We came across a bullish thesis on APA Corporation on Penny on the Dollar’s Substack. In this article, we will summarize the bulls’ thesis on APA. APA Corporation’s share was trading at $26.92 as of February 12th. APA’s trailing and forward P/E were 6.44 and 9.75 respectively according to Yahoo Finance.
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APA Corporation (APA) is a diversified oil and gas producer operating across the Permian Basin, Egypt, the North Sea, and offshore Suriname, with a market cap of $8.7 billion and enterprise value of $12.7 billion, trading at 2.3x EV/EBITDA. Analysts often focus on short-term oil price challenges and geopolitical risks, but a deeper analysis using Damodaran’s framework decomposes APA into three components: price-sensitive E&P operations, price-insensitive infrastructure-like assets, and undeveloped reserves treated as real options.
The company’s E&P operations, primarily in the Permian Basin, show strong sensitivity to WTI prices, with every $1 increase adding roughly $76.6 million to EBIT. APA’s gas marketing and trading business generates $630 million annually and is largely insulated from commodity price swings, valued at $4.3 billion or roughly $12 per share. Meanwhile, the GranMorgu offshore Suriname development represents a real option, with low-cost reserves of 180 million barrels providing upside optionality, valued at $3.8 billion at $60 WTI.
Combined, the sum-of-the-parts analysis indicates the market is pricing APA as if WTI will remain near $63–$65 per barrel, consistent with current high-$50s to low-$60s levels. However, upside is substantial if oil prices rise: $70 WTI implies $39 per share and $80 WTI supports $61 per share.
Additional catalysts include planned debt reduction to $3 billion and accelerated Suriname first oil, enhancing equity value even in a flat-price scenario. Key risks remain oil price declines, Egyptian geopolitical exposure, and Suriname execution uncertainties, but APA’s combination of commodity leverage, stable trading income, and optionality positions it as an asymmetric risk/reward opportunity for investors.
Previously, we covered a bullish thesis on Occidental Petroleum Corporation (OXY) by Magnus Ofstad in May 2025, which highlighted OXY’s low-cost Permian Basin production, diversified business model, and carbon capture initiatives as drivers for potential rerating. OXY’s stock price has appreciated by approximately 5.69% since our coverage. Penny on the Dollar’s thesis on APA Corporation shares a similar industry focus but emphasizes APA’s sum-of-the-parts valuation, infrastructure-like trading business, and Suriname optionality.
APA Corporation is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 33 hedge fund portfolios held APA at the end of the third quarter which was 33 in the previous quarter. While we acknowledge the risk and potential of APA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than APA and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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