Strategic Approach

At Apache, we strive to generate competitive returns and build a profitable oil and gas company for the long-term benefit of our shareholders using the following strategy:

• Build a balanced portfolio of assets which provides a platform for profitable growth through drilling and acquisitions across the cycles of our dynamic industry;
• Maintain financial discipline and a strong balance sheet; and
• Maximize cash flow and earnings from each unit of production by controlling administrative, operating and capital costs.

A key part of our strategy is balancing our portfolio through diversity of geological risk, political risk, hydrocarbon mix (crude oil versus natural gas) and reserve life in order to achieve consistency in results.

Our portfolio of geographic locations provides variation of all of these factors. Each region has a significant producing asset base as well as large undeveloped acreage positions which provide room for growth. In 2007, no single region contributed more than 26 percent of our production or reserves.

We seek to maintain diversity of reserve life, which translates into balance in the timing of returns on our investments. Reserve life (estimated reserves divided by annual production) in our regions ranges from as short as
six years to as long as 20 years.

By maintaining a balanced hydrocarbon mix, we are protecting against price
deterioration in a given product while retaining upside potential through a significant increase in either commodity price.

For example, in 2007, oil and liquids provided 47 percent of our production, but 65 percent of our total oil and gas revenues. At year-end, our estimated proved reserves were also balanced at 54 percent natural gas and 46 percent crude oil and liquids. Additionally, in each region, we have attained a critical mass that supports sustainable lower-risk drilling opportunities, balanced by higher-risk, higher-reward exploration.

We believe our balanced portfolio strategy enhances our ability to deliver long-term production growth, increase proved reserves at a reasonable economic cost and achieve competitive investment rates of return for the
benefit of our shareholders.