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Apache AR 2007 Document Transcript

  • 1. apache corporation finding a way Summary 07Annual Report
  • 2. Julimar-1 Jade 1-x 07 discoveries star Julimar-1 Alexandrite 1-x Australia discovery test flows 85 MMcf of gas per day star Jade 1-x Well in Egypt’s Western Desert tests 26 MMcf of gas per day from Jurassic formation star Alexandrite 1-x Egypt well tests 19.8 MMcf of gas, 4,045 barrels of condensate per day star Brunello-1 Discovery on Australia block tests 73 MMcf of gas per day star Ootla Apache tests commercial potential of vast shale play in British Columbia
  • 3. Brunello-1 Ootla  exploration innovation through When it comes to discovery, Apache Corporation took its global exploration to new heights in 2007. Apache’s portfolio of seven regions in six nations, including leasehold of 42 million acres, provided a platform for 12 percent production growth, a 6 percent increase in proved reserves, and a greater potential into the next decade. Apache’s values – integrity, respect for human dignity and a sense of urgency – along with a strong work ethic, an unwillingness to accept conventional thinking and the determination to overcome challenges are the keys to “finding a way.”
  • 4. 2007 a deliberate and determined journey 2 “finding a way” embodies Apache Corporation’s 53-year quest to build a significant and profitable oil and gas company, providing energy to meet constantly increasing global demand for the long-term benefit of our shareholders. From scraping together $250,000 to launch the company in 1954, to acquiring 1,050 square miles of three-dimensional seismic data at the environmentally sensitive tip of South America during 2007, Apache’s work ethic and its values have been the guiding principles behind “finding a way.” These are the year’s key statistics. The rest of the story lies in In 2007, your company: the underlying asset value and future resource potential that • Increased production 12 percent to the company has built. With 42 million gross acres in seven core 561,000 barrels of oil equivalent (boe) operating regions, Apache has a deep inventory of opportunities per day, the 28th annual increase in the across our portfolio that will enable the company to continue to last 29 years; grow profitably into the next decade. • Grew proved reserves by 6 percent to Over the course of a half century, a company is confronted with countless 2.4 billion boe, the 22nd consecutive year challenges and constant change. Most of all, “finding a way” means not of reserve growth; giving in to conventional thinking while having the determination • Earned a record $2.8 billion, or $8.39 to overcome any challenge to continue our record of profitable per diluted common share. Excluding growth. The difference between success and failure is measured in the non-cash impact of foreign currency inches, not miles, and to continue on our path of progress, we must fluctuations and tax rate changes constantly find new opportunities to fuel our growth – most recently, on deferred tax balances, Apache’s through exploration. 2007 adjusted earnings* were $8.65 per In 2007, our exploration and development program provided significant share, or 25 percent above 2006 adjusted momentum for future growth. Apache’s “ACE” core growth areas of earnings; and Australia, Canada and Egypt will further that momentum. • Generated a record $6.2 billion of cash from operations before changes in operating assets and liabilities.* *Non-GAAP
  • 5. In Australia, we discovered natural gas with the Julimar-1 well on the WA-356-P block in the Carnarvon Basin. With two additional discoveries, Apache booked our share of 650 billion cubic feet (Bcf) of estimated proved reserves. Five additional appraisal wells are planned for 2008, and we believe the ultimate size of this gas accumulation could be in the range of 2 to 4 trillion cubic feet (Tcf). Apache is developing our Reindeer discovery at a time of strong demand for Carnarvon Basin natural gas; industry prices recently have risen to a multiple of the company’s average price of $1.89 per thousand cubic feet (Mcf) in 2007. We hope to sanction the Julimar  gas development in late 2008. In Canada, Apache had encouraging results in the Ootla area of Apache employees thrive in a culture that values British Columbia, where we are continuing to test the commercial and rewards them for growth that is both profitable and geological potential of the Muskwa Shale. With our partner, and sustainable. EnCana, we have amassed 417,000 gross acres – the largest single acreage position in this sizable emerging play. As this report was being prepared, our employees achieved a goal that, when established in 2005, In Egypt, we made several deep Jurassic oil and gas discoveries, appeared to be an impossible dream: doubling the including the Jade, Alexandrite and Imhotep discoveries in the company’s share price by the end of 2008. Matruh Concession on the northern side of the Khalda area. Since kicking off the 2005 Share Appreciation Plan, Behind each of these discoveries are teams of experienced, creative our long-term shareholders have seen the value geologists, geophysicists and engineers equipped with Apache’s of the company more than double, increasing sense of urgency, the best technological tools, and a determination to market capitalization by more than $19 billion. For find a way to overcome obstacles. this achievement, 2,800 Apache employees will For example, when the wheels of 3-D seismic survey equipment receive approximately 2 million shares with total became bogged down in the muddy terrain of Argentina’s Tierra del value equal to about 1 percent of the market value Fuego, Apache’s exploration group brought in tracked vehicles used growth. More than 90 percent of the incentives in the Canadian Arctic Region to accelerate the completion of the will be paid to non-executives, with employees seismic survey in this environmentally sensitive area. This survey receiving shares equivalent to at least half of their already is yielding results in added production. annual salaries. The shares will be paid in four Apache also tested a new method of acquiring 3-D seismic annual installments, providing a strong retention information that speeds the job while increasing the quality of the incentive at a time when the competition for good data. Using 12 large, independently controlled Vibroseis seismic people is considerable. source trucks in Egypt’s Western Desert, we set a new record for acquiring data with more than 6,000 shots in just over eight hours. One essential element of Apache’s progress over the last 53 years is our commitment to long-term growth over short-term gratification. It seems that every week, another large institution is crippled by the impact of short-term thinking that disregards long-term consequences. The sub-prime credit debacle that has dragged the U.S. economy into recession is one such example. Essentially, mortgage brokers and bankers were rewarded for taking excessive risks by originating loans with little regard for the borrowers’ ability to repay.
  • 6. A New Era For Energy Our Role in the New Era While Apache focuses on its long-term goals, we are Apache’s primary responsibility is to find and develop oil and natural gas faced with unprecedented short-term volatility in that will provide a competitive return for our shareholders, fuel economic global crude oil markets. The phenomenal rise of growth, and help raise living standards. We applaud the recent trends crude oil prices – from $61 per barrel in January toward conservation and development of viable alternatives to fossil 2007 to $110 per barrel in March 2008 – is the fuels. However, these alternatives will not ebb the world’s demand product of many complex factors and signals the for fossil fuels for many years. emergence of a new competitive era for energy In 2007, in addition to our effective exploration program, we pushed across the globe. ahead on six large development projects that are expected to add Population growth and emerging economies such over 100,000 barrels of oil equivalent per day of new production as China and India have pushed oil demand from in 2009, 2010 and 2011. These projects include the Van Gogh and 65 million barrels per day to 85 million barrels Pyrenees oil developments and Reindeer and Julimar gas projects per day in 20 years. At current prices, the nations offshore Western Australia, as well as expansion of the Salam gas of the world are spending more than $3 trillion plant and secondary oil recovery projects in Egypt. annually to secure crude oil. The fastest-growing Apache has traversed enough price cycles over our 53 years to recognize demand is from less-developed countries to fuel that it would be imprudent to base our investment decisions on $100 progress and advance their standards of living.  per barrel oil. We use conservative price forecasts, and, when appropriate, have employed hedges to protect the economic viability For U.S. consumers, the recent rise in energy prices of acquisitions and development projects with long lead times. has been startling, because the nation had become accustomed to inexpensive energy after the price In addition to building a profitable corporation that provides spikes in the 1970s and 1980s. At the end of the essential energy supplies, we have a responsibility to be stewards 1990s, energy took a smaller bite out of disposable of the environment in which we operate and to do our part income than it did at the end of World War II. to improve living standards. Our operations in Egypt – where we are the third-largest producer and an important source of While increased demand, turmoil in the oil- foreign investment – illustrate the many ways we try to meet rich Middle East and the weak U.S. dollar play our responsibilities. large roles in rising oil prices, many analysts have concluded that the tremendous increase in We provide direct employment for 2,000 Egyptians, $9 million in speculation in oil futures markets by hedge funds, revenue for the government each day, and energy supplies for the pension funds and other investors has become one growing economy. In the Western Desert, we are converting diesel of the significant factors in setting oil prices. generators to cleaner-burning, less-expensive natural gas. We also tapped the spirit of our workforce, along with the generosity of our Speculative trading brings liquidity to commodity officers, employees, directors, industry colleagues and friends, to markets, allowing companies to hedge their build 200 one-room schools for girls from rural villages who had exposure to commodity prices. Apache has used not been able to attend school. this strategy to lock in the economic returns of acquisitions and development projects. Elsewhere in this annual report, we describe other aspects of Apache’s stewardship commitment, including some exciting But large-scale speculation can hurt the economy new initiatives. by distorting market signals regarding supply and demand in the physical market and lead to At Apache, “finding a way” also means avoiding the beaten path. Our excessive price volatility. We believe today’s trading initial investment in Egypt, at a time when other operators were volume of oil futures contracts – 15 times that of leaving, set the stage for the emergence of one of the company’s physical demand – is excessive and has had an core growth areas. We see similar opportunities for growth in undue influence on today’s lofty prices. Australia, Canada and Argentina. Apache’s 2007 was an outstanding year by most measures for our shareholders and our skilled and dedicated team. Although we anticipate turbulent times ahead as the U.S. economy struggles to right itself, we remain dedicated to adding value for our shareholders. G. Steven Farris Raymond Plank President, Chief Executive Officer and Chairman and Founder Chief Operating Officer
  • 7. performance highlights Year Ended December 31 (dollars in millions, except per-share data) 2007 2006 2005 Financial Highlights Revenues $9, 978 $8,289 $7,584 Income Attributable to Common Stock 2,807 2,547 2,618  Diluted Net Income per Common Share 8.39 7.64 7.84 Cash from Operations before Changes in Operating Assets and Liabilities (a): Net Cash Provided by Operating Activities 5,677 4,313 4,332 Changes in Operating Assets and Liabilities 518 755 412 Cash from Operations Before Changes in $6,195 $5,068 $4,744 Operating Assets and Liabilities Total Assets $28,635 $24,308 $19,272 Long-Term Debt 4,012 2,020 2,192 Shareholders’ Equity 15,378 13,191 10,541 Cash Dividends paid per Common Share 0.60 0.45 0.34 Operational Highlights Oil and Gas Expenditures $5,802 $6,420 $3,857 (including acquisitions, gas gathering, transmission and processing facilities and capitalized interest) Natural Gas Production (MMcf/d) 1,796 1,589 1,264 Oil and Condensate Production (Mbbls/d) 262 236 244 Proved Reserves (MMboe) 2,446 2,313 2,117 (a) NON-GAAP FINANCIAL MEASURE: The annual report discusses Apache’s cash from operations before changes in operating assets and liabilities. Management believes the information is useful for investors because it is used internally and widely accepted by those following the oil and gas industry as a financial indicator of a company’s ability to generate cash to internally fund exploration and development activities, fund dividend programs, and service debt. It is also used by research analysts to value and compare oil and gas exploration and production companies, and is frequently included in published research when providing investment recommendations. Cash from operations before changes in operating assets and liabilities, therefore, is an additional measure of liquidity, but is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing, or financing activities.
  • 8. darwin  making Stellar discoveries down under alice springs perth
  • 9. 7 Successful exploration and continuing development of several earlier discoveries were highlights of Apache’s activities in Australia. australia With 7.6 million acres and an active drilling Australia also provides a good example of the evolution of international gas markets as program, Apache has several catalysts for growth domestic users face competition for supply from in Australia. Development of the Van Gogh and international markets through the development Pyrenees oil fields in the Exmouth Basin are of liquefied natural gas (LNG) facilities. Natural expected to add significant production volumes gas prices in the Carnarvon Basin increased from by the end of the decade, and the Julimar and under $2 per Mcf to more than $7 per Mcf in the Reindeer fields in the Carnarvon Basin are past year as demand increased from the Western expected to contribute to future gas volumes. Australia mining industry and large takeaway In 2007, oil production increased 16 percent and gas capacity from LNG facilities. Apache expects production rose 5 percent from the prior year. Proved to sign a contract to sell gas from the Reindeer reserves increased 31 percent to an estimated 268 million development during 2008, with first production barrels of oil equivalent. in 2010. In 2008, Apache is planning to drill five additional wells at Julimar – an April 2007 Carnarvon discovery with estimated gross recoverable resource potential of 2 to 4 Tcf of natural gas. Also in the Carnarvon, Apache plans to drill two key exploration wells at Halyard and Marley. The 2008 exploration program includes a seven-well program planned in the Gippsland Basin, across a large offshore acreage position adjacent to some of Australia’s most prolific producing fields. Estimated resource potential in this program is more than 500 million barrels of oil equivalent.
  • 10. In Canada, Apache’s 2007 drilling program targeted the Muskwa Shale in the Ootla area, shallow gas reserves and significant coal bed methane resource potential.  canada Exploration and development activity in Apache’s 2008 winter drilling program includes nine wells in the Ootla area of British Columbia in the Muskwa Shale play Apache’s Canadian Region reaches across with 50-percent partner EnCana. The program is designed 6.8 million gross acres in the provinces of to determine the commerciality of the play and will include Alberta, British Columbia, Saskatchewan experiments with multi-stage fracture stimulation programs and the Northwest Territories. to enhance flow rates. The potential recoverable resource from the Production and reserves declined somewhat combined holdings of 417,000 acres is an estimated 9 to 16 Tcf of in 2007 as a result of a reduction in capital gas net to Apache. spending associated with cost inflation and The region continues to target shallow gas accumulations, reduced gas-price realizations. The reduction including coal bed methane (CBM) in fields such as Provost and in capital did not reflect our belief in the vast Nevis; Apache is one of Canada’s largest producers of CBM. hydrocarbon potential in Western Canada. With joint-venture partner EnCana, Apache is evaluating the commercial potential of the Mannville coals in the Nevis and Provost areas with net resource potential exceeding 1 Tcf. The North and South Grant Lands obtained through farm-ins in 2004 and 2005 provide additional CBM potential.
  • 11.  scouting the northwest calgary
  • 12. 0 cairo bright future ancient in an land
  • 13. Apache has exploration opportunities across its 19 million gross acres in Egypt.  egypt Growth in Apache’s Egypt Region continued in 2007, By year-end 2008, Apache expects to complete construction of two new processing plants at the with net oil production increasing 7 percent and Salam gas plant which are expected to add net net gas production climbing 11 percent. The region production of 90 MMcf to 100 Mcf of gas and 4,500 is on track to achieve its goal of doubling operated barrels of condensate per day. Continued expansion production from 2005 levels by 2010. of several water-flood projects, with additional Apache drilled several deep Jurassic oil and gas discoveries drilling and increased water injection capacity, is with substantial flow rates during 2007, including the expected to build toward net production of 20,000 Jade, Alexandrite, and Imhotep discoveries in the Matruh barrels of oil per day. Concession in the northern part of the Khalda area. Other discoveries were recorded in the Northeast Abu Gharadig Concession operated by Shell, and on the East Ras Budran Concession, an onshore area near the Gulf of Suez, where a well tested more than 1,900 barrels of oil per day. Appraisals of all of these discoveries are planned during 2008. The 2008 exploration program reaches across a range of plays and prospects that highlights the extent of Apache’s portfolio, including prospects from the shallow Upper Bahariya and Abu Roash to the Cretaceous Alem el Bueib to the deep Jurassic formations. The region plans to drill four wildcats on the 9-million- acre Tharwa farm-in acquired during 2007.
  • 14. The Central Region drilled 335 productive wells in West Texas, New Mexico and Oklahoma. 2 united states Apache’s Central Region brings the balance of long-lived reserves and consistent drilling results in the Permian Basin of West Texas and New Mexico, East Texas and the Anadarko Basin of Western Oklahoma. The Gulf Coast Region consistently delivers high returns on invested capital and cash flow significantly in excess of its exploration and development spending. In 2007, the Central Region increased production 18 percent by drilling 335 productive wells and augmented the region’s asset base with the acquisition of producing properties in the Permian Basin with estimated proved reserves of 70 million barrels of oil equivalent. In 2008, the region will continue to actively exploit fields in the Permian Basin and Western Oklahoma. The Gulf Coast Region, the company’s largest in terms of production volume and revenues, comprises Apache’s interests in and along the Gulf of Mexico, in the areas on- and offshore Louisiana and Texas. Apache has been the largest held-by-production acreage holder and the second-largest producer in Gulf waters less than 1,200 feet deep since 2004. Gulf Coast activities in 2007 focused on an active drilling program, completing 65 out of 84 wells drilled, and restoring production impacted by the 2005 hurricanes. In 2008, the region will continue to develop opportunities near the company’s extensive production base.
  • 15. tulsa houston  Reliable tapping streams of production
  • 16. aberdeen north sea Apache’s investments at the Forties Field were focused on enhancing the operating efficiency of the platforms and looking ahead to increasing the ultimate recovery from the largest field ever discovered in the United Kingdom sector of the North Sea, with an estimated 5 billion barrels of original  oil in place. Several key facilities projects were commissioned during 2007, including new power generation and Improvements of topside facilities multi-platform gas and power distribution systems, enhanced the operating efficiency export pumping, produced water-handling and of the Forties Field. injection systems, and drilling rig-package upgrades. Although operating efficiency improved 11 percent from 2006, production was 8 percent below 2006 levels as drilling was deferred to focus on completing topside projects. In 2008, completion of several facilities upgrades is planned, as well as 15 new wells that will add to the field’s productive capacity. The inventory of future drilling projects was updated with a newly reprocessed seismic survey that identified bypassed oil in the main reservoir units.
  • 17. Apache has found abundant opportunities for exploration and development drilling in Argentina’s producing basins.  buenos aires argentina Activity increased in Argentina in 2007, the first full year of operation for Apache’s newest core area. At year’s end, the Seccion Baños 2004 – the first significant well drilled from a 700-square-mile (1,800-square-kilometer), 3-D seismic survey in Argentina’s Tierra del Fuego – commenced production at a daily rate tierra del fuego of 1,635 barrels of oil and 1.3 MMcf of gas from the Lower Cretaceous Springhill sandstone. The discovery followed two wells that developed the previously unexploited discovery at Cabo Nombre Sur, located offshore 4.2 miles (7 km) to the south of the latest well. On the mainland, Apache established the commerciality of two gas areas in the Neuquén Basin. Apache receives low government-regulated pricing on a substantial portion of its natural gas production – an average of 76 cents per Mcf. Recently, we have signed contracts for the unregulated increment for approximately $3 per Mcf, although for reduced volumes. In response to gas shortages, the government has re-evaluated its gas pricing regulations and recently announced a “new gas / old gas” policy similar to U.S. regulations in the late 1970s. Gas shortages suggest that the government eventually may allow even regulated prices to increase in order to encourage more investments. No details have been published, and the effectiveness of the new regulations remains unclear. However, natural gas is in short supply and opportunities to find and develop it are abundant. In November 2007, Apache was awarded exploration rights on two blocks comprising 1 million net acres on the Chilean side of Tierra del Fuego. The acreage is adjacent to Apache’s 552,000 net acres on the Argentinean side of the island and represents a natural extension of our expanding exploration and production operations. Apache is finalizing the contracts with the Chilean government and plans to acquire 3-D seismic data in 2008.
  • 18. canada 388 MMcf/day Natural Gas Production 21,002 bbls/day Liquid Hydrocarbon Production 567 MMboe Proved Reserves 348 /287 Wells Drilled/Productive 6.8 million Gross Acreage 2007 worldwide operations  u.s. central region Natural Gas Production 296 MMcf/day Liquid Hydrocarbon Production 38,429 bbls/day Proved Reserves 636 MMboe Wells Drilled/Productive 343 /335 Gross Acreage 1.8 million u.s. gulf coast region Natural Gas Production 474 MMcf/day Liquid Hydrocarbon Production 60,032 bbls/day Proved Reserves 365 MMboe Wells Drilled/Productive 84/65 Gross Acreage 3.2 million argentina 201 MMcf/day Natural Gas Production 14,240 bbls/day Liquid Hydrocarbon Production 112 MMboe Proved Reserves 94 /92 Wells Drilled/Productive 2.5 million Gross Acreage
  • 19. north sea 2 MMcf/day Natural Gas Production 53,632 bbls/day Liquid Hydrocarbon Production 206 MMboe Proved Reserves 16/5 Wells Drilled/Productive 719,153 Gross Acreage 7 australia 195 MMcf/day Natural Gas Production 13,778 bbls/day Liquid Hydrocarbon Production 268 MMboe Proved Reserves 24 /10 Wells Drilled/Productive 7.6 million Gross Acreage egypt 241 MMcf/day Natural Gas Production 60,735 bbls/day Liquid Hydrocarbon Production 292 MMboe Proved Reserves 192 /161 Wells Drilled/Productive 18.9 million Gross Acreage
  • 20. considering global the perspective Stewardship In Canada, Apache’s Midale Field Enhanced Oil Recovery Project is injecting 10 million tons of CO2 into oil reservoirs that would The dictionary defines stewardship as “the have been emitted from a coal gasification plant in North Dakota. careful and responsible management of something Also in Canada, Apache injects a mixture of CO2 and hydrogen entrusted to one’s care.” Apache’s commitment sulfide (H 2S) in an enhanced oil recovery project in the Keg to stewardship spans five decades and reaches River oil reservoir. The project injects 32,000 tons of CO2 and has from environmental responsibility to the multi- enabled Apache to cease operation of a sulfur plant. In a related faceted goal of leaving the world a better place. development, the buoyant market for sulfur has enabled the Environment company to sell a stockpile of 200,000 tons of sulfur for use in fertilizer. Because Apache is part of an industry that derives benefit from the earth’s resources, Leaving the World a Better Place we maintain a commitment to operate in Almost every week, across Apache’s operating regions, employees an environmentally responsible manner are volunteering or providing financial support for a wide range throughout the world. of educational, civic and charitable activities. The company’s Apache incorporates voluntary, cost-effective philanthropic activities place a special emphasis on education, actions to reduce, sequester or offset greenhouse the environment, and the arts. gas emissions. Apache has identified emission To foster the giving spirit, in 2007, Apache donated $683,000 to match reduction projects that are clearly economic to contributions from 700 employees to the organizations of their choice. implement, yet result in significant reductions of greenhouse gases. One initiative, which joins Apache’s environmental stewardship with its philanthropic activities, gained significant momentum In 2007, Apache commissioned the innovative in 2007 and early 2008. The Apache Foundation Tree Program Forties Field natural gas ring main system is now about one-third of the way toward achieving its goal of that permitted replacement of diesel-burning planting 1 million trees, with a focus in areas near significant electric generators with more efficient, cleaner- Apache operations. burning, natural gas electric generators. The completion of a gas and power ring and the Trees are an effective way to improve communities and the installation of new electric generators increased environment by reducing sound, producing oxygen, storing the efficiency of the field, cut gas flaring and carbon, providing shade, reducing erosion and increasing consumption of diesel fuel, and reduced property values. In 2007, the foundation donated trees to emissions of carbon dioxide (CO2) by about schools, communities and conservation programs. 25 percent. Apache’s support for the Ucross Foundation in Wyoming reaches Similarly, Apache is replacing diesel-powered back to its founding more than 25 years ago. The foundation is generators in Egypt’s Western Desert with gas- best known in the arts through the more than 1,100 fellowships powered units, another effort that will reduce that have been granted through its Artists-in-Residence program. emissions by 3,900 tons while cutting costs by Alumni of this program have received Broadway’s Tony Awards, $20 million per year. Pulitzer Prizes and other national and international recognition.
  • 21. Support for teacher sabbaticals through Fund for Teachers and the Apache Foundation’s tree-planting programs are among the ways the company aims to leave the world a better place. Fund for Teachers is now in its eighth year of providing summer sabbaticals and growth experiences for teachers from pre-kindergarten through high school across the nation. Teachers, chosen for the  creativity of proposals of their own design, return from their experiences motivated to teach and transfer their enthusiasm and commitment for lifetime learning to their bright-eyed pupils. Fund for Teachers has created opportunities for more than 3,100 teachers, 550 of them in 2007, with awards of up to $5,000 each. As noted earlier in this report, Apache partnered with Springboard – Educating the Future, a U.S. non-profit; Egypt’s National Council for Childhood and Motherhood; and Egyptian non-profit Sawiris Foundation to build 200 schools to provide the first opportunity for many young Egyptian girls – particularly in rural areas – to attend school and learn to read, write and perform basic arithmetic. Apache’s newest initiative grew from Chairman and Founder Raymond Plank’s recent reunion with Dr. William T. Close, 65 years after their first encounter in the U.S. Army Air Corps. Dr. Close, who spent 16 years practicing medicine in Africa, provided keen insight into the daily struggle to provide medical care in some of the poorest Apache’s Safety Commitment nations in the world. Dr. Close and a group of dedicated professionals are developing a As the company’s operations have new program that will send talented U.S.-trained nursing educators expanded across the globe, spreading to poor countries for six to eight weeks, enabling them to immerse Apache’s safety culture has been an themselves in the education system of the host country, and important objective, building on a providing an interactive experience that will be valuable for the foundation of field-driven empowerment educators and the students. With the agreement of this great of workers to accept personal responsibility humanitarian, this new initiative will be called the W.T. Close Fund for safety. Apache believes that work- for Teaching Nurses. related injuries and illnesses are prevent- able, and continues to foster safety As with any new venture, this program will need financial support to leadership throughout the organization, grow. If you are interested in joining us, please call 800.705.6410 or engage employees and contractors in 713.296.7490 or e-mail info@wtclosefundforteachingnurses.org. worker competency programs, and perform To learn more about Apache’s outreach initiatives, please visit critical self-evaluations to detect potential this page on Apache’s Web site, compliance issues. www.apachecorp.com/about_us/our_commitments, The number of injuries experienced that or go to the following Web sites: resulted in time away from work declined www.ucrossfoundation.org, www.fundforteachers.org and 14 percent in 2007 from 2006, and the www.springboarded.org. We invite you to join our employees, rate of recordable injuries was 7 percent directors, friends and others to support these worthy programs. below 2006 levels. Driving safety programs At Apache, stewardship is part of the culture and fabric. Raymond resulted in 34 percent fewer accidents in Plank distills the concept with these words: “You should leave the 2007 than in 2006. world a better place than you found it.”
  • 22. financial highlights Investors benefited from Apache’s record performance Apache’s strategy is built on a as Wall Street took notice of Apache’s visible catalysts diversified portfolio that is balanced 20 for continued growth into the next decade. geographically, geologically and by product mix (oil vs. gas). With 42 million acres, Apache has an Year-End Share Price asset base with opportunities that span the globe. Operations are established ( $ dollars ) in areas with growing economies and 140 generally positive business and legal environments. Our goal is to build core areas that will support a sustainable 120 program of lower-risk, repeatable drilling opportunities, balanced by higher-risk, higher-reward exploration in core growth 100 areas such as Australia, Canada and Egypt. 80 60 40 20 03 04 05 06 07
  • 23. Apache’s seven core areas include five outside the United States that represent 60 percent of production and reserves. No single basin contributes more than 25 percent of production. Virtually all core areas have large undeveloped acreage with opportunities for future growth. U.S. Gulf Coast 51 2007 Production 25% ( MMboe ) 205 Egypt 2 (total) 37 18% 2007 Reserves ( MMboe ) Canada 15% 8% 2,446 Australia 31 (total) 17 U.S. Gulf Coast 365 10% North Sea 15% Canada 20 567 8% 23% 16% Argentina Egypt U.S. Central 17 12% 292 32 11% Australia 268 26% 8% U.S. Central North Sea 636 5% 206 Argentina 112 Drilling opportunities from Apache’s operating regions are judged on rate of return using conservative price assumptions. Cash flow from the U.S. regions funds the company’s U.S. Gulf Coast international expansion. 994 24% Egypt Canada 605 14% 15% 651 Exploration & Development 12% Australia Capital 516 ( $ millions ) 15% 13% 4,228 U.S. Central (total) 7% North Sea 637 538 Argentina 287
  • 24. Strong commodity prices and record production fueled Liquid hydrocarbons represent about half of Apache’s revenue growth. Record cash from operations provided 2007 production but two-thirds of revenues. Apache funds for the company’s drilling program. replaced 167 percent of its 2007 production, including 140 percent from drilling activity. Annual Production Revenues ( MMboe ) ( $ billions ) Net Cash 250 10 Provided by Operating Activities 225 9 ( $ billions ) Proved Reserves 200 8 ( MMboe ) 7 175 7 22 6 150 6 3000 5 125 5 2500 4 100 4 2000 3 75 3 1500 2 50 2 1000 1 25 1 500 03 04 05 06 07 03 04 05 06 07 03 04 05 06 07 03 04 05 06 07 gas gas liquids liquids Apache’s strong balance sheet, with debt at 22 percent Apache’s balanced product mix and growing production of capitalization, provides financial flexibility to pursue profile in a rising commodity price environment fueled its growth strategy in a time of economic uncertainty. record earnings and strong returns. Earnings per Diluted Common Share Return on Equity ($) Returns (%) 9 on Average Capital Employed Capitalization 40 8 (%) ( $ billions ) 35 7 30 6 30 30 25 5 25 25 20 4 20 20 15 3 15 15 10 2 10 10 5 1 5 5 03 04 05 06 07 03 04 05 06 07 03 04 05 06 07 03 04 05 06 07 equity debt
  • 25. board of directors George d. lawrence Frederick m. Bohen [1] [3] [3] [5] [ 1 ] Executive Committee [ 2 ] Audit Committee Private Investor; Former Executive Vice President and Former Chief Executive Officer, [ 3 ] Management Development and Chief Operating Officer, Compensation Committee The Phoenix Resource Companies, Inc. The Rockefeller University [ 4 ] Corporate Governance and f.h. Merelli g. Steven Farris [1] [2] [1] Nominating Committee Chairman of the Board, President, Chief Executive Officer and [ 5 ] Stock Option Plan Committee Chief Executive Officer and President, Chief Operating Officer, Cimarex Energy Co. Apache Corporation Rodman d. Patton Randolph m. Ferlic, md [2] [1] [2] Former Managing Director, Founder and Former President, Merrill Lynch Energy Group Surgical Services of the Great Plains, P.C. Charles j. Pitman Eugene c. Fiedorek [4] [2] Former Regional President — Private Investor, Former Managing Director, 2 Middle East/Caspian/Egypt/India, EnCap Investments L.C. BP Amoco plc a.d. Frazier, Jr. [3] [5] Raymond Plank [1] Chairman and Chief Executive Officer, Founder and Chairman of the Board, Danka Business Systems PLC Apache Corporation Patricia Albjerg Graham [4] Charles Warren Research Professor of the History of American Education Emerita, Harvard University John a. Kocur [1] [3] [4] Attorney at Law; Former Vice Chairman of the Board, Apache Corporation corporate officers Jon a. Jeppeson Robert j. Dye Raymond Plank Senior Vice President Vice President — Investor Relations Chairman of the Board p. Anthony Lannie Margery m. Harris g. Steven Farris Senior Vice President and Vice President — Human Resources President, Chief Executive Officer and General Counsel Chief Operating Officer Rebecca a. Hoyt w. Kregg Olson Michael s. Bahorich Vice President and Controller Senior Vice President — Executive Vice President — Janine j. McArdle Corporate Reservoir Engineering Exploration and Production Technology Vice President — Oil and Gas Marketing Sarah b. Teslik John a. Crum Jon w. Sauer Senior Vice President — Policy and Governance Executive Vice President and President, Vice President — Tax Apache Canada Ltd. Thomas p. Chambers Cheri l. Peper Rodney j. Eichler Vice President — Corporate Planning Corporate Secretary Executive Vice President and John j. Christmann General Manager, Apache Egypt Companies Vice President — Business Development Roger b. Plank Matthew w. Dundrea Executive Vice President and Chief Financial Officer Vice President and Treasurer Floyd r. Price Executive Vice President — Eurasia, Latin America and New Ventures
  • 26. shareholder dividend reinvestment plan information Shareholders of record may invest their dividends automatically in additional shares of Apache common stock at the market price. Participants may also invest up to an additional $25,000 in Apache shares each quarter through this service. All bank service fees and brokerage commissions on purchases are paid by Apache. A prospectus describing the terms of the Plan and an authorization form may be obtained from the Company’s stock Dividends Price Range transfer agent, Wells Fargo Bank, N.A. per Share direct registration High Low Declared Paid Shareholders of record may hold their shares of Apache common 2007 stock in book-entry form. This eliminates costs related to First Quarter $73.44 $63.01 $0.15 $0.15 safekeeping or replacing paper stock certificates. In addition, shareholders of record may request electronic movement of Second Quarter 87. 82 70.53 0.15 0.15 book-entry shares between your account with the Company’s 2 Third Quarter 91.25 73.41 0.15 0.15 stock transfer agent and your broker. Stock certificates may be converted to book-entry shares at any time. Questions regarding Fourth Quarter 109.32 87.44 0.15 0.15 this service may be directed to the Company’s stock transfer agent, Wells Fargo Bank, N.A. 2006 annual meeting First Quarter $76.25 $63.17 $0.10 $0.10 Apache will hold its annual meeting of shareholders at: Second Quarter 75.66 56.50 0.10 0.10 Ballroom, Hilton Houston Post Oak Third Quarter 72.40 59.18 0.15 0.10 2001 Post Oak Boulevard, Houston, Texas Fourth Quarter 70.50 59.99 0.15 0.15 Thursday, May 8, 2008, 10 am Apache plans to Web cast the annual meeting live; connect through the Apache Web site: www.apachecorp.com stock held in “street name” The Company has paid cash dividends on its common stock for 43 consecutive years through December 31, 2007. Future dividend The Company maintains a direct mailing list to ensure that payments will depend upon the Company’s level of earnings, shareholders with stock held in brokerage accounts receive financial requirements and other relevant factors. information on a timely basis. Shareholders wanting to be added to this list should direct their requests to: Apache common stock is listed on the New York and Chicago stock exchanges and the NASDAQ Stock Market (symbol APA). Apache’s Public Affairs Department At December 31, 2007, the Company’s shares of common stock 2000 Post Oak Boulevard, Suite 100 outstanding were held by approximately 7,000 shareholders of Houston, Texas 77056-4400 record and 363,000 beneficial owners. Also listed on the New York or by calling 713.296.6157 Stock Exchange are: or by registering on Apache’s Web site: apache Finance Canada’s 7.75% notes, due 2029 (symbol APA 29) www.apachecorp.com corporate offices form 10-k request One Post Oak Central 2000 Post Oak Boulevard, Suite 100 Shareholders and other persons interested in obtaining, without Houston, Texas 77056-4400 cost, a copy of the Company’s Form 10-K filed with the Securities 713.296.6000 and Exchange Commission may do so by writing to: Cheri L. Peper, Corporate Secretary independent public accountants 2000 Post Oak Boulevard, Suite 100 Houston, Texas 77056-4400 Ernst & Young llp Five Houston Center investor relations 1401 McKinney Street, Suite 1200 Houston, Texas 77010-2007 Shareholders, brokers, securities analysts or portfolio managers Designed by: Origin, Houston, Texas seeking information about the Company are welcome to contact: stock transfer agent and registrar Robert J. Dye, Vice President of Investor Relations Wells Fargo Bank, N.A. 713.296.6662 Attn: Shareowner Services www.origindesign.com Members of the news media and others seeking information PO Box 64854 about the Company should contact: South St. Paul, Minnesota 55164-0854 651.450.4064 or 800.468.9716 Bill Mintz, Director of Public Affairs, at 713.296.7276 Communications concerning the transfer of shares, lost certificates, web site dividend checks, duplicate mailings or change of address should be directed to the stock transfer agent. Shareholders can access www.apachecorp.com account information on the Web site: www. shareowneronline.com
  • 27. apache corporation 2000 Post Oak Boulevard, Suite 100 Houston, Texas 77056 www.apachecorp.com