Region overview

We have had a continuous presence in Argentina since 2001, which was expanded substantially by two acquisitions in 2006. We currently have operations in the Provinces of Neuquén, Rio Negro, Tierra del Fuego, and Mendoza. We have interests in 34 concessions, exploration permits, and other interests totaling 3.7 million gross acres in four of the main Argentine hydrocarbon basins: Neuquén, Austral, Cuyo, and Noroeste. Our concessions have varying expiration dates ranging from three years to over 15 years remaining, subject to potential extensions. In 2011, Argentina produced 6 percent of our worldwide production and held four percent of our estimated proved reserves at year end.

In 2011, the region achieved record production of 48,000 barrels of oil equivalent per day (Boed) and drilled 36 gross wells pursuant to a development drilling program that achieved a 97 percent success rate by focusing on unconventional premium gas and shallow oil targets. Our exploration program included drilling six gross wells in 2011. We are continuing to test two vertical wells targeting the Vaca Muerta formation in the Huacalera and Cortadera areas and are targeting oil in two recent exploration wells drilled in the Cuyo basin.

During the year, Apache’s first horizontal well in the Anticlinal Campamento field in the Neuquén basin began producing at a rate over 10 million cubic feet per day (MMcfd). The well was a test of horizontal drilling and multi-stage hydraulic fracturing in the low-permeability pre-Cuyo formation. In the third quarter, we completed the first horizontal multi-stage hydraulic-fractured shale gas well drilled and completed in South America. The region will continue to evaluate the use of horizontal drilling techniques on tight and unconventional gas resources in the pre-Cuyo, Los Molles, and Vaca Muerta formations of the Neuquén basin, as these formations receive the benefit of higher gas prices under the Gas Plus program, as defined below.

Apache added acreage during the year in the Neuquén and Noroeste basins, increasing the region’s unconventional oil and gas potential. We also began negotiations for extensions of concessions in the Tierra del Fuego and Rio Negro Provinces, which are scheduled to expire between 2015 and 2017. Future investment by Apache in the Tierra del Fuego and Rio Negro Provinces will be significantly influenced by the ability to extend the present concessions.