LETTER 1 filename1.txt January 5, 2006 Thomas L. Mitchell, Vice President and Controller Apache Corporation One Post Oak Central 2000 Post Oak Boulevard, Suite 100 Houston, TX 77056-4400 Re: Apache Corporation Form 10-K for the Year Ended December 31, 2004 Filed March 15, 2005 File No. 001-04300 Response Letter dated December 14, 2005 Dear Mr. Mitchell: We have reviewed the above filings and have the following comments. We have limited our review of your filings to those issues we have addressed in our comments. Where indicated, we think you should revise your document in response to these comments. If you disagree, we will consider your explanation as to why our comment is inapplicable or a revision is unnecessary. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. After reviewing this information, we may raise additional comments. Form 10-K for the Year Ended December 31, 2004 Statement of Consolidated Cash Flows, page F-5 1. We are considering your response to the prior comment number one from our letter dated November 9, 2005. Anadarko Petroleum, page F-16 2. We note your response to the prior comment number two from our letter dated November 9, 2005. We believe a VPP obligation assumed in a business combination should be valued at fair value pursuant to paragraphs 35 and B99 of FASB Statement No. 141. The fair value would be the price a third party would require to assume that obligation alone, which would be the estimated cost to produce the VPP reserves plus a normal profit margin. Also, it is our view that the VPP is an obligation to provide the lifting "service". Therefore, as production occurs, or the service is provided, the reversal of the VPP liability should be to revenue and the cost of providing the service along with your share of the production costs should be reflected as lease operating expense on a gross basis. Please provide SAB 99 analysis to determine if any corrections would be material to years 2003, 2004 and 2005 and to future periods for the VPP obligation related to the BP and Shell acquisitions in 2003 and Anadarko acquisition in 2004. Closing Comments Please respond to these comments within 10 business days or tell us when you will provide us with a response. Please furnish a letter that keys your responses to our comments and provides any requested information. Detailed letters greatly facilitate our review. Please understand that we may have additional comments after reviewing your responses to our comments. You may contact Yong Choi at (202) 551-3758 if you have questions regarding comments on the financial statements and related matters. Please contact me at (202) 551-3684 with any other questions. Sincerely, April Sifford Branch Chief ?? ?? ?? ?? Mr. Mitchell Apache Corporation January 5, 2006 Page 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-7010 DIVISION OF CORPORATION FINANCE MAIL STOP 7010