APA Corporation (APA)

Oil and gas producer APA Corporation (NASDAQ:APA) reported Q4 CY2025 results topping the market’s revenue expectations, but sales fell by 11.8% year on year to $1.87 billion. Its non-GAAP profit of $0.91 per share was 41.7% above analysts’ consensus estimates.

Company Overview

Operating in three continents with a history stretching back to 1954, APA Corporation (NASDAQ:APA) explores for, develops, and produces crude oil, natural gas, and natural gas liquids in the U.S., Egypt, and the U.K. North Sea.

This category includes smaller or niche E&P companies operating in specialized basins, geographies, or resource types outside major classifications. These firms may target unconventional resources, frontier regions, or specific commodity niches. Tailwinds include potential for outsized returns from successful exploration, acquisition opportunities during industry downturns, and specialized expertise commanding premium valuations. Headwinds include higher operational and geological risks, limited scale reducing negotiating power and cost efficiencies, and constrained capital market access during challenging commodity environments. Regulatory risks and ESG concerns may disproportionately affect smaller operators with fewer resources for compliance.

APA Corporation competes with other independent oil and gas producers including Devon Energy (NYSE:DVN), EOG Resources (NYSE:EOG), ConocoPhillips (NYSE:COP), and Occidental Petroleum (NYSE:OXY) in the Permian Basin and other regions.

In Energy, scale separates fragile single-asset producers from platform-style businesses that generate revenue across entire basins and infrastructure networks. APA Corporation’s $8.15 billion of revenue in the last year is top-tier for the industry, suggesting the type of diversification that reduces operational risk.

Cyclical industries such as Energy can make mediocre companies look great for a time, but a long-term view reveals which businesses can actually withstand and adapt to changing conditions. Over the last five years, APA Corporation grew its sales at a solid 15.6% compounded annual growth rate. Its growth surpassed the average energy upstream and integrated energy company and shows its offerings resonate with customers, a great starting point for our analysis.

Even a long stretch in Energy can be shaped by a single commodity cycle, so extending the view to ten years adds another perspective and reveals which companies are built to grow regardless of the pricing regime. APA Corporation’s annualized revenue growth of 2.2% over the last ten years is below its five-year trend, but we still think the results were respectable.

While looking at revenue is important, it can also introduce noise around commodity prices and M&A. Analyzing production, on the other hand, highlights what is happening inside the asset base and whether the economic footprint of a company is expanding. Over the last two years, APA Corporation’s oil production per day averaged 32.4% year-on-year growth while its natural gas production per day averaged 7.1% year-on-year growth.

This quarter, APA Corporation’s revenue fell by 11.8% year on year to $1.87 billion but beat Wall Street’s estimates by 4.3%. This quarter, APA Corporation’s Oil production per day fell by 10.6% year on year.

In a single quarter or year, gross margins in the sector can swing wildly due to commodity prices, hedging, or changes in labor costs. Over a multi-year period across different points in the cycle, gross margin differences can signal whether a company is a structurally-advantaged producer (“rock” quality, takeaway, operating costs) or not.

APA Corporation, which averaged 65.1% gross margin over the last five years, exhibits good unit economics in the sector. It means the company will remain profitable at lower commodity prices than peers with inferior gross margins and serves as an encouraging starting point for ultimate operating profits and free cash flow generation.

APA Corporation’s gross profit margin came in at 81.4% this quarter , marking a 14.7 percentage point increase from 66.7% in the same quarter last year. Note that energy margins can be volatile due to commodity price changes.

APA Corporation has been a well-oiled machine over the last five years. It demonstrated elite profitability for an upstream and integrated energy business, boasting an average EBITDA margin of 63.5%.

Looking at the trend in its profitability, APA Corporation’s EBITDA margin decreased by 10.4 percentage points over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q4, APA Corporation generated an EBITDA margin profit margin of 63.7%, down 1.3 percentage points year on year. This reduction is quite minuscule and indicates the company’s overall cost structure has been relatively stable. This adjusted EBITDA beat Wall Street’s estimates by 6.7%.

Adjusted EBITDA shows how profitable a company’s existing “rock” is before financing and reinvestment, while free cash flow shows how much value remains after paying to replace those wells. Because production declines over time, strong EBITDA can coexist with weak FCF if drilling is expensive or declines are steep. FCF therefore captures both operating efficiency and the cost of sustaining production.

APA Corporation has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the energy upstream and integrated energy sector, averaging 17.9% over the last five years.

While the level of free cash flow margins is important, their consistency matters just as much.

APA Corporation’s ratio of quarterly free cash flow volatility to WTI Crude price volatility over the past five years was 3.6 (lower is better), indicating unusually strong insulation from commodity swings. This stability supports superior capital access in downturns and positions APA Corporation to act as a consolidator when weaker peers are forced to retrench.

You may be asking why we wait until the free cash flow line to perform this stability analysis versus commodity prices. Why not compare revenue or EBITDA to WTI Crude prices in the case of APA Corporation? Because what ultimately matters is not how much revenue or profit you earn when prices are high but how much cash you can generate when prices are low. Free cash flow is the superior metric because it includes everything from hedging prowess to growth and maintenance capex to management behavior during good times and bad.

APA Corporation’s free cash flow clocked in at $425 million in Q4, equivalent to a 22.7% margin. This result was good as its margin was 2.9 percentage points higher than in the same quarter last year. Its cash profitability was also above its five-year level, and we hope the company can build on this trend.

Free cash flow tells investors how much money an Energy producer made, and ROIC takes this one step further by telling investors how well and effectively the business made it. ROIC illustrates how much operating profit a producer generated relative to the money it has raised (debt and equity).

We at StockStory like to look at ROIC over a ten-year period because energy investment cycles can involve up to five years of ramping production and another five years of harvesting. A decade view captures buying, extracting, and monetizing rather than just part of that picture. APA Corporation’s ten-year average ROIC was 14.2%, beating other energy upstream and integrated energy companies by a wide margin. This illustrates its management team’s ability to invest in attractive growth opportunities and produce tangible results for shareholders.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, APA Corporation’s ROIC has decreased significantly over the last few years. Only time will tell if its new bets can bear fruit and potentially reverse the trend.

APA Corporation reported $516 million of cash and $4.49 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $5.16 billion of EBITDA over the last 12 months, we view APA Corporation’s 0.8× net-debt-to-EBITDA ratio as safe. We also see its $260 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see APA Corporation beat analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this quarter featured some important positives. The stock traded up 5.9% to $41.32 immediately following the results.

Updated: March 29, 2026 at 1:04 AM EDT

Before making an investment decision, investors should account for APA Corporation’s business fundamentals and valuation in addition to what happened in the latest quarter.

There is a lot to like about APA Corporation. First of all, the company’s revenue growth over the last five years was solid for the sector. And while its declining EBITDA margin shows the business has become less efficient, its top-tier scale enables operational efficiencies, capital market access, and investment in advanced technologies. On top of that, APA Corporation’s impressive EBITDA margins show it has a highly efficient business model.

APA Corporation’s P/E ratio based on the next 12 months is 9.9x. Looking across the spectrum of energy upstream and integrated energy businesses, APA Corporation’s fundamentals shine bright. We like the stock at this bargain price.

Wall Street analysts have a consensus one-year price target of $35.39 on the company (compared to the current share price of $44.56).