APA Corporation

Methodology

APA Corporation's oil and gas exploration and production earnings are extremely sensitive to crude and natural gas prices, making this calculation highly volatile. During commodity price spikes, earnings surge dramatically; during crashes, they can turn negative. This method is problematic for E&P companies unless normalized around mid-cycle oil prices ($60-70 WTI), as spot prices create misleading growth and fair value projections that reverse quickly.

Methodology

APA's PEG ratio fluctuates wildly with energy cycles, often appearing cheapest at cycle peaks when growth rates are highest but unsustainable. The company's production growth is limited without significant capital investment, and returns depend heavily on commodity price realizations. For E&P companies like APA, valuation based on reserves, production costs, and free cash flow at various oil prices provides better insight than earnings-based PEG ratios.

Methodology

APA's variable dividend approach tied to free cash flow means yield fluctuates dramatically with oil prices, providing some return during strong commodity environments. The company prioritizes debt reduction and return of excess cash over fixed dividend commitments. PEGY offers limited insight for APA given dividend volatility, with investors better served focusing on breakeven oil prices, debt levels, and free cash flow generation at various commodity price scenarios.