APA's (APA) second-half 2026 performance is expected to remain broadly in line with its guidance, while its planned share buybacks could draw investor attention as the company continues to reduce debt and costs, TPH Energy Research analyst Oliver Huang said in a Tuesday note.
The company has improved results for several quarters, executing its operating plan, cutting costs and reducing leverage, Huang said. APA is targeting about $500 million in annualized cost savings by the end of 2026.
Management has reaffirmed its plan to return at least 60% of adjusted free cash flow to shareholders this year. Based on an estimated $2.3 billion of adjusted free cash flow, APA could have roughly $900 million of buybacks remaining in the second half.
The outlook is not without risks. Lower profitability in APA's marketing business is expected to weigh on 2027 results, while publicly available data on wells in the Midland Basin has been uneven, potentially renewing investor scrutiny of the company's US operations.
Attention could increasingly shift to APA's international exploration portfolio, the analyst said. Key developments include an Eni partnership, with its first Uruguay well expected to be drilled in late 2027, as well as Alaska projects including the Hungry Horse appraisal at Sockeye and a Chinook exploration well planned for this winter.
APA also expects to drill another one or two exploration wells annually as its Suriname project moves toward a targeted first oil date in mid-2028.
TPH estimates APA will report third-quarter 2026 production of 443,000 barrels of oil equivalent per day, above the Wall Street estimate of 438,000 barrels. Fourth-quarter production is projected at 446,000 barrels per day.
Huang also sees significant potential value from exploration, assigning about $10 per share to the combined Sockeye and Chinook prospects and another $2 per share to future Suriname exploration.
THP kept a Hold rating and a $48 price target on APA.