Overview

Apache’s U.S. operations have provided the foundation for Apache's growth since the company's first well in Cushing, Oklahoma, began production in 1955. Today, Apache's U.S. regions are the largest contributor to operating income.

The Gulf Coast Region consistently delivers high returns on capital employed, as well as cash flow significantly in excess of our exploration and development spending. Acquisitions are part of the picture because, with steep decline rates, offshore reserves are generally short-lived and difficult to replace through drilling alone. The Central Region brings the balance of long-lived reserves and consistent drilling results in the Permian Basin of West Texas and New Mexico, the Anadarko Basin in western Oklahoma and East Texas. Apache’s future growth in the United States is more likely to be achieved in the U.S. through drilling and acquisitions, rather than through drilling activity alone.

Gulf Coast Region | Central Region

Gulf Coast — The Gulf Coast region comprises our interests in and along the Gulf of Mexico, in the areas on- and offshore Louisiana and Texas. Apache is the largest held-by-production acreage holder and the second largest producer in Gulf waters less than 1,200 feet deep. For the third year in a row, the Gulf Coast was our leading region for both production volumes and revenues. Gulf Coast activities in 2006 focused on restoring production impacted by the 2005 hurricanes, while maintaining an active drilling program. This region performed 296 workover and recompletion operations during 2006 and completed 65 out of 83 total wells drilled as producers. Our drilling locations mostly included proved undeveloped reserves at platforms sustaining minimum or no hurricane damage with access to third-party transport facilities. In June 2006, we acquired producing properties, facilities and prospects on the Outer Continental Shelf of the Gulf of Mexico from BP plc (BP) for $845 million, adding an estimated 44.2 MMboe of proved reserves. As of year-end 2006, the Gulf Coast region accounted for 17 percent of our estimated proved reserves.

Central — The Central Region includes assets in the Permian basin of West Texas and New Mexico, East Texas, and the Anadarko basin of western Oklahoma, where the Company got its start over 50 years ago. On Jan. 5, 2006, the Company expanded its presence in the Permian basin by purchasing an estimated 31.5 MMboe of reserves in eight fields for $269 million from Amerada-Hess. In early 2007, we also entered into agreements to acquire additional Permian basin interests from Anadarko as described in more detail below under “Subsequent Events.” As of year-end 2006, the Central region accounted for approximately 24 percent of our estimated proved reserves, the second largest concentration in the Company. During 2006, we participated in drilling 374 wells, 363 of which were completed as productive. Apache performed 615 workovers and recompletions in the region during the year.

Production and Pricing Data

	Quarter Ended Sept. 30, 2007	Year Ended Dec. 31, 2006
Oil Volume Barrels per day	97,025	66,833
Average Oil Price Per Barrel	$67.70	$54.22
Natural Gas Volume Mcf per day	763,693	666,964
Average Natural Gas Price Per Mcf	$6.59	$6.54
NGL Volume Barrels per day	7,766	7,986
Average NGL Price Per Barrel	$47.18	$38.44