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Overview

Argentina became our latest core area following two significant acquisitions in 2006 that substantially increased our presence in the country. In the second quarter of 2006, we completed our purchase of Pioneer’s operations in Argentina for $675 million, with estimated proved reserves of 22 million barrels of liquid hydrocarbons and 297 billion cubic feet of natural gas. In the third quarter of 2006, we acquired additional interests in (and now operate) seven concessions in Tierra del Fuego from Pan American for total consideration of $429 million. Our oil and gas assets are located in the Neuquén, San Jorge and Austral basins of Argentina.

In 2007, we recorded 17.4 million barrels of oil equivalent (MMboe) of production and at year end had 112.0 MMboe of estimated proved reserves, approximately eight percent and five percent, respectively, of Apache’s total production and reserves. Also in 2007, Apache completed over 1,700 square kilometers of a nearly 2,500 square kilometer 3D seismic mega shoot in Tierra del Fuego. The program will be completed in 2008.

On the mainland, we established the commerciality of two gas areas in the Neuquén Basin, each operated by Apache with a 100 percent working interest. In the Anticlinal Campamento block, Apache completed five Pre Cuyo “Deep Gas” wells. In our Estacion Fernandez Oro block we completed four wells and established commerciality of the “Deep Lajas” gas play. We are encouraged by the results and foresee the potential of 150 new drilling locations.

In Tierra del Fuego, Apache made two significant discoveries on operated blocks in which we own a 70 percent working interest. In our Cabo Nombre Sur area, we drilled two wells directionally into a new reservoir structure. In our Seccion Banos area, we discovered a new field between two mature fields five miles apart. We believe we have sufficient drilling locations to utilize our shallow rig for the remainder of 2008 and are evaluating mobilizing another rig to the province.

In total, the region drilled 94 wells, 92 of which were productive. In 2008, Apache plans to drill 100 wells and perform recompletion activities. The region also plans to invest in waterfloods and expanded production facilities.