prompting the company to raise its cash flow outlook to about $1.1 billion.

APA has maintained its commitment to return at least 60% of cumulative free cash flow to shareholders and has returned about 75% since Q4 of 2021, though debt reduction remains the primary focus in 2026.

RBC maintained its Sector Perform rating on APA and kept its $45 price target, which is based on a blend of forward EBITDA multiples and net asset value.

Price: $38.61, Change: $+0.80, Percent Change: +2.12%

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