On their 4Q and full-year 2025 earnings call, APA outlined three core initiatives—portfolio actions, cost structure improvements, and a refined development approach—that management believes have structurally enhanced the company’s long-term free cash flow profile. The Permian Basin remains the company’s foundational asset.
Beginning with cost structure, the company highlighted, over $300 million captured in 2025 savings and a projected $450 million run-rate reduction by the end of 2026. Drilling and completion (D&C) costs have declined materially, averaging $595 per lateral foot in the Midland Basin and $750 per foot in the Delaware Basin, alongside lower facilities spending through brownfield expansions. Lease Operating Expense (LOE), which represents the ongoing cost to operate producing properties, is being structurally reduced through targeted base capital projects designed to improve uptime and lower breakeven levels.
These cost improvements have enabled APA’s refined development approach: historically wider well spacing with high-intensity completions has evolved toward tighter spacing and moderated completion intensity. This higher-density model captures economies of scale, converts technical upside into economic inventory, and reinforces a cycle in which lower costs enable more development, which in turn further reduces costs. Management stressed that these improvements are structural rather than macro-driven, positioning the company to sustain Permian oil production for at least the next decade while expanding inventory depth and capital efficiency.
The company said they have ~1,700 economic drilling locations in the Permian, defined as projects expected to generate at least a 10% internal rate of return (IRR) at $75/bbl, based on current costs and including full field-level burdens such as drilling, completion, equipping, facilities, and gathering systems. Further, ~1,000 of those locations would be economic at $50/bbl (see slide below).
An additional roughly 1,700 locations are categorized as “technical upside,” meaning they require further appraisal but could compete economically as costs decline and delineation improves. Those developments are largely in the Texas Delaware in Ward, Reeves and Winkler counties, targeting the Avalon and 1st and 2nd Bone Springs formations.
