Overview

Apache is one of Australia’s most active offshore explorers. Since 1997, we have made 20 commercial oil and 10 commercial gas field discoveries. In Australia, our exploration activity is focused in the offshore Carnarvon, Gippsland and Browse basins, where at the end 2008, Apache held 4.3 million net acres in 30 exploration permits, 11 production licences and six retention leases. Production operations are concentrated in the Carnarvon and Exmouth basins, the location of Apache’s 11 production licenses, all of which are Apache operated. Australia held 12 percent of our year-end estimated proved reserves. During the year, the region participated in drilling 46 wells, which generated 25 productive oil wells and nine productive gas wells.

The Australia Region’s 2009 production through the end of the third quarter totaled 117,240 barrels of oil equivalent (Boe) per day, or 7 percent of Apache’s total production.

During the third quarter 2009, net production was 48,400 Boe per day, a 30 percent increase over second quarter. Gas and oil production increased by 40 percent and 4 percent respectively, primarily due to having the full quarter's production following completion of the Varanus Island repairs in the second quarter.

Van Gogh

At our Van Gogh oil project, which Apache operates with a 52.5 percent working interest, the Ningaloo Vision floating production, storage and offloading (FPSO) vessel has arrived on station and commissioning activities are under way in the Exmouth Sub-Basin, offshore Western Australia. Production is expected to commense in February. Net production is anticipated to ramp up to a peak of 20,000 barrels per day (Bpd) in 2010.

During the third quarter, drilling activity was focused on the Coniston appraisal project with five wells drilled to date. Apache operates this project with a 45.7 percent working interest. Two wells in this program, Novara-3H and Coniston 2-H, have been production tested at rates of 5,500 Bpd and 11,200 Bpd respectively. Additional wells will be required to fully delineate the pool in the fourth quarter. The Coniston accumulation is likely to be developed as a tie-back to the Van Gogh FPSO.

Pyrenees

The nearby BHP Billiton-operated Pyrenees FPSO development project, in which Apache has a 28.6 percent working interest, is also underway with development drilling and subsea installation progressing as planned. We expect first production in the first quarter of 2010. Net production is also anticipated to ramp up to a peak of 20,000 Bpd in 2010.

Devil Creek

Apache broke ground at the Devil Creek gas plant in September. First gas from the Reindeer field is anticipated in the third quarter of 2011. Apache operates the project with a 55 percent working interest. Net production is expected to ramp up to 60 MMcfd per day in 2012.

Macedon

Apache began the front-end engineering design (FEED) study for the BHP-operated Macedon domestic gas development during the third quarter with a final investment decision expected in June 2010. Apache has a 28.6 percent working interest in the project.

Wheatstone LNG

Apache and Kuwait Foreign Petroleum Exploration Co. (KUFPEC) joined with Chevron to develop the Wheatstone liquefied natural gas (LNG) hub in Western Australia. Apache and KUFPEC signed an exclusive agreement to supply gas from the Julimar and Brunello discoveries and become foundation equity partners in the Chevron-operated Wheatstone project facilities.

This project unlocks 2.1 trillion cubic feet (Tcf) of gas reserves at two of Apache's largest discoveries and generates steady net sales of about 190 million cubic feet per day (MMcfd) and 5,100 Bpd for 15 years at prices pegged to world oil markets. Apache will have a net 16.25 percent interest in the Wheatstone phase 1 development. As a foundation partner, Apache will also have the opportunity to participate in future expansion of the project providing additional options for gas commercialization. A final investment decision on the first phase of the project is slated for 2011, after the FEED is completed.