Why Shares in APA Corporation Fell Today

Key Points

• The company is susceptible to the matter for two reasons.

• There's no guarantee of a production hike, let alone of its leading to a lower oil price.

• 10 stocks we like better than Apa ›

Shares in APA Corporation (NASDAQ: APA) were lower by 4.2% at 11 a.m. ET today. The decline comes after news reports that a group of eight OPEC+ members will meet on Sunday and will consider raising oil production. These countries, which include energy giants Saudi Arabia, Russia, Iraq, UAE, and Kuwait are reportedly looking at raising oil production on top of the increases started in April.

While it may seem counterproductive for OPEC+ to raise production, thereby hurting prices, it makes sense given that lower-cost OPEC+ producers want to regain market share from higher-cost producers.

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What it means to APA Corporation

Two things make APA sensitive to an OPEC+ production increase. First, it's a focused exploration and production company. It doesn't have the downstream operations of a company like Chevron, which can better manage a period of lower oil prices. Second, its exposure to higher-cost producing assets in the US -- 62% of production was from the US in 2024 -- means it's less able to cope with lower oil prices.

On the last earnings call, APA President Stephen Riney discussed the company's breakeven oil price (the price a developer needs to cover costs and obligations), saying, "In the Permian, we are running on average in the low 40s across the entire Permian in terms of a WTI breakeven oil price. In Midland Basin, we're running in the high 30s. And in the Delaware Basin, we're in the low 50s."

Image source: Getty Images.

With the price of oil currently below $64 a barrel, investors are concerned about a potential decline that could hurt APA's prospects. Still, at this point, there's no guarantee that OPEC+ will raise production, and if it does, there's no guarantee the price of oil will decline.

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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.