U.S. Central

Overview

Apache’s Central Region spans the Permian Basin of West Texas and New Mexico, the Anadarko Basin in western Oklahoma, and East Texas. We are the fourth-largest producer in both the Anadarko and Permian basins. This region brings the balance of long-lived reserves and consistent drilling results through our portfolio of low-risk, repeatable opportunities. We have applied our expertise in adding value to mature fields.

At year-end 2008, the Central region accounted for approximately 25 percent of our estimated proved reserves, the largest concentration in the Company. During 2008, we participated in drilling 415 wells in the Central region, 404 of which were completed as producers. Apache also performed 1,210 workovers and recompletions in the region during the year.

During the second quarter, the Central region produced 87,700 barrels of equivalent (Boe) per day, down 2.2 percent from the first quarter primarily due to natural well declines and little new drilling activity. Rig activity was deliberately slowed in the first half of 2009 pending drilling and well service costs to drop to a level more consistent with lower oil and gas prices. With reduced activity levels, we concentrated on building our inventory of opportunities and developing lower-cost projects, such as waterflood expansions.

 Anadarko Basin

Apache owns interests in almost 200,000 acres in the Anadarko Basin. We are currently concentrating on the emerging horizontal Granite Wash gas play.  We have drilled more than 100 successful vertical Granite Wash wells over the past five years, and started drilling dozens of horizontal wells in 2009.  We have encountered initial rates above 10 MMcfd, significantly reducing our risk as we begin rigorous evaluation of the horizontal potential on our acreage. We are presently drilling our first operative horizontal Granite Wash well.  We have also identified other horizontal gas and oil plays on our acreage and will be testing these over the remainder of 2009 and into 2010.

Apache began operating our first compressed natural gas (CNG) refueling station at Elk City, Okla., enabling the company to fuel 40 converted field vehicles with cleaner-burning natural gas produced from our wells in the Anadarko Basin. See Apache Celebrates Earth Day With New Refueling Station in Elk City, Okla. to Power Company Vehicles With Cleaner-Burning, Abundant Natural Gas. In August, we announced plans to build two additional CNG refueling stations in the state. See Oklahoma speaker, Apache CEO highlight state’s commitment to natural gas-fueled transportation at Elk City CNG refueling station.

 Permian Basin

Apache is acquiring Permian Basin properties from Marathon for $190 million (Read the news release). The properties are located in nine fields in West Texas and eastern New Mexico. The most significant portion directly offsets our Eunice operations area, which has been the foundation of our drilling programs in the Permian for over a decade. The properties currently produce 1,850 Bpd of oil and natural gas liquids, plus 10 million cubic feet per day (MMcfd) of gas. We have already identified over 200 possible drilling locations. During the second quarter, we confirmed attractive drilling targets for oil, especially in southeast New Mexico where we just sanctioned a 10-well program.

 East Texas

We drilled and completed our Moody 7H, a Bossier horizontal well in Freestone County, Texas. It tested at a rate of 15 MMcfd in February. Apache has 100 percent working interest in this well, and a number of other prospects in the area.