APA vs. OXY: Which Upstream Energy Stock is the Stronger Bet?

Industry Overview - The Zacks Oil and Gas Exploration and Production - United States industry presents a strong long-term investment case due to rich shale reserves, advanced extraction technologies, and sustained global energy demand [1] - Techniques like hydraulic fracturing and horizontal drilling have significantly increased U.S. oil and natural gas production, positioning the country as a leader in global exports [1][2] Geopolitical and Economic Factors - U.S. E&P companies benefit from strategic geopolitical advantages and growing LNG export opportunities, enhancing energy security [2] - Emphasis on capital discipline and shareholder-focused strategies has improved free cash flow, supporting consistent earnings generation [2] Company Profiles Occidental Petroleum Corporation (OXY) - Occidental Petroleum offers a compelling investment opportunity with a diverse asset base and strong free cash flow generation [3] - The company focuses on low-carbon initiatives and maintains resilient production and earnings, supported by disciplined capital allocation and debt reduction efforts [3] APA Corporation (APA) - APA Corporation shows promising growth prospects with a diversified reserve base and positive exploration results, particularly in Alaska [4] - The acquisition of Callon enhances its Permian Basin footprint, while the GranMorgu project boosts its offshore potential [4] Financial Performance - The Zacks Consensus Estimate for APA's earnings per share in 2025 and 2026 has increased by 3.08% and 2.53%, respectively [6] - APA outperforms OXY with a 23.22% return on equity (ROE) and a 5.39% dividend yield, compared to OXY's 16.6% ROE and 2.25% dividend yield [7][10][11] Valuation Metrics - APA is currently trading at a lower EV/EBITDA valuation of 2.68X compared to OXY's 4.97X, indicating a more attractive valuation [14] - Both companies have higher debt-to-capital ratios than the S&P 500, with APA at 45.17% and OXY at 42.17% [13] Price Performance - APA's shares have gained 9.1% over the last month, outperforming OXY's 4.5% increase and the S&P 500's 4.4% return [16] Conclusion - APA Corporation is positioned as a better investment choice in the oil and energy sector due to its superior return on equity, lower valuation, rising earnings estimates, and higher dividend yield [20][21]