Overview

The Egypt region represents Apache's largest acreage position with approximately 11.2 million gross acres in 23 separate concessions (19 producing concessions). Apache is the largest producer of liquid hydrocarbons and natural gas in the Western Desert and the third largest in Egypt. Apache's production is operated under two joint ventures, Khalda and Qarun Petroleum Company. In addition, we have production from non-operated properties such as Northeast Abu Gharadig (NEAG).

In 2008, the Egypt region contributed approximately 21 percent of Apache’s production revenue and approximately 14 percent of total estimated proved reserves. Apache had an active drilling program in Egypt, completing 215 of 238 wells and conducted 701 workovers and recompletions.

The region achieved new daily production records in the first quarter 2009 for gross oil and condensate at 161,739 barrels per day (Bpd) and gross gas at 684.7 million cubic feet per day (MMcfd). Net production was 136,500 barrels of oil equivalent (Boe), a 10.9 percent increase over the fourth quarter.

 Development Projects

In the first quarter of 2009, incremental production began from the expansion of our Western Desert gas processing capacity and infrastructure, which will process an additional 200 MMcfd and 10,000 barrels of condensate per day gross (100 MMcfd and 5,000 barrels of condensate per day net) primarily from the Qasr field discovery.

Commissioning and start-up of the Salam Gas Plant Trains 3 and 4 and the Northern Pipeline Compression project are progressing for completion in the second quarter. We expect gross gas production to average 730 MMcfd, a 34-percent increase from the beginning of the first quarter.

The Karama power project, which will help reduce over 3,000 tons of CO₂ emissions, is underway for completion in 2009.

 Khalda Area

Apache operates Khalda with a 100-percent contractor interest. The area produces oil, natural gas and natural gas liquids from several fields. Implementation of waterflood, fracture-stimulation and horizontal-drilling technologies has given new life to many old fields.

In the first quarter, we completed drilling and/or testing operations on eight exploratory wells resulting in four new field discoveries.

The Phiops-1X exploration well on the Kalabsha Development Lease logged 173 feet of oil pay in the Cretaceous Alam El Bueib (AEB) sand and 103 feet of pay in the Jurassic Safa sands. The Safa sands tested at 2,278 Bpd and 5.2 MMcfd – production commenced in April. Two development wells in the AEB and Safa pay are scheduled in the second quarter.

The WKAL-A-1X discovery well in the West Kalabsha concession logged 202 net feet oil pay in AEB sands and 17 feet of Jurassic Zahra sand pay. Test rates were 2,906 Bpd and 3.9 MMcfd in the Zahra. First production is expected in the third quarter.

The NTRK-C-1X discovery well is the first commercial discovery in the North Tarek concession. It logged 48 feet of AEB sand pay, and tested at 3,489 Bpd and 4.5 MMcfd. First production is expected in the fourth quarter.

The Neith-1X discovery will be tested in the second quarter. Plus, we are currently drilling two new Jurassic discovery exploratory wells, the Falcon-1X and Chelsa-1X.

 Qarun Area

Qarun, the source of our original oil production in Egypt, comprises 16 exploration concessions and 55 development leases across 1 million gross acres. Current daily production is approximately 45,500 Bpd, 90 percent of which comes from long-life waterflood fields. Over the last two years, water injection has doubled year on year with daily water injection currently 50,000 barrels of water per day (Bwpd).

During 2008, several new oil fields were discovered in the Bahariya formation in the East Bahariya concession on a positive geological trend identified from 3-D seismic acquired in 2006. In the first quarter, the EBAH-G-1X discovery tested 750 Bpd. These discoveries will add significantly to our inventory of waterflood projects in the concession.

 Northeast Abu Gharadig (NEAG) Area

Apache began exploring with operator Shell Egypt in NEAG in January 1997 following the acquisition of Mobil’s interest. Apache and Shell have made seven new field discoveries since 2002, including three new discoveries in 2008 that are expected to start producing later in 2009. Production from the concession is currently at 11,000 Bpd and 52 MMcfd. A growing volume is now coming from new Bahariya oil fields located just north of Apache’s Yomna Field in East Bahariya Concession.