10-Q/A

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2010

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to

Commission File Number 1-4300

APACHE CORPORATION

(exact name of registrant as specified in its charter)

Delaware	41-0747868
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400
(Address of principal executive offices)

Registrant’s Telephone Number, Including Area Code: (713) 296-6000

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ     No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ     No o

      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer o
Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o     No þ

Number of shares of registrant’s common stock outstanding as of July 31, 2010                                                                             364,278,514

EXPLANATORY NOTE

     Apache Corporation (Apache or the Company) is filing this Amendment No. 1 on Form 10-Q/A to amend and restate in its entirety the following items of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, as originally filed with the Securities and Exchange Commission on August 6, 2010 (the “Original Form 10-Q”): (i) Item 1 of Part I “Financial Information,” and (ii) Item 2 of Part I, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and we have also updated the signature page, the certifications of our Chief Executive Officer and Chief Financial Officer in Exhibits 31.1, 31.2, and 32.1, and our financial statements formatted in Extensible Business Reporting Language (XBRL) in Exhibits 101. No other sections were affected, but for the convenience of the reader, this report on Form 10-Q/A restates in its entirety, as amended, our Original Form 10-Q.

     In light of the repeal of SEC Rule 436(g) by Congress in the Dodd-Frank Act, effective Thursday, July 22, 2010, we have deleted the reference to our credit ratings in Note 6 — Debt of Item 1 of Part I, “Financial Information” and have expanded our disclosure regarding our credit ratings in Item 2 of Part 1, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Capital Resources and Liquidity”.

     This report on Form 10-Q/A is presented as of the filing date of the Original Form 10-Q and does not reflect events occurring after that date, or modify or update disclosures in any way other than as required to reflect the amendments described above.

TABLE OF CONTENTS

		Page
PART I — FINANCIAL INFORMATION		1
	ITEM 1 — FINANCIAL STATEMENTS	1
	ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	29
	ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	50
	ITEM 4 — CONTROLS AND PROCEDURES	53
PART II — OTHER INFORMATION		54
	ITEM 1. LEGAL PROCEEDINGS	54
	ITEM 1A. RISK FACTORS	54
	ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	58
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES	58
	ITEM 4. [REMOVED AND RESERVED]	58
	ITEM 5. OTHER INFORMATION	58
	ITEM 6. EXHIBITS	58
SIGNATURES		60
EX-10.2
EX-10.3
EX-10.4
EX-10.5
EX-10.6
EX-10.7
EX-12.1
EX-31.1
EX-31.2
EX-32.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED OPERATIONS
(Unaudited)

	For the Quarter				For the Six Months
	Ended June 30,				Ended June 30,
	2010		2009		2010			2009
	(In thousands, except per common share data)
REVENUES AND OTHER:
Oil and gas production revenues	$	2,968,765	$	2,074,344	$	5,662,390		$	3,677,958
Other		3,145		19,034		(17,229	)		49,245
		2,971,910		2,093,378		5,645,161			3,727,203
OPERATING EXPENSES:
Depreciation, depletion and amortization
Recurring		729,751		573,359		1,368,249			1,153,976
Additional		—		—		—			2,818,161
Asset retirement obligation accretion		24,760		26,483		48,762			53,221
Lease operating expenses		445,949		405,273		886,195			802,762
Gathering and transportation		43,038		33,479		83,403			66,818
Taxes other than income		186,833		115,941		363,771			203,280
General and administrative		91,829		90,905		178,979			175,951
Financing costs, net		55,757		61,155		115,024			119,742
		1,577,917		1,306,595		3,044,383			5,393,911
INCOME (LOSS) BEFORE INCOME TAXES		1,393,993		786,783		2,600,778			(1,666,708	)
Current income tax provision		339,151		218,247		682,125			220,741
Deferred income tax provision (benefit)		194,619		123,816		353,449			(575,229	)
NET INCOME (LOSS)		860,223		444,720		1,565,204			(1,312,220	)
Preferred stock dividends		—		1,420		—			2,840
INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK	$	860,223	$	443,300	$	1,565,204		$	(1,315,060	)
NET INCOME (LOSS) PER COMMON SHARE:
Basic	$	2.55	$	1.32	$	4.64		$	(3.92	)
Diluted	$	2.53	$	1.31	$	4.61		$	(3.92	)

The accompanying notes to consolidated financial statements
are an integral part of this statement.

1

APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(Unaudited)

	For the Six Months Ended June 30,
	2010			2009
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	1,565,204		$	(1,312,220	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization		1,368,249			3,972,137
Asset retirement obligation accretion		48,762			53,221
Provision for (benefit from) deferred income taxes		353,449			(575,229	)
Other		66,939			104,734
Changes in operating assets and liabilities:
Receivables		(103,847	)		(173,502	)
Inventories		(6,812	)		(4,049	)
Drilling advances		21,827			(89,751	)
Deferred charges and other		729			5,871
Accounts payable		49,573			(176,572	)
Accrued expenses		(291,931	)		(376,981	)
Deferred credits and noncurrent liabilities		13,299			(60,930	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		3,085,441			1,366,729
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas property		(1,937,613	)		(2,117,415	)
Additions to gas gathering, transmission and processing facilities		(256,728	)		(164,723	)
Acquisition of Marathon properties		—			(181,133	)
Acquisition of Devon properties		(1,017,238	)		—
Short-term investments		—			791,999
Restricted cash		—			13,880
Other, net		(6,904	)		(85,399	)
NET CASH USED IN INVESTING ACTIVITIES		(3,218,483	)		(1,742,791	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Commercial paper, credit facility and bank notes, net		(55,384	)		147,666
Payments on fixed-rate notes		—			(100,000	)
Dividends paid		(101,065	)		(103,331	)
Common stock activity		21,346			9,971
Treasury stock activity, net		3,591			2,669
Cost of debt and equity transactions		(289	)		(403	)
Other		22,073			9,597
NET CASH USED IN FINANCING ACTIVITIES		(109,728	)		(33,831	)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(242,770	)		(409,893	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		2,048,117			1,181,450
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	1,805,347		$	771,557
SUPPLEMENTARY CASH FLOW DATA:
Interest paid, net of capitalized interest	$	113,099		$	122,120
Income taxes paid, net of refunds		595,472			188,251

The accompanying notes to consolidated financial statements
are an integral part of this statement.

2

APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)

	June 30,			December 31,
	2010			2009
	(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,805,347		$	2,048,117
Receivables, net of allowance		1,647,952			1,545,699
Inventories		508,702			533,251
Drilling advances		205,965			230,733
Prepaid taxes		137,556			146,653
Prepaid assets and other		201,418			81,396
		4,506,940			4,585,849
PROPERTY AND EQUIPMENT:
Oil and gas, on the basis of full-cost accounting:
Proved properties		47,078,456			44,267,037
Unproved properties and properties under development, not being amortized		1,968,079			1,479,008
Gas gathering, transmission and processing facilities		3,445,906			3,189,177
Other		524,642			492,511
		53,017,083			49,427,733
Less: Accumulated depreciation, depletion and amortization		(27,893,628	)		(26,527,118	)
		25,123,455			22,900,615
OTHER ASSETS:
Goodwill, net		189,252			189,252
Deferred charges and other		612,760			510,027
	$	30,432,407		$	28,185,743

The accompanying notes to consolidated financial statements
are an integral part of this statement.

3

APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)

	June 30,			December 31,
	2010			2009
	(In thousands)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	485,601		$	396,564
Accrued operating expense		92,678			90,151
Accrued exploration and development		895,305			923,084
Accrued compensation and benefits		97,250			151,408
Current debt		116,205			117,326
Asset retirement obligation		147,374			146,654
Other		368,422			567,371
		2,202,835			2,392,558
LONG-TERM DEBT		4,896,127			4,950,390
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes		3,247,065			2,764,901
Asset retirement obligation		1,874,743			1,637,357
Other		535,877			661,916
		5,657,685			5,064,174
COMMITMENTS AND CONTINGENCIES (Note 9)
SHAREHOLDERS’ EQUITY:
Common stock, $0.625 par, 430,000,000 shares authorized, 345,278,595 and 344,076,790 shares issued, respectively		215,799			215,048
Paid-in capital		4,748,709			4,634,326
Retained earnings		12,900,582			11,436,580
Treasury stock, at cost, 7,479,435 and 7,639,818 shares, respectively		(212,280	)		(216,831	)
Accumulated other comprehensive income (loss)		22,950			(290,502	)
		17,675,760			15,778,621
	$	30,432,407		$	28,185,743

The accompanying notes to consolidated financial statements
are an integral part of this statement.

4

APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED SHAREHOLDERS’ EQUITY
(Unaudited)

																	Accumulated
				Series B													Other			Total
	Comprehensive			Preferred		Common								Treasury			Comprehensive			Shareholders’
	Income (Loss)			Stock		Stock		Paid-In Capital			Retained Earnings			Stock			Income (Loss)			Equity
	(In thousands)
BALANCE AT DECEMBER 31, 2008				$	98,387	$	214,221	$	4,472,826		$	11,929,827		$	(228,304	)	$	21,764		$	16,508,721
Comprehensive loss:
Net loss	$	(1,312,220	)		—		—		—			(1,312,220	)		—			—			(1,312,220	)
Commodity hedges, net of income tax benefit of $108,393		(194,508	)		—		—		—			—			—			(194,508	)		(194,508	)
Comprehensive loss	$	(1,506,728	)
Dividends:
Preferred					—		—		—			(2,840	)		—			—			(2,840	)
Common ($.30 per share)					—		—		—			(100,567	)		—			—			(100,567	)
Common shares issued					—		537		(3,886	)		—			—			—			(3,349	)
Treasury shares issued, net					—		—		(4,840	)		—			5,040			—			200
Compensation expense					—		—		63,356			—			—			—			63,356
Other					—		—		(98	)		—			—			—			(98	)
BALANCE AT JUNE 30, 2009				$	98,387	$	214,758	$	4,527,358		$	10,514,200		$	(223,264	)	$	(172,744	)	$	14,958,695
BALANCE AT DECEMBER 31, 2009				$	—	$	215,048	$	4,634,326		$	11,436,580		$	(216,831	)	$	(290,502	)	$	15,778,621
Comprehensive income:
Net income	$	1,565,204			—		—		—			1,565,204			—			—			1,565,204
Commodity hedges, net of income tax expense of $150,207		313,452			—		—		—			—			—			313,452			313,452
Comprehensive income	$	1,878,656
Common stock dividends ($.30 per share)					—		—		—			(101,204	)		—			—			(101,204	)
Common shares issued					—		751		12,473			—			—			—			13,224
Treasury shares issued, net					—		—		(519	)		—			4,551			—			4,032
Compensation expense					—		—		102,006			—			—			—			102,006
Other					—		—		423			2			—			—			425
BALANCE AT JUNE 30, 2010				$	—	$	215,799	$	4,748,709		$	12,900,582		$	(212,280	)	$	22,950		$	17,675,760

The accompanying notes to consolidated financial statements
are an integral part of this statement.

5

APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

     These financial statements have been prepared by Apache Corporation (Apache or the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). They reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods, on a basis consistent with the annual audited financial statements. All such adjustments are of a normal recurring nature. Certain information, accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. This Quarterly Report on Form 10-Q should be read along with the Annual Report on Form 10-K for the fiscal year ended December 31, 2009, which contains a summary of the Company’s significant accounting policies and other disclosures. Additionally, the Company’s financial statements for prior periods include reclassifications that were made to conform to the current-period presentation.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     As of June 30, 2010, Apache’s significant accounting policies are consistent with those discussed in Note 1 of its consolidated financial statements contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

Use of Estimates

     The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates with regard to these financial statements include the estimate of proved oil and gas reserves and related present value estimates of future net cash flow therefrom, asset retirement obligations and income taxes. Actual results could differ from those estimates.

2. ACQUISITIONS

Kitimat LNG Terminal

     In the first quarter of 2010, Apache announced an agreement to acquire a 51-percent interest in Kitimat LNG Inc’s proposed liquefied natural gas (LNG) export terminal (Kitimat) in British Columbia. The Company also reserved 51 percent of throughput capacity in the terminal. Planned plant gross capacity will be approximately 700 million cubic feet of natural gas per day (MMcf/d), or five million metric tons of LNG per year. This project has the potential to access new markets in the Asia-Pacific region and enable Apache to monetize gas from its Canadian region, including its interest in the Horn River Basin in northeast British Columbia. Kitimat is designed to be linked to the pipeline system servicing Western Canada’s natural gas producing regions proposed by Pacific Trail Pipelines. In association with the Company’s acquisition of interest in the Kitimat project, Apache also acquired a 25.5-percent interest in the proposed pipeline and 350 MMcf/d of net capacity rights. Preliminary gross construction cost of the Kitimat LNG export terminal, which will be refined upon completion of a front-end engineering and design (FEED) study, total C$3 billion and of the pipeline total C$1.1 billion. Apache projects that most of the costs for the LNG export terminal and pipeline will be incurred throughout a three and one-half year construction phase which is expected to begin in the second half of 2011.

     During the second quarter Apache received proposals from three contractors on the FEED study and expects to award the contract by the end of the third quarter of 2010. Memorandums of Understanding (MOUs) have been developed and discussions with LNG buyers have been ongoing to market the LNG. Also, negotiations for specific agreements required with First Nations and Canadian federal and provincial governments are underway with completion anticipated during the third quarter of 2010. A final investment decision is expected in 2011, with the first LNG shipments projected as early as the end of 2014.

6

Gulf of Mexico Shelf Acquisition

     On June 9, 2010, Apache completed a $1.05 billion acquisition of oil and gas assets in the Gulf of Mexico shelf from Devon Energy Corporation (Devon). The acquisition was effective as of January 1, 2010. The acquired assets include 477,000 net acres across 150 blocks and estimated proved reserves of 41 million barrels of oil equivalent (MMboe). Approximately half of the estimated net proved reserves were liquid hydrocarbons and seven major fields account for 90 percent of the estimated proved reserves. Virtually all of the production is located in fields in water depths less than 500 feet and Apache operates 75 percent of the production. The acquisition was funded primarily from existing cash balances.

Mariner Energy, Inc. Merger Agreement

     On April 15, 2010, Apache and Mariner Energy, Inc., a Delaware corporation (Mariner), announced that we had entered into a definitive agreement pursuant to which Apache will acquire Mariner in a stock and cash transaction. The Agreement and Plan of Merger dated April 14, 2010 (as amended by amendment No. 1 dated August 2, 2010, referred to as the Merger Agreement), by and among Apache, Mariner and ZMZ Acquisitions LLC, a Delaware limited liability company and wholly owned subsidiary of Apache (Merger Sub), contemplates a merger (the Merger) whereby Mariner will be merged with and into Merger Sub, with Merger Sub surviving the Merger as a wholly owned subsidiary of Apache.

     The total amount of cash and shares of Apache common stock that will be paid and issued, respectively, pursuant to the Merger Agreement is fixed, and Mariner stockholders will be entitled to receive (on an aggregate basis) 0.17043 of a share of Apache common stock, par value $0.625 per share, and $7.80 in cash for each share of Mariner common stock (the Mixed Consideration). Mariner stockholders have the right to elect to receive all cash ($26.00 per share), all Apache common stock (0.24347 of a share of Apache common stock) or the Mixed Consideration, subject to proration procedures as provided in the Merger Agreement.

     Upon completion of the Merger, each outstanding option to purchase Mariner common stock will be converted into a fully vested option to purchase 0.24347 shares of Apache common stock.

     In connection with the Merger, Apache expects to issue approximately 17.5 million shares of common stock (an increase of approximately five percent of the Company’s outstanding common shares) and pay cash of approximately $800 million to Mariner stockholders. Apache intends to fund the cash portion of the consideration with existing cash balances and commercial paper. Upon consummation of the Merger, Apache will assume Mariner’s debt, which was approximately $1.2 billion at the time of the Merger Agreement.

     The Merger Agreement has been approved by the boards of directors of Apache, Mariner, and Merger Sub. The completion of the Merger is subject to certain conditions, including: (i) the adoption of the Merger Agreement by the stockholders of Mariner; (ii) with certain materiality exceptions, the accuracy of the representations and warranties made by Apache and Mariner; (iii) the effectiveness of a registration statement on Form S-4 associated with the issuance of its common stock in the Merger, and the approval of the listing of these shares on the New York Stock Exchange; (iv) the termination or expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR Act); (v) the delivery of customary opinions from counsel to Apache and Mariner that the Merger will be treated as a tax-free reorganization for U.S. federal income tax purposes; (vi) compliance by Apache and Mariner with their respective obligations under the Merger Agreement; and (vii) the absence of legal impediments prohibiting the Merger. On May 3, 2010, the U.S. Department of Justice and the Federal Trade Commission granted early termination of the waiting period under the HSR Act. Additional post-closing regulatory approvals are pending. Completion of the transaction is projected for the third quarter of 2010.

     The Merger Agreement contains customary representations and warranties that the parties have made to each other as of specific dates. Apache and Mariner have each agreed to certain covenants in the Merger Agreement. Among other covenants, Mariner has agreed, subject to certain exceptions, not to initiate, solicit, negotiate, provide information in furtherance of, approve, recommend or enter into an Acquisition Proposal (as defined in the Merger Agreement).

     The Merger Agreement also contains certain termination rights for both Apache and Mariner, including if the Merger is not completed by January 31, 2011. In the event of a termination of the Merger Agreement under certain circumstances, Mariner may be required to pay Apache a termination fee of $67 million. (less any Apache expenses previously reimbursed by Mariner). In connection with the settlement of two stockholder lawsuits, on August 2, 2010, Apache and Mariner amended the Merger Agreement to eliminate the termination fee for one of the events which would trigger the payment of the fee: in the event that Mariner terminates the Merger Agreement in order to enter into an unsolicited “superior proposal” with another party (refer to Note 9 – Commitments and Contingencies, of Item I of this form 10-Q for further discussion). In addition, under certain circumstances, the Merger Agreement requires each of Apache and Mariner to reimburse the other’s expenses, up to $7.5 million, in the event the Merger Agreement is terminated. Any reimbursement of expenses by Mariner to Apache will reduce the amount of any termination fee paid by Mariner to Apache.

7

     At year-end 2009, Mariner had estimated proved reserves of 181 MMboe. Mariner’s oil and gas properties are primarily located in the Gulf of Mexico deepwater and shelf, the Permian Basin and onshore in the Gulf Coast, encompassing 541,000 net developed and 623,000 net undeveloped acres at December 31, 2009. Mariner’s current deepwater Gulf of Mexico portfolio includes over 99 blocks, seven discoveries in development and more than 50 drilling prospects. The Permian Basin and Gulf of Mexico Shelf assets fit well with Apache’s existing holdings and provide an inventory of future potential drilling locations, particularly in the Spraberry, Wolfcamp and Wolfberry formation oil plays of the Permian Basin. Additionally, Mariner has accumulated acreage in emerging unconventional shale oil resources in the U.S.

     Assuming the Merger is approved by Mariner stockholders and is cleared by regulatory authorities, the transaction will be accounted for as a business combination, with Mariner’s assets and liabilities reflected in Apache’s financial statements at fair value.

3. SUBSEQUENT EVENTS

Agreement to acquire Permian Basin, Egypt and Canada properties from BP

     On July 20, 2010, we announced the signing of three definitive purchase and sale agreements to acquire the properties described below (BP Properties) from subsidiaries of BP plc (collectively referred to as “BP”) for aggregate consideration of $7.0 billion, subject to customary adjustments (BP Acquisition).

     Permian Basin. All of BP’s oil and gas operations, related infrastructure and acreage in the Permian Basin of West Texas and New Mexico. The assets include interests in 10 field areas in the Permian Basin, (including Block 16/Coy Waha, Block 31, Brown Basset, Empire/Yeso, Pegasus, Southeast Lea, Spraberry, Wilshire, North Misc and Delaware Penn), approximately 405,000 net mineral and fee acres, 358,000 leasehold acres, approximately 3,629 active wells and three gas processing plants, two of which are currently operated by BP. Based on our investigation and review of data provided by BP, these assets produced 15,110 barrels of liquid hydrocarbons (liquids) and 81 MMcf of gas per day in the first six months of 2010. The Permian Basin assets had estimated net proved reserves of 141 MMboe at June 30, 2010 (65 percent liquids).

     Western Canada Sedimentary Basin. Substantially all of BP’s Western Canadian upstream gas assets, including approximately 1,278,000 net mineral and leasehold acres, interests in approximately 1,600 active wells, and eight operated and 14 non-operated gas processing plants. The position includes many drilling opportunities ranging from conventional to several unconventional targets, including shale gas, tight gas and coal bed methane in historically productive formations including the Montney, Cadomin and Doig. Based on our investigation and review of data provided by BP, during the first half of 2010 these properties produced 6,529 barrels of liquids and 240 MMcf of gas per day and had estimated net proved reserves of 224 MMboe at June 30, 2010 (94 percent gas). We currently have operations in approximately half of these 13 field areas.

     Western Desert, Egypt. BP’s interests in four development licenses and one exploration concession (East Badr El Din), covering 394,000 net acres south of El Alamein in the Western Desert of Egypt. These properties are operated by Gulf of Suez Petroleum Company, a joint venture between BP and the Government of Egypt. The transaction includes BP’s interests in 65 active wells, a 24-inch gas line to Dashour, a liquefied petroleum gas plant in Dashour, a gas processing plant in Abu Gharadig and a 12-inch oil export line to the El Hamra Terminal on the Mediterranean Sea. Based on our investigation and review of data provided by BP, during the first six months of 2010 these properties produced 6,016 barrels of oil and 11 MMcf of gas per day of BP’s production, and had estimated net proved reserves of 20 MMboe at June 30, 2010 (59 percent liquids). The BP Properties in Egypt are complementary to the over 11 million gross acres in 21 separate concessions in the Western Desert we currently hold. The Merged Concession Agreement related to the development licenses runs through 2024, subject to a five year extension at the option of the operator.

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     The acquisition is subject to a number of closing conditions, including regulatory approvals in the U.S., Canada and Egypt. On August 3, 2010, the U.S. Department of Justice and the Federal Trade Commission granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Additional regulatory approvals are pending. Also, some of the BP Properties are subject to preferential rights to purchase interests held by third parties, and those rights may be exercised before or after we close the acquisition. The acquisition is subject to certain post-closing requirements relating to, among other things, resolution of title, environmental and legal issues and any exercise of preferential purchase rights after closing.

     In conjunction with the acquisition, Apache issued 26.45 million shares of common stock and 25.3 million depositary shares, raising net proceeds of $3.5 billion (refer to Note 8 — Capital Stock, of Item 1 of this Form 10-Q for further discussion). The Company plans to fund the acquisition with the proceeds of these offerings and some combination of the following: cash on hand, our existing revolving credit and commercial paper facilities, a 364-day revolving credit facility, the issuance of term debt and the short term use of a bridge loan facility. The Company intends to increase its commercial paper program by $1 billion, the amount of the new 364-day revolving credit facility. We also secured a $5 billion bridge loan facility to backstop our financing requirements. The commitment under the bridge loan facility has been reduced by $3.5 billion, which is the amount of the net proceeds from the common stock and mandatory convertible preferred offerings discussed above. Depending on when the closing of the acquisition of the Permian Basin BP Properties occurs, we may fund a portion of the amount due for those properties by drawing under the bridge loan facility. Any such borrowing would be repaid from the Company’s next debt offering. Under the purchase and sale agreement, Apache advanced $5 billion of the purchase price to BP plc on July 30, 2010, ahead of the anticipated closings. This advance will be returned to Apache or applied to the purchase price at closing. BP plc provided a limited guarantee with respect to the purchase and sale agreements, principally as to the return of the advance.

4. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Objectives and Strategies for Using Derivative Instruments

     The Company is exposed to fluctuations in crude oil and natural gas prices on the majority of its worldwide production. Management occasionally manages the variability in cash flows by entering into hedges on a portion of its crude oil and natural gas production. The Company utilizes various types of derivative financial instruments, including swaps and options, to manage fluctuations in cash flows resulting from changes in commodity prices. Derivative instruments typically entered into are designated as cash flow hedges.

Counterparty Risk

     The use of derivative transactions exposes the Company to counterparty credit risk, or the risk that a counterparty will be unable to meet its commitments. To reduce the concentration of exposure to any individual counterparty, Apache utilizes a diversified group of counterparties, primarily financial institutions, for its derivative transactions. As of June 30, 2010, Apache had positions with 16 counterparties, all but one of which were rated A or higher by Standard & Poor’s and A2 or higher by Moody’s. The Company monitors counterparty creditworthiness on an ongoing basis; however, it cannot predict sudden changes in counterparties’ creditworthiness. In addition, even if such changes are not sudden, the Company may be limited in its ability to mitigate an increase in counterparty credit risk. Should any or all of these counterparties not perform, Apache may not realize the benefit of some or all of its derivative instruments resulting from lower commodity prices.

     The Company executes commodity derivative transactions under master agreements that have netting provisions that provide for offsetting payables against receivables. In general, if a party to a derivative transaction incurs a material deterioration in its credit ratings, as defined in the applicable agreement, the other party will have the right to demand the posting of collateral, demand a transfer or terminate the arrangement.

Commodity Derivative Instruments

     As of June 30, 2010, Apache had the following open crude oil derivative positions:

	Fixed-Price Swaps				Collars
			Weighted				Weighted		Weighted
Production			Average				Average		Average
Period	Mbbls		Fixed Price(1)		Mbbls		Floor Price(1)		Ceiling Price(1)
2010		1,840	$	70.10		5,474	$	67.37	$	84.51
2011		3,650		70.12		8,575		69.09		90.12
2012		3,292		70.99		5,482		72.17		95.34
2013		1,451		72.01		2,416		78.02		103.06
2014		76		74.50		—		—		—

⁽¹⁾ Crude oil prices represent a weighted average of several contracts entered into on a per barrel basis. Crude oil contracts are primarily settled against NYMEX WTI Cushing Index.

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     As of June 30, 2010, Apache had the following open natural gas derivative positions:

	Fixed-Price Swaps						Collars
					Weighted						Weighted		Weighted
Production	MMBtu		GJ		Average		MMBtu		GJ		Average		Average
Period	(in 000’s)		(in 000’s)		Fixed Price(1)		(in 000’s)		(in 000’s)		Floor Price(1)		Ceiling Price(1)
2010		45,540		—	$	5.72		14,720		—	$	5.41	$	6.91
2010		—		27,600	C$	5.37		—		—		—		—
2011		46,538		—	$	6.13		9,125		—	$	5.00	$	8.85
2011		—		51,100	C$	6.26		—		3,650	C$	6.50	C$	7.10
2012		19,215		—	$	6.51		21,960		—	$	5.54	$	7.30
2012		—		43,920	C$	6.61		—		7,320	C$	6.50	C$	7.27
2013		1,825		—	$	7.05		6,825		—	$	5.35	$	6.67
2014		755		—	$	7.23		—		—		—		—

⁽¹⁾ U.S. natural gas prices represent a weighted average of several contracts entered into on a per million British thermal units (MMBtu) basis and are settled primarily against NYMEX Henry Hub and various Inside FERC indices. The Canadian natural gas prices represent a weighted average of AECO Index prices and are shown in Canadian dollars. The Canadian gas contracts are entered into on a per gigajoule (GJ) basis and are settled against AECO Index.

     As of June 30, 2010, Apache had the following open natural gas financial basis swap contracts:

			Weighted
	MMBtu		Average
Production Period	(in 000’s)		Price Differential(1)
2010		21,160	$	(0.54	)
2011		18,250	$	(0.30	)
2012		10,980	$	(0.36	)

(1) Natural gas financial basis swap contracts represent a weighted average differential between prices primarily against Inside FERC PEPL and NYMEX Henry Hub prices.

Fair Values of Derivative Instruments Recorded in the Consolidated Balance Sheet

     The Company accounts for derivative instruments and hedging activity in accordance with Accounting Standards Codification (ASC) Topic 815, “Derivatives and Hedging,” and all derivative instruments are reflected as either assets or liabilities at fair value in the consolidated balance sheet. These fair values are recorded by netting asset and liability positions where counterparty master netting arrangements contain provisions for net settlement. The fair market value of the Company’s derivative assets and liabilities are as follows:

	June 30,		December 31,
	2010		2009
	(In millions)
Current Assets: Prepaid assets and other	$	145	$	13
Other Assets: Deferred charges and other		155		51
Total Derivative Assets	$	300	$	64
Current Liabilities: Other	$	36	$	128
Noncurrent Liabilities: Other		65		202
Total Derivative Liabilities	$	101	$	330

     The methods and assumptions used to estimate the fair values of the Company’s commodity derivative instruments and gross amounts of commodity derivative assets and liabilities are more fully discussed in Note 10 — Fair Value Measurements.

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Commodity Derivative Activity Recorded in Statement of Consolidated Operations

     The following table summarizes the effect of derivative instruments on the Company’s statement of consolidated operations:

	Gain (Loss) on Derivatives	For the Quarter Ended					For the Six Months Ended
	Recognized In Income	June 30,					June 30,
		2010		2009			2010			2009
				(In millions)
Gain (loss) reclassified from accumulated other comprehensive income (loss)	Oil and Gas Production
into operations (effective portion)	Revenues	$	52	$	52		$	51		$	108
Gain (loss) derivatives recognized in operations (ineffective portion and basis)	Revenues and Other: Other	$	—	$	(1	)	$	(1	)	$	(4	)

Commodity Derivative Activity in Accumulated Other Comprehensive Income (Loss)

     As of June 30, 2010, substantially all of the Company’s derivative instruments were designated as cash flow hedges in accordance with ASC Topic 815. A reconciliation of the components of accumulated other comprehensive income (loss) in the statement of consolidated shareholders’ equity related to Apache’s cash flow hedges is presented in the table below:

	For the Six Months Ended June 30,
	2010						2009
	Before tax			After tax			Before tax			After tax
	(In millions)
Unrealized gain (loss) on derivatives at beginning of period	$	(267	)	$	(170	)	$	212		$	138
Realized amounts reclassified into earnings		(51	)		(33	)		(108	)		(73	)
Net change in derivative fair value		514			346			(196	)		(122	)
Ineffectiveness reclassified into earnings		1			1			1			—
Unrealized gain (loss) on derivatives at end of period	$	197		$	144		$	(91	)	$	(57	)

     Based on market prices as of June 30, 2010, the Company’s net unrealized income in accumulated other comprehensive income (loss) for commodity derivatives designated as cash flow hedges totaled a gain of $197 million ($144 million after tax). Gains and losses on hedges will be realized in future earnings through mid-2014, contemporaneously with the related sales of natural gas and crude oil production applicable to specific hedges. Included in accumulated other comprehensive income (loss) as of June 30, 2010 is a net gain of approximately $109 million ($77 million after tax) that applies to the next 12 months; however, estimated and actual amounts are likely to vary materially as a result of changes in market conditions.

5. ASSET RETIREMENT OBLIGATION

     The following table describes changes to the Company’s asset retirement obligation (ARO) liability for the six months ended June 30, 2010:

	(In millions)
Asset retirement obligation at December 31, 2009	$	1,784
Liabilities incurred		314
Liabilities settled		(125	)
Accretion expense		49
Asset retirement obligation at June 30, 2010		2,022
Less current portion		(147	)
Asset retirement obligation, long-term	$	1,875

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     The ARO reflects the estimated present value of the amount of dismantlement, removal, site reclamation and similar activities associated with Apache’s oil and gas properties. The Company utilizes current retirement costs to estimate the expected cash outflows for retirement obligations. To determine the current present value of this obligation, some key assumptions the Company must estimate include the ultimate productive life of the properties, a risk adjusted discount rate and an inflation factor. To the extent future revisions to these assumptions impact the present value of the existing ARO liability, a corresponding adjustment is made to the oil and gas property balance. The period includes $233 million of liabilities incurred related to the Devon acquisition which closed in June, 2010.

6. DEBT

     As of June 30, 2010, the Company had unsecured committed revolving syndicated bank credit facilities totaling $2.3 billion, which mature in May 2013. These consist of a $1.5 billion facility and a $450 million facility in the U.S., a $200 million facility in Australia and a $150 million facility in Canada. Since there are no outstanding borrowings or commercial paper at quarter-end, the full $2.3 billion of unsecured credit facilities are available to the Company.

     The Company has available a $1.95 billion commercial paper program, which generally enables Apache to borrow funds for up to 270 days at competitive interest rates. The commercial paper program is fully supported by available borrowing capacity under U.S. committed credit facilities, which expire in 2013.

     One of the Company’s Australian subsidiaries has a secured revolving syndicated credit facility for its Van Gogh and Pyrenees oil developments offshore Western Australia. The facility provides for total commitments of up to $350 million, with availability determined by a borrowing base formula. The borrowing base was initially set at $350 million and will be redetermined upon project completion, as defined in the facility, which is expected to occur in the fourth quarter of 2010, and semi-annually thereafter. The Company has agreed to guarantee the credit facility until project completion. In the event project completion does not occur by December 31, 2010, pursuant to the terms of the facility, the lenders may require repayment of outstanding amounts in the first quarter of 2011.

     The outstanding balance under the facility as of June 30, 2010 was $300 million in accordance with the terms of the facility, down from $350 million on December 31, 2009. Under the terms of the agreement, the facility amount was reduced initially on June 30, 2010 and will be further reduced semi-annually thereafter until maturity on March 31, 2014. As $60 million and $55 million of the existing balance will be repaid by December 31, 2010 and June 30, 2011, respectively, $115 million has been classified as current debt at June 30, 2010.

     At June 30, 2010 and December 31, 2009, there was $1.2 million and $7.3 million, respectively, borrowed on uncommitted overdraft lines in Argentina and the U.S.

Financing Costs, Net

     Financing costs incurred during the periods noted are composed of the following:

	For the Quarter Ended						For the Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
				(In millions)
Interest expense	$	75		$	77		$	151		$	156
Amortization of deferred loan costs		1			1			3			3
Capitalized interest		(18	)		(15	)		(35	)		(31	)
Interest income		(2	)		(2	)		(4	)		(8	)
Financing costs, net	$	56		$	61		$	115		$	120

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7. INCOME TAXES

     The Company estimates its annual effective income tax rate in recording its quarterly provision for income taxes in the various jurisdictions in which the Company operates. Statutory tax rate changes and other significant or unusual items are recognized as discrete items in the quarter in which they occur. There were no significant discrete tax events that occurred during the first six months of 2010. The 2009 year-to-date tax provision includes the impact of the non-cash write-down of proved oil and gas properties, which was recognized as a discrete item in the first quarter of 2009.

     Apache and its subsidiaries are subject to U.S. federal income tax as well as income or capital taxes in various state and foreign jurisdictions. The Company’s tax reserves are related to tax years that may be subject to examination by the relevant taxing authority. The Company is in Administrative Appeals with the United States Internal Revenue Service (IRS) regarding the 2004 through 2007 tax years and under audit for the 2008 tax year. The Company is also under audit in various states and in most of the Company’s foreign jurisdictions as part of its normal course of business.

8. CAPITAL STOCK

Net Income (Loss) per Common Share

     A reconciliation of the components of basic and diluted net income (loss) per common share for the quarters and six-month periods ended June 30, 2010 and 2009 is presented in the table below. The loss for the first six months of 2009 reflects a $1.98 billion after-tax write-down of the carrying value of the Company’s March 31, 2009, proved property balances in the U.S. and Canada.

	For the Quarter Ended June 30,
	2010						2009
	Income		Shares		Per Share		Income		Shares		Per Share
	(In millions, except per share amounts)
Basic:
Income attributable to common stock	$	860		338	$	2.55	$	443		336	$	1.32
Effect of Dilutive Securities:
Stock options and other		—		1				—		1
Diluted:
Income attributable to common stock, including assumed conversions	$	860		339	$	2.53	$	443		337	$	1.31

	For the Six Months Ended June 30,
	2010						2009
	Income		Shares		Per Share		Loss			Shares		Per Share
	(In millions, except per share amounts)
Basic:
Income (loss) attributable to common stock	$	1,565		337	$	4.64	$	(1,315	)		335	$	(3.92	)
Effect of Dilutive Securities:
Stock options and other		—		2				—			—
Diluted:
Income (loss) attributable to common stock, including assumed conversions	$	1,565		339	$	4.61	$	(1,315	)		335	$	(3.92	)

     The diluted earnings per share calculation excludes options and restricted stock units that were anti-dilutive totaling 3.3 million and 4.1 million for the quarters ending June 30, 2010 and 2009 and 2.9 million and 3.9 million for the six months ended June 30, 2010 and 2009, respectively. The provisions of ASC Topic 260, “Earnings Per Share,” state that unvested share-based payment awards that contain rights to receive non-forfeitable dividends or dividend equivalents are participating securities prior to vesting and are required to be included in the earnings allocations in computing basic EPS under the two-class method. These participating securities had a negligible impact on earnings per share.

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Common and Preferred Stock Dividends

     For the quarter ending June 30, 2010 and 2009, Apache paid $51 million and $50 million, respectively, in dividends on its common stock. In both six-month periods ended June 30, 2010 and 2009, the Company paid $101 million in dividends on its common stock. In the three-and six-month periods ended June 30, 2009, Apache paid a total of $1.4 million and $2.8 million, respectively, in dividends on its Series B Preferred Stock issued in August 1998. The Company redeemed all outstanding shares of its Series B Preferred Stock on December 30, 2009.

Stock-Based Compensation

     Share Appreciation Plans

     The Company utilizes share appreciation plans from time to time to provide incentives for substantially all full-time employees to increase Apache’s share price within a stated measurement period. To achieve the payout under those plans, the Company’s stock price must close at or above a stated threshold for 10 out of any 30 consecutive trading days before the end of the stated period. Since 2005, two separate share appreciation plans have been approved. A summary of these plans follows:

• On May 7, 2008, the Stock Option Plan Committee of the Company’s Board of Directors, pursuant to the Company’s 2007 Omnibus Equity Compensation Plan, approved the 2008 Share Appreciation Program, with a target to increase Apache’s share price to $216 by the end of 2012 and an interim goal of $162 to be achieved by the end of 2010. Any awards under the plan would be payable in five equal annual installments. As of June 30, 2010, neither share price threshold had been met.

• On May 5, 2005, the Company’s stockholders approved the 2005 Share Appreciation Plan, with a target to increase Apache’s share price to $108 by the end of 2008 and an interim goal of $81 to be achieved by the end of 2007. Awards under the plan were payable in four equal annual installments to eligible employees remaining with the Company. Apache’s share price exceeded the interim $81 threshold for the 10-day requirement on June 14, 2007. The final installment was awarded in June 2010. Apache’s share price exceeded the $108 threshold for the 10-day requirement as of February 29, 2008. The third installment was awarded in March 2010.

     2010 Performance Program and Restricted Stock Awards

     To provide long-term incentives for Apache employees to deliver competitive returns to our stockholders, in November 2009, the Company’s Board of Directors approved the 2010 Performance Program, pursuant to the 2007 Omnibus Equity Compensation Plan. Eligible employees were granted initial conditional restricted stock units totaling 541,440 units. The ultimate number of restricted stock units to be awarded,will be based upon measurement of the total shareholder return of Apache common stock as compared to a designated peer group during a three-year performance period. Should any restricted stock units be awarded at the end of the three-year performance period, December 31, 2012, 50 percent of restricted stock units awarded will immediately vest, and an additional 25 percent will vest on the two succeeding anniversaries following the end of the performance period. In January 2010, the Company’s Board of Directors also approved one-time restricted stock unit awards totaling 502,470 shares to eligible Apache employees, with one-third of the units granted immediately vesting and an additional one-third vesting on each of the first and second anniversaries of the grant date.

Subsequent Events

     Common and Depositary Share Offerings

     In conjunction with the BP Acquisition, Apache issued 26.45 million shares of common stock at a public offering price of $88.00 per share. Proceeds, after underwriting discounts and before expenses, from the common stock offering were approximately $2.3 billion. The initial offering of 21 million shares was increased to 23 million shares and the underwriters exercised their option to purchase an additional 3.45 million shares. The Company also received proceeds of $1.2 billion, after underwriting discounts and before expenses, from the sale of 25.3 million depositary shares, each representing a 1/20th interest in a share of Apache’s 6.00% Mandatory Convertible Preferred Stock, Series D, with an initial liquidation preference of $1,000 per share (equivalent to $50 liquidation preference per depositary share). The Company offered 22 million depositary shares and the underwriters exercised their option to purchase an additional 3.3 million depositary shares. Net proceeds to the Company from the common stock and depositary share offerings totaled approximately $3.5 billion after underwriting discounts and before expenses.

9. COMMITMENTS AND CONTINGENCIES

Legal Matters

     Apache is party to various legal actions arising in the ordinary course of business, including litigation and governmental and regulatory controls. The Company has an accrued liability of approximately $23 million for all legal contingencies that are deemed to be probable of occurring and can be reasonably estimated. Apache’s estimates are based on information known about the matters and its experience in contesting, litigating and settling similar matters. Although actual amounts could differ from management’s estimate, none of the actions are believed by management to involve future amounts that would be material to Apache’s financial position or results of operations after consideration of recorded accruals. It is management’s opinion that the loss for any other litigation matters and claims that are reasonably possible to occur will not have a material adverse effect on the Company’s financial position or results of operations.

Argentine Environmental Claims

     In connection with the acquisition from Pioneer in 2006, the Company acquired a subsidiary of Pioneer in Argentina (PNRA) that is involved in various administrative proceedings with environmental authorities in the Neuquén Province relating to permits for and discharges from operations in that province. In addition, PNRA was named in a suit initiated against oil companies operating in the Neuquén basin entitled Asociación de Superficiarios de la Patagonia v YPF S.A., et. al., originally filed on August 21, 2003, in the Argentine National Supreme Court of Justice. The plaintiffs, a private group of landowners, have also named the national government and several provinces as third parties. The lawsuit alleges injury to the environment generally by the oil and gas industry. The plaintiffs principally seek from all defendants, jointly, (i) the remediation of contaminated sites, of the superficial and underground waters, and of soil that allegedly was degraded as a result of deforestation, (ii) if the remediation is not possible, payment of an indemnification for the material and moral damages claimed from defendants operating in the Neuquén basin, of which PNRA is a small portion, (iii) adoption of all the necessary measures to prevent future environmental damages, and (iv) the creation of a private restoration fund to provide coverage for remediation of potential future environmental damages. Much of the alleged damage relates to operations by the Argentine state oil company, which conducted oil and gas operations throughout Argentina prior to its privatization, which began in 1990. While the plaintiffs will seek to make all oil and gas companies operating in the Neuquén basin jointly liable for each others’ actions, PNRA will defend on an individual basis and attempt to require the plaintiffs to delineate damages by company. PNRA intends to defend itself vigorously in the case. It is not certain exactly how or what the court will do in this matter as it is the first of its kind. While it is possible PNRA may incur liabilities related to the environmental claims, no reasonable prediction can be made as PNRA’s exposure related to this lawsuit is not currently determinable.

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Louisiana Restoration

     Numerous surface owners have filed claims or sent demand letters to various oil and gas companies, including Apache, claiming that, under either expressed or implied lease terms or Louisiana law, they are liable for damage measured by the cost of restoration of leased premises to their original condition as well as damages from contamination and cleanup. Many of these lawsuits claim small amounts, while others assert claims in excess of one million dollars. Also, some lawsuits or claims are being settled or resolved, while others are still being filed. Any exposure, therefore, related to these lawsuits and claims is not currently determinable. While an adverse judgment against Apache is possible, Apache intends to actively defend the cases.

Hurricane Related Litigation

     In a case styled Ned Comer, et al vs. Murphy Oil USA, Inc., et al, Case No: 1:05-cv-00436; U.S.D.C., United States District Court, Southern District of Mississippi, Mississippi property owners allege that hurricanes’ meteorological effects increased in frequency and intensity due to global warming, and there will be continued future damage from increasing intensity of storms and sea level rises. They claim this was caused by the various defendants (oil and gas companies, electric and coal companies, and chemical manufacturers). Plaintiffs claim defendants’ emissions of “greenhouse gases” cause global warming, which they blame as the cause of their damages. They also claim that the oil company defendants artificially inflated and manipulated the prices of gasoline, diesel fuel, jet fuel, natural gas, and other end-use petrochemicals, and covered it up by misrepresentations. They further allege a conspiracy to disseminate misinformation and cover up the relationship between the defendants and global warming. Plaintiffs seek, among other damages, actual, consequential, and punitive or exemplary damages. The District Court dismissed the case on August 30, 2007. The plaintiffs appealed the dismissal. Prior to the dismissal, the plaintiffs filed a motion to amend the lawsuit to add additional defendants, including Apache. On October 16, 2009, the United States Court of Appeals for the Fifth Circuit reversed the judgment of the District Court and remanded the case to the District Court. The Fifth Circuit held that plaintiffs have pleaded sufficient facts to demonstrate standing for their public and private nuisance, trespass, and negligence claims, and that those claims are justifiable and do not present a political question. However, the Fifth Circuit declined to find standing for the unjust enrichment, civil conspiracy, and fraudulent misrepresentation claims, and therefore dismissed those claims. Several defendants filed a petition with the Fifth Circuit for a rehearing en banc. In granting an appeal for an en banc hearing, the U.S. Fifth Circuit Court of Appeals vacated an earlier ruling by its three-member panel. That decision reinstated the district judge’s dismissal of the lawsuit. Subsequently, the Fifth Circuit Court of Appeals could not form a quorum to hear the en banc appeal. Therefore, the court ruled that its earlier order (vacating the panel’s ruling) stood, which had the effect of dismissing the original lawsuit. An appeal by the plaintiffs to the U.S. Supreme Court is possible.

Australia Gas Pipeline Force Majeure

     The Company subsidiaries reported a pipeline explosion that interrupted deliveries of natural gas to customers under various long-term contracts. Company subsidiaries believe that the event was a force majeure and as a result, the subsidiaries and their joint venture participants have declared force majeure under those contracts. On December 16, 2009, a customer, Burrup Fertilisers Pty Ltd, filed a lawsuit on behalf of itself and certain of its underwriters at Lloyd’s London and other insurers, against the Company and its subsidiaries in Texas state court, asserting claims for negligence, breach of contract, alter ego, single business enterprise, res ipsa loquitur, and gross negligence/exemplary damages. Other customers have threatened to file suit challenging the declaration of force majeure under their contracts. Contract prices under their contracts are significantly below current spot prices for natural gas in Australia. In the event it is determined that the pipeline explosion was not a force majeure, Company subsidiaries believe that liquidated damages should be the extent of the damages under those long-term contracts with such provisions. Approximately 90 percent of the natural gas volumes sold by Company subsidiaries under long-term contracts have liquidated damages provisions. Contractual liquidated damages under the long-term contracts with such provisions would not be expected to exceed $200 million AUD. In their Harris County petition, Burrup Fertilisers and its underwriters and insurers seek to recover unspecified actual damages, cost of repair and replacement, exemplary damages, lost profits, loss of business goodwill, value of the gas lost under the GSA, interest and court costs. No assurance can be given that Burrup Fertilisers and other customers would not assert claims in excess of contractual liquidated damages, and exposure related to such claims is not currently determinable. While an adverse judgment against Company subsidiaries (and Company, in the case of the Burrup Fertilisers lawsuit) is possible, Company and Company subsidiaries do not believe any such claims would have merit and plan to vigorously pursue their defenses against any such claims.

     In December 2008, the Senate Economics Committee of the Parliament of Australia released its findings from public hearings concerning the economic impact of the gas shortage following the explosion on Varanus Island and the government’s response. The Committee concluded, among other things, that the macroeconomic impact to Western Australia will never be precisely known, but cited to a range of estimates from $300 million AUD to $2.5 billion AUD consisting in part of losses alleged by some parties who have long-term contracts with Company subsidiaries (as described above), but also losses alleged by third parties who do not have contracts with Company subsidiaries (but who may have purchased gas that was re-sold by customers or who may have paid more for energy following the explosion or who lost wages or sales due to the inability to obtain energy or the increased price of energy). A timber industry group, whose members do not have a contract with Company subsidiaries, has announced that it intends to seek compensation for its members and their subcontractors from Company subsidiaries for $20 million AUD in losses allegedly incurred as a result of the gas supply shortage following the explosion. In Johnson Tiles Pty Ltd v. Esso Australia Pty Ltd [2003] VSC 27 (Supreme Court of Victoria, Gillard J presiding), which concerned a 1998 explosion at an Esso natural gas processing plant at Longford in East Gippsland, Victoria, the Court held that Esso was not liable for $1.3 billion AUD of pure economic losses suffered by claimants that had no contract with Esso, but was liable to such claimants for reasonably foreseeable property damage which Esso settled for $32.5 million plus costs. In reaching this decision the Court held that third-party claimants should have protected themselves from pure economic losses, through the purchase of insurance or the installation of adequate backup measures, in case of an interruption in their gas supply from Esso. While an adverse judgment against Company subsidiaries is possible if litigation is filed, Company subsidiaries do not believe any such claims would have merit and plan to vigorously pursue their defenses against any such claims. Exposure related to any such potential claims is not currently determinable.

15

     On October 10, 2008, the Australia National Offshore Petroleum Safety Authority (NOPSA) released a self-titled “Final Report” of the findings of its investigation into the pipeline explosion, prepared at the request of the Western Australian Department of Industry and Resources (DoIR). NOPSA concluded in its report that the evidence gathered to date indicates that the main causal factors in the incident were: (1) ineffective anti-corrosion coating at the beach crossing section of the 12 inch sales gas pipeline, due to damage and/or dis-bondment from the pipeline; (2) ineffective cathodic protection of the wet-dry transition zone of the beach crossing section of the 12 inch sales gas pipeline; and (3) ineffective inspection and monitoring by Company subsidiaries of the beach crossing and shallow water section of the 12 inch sales gas pipeline. NOPSA further concluded that the investigation identified that Apache Northwest Pty Ltd and its co-licensees may have committed offences under the Petroleum Pipelines Act 1969, Sections 36A & 38(b) and the Petroleum Pipelines Regulations 1970, Regulation 10, and that some findings may also constitute non-compliance with pipeline license conditions. NOPSA states in its report that an application for renewal of the pipeline license covering the area of the Varanus Island facility was granted in May 1985 with 21 years validity, and an application for renewal of the license was submitted to DoIR by Company subsidiaries in December 2005 and remains pending.

     Company subsidiaries disagree with NOPSA’s conclusions and believe that the NOPSA report is premature, based on an incomplete investigation and misleading. In a July17, 2008, media statement, DoIR acknowledged, “The pipelines and Varanus Island facilities have been the subject of an independent validation report [by Lloyd’s Register] which was received in August 2007. NOPSA has also undertaken a number of inspections between 2005 and the present.” These and numerous other inspections, audits and reviews conducted by top international consultants and regulators did not identify any warnings that the pipeline had a corrosion problem or other issues that could lead to its failure. Company subsidiaries believe that the explosion was not reasonably foreseeable, and was not within the reasonable control of Company’s subsidiaries or able to be reasonably prevented by Company subsidiaries.

     On January 9, 2009, the governments of Western Australia and the Commonwealth of Australia announced a joint inquiry to consider the effectiveness of the regulatory regime for occupational health and safety and integrity that applied to operations and facilities at Varanus Island and the role of DoIR, NOPSA and the Western Australian Department of Consumer and Employment Protection (DoCEP). The joint inquiry’s report was published in June 2009.

     On May 8, 2009, the government of Western Australia announced that its Department of Mines and Petroleum (DMP) will carry out “the final stage of investigations into the Varanus Island gas explosion.” Inspectors were appointed under the Petroleum Pipelines Act to coordinate the final stage of the investigations. Their report has been delivered to the Minister for Mines and Petroleum, but neither the report nor its contents have been made available to Company subsidiaries for their review and comment.

     On May 28, 2009, the DMP filed a prosecution notice in the Magistrates Court of Western Australia, charging Apache Northwest Pty Ltd and its co-licensees with failure to maintain a pipeline in good condition and repair under the Petroleum Pipelines Act 1969, Section 38(b). The maximum fine associated with the alleged offense is $50,000 AUD. The Company subsidiary does not believe that the charge has merit and plans to vigorously pursue its defenses.

Seismic License

     In December 1996, the Company and Fairfield Industries Incorporated entered into a Master Licensing Agreement for the licensing of seismic data relating to certain blocks in the Gulf of Mexico. The Company and Fairfield also entered into supplemental agreements specifying the data to be licensed to the Company as well as the consideration due Fairfield. In February 2009, the Company filed an action in Texas state court seeking a declaration of the parties’ contractual obligations. The Company and its subsidiary, GOM Shelf LLC, have also asserted a claim to recover damages for certain overpayments to Fairfield under the parties’ agreements. Fairfield and a related entity, Fairfield Royalty Corporation, counterclaimed. As a result of a nonbinding mediation on July 21-22, 2010, the parties have resolved the matter amicably, which resolution did not have a material affect on the Company.

Mariner Stockholder Lawsuits

     In connection with the Merger, two shareholder lawsuits styled as class actions have been filed against Mariner and its board of directors. The lawsuits are entitled City of Livonia Employees’ Retirement System, Individually and on Behalf of All Others Similarly Situated vs. Mariner Energy, Inc, et al., (filed April 16, 2010 in the District Court of Harris County, Texas), and Southeastern Pennsylvania Transportation Authority, individually, and on behalf of all those similarly situated,vs. Scott D. Josey, et.al., (filed April 21, 2010 in the Court of Chancery in the State of Delaware). The Southeastern Pennsylvania Transportation Authority lawsuit also names Apache and its wholly owned subsidiary, ZMZ Acquisitions LLC (the Merger Sub) as defendants. The complaints generally allege that (1) Mariner’s directors breached their fiduciary duties in negotiating and approving the Merger and by administering a sale process that failed to maximize shareholder value and (2) Mariner, and in the case of the Southeastern Pennsylvania Transportation Authority complaint, Apache and the Merger Sub, aided and abetted Mariner’s directors in breaching their fiduciary duties. The City of Livonia Employees’ Retirement System complaint also alleges that Mariner’s directors and executives stand to receive substantial financial benefits if the transaction is consummated on its current terms. Pending court approval, these lawsuits have been settled, in principle and are not expected to have a material impact on Apache.

Marbob Energy Corporation and Concho Resources Lawsuits

     Marbob Energy Corporation, Concho Resources and other parties have filed lawsuits against BP America Inc, BP America Production Company (“BP”), and ZPZ Delaware I LLC (“ZPZ”), Apache’s wholly owned subsidiary, in New Mexico seeking a declaratory judgment that Plaintiffs are entitled to receive preferential rights to purchase (“PPR”) notices on certain of the properties that are included in the Purchase and Sale Agreement between BP and ZPZ and injunctive relief to force BP promptly to issue to Plaintiffs PPR notices on those properties. Plaintiffs do not seek monetary damages, other than fees and costs incurred in bringing these actions. Apache has agreed to indemnify BP for these actions.

Environmental Matters

     As of June 30, 2010, the Company had an undiscounted reserve for environmental remediation of approximately $24 million. The Company is not aware of any environmental claims existing as of June 30, 2010, which have not been provided for or would otherwise have a material impact on its financial position or results of operations. There can be no assurance, however, that current regulatory requirements will not change or past non-compliance with environmental laws will not be discovered on the Company’s properties.

10. FAIR VALUE MEASUREMENTS

     ASC 820, “Fair Value Measurements and Disclosures,” provides a hierarchy that prioritizes and defines the types of inputs used to measure fair value. The fair value hierarchy gives the highest priority to Level 1 inputs, which consist of unadjusted quoted prices for identical instruments in active markets. Level 2 inputs consist of quoted prices for similar instruments. Level 3 valuations are derived from inputs that are significant and unobservable, and these valuations have the lowest priority.

     The valuation techniques that may be used to measure fair value include a market approach, an income approach, and a cost approach. A market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. An income approach uses valuation techniques to convert future amounts to a single present amount based on current market expectations, including present value techniques, option-pricing models and excess earnings method. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

Assets and Liabilities Measured at Fair Value on a Recurring Basis

     Certain assets and liabilities are reported at fair value on a recurring basis in Apache’s consolidated balance sheet. The following methods and assumptions were used to estimate the fair values:

     Cash, Cash Equivalents, Short-Term Investments, Accounts Receivable and Accounts Payable

     The carrying amounts approximate fair value because of the short-term nature or maturity of these instruments.

     Commodity Derivative Instruments

     Apache’s commodity derivative instruments consist of variable-to-fixed price commodity swaps and options. The Company uses a market approach to estimate the fair values of derivative instruments, utilizing published commodity futures price strips for the underlying commodities as of the date of the estimate. The fair values of the Company’s derivative instruments are not actively quoted in the open market and are valued using forward commodity price curves provided by a reputable third party. These valuations are Level 2 inputs. See Note 4 — Derivative Instruments and Hedging Activities of this Form 10-Q for further information.

     The following table presents the Company’s material assets and liabilities measured at fair value on a recurring basis for each hierarchy level:

16

	Fair Value Measurements Using
	Quoted Price in				Significant		Total
	Active Markets		Significant Other		Unobservable Inputs		Fair					Carrying
	(Level 1)		Inputs (Level 2)		(Level 3)		Value		Netting (1)			Amount
					(In millions)
June 30, 2010
Assets:
Commodity Derivative Instruments	$	—	$	346	$	—	$	346	$	(46	)	$	300
Liabilities:
Commodity Derivative Instruments		—		147		—		147		(46	)		101
December 31, 2009
Assets:
Commodity Derivative Instruments	$	—	$	75	$	—	$	75	$	(11	)	$	64
Liabilities:
Commodity Derivative Instruments		—		341		—		341		(11	)		330

⁽¹⁾ The derivative fair values above are based on analysis of each contract as required by ASC 820. Derivative assets and liabilities with the same counterparty are presented here on a gross basis, even where the legal right of offset exists. See Note 4 — Derivative Instruments and Hedging Activities of this Form 10-Q for a discussion of net amounts recorded on the consolidated balance sheet at June 30, 2010 and December 31, 2009.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

     Certain assets and liabilities are reported at fair value on a nonrecurring basis in Apache’s consolidated balance sheet. The following methods and assumptions were used to estimate the fair values:

     Asset Retirement Obligations Incurred in Current Period

     Apache uses an income approach to estimate the fair value of AROs based on discounted cash flow projections using numerous estimates, assumptions and judgments regarding such factors as the existence of a legal obligation for an ARO; estimated probabilities; amounts and timing of settlements; the credit-adjusted risk-free rate to be used; and inflation rates. AROs incurred in the current period were Level 3 fair value measurements. A summary of changes in the ARO liability is provided in Note 5 — Asset Retirement Obligation of this Form 10-Q.

     Debt

     The Company’s debt is recorded at the carrying amount on its consolidated balance sheet. In accordance with ASC 825, “Financial Instruments,” disclosure of the fair value of total debt is required for interim reporting. Apache uses a market approach to determine the fair value of Apache’s fixed-rate debt using estimates provided by an independent investment banking firm, which is a Level 2 fair value measurement. The carrying amount of floating-rate debt approximates fair value because the interest rates are variable and reflective of market rates. The following table presents the carrying amounts and estimated fair values of the Company’s debt at June 30, 2010 and December 31, 2009:

	June 30, 2010				December 31, 2009
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(In millions)
Total Debt, Net of Unamortized Discount	$	5,012	$	5,774	$	5,067	$	5,635

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11. COMPREHENSIVE INCOME (LOSS)

     The following table presents the components of Apache’s comprehensive income (loss) for the three-month and six-month periods ended June 30, 2010 and 2009.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
				(In millions)
Comprehensive Income (Loss)
Net income (Loss)	$	860		$	445		$	1,565		$	(1,312	)
Other Comprehensive Income (Loss)
Commodity hedges		103			(323	)		464			(303	)
Income tax related to commodity hedges		(39	)		113			(150	)		108
Total	$	924		$	235		$	1,879		$	(1,507	)

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12. BUSINESS SEGMENT INFORMATION

     Apache is engaged in a single line of business. Both domestically and internationally, the Company explores for, develops, and produces natural gas, crude oil and natural gas liquids. The Company has production in six countries: the United States, Canada, Egypt, Australia, the United Kingdom (U.K.) and Argentina. Apache also has exploration interests in Chile. Financial information for each country is presented below:

	United														Other
	States			Canada			Egypt		Australia		U.K.		Argentina		International		Total
									(In millions)
For the Quarter Ended June 30, 2010
Oil and Gas Production Revenues	$	962		$	240		$	806	$	452	$	421	$	88	$	—	$	2,969
Operating Income (1)	$	452		$	71		$	548	$	285	$	165	$	18	$	—	$	1,539
Other Income (Expense):
Other																		3
General and administrative																		(92	)
Financing costs, net																		(56	)
Income Before Income Taxes																	$	1,394
For the Six Months Ended June 30, 2010
Oil and Gas Production Revenues	$	1,954		$	493		$	1,547	$	676	$	812	$	180	$	—	$	5,662
Operating Income (1)	$	963		$	166		$	1,041	$	386	$	313	$	43	$	—	$	2,912
Other Income (Expense):
Other																		(17	)
General and administrative																		(179	)
Financing costs, net																		(115	)
Income Before Income Taxes																	$	2,601
Total Assets	$	12,473		$	4,243		$	5,910	$	3,737	$	2,526	$	1,488	$	55	$	30,432
For the Quarter Ended June 30, 2009
Oil and Gas Production Revenues	$	707		$	215		$	655	$	87	$	322	$	88	$	—	$	2,074
Operating Income (1)	$	243		$	63		$	441	$	13	$	140	$	20	$	—	$	920
Other Income (Expense):
Other																		19
General and administrative																		(91	)
Financing costs, net																		(61	)
Income Before Income Taxes																	$	787
For the Six Months Ended June 30, 2009
Oil and Gas Production Revenues	$	1,303		$	425		$	1,075	$	130	$	565	$	180	$	—	$	3,678
Operating Income (Loss)(1)	$	(857	)	$	(1,495	)	$	664	$	—	$	228	$	40	$	—	$	(1,420	)
Other Income (Expense):
Other																		49
General and administrative																		(176	)
Financing costs, net																		(120	)
Loss Before Income Taxes																	$	(1,667	)
Total Assets	$	10,438		$	4,435		$	5,103	$	3,005	$	2,025	$	1,396	$	—	$	26,402

⁽¹⁾ Operating Income (Loss) consists of oil and gas production revenues less depreciation, depletion and amortization, asset retirement obligation accretion, lease operating expenses, gathering and transportation costs, and taxes other than income. The U.S. and Canada operating losses for the six-month period of 2009 include additional depletion of $1.2 billion and $1.6 billion, respectively, to write-down the carrying value of oil and gas properties in the first quarter of 2009.

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13. SUPPLEMENTAL GUARANTOR INFORMATION

     Apache Finance Canada Corporation (Apache Finance Canada) is a subsidiary of Apache and has issued approximately $300 million of publicly-traded notes due in 2029 and an additional $350 million of publicly-traded notes due in 2015 that are fully and unconditionally guaranteed by Apache. The following condensed consolidating financial statements are provided as an alternative to filing separate financial statements.

     Apache Finance Canada has been fully consolidated in Apache’s consolidated financial statements. As such, these condensed consolidating financial statements should be read in conjunction with the financial statements of Apache Corporation and subsidiaries and notes thereto, of which this note is an integral part.

20

APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended June 30, 2010

					All Other
			Apache		Subsidiaries
	Apache		Finance		of Apache			Reclassifications
	Corporation		Canada		Corporation			& Eliminations			Consolidated
	(In thousands)
REVENUES AND OTHER:
Oil and gas production revenues	$	861,190	$	—	$	2,107,575		$	—		$	2,968,765
Equity in net income (loss) of affiliates		731,011		39,584		(9,370	)		(761,225	)		—
Other		2,090		14,739		(12,647	)		(1,037	)		3,145
		1,594,291		54,323		2,085,558			(762,262	)		2,971,910
OPERATING EXPENSES:
Depreciation, depletion and amortization		234,416		—		495,335			—			729,751
Asset retirement obligation accretion		12,751		—		12,009			—			24,760
Lease operating expenses		172,185		—		273,764			—			445,949
Gathering and transportation costs		10,436		—		32,602			—			43,038
Taxes other than income		32,113		—		154,720			—			186,833
General and administrative		72,030		—		20,836			(1,037	)		91,829
Financing costs, net		49,141		14,116		(7,500	)		—			55,757
		583,072		14,116		981,766			(1,037	)		1,577,917
INCOME BEFORE INCOME TAXES		1,011,219		40,207		1,103,792			(761,225	)		1,393,993
Provision for income taxes		150,996		9,993		372,781			—			533,770
NET INCOME		860,223		30,214		731,011			(761,225	)		860,223
Preferred stock dividends		—		—		—			—			—
INCOME ATTRIBUTABLE TO COMMON STOCK	$	860,223	$	30,214	$	731,011		$	(761,225	)	$	860,223

21

APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended June 30, 2009

							All Other
				Apache			Subsidiaries
	Apache			Finance			of Apache			Reclassifications
	Corporation			Canada			Corporation			& Eliminations			Consolidated
	(In thousands)
REVENUES AND OTHER:
Oil and gas production revenues	$	640,421		$	—		$	1,433,923		$	—		$	2,074,344
Equity in net income of affiliates		306,956			7,393			3,911			(318,260	)		—
Other		(1,184	)		14,630			6,625			(1,037	)		19,034
		946,193			22,023			1,444,459			(319,297	)		2,093,378
OPERATING EXPENSES:
Depreciation, depletion and amortization		201,542			—			371,817			—			573,359
Asset retirement obligation accretion		16,166			—			10,317			—			26,483
Lease operating expenses		173,639			—			231,634			—			405,273
Gathering and transportation costs		7,217			—			26,262			—			33,479
Taxes other than income		20,861			—			95,080			—			115,941
General and administrative		73,286			—			18,656			(1,037	)		90,905
Financing costs, net		57,959			14,115			(10,919	)		—			61,155
		550,670			14,115			742,847			(1,037	)		1,306,595
INCOME BEFORE INCOME TAXES		395,523			7,908			701,612			(318,260	)		786,783
Provision (benefit) for income taxes		(49,197	)		(3,396	)		394,656			—			342,063
NET INCOME		444,720			11,304			306,956			(318,260	)		444,720
Preferred stock dividends		1,420			—			—			—			1,420
INCOME ATTRIBUTABLE TO COMMON STOCK	$	443,300		$	11,304		$	306,956		$	(318,260	)	$	443,300

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APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2010

					All Other
			Apache		Subsidiaries
	Apache		Finance		of Apache			Reclassifications
	Corporation		Canada		Corporation			& Eliminations			Consolidated
	(In thousands)
REVENUES AND OTHER:
Oil and gas production revenues	$	1,750,315	$	—	$	3,912,075		$	—		$	5,662,390
Equity in net income (loss) of affiliates		1,195,270		63,603		(15,050	)		(1,243,823	)		—
Other		2,798		29,344		(47,298	)		(2,073	)		(17,229	)
		2,948,383		92,947		3,849,727			(1,245,896	)		5,645,161
OPERATING EXPENSES:
Depreciation, depletion and amortization		448,025		—		920,224			—			1,368,249
Asset retirement obligation accretion		24,720		—		24,042			—			48,762
Lease operating expenses		337,817		—		548,378			—			886,195
Gathering and transportation costs		21,050		—		62,353			—			83,403
Taxes other than income		67,473		—		296,298			—			363,771
General and administrative		144,496		—		36,556			(2,073	)		178,979
Financing costs, net		101,696		28,236		(14,908	)		—			115,024
		1,145,277		28,236		1,872,943			(2,073	)		3,044,383
INCOME BEFORE INCOME TAXES		1,803,106		64,711		1,976,784			(1,243,823	)		2,600,778
Provision for income taxes		237,902		16,158		781,514			—			1,035,574
NET INCOME		1,565,204		48,553		1,195,270			(1,243,823	)		1,565,204
Preferred stock dividends		—		—		—			—			—
INCOME ATTRIBUTABLE TO COMMON STOCK	$	1,565,204	$	48,553	$	1,195,270		$	(1,243,823	)	$	1,565,204

23

APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2009

							All Other
				Apache			Subsidiaries
	Apache			Finance			of Apache			Reclassifications
	Corporation			Canada			Corporation			& Eliminations			Consolidated
	(In thousands)
REVENUES AND OTHER:
Oil and gas production revenues	$	1,185,151		$	—		$	2,492,807		$	—		$	3,677,958
Equity in net income (loss) of affiliates		(638,787	)		(534,943	)		141,223			1,032,507			—
Other		392			29,314			21,574			(2,035	)		49,245
		546,756			(505,629	)		2,655,604			1,030,472			3,727,203
OPERATING EXPENSES:
Depreciation, depletion and amortization		1,643,031			—			2,329,106			—			3,972,137
Asset retirement obligation accretion		32,475			—			20,746			—			53,221
Lease operating expenses		346,807			—			455,955			—			802,762
Gathering and transportation costs		15,696			—			51,122			—			66,818
Taxes other than income		42,288			—			160,992			—			203,280
General and administrative		146,177			—			31,809			(2,035	)		175,951
Financing costs, net		111,411			28,228			(19,897	)		—			119,742
		2,337,885			28,228			3,029,833			(2,035	)		5,393,911
LOSS BEFORE INCOME TAXES		(1,791,129	)		(533,857	)		(374,229	)		1,032,507			(1,666,708	)
Provision (benefit) for income taxes		(478,909	)		(140,137	)		264,558			—			(354,488	)
NET LOSS		(1,312,220	)		(393,720	)		(638,787	)		1,032,507			(1,312,220	)
Preferred stock dividends		2,840			—			—			—			2,840
LOSS ATTRIBUTABLE TO COMMON STOCK	$	(1,315,060	)	$	(393,720	)	$	(638,787	)	$	1,032,507		$	(1,315,060	)

24

APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 2010

							All Other
				Apache			Subsidiaries
	Apache			Finance			of Apache			Reclassifications
	Corporation			Canada			Corporation			& Eliminations			Consolidated
	(In thousands)
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	1,184,700		$	(36,071	)	$	1,936,812		$	—		$	3,085,441
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas property		(529,851	)		—			(1,407,762	)		—			(1,937,613	)
Additions to gas gathering, transmission and processing facilities		—			—			(256,728	)		—			(256,728	)
Acquisition of Devon properties		(1,017,238	)		—			—			—			(1,017,238	)
Short-term investments		—			—			—			—			—
Restricted cash for acquisition settlement		—			—			—			—			—
Proceeds from sale of oil & gas properties		—			—			—			—			—
Investment in subsidiaries, net		(79,990	)		—			—			79,990			—
Other, net		(44,697	)		—			37,793			—			(6,904	)
NET CASH USED IN INVESTING ACTIVITIES		(1,671,776	)		—			(1,626,697	)		79,990			(3,218,483	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt borrowings		1,696			2,403			18,715			(78,198	)		(55,384	)
Payments on debt		—			—			—			—			—
Dividends paid		(101,065	)		—			—			—			(101,065	)
Common stock activity		21,346			33,295			(31,503	)		(1,792	)		21,346
Treasury stock activity, net		3,591			—			—			—			3,591
Cost of debt and equity transactions		(289	)		—			—			—			(289	)
Other		22,073			—			—			—			22,073
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(52,648	)		35,698			(12,788	)		(79,990	)		(109,728	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(539,724	)		(373	)		297,327			—			(242,770	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		646,751			2,097			1,399,269			—			2,048,117
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	107,027		$	1,724		$	1,696,596		$	—		$	1,805,347

25

APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 2009

							All Other
				Apache			Subsidiaries
	Apache			Finance			of Apache			Reclassifications
	Corporation			Canada			Corporation			& Eliminations			Consolidated
	(In thousands)
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	659,679		$	(22,357	)	$	729,407		$	—		$	1,366,729
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas property		(666,421	)		—			(1,450,994	)		—			(2,117,415	)
Additions to gas gathering, transmission and processing facilities		—			—			(164,723	)		—			(164,723	)
Acquisition of Marathon properties		(181,133	)		—			—			—			(181,333	)
Short-term investments		791,999			—			—			—			791,999
Restricted cash for acquisition settlement		13,880			—			—			—			13,880
Investment in subsidiaries, net		(300,472	)		—			—			300,472			—
Other, net		(26,759	)		—			(58,640	)		—			(85,399	)
NET CASH USED IN INVESTING ACTIVITIES		(368,906	)		—			(1,674,357	)		300,472			(1,742,791	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt borrowings		652			40			448,985			(302,011	)		147,666
Payments on debt		—			—			(100,000	)		—			(100,000	)
Dividends paid		(103,331	)		—			—			—			(103,331	)
Common stock activity		9,971			20,606			(22,145	)		1,539			9,971
Treasury stock activity, net		2,669			—			—			—			2,669
Cost of debt and equity transactions		(403	)		—			—			—			(403	)
Other		9,597			—			—			—			9,597
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(80,845	)		20,646			326,840			(300,472	)		(33,831	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		209,928			(1,711	)		(618,110	)		—			(409,893	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		142,026			1,714			1,037,710			—			1,181,450
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	351,954		$	3		$	419,600		$	—		$	771,557

26

APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
As of June 30, 2010

						All Other
				Apache		Subsidiaries
	Apache			Finance		of Apache			Reclassifications
	Corporation			Canada		Corporation			& Eliminations			Consolidated
	(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	107,027		$	1,724	$	1,696,596		$	—		$	1,805,347
Receivables, net of allowance		512,646			—		1,135,306			—			1,647,952
Inventories		42,468			—		466,234			—			508,702
Drilling advances		12,292			1,884		191,789			—			205,965
Prepaid taxes		102,341			—		35,215			—			137,556
Prepaid assets and other		(23,929	)		—		225,347			—			201,418
		752,845			3,608		3,750,487			—			4,506,940
PROPERTY AND EQUIPMENT, NET		10,491,336			—		14,632,119			—			25,123,455
OTHER ASSETS:
Intercompany receivable, net		2,051,441			—		(551,901	)		(1,499,540	)		—
Equity in affiliates		12,437,431			1,121,775		99,810			(13,659,016	)		—
Restricted cash		—			—		—			—			—
Goodwill, net		—			—		189,252			—			189,252
Deferred charges and other		182,255			1,002,878		427,627			(1,000,000	)		612,760
	$	25,915,308		$	2,128,261	$	18,547,394		$	(16,158,556	)	$	30,432,407
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	328,438		$	2,273	$	1,654,430		$	(1,499,540	)	$	485,601
Current Debt		1,000			—		115,205			—			116,205
Accrued exploration and development		239,972			—		655,333			—			895,305
Asset retirement obligation		147,374			—		—			—			147,374
Other accrued expenses		248,793			2,883		306,674			—			558,350
		965,577			5,156		2,731,642			(1,499,540	)		2,202,835
LONG-TERM DEBT		4,063,036			647,194		185,897			—			4,896,127
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes		1,583,293			4,326		1,659,446			—			3,247,065
Asset retirement obligation		1,043,824			—		830,919			—			1,874,743
Other		583,818			250,000		702,059			(1,000,000	)		535,877
		3,210,935			254,326		3,192,424			(1,000,000	)		5,657,685
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY		17,675,760			1,221,585		12,437,431			(13,659,016	)		17,675,760
	$	25,915,308		$	2,128,261	$	18,547,394		$	(16,158,556	)	$	30,432,407

27

APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2009

						All Other
						Subsidiaries
	Apache		Apache			of Apache			Reclassifications
	Corporation		Finance Canada			Corporation			& Eliminations			Consolidated
	(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	646,751	$	2,097		$	1,399,269		$	—		$	2,048,117
Receivables, net of allowance		576,379		—			969,320			—			1,545,699
Inventories		50,946		—			482,305			—			533,251
Drilling advances		13,103		1,095			216,535			—			230,733
Prepaid taxes		142,675		—			3,978			—			146,653
Prepaid assets and other		8,876		—			72,520			—			81,396
		1,438,730		3,192			3,143,927			—			4,585,849
PROPERTY AND EQUIPMENT, NET		9,009,753		—			13,890,862			—			22,900,615
OTHER ASSETS:
Intercompany receivable, net		1,973,243		—			(482,366	)		(1,490,877	)		—
Equity in affiliates		11,132,891		980,709			98,615			(12,212,215	)		—
Goodwill, net		—		—			189,252			—			189,252
Deferred charges and other		133,557		1,003,037			373,433			(1,000,000	)		510,027
	$	23,688,174	$	1,986,938		$	17,213,723		$	(14,703,092	)	$	28,185,743
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	258,507	$	(88	)	$	1,629,022		$	(1,490,877	)	$	396,564
Accrued exploration and development		244,188		—			678,896			—			923,084
Current debt		—		—			117,326			—			117,326
Asset retirement obligation		146,654		—			—			—			146,654
Other accrued expenses		347,104		6,121			455,705			—			808,930
		996,453		6,033			2,880,949			(1,490,877	)		2,392,558
LONG-TERM DEBT		4,062,339		647,152			240,899			—			4,950,390
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes		1,347,642		4,429			1,412,830			—			2,764,901
Asset retirement obligation		817,507		—			819,850			—			1,637,357
Other		685,612		250,000			726,304			(1,000,000	)		661,916
		2,850,761		254,429			2,958,984			(1,000,000	)		5,064,174
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY		15,778,621		1,079,324			11,132,891			(12,212,215	)		15,778,621
	$	23,688,174	$	1,986,938		$	17,213,723		$	(14,703,092	)	$	28,185,743

28

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     Apache Corporation, a Delaware corporation formed in 1954, together with its subsidiaries (collectively, Apache) is one of the world’s largest independent oil and gas companies with exploration and production interests in the United States, Canada, Egypt, offshore Western Australia, offshore the United Kingdom (U.K.) in the North Sea (North Sea) and Argentina. We also have exploration interests on the Chilean side of the island of Tierra del Fuego.

     This discussion relates to Apache Corporation and its consolidated subsidiaries and should be read in conjunction with our consolidated financial statements and accompanying notes included under Part I, Item 1, of this Quarterly Report on Form 10-Q, as well as our consolidated financial statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our most recent Annual Report on Form 10-K.

Earnings and Cash Flow

     Record production and higher relative prices drove second-quarter 2010 earnings to $860 million, or $2.53 per diluted common share, up from $443 million, or $1.31 per share, in the comparable year-ago period. Apache’s 2010 second-quarter adjusted earnings⁽¹⁾, which exclude certain items impacting the comparability of results, were $829 million, or $2.44 per diluted common share, compared to $474 million, or $1.41 per share in the year-earlier period. Net cash provided by operating activities increased to $1.9 billion from $824 million in the second quarter of 2009.

     For the first half of 2010, earnings totaled $1.57 billion, or $4.61 per share, compared to a loss of $1.32 billion, or $3.92 per share in 2009. The 2009 results reflect the impact of a $1.98 billion non-cash after-tax write-down of the carrying value of our U.S. and Canadian proved oil and gas properties. Apache’s 2010 first-half adjusted earnings⁽¹⁾ were $1.54 billion, or $4.54 per diluted common share, compared to $693 million, or $2.05 per share, in the year-earlier period. Net cash provided by operating activities increased to $3.1 billion from $1.4 billion in the first half of 2009.

     The improvement in 2010 second-quarter and six-month earnings and cash flow was driven by record second-quarter production, substantially higher oil price realizations and moderate increases in gas price realizations. Second-quarter 2010 production averaged a record 646,866 barrels of oil equivalent per day (boe/d), up 10 percent from 2009, led by Australia’s 60,680 barrels per day (b/d), a nearly six-fold increase over the 2009 flow rate. Australia’s production gains came from the Van Gogh and Pyrenees developments which were commissioned in the first quarter of 2010.

⁽¹⁾ See Results of Operations – Non-GAAP Measures – Adjusted Earnings for a description of Adjusted Earnings, which is not a U.S. Generally Accepted Accounting Principles (GAAP) measure, and reconciliation to this measure from Income (Loss) Attributable to Common Stock, which is presented in accordance with GAAP.

BP Asset Acquisition

     On July 20, 2010, we announced the signing of three definitive purchase and sale agreements (BP Purchase Agreements) to acquire the properties described below (BP Properties) from subsidiaries of BP plc (collectively referred to as “BP”) for aggregate consideration of $7.0 billion, subject to customary adjustments in accordance with the BP Purchase Agreements (BP Acquisition).

     Permian Basin. All of BP’s oil and gas operations, related infrastructure and acreage in the Permian Basin of West Texas and New Mexico. The assets include interests in 10 field areas in the Permian Basin, (including Block 16/Coy Waha, Block 31, Brown Basset, Empire/Yeso, Pegasus, Southeast Lea, Spraberry, Wilshire, North Misc and Delaware Penn), approximately 405,000 net mineral and fee acres, 358,000 leasehold acres, approximately 3,629 active wells and three gas processing plants, two of which are currently operated by BP. Based on our investigation and review of data provided by BP, these assets produced 15,110 barrels of liquid hydrocarbons (liquids) and 81 million cubic feet of natural gas per day (MMcf/d) in the first six months of 2010. The Permian Basin assets had estimated net proved reserves of 141 million barrels of oil equivalent (MMboe) at June 30, 2010 (65 percent liquids).

     Western Canada Sedimentary Basin. Substantially all of BP’s Western Canadian upstream gas assets, including approximately 1,278,000 net mineral and leasehold acres, interests in approximately 1,600 active wells, and eight operated and 14 non-operated gas processing plants. The position includes many attractive drilling opportunities ranging from conventional to several unconventional targets, including shale

29

gas, tight gas and coal bed methane in historically productive formations including the Montney, Cadomin and Doig. Based on our investigation and review of data provided by BP, during the first half of 2010 these properties produced 6,529 barrels of liquids and 240 MMcf of gas per day and had estimated net proved reserves of 224 MMboe at June 30, 2010 (94 percent gas). We currently have operations in approximately half of these 13 field areas.

     Western Desert, Egypt. BP’s interests in four development licenses and one exploration concession (East Badr El Din) covering 394,000 net acres south of El Alamein in the Western Desert of Egypt. These properties are operated by Gulf of Suez Petroleum Company, a joint venture between BP and the Government of Egypt. The transaction includes BP’s interests in 65 active wells, a 24-inch gas line to Dashour, a liquefied petroleum gas plant in Dashour, a gas processing plant in Abu Gharadig and a 12-inch oil export line to the El Hamra Terminal on the Mediterranean Sea. Based on our investigation and review of data provided by BP, during the first six months of 2010 these properties produced 6,016 barrels of oil and 11 MMcf of gas per day of BP’s production, and had estimated net proved reserves of 20 MMboe at June 30, 2010 (59 percent liquids). The BP Properties in Egypt are complementary to the over 11 million gross acres in 21 separate concessions in the Western Desert we currently hold. The Merged Concession Agreement related to the development licenses runs through 2024, subject to a five year extension at the option of the operator.

     The acquisition is subject to a number of closing conditions, including regulatory approvals in the U.S., Canada and Egypt. On August 3, 2010, the U.S. Department of Justice and the Federal Trade Commission granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Additional regulatory approvals are pending. Also, some of the BP Properties are subject to preferential rights to purchase interests held by third parties, and those rights may be exercised before or after we close the acquisition. The acquisition is subject to certain post-closing requirements relating to, among other things, resolution of title, environmental and legal issues and any exercise of preferential purchase rights after closing.

     Common and Depositary Share Offering In conjunction with the acquisition, Apache issued 26.45 million shares of common stock at a public offering price of $88.00 per share. Proceeds, after underwriting discounts and before expenses, from the common stock offering were approximately $2.3 billion. The Company also received proceeds, after underwriting discounts and before expenses, of $1.2 billion from the sale of 25.3 million depositary shares, each representing a 1/20th interest in a share of Apache’s 6.00% Mandatory Convertible Preferred Stock, Series D, with an initial liquidation preference of $1,000 per share (equivalent to $50 liquidation preference per depositary share). Proceeds to the Company from the common stock and depositary share offerings, after underwriting discounts and before expenses, totaled approximately $3.5 billion.

     The Company plans to fund the acquisition with the proceeds of these offerings and some combination of the following: cash on hand, our existing revolving credit and commercial paper facilities, a 364-day revolving credit facility, the issuance of term debt and the short term use of a bridge loan facility. The Company intends to increase its commercial paper program by $1 billion, the amount of the new 364-day revolving credit facility. We also secured a $5 billion bridge loan facility to backstop our financing requirements. The commitment under the bridge loan facility has been reduced by $3.5 billion, which is the amount of the net proceeds from the common stock and mandatory convertible preferred offerings discussed above. Depending on when the closing of the acquisition of the Permian Basin BP Properties occurs, we may fund a portion of the amount due for those properties by drawing under the bridge loan facility. Any such borrowing would be repaid from the Company’s next debt offering. Under the purchase and sale agreement, Apache advanced $5 billion of the purchase price to BP plc on July 30, 2010, ahead of the anticipated closings. This advance will be returned to Apache or applied to the purchase price at closing. BP plc provided a limited guarantee with respect to the BP Purchase Agreements, principally as to the return of the advance. The acquisition and related equity offerings are not expected to be accretive to earnings per share in the first several quarters and may be dilutive. They are, however, expected to be accretive to cash flow immediately and are expected to be accretive to per share production growth and neutral to earnings per share for the full year of 2011.

     Production following Closing of Recent Acquisitions and Mariner Merger Upon closing of the acquisition of the offshore Gulf of Mexico properties from Devon, the acquisition of BP Properties and following consummation of the Merger with Mariner, a larger percentage of Apache’s total production will be contributed from offshore Gulf of Mexico properties. Apache’s offshore Gulf of Mexico properties contributed 16 percent of our worldwide equivalent production in the second quarter of 2010. We expect Gulf of Mexico deepwater and shelf properties to contribute approximately 19 percent of our worldwide production following the completion of the Devon property acquisition, the BP property acquisition and the Mariner Merger. After completion of the BP property acquisitions, we expect production from Permian and Canada will rise to 12 and 15 percent of worldwide production, respectively.

Impact of Deepwater Horizon explosion and oil spill on Gulf of Mexico operations

     In April 2010, a deepwater Gulf of Mexico drilling rig, the Deepwater Horizon, operating in the Gulf of Mexico on Mississippi Canyon Block 252, sank after an apparent blowout and fire. As of the date of this filing it appears that the well has been contained as efforts to permanently cap the well proceed. Remediation of the environmental impacts of the spill is ongoing. Neither Apache nor Mariner owns an interest in the field.

     As a result of the incident and spill, the U.S. Department of the Interior (DOI) issued a series of reforms to the oversight and management of offshore exploration drilling activities on the federal Outer Continental Shelf (the OCS). On May 30, 2010, the Bureau of Ocean Energy Management, Regulatory and Enforcement (the BOEM, formerly the Minerals Management Service) of the DOI announced, as a result of the Deepwater Horizon incidents, a Moratorium Notice to Lessees and Operators (Moratorium NTL), which directed oil and gas lessees and operators to cease drilling new deepwater (depths greater than 500 feet) wells on the OCS, and put oil and gas lessees and operators on notice that, with certain exceptions, the BOEM would not consider drilling permits for deepwater wells and related activities for a period of six months. On June 22, 2010, the U.S. District Court for the Eastern District of Louisiana issued a preliminary injunction prohibiting the enforcement of the moratorium, which the DOI has appealed to the Fifth Circuit Court of Appeals. On July 8, 2010, the court of appeals denied the government’s

30

request that the district court’s order be stayed while the appeal is pending. On July 12, 2010, the Secretary of the DOI directed the BOEM to issue a suspension until November 30, 2010 of drilling activities that use subsea blowout preventers or surface blowout preventers on floating facilities, rather than a moratorium based on water depths.

     In addition on June 8, 2010, the BOEM issued a Notice to Lessees, NTL-05, focusing on increased safety measures. This NTL specifically affects all drilling wells, workovers and anything with a blowout preventer. It requires:

• Third party review and certification of blowout preventers/shear rams;

• Professional engineer certification of well plan and cement procedures; and

• Chief Executive Officer certification that the operator is in compliance with and is conducting all operations in accordance with all operating regulations found at 30 CFR 250.

     On June 18, 2010, the BOEM issued a Notice to Lessees, NTL-06, focusing on operator’s plans for a blowout scenario and worst case discharge scenario. This NTL specifically affects all new drilling wells, and sidetracks that cross lease lines. It requires:

• Detailed response plans for a blowout event including relief well rig availability and timing to contract a rig, move it onsite and drill a relief well;

• Calculation of Worst Case Discharge (WCD) scenario including all models, calculations and assumptions used to calculate daily discharge rate; and

• Measures that operator would propose to enhance the ability to prevent or reduce the likelihood of a blowout.

     These regulatory changes effectively halted all permitting activity in the Gulf of Mexico; however, on July 16, 2010, the DOI issued a permit to Apache under NTL-05 to drill a natural gas well in shallow waters off the southeast Texas coast. This permit was the first issued since stricter safety and environmental measures were imposed. While we have seen additional approvals for permits under NTL-05, permits for wells falling under NTL-06 continue to be delayed. At the date of this filing, Apache has received only one permit under NTL-06, and as a result, has declared force majeure on a rig and subsequently released that rig for lack of permits. Apache continues to work with the DOI on other outstanding permit applications.

     The drilling suspension, lack of certainty and continuing delays in approval of drilling permits may also result in an exodus of both deepwater and shallow-water drilling rigs as they seek opportunities outside the Gulf of Mexico.

     The Gulf of Mexico offshore operations of Mariner and Apache have been impacted, and likely will be impacted in the future, by increased regulatory oversight, which may increase the cost of OCS wells and delay drilling and production therefrom. There may be future changes in laws and regulations, increases in insurance costs or decreases in insurance availability, as well as further delays in offshore exploration and drilling activities in the Gulf of Mexico. Once deepwater drilling activities are permitted to resume, projects may face additional delays because of increased time for permitting and rig availability.

Operating Highlights

United States

     Gulf of Mexico Shelf Acquisition On June 9, 2010, Apache completed a $1.05 billion acquisition of oil and gas assets in the Gulf of Mexico shelf from Devon Energy Corporation (Devon). The acquisition was effective as of January 1, 2010. The acquired assets include 477,000 net acres across 150 blocks and estimated proved reserves of 41 MMboe. Approximately half of the estimated net proved reserves were liquid hydrocarbons and seven major fields account for 90 percent of the estimated proved reserves. Virtually all of the production is located in fields in water depths less than 500 feet and Apache operates 75 percent of the production. The acquisition was funded primarily from existing cash balances.

     The Company believes that these well-maintained, high-quality assets fit well with Apache’s existing infrastructure and play to the strengths that come with our experience operating on the shelf, exploiting the current production base and capturing upside potential. Many of these properties are geologically complex fields that contain large structures with multiple pay intervals that we believe are under-exploited. The prospect inventory includes high-potential trend exploration opportunities in the Norphlet play and highly prospective exploratory acreage off the Texas coast.

     Mariner Energy, Inc. Merger Agreement On April 15, 2010, Apache and Mariner Energy, Inc., a Delaware corporation (Mariner), announced that we have entered into a definitive agreement, pursuant to which Apache will acquire Mariner in a stock and cash transaction. The Agreement and Plan of Merger dated April 14, 2010 (as

31

amended by amendment No. 1 dated August 2, 2010, referred to as the Merger Agreement), by and among Apache, Mariner and ZMZ Acquisitions LLC, a Delaware limited liability company and wholly owned subsidiary of Apache (Merger Sub), contemplates a merger (the Merger) whereby Mariner will be merged with and into Merger Sub, with Merger Sub surviving the Merger as a wholly owned subsidiary of Apache.

     The total amount of cash and shares of Apache common stock that will be paid and issued, respectively, pursuant to the Merger Agreement is fixed, and Mariner stockholders will be entitled to receive (on an aggregate basis) 0.17043 of a share of Apache common stock, par value $0.625 per share, and $7.80 in cash for each share of Mariner common stock (the Mixed Consideration). In connection with the Merger, Apache expects to issue approximately 17.5 million shares of common stock (an increase of approximately five percent of Apache’s outstanding common shares) and pay cash of approximately $800 million to Mariner stockholders.

     Apache intends to fund the cash portion of the consideration with existing cash balances and commercial paper. Upon consummation of the Merger, Apache will assume Mariner’s debt, which was approximately $1.2 billion at the time of the Merger Agreement. Apache estimates it will ultimately incur approximately $130 million in costs related to the Merger.

     On May 3, 2010, the U.S. Department of Justice and the Federal Trade Commission granted early termination of the waiting period under the HSR Act. Additional regulatory post-closing approvals are pending. Completion of the transaction is projected for the third quarter of 2010.

     The Merger Agreement also contains certain termination rights for both Apache and Mariner, including if the Merger is not completed by January 31, 2011. In the event of a termination of the Merger Agreement, under certain circumstances, Mariner may be required to pay Apache a termination fee of $67 million (less any Apache expenses previously reimbursed by Mariner). In connection with the settlement of two stockholder lawsuits, on August 2, 2010, Apache and Mariner amended the Merger Agreement to eliminate the termination fee for one of the events which would trigger the payment of the fee: in the event that Mariner terminates the Merger Agreement in order to enter into an unsolicited “superior proposal” with another party (refer to Note 9 – Commitments and Contingencies, of Item I of this Form 10-Q for further discussion). In addition, under certain circumstances, the Merger Agreement requires each of Apache and Mariner to reimburse the other’s expenses, up to $7.5 million, in the event the Merger Agreement is terminated. Any reimbursement of expenses by Mariner to Apache will reduce the amount of any termination fee paid by Mariner to Apache.

     Assuming the Merger is approved by Mariner stockholders and is cleared by regulatory authorities, the transaction will be accounted for as a business combination, with Mariner’s assets and liabilities reflected in Apache’s financial statements at fair value. The transaction is not expected to be accretive to earnings per share for the first several quarters and may be dilutive. It is, however, expected to be accretive to Apache’s per-share production growth and cash flow immediately, and is expected to be accretive to earnings per share for the full year of 2011.

Canada

     Kitimat LNG Terminal In the first quarter of 2010, Apache announced an agreement to acquire a 51-percent interest in Kitimat LNG Inc’s proposed liquefied natural gas (LNG) export terminal (Kitimat) in British Columbia. The Company also reserved 51 percent of throughput capacity in the terminal. Planned plant gross capacity will be approximately 700 MMcf/d, or five million metric tons of LNG per year. This project has the potential to access new markets in the Asia-Pacific region and enable Apache to monetize gas from its Canadian region, including its interest in the Horn River Basin. Kitimat is designed to be linked to the pipeline system servicing Western Canada’s natural gas producing regions proposed by Pacific Trail Pipelines. In association with the Company’s acquisition of interest in the Kitimat project, Apache also acquired a 25.5-percent interest in the proposed pipeline and 350 MMcf/d of net capacity rights. Preliminary gross construction cost of the Kitimat LNG export terminal, which will be refined upon completion of a front-end engineering and design (FEED) study, total C$3 billion and of the pipeline total C$1.1 billion. Apache projects that most of the costs for the LNG export terminal and pipeline will be incurred throughout the three and one-half year construction phase which is expected to begin in the second half of 2011.

     During the second quarter Apache received proposals from three contractors on the FEED study and expects to award the contract by the end of the third quarter of 2010. Memorandums of Understanding (MOUs) have been developed and discussions with LNG buyers have been ongoing to market the LNG. Also, negotiations for specific agreements required with First Nations and Canadian federal and provincial governments are underway with completion anticipated during the third quarter of 2010. A final investment decision is expected in 2011, with the first LNG shipments projected as early as the end of 2014.

32

Egypt

     Egypt Gross Production 2X Goal On June 16, 2010, the Company announced that new production from its Faghur Basin field discoveries propelled its Egyptian gross-operated oil and gas production above 330,000 boe per day, surpassing the Company’s late-2005 goal of doubling output from Egypt’s Western Desert within five years. The completion of new Kalabsha processing and transportation facilities also helped enable Apache to achieve our goal. When the project was initiated, Apache’s gross-operated Egyptian production was approximately 163,000 boe per day.

     Apache invested $4.2 billion in exploration, development and facilities to achieve the “2X” production goal. During that period, the Company also:

• Discovered 57 new fields;

• Drilled 869 new wells;

• Acquired 17,300-square kilometers of three-dimensional (3D) seismic;

• Designed and constructed gathering facilities and two new gas processing trains for Qasr field gas production;

• Installed a major strategic gas pipeline compression project on Egypt’s northern gas pipeline;

• Built a third processing train at the Qarun Concession;

• Implemented 13 waterflood secondary oil recovery projects; and

• Completed the first phase of Kalabsha facilities in the Faghur Basin.

     Matruh Discovery On May 26, 2010, the Company announced that its second discovery of the year in Egypt’s Matruh Basin – the Samaa-1X – tested 44 MMcf of natural gas and 2,910 barrels of condensate per day from two zones. Eleven additional exploration wells and two appraisal wells are planned during the remainder of 2010. Apache has a 100 percent contractor interest in the Matruh Concession

     The Matruh Basin continues to be a successful focus area for Apache, with AEB and Safa reservoirs that have proven to be prolific oil and gas producers. The thickness of the sands and the stacked pay zones present multiple opportunities for further exploration.

     The Matruh Concession currently has gross production of 130 MMcf of gas and 18,000 barrels of oil per day from 16 wells. Since early 2009, gross production on the concession has grown from 60 MMcf of gas and 5,000 barrels of oil per day.

Australia

     Pyrenees and Van Gogh The second quarter of 2010 marked the first full quarter of oil production from the Pyrenees and Van Gogh developments located offshore Western Australia. The Pyrenees and Van Gogh developments, which contributed 22,347 b/d and 29,046 b/d during the second quarter, respectively, drove Australia oil production to 60,680 b/d.

     Wheatstone LNG Project In October 2009, Apache announced an agreement to become a foundation equity partner in Chevron’s Wheatstone LNG hub in Western Australia. Chevron, which has a 100-percent interest in the Wheatstone field, will operate the LNG facilities with a 75 percent interest. Apache currently owns a 16.25 percent interest in the project and our partner in the Julimar and Brunello fields, Kuwait Foreign Petroleum Exploration Co., k.s.c. (KUFPEC) owns the remaining project interest. The Wheatstone project is targeting a final investment decision (FID) in 2011 and first sales from the facility are projected for 2015. Our net capital for the project is currently estimated to be $1.2 billion for upstream development of the Julimar and Brunello fields and $3.0 billion for the Wheatstone facilities. The investment in the multi-year project will be funded over several years.

     Apache is currently pursuing the sale of a small percentage of interests in its Julimar and Brunello field discoveries in conjunction with the sale of LNG to potential gas buyers, including those described below.

     On July 19, 2010, Apache announced that it, KUFPEC and KOGAS had signed Heads of Agreements (HoAs) for KOGAS to purchase LNG from and to buy an equity stake in the Wheatstone LNG project in Australia. Under the LNG purchase HoA, KOGAS plans to purchase 1.5 million tons per annum of LNG from Apache, KUFPEC and Chevron for up to 20 years. Approximately 25 percent of the LNG is expected to be purchased from Apache and KUFPEC, with the remainder from Chevron. Apache's share of the sales agreement is expected to be approximately 240,000 tons of LNG per year, or 32 MMcf per day of natural gas. Under the equity HoA and the related transaction with Chevron, KOGAS intends to acquire a five percent interest in the entire Wheatstone project, comprising a five percent interest in: Apache's and KUFPEC's Julimar and Brunello field interests; Chevron's Wheatstone field licenses; and the Wheatstone project facilities. Under the terms of KOGAS' participation, Apache's interest in the Wheatstone LNG facilities and Julimar and Brunello field discoveries, including the capital funding requirements, would be reduced to 15.4375 percent and 61.75 percent, respectively.

33

Results of Operations

Oil and Gas Revenues

	For the Quarter Ended June 30,										For the Six Months Ended June 30,
	2010					2009					2010					2009
	$		%			$		%			$		%			$		%
	Value		Contribution			Value		Contribution			Value		Contribution			Value		Contribution
	($ in millions)
Total Oil and Gas Revenues:
United States	$	962		32	%	$	707		34	%	$	1,954		35	%	$	1,303		35	%
Canada		240		8	%		215		10	%		493		9	%		425		12	%
North America		1,202		40	%		922		44	%		2,447		44	%		1,728		47	%
Egypt		806		28	%		655		32	%		1,547		27	%		1,075		29	%
Australia		452		15	%		87		4	%		676		12	%		130		4	%
North Sea		421		14	%		322		16	%		812		14	%		565		15	%
Argentina		88		3	%		88		4	%		180		3	%		180		5	%
International		1,767		60	%		1,152		56	%		3,215		56	%		1,950		53	%
Total (1)	$	2,969		100	%	$	2,074		100	%	$	5,662		100	%	$	3,678		100	%
Total Oil Revenues:
United States	$	604		27	%	$	459		31	%	$	1,198		29	%	$	792		32	%
Canada		94		4	%		79		5	%		191		5	%		136		5	%
North America		698		31	%		538		36	%		1,389		34	%		928		37	%
Egypt		682		30	%		523		35	%		1,307		31	%		840		34	%
Australia		411		19	%		60		4	%		594		14	%		83		3	%
North Sea		417		18	%		319		22	%		804		19	%		560		22	%
Argentina		50		2	%		51		3	%		101		2	%		103		4	%
International		1,560		69	%		953		64	%		2,806		66	%		1,586		63	%
Total (2)	$	2,258		100	%	$	1,491		100	%	$	4,195		100	%	$	2,514		100	%
Total Gas Revenues:
United States	$	314		48	%	$	234		42	%	$	680		50	%	$	486		43	%
Canada		139		21	%		131		23	%		289		21	%		281		25	%
North America		453		69	%		365		65	%		969		71	%		767		68	%
Egypt		124		19	%		132		23	%		240		17	%		235		22	%
Australia		41		6	%		27		5	%		82		6	%		47		4	%
North Sea		4		1	%		3		1	%		8		1	%		5		–
Argentina		31		5	%		33		6	%		62		5	%		68		6	%
International		200		31	%		195		35	%		392		29	%		355		32	%
Total (3)	$	653		100	%	$	560		100	%	$	1,361		100	%	$	1,122		100	%
Natural Gas Liquids (NGL)
Revenues:
United States	$	44		76	%	$	14		61	%	$	76		72	%	$	25		60	%
Canada		7		12	%		5		22	%		13		12	%		8		19	%
North America		51		88	%		19		83	%		89		84	%		33		79	%
Argentina		7		12	%		4		17	%		17		16	%		9		21	%
Total	$	58		100	%	$	23		100	%	$	106		100	%	$	42		100	%

(1)	Included in oil and gas production revenues were a gain of $52.5 million and $51.3 million for the 2010 second quarter and six-month period, respectively, and a gain of $51.6 million and $107.7 million for the 2009 second quarter and six-month period, respectively, from financial derivative hedging activities.
(2)	Included in oil revenues were a loss of $11.9 million and $26.3 million for the 2010 second quarter and six-month period, respectively, and a gain of $13.1 million and $51.6 million for the 2009 second quarter and six-month period, respectively, from financial derivative hedging activities.
(3)	Included in natural gas revenues were a gain of $64.4 million and $77.6 million for the 2010 second quarter and six-month period, respectively, and a gain of $38.5 million and $56.1 million for the 2009 second quarter and six-month period, respectively, from financial derivative hedging activities.

34

Production

	For the Quarter Ended June 30,							For the Six Months Ended June 30,
					Increase							Increase
	2010		2009		(Decrease)			2010		2009		(Decrease)
Oil Volume – b/d:
United States		89,529		88,530		1	%		89,144		87,642		2	%
Canada		14,561		15,833		(8	)%		14,447		16,090		(10	)%
North America		104,090		104,363		—			103,591		103,732		—
Egypt		98,495		95,359		3	%		94,642		89,475		6	%
Australia		60,680		10,478		479	%		43,978		9,164		380	%
North Sea		58,141		59,688		(3	)%		57,995		60,089		(3	)%
Argentina		9,874		11,948		(17	)%		9,897		12,192		(19	)%
International		227,190		177,473		28	%		206,512		170,920		21	%
Total (1)		331,280		281,836		18	%		310,103		274,652		13	%
Natural Gas Volume – Mcf/d:
United States		674,886		662,834		2	%		673,361		637,894		6	%
Canada		339,611		373,796		(9	)%		326,646		365,551		(11	)%
North America		1,014,497		1,036,630		(2	)%		1,000,007		1,003,445		—
Egypt		388,367		376,737		3	%		375,249		347,443		8	%
Australia		203,147		161,069		26	%		205,209		151,607		35	%
North Sea		2,516		2,645		(5	)%		2,540		2,663		(5	)%
Argentina		183,028		192,542		(5	)%		168,953		192,250		(12	)%
International		777,058		732,993		6	%		751,951		693,963		8	%
Total (2)		1,791,555		1,769,623		1	%		1,751,958		1,697,408		3	%
Natural Gas Liquids (NGL) Volume – b/d:
United States		11,878		5,483		117	%		9,374		5,198		80	%
Canada		1,996		2,052		(3	)%		1,866		2,082		(10	)%
North America		13,874		7,535		84	%		11,240		7,280		54	%
Argentina		3,118		3,091		1	%		3,204		3,114		3	%
Total		16,992		10,626		60	%		14,444		10,394		39	%
BOE per day(3)
United States		213,889		204,485		5	%		210,746		199,156		6	%
Canada		73,159		80,185		(9	)%		70,753		79,097		(11	)%
North America		287,048		284,670		1	%		281,499		278,253		1	%
Egypt		163,223		158,148		3	%		157,184		147,382		7	%
Australia		94,538		37,323		153	%		78,179		34,431		127	%
North Sea		58,560		60,129		(3	)%		58,418		60,533		(3	)%
Argentina		43,497		47,130		(8	)%		41,260		47,348		(13	)%
International		359,818		302,730		19	%		335,041		289,694		16	%
Total		646,866		587,400		10	%		616,540		567,947		9	%

(1)	Approximately nine and 11 percent of worldwide oil production was subject to financial derivative hedges for the second quarter and six-month period of 2010, respectively, and eight percent for the 2009 second quarter and six-month periods.
(2)	Approximately 23 and 24 percent of worldwide natural gas production was subject to financial derivative hedges for the second quarter and six-month period of 2010, respectively, and eight percent for the 2009 second quarter and six-month periods.
(3)	The table shows reserves on a barrel of oil equivalent basis (boe) in which natural gas is converted to an equivalent barrel of oil based on a 6:1 energy equivalent ratio. This ratio is not reflective of the price ratio between the two products.

35

Pricing

	For the Quarter Ended June 30,							For the Six Months Ended June 30,
					Increase							Increase
	2010		2009		(Decrease)			2010		2009		(Decrease)
Average Oil Price – Per barrel:
United States	$	74.20	$	57.00		30	%	$	74.26	$	49.95		49	%
Canada		70.87		55.17		28	%		73.10		46.49		57	%
North America		73.73		56.72		30	%		74.10		49.41		50	%
Egypt		76.08		60.30		26	%		76.27		51.90		47	%
Australia		74.42		63.01		18	%		74.58		49.74		50	%
North Sea		78.78		58.77		34	%		76.58		51.51		49	%
Argentina		55.41		46.17		20	%		56.60		46.73		21	%
International		75.43		58.99		28	%		75.05		51.28		46	%
Total (1)		74.89		58.15		29	%		74.74		50.57		48	%
Average Natural Gas Price – Per Mcf:
United States	$	5.11	$	3.88		32	%	$	5.58	$	4.21		33	%
Canada		4.51		3.86		17	%		4.88		4.26		15	%
North America		4.91		3.88		27	%		5.35		4.23		26	%
Egypt		3.51		3.85		(9	)%		3.54		3.73		(5	)%
Australia		2.22		1.82		22	%		2.22		1.71		30	%
North Sea		17.15		12.24		40	%		17.73		9.82		81	%
Argentina		1.88		1.89		(1	)%		2.01		1.94		4	%
International		2.83		2.92		(3	)%		2.88		2.82		2	%
Total (2)		4.01		3.48		15	%		4.29		3.65		18	%
Average NGL Price – Per barrel:
United States	$	40.48	$	27.36		48	%	$	44.63	$	25.90		72	%
Canada		35.76		24.23		48	%		37.97		22.40		70	%
North America		39.80		26.50		50	%		43.52		24.90		75	%
Argentina		25.68		15.91		61	%		30.23		16.51		83	%
Total		37.21		23.42		59	%		40.58		22.39		81	%

(1)	Reflects a per barrel decrease of $.39 and $.47 from financial derivative hedging activities for the 2010 second quarter and six-month period, respectively, and an increase of $.51 and $1.04 from financial derivative hedging activities for the 2009 second quarter and six-month period, respectively.
(2)	Reflects a per Mcf increase of $.39 and $.24 from financial derivative hedging activities for the 2010 second quarter and six-month period, respectively, and an increase of $.24 and $.18 from financial derivative hedging activities for the 2009 second quarter and six-month period, respectively.

Second-Quarter 2010 compared to Second-Quarter 2009

     Crude Oil Revenues Second-quarter crude oil revenues of $2.3 billion were $767 million higher than the 2009 period as worldwide production surged 18 percent to 331,280 b/d and prices rose 29 percent. Crude oil accounted for 76 percent of our oil and gas production revenues during the quarter and 51 percent of our equivalent production, compared to 72 and 48 percent, respectively, for the same period last year. Higher production volumes contributed $337 million to the increase in second-quarter revenues, while higher realized prices added another $430 million.

     U.S. oil revenues were $145 million higher than the 2009 quarter; $138 million from higher price realizations and $7 million from increased production. Prices in the U.S. were 30 percent higher, while production increased marginally. The Gulf Coast region production was down two percent on natural decline. The Central region production increased 717 b/d on drilling activity and the Permian region increased production five percent on new drilling and acquisitions.

     Canada’s revenues increased $15 million, with higher prices contributing $23 million of additional revenues. The benefit from higher prices was partially offset by an eight percent drop in production, primarily from natural decline. Canada’s oil prices averaged $70.87 per barrel, up 28 percent from the 2009 comparative quarter.

     Egypt’s crude oil revenues rose $159 million compared to the prior-year quarter as oil price realizations increased 26 percent, boosting revenues by $137 million. Production growth added $22 million. Gross production increased 14 percent while net production was up only three percent, a function of higher prices and the mechanics of our production sharing contracts. Gross production growth was driven by our drilling and recompletion programs at the Matruh, East Bahariya Extension, South Umbarka and Shushan concessions.

     Australia’s oil revenues were $351 million higher than the prior-year quarter on a sharp increase in production at the Pyrenees and Van Gogh developments, which together contributed an additional 51,393 b/d, driving total Australia production to 60,680 b/d. The higher production added $340 million to revenue while higher price realizations, which were up 18 percent, added another $11 million.

36

     North Sea crude oil revenues were up $98 million. This was due to a 34 percent increase in prices, raising revenues by $109 million, partially offset by a three percent drop in production, which decreased revenues by $11 million. Production was down primarily on natural decline.

     Argentina’s oil revenues totaled $50 million, down slightly from the year-ago period. Production decreased 17 percent on natural decline, lowering revenues by $11 million, mostly offset by 20 percent higher price realizations that contributed $10 million to revenues. Oil realizations averaged $55.41 per barrel, as export price limitations imposed on our Argentine production moderated price realizations as compared to our other operating regions.

     Natural Gas Revenues Second-quarter natural gas revenues of $653 million were $93 million higher than the comparable 2009 period, driven primarily by higher realized prices. Average realized prices for the quarter of $4.01 per Mcf, a 15 percent increase from the $3.48 seen in the second quarter of 2009, boosted revenues by $85 million. Worldwide production increased one percent to 1,792 MMcf/d, adding another $8 million.

     U.S. natural gas revenues were up $80 million, with a 32 percent rise in realized prices and two percent higher production increasing revenues by $74 million and $6 million, respectively. Natural gas prices averaged $5.11 per Mcf, up from $3.88 from the comparable year-ago period. Gulf Coast region gas production was up five percent with production restored from wells shut-in because of hurricanes, additional production resulting from new drilling and recompletion activity and properties acquired in the Devon acquisition more than offsetting natural decline. Central region production was up two percent from drilling and recompletion activity. A change in natural gas marketing strategy in the Permian region led to a 10 percent reduction in sales volumes. During the quarter we entered into new marketing contracts, and condensate-rich gas production which was previously sold prior to being processed is now being sold after liquids are removed. The result was an increase in the volumes of natural gas liquids (NGL) sold, and an associated decrease in the volumes of natural gas sold. Permian region’s NGL production for the period increased 5,128 b/d to 6,475 b/d, 381 percent higher than the year-ago period.

     Canada’s natural gas revenues increased $8 million as a 17 percent increase in price realizations was largely offset by a nine percent decrease in production. Gas price realizations rose $0.65 to $4.51 per Mcf, increasing revenues $22 million. Driven primarily by natural decline, gas production fell to 340 MMcf/d, reducing revenues by $14 million.

     Egypt’s natural gas revenues were down $8 million compared to the 2009 second quarter, with a $12 million reduction related to a nine percent price drop partially offset by $4 million of additional revenues attributed to production gains. Gross production was up 14 percent, while net production rose only three percent, a function of the mechanics of our production sharing contracts. The increase in gross production was primarily from drilling and recompletion activity on our Khalda and Matruh concessions.

     Australia’s natural gas revenues rose $14 million relative to the prior-year period, with a 26 percent increase in production adding $8 million in revenues and a 22 percent increase in prices contributing another $6 million. Production reached an average of 203 MMcf/d, up on higher customer takes from our Harriet and John Brookes fields.

     Argentina’s gas revenues fell $2 million on a five percent decline in production, related to natural decline. Production for the quarter was 183 MMcf/d. Natural gas realizations of $1.88 per Mcf were relatively flat from last year’s second quarter and resulted in a minimal downward impact on revenues.

37

Operating Expenses

     The table below presents a comparison of our expenses on an absolute dollar basis and an equivalent unit of production (boe) basis. Our discussion may reference expenses either on a boe basis, on an absolute dollar basis or both, depending on their relevance. Amounts included in this table and in the discussion that follows are rounded to millions and may differ slightly from those presented elsewhere in this document.

	For the Quarter Ended June 30,				For the Quarter Ended June 30,
	2010		2009		2010		2009
	(In millions)				(Per boe)
Depreciation, depletion and amortization:
Oil and gas property and equipment
Recurring	$	676	$	527	$	11.49	$	9.86
Other assets		53		46		.91		.87
Asset retirement obligation accretion		25		27		.42		.50
Lease operating expenses		446		405		7.58		7.58
Gathering and transportation		43		34		.73		.62
Taxes other than income		187		116		3.17		2.17
General and administrative expenses		92		91		1.56		1.70
Financing costs, net		56		61		.95		1.14
Total	$	1,578	$	1,307	$	26.81	$	24.44

     Depreciation, Depletion and Amortization (DD&A) The following table details the changes in recurring DD&A of oil and gas properties between the second quarters of 2010 and 2009:

	Recurring DD&A
	(In millions)
Second-quarter 2009 DD&A	$	527
Volume change		67
Rate change		82
Second-quarter 2010 DD&A	$	676

     Recurring full-cost DD&A expense of $676 million increased $149 million on an absolute dollar basis; $82 million higher on rate and $67 million from higher production. The Company’s full-cost DD&A rate increased $1.63 to $11.49 per boe as the costs to acquire, find and develop reserves continue to exceed our historical cost basis. The recent acquisition of assets on the Gulf of Mexico shelf from Devon, completed in June 2010, also impacted the current quarter full-cost depletion rate.

     Lease Operating Expenses (LOE) Second-quarter 2010 LOE increased $41 million, or 10 percent on an absolute dollar basis, as compared to the second quarter of 2009. On a per unit basis, LOE was unchanged. The following table identifies changes in Apache’s LOE rate between the second quarter of 2009 and 2010.

	Per boe
Second-quarter 2009 LOE	$	7.58
FX impact		0.22
Equipment rental – Australia		0.22
Workover costs		0.13
Labor and pumper costs		0.12
Other		0.12
Devon acquisition		0.10
Materials, surface and sub-surface		0.08
Non-recurring repair and maintenance		0.06
Power and fuel costs		0.06
U.S. hurricane repair costs		(0.35	)
Increased production		(0.76	)
Second-quarter 2010 LOE	$	7.58

38

     Gathering and Transportation Gathering and transportation costs totaled $43 million in the second quarter of 2010, up $9 million. On a per unit basis, gathering and transportation costs were up 18 percent as the impact from higher costs was partially offset by a decrease in rate related to higher production. The following table presents gathering and transportation costs paid by Apache directly to third-party carriers for each of the periods presented:

	For the Quarter Ended
	June 30,
	2010		2009
	(In millions)
U.S.	$	11	$	8
Canada		16		13
North Sea		6		6
Egypt		9		6
Argentina		1		1
Total Gathering and Transportation	$	43	$	34

     The U.S. increased $3 million primarily from an increase in volumes transported under contracts where charges are paid directly to a third party. Canada’s transportation was up $3 million primarily from the impact of foreign exchange rates and higher gas transportation rates, partially offset by lower transported volumes. Egypt’s costs were up $3 million on an increase in tariff fees.

     Taxes other than Income Taxes other than income totaled $187 million, an increase of $71 million. On a per unit basis, taxes other than income increased 46 percent. Higher production decreased the rate by 15 percent, while higher costs increased the rate by 61 percent. A detail of these taxes follows:

	For the Quarter Ended
	June 30,
	2010		2009
	(In millions)
U.K. PRT	$	130	$	73
Severance taxes		28		18
Ad valorem taxes		17		13
Canadian taxes		3		4
Other		9		8
Total Taxes other than Income	$	187	$	116

     U.K. Petroleum Revenue Tax (PRT) is assessed on net profits from subject fields in the U.K. North Sea. U.K. PRT was $57 million higher than the 2009 period on an 85 percent increase in net profits, driven by 34 percent higher realized oil prices and 23 percent lower capital expenditures.

     Severance taxes are incurred primarily on onshore properties in the U.S. and certain properties in Australia and Argentina. The $10 million increase in severance taxes resulted from higher taxable revenues in the U.S. and Australia, consistent with the higher realized oil and natural gas prices.

     Ad valorem taxes are assessed on U.S. and Canadian property values. The $4 million increase resulted primarily from higher commodity prices which increased property values over 2009.

     General and Administrative Expenses General and administrative expenses (G&A) were $1 million higher on an absolute basis, but on a per unit basis were down $.14 to an average of $1.56 per boe. Lower employee separation costs and stock-based compensation costs were offset by higher administrative costs related to acquisitions, the Kitimat LNG project and various other corporate expenses.

39

     Financing Costs, Net Financing costs incurred during the period noted are composed of the following:

	For the Quarter Ended
	June 30,
	2010			2009
	(In millions)
Interest expense	$	75		$	77
Amortization of deferred loan costs		1			1
Capitalized interest		(18	)		(15	)
Interest income		(2	)		(2	)
Financing costs, net	$	56		$	61

     Net financing costs fell $5 million, or $.20 on a boe basis. The decrease in absolute dollars is primarily the result of a $2 million decrease in interest expense related to lower average outstanding debt balances and a $3 million increase in capitalized interest related to higher unproved property balances. The $.20 reduction on a unit basis was essentially split evenly between the lower net costs and the impact of higher production.

     Provision for Income Taxes During interim periods, income tax expense is based on the estimated effective income tax rate that is expected for the entire fiscal year, after consideration of discrete items. No significant discrete tax events occurred during the second quarter of 2010 or 2009.

     The provision for income taxes increased $192 million to $534 million, 56 percent above prior year, as income before taxes increased on higher oil and gas production revenues. The effective income tax rate in the second quarter of 2010 was 38.3 percent compared to 43.5 percent in the second quarter of 2009. The 2010 rate was impacted by a $32 million non-cash benefit related to the strengthening U.S. dollar compared to $31 million of expense in 2009.

Year-to-Date 2010 compared to Year-to-Date 2009

     Crude Oil Revenues Year-to-date crude oil revenues of $4.2 billion were $1.7 billion higher than the 2009 period as worldwide production increased 13 percent to 310,103 b/d and prices rose 48 percent over the prior-year period. Crude oil accounted for 74 percent of our oil and gas production revenues during the period and 50 percent of our equivalent production, compared to 68 and 48 percent, respectively, for the same period last year. Higher realized prices added $1.2 billion to our six-month revenues, while higher production volumes contributed $480 million.

     U.S. oil revenues were $406 million higher than the comparable six-month period of 2009: $386 million from higher price realizations and $20 million from increased production. Prices in the U.S. jumped 49 percent, while production increased two percent. Central region production increased 18 percent on drilling activity and the Permian region increased production three percent on new drilling and acquisitions. Gulf Coast region production was flat as compared to the prior period.

     Canada’s revenues increased $55 million, with higher prices contributing $77 million and decreased production lowering revenues by $22 million. Canada’s oil prices averaged $73.10 per barrel, up 57 percent from the year-ago period. Production fell 10 percent, primarily from natural decline.

     Egypt’s crude oil revenues rose $467 million as oil price realizations increased 47 percent, boosting revenues $395 million. Production growth added $72 million, relative to the 2009 period. Gross production increased 16 percent while net production was up only six percent, a function of higher prices and the mechanics of our production sharing contracts. Gross production growth was driven by drilling and recompletion programs at the Matruh, East Bahariya Extension, South Umbarka and Northeast Abu Gharadig (NEAG) Extension concessions.

     Australia’s oil revenues were $511 million higher than the prior-year six-month period on a sharp increase in production at the Pyrenees and Van Gogh developments, which together contributed an additional 34,559 b/d, driving total Australia production to 43,978 b/d. The higher production added $470 million to revenue while higher price realizations, which were up 50 percent, adding another $41 million.

     North Sea crude oil revenues were up $244 million. This was due to a 49 percent increase in prices, raising revenues by $273 million, partially offset by a three percent drop in production, which decreased revenues by $29 million. Production was down on natural decline.

40

     Argentina’s oil revenues totaled $101 million, down slightly from the year-ago period. Production decreased 19 percent on natural decline lowering revenues by $24 million, which was mostly offset by 21 percent higher price realizations that contributed $22 million of additional revenues. Oil realizations averaged $56.60 per barrel, as export price limitations imposed on our Argentine production moderate price realizations as compared to our other operating regions.

     Natural Gas Revenues Natural gas revenues for the six-month period of 2010 of $1.4 billion were $239 million higher than the comparable 2009 period, driven primarily by higher realized prices. Average realized prices for the period of $4.29 per Mcf, an 18 percent increase from the $3.65 seen in the 2009 period, boosted revenues by $197 million. Worldwide production increased three percent to 1,752 MMcf/d, adding another $42 million to revenues.

     U.S. natural gas revenues were up $194 million, with a 33 percent rise in realized prices and six percent higher production increasing revenues by $158 million and $36 million, respectively. Natural gas prices averaged $5.58 per Mcf, up from $4.21 in the comparable year-ago period. Gulf Coast region gas production increased 13 percent on new drilling and recompletions, as well as production from acquisitions. Central region production was down four percent on natural decline. Permian region gas production was up marginally.

     Canada’s natural gas revenues increased $8 million as a 15 percent increase in price realizations was largely offset by an 11 percent decrease in production. Gas price realizations rose $.62 to $4.88 per Mcf, increasing revenues $42 million. Driven primarily by natural decline, gas production fell to 327 MMcf/d, reducing revenues by $34 million.

     Egypt’s natural gas revenues were up $5 million compared to the 2009 period, with $17 million of additional revenues attributed to production gains being partially offset by a $12 million reduction related to a five percent price decline. Gross production was up 20 percent, while net production rose only eight percent, a function of the mechanics of our production sharing contracts. The increase in gross production was primarily from our Khalda and Matruh concessions.

     Australia’s natural gas revenues rose $35 million, with a 35 percent increase in production adding $21 million in revenues and a 30 percent increase in prices contributing another $14 million. Production reached an average of 205 MMcf/d in the period on higher customer takes from our Harriet and John Brookes fields.

     Argentina’s gas revenues fell $6 million, as 12 percent lower production reduced revenues by $8 million and four percent higher prices added back $2 million. Production for the current period was 169 MMcf/d, down primarily on natural decline. Natural gas realizations rose $.07 to $2.01 per Mcf.

Operating Expenses

     The table below presents a comparison of our expenses on an absolute dollar basis and an equivalent unit of production (boe) basis. Our discussion may reference expenses either on a boe basis, on an absolute dollar basis or both, depending on their relevance. Amounts included in this table and in the discussion that follows are rounded to millions and may differ slightly from those presented elsewhere in this document.

	For the Six Months Ended June 30,				For the Six Months Ended June 30,
	2010		2009		2010		2009
	(In millions)				(Per boe)
Depreciation, depletion and amortization:
Oil and gas property and equipment
Recurring	$	1,263	$	1,063	$	11.32	$	10.34
Additional		—		2,818		—		27.41
Other assets		105		91		.94		.89
Asset retirement obligation accretion		49		53		.44		.52
Lease operating expenses		886		803		7.94		7.81
Gathering and transportation		83		67		.75		.65
Taxes other than income		364		203		3.26		1.98
General and administrative expenses		179		176		1.60		1.71
Financing costs, net		115		120		1.03		1.16
Total	$	3,044	$	5,394	$	27.28	$	52.47

41

     Depreciation, Depletion and Amortization (DD&A) The following table details the changes in recurring DD&A of oil and gas properties between the six-month periods of 2010 and 2009:

	Recurring DD&A
	(In millions)
2009 DD&A	$	1,063
Volume change		104
Rate change		96
2010 DD&A	$	1,263

     Recurring full-cost DD&A expense of $1.26 billion increased $200 million on an absolute dollar basis; $104 million from higher production and $96 million on rate. The Company’s full-cost DD&A rate increased $.98 to $11.32 per boe. The increase in rate is the result of adding new reserves, through both drilling and acquisitions, at a cost per boe that is higher than the average historical cost of reserves at the beginning of the period.

     In the first quarter of 2009, we recorded a $2.82 billion ($1.98 billion net of tax) non-cash write-down of the carrying value of our March 31, 2009, proved oil and gas property balances in the U.S. and Canada. Under the full-cost method of accounting, the Company is required to review the carrying value of its proved oil and gas properties each quarter on a country-by-country basis. Under these rules, capitalized costs of oil and gas properties, net of accumulated DD&A and deferred income taxes, may not exceed the present value of estimated future net cash flows from proved oil and gas reserves, discounted 10 percent, net of related tax effects. Until December 31, 2009, the rules generally required pricing future oil and gas production at the unescalated oil and gas prices and costs in effect at the end of each fiscal quarter. Effective December 31, 2009, estimated future net cash flows are calculated using an unweighted arithmetic average of commodity prices in effect on the first day of each month in the prior 12 months, held flat for the life of the production, except where prices are defined by contractual arrangements. The rules also generally require the estimation of future costs in effect at the end of each fiscal quarter. Write-downs required by these rules do not impact cash flow from operating activities.

     Lease Operating Expenses (LOE) LOE for the first six months of 2010 increased $83 million, or 10 percent on an absolute dollar basis, as compared to the same period of 2009. On a per unit basis, LOE increased two percent with the impact of higher production nearly offsetting a 10 percent increase in higher costs. The following table identifies changes in Apache’s LOE rate between the six-month periods ended June 30, 2009 and 2010.

	Per boe
2009 LOE	$	7.81
FX impact		0.33
Equipment rental – Australia		0.18
Workover costs		0.15
Stock-based compensation		0.10
OIL theoretical withdrawal		0.10
Labor and pumper costs		0.08
Materials, surface and sub-surface		0.06
Other		0.05
Power and fuel costs		0.05
U.S. hurricane repair costs		(0.29	)
Increased production		(0.68	)
2010 LOE	$	7.94

42

     Gathering and Transportation Gathering and transportation costs totaled $83 million in the first six months of 2010, up $16 million. On a per unit basis, gathering and transportation costs were up 15 percent as higher costs increased the rate 25 percent and higher production decreased the rate 10 percent. The following table presents gathering and transportation costs paid by Apache directly to third-party carriers for each of the periods presented:

	For the Six Months Ended
	June 30,
	2010		2009
	(In millions)
U.S.	$	21	$	16
Canada		33		24
North Sea		12		13
Egypt		15		12
Argentina		2		2
Total Gathering and Transportation	$	83	$	67

     The $5 million increase in the U.S. resulted primarily from an increase in volumes transported under contracts where charges are paid directly to a third party. Canada’s transportation was up $9 million primarily from the impact of foreign exchange rates and higher gas transportation rates, partially offset by lower transported volumes. Egypt’s costs were up $3 million on an increase in tariff fees.

     Taxes other than Income Taxes other than income totaled $364 million, an increase of $161 million. On a per unit basis, taxes other than income increased 65 percent; 79 percent on higher costs, offset by 14 percent decrease in rate on production growth. A detail of these taxes follows:

	For the Six Months Ended
	June 30,
	2010		2009
	(In millions)
U.K. PRT	$	253	$	123
Severance taxes		60		35
Ad valorem taxes		35		21
Canadian taxes		1		8
Other		15		16
Total Taxes other than Income	$	364	$	203

     U.K. PRT is assessed on net profits from subject fields in the U.K. North Sea. U.K. PRT was $130 million more than the 2009 period on a 105 percent increase in net profits driven by a 49 percent increase in realized oil prices, and 15 percent lower capital expenditures.

     Severance taxes are incurred primarily on onshore properties in the U.S. and certain properties in Australia and Argentina. The $25 million increase in severance taxes resulted from higher taxable revenues in the U.S., consistent with the higher realized oil and natural gas prices.

     Ad valorem taxes are assessed on U.S. and Canadian assessed property values. The $14 million increase resulted primarily from an increase in assessments from the prior year.

     General and Administrative Expenses General and administrative expenses (G&A) were $3 million higher on an absolute basis, but on a per unit basis were down $.11 to an average of $1.60 per boe. Lower employee separation costs were offset by higher stock-based compensation, higher administrative costs related to acquisitions, the Kitimat LNG project and various other corporate expenses.

     Financing Costs, Net Financing costs incurred during the periods noted are composed of the following:

	For the Six Months Ended
	June 30,
	2010			2009
	(In millions)
Interest expense	$	151		$	156
Amortization of deferred loan costs		3			3
Capitalized interest		(35	)		(31	)
Interest income		(4	)		(8	)
Financing costs, net	$	115		$	120

43

     Net financing costs fell $5 million, primarily the result of a $5 million decrease in interest expense. On a per boe basis, net financing costs were down $.13, with approximately two-thirds of the decline in the boe rate attributable to higher production.

     Provision for Income Taxes During interim periods, income tax expense is based on the estimated effective income tax rate that is expected for the entire fiscal year, after consideration of discrete items. No discrete items were recorded in the first half of 2010. The Company’s first-quarter 2009 non-cash write-down of the carrying value of its proved oil and gas properties was deemed a discrete event. No significant discrete tax events occurred during the second quarter of 2009.

     The provision for income taxes for the first six months of 2010 was an expense of $1.0 billion compared to a benefit of $354 million in the 2009 period. The benefit resulted from the non-cash write-down of the carrying value of our proved oil and gas properties previously discussed. The effective income tax rate was 39.8 percent compared to 21.3 percent in 2009, impacted by the magnitude of the tax benefit related to the write-down. We recorded a $25 million benefit to tax expense in 2010 related to foreign currency fluctuations, compared to a $26 million expense in 2009.

Non-GAAP Measures

     The Company makes reference to some measures in discussion of its financial and operating highlights that are not required by or presented in accordance with GAAP. Management uses these measures in assessing operating results and believes the presentation of these measures provides information useful in assessing the Company’s financial condition and results of operations. These non-GAAP measures should not be considered as alternatives to GAAP measures and may be calculated differently from, and therefore may not be comparable to, similarly-titled measures used at other companies.

Adjusted Earnings

     To assess the Company’s operating trends and performance, management uses Adjusted Earnings, which is net income excluding certain items that management believes affect the comparability of operating results. Management believes this presentation may be useful to investors who follow the practice of some industry analysts who adjust reported company earnings for items that may obscure underlying fundamentals and trends. The reconciling items below are the types of items management excludes and believes are frequently excluded by analysts when evaluating the operating trends and comparability of the Company’s results.

	For the Quarter					For the Six Months
	Ended June 30,					Ended June 30,
	2010			2009		2010			2009
	(In millions, except per share data)
Income (Loss) Attributable to Common Stock (GAAP)	$	860		$	443	$	1,565		$	(1,315	)
Adjustments:
Foreign currency fluctuation impact on deferred tax expense		(31	)		31		(25	)		26
Additional depletion, net of tax (1)		—			—		—			1,982
Adjusted Earnings (Non-GAAP)	$	829		$	474	$	1,540		$	693
Adjusted Earnings Per Share (Non-GAAP)
Basic	$	2.45		$	1.41	$	4.57		$	2.07
Diluted	$	2.44		$	1.41	$	4.54		$	2.05
Average Number of Common Shares
Basic		337,618			335,637		337,273			335,372
Diluted		339,377			337,365		339,282			337,198

⁽¹⁾ Additional depletion (non-cash write-down of the carrying value of proved property) recorded in 2009 was $2,818 million pre-tax, for which a deferred tax benefit of $837 million was recognized. The tax effect of the write-down of the carrying value of proved property (additional depletion) in 2009 was calculated utilizing the statutory rates in effect in each country where a write-down occurred.

44

Capital Resources and Liquidity

     Net cash provided by operating activities (operating cash flows or cash flows) is our primary source of liquidity. Our cash flows, both in the short-term and the long-term, are impacted by highly volatile oil and natural gas prices. Significant deterioration in commodity prices negatively impacts our revenues, earnings and cash flows, and potentially our liquidity, if costs do not trend downward as well. Sales volumes and costs also impact cash flows; however, these historically have not been as volatile or as impactive as commodity prices in the short-term.

     Our long-term operating cash flows are also dependent in part on reserve replacement and the level of costs required for ongoing operations. Our business, as with other extractive industries, is a depleting one in which each unit produced must be replaced or the Company and our reserves, a critical source of future liquidity, will shrink. Cash investments are required continuously to fund exploration and development projects and acquisitions, which are necessary to offset the inherent declines in production and proven reserves. Future success in maintaining and growing reserves and production is highly dependent on the success of our exploration and development activities or our ability to acquire additional reserves at reasonable costs.

     We may also elect to utilize available committed borrowing capacity, debt and equity capital markets or proceeds from the occasional sale of nonstrategic assets for all other liquidity and capital resource needs. Apache’s ability to access the debt and equity capital markets is supported by its investment-grade credit ratings.

     We believe the liquidity and capital resource alternatives available to Apache, combined with internally-generated cash flows, will be adequate to fund our short-term and long-term operations, including our capital spending program, repayment of debt maturities and any amount that may ultimately be paid in connection with contingencies.

     Our primary uses of cash are exploration, development and acquisition of oil and gas properties, costs necessary to maintain ongoing operations, repayment of principal and interest on outstanding debt and payment of dividends. We fund our exploration and development activities primarily through net cash flows and budget our capital expenditures based on projected cash flows.

     See Part II, Item 1A, “Risk Factors” of this Form 10-Q and Part I, Items 1 and 2, “Business and Properties,” and Item 1A, “Risk Factors Related to Our Business and Operations,” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

Sources and Uses of Cash

     The following table presents the sources and uses of our cash and cash equivalents for the periods presented.

	For the Six Months Ended
	June 30,
	2010			2009
	(In millions)
Sources of Cash and Cash Equivalents:
Net cash provided by operating activities	$	3,085		$	1,367
Sale of short-term investments		—			792
Net commercial paper and bank loan borrowings		—			148
Restricted cash		—			14
Common stock issuances		25			13
Other		22			9
		3,132			2,343
Uses of Cash and Cash Equivalents:
Capital expenditures(1)	$	2,195		$	2,283
Oil and gas acquisitions		1,017			181
Payments on fixed-rate notes		—			100
Dividends		101			103
Net commercial paper and bank loan repayments		55			—
Other		7			86
		3,375			2,753
Increase (decrease) in cash and cash equivalents	$	(243	)	$	(410	)

⁽¹⁾ The table presents capital expenditures on a cash basis; therefore, the amounts differ from those discussed elsewhere in this document, which include accruals.

45

     Net Cash Provided by Operating Activities Cash flows are our primary source of capital and liquidity and are impacted, both in the short-term and the long-term, by highly volatile oil and natural gas prices.

     Crude oil realizations averaged $74.74 for the first six months of 2010, up 48 percent from 2009 levels. Natural gas price realizations averaged $4.29 per Mcf, 18 percent higher than the comparable 2009 period.

     Factors affecting operating cash flows are largely the same as those that affect net earnings, with the exception of non-cash expenses such as DD&A, ARO accretion and deferred income tax expense.

     Net cash provided by operating activities for the first six months of 2010 totaled $3.1 billion, up $1.7 billion from the first six months of 2009. The increase reflects the impact of higher oil and gas revenues (up $2.0 billion) with higher commodity prices contributing $1.4 billion, and a nine percent increase in daily equivalent production adding another $552 million. Also positively impacting operating cash flows was the change in working capital during the first six months of 2010 compared to same period of 2009.

     For a detailed discussion of commodity prices, production, costs and expenses, refer to the “Results of Operations” of this Item 2. For additional detail of changes in operating assets and liabilities, see the Statement of Consolidated Cash Flows in Item 1, Financial Statements of this Quarterly Form 10-Q.

     Capital Expenditures We fund exploration and development activities primarily through operating cash flows and budget capital expenditures based on projected cash flows. Capital expenditures totaled $3.6 billion for the first six months of 2010, compared to $2.3 billion for the comparable period last year. The following table details capital expenditures for each country in which we do business for the six months ended June 30, 2010 and 2009:

	For the Six Months
	Ended
	June 30,
	2010		2009
	(In millions)
Exploration and Development Costs:
United States	$	618	$	569
Canada		365		210
North America		983		779
Egypt		305		389
Australia		295		285
North Sea		230		216
Argentina		94		82
Chile		14		4
International		938		976
Worldwide Exploration and Development Costs		1,921		1,755
Gathering Transmission and Processing Facilities:
Canada		72		56
Egypt		90		95
Australia		90		13
Argentina		1		1
Total Gathering Transmission and Processing Facility Cost		253		165
Asset Retirement Costs		315		94
Capitalized Interest		35		31
Capital Expenditures, excluding acquisitions		2,524		2,045
Acquisitions – Oil and Gas Properties		1,033		243
Total Capital Expenditures	$	3,557	$	2,288

     Exploration and development (E&D) expenditures were $166 million, or nine percent, higher than the 2009 comparable six-month period. The U.S. accounted for 32 percent of total E&D activity in the first six months of 2010 and 2009. Canada accounted for 19 percent of worldwide E&D expenditures in the first six months of 2010, up $155 million from the comparable 2009 period, primarily on increased drilling activity in the Horn River Basin. Egypt accounted for 16 percent of worldwide E&D spending for the first six months of 2010, compared to 22 percent in the prior-year period, down $84 million on lower drilling activity and reduction of well costs. Australia’s E&D expenditures were up slightly and represented 15 percent of total expenditures. North Sea’s E&D expenditures increased $14 million and represented 12 percent of worldwide E&D expenditures. Argentina, which represented five percent of E&D spending, increased E&D expenditures $12 million. Chile’s E&D expenditures increased $10 million and represented less than one percent of worldwide E&D expenditure spending.

46

     Gathering, transmission and processing (GTP) facility expenditures totaled $253 million, in the first half of 2010. GTP expenditures in Australia during the first six months of 2010 consisted of construction activity at the Devil Creek gas plant and the FEED study for the Wheatstone LNG project. Activity in Canada was centered in the Horn River Basin, with expenditures for compressor stations, a water treatment facility, gathering systems and a gas processing plant. Expenditures in Egypt included the initial phase of the Kalabsha oil processing facility.

     On June 9, 2010, we completed the acquisition of oil and gas assets on the Gulf of Mexico shelf from Devon. The acquisition is effective as of January 1, 2010.

     Dividends In both six-month periods ended June 30, 2010 and 2009, the Company paid $101 million in dividends on its common stock. In the first six months of 2009, Apache paid a total of $2.8 million in dividends on its Series B Preferred Stock issued in August 1998. The Company redeemed all outstanding shares of its Series B Preferred Stock on December 30, 2009.

Liquidity

     The following table presents a summary of our key financial indicators for the periods presented:

	June 30,			December 31,
	2010			2009
	(In millions of dollars, except as indicated)
Cash and cash equivalents	$	1,805		$	2,048
Total debt		5,012			5,067
Shareholders’ equity		17,676			15,779
Available committed borrowing capacity		2,300			2,300
Floating-rate debt/total debt		6	%		7	%
Percent of total debt-to-capitalization		22	%		24	%

     Cash and Cash Equivalents We had $1.8 billion in cash and cash equivalents as of June 30, 2010, compared to $2.0 billion at December 31, 2009. Approximately $1.7 billion of the cash was held by foreign subsidiaries, with the remaining balance held by Apache Corporation and U.S. subsidiaries. The cash held by foreign subsidiaries is subject to additional U.S. income taxes if repatriated. Almost all of the cash is denominated in U.S. dollars and, at times, is invested in highly liquid investment grade securities with maturities of three months or less at the time of purchase.

     Debt As of June 30, 2010, outstanding debt, which consisted of notes, debentures and uncommitted bank lines, totaled $5.0 billion. Current debt includes $115 million of loans under the Apache PVG Pty Ltd facility due over the next 12 months and $1.2 million borrowed under uncommitted overdraft lines in Argentina and the U.S.

     Available committed borrowing capacity As of June 30, 2010, the Company had unsecured committed revolving syndicated bank credit facilities totaling $2.3 billion, which mature in May 2013. These consist of a $1.5 billion facility and a $450 million facility in the U.S., a $200 million facility in Australia and a $150 million facility in Canada. Since there are no outstanding borrowings or commercial paper at June 30, 2010, the full $2.3 billion of unsecured credit facilities are available to the Company.

     The Company has available a $1.95 billion commercial paper program, which generally enables Apache to borrow funds for up to 270 days at competitive interest rates. If the Company is unable to issue commercial paper following a significant credit downgrade or dislocation in the market, the Company’s U.S. credit facilities are available as a 100 percent backstop.

     One of the Company’s Australian subsidiaries has a secured revolving syndicated credit facility for its Van Gogh and Pyrenees oil developments offshore Western Australia. The facility provides for total commitments of up to $350 million, with availability determined by a borrowing base formula. The borrowing base was initially set at $350 million and will be redetermined upon project completion, as defined in the facility, which is expected to occur in the fourth quarter of 2010, and semi-annually thereafter. The Company has agreed to guarantee the credit facility until project completion. In the event project completion does not occur by December 31, 2010, pursuant to the terms of the facility, the lenders may require repayment of outstanding amounts in the first quarter of 2011.

     The outstanding balance under the facility as of June 30, 2010 was $300 million, in accordance with the terms of the facility. Also, under the terms of the agreement, the facility amount will be further reduced semi-annually until maturity on March 31, 2014, with $60 million and $55 million of the outstanding balance due on December 31, 2010, and June 30, 2011, respectively. This $115 million is classified as current debt at June 30, 2010.

     The Company was in compliance with the terms of all credit facilities as of June 30, 2010.

     Percent of total debt to capitalization The Company’s June 30, 2010 debt-to-capitalization ratio was 22 percent, down from 24 percent at December 31, 2009.

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     Credit Rating Historically, Apache has maintained a relatively conservative capital structure, with debt ratings reflecting this approach. As of June 30, 2010, Apache’s senior unsecured long-term debt was rated A3 by Moody’s and A- by Standard & Poor’s and by Fitch. The Company has received short-term debt ratings for its commercial paper program of P-2 from Moody’s, A-2 from Standard & Poor’s and F2 from Fitch. In order to realize the opportunity presented by the BP Acquisition, Apache decided to accept greater financial leverage on its balance sheet. As a result of the announcement of the BP Acquisition, Moody’s put Apache’s senior unsecured debt rating under review for downgrade, and Fitch placed the Company’s senior unsecured debt rating on rating watch negative. Any such downgrade has the potential to increase Apache’s long-term financing costs as lenders can be expected to consult such ratings in determining the terms on which credit is extended to Apache in the future. In addition, a downgrade by two of the three rating agencies would trigger provisions in Apache’s debt facilities, automatically increasing the interest rates on borrowings under such facilities. Additionally, counterparties to certain agreements, such as its derivative financial instruments used to hedge oil and gas prices, may require additional security or other changes in business terms if Apache’s credit ratings are downgraded. Any downgrade in Apache’s credit ratings from current levels could adversely affect Apache’s long-term financing costs, which in turn could adversely affect Apache’s ability to pursue business opportunities.

Impact of Recent Acquisitions

     Common and Depositary Share Offering In conjunction with the acquisition of BP Properties, Apache issued 26.45 million shares of common stock at a public offering price of $88.00 per share. Proceeds, after underwriting discounts and before expenses, from the common stock offering were approximately $2.3 billion. The initial offering of 21 million shares was increased to 23 million shares and the underwriters exercised their option to purchase an additional 3.45 million shares. The Company also received proceeds of $1.2 billion, after underwriting discounts and before expenses, from the sale of 25.3 million depositary shares, each representing a 1/20^th interest in a share of Apache’s 6.00% Mandatory Convertible Preferred Stock, Series D, with an initial liquidation preference of $1,000 per share (equivalent to $50 liquidation preference per depositary share). The Company offered 22 million depositary shares and the underwriters exercised their option to purchase an additional 3.3 million depositary shares. Proceeds to the Company from the common stock and depositary share offerings totaled approximately $3.5 billion after underwriting discounts and before expenses.

     The Company plans to fund the asset acquisition with the proceeds of these offerings and a combination of the following: cash on hand, our existing revolving credit and commercial paper facilities, a 364-day revolving credit facility, the issuance of term debt and the short term use of a bridge loan facility. The Company intends to increase its commercial paper program by $1 billion, the amount of the new 364-day revolving credit facility. We also secured a $5 billion bridge loan facility to backstop our financing requirements. The commitment under the bridge loan facility has been reduced by $3.5 billion, which is the amount of the net proceeds from the common stock and mandatory convertible preferred offerings discussed above. Depending on when the closing of the acquisition of the Permian Basin BP Properties occurs, we may fund a portion of the amount due for those properties by drawing under the bridge loan facility. Any such borrowing would be repaid from the Company’s next debt offering. Under the purchase and sale agreement, Apache advanced $5 billion of the purchase price to BP plc on July 30, 2010, ahead of the anticipated closings. This advance will be returned to Apache or applied to the purchase price at closing. BP plc provided a limited guarantee with respect to the BP Purchase Agreements, principally as to the return of the advance. The transaction is effective July 1, 2010, with closing subject to certain preferential rights as well as normal regulatory approvals and conditions in the U.S., Canada and Egypt. On August 3, 2010, the U.S. Department of Justice and the Federal Trade Commission granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. We anticipate the transactions will close in the third and fourth quarters of 2010.

Additional information about Apache

Insurance

     We maintain insurance coverage that includes coverage for physical damage to our oil and gas properties, third party liability, workers’ compensation and employers’ liability, general liability, sudden pollution and other coverage. Our insurance coverage includes deductibles which must be met prior to recovery. Additionally, our insurance is subject to exclusions and limitations and there is no assurance that such coverage will adequately protect us against liability from all potential consequences and damages.

     In general, our current insurance policies covering physical damage to our oil and gas assets provide $250 million per occurrence with an additional $250 million per year. Coverage for damage to our U.S. Gulf of Mexico assets specifically resulting from a named windstorm, however, is subject to a maximum of $250 million per named windstorm, includes a self-insured retention of 40 percent of the losses above a $100 million deductible, and is limited to no more than two storms per year. In addition, our policies covering physical damage to our North Sea oil and gas assets provide $250 million per occurrence with an additional $750 million per year.

     Our various insurance policies also provide coverage for, among other things, liability related to negative environmental impacts of a sudden pollution event in the amount of $750 million per occurrence, charterer’s legal liability in the amount of $1 billion per occurrence, aircraft liability in the amount of $750 million per occurrence, and general liability, employer’s liability and auto liability in the amount of $500 million per occurrence. Our service agreements, including drilling contracts, generally indemnify Apache for injuries and death of the service provider’s employees as well as contractors and subcontractors hired by the service provider.

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     Our insurance policies generally renew in January and June of each year, with the next renewals scheduled for 2011. In light of the recent catastrophic accident in the Gulf of Mexico, we may not be able to secure similar coverage for the same costs. Future insurance coverage for our industry could increase in cost and may include higher deductibles or retentions. In addition, some forms of insurance may become unavailable in the future or unavailable on terms that we believe are economically acceptable.

Remediation Plans and Procedures

     Apache has in place for its Gulf of Mexico operations a Region Spill Response Plan (the Plan), which details procedures for rapid and effective response to spill events that may occur as a result of Apache’s operations. Periodically, drills are conducted to measure and maintain the effectiveness of the Plan. These drills include the participation of spill response contractors, representatives of the Clean Gulf Associates (CGA, described below), and representatives of governmental agencies. The primary association available to Apache in the event of a spill is CGA. Apache has received approval for the Plan from the Bureau of Ocean Energy Management, Regulatory and Enforcement (formerly, the Minerals Management Service). Apache personnel review the Plan annually and update where necessary.

     Apache is a member of, and has an employee representative on the executive committee of, CGA, a not-for-profit association of producing and pipeline companies operating in the Gulf of Mexico. CGA was created to provide a means of effectively staging response equipment and providing immediate spill response for its member companies’ operations in the Gulf of Mexico. To this end, CGA has bareboat chartered its marine equipment to the Marine Spill Response Corporation (MSRC), a national, private, not-for-profit marine spill response organization, which is funded by grants from the Marine Preservation Association. MSRC maintains CGA’s equipment (including skimmers, fast response vessels, fast response containment-skimming units, a large skimming containment barge, numerous containment systems, wildlife cleaning and rehabilitation facilities and dispersant inventory) at various staging points around the Gulf of Mexico in its ready state, and in the event of a spill, MSRC stands ready to mobilize all of this equipment to CGA members. MSRC also handles the maintenance and mobilization of CGA non-marine equipment. MSRC has contracts in place with many environmental contractors around the country, in addition to hundreds of other companies which provide support services during spill response. In the event of a spill, MSRC will activate these contracts as necessary to provide additional resources or support services requested by its customers. In addition, CGA maintains a contract with Airborne Support Inc. (ASI), which provides aircrafts and dispersant capabilities for CGA member companies. Apache’s annual fees for 2009 consisted of $213,445 based on a $12,800 per capita charge plus $200,645 based on annual production of approximately 24 million barrels of oil equivalent.

     In the event that CGA and MSRC resources are already being utilized, other associations are available to Apache. Apache is a member of Oil Spill Response Limited, which entitles any Apache entity worldwide to access their service. Oil Spill Response Limited is the world’s largest oil spill preparedness and response organization, dedicated to providing resources to respond to oil spills efficiently and effectively on a global basis. In addition, resources of other organizations are available to Apache as a non-member, such as those of National Response Corporation (NRC) and MSRC, albeit at a higher cost.

     In light of the current events in the Gulf of Mexico, Apache is participating in a number of industry-wide task forces, which are studying ways to better access and control blowouts in subsea environments and increase containment and recovery methods. Two such task forces are the Subsea Well Control and Containment Task Force and the Offshore Operating Procedures Task Force.

Competitive Conditions

     The oil and gas business is highly competitive in the exploration for and acquisition of reserves, the acquisition of oil and gas leases, equipment and personnel required to find and produce reserves and in the gathering and marketing of oil, gas and natural gas liquids. Our competitors include national oil companies, major integrated oil and gas companies, other independent oil and gas companies and participants in other industries supplying energy and fuel to industrial, commercial and individual consumers.

     Certain of our competitors may possess financial or other resources substantially larger than we possess or have established strategic long-term positions and maintain strong governmental relationships in countries in which we may seek new entry. As a consequence, we may be at a competitive disadvantage in bidding for leases or drilling rights. However, we believe our diversified portfolio of core assets, which is comprised of large acreage positions and well established production bases across six countries, and our balanced production mix between oil and gas gives us a strong competitive position relative to many of our competitors who do not possess similar political, geographic and production diversity. Our global position provides a large inventory of geologic and geographic opportunities in the six countries in which we have producing operations to which we can reallocate capital

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investments in response to changes in local business environments and markets. It also reduces the risk that we will be materially impacted by an event in a specific area or country.

     While the Merger (discussed above), if consummated, will increase our holdings in the U.S., we believe that following the Merger Apache will maintain asset diversity, as production from our international locations is projected to increase for the next several years as longer-term projects to develop significant discoveries are completed.

Environmental Compliance

     As an owner or lessee and operator of oil and gas properties, we are subject to numerous federal, provincial, state, local and foreign country laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution clean-up resulting from operations, subject the lessee to liability for pollution damages and require suspension or cessation of operations in affected areas. Although environmental requirements have a substantial impact upon the energy industry, as a whole, we do not believe that these requirements affect us differently, to any material degree, than other companies in our industry.

     We have made and will continue to make expenditures in our efforts to comply with these requirements, which we believe are necessary business costs in the oil and gas industry. We have established policies for continuing compliance with environmental laws and regulations, including regulations applicable to our operations in all countries in which we do business. We have established operating procedures and training programs designed to limit the environmental impact of our field facilities and identify and comply with changes in existing laws and regulations. The costs incurred under these policies and procedures are inextricably connected to normal operating expenses such that we are unable to separate expenses related to environmental matters; however, we do not believe expenses related to training and compliance with regulations and laws that have been adopted or enacted to regulate the discharge of materials into the environment will have a material impact on our capital expenditures, earnings or competitive position.

     Changes to existing, or additions of, laws, regulations, enforcement policies or requirements in one or more of the countries or regions in which we operate could require us to make additional capital expenditures. While the recent events in the U.S. Gulf of Mexico have resulted in the enactment of, and may result in the enactment of additional, laws or requirements regulating the discharge of materials into the environment, we do not believe that any such regulations or laws enacted or adopted as of this date will have a material adverse impact on Apache’s, Mariner’s, or the combined company’s cost of operations, earnings or competitive position.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Commodity Risk

     The Company’s revenues, earnings, cash flow, capital investments and, ultimately, future rate of growth are highly dependent on the prices we receive for our crude oil, natural gas and NGLs, which have historically been very volatile because of unpredictable events such as economic growth or retraction, weather and climate. Our average crude oil realizations have increased dramatically since the first six months of 2009, rising 48 percent to $74.74 per barrel in first six months 2010 from $50.57 per barrel in first six months 2009. Our average natural gas price realizations have also trended upward, increasing 18 percent to $4.29 per Mcf in the first six months of 2010 from $3.65 per Mcf in the first six months of 2009.

     Global oil prices are generally priced in U.S. dollars, with a weaker U.S. dollar often leading to higher prices and a stronger U.S. dollar often resulting in lower prices.

     We periodically enter into hedging activities on a portion of our projected oil and natural gas production through a variety of financial and physical arrangements intended to support oil and natural gas prices at targeted levels and to manage our overall exposure to oil and gas price fluctuations. For the second quarter and first six months of 2010, our natural gas production was subject to financial derivative hedges of approximately 23 and 24 percent, respectively, and our crude oil production was subject to financial derivative hedges of approximately nine and 11 percent, respectively.

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     Apache may use futures contracts, swaps, options and fixed-price physical contracts to hedge its commodity prices. Realized gains or losses from the Company’s price-risk management activities are recognized in oil and gas production revenues when the associated production occurs. Apache does not generally hold or issue derivative instruments for trading purposes.

     On June 30, 2010, the Company had open natural gas derivative hedges in an asset position with a fair value of $294 million. A 10 percent increase in natural gas prices would reduce the fair value by approximately $114 million, while a 10 percent decrease in prices would increase the fair value by approximately $114 million. The Company also had open oil derivatives in a liability position with a fair value of $95 million. A 10 percent increase in oil prices would increase the liability by approximately $190 million, while a 10 percent decrease in prices would move the derivatives to an asset position of $88 million. These fair value changes assume volatility based on prevailing market parameters at June 30, 2010. See Note 4 – Derivative Instruments and Hedging Activities of the Notes to Consolidated Financial Statements in Item 1 of this quarterly report for notional volumes and terms associated with the Company’s derivative contracts.

Interest Rate Risk

     The Company considers its interest rate risk exposure to be minimal as a result of fixing interest rates on approximately 94 percent of the Company’s debt. At June 30, 2010, total debt included $301 million of floating-rate debt. As a result, Apache’s annual interest costs in 2010 will fluctuate based on short-term interest rates on what is approximately six percent of our total debt outstanding at June 30, 2010. The impact on cash flow of a 10 percent change in the floating interest rate from that at June 30, 2010, would be approximately $103,500 per quarter.

Foreign Currency Risk

     The Company’s cash flow stream relating to certain international operations is based on the U.S. dollar equivalent of cash flows measured in foreign currencies. In Australia, oil production is sold under U.S. dollar contracts, and the majority of our gas production is sold under fixed-price Australian dollar contracts. Approximately half of our costs incurred for Australian operations are paid in U.S. dollars. In Canada, oil and gas prices and costs, such as equipment rentals and services, are generally denominated in Canadian dollars but heavily influenced by U.S. markets. Our North Sea production is sold under U.S. dollar contracts, and the majority of costs incurred are paid in British pounds. In Egypt, all oil and gas production is sold under U.S. dollar contracts, and the majority of the costs incurred are denominated in U.S. dollars. Argentine revenues and expenditures are largely denominated in U.S. dollars, but are converted into Argentine pesos at the time of payment. Revenue and disbursement transactions denominated in Australian dollars, Canadian dollars, British pounds, Egyptian pounds and Argentine pesos are converted to U.S. dollar equivalents based on the average exchange rates during the period.

     Foreign currency gains and losses also arise when monetary assets and monetary liabilities denominated in foreign currencies are translated at the end of each month. Currency gains and losses are included as either a component of “Other” under “Revenues and Other,” or, as is the case when we remeasure our foreign tax liabilities, as a component of the Company’s provision for income taxes on the statement of consolidated operations in Item 1 of this quarterly report. A 10 percent strengthening or weakening of the Australian dollar, Canadian dollar, British pound, Egyptian pound and Argentine peso as of June 30, 2010, would result in a cumulative foreign currency net loss or gain, respectively, of approximately $54 million.

Forward-Looking Statements and Risk

     This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included or incorporated by reference in this report, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected revenues, projected costs and plans and objectives of management for future operations, are forward-looking statements. Such forward-looking statements are based on our examination of historical operating trends, the information that was used to prepare our estimate of proved reserves as of December 31, 2009, and other data in our possession or available from third parties. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “project,” “estimate,” “anticipate,” “believe,” “continue” or similar terminology. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, our assumptions about:

• the market prices of oil, natural gas, NGLs and other products or services;

• approval of the Mariner Merger by Mariner stockholders and the timing of the closing of the Merger;

• the satisfaction of the closing conditions of the Mariner Merger and the BP Acquisition;

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• negative effects from the pendency of the Mariner Merger;

• the retention of key employees of Mariner;

• the integration of Mariner following completion of the Merger;

• the diversion of management’s time on issues related to the Mariner Merger and the BP Acquisition;

• the integration of the BP Properties following completion of the BP Acquisition;

• the affect on the BP Acquisition and/or our liabilities in the event one or more BP entities becomes the subject of a bankruptcy case;

• the affect on our common stock due to a failure to complete the BP Acquisition;

• regulatory approvals and third party consents required for the consummation of the BP Acquisition by Apache may not be received in a timely manner;

• preferential purchase rights may be exercised with respect to certain of the BP Properties;

• increased scrutiny from regulatory agencies due to the BP Acquisition;

• the significant transaction and BP Acquisition related costs associated with the BP Acquisition;

• our commodity hedging arrangements;

• the supply and demand for oil, natural gas, NGLs and other products or services;

• production and reserve levels;

• drilling risks;

• economic and competitive conditions;

• the availability of capital resources;

• capital expenditure and other contractual obligations;

• currency exchange rates;

• weather conditions;

• inflation rates;

• the availability of goods and services;

• legislative or regulatory changes;

• terrorism;

• occurrence of property acquisitions or divestitures;

• the securities or capital markets and related risks such as general credit, liquidity, market and interest-rate risks; and

• other factors disclosed under Items 1 and 2 – “Business and Properties – Estimated Proved Reserves and Future Net Cash Flows,” Item 1A – “Risk Factors,” Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” Item 7A – “Quantitative and Qualitative Disclosures About Market Risk” and elsewhere in our most recently filed Form 10-K, other risks and uncertainties detailed in our first-quarter 2010 earnings release, and other filings that we make with the Securities and Exchange Commission.

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     All subsequent written and oral forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements. We assume no duty to update or revise our forward-looking statements based on changes in internal estimates or expectations or otherwise.

ITEM 4 – CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

     G. Steven Farris, the Company’s Chairman and Chief Executive Officer, in his capacity as principal executive officer, and Roger B. Plank, the Company’s President, in his capacity as principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2010, the end of the period covered by this report. Based on that evaluation and as of the date of that evaluation, these officers concluded that the Company’s disclosure controls and procedures were effective, providing effective means to ensure that information we are required to disclose under applicable laws and regulations is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

     We periodically review the design and effectiveness of our disclosure controls, including compliance with various laws and regulations that apply to our operations both inside and outside the United States. We make modifications to improve the design and effectiveness of our disclosure controls, and may take other corrective action, if our reviews identify deficiencies or weaknesses in our controls.

     There was no change in our internal controls over financial reporting during the period covered by this quarterly report on Form 10-Q that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Please refer to both Part I, Item 3 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 (filed with the SEC on March 1, 2010) and Part I, Item 1 of each of our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2010 and June 30, 2010, for a description of material legal proceedings.

ITEM 1A. RISK FACTORS

Please refer to the risk factors as previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 and our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2010. For the quarter ending June 30, 2010, Apache notes the following additional risk factors:

Our operations involve a high degree of operational risk, particularly risk of personal injury, damage or loss of equipment and environmental accidents.

Our operations are subject to hazards and risks inherent in the drilling, production and transportation of crude oil and natural gas, including:

• drilling well blowouts, explosions and cratering;

• pipeline ruptures and spills;

• fires;

• formations with abnormal pressures;

• equipment malfunctions; and

• hurricanes, which could affect our operations in areas such as the Gulf Coast and deepwater Gulf of Mexico, and other natural disasters.

Failure or loss of equipment, as the result of equipment malfunctions or natural disasters such as hurricanes, could result in property damages, personal injury, environmental pollution and other damages for which we could be liable. Litigation arising from a catastrophic occurrence, such as a well blowout, explosion or fire at a location where our equipment and services are used, may result in substantial claims for damages. Ineffective containment of a drilling well blowout or pipeline rupture could result in extensive environmental pollution and substantial remediation expenses. If a significant amount of our production is interrupted, our containment efforts prove to be ineffective or litigation arises as the result of a catastrophic occurrence, our cash flow and, in turn, our results of operations could be materially and adversely affected.

Risks Relating to the Mariner Merger

Uncertainty about the effect of the Merger on Mariner Energy, Inc.’s (Mariner) employees may have an adverse effect on Mariner and consequently Apache.

The uncertainty created by the pending Merger may impair Mariner’s ability to attract, retain and motivate key personnel until the Merger is completed as current and prospective employees may experience uncertainty about their future roles with Apache. If key employees of Mariner depart because of issues relating to the uncertainty and difficulty of integration or a desire not to become Apache employees, Apache’s ability to realize the anticipated benefits of the Merger could be reduced or delayed.

The pendency of the Merger could adversely affect Apache.

We may not realize the benefits we anticipated from the Merger.

Certain costs relating to the Merger, including certain investment banking, financing, legal and accounting fees and expenses, must be paid even if the Merger is not completed.

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Time demands and commitments related to the Merger may distract management and other employees from current day-to-day responsibilities, preventing Apache from realizing benefits from other existing opportunities.

The Devon and Mariner transactions will increase our exposure to Gulf of Mexico operations.

Our recent acquisition of oil and gas assets on the Gulf of Mexico shelf from Devon Energy Corporation has increased our exposure to Gulf of Mexico operations. Following the completion of the Mariner Merger, an even larger percentage of our exploration and production operations will be related to offshore Gulf of Mexico properties. Greater offshore concentration proportionately increases risks from delays or higher costs common to offshore activity, including severe weather, availability of specialized equipment and compliance with environmental and other laws and regulations.

A drilling moratorium in the U.S. Gulf of Mexico, or other regulatory initiatives in response to the current oil spill in the Gulf of Mexico, could adversely affect Apache’s and Mariner’s business.

As has been widely reported, on April 20, 2010, a fire and explosion occurred onboard the semisubmersible drilling rig Deepwater Horizon, leading to the oil spill currently affecting the Gulf of Mexico. In response to this incident, the Minerals Management Service (now known as the Bureau of Ocean Energy Management, Regulation and Enforcement, or “BOEM”) of the U.S. Department of the Interior issued a notice on May 30, 2010 implementing a six-month moratorium on certain drilling activities in the U.S. Gulf of Mexico. Implementation of the moratorium was blocked by a U.S. district court, which was subsequently affirmed on appeal, but on July 12, 2010, the BOEM issued a new moratorium that applies to deep-water drilling operations that use subsea blowout preventers or surface blowout preventers on floating facilities. The new moratorium will last until November 30, 2010, or until such earlier time that the BOEM determines that deep-water drilling operations can proceed safely. The BOEM is also expected to issue new safety and environmental guidelines or regulations for drilling in the U.S. Gulf of Mexico, and potentially in other geographic regions, and may take other steps that could increase the costs of exploration and production, reduce the area of operations and result in permitting delays. This incident could also result in drilling suspensions or other regulatory initiatives in other areas of the U.S. and abroad. Although it is difficult to predict the ultimate impact of the moratorium or any new guidelines, regulations or legislation, a prolonged suspension of drilling activity in the U.S. Gulf of Mexico and other areas, new regulations and increased liability for companies operating in this sector could adversely affect Apache’s and Mariner’s operations in the U.S. Gulf of Mexico as well as in other offshore locations.

Risks Related to the BP Acquisition

The Mariner and BP transactions will expose us to additional risks and uncertainties with respect to the acquired businesses and their operations.

Although the acquired Mariner and BP businesses will generally be subject to risks similar to those to which we are subject in our existing businesses, the Mariner and BP transactions may increase these risks. For example, the increase in the scale of our operations may increase our operational risks. Recent publicity associated with the oil spill in the Gulf of Mexico resulting from the fire and explosion onboard the Deepwater Horizon, which was under contract to BP, may cause regulatory agencies to scrutinize our operations more closely, as the acquirer of certain of BP’s operations. This additional scrutiny may adversely affect our operations.

We may have difficulty combining the operations of both Mariner and the BP Properties, and the anticipated benefits of these transactions may not be achieved.

Achieving the anticipated benefits of the Mariner and BP transactions will depend in part upon whether we can successfully integrate the operations of Mariner and the BP Properties with ours. Our ability to integrate the operations of Mariner and the BP Properties successfully will depend on our ability to monitor operations, coordinate exploration and development activities, control costs, attract, retain and assimilate qualified personnel and maintain compliance with regulatory requirements. The difficulties of integrating the operations of Mariner and the BP Properties may be increased by the necessity of combining organizations with distinct cultures and widely dispersed operations. The integration of operations following these transactions will require the dedication of management and

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other personnel, which may distract their attention from the day-to-day business of the combined enterprise and prevent us from realizing benefits from other opportunities. Completing the integration process may be more expensive than anticipated, and we cannot assure you that we will be able to effect the integration of these operations smoothly or efficiently or that the anticipated benefits of the transactions will be achieved.

Several significant matters in the BP Acquisition will not be resolved before closing.

Because of the relatively short time period between signing the BP Purchase Agreements and the expected closing of the BP Acquisition, several significant matters commonly resolved prior to closing such an acquisition have been reserved for after closing. For example, title review with respect to most of the BP Properties will not be completed until after closing. In addition, we will not have sufficient time before closing to conduct a full assessment of any environmental and legal liabilities with respect to the BP Properties. As a result, we may discover title defects or adverse environmental or other conditions after we have closed the BP Acquisition and after expiration of the time periods specified in the BP Purchase Agreements during which we may be able to seek, in certain cases, indemnification from or cure of the defect or adverse conditions by BP for such matters. In addition, not all environmental or other conditions that may be identified will be the subject of contractual remedies, however, such contractual remedies may not be adequate for any liabilities we incur.

The reserves, production, revenue and direct operating expense estimates with respect to the BP Properties may differ materially from the actual amounts.

The reserves and production estimates with respect to the BP Properties mentioned in this Form 10-Q are based on our analysis of historical production data, assumptions regarding capital expenditures and anticipated production declines. These estimates of reserves and production are based on estimates of our engineers without review by an independent petroleum engineering firm. Data used to make these estimates were furnished by BP or obtained from publicly available sources. We cannot assure you that these estimates of proved reserves and production are accurate. After such data is reviewed by an independent petroleum engineering firm, the BP Acquisition reserves and production may differ materially from the amounts indicated in this Form 10-Q. In addition, the preliminary revenue and direct operating expense estimates with respect to the BP Properties were provided by BP, are unaudited, and have not been reviewed by our independent accountants. We cannot assure you that these preliminary estimates are accurate, and when we file separate financial statements and pro forma financial information following consummation of the BP Acquisition, such amounts may differ materially from the amounts indicated in this Form 10-Q.

The BP Acquisition and/or our liabilities could be adversely affected in the event one or more of the BP entities become the subject of a bankruptcy case.

In light of the extensive costs and liabilities related to the current oil spill in the Gulf of Mexico, there has been public speculation as to whether one or more of the BP entities will become the subject of a case or proceeding under Title 11 of the United States Code or any other relevant insolvency law or similar law (which we collectively refer to as “Insolvency Laws”). In the event that one or more of the BP entities were to become the subject of such a case or proceeding, a court may find that the BP Purchase Agreements are executory contracts, in which case such BP entities may, subject to relevant Insolvency Laws, have the right to reject the agreements and refuse to perform their future obligations under them. In this event, our ability to enforce our rights under the BP Purchase Agreements could be adversely affected. Furthermore, if any of the BP entities were to become the subject of such a case or proceeding, and we were unable to consummate the BP Acquisition, we may not be able to collect all or a portion of the full $5.0 billion we have deposited with BP plc pending completion of the acquisition.

Additionally, in a case or proceeding under relevant Insolvency Laws, a court may find that the sale of the BP Properties constitutes a constructive fraudulent conveyance that should be set aside. While the tests for determining whether a transfer of assets constitutes a constructive fraudulent conveyance vary among jurisdictions, such a determination generally requires that the seller received less than a reasonably equivalent value in exchange for such transfer or obligation and the seller was insolvent at the time of the transaction, or was rendered insolvent or left with unreasonably small capital to meet its anticipated business needs as a result of the transaction. The applicable time periods for such a finding also vary among jurisdictions, but generally range from two to six years. If a court were to make such

56

a determination in a proceeding under relevant Insolvency Laws, our rights under the BP Purchase Agreements, and our rights to the BP Properties, could be adversely affected.

We will incur significant transaction and BP Acquisition-related costs in connection with the financing of the BP Acquisition, and may be unable to complete alternative financing before closing the BP Acquisition.

We expect to incur, until the closing of the BP Acquisition, significant non-recurring costs associated with the financing of the BP Acquisition, including obtaining and maintaining the committed Bridge Facility that assures our ability to pay the consideration for the BP Acquisition. In addition, we will be subject to numerous market risks in connection with our plan to raise alternative financing to fund the purchase price of the BP Acquisition prior to closing, including risks related to general economic conditions and changes in the costs of capital. In the event less than all of the BP Acquisition purchase price, or applicable portions thereof, is available to us when due and payable, we will be required to draw under the Bridge Facility in order to complete the BP Acquisition.

The failure to complete the BP Acquisition could adversely affect the market price of our common stock and otherwise have an adverse effect on us.

There are a number of conditions to the completion of the BP Acquisition contained in the BP Purchase Agreements that must be satisfied for the transactions to close, and there can be no assurance that the conditions will be satisfied. If we do not complete the acquisition under one or more of the BP Purchase Agreements, the market price of our common stock will likely fall to the extent that the market price reflects an expectation that all of the transactions will be completed. Further, a failed transaction may result in negative publicity and/or negative impression of us in the investment community and may affect our relationships with creditors and other business partners.

If the BP Acquisition is not completed, we also must pay costs related to the BP Acquisition including, among others, legal, accounting and financial advisory, as well as certain fees and expenses with respect to the committed Bridge Facility whether the BP Acquisition is completed or not. We also could be subject to litigation related to the failure to complete the BP Acquisition or other factors, which may adversely affect our business, financial results and stock price. In addition, if the BP Acquisition is not completed, we intend to use the net proceeds in connection with our offerings of common stock, depositary shares and the subsequent debt financing we expect to undertake, for general corporate purposes. However, we would be subject to significant earnings per share dilution and significantly increased leverage as a result.

Our ability to declare and pay dividends is subject to limitations.

The payment of future dividends on our capital stock is subject to the discretion of our board of directors, which considers, among other factors, our operating results, overall financial condition, credit-risk considerations and capital requirements, as well as general business and market conditions. Our board of directors is not required to declare dividends on our common stock and may decide not to declare dividends.

The instrument governing our revolving credit facility limits, the Bridge Facility limits, and any indentures and other financing agreements that we enter into in the future may limit, our ability to pay cash dividends on our capital stock, including the common stock. In the event that any of our indentures or other financing agreements in the future restrict our ability to pay dividends in cash on the mandatory convertible preferred stock, we may be unable to pay dividends in cash on the common stock unless we can refinance amounts outstanding under those agreements.

In addition, under Delaware law, dividends on capital stock may only be paid from “surplus,” which is defined as the amount by which our total assets exceeds the sum of our total liabilities, including contingent liabilities, and the amount of our capital; if there is no surplus, cash dividends on capital stock may only be paid from our net profits for the then current and/or the preceding fiscal year. Further, even if we are permitted under our contractual obligations and Delaware law to pay cash dividends on common stock, we may not have sufficient cash to pay dividends in cash on our common stock.

57

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. [REMOVED AND RESERVED]

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

2.1	Purchase and Sale Agreement by and between BP America Production Company and ZPZ Delaware I LLC dated July 20, 2010 (incorporated by reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K/A, dated July 20, 2010, filed on July 21, 2010, SEC File No. 001-4300)
2.2	Partnership Interest and Share Purchase and Sale Agreement by and between BP Canada Energy and Apache Canada Ltd. dated July 20, 2010 (incorporated by reference to Exhibit 2.2 to Registrant’s Current Report on Form 8-K/A, dated July 20, 2010, filed on July 21, 2010, SEC File No. 001-4300)
2.3	Purchase and Sale Agreement by and among BP Egypt Company, BP Exploration (Delta) Limited and ZPZ Egypt Corporation LDC dated July 20, 2010 (incorporated by reference to Exhibit 2.3 to Registrant’s Current Report on Form 8-K/A filed on July 20, 2010, SEC File No. 001-4300)
2.4	Agreement and Plan of Merger, dated April 14, 2010, by and among Registrant, Mariner Energy, Inc. and ZMZ Acquisitions LLC (incorporated by reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K, dated April 14, 2010, filed April 16, 2010, SEC File No. 001-4300).
2.5	Amendment No. 1 dated as of August 2, 2010 to the Agreement and Plan of Merger dated as of April 14, 2010 by and among Apache Corporation, ZMZ Acquisitions LLC and Mariner Energy, Inc. (incorporated by reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K, dated August 2, 2010, filed on August 3, 2010, SEC File No. 001-4300)
3.1	Restated Certificate of Incorporation of Registrant, dated February 23, 2010, as filed with the Secretary of State of Delaware on February 23, 2010 (incorporated by reference to Exhibit 3.1 to Registrant’s Annual Report on Form 10-K for year ended December 31, 2009, SEC File No. 001-4300).
3.2	Certificate of Designations of the 6.00% Mandatory Convertible Preferred Stock, Series D (incorporated by reference to Exhibit 3.3 to Registrant’s Registration Statement on Form 8-A, dated July 29, 2010, SEC File No. 001-4300)
3.3	Bylaws of Registrant, as amended August 6, 2009 (incorporated by reference to Exhibit 3.2 to Registrant’s Quarterly Report on Form 10-Q for quarter ended June 30, 2009, SEC File No. 001-4300).
4.1	Form of certificate for the 6.00% Mandatory Convertible Preferred Stock, Series D (incorporated by reference to Exhibit A of Exhibit 3.3 to Registrant’s Registration Statement on Form 8-A, dated July 29, 2010, SEC File No. 001-4300)
4.2	Deposit Agreement, dated as of July 28, 2010, between Apache Corporation and Wells Fargo Bank, N.A., as depositary, on behalf of all holders from time to time of the receipts issued thereunder (incorporated by reference to Exhibit 4.2 to Registrant’s Current Report on Form 8-K, dated July 22, 2010, filed on July 28, 2010, SEC File No. 001-4300)
4.3	Form of Depositary Receipt for the Depositary Shares (incorporated by reference to Exhibit A to Exhibit 4.2 to Registrant’s Current Report on Form 8-K, dated July 22, 2010, filed on July 28, 2010, SEC File No. 001-4300).
10.1	Term Loan Agreement dated July 20, 2010 by and among Apache Corporation, JPMorgan Chase Bank, N.A., as administrative agent, Citibank, N.A., Bank of America, N.A., and Goldman Sachs Bank USA, as co-syndication agents, J.P. Morgan Securities Inc., Citigroup Global Markets Inc., Banc of America Securities, LLC and Goldman Sachs Bank USA, as co-lead arrangers and joint bookrunners, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, dated July 20, 2010, filed on July 21, 2010, SEC File No. 001-4300)

58

†*10.2	Amendment to Apache Corporation 401(k) Plan, dated July 14, 2010.
†*10.3	Non-Qualified Retirement/Savings Plan of Apache Corporation, as amended and restated July 14, 2010, except as otherwise specified.
†*10.4	Apache Corporation 2007 Omnibus Equity Compensation Plan, as amended and restated July 13, 2010, effective December 31, 2009.
†*10.5	Apache Corporation Income Continuance Plan, as amended and restated July 14, 2010, effective January 1, 2009.
†*10.6	Apache Corporation Deferred Delivery Plan, as amended and restated July 13, 2010, effective January 1, 2009.
†*10.7	Apache Corporation Outside Directors’ Retirement Plan, as amended and restated July 14, 2010, effective January 1, 2009.
*12.1	Statement of computation of ratio of earnings to fixed charges and combined fixed charges and preferred stock dividends.
*31.1	Certification (pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act) by Principal Executive Officer.
*31.2	Certification (pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act) by Principal Financial Officer.
*32.1	Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Principal Executive Officer and Principal Financial Officer.
**101	The following materials from the Apache Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, formatted in XBRL (Extensible Business Reporting Language): (i) Statement of Consolidated Operations, (ii) Statement of Consolidated Cash Flows, (iii) Consolidated Balance Sheet, (iv) Statement of Consolidated Shareholders’ Equity, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text.

†	Management contracts or compensatory plans or arrangements required to be filed herewith pursuant to Item 15 hereof.
*	Filed herewith
**	Furnished herewith

59

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	APACHE CORPORATION
Dated: August 17, 2010	/ s / ROGER B. PLANK
	Roger B. Plank
	President
	(Principal Financial Officer)
Dated: August 17, 2010	/ s / REBECCA A. HOYT
	Rebecca A. Hoyt
	Vice President and Controller
	(Principal Accounting Officer)

60

EX-10.2

Exhibit 10.2

Apache Corporation 401(k) Savings Plan

Amendment

Apache Corporation (“Apache”) sponsors the Apache Corporation 401(k) Savings Plan (the “Plan”). In section 10.4 of the Plan, Apache reserved the right to amend the Plan from time to time. Apache hereby exercises that right by adding the following two rows to the table in Appendix C, effective as of June 10, 2010 for Devon Energy Corporation and, for Mariner Energy, Inc., effective as of the date of the merger of Mariner Energy Inc. with Apache.

Devon Energy Corporation (“Devon”)

All individuals hired on June 10, 2010 from Devon and related companies in connection with Apache’s acquisition of certain property on such date.

Mariner Energy, Inc. (“Mariner”)

All individuals who became Covered Employees on the date of the merger between Apache and Mariner are New Employees. A New Employee shall be eligible to make Participant Contributions from any Compensation paid after the date of the merger. The Company Matching Contribution for 2010 for a New Employee shall be based solely on his Compensation paid after the date of the merger and his Participant Contributions after the date of the merger, with the following exception. A New Employee who makes the maximum possible Participant Contribution allowable under Code §402(g) during 2010, and who is an Employee on the last business day of 2010, will receive a Company Matching Contribution equal to the greater of (a) the amount determined under the preceding sentence and (b) the total match he would have received in both this Plan and the Mariner Energy, Inc. Employee Capital Accumulation Plan if he contributed the same amount from each paycheck during 2010, minus the match allocated to him in the Mariner Energy, Inc. Employee Capital Accumulation Plan.

EXECUTED this 13th day of July 2010.

APACHE CORPORATION
By:	/s/ Roger B. Plank
	Roger B. Plank President

Prepared July 5, 2010

EX-10.3

Exhibit 10.3

NON-QUALIFIED RETIREMENT/SAVINGS PLAN

OF

APACHE CORPORATION

Amended and restated as of July 14, 2010 except as otherwise provided herein

Prepared July 13, 2010

Table of Contents

ARTICLE I     DEFINITIONS	1
1.01     Account	1
1.02     Affiliated Entity	1
1.03     Apache	1
1.04     Beneficiary	1
1.05     Change of Control	1
1.06     Code	1
1.07     Committee	1
1.08     Company	1
1.09     Company Deferrals	1
1.10     Compensation	2
1.11     Employee	3
1.12     Enrollment Agreement	3
1.13     ERISA	3
1.14     Participant	3
1.15     Participant Deferrals	3
1.16     Payment Processing Date	3
1.17     Plan	3
1.18     Plan Year	3
1.19     Retirement Plan	3
1.20     Savings Plan	3
1.21     Separation from Service and Separate from Service	3
1.22     Spouse	3
1.23     Trust	4
1.24     Trust Agreement	4
1.25     Trustee	4
ARTICLE II     ELIGIBILITY AND PARTICIPATION	4
2.01     Eligibility and Participation	4
2.02     Enrollment	4
2.03     Failure of Eligibility	4
ARTICLE III     CONTRIBUTION DEFERRALS	4
3.01     Participant Deferrals	4
3.02     Company Deferrals	6
ARTICLE IV     CREDITING OF ACCOUNTS	7
4.01     Accounts	7
4.02     Investments	7
ARTICLE V     DISTRIBUTIONS	7
5.01     Vesting and Forfeitures	7
5.02     Rehires	8
5.03     Distribution Overview	9
5.04     Distributions after Separation from Service and In-Service Withdrawals	9
5.05     Payments after a Participant Dies	11
5.06     Change of Control	12
5.07     Hardship Withdrawals	13
5.08     Divorce	13
5.09     Administrative Delays in Payments	14
5.10     Noncompliance with Code §409A	14
5.11     Cash Payment and Withholding	15
ARTICLE VI     ADMINISTRATION	15
6.01     The Committee — Plan Administrator	15
6.02     Committee Duties	15
6.03     Organization of Committee	15
6.04     Indemnification	16
6.05     Agent for Process	16
6.06     Determination of Committee Final	16
6.07     No Bonding	16
ARTICLE VII     TRUST	16
7.01     Trust Agreement	16
7.02     Expenses of Trust	16
ARTICLE VIII     AMENDMENT AND TERMINATION	16
8.01     Termination of Plan	16
8.02     Amendment	16
ARTICLE IX     MISCELLANEOUS	17
9.01     Funding of Benefits — No Fiduciary Relationship	17
9.02     Right to Terminate Employment	17
9.03     Inalienability of Benefits	17
9.04     Claims Procedure	17
9.05     Disposition of Unclaimed Distributions	19
9.06     Distributions due Infants or Incompetents	19
9.07     Use and Form of Words	19
9.08     Headings	19
9.09     Governing Law	19

NON-QUALIFIED RETIREMENT/SAVINGS PLAN
OF
APACHE CORPORATION

Apache established this Plan effective as of November 16, 1989. Apache is now restating the Plan in its entirety effective as of the date the restatement is signed, except as otherwise stated herein.

Apache intends for this Plan to provide a select group of management or highly compensated employees of the Company with deferred retirement benefits, in addition to the retirement benefits provided under the Retirement Plan and the Savings Plan, in consideration of the valuable services provided by such employees to the Company and to induce such employees to remain in the employ of the Company.

Apache intends that the Plan not be treated as a “funded” plan for purposes of either the Code or ERISA. Apache’s also intends for this Plan to comply with the requirements of Code §409A, and the Plan shall be interpreted in that light.

ARTICLE I
DEFINITIONS

Defined terms used in this Plan have the meanings set forth below or the same meanings as in the Retirement Plan or the Savings Plan, as the case may be:

1.01	Account
	“Account” means the account maintained for each Participant to which is credited all Participant Deferrals made by a Participant, all Company Deferrals on behalf of a Participant, and all adjustments thereto. Each Account is divided into a variety of subaccounts, as detailed in Article V.
1.02	Affiliated Entity
	“Affiliated Entity” means any legal entity that is treated as a single employer with Apache pursuant to Code §414(b), §414(c), §414(m), or §414(o).
1.03	Apache
	“Apache” means Apache Corporation or any successor thereto.
1.04	Beneficiary
	“Beneficiary” means a Participant’s beneficiary, as determined in section 5.05.
1.05	Change of Control
	“Change of Control” means an event described in Code §409A(a)(2)(A)(v) that pertains to Apache.
1.06	Code
	“Code” means the Internal Revenue Code of 1986, as amended.
1.07	Committee
	“Committee” means the administrative committee provided for in section 6.01.
1.08	Company
	“Company” means Apache and any Affiliated Entity that, with approval of the Board of Directors of Apache, has adopted the Plan.
1.09	Company Deferrals
	“Company Deferrals” means the allocations to a Participant’s Account made pursuant to section 3.02.

Page 1 of 19

1.10	Compensation
	“Compensation” generally means regular compensation paid by the Company.

(a) Inclusions. Specifically, Compensation includes:

(i)	regular salary or wages,
(ii)	overtime pay, and
(iii)	the regular annual bonus (i.e., incentive compensation), to the extent that it is payable in cash, and any other bonus designated by the Committee.

(b) Exclusions. Compensation excludes:

(i)	commissions,
(ii)	severance pay,
(iii)	moving expenses,
(iv)	any gross-up of moving expenses to account for increased income taxes,
(v)	foreign service premiums paid as an inducement to work outside of the United States,
(vi)	Company contributions under the Retirement Plan
(vii)	Company contributions under the Savings Plan,
(viii)	other contingent compensation,
(ix)	contributions to any other fringe benefit plan (including, but not limited to, overriding royalty payments or any other exploration-related payments),
(x)	any amounts relating to the granting of a stock option by the Company or an Affiliated Entity, the exercise of such a stock option, or the sale or deemed sale of any shares thereby acquired,
(xi)	any bonus other than a bonus described in paragraph (a)(iii),
(xii)	payments from any benefit plan, such as any stock appreciation right or payments from a Share Appreciation Plan, any payment from the Deferred Delivery Plan or the Executive Restricted Stock Plan, and payments pursuant to grants made under the Omnibus Equity Compensation Plan of 2007, and
(xiii)	any benefit accrued under, or any payment from, any nonqualified plan of deferred compensation.

(c) Timing Rules.

(i)

Participant Deferrals. For purposes of calculating Participant Deferrals, Compensation includes only those amounts paid after the Employee has made both his initial payout election under section 5.04 and his Enrollment Agreement under section 3.01. Compensation does not include any amounts paid after the Participant ceased to be eligible to participate in the Plan. A Participant who begins participating in the middle of a Plan Year cannot make Participant Deferrals from a bonus under paragraph (a)(iii) that is attributable to the Participant’s services during the Plan Year in which his participation begins. For example, a Participant hired in September 2010 cannot make Participant Deferrals from the incentive compensation paid to him in February 2011.

(ii)

Company Deferrals. The Company Deferrals for a Participant, including one who begins participating in the middle of a Plan Year, are calculated by taking into account all

Page 2 of 19

Compensation paid to him during the entire Plan Year, including any incentive compensation paid during the Plan Year.

1.11	Employee
	“Employee” means any common-law employee of Apache or any Affiliated Entity. An Employee ceases to be an Employee on the date he Separates from Service.
1.12	Enrollment Agreement
	“Enrollment Agreement” means an agreement made by an eligible employee whereby he elects the amounts to be withheld from his Compensation pursuant to section 3.01.
1.13	ERISA
	“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
1.14	Participant
	“Participant” means any eligible employee who has begun to participate in this Plan.
1.15	Participant Deferrals
	“Participant Deferrals” means the amounts of a Participant’s Compensation that he elects to defer and have allocated to his Account pursuant to section 3.01.
1.16	Payment Processing Date
	“Payment Processing Date” means the date selected by the Committee on which payments from this Plan will be processed. Except in extraordinary circumstances, there will be at least one Payment Processing Date each calendar month.
1.17	Plan
	“Plan” means the plan set forth in this document, as amended.
1.18	Plan Year
	“Plan Year” means the period during which the Plan records are kept. The Plan Year is the calendar year.
1.19	Retirement Plan
	“Retirement Plan” means the Apache Corporation Money Purchase Retirement Plan, as amended.
1.20	Savings Plan
	“Savings Plan” means Apache Corporation 401(k) Savings Plan, as amended.
1.21	Separation from Service and Separate from Service
	“Separation from Service” has the same meaning as the term “separation from service” in Code §409A(a)(2)(A)(i), determined using the default rules in the regulations and other guidance of general applicability issued pursuant to Code §409A, except that a Separation from Service occurs only if both the Company and the Participant expect the Participant’s level of services to permanently drop by more than half. A Participant who has a Separation from Service “Separates from Service.”
1.22	Spouse
	“Spouse” means the individual of the opposite sex to whom a Participant is lawfully married according to the laws of the state of the Participant’s domicile.

Page 3 of 19

1.23	Trust
	“Trust” means the trust or trusts, if any, created by the Company to provide funding for the distribution of benefits in accordance with the provisions of the Plan. The assets of any such Trust remain subject to the claims of the Company’s general creditors in the event of the Company’s insolvency.
1.24	Trust Agreement
	“Trust Agreement” means the written instrument pursuant to which each separate Trust is created.
1.25	Trustee
	“Trustee” means one or more banks, trust companies, or insurance companies designated by the Company to hold and invest the Trust Fund and to pay benefits and expenses as authorized by the Committee in accordance with the terms and provisions of the Trust Agreement.

ARTICLE II
ELIGIBILITY AND PARTICIPATION

2.01	Eligibility and Participation
	The Committee shall from time to time in its sole discretion select those Employees who are eligible to participate in the Plan from those Employees who are among a select group of management or highly compensated employees.
2.02	Enrollment
	Employees who have been selected by the Committee to participate in the Plan shall complete the enrollment procedure specified by the Committee. The enrollment procedure may include written or electronic form(s) for the employee to designate his beneficiary or beneficiaries, provide instructions regarding the investment of his Account, make Participant Deferrals by entering into one or more Enrollment Agreements with the Company, select one or more payment options for the eventual distribution of his benefits, and provide such other information as the Committee may reasonably require.
2.03	Failure of Eligibility
	The Committee has the authority to determine that a Participant is no longer eligible to participate in the Plan. No Company Deferrals will be accrued, nor any Participant Deferrals made after the Participant ceases to be eligible to participate in the Plan. The determination of the Committee with respect to the termination of participation in the Plan will be final and binding on all parties affected thereby. Any benefits accrued under the Plan at the time the Participant becomes ineligible to continue participation will be distributed in accordance with the provisions of Article V.

ARTICLE III
CONTRIBUTION DEFERRALS

3.01 Participant Deferrals

(a)	General. A Participant may elect to defer a portion of his Compensation by submitting a completed Enrollment Agreement. Each Enrollment Agreement must specify the amount the Participant elects to defer. Participant Deferrals are deducted through payroll withholding from the Participant’s cash Compensation payable by the Company.
(b)	Maximum and Minimum Deferrals. A Participant may elect to defer up to 50% of his Compensation (other than a bonus described in section 1.10(a)(iii)) and up to 75% of a bonus described in section 1.10(a)(iii). The minimum deferral that a Participant may elect, for both this Plan and the Savings Plan combined, is 6% of his Compensation. If the Participant does not elect the minimum deferral from a

Page 4 of 19

bonus described in section 1.10(a)(iii) (in his June election), he cannot make any deferrals from his regular pay during the next regular-pay deferral election (in December).

(c) Deadlines for Enrollment Agreements.

(i) Enrollment Period. In order to make Participant Deferrals, a Participant must submit an Enrollment Agreement during the enrollment period established by the Committee. The enrollment period must precede the Plan Year in which the services giving rise to the Compensation are performed, except in the following situations.

(A)	Performance-Based Compensation. If the Compensation is “performance-based compensation based on services performed over a period of at least 12 months” (within the meaning of Code §409A(a)(4)(B)(iii)), the enrollment period must end at least six months before the end of the performance period.
(B)	New Participant. The enrollment period for a new Participant must end no later than 30 days after he became eligible to participate in the Plan; the new Participant’s initial Enrollment Agreement may only apply to Compensation for which he has not yet performed any services.

(ii) Duration. The Enrollment Agreement shall apply to Compensation, or to a specific form of Compensation, paid during one entire Plan Year unless it is earlier canceled or revised by the Committee pursuant to subsection (f), cancelled because the Participant ceases to be eligible to participate in the Plan, or cancelled pursuant to subsection (e) (relating to hardship withdrawals).

(d)

Procedures for Making Elections. The Committee has complete discretion to establish procedures for the completion of Enrollment Agreements, including the acceptable forms and formats of the deferral election (for example, written or electronic, as a whole percentage of Compensation or specific dollar amount, and the manner in which the Enrollment Agreement coordinates with the Savings Plan). The Committee has complete discretion to establish the enrollment periods during which Participants may make Enrollment Agreements, within the bounds described in subsections (a) and (c). The Committee may establish different enrollment periods for different types of Compensation or different groups of Participants. The Committee may specify any default choices that will apply unless the Participant affirmatively elects otherwise. For example, the Committee could decide that the failure to complete a new Enrollment Agreement means that (i) the prior Plan Year’s Enrollment Agreement will be continued for another year, or (ii) no Participant Deferrals will be made, or (iii) the Participant will defer 6% of his Compensation.

(e)

Cancellation or Modification of Enrollment Agreements Following a Hardship Withdrawal.

(i)

Hardship Withdrawal from this Plan. If a Participant receives a hardship withdrawal from this Plan pursuant to section 5.07, all his outstanding Enrollment Agreements shall be modified to require future Participant Deferrals of 6% of his future Compensation. The Participant may subsequently enter into new Enrollment Agreements at the usual times specified in subsection (c).

(ii)

Hardship Withdrawal from the Savings Plan. If the Participant receives a hardship withdrawal from the Savings Plan, all outstanding Enrollment Agreements that apply or might apply to Compensation paid in the six months after the hardship withdrawal shall be cancelled. The Participant may subsequently enter into new Enrollment Agreements at the usual times under subsection (c), but the new Enrollment Agreements cannot apply to any Compensation paid within the six-month period following the hardship withdrawal from the Savings Plan.

(f) Committee-Initiated Changes in Enrollment Agreement. This subsection is effective as of January 1, 2009. If the amounts to be withheld from a Participant’s paycheck (including, without limitation, loan repayments, Participant Deferrals, taxes, contributions to the Savings Plan, and premium payments for

Page 5 of 19

various benefits) are greater than the paycheck, (i) the Committee shall establish the order in which the deductions are applied, with the result that Participant Deferrals may be reduced below what the Participant had elected in an Enrollment Agreement, and (ii) the Committee’s procedures shall, if practicable, also automatically increase a Participant’s Participant Deferrals in subsequent pay period(s) covered by that Enrollment Agreement to make up for any missed deferrals.

3.02

Company Deferrals

The Company shall credit to a Participant’s Account a matching contribution for the Plan Year and a retirement-6 contribution for the Plan Year. Company Deferrals begin to share in the investment earnings (or losses) at the time specified in section 4.01. The Company may credit matching contributions to a Participant’s Account during the Plan Year on a contingent basis; if the Participant does not satisfy the requirements to receive a matching contribution for the Plan Year, or if the matching contribution credited to the Participant’s Account for the Plan Year is incorrect, the Participant will forfeit any excess matching contribution (adjusted to reflect investment earnings or losses thereon) credited to his Account.

(a) Matching Contribution.

(i)	Basic Match. The “total match” for the Plan Year is equal to the Participant’s “total deferrals” for the Plan Year, up to a maximum total match for the Plan Year of 6% of the Participant’s Compensation for the Plan Year, except that the match in this Plan is $0 if the Participant has not made the maximum contributions to the Savings Plan that are excludable from his gross income pursuant to Code §402(g).
(ii)	Definitions.
	The “total match” for a Plan Year is equal to the matching contribution to the Participant’s Account in this Plan for the Plan Year plus the Company Matching Contribution allocated to the Participant’s account in the Savings Plan for the Plan Year.
	The “total deferrals” for a Plan Year are equal to the Participant Deferrals for the Plan Year plus the Before-Tax Contributions to the Savings Plan for the Plan Year.
(iii)	Additional Match. If a Participant’s match in the Savings Plan is reduced to comply with any requirement of federal law (such as the ACP test of Code §401(m) or the limits imposed by Code §415 or §401(a)(17)) after the match for this Plan has been calculated, then the Participant’s match for this Plan will be increased by the amount of the reduction in the match in the Savings Plan.

(b)

Retirement-6. In order to receive an allocation of the retirement-6 contribution, an employee must be eligible to participate in the Plan on the last business day of the Plan Year. The retirement-6 contribution is calculated each Plan Year after the Company Mandatory Contribution is calculated in the Retirement Plan for the Plan Year. The sum of the Participant’s retirement-6 contribution in this Plan and his Company Mandatory Contribution in the Retirement Plan are equal to 6% of the Participant’s Compensation for the Plan Year. If a Participant’s Company Mandatory Contribution in the Retirement Plan is reduced to comply with any requirement of federal law after the retirement-6 contribution for this Plan has been calculated, then the Participant’s retirement-6 contribution for this Plan will be increased by the amount of the reduction in the Company Mandatory Contribution in the Retirement Plan.

(c)

Additional Contribution. A Company may make an additional Company Deferral to any Participant’s Account at any time, provided that the Company advises the Committee in writing of the contribution.

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ARTICLE IV
CREDITING OF ACCOUNTS

4.01 Accounts

(a)	Establishment of Accounts. The Committee shall establish one Account for each Participant, which will be subdivided into various subaccounts. The Accounts and subaccounts are merely for recordkeeping purposes, and do not represent any actual property that has been set aside for Participants. Nothing contained in this Article may be construed to require the Company or the Committee to fund any Participant’s Account.
(b)	Crediting of Contributions. Participant Deferrals are credited to a Participant’s Account as of the date that the Participant Deferral would have been paid to the Participant had there been no Enrollment Agreement. Company Deferrals are credited to a Participant’s Account as of the date that the Company Deferral was earned by the Participant.
(c)	Crediting of Earnings. Each Account is credited with investment earnings or losses calculated in accordance with section 4.02. Participant Deferrals and Company Deferrals start to be credited with investment earnings or losses as soon as administratively convenient after such amounts are credited to Accounts, except that the retirement-6 contribution under section 3.02(b) is not credited with investment earnings or losses until the corresponding Company Mandatory Contribution to the Retirement Plan is actually paid to the Retirement Plan (usually in late February).

4.02 Investments

(a)

Investment Options. All amounts credited to a Participant’s Account are credited with investment earnings or losses as if the Participant’s Account was invested in one or more investments. The Committee shall designate the default investment as well as any alternatives, and may change the available alternatives or the default investment from time to time. One or more of the investment alternatives may consist, in whole or in part, of Apache common stock. At such times and under such procedures as the Committee may designate, a Participant may determine the portion of his Account that is to be deemed invested in each alternative. The Participant may make prospective changes for his investment selection as often as the Committee permits and subject to the procedures established by the Committee. A Participant may never make any retroactive changes to his investment selections.

(b)

No Ownership Rights. A Participant has no ownership rights with respect to any investment of his Account. Nothing contained in this Article may be construed to give any Participant any power or control to make investment directions or otherwise influence in any manner the investment and reinvestment of assets contained within any investment alternative, such control being at all times retained in the full discretion of the Committee. As a consequence, for example, if a Participant has elected to invest a portion of his Account in Apache stock, the Participant has no voting rights with respect to that stock.

ARTICLE V
DISTRIBUTIONS

5.01 Vesting and Forfeitures

(a)	Participant Deferrals. A Participant is fully vested in the portion of his Account that is attributable to his Participant Deferrals.
(b)	Company Deferrals, General Rule. A Participant’s years of completed service in this Plan are identical to his “Period of Service” in the Savings Plan. A Participant will vest in the portion of his Plan Account that is attributable to Company Deferrals according to the following schedule, unless subsection (c) provides for faster vesting:

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Years of Completed Service	Vested Portion
Less than 1	0%
1	20%
2	40%
3	60%
4	80%
5 or more	100%

(c) Company Deferrals, Accelerated Vesting. A Participant is fully vested in the portion of his Plan Account that is attributable to Company Deferrals in the following circumstances.

(i)	The Participant is fully vested if he attains age 65 while he is an Employee.
(ii)	The Participant is fully vested if he becomes an Employee after attaining age 65.
(iii)	The Participant is fully vested if, while he is an Employee, he incurs a disability that qualifies the Employee for long-term disability payments under Apache’s Long-Term Disability Plan.
(iv)	The Participant is fully vested if he dies while he is an Employee.
(v)	All Participants are fully vested if a change of control, as defined in the Income Continuance Plan, occurs.

(d) Forfeiture Timing. The portion of a Participant’s Account that is not vested is forfeited immediately upon his Separation from Service.

5.02 Rehires

(a)	Distributions. If a Participant Separated from Service and subsequently becomes eligible to participate in the Plan again, the benefits from his earlier episode of participation will be paid out as originally scheduled; the new participation will not affect the timing of any benefit payments from his earlier episode of participation.
(b)	Vesting. If a Participant becomes eligible to again make Participant Deferrals more than five years after Separating from Service, (i) the Plan will establish a new Account for the benefits he accrues during his second episode of participation; (ii) his years of completed service for his new Account will include only his service from his second episode; and (iii) his new service will not increase the vesting of any benefits from his first episode of participation. If a Participant becomes eligible to again make Participant Deferrals less than five years after Separating from Service, the Participant’s years of completed service for his benefits from his second episode of participation will include his service from both episodes of employment.
(c)	Restoration of Forfeiture. If a Participant begins to participate in the Plan again within five years after his Separation from Service, the exact amount of any forfeiture upon his earlier Separation from Service will be restored to his Account, and will be credited to a separate subaccount. The restoration will occur on the 31st day after the Participant again begins participating in the Plan, but only if the Participant is still eligible to participate in the Plan on that date. The restored subaccount vests based on his service from both episodes of employment (and thus will almost always be partially vested immediately when the Participant again starts to participate). The vested portion of the restored subaccount will be paid to the Participant as the Participant elects in section 5.04(b) for the payment of his new Account attributable to Company Deferrals, unless section 5.05 or 5.06 require faster payment following the Participant’s death or a Change of Control or the Participant takes a hardship withdrawal under section 5.07.

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5.03 Distribution Overview

(a) General. In general, a single payment will occur, or a stream of installment payments will commence, on the Payment Processing Date following the earliest of the following dates, or as soon thereafter as is administratively convenient:

(i)	Six months after the Participant Separates from Service. See section 5.04.
(ii)	For unmatched Participant Deferrals only, at the time(s) selected by the Participant. See sections 5.04(c)(ii) and 5.04(c)(iii).
(iii)	The date the Participant dies. See section 5.05.
(iv)	The date of a Change of Control. See section 5.06.

(b)	Hardships. A Participant may take a withdrawal under section 5.07 if he has a financial hardship.
(c)	Divorce. Some or all of a Participant’s benefits in this Plan may be allocated to, and distributed to, his former Spouse, pursuant to section 5.08.

5.04 Distributions after Separation from Service and In-Service Withdrawals

(a)

General. A Participant who Separated from Service before January 1, 2009 will be paid according to the payout provisions in the Plan (and any payout elections that had been made) that were effective when he Separated from Service, except that (i) sections 5.05 or 5.06 will apply to such Participants (and accelerate any remaining payments) if there is a Change of Control or the Participant dies, (ii) section 5.07 will apply if the Participant has a financial hardship, and (iii) section 5.08 will apply if the Participant becomes divorced. This remainder of this section contains the rules for distributions following a Separation from Service that occurs on or after January 1, 2009.

(b)

Distribution of Company Deferrals.

(i)	Initial Election. Upon becoming a Participant, an Employee shall make a payout election to have his vested Account attributable to Company Deferrals paid out in a single payment or in two to ten annual installments. To be effective, the Participant’s payout election must be provided to the Plan within 30 days after the date the Participant became a Participant or by such earlier date established by the Committee. The single payment or the first installment payment will be paid on the first Payment Processing Date that occurs six months or more after the Participant’s Separation from Service. Subsequent installments will be paid each 12 months thereafter.
(ii)	Special 2007 Payout Election. The Committee extended to certain Participants the opportunity a new payout election in 2007 to have his vested Account attributable to Company Deferrals paid out in a single payment or in two to ten annual installments. To be effective, the Participant’s payout election must have been provided to the Plan by December 31, 2007 or by such earlier deadline established by the Committee, and the Participant must have been an Employee on the last business day of 2007. The single payment or the first installment payment will be paid on the first Payment Processing Date that occurs six months or more after the Participant’s Separation from Service; subsequent installments will be paid each 12 months thereafter.
(iii)	Minimum Account Balance for Installments. See section 5.04(d) for the situations when a Participant will be paid a lump sum in spite of having elected installments.

(c) Distribution of Participant Deferrals.

(i) Matched and Unmatched Participant Deferrals. Because different payout alternatives are available for matched and unmatched Participant Deferrals, the Plan will separately account for matched and unmatched Participant Deferrals. Each Plan Year’s unmatched Participant

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Deferrals, if any, are equal to the amount by which the sum of the Participant Deferrals to this Plan for the Plan Year and the Before-Tax Contributions to the Savings Plan for the Plan Year are greater than 6% of the Participant’s Compensation for the Plan Year. The Committee has full discretion in determining an appropriate and administratively feasible method for differentiating between matched and unmatched Participant Deferrals. The Committee may wait until the end of the Plan Year to make this determination, and may attribute the investment earnings or losses on the Participant Deferrals to the matched Participant Deferrals, to the unmatched Participant Deferrals, or partly to each.

(ii)

Matched Participant Deferrals. A Participant’s matched Participant Deferrals will be paid out in the same fashion as the balance of his Account attributable to Company Deferrals under subsection (b).

(iii)

Payout Elections for Unmatched Participant Deferrals. A Participant shall make a separate payout election for the next year’s unmatched Participant Deferrals. Beginning with Enrollment Agreements entered into in 2009, the payout election must be made no later than June 30 (or such earlier date established by the Committee) of the year preceding the year in which the unmatched Participant Deferral occurs. The payout elections for 2007, 2008, and 2009 unmatched Participant Deferrals must be made by the end of the year preceding the year in which the unmatched Participant Deferral occurs or such earlier date established by the Committee. Newly eligible Participants must complete a payout election at the same time as their initial Enrollment Agreement. The Participant may choose from among the following payout alternatives for the subaccount containing that Plan Year’s unmatched Participant Deferrals.

(A)	No In-Service Withdrawal. The subaccount will be paid out in a single payment or in two to ten annual installments. The single payment or the first installment payment will be paid on the first Payment Processing Date that occurs six months or more after the Participant’s Separation from Service; subsequent installments will be paid each 12 months thereafter. Each installment will be equal to the balance in the subaccount measured as short a period of time before the installment is paid as is administratively convenient, divided by the number of remaining annual installments.
(B)	In-Service Withdrawal, Single Payment. The subaccount will be paid in a single payment on the first Payment Processing Date that occurs during the month and year selected by the Participant. The Participant cannot choose to receive the single payment until the second year following the year in which the Participant Deferral occurred. For example, unmatched Participant Deferrals made in 2008 cannot be withdrawn pursuant to this paragraph until January 2010. If the Participant Separates from Service before receiving the single payment, (1) if the single payment is scheduled to be paid during the six months after the Separation from Service, it will be paid as scheduled, and (2) if the single payment is scheduled to be paid more than six months after the Separation from Service, it will instead be paid on the first Payment Processing Date that occurs six months or more after the Separation from Service.
(C)	In-Service Withdrawal, Installments. The subaccount will be paid in a two to ten annual installments, with the first installment paid on the first Payment Processing Date that occurs during the month and year selected by the Participant, and subsequent installments paid each 12 months thereafter. The Participant cannot choose to receive his first installment until the second year following the year in which the Participant Deferral occurred. Each installment will be equal to the balance in the subaccount measured as short a period of time before the installment is paid as is administratively convenient, divided by the number of remaining annual installments. If the Participant Separates from Service before receiving all installments, (1) any installment scheduled to be paid

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during the six months after the Separation from Service will be paid as scheduled, and (2) the remaining subaccount balance will be paid on the first Payment Processing Date that occurs six months or more after the Separation from Service.

(d)	Calculating Installment Payments.
	If the value of the Participant’s Account is less than $50,000 six months after the Participant’s Separation from Service, the Participant will be paid a lump sum of his Account on the first Payment Processing Date that occurs six months or more after his Separation from Service. If the preceding sentence does not apply, each installment, other than installments of unmatched Participant Deferrals under section 5.03(c)(iii) above, will be equal to the vested Account balance (ignoring the subaccount(s) containing unmatched Participant Deferrals) measured as short a period of time before the installment is paid as is administratively convenient, divided by the number of remaining annual installments.
(e)	Additional Rules for Payout Elections. The Committee has complete discretion to establish procedures for the completion of payout elections, including the acceptable forms and formats of the payout election. The Committee has complete discretion to establish deadlines for the completion of payout elections, within the bounds described in this section. The Committee may establish default choices in the absence of an affirmative Participant election.
(f)	Coordination with Other Distribution Sections.

(i)	Change of Control. Section 5.06 will apply to determine the timing and amount of certain payments made on or after a Change of Control.
(ii)	Death. Section 5.05 will apply to determine the timing and amount of all payments made after the Participant dies.
(iii)	Hardships. A Participant may take a withdrawal under section 5.07 if he has a financial hardship.
(iv)	Divorce. Some or all of a Participant’s benefits in this Plan may be allocated to, and distributed to, his former Spouse, pursuant to section 5.08.

5.05 Payments after a Participant Dies

(a)	Payout. When a Participant dies, his remaining vested Account balance will be distributed to each of his Beneficiaries on the Payment Processing Date in the fourth month following the Participant’s death, provided that the Beneficiary has completed the tax-withholding forms and supplied such other information as the Committee may reasonably require. For example, if the Participant dies in November, the Beneficiary will be paid in March. This four-month delay should give the Beneficiary adequate time to decide whether to disclaim all or any part of his interest under subsection (d)). Each Beneficiary will receive a single payment.
(b)	Beneficiary Designation. Each Participant shall designate one or more persons, trusts, or other entities as his Beneficiary to receive any amounts distributable hereunder at the time of the Participant’s death. In the absence of an effective beneficiary designation as to part or all of a Participant’s interest in the Plan, such amount will be distributed to the Participant’s surviving Spouse, if any, otherwise to the personal representative of the Participant’s estate.
(c)	Special Rules for Spouses. A beneficiary designation may be changed by the Participant at any time and without the consent of any previously designated Beneficiary. However, if the Participant is married, his Spouse will be his Beneficiary unless such Spouse has consented to the designation of a different Beneficiary. To be effective, the Spouse’s consent must be in writing, witnessed by a notary public, and filed with the Committee. If the Participant has designated his Spouse as a primary or contingent Beneficiary, and the Participant and Spouse later divorce (or their marriage is annulled),

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then the former Spouse will be treated as having pre-deceased the Participant for purposes of interpreting a beneficiary designation that was completed prior to the divorce or annulment; this provision will apply only if the Committee is informed of the divorce or annulment before payment to the former Spouse is authorized.

(d) Disclaiming. Any individual or legal entity who is a beneficiary may disclaim all or any portion of his interest in the Plan, provided that the disclaimer satisfies the requirements of Code §2518(b) and applicable state law. The legal guardian of a minor or legally incompetent person may disclaim for such person. The personal representative (or the individual or legal entity acting in the capacity of the personal representative according to applicable state law) may disclaim on behalf of a beneficiary who has died. The amount disclaimed will be distributed as if the disclaimant had predeceased the individual whose death caused the disclaimant to become a beneficiary.

5.06 Change of Control

(a) Former Employees.

(i)	Separated More than Six Months. Each Participant who Separated from Service more than six months before the date of a Change of Control, including those already receiving installment payments, will be paid a single payment of his entire remaining vested Account balance on the date of a Change of Control or as soon thereafter as is administratively practicable.
(ii)	Recent Separations. Each Participant who Separated from Service within six months before the date of the Change of Control will be paid his normally scheduled payments for the first six months after he Separated from Service and the remainder of his vested Account balance will be paid to him six months after his Separation from Service or as soon thereafter as is administratively practicable.

(b) Current Employees.

(i)

Payout upon Separation From Service. Except as provided in paragraph (ii), each Participant who is an Employee on the date of a Change of Control, and who Separates from Service before the first anniversary of the Change of Control, will be paid a single payment of his entire vested Account balance as soon as administratively practicable after the Separation from Service; however, if the Participant is a “specified employee,” (A) his normally scheduled payments for the first six months after he Separated from Service will be paid as scheduled and (B) the remainder of his vested Account balance will be paid as soon as administratively practicable six months after the Separation from Service. As used in this section, the term “specified employee” has the same meaning as in Code §409A(a)(2)(B)(i) and is determined using the default rules contained in the regulations and other guidance of general applicability issued pursuant to Code §409A. Except as provided in paragraph (ii), each Participant who does not Separate from Service within one year of a Change of Control will be paid his benefits pursuant to section 5.04, 5.05, 5.07, or 5.08.

(ii)

Payout upon a Change of Control. This paragraph applies only to benefits accrued after December 31, 2010. A Participant may elect to have all his vested benefits accrued after December 31, 2010 paid to him in a single payment on the date of the Change of Control or as soon as administratively practicable thereafter; to the extent the Participant does not elect to receive payment upon the Change of Control, his benefits shall be paid pursuant to whichever of sections 5.04, 5.05, 5.06(b)(i), 5.07, or 5.08 applies. The Participant’s election under this paragraph must be made no later than the later of (A) the deadline for the Participant’s initial payout election pursuant to section 5.04(b)(i) (that is, within 30 days of becoming eligible to participate in the Plan) or (B) June 30, 2010. The Committee may establish an earlier deadline for the payout election under this paragraph.

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5.07

Hardship Withdrawals

A Participant may withdraw all or part of the vested portion of his Account if he has a financial hardship, subject to the following rules. A Participant may take a hardship withdrawal while he is an Employee and also after he has Separated from Service. Payment shall be made as soon as practicable after the Committee has approved the withdrawal, except that payment for a financial hardship that occurs less than six months after the Participant’s Separation from Service shall be made as soon as practicable after the Participant has been Separated from Service for six months.

(a)	Request for Hardship Withdrawal. The Participant must file a request for withdrawal with the Committee, along with such information and documentation as the Committee may request for this purpose. The Committee shall review the information filed as soon as practicable after it is received and shall promptly inform the Participant of the results of the Committee’s determination.
(b)	Unforeseeable Emergency. A hardship withdrawal may be made only for the purpose of meeting an unforeseeable emergency, which is a severe financial hardship to the Participant resulting from (i) a sudden and unexpected illness or accident of the Participant, the Participant’s Spouse, the Participant’s dependent (within the meaning of Code §152(a) without regard to Code §152(b)(1), §152(b)(2), or §152(d)(1)(B)), or the Participant’s Beneficiary; (ii) loss of the Participant’s property due to casualty; (iii) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, such as the imminent foreclosure of or eviction from the Participant’s primary residence or the payment of medical expenses, or (iv) the funeral expenses of the Participant’s Spouse, Beneficiary, or dependent (within the meaning of Code §152(a) without regard to Code §152(b)(1), §152(b)(2), or §152(d)(1)(B)). The Committee shall determine whether an unforeseeable emergency exists based on all relevant facts and circumstances, all documentation provided by the Participant, and any guidance provided by the IRS.
(c)	Amount of Withdrawal. The amount withdrawn with respect to an unforeseeable emergency may not exceed the amount necessary to satisfy the emergency plus amounts necessary to pay taxes reasonably anticipated to be incurred because of the withdrawal. The withdrawal will be reduced to take into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship).
(d)	Coordination with Savings Plan. If the Participant’s circumstances are such that he can take a hardship withdrawal from both the Savings Plan and from this Plan, the withdrawal will first be taken from this Plan and, if the Participant exhausts his vested Account in this Plan, the Participant may elect to satisfy any remaining hardship by taking a hardship withdrawal from the Savings Plan.
(e)	Cancellation or Modification of Participant Deferrals. See section 3.01(e) for the cancellation or modification of Enrollment Agreements after a hardship withdrawal from this Plan or the Savings Plan.
(f)	Source of Funds. A Participant’s hardship withdrawal will be taken first from the subaccounts containing unmatched Participant Deferrals, with the earliest-made unmatched Participant Deferrals withdrawn first. Then, if necessary, amounts will be withdrawn from the subaccount(s) containing matched Participant Deferrals. And finally, if necessary, vested amounts will be withdrawn from the subaccount(s) containing Company Deferrals.

5.08 Divorce

(a)	General. If a Participant has divorced his Spouse, all or a portion of his Account may be allocated to his former Spouse. The Participant may be a former or current employee of the Company.
(b)	Contents of Order. The allocation will occur as soon as practicable after the Plan receives a judgment, decree, or order (collectively, an “order”) that (i) is made pursuant to a state domestic relations law or community property law, (ii) relates to the marital property rights of the former Spouse, (iii)

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unambiguously specifies the amount or percentage of the Participant’s Account that is to be allocated to the former Spouse, or unambiguously specifies the manner in which the amount or percentage is to be calculated, (iv) does not allocate any benefits that have already been allocated to a different former Spouse, (v) contains the name and last known mailing address of the Participant and the former Spouse, (vi) the name of the Plan, (vii) does not contain any provision that violates subsections (c), (d), or (e), and (viii) contains the former Spouse’s Social Security number (or other similar taxpayer identification number) unless such number has been provided by the former Spouse to the Plan in a manner acceptable to the Committee.

(c)	Payout Provisions. The vested portion of the amount allocated to the former Spouse will be paid to the former Spouse in a single payment on the first Payment Processing Date that is administratively practicable after (i) the Plan has determined that the order meets the requirements of subsection (b), (ii) the Plan has communicated its interpretation of the order to the Participant and former Spouse, and given them a reasonable amount of time (such as 30 days) to object to the Plan’s interpretation, (and if there is a timely objection, the parties must submit a revised order or withdraw their objections), and (iii) the parties agree to the Plan’s interpretation of the order.
(d)	Not Fully Vested. If the former Spouse is allocated any unvested amounts, the Plan will establish a separate account for the former Spouse and she may direct the Plan as to how those amounts will be deemed to be invested, in the same manner as a Participant directs the Plan in Article IV. Unvested amounts are forfeited at the same time as the Participant’s unvested amounts are forfeited. If an amount allocated to the former Spouse subsequently become vested, the newly-vested amount will be paid to the former Spouse in a single payment on the first Payment Processing Date that is administratively practicable following the additional vesting. If the former Spouse dies before award is fully vested, she shall forfeit her remaining Account balance, and that exact amount shall be returned to the Participant’s subaccount containing Company Deferrals.
(e)	Source of Funds. If a Participant is not fully vested in his Account when the allocation to the former Spouse occurs, the amount allocated to the former Spouse will be taken on a pro-rata basis from each of the Participant’s subaccounts.

5.09

Administrative Delays in Payments

The Committee may delay any payment from this Plan for as short a period as is administratively necessary. For example, a delay may be imposed upon all payments when there is a change of recordkeeper or trustee, and a delay may be imposed on payments to any recipient until the recipient has provided (a) the information needed to determine the appropriate tax withholding and tax reporting and (b)any other information reasonably requested by the Committee.

5.10

Noncompliance with Code §409A

To the extent that the Company or the Committee takes any action that causes a violation of Code §409A or fails to take any reasonable action required to comply with Code §409A, Apache shall pay an additional amount (the “gross-up”) to the individual(s) who are subject to the penalty tax under Code §409A(a)(1); the gross-up will be sufficient to put the individual in the same after-tax position he would have been in had there been no violation of Code §409A. The Company shall not pay a gross-up if the cause of the violation of Code §409A is the due to the recipient’s action or due to the recipient’s failure to take reasonable actions (such as failing to timely provide the information required for tax withholding or failing to timely provide other information reasonably requested by the Committee — with the result that the delay in payment violates Code §409A). Any gross-up will be paid as soon as administratively convenient after the Committee determines the gross-up is owed, and no later than the end of the calendar year immediately following the calendar year in which the additional taxes are remitted. However, if the gross-up is due to a tax audit or litigation addressing the existence or amount of a tax liability, the gross-up will be paid as soon as administratively convenient after the litigation or audit is completed, and no later than the end of the calendar

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year following the calendar year in which the audit is completed or there is a final and non-appealable settlement or other resolution of the litigation.

5.11	Cash Payment and Withholding
	All payments from the Plan will be made in cash. The Plan will withhold any taxes or other amounts that it is required to withhold pursuant to any applicable law.

ARTICLE VI
ADMINISTRATION

6.01 The Committee — Plan Administrator

(a)	Current. As of January 1, 2009, the Committee is comprised of the members of the Retirement Plan Advisory Committee.
(b)	Before a Change of Control. Before a change of control, as defined in the Income Continuance Plan, the board of directors of Apache shall appoint an administrative Committee consisting of no fewer than three individuals who may be, but need not be, Participants, officers, directors, or employees of the Company. Apache’s board of directors may remove Committee members at will. If the absence of any Committee members, Apache shall become the sole Committee member.
(c)	After a Change of Control. This subsection applies on and after the date of a change of control, as defined in the Income Continuance Plan. The only individuals who are able to serve on the Committee after the date of the Change of Control are those who are not then employed by Apache, its successor, or any related legal entities. No Committee members may be added on or after the day of the Change of Control, except that, if the Committee is comprised solely of individuals, (i) the Committee may appoint a legal entity as a Committee member, and (ii) if the number of Committee members drops below three, the remaining member(s) may not resign until having appointed a legal entity or another individual as a Committee member. If all Committee members leave the Committee (if, for example, all Committee members die before the last one appoints a new Committee member or if the sole Committee member is a legal entity that goes out of business), the Committee shall automatically consist of the three Participants with the largest Accounts who are not then employed by Apache, its successor, or any related legal entities.
(d)	Plan Administrator. The Committee is the Plan’s “administrator” within the meaning of ERISA §3(16)(A). The sole named fiduciaries of the Plan are the Committee and any Trustees.

6.02	Committee Duties
	The Committee shall administer the Plan and shall have all discretion and powers necessary for that purpose, including, but not by way of limitation, full discretion and power to interpret the Plan, to determine the eligibility, status, and rights of all persons under the Plan and, in general, to decide any dispute and all questions arising in connection with the Plan. The Committee shall direct the Company, the Trustee, or both, as the case may be, concerning distributions in accordance with the provisions of the Plan. The Committee shall maintain all Plan records except records of any Trust. The Committee shall publish, file, or disclose — or cause to be published, filed, or disclosed — all reports and disclosures required by federal or state laws. The Committee may authorize one or more of its members or agents to sign instructions, notices, and determinations on its behalf.
6.03	Organization of Committee
	The Committee shall adopt such rules as it deems desirable for the conduct of its affairs and for the administration of the Plan. It may appoint agents (who need not be members of the Committee) to whom it may delegate such powers as it deems appropriate, except that any dispute shall be determined by the Committee. The Committee may make its determinations with or without meetings. It may authorize one or more of its members or agents to sign instructions, notices, and determinations on its behalf. If a Committee

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decision or action affects a relatively small percentage of Plan Participants including a Committee member, such Committee member will not participate in the Committee decision or action. The action of a majority of the disinterested Committee members constitutes the action of the Committee.

6.04	Indemnification
	The Committee and all of the agents and representatives of the Committee shall be indemnified and saved harmless by the Company against any claims, and the expenses of defending against such claims, resulting from any action or conduct relating to the administration of the Plan, except claims judicially determined to be attributable to gross negligence or willful misconduct.
6.05	Agent for Process
	Apache’s Vice President, General Counsel, and Secretary shall be the agents of the Plan for service of all process on the Plan.
6.06	Determination of Committee Final
	The decisions made by the Committee are final and conclusive on all persons.
6.07	No Bonding
	Neither the Committee nor any committee member is required to give any bond or other security in any jurisdiction in connection with the administration of the Plan, unless Apache determines otherwise or any applicable federal or state law so requires.

ARTICLE VII
TRUST

7.01	Trust Agreement
	The Company may, but is not required to, adopt one or more Trust Agreements for the holding, investment, and administration of funds for Plan benefits. The Trustee may maintain and allocate assets to a separate account for each Participant under the Plan. The assets of any Trust remain subject to the claims of the Company’s general creditors in the event of the Company’s insolvency.
7.02	Expenses of Trust
	The parties expect that any Trust created pursuant to section 7.01 will be treated as a “grantor” trust for federal and state income tax purposes and that, as a consequence, the Company will recognize taxable income from the Trust assets, but the Trust itself will not separately be subject to income tax with respect to its income. However, if the Trust should be separately taxable, the Trustee will pay all such taxes out of the Trust. All expenses of administering any Trust, if not paid by the Company, will be a charge against and will be paid from the assets of the Trust.

ARTICLE VIII
AMENDMENT AND TERMINATION

8.01	Termination of Plan
	Apache expects to continue the Plan indefinitely, but each Company may terminate its participation in the Plan at any time with Apache’s permission, and Apache may terminate the entire Plan at any time.
8.02	Amendment

(a) Before a Change of Control. Before a change of control, as defined in the Income Continuance Plan, Apache may amend the Plan at any time and from time to time, retroactively or otherwise, on behalf of

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all Companies, but no amendment may reduce any vested benefit that has accrued on the later of (a) the effective date of the amendment, or (b) the date the amendment is adopted.

(b)

After a Change of Control. The Plan may be amended after a change of control, as defined in the Income Continuance Plan, (i) at any time but only to the extent necessary to alleviate a material adverse tax consequence to one or more Participants, former Spouses, or Beneficiaries, and (ii) at any time after the second anniversary of such change of control, but only with respect to the benefits of Participants who are then employed by Apache, its successor, or any related entity.

(c)

Procedure. Each amendment must be in writing. Each amendment must be approved by the board of directors of Apache or its successor, or by an officer of Apache or its successor who is authorized by its board of directors to amend the Plan. Each amendment must be executed by an officer of Apache or its successor who is authorized to execute the amendment.

ARTICLE IX
MISCELLANEOUS

9.01	Funding of Benefits — No Fiduciary Relationship
	All benefits payable under the Plan will be paid either from the Trust or by the Company out of its general assets. Nothing contained in the Plan may be deemed to create any fiduciary relationship between the Company and the Participants. Notwithstanding anything herein to the contrary, to the extent that any person acquires a right to receive benefits under the Plan, such right will be no greater than the right of any unsecured general creditor of the Company, except to the extent provided in the Trust Agreement, if any.
9.02	Right to Terminate Employment
	The Company may terminate the employment of any Participant as freely and with the same effect as if the Plan were not in existence.
9.03	Inalienability of Benefits
	Except for disclaimers under section 5.05(d) and payments to a former Spouse pursuant to section 5.08, no Participant or Beneficiary has the right to assign, alienate, pledge, transfer, hypothecate, encumber, or anticipate his interest in any benefits under the Plan, nor are the benefits subject to garnishment by any creditor, nor may the benefits under the Plan be levied upon or attached. The preceding sentence does not apply to the enforcement of a federal tax levy made pursuant to Code §6331, the collection by the United States on a judgment resulting from an unpaid tax assessment, or any debt or obligation that is permitted to be collected from the Plan under federal law (such as the Federal Debt Collection Procedures Act of 1977).
9.04	Claims Procedure

(a)

General. Each claim for benefits will be processed in accordance with the procedures established by the Committee. The procedures will comply with the guidelines specified in this section. The Committee may delegate its duties under this section.

(b)

Representatives. A claimant may appoint a representative to act on his behalf. The Plan will only recognize a representative if the Plan has received a written authorization signed by the claimant and on a form prescribed by the Committee, with the following exceptions. The Plan will recognize a claimant’s legal representative, once the Plan is provided with documentation of such representation. If the claimant is a minor child, the Plan will recognize the claimant’s parent or guardian as the claimant’s representative. Once an authorized representative is appointed, the Plan will direct all information and notification regarding the claim to the authorized representative and the claimant will be copied on all notifications regarding decisions, unless the claimant provides specific written direction otherwise.

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(c)	Extension of Deadlines. The claimant may agree to an extension of any deadline that is mentioned in this section that applies to the Plan. The Committee or the relevant decision-maker may agree to an extension of any deadline that is mentioned in this section that applies to the claimant.
(d)	Fees. The Plan may not charge any fees to a claimant for utilizing the claims process described in this section.
(e)	Filing a Claim. A claim is made when the claimant files a claim in accordance with the procedures specified by the Committee. Any communication regarding benefits that is not made in accordance with the Plan’s procedures will not be treated as a claim.
(f)	Initial Claims Decision. The Plan will decide a claim within a reasonable time up to 90 days after receiving the claim. The Plan will have a 90-day extension, but only if the Plan is unable to decide within 90 days for reasons beyond its control, the Plan notifies the claimant of the special circumstances requiring the need for the extension by the 90th day after receiving the claim, and the Plan notifies the claimant of the date by which the Plan expects to make a decision.
(g)	Notification of Initial Decision. The Plan will provide the claimant with written notification of the Plan’s full or partial denial of a claim, reduction of a previously approved benefit, or termination of a benefit. The notification will include a statement of the reason(s) for the decision; references to the plan provision(s) on which the decision was based; a description of any additional material or information necessary to perfect the claim and why such information is needed; a description of the procedures and deadlines for appeal; a description of the right to obtain information about the appeal procedures; and a statement of the claimant’s right to sue.
(h)	Appeal. The claimant may appeal any adverse or partially adverse decision. To appeal, the claimant must follow the procedures specified by the Committee. The appeal must be filed within 60 days of the date the claimant received notice of the initial decision. If the appeal is not timely and properly filed, the initial decision will be the final decision of the Plan. The claimant may submit documents, written comments, and other information in support of the appeal. The claimant will be given reasonable access at no charge to, and copies of, all documents, records, and other relevant information.
(i)	Appellate Decision. The Plan will decide the appeal of a claim within a reasonable time of no more than 60 days from the date the Plan receives the claimant’s appeal. The 60-day deadline will be extended by an additional 60 days, but only if the Committee determines that special circumstances require an extension, the Plan notifies the claimant of the special circumstances requiring the need for the extension by the 60th day after receiving the appeal, and the Plan notifies the claimant of the date by which the Plan expects to make a decision. If an appeal is missing any information from the claimant that is needed to decide the appeal, the Plan will notify the claimant of the missing information and grant the claimant a reasonable period to provide the missing information. If the missing information is not timely provided, the Plan will deny the claim. If the missing information is timely provided, the 60-day deadline (or 120-day deadline with the extension) for the Plan to make its decision will be increased by the length of time between the date the Plan requested the missing information and the date the Plan received it.
(j)	Notification of Decision. The Plan will provide the claimant with written notification of the Plan’s appellate decision (positive or adverse). The notification of any adverse or partially adverse decision must include a statement of the reason(s) for the decision; reference to the plan provision(s) on which the decision was based; a description of the procedures and deadlines for a second appeal, if any; a description of the right to obtain information about the second-appeal procedures; a statement of the claimant’s right to sue; and a statement that the claimant is entitled to receive, free of charge and upon request, reasonable access to and copies of all documents, records, and other information relevant to the claim.

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(k) Limitations on Bringing Actions in Court. Once an appellate decision that is adverse or partially adverse to the claimant has been made, the claimant may file suit in court only if he does so by the earlier of the following dates: (i) the one-year anniversary of the date of an appellate decision made on or before a Change of Control or the three-year anniversary of the date of an appellate decision made after a Change of Control, or (ii) the date on which the statute of limitations for such claim expires.

9.05	Disposition of Unclaimed Distributions
	It is the affirmative duty of each Participant to inform the Plan of, and to keep on file with the Plan, his current mailing address and the mailing address of any beneficiaries. If a Participant fails to inform the Plan of these current mailing addresses, neither the Plan nor the Company is responsible for any late payment of benefits or loss of benefits. The Plan, the Committee, and the Company have no duty to search for a missing individual until the date of a Change of Control, at which point the Company has the duty to undertake reasonable measures to search for the proper recipient of any payment under the Plan that is scheduled to be paid on or after the date of the Change of Control. If the missing individual is not found within a year after a payment should have been made to him, all his benefits will be forfeited. If the missing individual later is found, the exact amount forfeited will be restored to his Account as soon as administratively convenient, without any adjustment for forgone investment earnings or losses.
9.06	Distributions due Infants or Incompetents
	If any person entitled to a distribution under the Plan is an infant, or if the Committee determines that any such person is incompetent by reason of physical or mental disability, whether or not legally adjudicated an incompetent, the Committee has the power to cause the distributions becoming due to such person to be made to another for his benefit, without responsibility of the Committee to see to the application of such distributions. Distributions made pursuant to such power will operate as a complete discharge of the Company, the Trustee, the Plan, and the Committee.
9.07	Use and Form of Words
	When any words are used herein in the masculine gender, they are to be construed as though they were also used in the feminine gender in all cases where they would so apply, and vice versa. Whenever any words are used herein in the singular form, they are to be construed as though they were also used in the plural form in all cases where they would so apply, and vice versa.
9.08	Headings
	Headings of Articles and sections are inserted solely for convenience and reference, and constitute no part of the Plan.
9.09	Governing Law
	The Plan shall be construed in accordance with ERISA, the Code, and, to the extent applicable, the laws of the State of Texas excluding any conflicts-of-law provisions.

APACHE CORPORATION
 

/s/ Margery M. Harris  

Margery M. Harris 

Vice President, Human Resources
July 14, 2010 

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EX-10.4

Exhibit 10.4

APACHE CORPORATION
2007 Omnibus Equity Compensation Plan
As amended and restated July 13, 2010; effective December 31, 2009

Section 1

Introduction

1.1 Establishment. Apache Corporation, a Delaware corporation (hereinafter referred to, together with its Affiliates (as defined below) as the “Company” except where the context otherwise requires), hereby establishes the Apache Corporation 2007 Omnibus Equity Compensation Plan (the “Plan”).

1.2 Purpose. The purpose of the Plan is to provide Eligible Persons designated by the Committee for participation in the Plan with equity-based incentives to: (i) encourage such individuals to continue in the long-term service of the Company and its Affiliates, (ii) create in such individuals a more direct interest in the future success of the operations of the Company, (iii) attract outstanding individuals, and (iv) retain and motivate such individuals. The Plan is intended to provide eligible individuals with the opportunity to invest in the Company, thereby relating incentive compensation to increases in stockholder value and more closely aligning the compensation of such individuals with the interests of the Company’s stockholders.

Accordingly, this Plan provides for the granting of Incentive Stock Options, Non-Qualified Stock Options, Performance Awards, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights or any combination of the foregoing, as the Committee determines is best suited to the circumstances of the particular individual as provided herein.

1.3 Effective Date. The Effective Date of the Plan (the “Effective Date”) is May 2, 2007. This amendment and restatement is effective as of December 31, 2009.

Section 2

Definitions

2.1 Definitions. The following terms shall have the meanings set forth below:

     (a) “Administrative Agent” means any designee or agent that may be appointed by the Committee pursuant to subsections 3.1(h) and 3.4 hereof.

     (b) “Affiliate” means any entity other than the Company that is affiliated with the Company through stock or equity ownership or otherwise and is designated as an Affiliate for purposes of the Plan by the Committee; provided, however, that,

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notwithstanding any other provisions of the Plan to the contrary, for purposes of NQSOs and SARs, if an individual who otherwise qualifies as an Eligible Person provides services to such an entity and not to the Company, such entity may only be designated an Affiliate if the Company qualifies as a “service recipient,” within the meaning of Internal Revenue Code Section 409A, with respect to such individual; provided further that such definition of “service recipient” shall be determined by (a) applying Internal Revenue Code Section 1563(a)(1), (2), and (3), for purposes of determining a controlled group of corporations under Internal Revenue Code Section 414(b), using the language “at least 50 percent” instead of “at least 80 percent” each place it appears in Internal Revenue Code Section 1563(a)(1), (2), and (3), and by applying Treasury Regulations Section 1.414(c)-2, for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of Internal Revenue Code Section 414(c), using the language “at least 50 percent” instead of “at least 80 percent” each place it appears in Treasury Regulations Section 1.414(c)-2, and (b) where the use of Shares with respect to the grant of an Option or SAR to such an individual is based upon legitimate business criteria, by applying Internal Revenue Code Section 1563(a)(1), (2), and (3), for purposes of determining a controlled group of corporations under Internal Revenue Code Section 414(b), using the language “at least 20 percent” instead of “at least 80 percent” at each place it appears in Internal Revenue Code Section 1563(a)(1), (2), and (3), and by applying Treasury Regulations Section 1.414(c)-2, for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of Internal Revenue Code Section 414(c), using the language “at least 20 percent” instead of “at least 80 percent” at each place it appears in Treasury Regulations Section 1.414(c)-2; provided further that for purposes of ISOs, “Affiliate” shall mean any present or future corporation which is or would be a “subsidiary corporation” of the Company as the term is defined in Section 424(f) of the Internal Revenue Code.

     (c) “Award” means any Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent or any other stock-based award granted to a Participant under the Plan.

     (d) “Board” means the Board of Directors of the Company.

     (e) “Change of Control” shall have the meaning assigned to such term in the Company’s Income Continuance Plan as in effect on the Effective Date.

     (f) “Committee” means the Stock Option Plan Committee of the Board or such other Committee of the Board that is empowered hereunder to administer the Plan. The Committee shall be constituted at all times so as to permit the Plan to be administered by “non-employee directors” (as defined in Rule 16b-3 of the Exchange Act) and “outside directors” (as defined in Treasury Regulations Section 1.162-27 (e)(3)) and to satisfy such additional regulatory or listing requirements as the Board may determine to be applicable or appropriate.

     (g) “Deferred Delivery Plan” means the Company’s Deferred Delivery Plan, as it has been or may be amended from time to time, or any successor plan.

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     (h) “Dividend Equivalent” means a right, granted to an Eligible Person to receive cash, Stock, other Awards or other property equal in value to dividends paid with respect to a specified number of shares of Stock, or other periodic payments.

     (i) “Eligible Persons” means those employees of the Company or of any Affiliates, members of the Board, and members of the board of directors of any Affiliates who are designated as Eligible Persons by the Committee. Notwithstanding the foregoing, grants of Incentive Stock Options may not be granted to anyone who is not an employee of the Company or an Affiliate.

     (j) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     (k) “Exercise Date” means the date of exercise determined in accordance with subsection 6.2(g) hereof.

     (l) “Fair Market Value” means the per share closing price of the Stock as reported on The New York Stock Exchange, Inc. Composite Transactions Reporting System for a particular date or, if the Stock is not so listed on such date, as reported on NASDAQ or on such other exchange or electronic trading system which, on the date in question, reports the largest number of traded shares of Stock, provided, however, that if on the date Fair Market Value is to be determined there are no transactions in the Stock, Fair Market Value shall be determined as of the immediately preceding date on which there were transactions in the Stock; provided further, however, that if the foregoing provisions are not applicable, the fair market value of a share of the Stock as determined by the Committee by the reasonable application of such reasonable valuation method, consistently applied, as the Committee deems appropriate; provided further, however, that, with respect to ISOs, such Fair Market Value shall be determined subject to Section 422(c)(7) of the Internal Revenue Code.

     (m) “Incentive Stock Option” or “ISO” means any Option intended to be and designated as an incentive stock option and which satisfies the requirements of Section 422 of the Internal Revenue Code or any successor provision thereto.

     (n) “Internal Revenue Code” means the Internal Revenue Code of 1986, as it may be amended from time to time, and any successor thereto. Any reference to a section of the Internal Revenue Code or Treasury Regulation shall be treated as a reference to any successor section.

     (o) “Non-Qualified Stock Option” or “NQSO” means any Option that is not intended to qualify as an “incentive stock option” under Section 422 of the Internal Revenue Code.

     (p) “Option” means an option to purchase a number of shares of Stock granted pursuant to subsection 6.1.

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     (q) “Option Price” means the price at which shares of Stock subject to an option may be purchased, determined in accordance with subsection 6.2(b) hereof.

     (r) “Participant” means an Eligible Person designated by the Committee, from time to time during the term of the Plan to receive one or more Awards under the Plan.

     (s) “Performance Award” is a right to either a number of shares of Stock or SARs (“Performance Shares”) determined (in either case) in accordance with subsection 9.1 of this Plan based on the extent to which the applicable Performance Goals are achieved. A Performance Share shall be of no value to a Participant unless and until earned in accordance with subsection 9.2 hereof.

     (t) “Performance Goals” are the performance conditions, if any, established pursuant to subsection 9.1 by the Committee in connection with an Award.

     (u) “Performance Period” with respect to a Performance Award is a period not less than one calendar year or one fiscal year of the Company, beginning not earlier than the year in which such Performance Award is granted, which may be referred to herein and by the Committee by use of the calendar of fiscal year in which a particular Performance Period commences.

     (v) “Prior Plans” means the Company’s 2005 Stock Option Plan and the Executive Restricted Stock Plan.

     (w) “Restricted Stock” means Stock granted to an Eligible Person under Section 8 hereof, that is subject to certain restrictions and to a risk of forfeiture.

     (x) “Restricted Stock Unit” means a right, granted to an Eligible Person under Section 8 hereof, to receive Stock, cash or a combination thereof at the end of a specified vesting period.

     (y) “Restriction Period” shall have the meaning assigned to such term in subsection 8.1.

     (z) “Stock” means the $0.625 par value common stock of the Company and or any security into which such common stock is converted or exchanged upon merger, consolidation, or any capital restructuring (within the meaning of Section 13) of the Company.

     (aa) “Stock Appreciation Right” or “SAR” means a right granted to an Eligible Person to receive an amount in cash, Stock, or other property equal to the excess of the Fair Market Value as of the Exercise Date of one share of Stock over the SAR Price times the number of shares of Stock to which the Stock Appreciation Right relates. Stock Appreciation Rights may be granted in tandem with Options or other Awards or may be freestanding.

4

     (bb) “SAR Price” means the price at which the Stock Appreciation Right was granted, which shall be determined in the same manner as the Option Price of an Option in accordance with subsection 6.2 hereof.

     (cc) “Involuntary Termination” means the termination of employment of the Participant by the Company or its successor for any reason on or after a Change of Control; provided, that the termination does not result from an act of the Participant that (i) constitutes common-law fraud, a felony, or a gross malfeasance of duty, or (ii) is materially detrimental to the best interests of the Company or its successor.

     (dd) “Voluntary Termination with Cause” occurs upon a Participant’s separation from service of his own volition and one or more of the following conditions occurs without the Participant’s consent on or after a Change of Control:

          (i) There is a material diminution in the Participant’s base compensation, compared to his rate of base compensation on the date of the Change of Control.

          (ii) There is a material diminution in the Participant’s authority, duties or responsibilities.

          (iii) There is a material diminution in the authority, duties or responsibilities of the Participant’s supervisor, such as a requirement that the Participant (or his supervisor) report to a corporate officer or employee instead of reporting directly to the board of directors.

          (iv) There is a material diminution in the budget over which the Participant retains authority.

          (v) There is a material change in the geographic location at which the Participant must perform his service, including, for example the assignment of the Participant to a regular workplace that is more than 50 miles from his regular workplace on the date of the Change of Control.

The Participant must notify the Company of the existence of one or more adverse conditions specified in clauses (i) through (v) above within 90 days of the initial existence of the adverse condition. The notice must be provided in writing to Apache Corporation’s Vice President, Human Resources or her delegate. The notice may be provided by personal delivery or it may be sent by email, inter-office mail, regular mail (whether or not certified), fax, or any similar method. Apache Corporation’s Vice President, Human Resources or her delegate shall acknowledge receipt of the notice within 5 business days; the acknowledgement shall be sent to the Participant by certified mail. Notwithstanding the foregoing provisions of this definition, if the Company remedies the adverse condition within 30 days of being notified of the adverse condition, no Voluntary Termination with Cause shall occur.

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2.2 Headings; Gender and Number. The headings contained in the Plan are for reference purposes only and shall not affect in any way the meaning or interpretation of the Plan. Except when otherwise indicated by the context, the masculine gender shall also include the feminine gender, and the definition of any term herein in the singular shall also include the plural.

Section 3

Plan Administration

3.1 Administration by the Committee. The Plan shall be administered by the Committee. In accordance with the provisions of the Plan, the Committee shall, in its sole discretion, adopt rules and regulations for carrying out the purposes of the Plan, including, without limitation, the authority to:

     (a) Grant Awards;

     (b) Select the Eligible Persons and the time or times at which Awards shall be granted;

     (c) Determine the type and number of Awards to be granted, the number of shares of Stock to which an Award may relate and the terms, conditions, restrictions, and Performance Goals relating to any Award;

     (d) Determine whether, to what extent, and under what circumstances an Award may be settled, canceled, forfeited, exchanged, or surrendered;

     (e) Construe and interpret the Plan and any Award;

     (f) Prescribe, amend, and rescind rules and procedures relating to the Plan;

     (g) Determine the terms and provisions of agreements;

     (h) Appoint designees or agents (who need not be members of the Committee or employees of the Company) to assist the Committee with the administration of the Plan; and

     (i) Make all other determinations deemed necessary or advisable for the administration of the Plan.

3.2 The Committee shall, in its absolute discretion, and without amendment to the Plan, have the power to accelerate, waive or modify, at any time, any term or condition of an Award that is not mandatory under this Plan; provided, however, that the Committee

6

shall not have any discretion to accelerate, waive or modify any term or condition of an Award that is intended to qualify as “performance-based compensation” for purposes of Section 162(m) of the Internal Revenue Code if such discretion would cause the Award to not so qualify. In the event of a Change of Control, the provisions of Section 12 hereof shall be mandatory and shall govern the vesting and exercisability schedule of any Award granted hereunder.

3.3 No member of the Committee shall be liable for any action, omission, or determination made in good faith. The Company shall indemnify (to the extent permitted under Delaware law) and hold harmless each member of the Committee and each other director or employee of the Company to whom any duty or power relating to the administration or interpretation of the Plan has been delegated against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim with the approval of the Committee) arising out of any action, omission or determination relating to the Plan, unless, in either case, such action, omission or determination was taken or made by such member, director or employee in bad faith and without reasonable belief that it was in the best interests of the Company. The determination, interpretations and other actions of the Committee pursuant to the provisions of the Plan shall be binding and conclusive for all purposes and on all persons.

3.4 The Committee may from time to time adopt such rules and regulations for carrying out the purposes of the Plan as it may deem proper and in the best interests of the Company. The Committee may appoint an Administrative Agent, who need not be a member of the Committee or an employee of the Company, to assist the Committee in administration of the Plan and to whom it may delegate such powers as the Committee deems appropriate, except that the Committee shall determine any dispute. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan, or in any agreement entered into hereunder, in the manner and to the extent it shall deem expedient, and it shall be the sole and final judge of such inconsistency.

3.5 Compliance with Section 162(m). Except as expressly otherwise stated in any resolution of the Committee, the Plan is intended to comply with the requirements of Section 162(m) or any successor section(s) of the Internal Revenue Code (“Section 162(m)”) as to any “covered employee” as defined in Section 162(m), and shall be administered, interpreted, and construed consistently therewith. The Committee is authorized to take such additional action, if any, that may be required to ensure that the Plan and any Award under the Plan satisfy the requirements of Section 162(m), taking into account any regulations or other guidance issued by the Internal Revenue Service.

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Section 4

Stock Subject to the Plan

4.1 Number of Shares. Subject to adjustments pursuant to Section 4.4 hereof, up to 15,000,000 shares of Stock, plus any shares of Stock available for issuance under the Prior Plans but not underlying outstanding stock options or other awards under the Prior Plans or which shares are allocable to any outstanding stock options or other awards under the Prior Plans to the extent such stock options or other awards expire, are forfeited or otherwise terminate unexercised, are authorized for issuance under the Plan in accordance with the Plan’s terms and subject to such restrictions or other provisions as the Committee may from time to time deem necessary. Of such total number of shares of Stock so authorized, not more than 10,000,000 may be designated for Restricted Stock, Restricted Stock Units, and Performance Awards. During the duration of the Plan, no Eligible Person may be granted Options which in the aggregate cover in excess of 10 percent of the total shares of Stock authorized under the Plan. No Award may be granted under the Plan on or after the 10-year anniversary of the Effective Date. The foregoing to the contrary notwithstanding, the total number of shares of Stock that may be issued pursuant to ISOs granted under the Plan shall be equal to 5,000,000, subject to adjustments pursuant to Section 4.4 hereof.

4.2 Availability of Shares Not Issued under Awards. If shares of Stock which may be issued pursuant to the terms of the Plan awarded hereunder are forfeited, cancelled, exchanged or surrendered or if an Award otherwise terminates or expires without a distribution of shares to the holder of such Award, the shares of Stock with respect to such Award shall, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for Awards under the Plan.

4.3 Stock Offered. The Company shall at all times during the term of the Plan retain as authorized and unissued Stock and/or Stock in the Company’s treasury, at least the number of shares from time to time required under the provisions of the Plan, or otherwise assure itself of its ability to perform its obligations hereunder.

4.4 Adjustments for Stock Split, Stock Dividend, Etc. If the Company shall at any time increase or decrease the number of its outstanding shares of Stock or change in any way the rights and privileges of such shares by means of the payment of a Stock dividend or any other distribution upon such shares payable in Stock or rights to acquire Stock, or through a Stock split, reverse Stock split, subdivision, consolidation, combination, reclassification or recapitalization involving the Stock (any of the foregoing being herein called a “capital restructuring”), then in relation to the Stock that is affected by one or more of the above events, the numbers, rights, and privileges of the following shall be, in each case, equitably and proportionally adjusted to take into account the occurrence of any of the above events, (i) the number and kind of shares of Stock or other property (including cash) that may thereafter be issued pursuant to subsections 4.1 and 4.10, (ii) the number and kind of shares of Stock or other property (including cash) issued or issuable in respect of outstanding Awards; and (iii) the exercise price, grant price, or

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purchase price relating to any Award; provided that, with respect to Incentive Stock Options, such adjustment shall be made in accordance with Section 424(h) of the Internal Revenue Code; (iv) the Performance Goals, and (v) the individual limitations applicable to Awards.

4.5 Other Changes in Stock. In the event there shall be any change, other than as specified in subsections 4.4 hereof, in the number or kind of outstanding shares of Stock or of any stock or other securities into which the Stock shall be changed or for which it shall have been exchanged, and if the Committee shall in its discretion determine that such change equitably requires an adjustment in the number or kind of shares subject to outstanding Awards or which have been reserved for issuance pursuant to the Plan but are not then subject to an Award, then such adjustments shall be made by the Committee and shall be effective for all purposes of the Plan and on each outstanding Award that involves the particular type of stock for which a change was effected.

4.6 Rights to Subscribe. If the Company shall at any time grant to the holders of its Stock rights to subscribe pro rata for additional shares thereof or for any other securities of the Company or of any other corporation, there shall be reserved with respect to the shares then under an outstanding Award to any Participant of the particular class of Stock involved the Stock or other securities which the Participant would have been entitled to subscribe for if immediately prior to such grant the Participant had exercised his entire Option. If, upon exercise of any such Option, the Participant subscribes for the additional shares or other securities, the aggregate Option Price shall be increased by the amount of the price that is payable by the Participant for such additional shares or other securities as if the Participant had exercised his entire Option immediately prior to the grant of such additional shares or other securities.

4.7 General Adjustment Rules. No adjustment or substitution provided for in this Section 4 shall require the Company to sell a fractional share of Stock under any Option, or otherwise issue a fractional share of Stock, and the total substitution or adjustment with respect to each Option shall be limited by deleting any fractional share. In the case of any such substitution or adjustment, the aggregate Option Price for the shares of Stock then subject to the Option shall remain unchanged but the Option Price per share under each such Option shall be equitably adjusted by the Committee to reflect the greater or lesser number of shares of Stock or other securities into which the Stock subject to the Option may have been changed.

4.8 Determination by the Committee, Etc. Adjustments under this Section 4 shall be made by the Committee, whose determinations with regard thereto shall be final and binding upon all parties.

4.9 Code Section 409A. For any Award that is not subject to Internal Revenue Code Section 409A before the adjustments identified in the preceding sections of this Section 4, no adjustment shall be made that would cause the Award to become subject to Internal Revenue Code Section 409A. For an Award that is subject to Internal Revenue Code Section 409A before the adjustments identified in the preceding sections of this Section

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4, no adjustment shall cause the Award to violate Internal Revenue Code Section 409A, without the prior written consent of both the Participant and the Committee.

4.10 Award Limits. The following limits shall apply to grants of all Awards under the Plan:

     (a) Options: The maximum aggregate number of shares of Stock that may be subject to Options granted in any calendar year to any one Participant shall be 250,000 shares.

     (b) SARs: The maximum aggregate number of shares that may be subject to Stock Appreciation Rights granted in any calendar year to any one Participant shall be 250,000 shares. Any shares covered by Options which include tandem SARs granted to one Participant in any calendar year shall reduce this limit on the number of shares subject to SARs that can be granted to such Participant in such calendar year.

     (c) Restricted Stock or Restricted Stock Units: The maximum aggregate number of shares of Stock that may be subject to Awards of Restricted Stock or Restricted Stock Units granted in any calendar year to any one Participant shall be 250,000 shares.

     (d) Performance Awards: The maximum aggregate grant with respect to Performance Awards granted in any calendar year to any one Participant shall be 250,000 shares (or SARs based on the value of such number of shares).

To the extent required by Section 162(m) of the Code, shares subject to Options or SARs which are canceled shall continue to be counted against the limits set forth in paragraphs (a) and (b) immediately preceding.

Section 5

Granting of Awards to Participants

5.1 Participation. Participants in the Plan shall be those Eligible Persons who, in the judgment of the Committee, are performing, or during the term of their incentive arrangement will perform, vital services in the management, operation, and development of the Company or an Affiliate, and significantly contribute, or are expected to significantly contribute, to the achievement of the Company’s long-term corporate economic objectives. Participants may be granted from time to time one or more Awards; provided, however, that the grant of each such Award shall be separately approved by the Committee, and receipt of one such Award shall not result in automatic receipt of any other Award. Upon determination by the Committee that an Award is to be granted to a Participant, as soon as practicable, written notice shall be given to such person, specifying the terms, conditions, rights and duties related thereto. Each Participant shall, if required by the Committee, enter into an agreement with the

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Company, in such form as the Committee shall determine and which is consistent with the provisions of the Plan, specifying such terms, conditions, rights, and duties. Awards shall be deemed to be granted as of the date specified in the grant resolution of the Committee, which date shall be the date of any related agreement with the Participant. In the event of any inconsistency between the provisions of the Plan and any such agreement entered into hereunder, the provisions of the Plan shall govern.

Awards granted to members of the Board shall be recommended to the full Board by the Management Development and Compensation Committee and approved by the full Board.

5.2 Notification to Participants and Delivery of Documents. As soon as practicable after such determinations have been made, each Participant shall be notified of (a) his/her designation as a Participant, (b) the date of grant, (c) the number and type of Awards granted to the Participant, (d) in the case of Performance Awards, the Performance Period and Performance Goals, (e) in the case of Restricted Stock or Restricted Stock Units, the Restriction Period (as defined in subsection 8.1), and (f) any other terms or conditions imposed by the Committee with respect to the Award.

5.3 Delivery of Award Agreement. This requirement for delivery of a written Award agreement is satisfied by electronic delivery of such agreement provided that evidence of the Participant’s receipt of such electronic delivery is available to the Company and such delivery is not prohibited by applicable laws and regulations.

Section 6

Stock Options

6.1 Grant of Stock Options. Coincident with or following designation for participation in the Plan, an Eligible Person may be granted one or more Options. Grants of Options under the Plan shall be made by the Committee. In no event shall the exercise of one Option affect the right to exercise any other Option or affect the number of shares of Stock for which any other Option may be exercised, except as provided in subsection 6.2(j) hereof.

6.2 Stock Option Agreements. Each Option granted under the Plan shall be identified as either an Incentive Stock Option or a Non-Qualified Stock Option (or, if no such identification is made, then it shall be a Non-Qualified Stock Option) and evidenced by a written agreement which shall be entered into by the Company and the Participant to whom the Option is granted, and which shall contain the following terms and conditions set out in this subsection 6.2, as well as such other terms and conditions, not inconsistent therewith, as the Committee may consider appropriate.

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     (a) Number of Shares. Each Stock Option agreement shall state that it covers a specified number of shares of Stock, as determined by the Committee.

     (b) Price. The price at which each share of Stock covered by an Option may be purchased, the Option Price, shall be determined in each case by the Committee and set forth in the Stock Option agreement. The price may vary according to a formula specified in the Stock Option agreement, but in no event shall the Option Price ever be less than the Fair Market Value of the Stock on the date the Option is granted.

     (c) No Backdating. There shall be no backdating of Options, and each Option shall be dated the actual date that the Committee adopts the resolution awarding the grant of such Option.

     (d) Limitations on Incentive Stock Options. No Incentive Stock Option may be granted to an individual if, at the time of the proposed grant, such individual owns (or is attributed to own by virtue of the Internal Revenue Code) Stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or any Affiliate unless (i) the exercise price of such Incentive Stock Option is at least 110 percent of the Fair Market Value of a share of Stock at the time such Incentive Stock Option is granted and (ii) such Incentive Stock Option is not exercisable after the expiration of five years from the date such Incentive Stock Option is granted.

     To the extent that the aggregate Fair Market Value of Stock of the Company with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year under the Plan and any other option plan of the Company (or any Affiliate) shall exceed $100,000, such Options shall be treated as Non-Qualified Stock Options. Such Fair Market Value shall be determined as of the date on which each such Incentive Stock Option is granted.

     (e) Duration of Options. Each Stock Option agreement shall state the period of time, determined by the Committee, within which the Option may be exercised by the Participant (the “Option Period”). The Option Period must end, in all cases, not more than ten years from the date an Option is granted.

     (f) Termination of Options. During the lifetime of a Participant to whom a Stock Option is granted, the Stock Option may be exercised only by such Participant or, in the case of disability (as determined pursuant to the Company’s Long-Term Disability Plan or any successor plan) by the Participant’s designated legal representative, except to the extent such exercise would cause any Award intended to qualify as an ISO not to so qualify. Once a Participant to whom a Stock Option was granted dies, the Stock Option may be exercised only by the personal representative of the Participant’s estate. Unless the Stock Option agreement shall specify a longer or shorter period, at the discretion of the Committee, then the Participant (or representative) may exercise the Stock Option for a period of up to three months after such Participant terminates employment or ceases to be a member of the Board.

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     (g) Exercise, Payments, Etc.

          (i) Each Stock Option agreement shall provide that the method for exercising the Option granted therein shall be by delivery to the Office of the Secretary of the Company or to the Administrative Agent of written notice specifying the number of shares of Stock with respect to which such Option is exercised and payment to the Company of the aggregate Option Price. Such notice shall be in a form satisfactory to the Committee and shall specify the particular Options (or portions thereof) which are being exercised and the number of shares of Stock with respect to which the Options are being exercised. The Participant’s obligation to deliver written notice of exercise is satisfied by electronic delivery of such notice through means satisfactory to the Committee and prescribed by the Company. The exercise of the Option shall be deemed effective on the date such notice is received by the Office of the Secretary or by the Administrative Agent and payment is made to the Company of the aggregate Option Price (the “Exercise Date”); however, if payment of the aggregate Option Price is made pursuant to a sale of shares of Stock as contemplated by subsection 6.2(g)(iv)(E) below, the Exercise Date shall be deemed to be the date of such sale. If requested by the Company, such notice shall contain the Participant’s representation that he or she is purchasing the Stock for investment purposes only and his or her agreement not to sell any Stock so purchased in any manner that is in violation of the Exchange Act or any applicable state law, and such restriction, or notice thereof, shall be placed on the certificates representing the Stock so purchased. The purchase of such Stock shall take place upon delivery of such notice to the Office of the Secretary of the Company or to the Administrative Agent, at which time the aggregate Option Price shall be paid in full to the Company by any of the methods or any combination of the methods set forth in subsection 6.2(g)(iv) below.

          (ii) The shares of Stock to which the Participant is entitled as a result of the exercise of the Option shall be issued by the Company and either (A) delivered by electronic means to an account designated by the Participant or (B) delivered to the Participant in the form of a properly executed certificate or certificates representing such shares of Stock. If shares of Stock are used to pay all or part of the aggregate Option Price, the Company shall issue and deliver to the Participant the additional shares of Stock, in excess of the aggregate Option Price or portion thereof paid using shares of Stock, to which the Participant is entitled as a result of the Option exercise.

          (iii) The Company’s obligation to deliver the shares of Stock to which the Participant is entitled as a result of the exercise of the Option shall be subject to the payment in full to the Company of the aggregate Option Price and the required tax withholding.

          (iv) The aggregate Option Price shall be paid by any of the following methods or any combination of the following methods:

               (A) in cash, including the wire transfer of funds in U.S. dollars to one of the Company’s bank accounts located in the United States, with such bank account to be designated from time to time by the Company;

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               (B) by personal, certified or cashier’s check payable in U.S. dollars to the order of the Company;

               (C) by delivery to the Company or the Administrative Agent of certificates representing a number of shares of Stock then owned by the Participant, the aggregate Fair Market Value of which (as of the Exercise Date) is equal to the aggregate Option Price of the Option being exercised, properly endorsed for transfer to the Company, provided that the shares of Stock used for this purpose must have been owned by the Participant for a period of at least six months;

               D) by certification or attestation to the Company or the Administrative Agent of the Participant’s ownership (as of the Exercise Date) of a number of shares of Stock, the aggregate Fair Market Value of which (as of the Exercise Date) is not greater than the aggregate Option Price of the Option being exercised, provided that the shares of Stock used for this purpose have been owned by the Participant for a period of at least six months; or

               (E) by delivery to the Company or the Administrative Agent of a properly executed notice of exercise together with irrevocable instructions to a broker to promptly deliver to the Company, by wire transfer or check as noted in subsection 6.2(g)(iv)(A) and (B) above, the amount of the proceeds of the sale of all or a portion of the Stock or of a loan from the broker to the Participant necessary to pay the aggregate Option Price.

     (h) Tax Withholding. Each Stock Option agreement shall provide that, upon exercise of the Option, the Participant shall make appropriate arrangements with the Company to provide for not less than the minimum amount of tax withholding required by law, including without limitation Sections 3102 and 3402 or any successor section(s) of the Internal Revenue Code and applicable state and local income and other tax laws, by payment of such taxes in cash (including wire transfer), by check, or as provided in Section 11 hereof.

     (i) Repricing Prohibited. Subject to Sections 4, 6, 12, 13, and 16, outstanding Stock Options granted under this Plan shall not be repriced without approval by the Company’s stockholders. In particular, neither the Board nor the Committee may take any action: (1) to amend the terms of an outstanding Option or SAR to reduce the Option Price or grant price thereof, cancel an Option or SAR and replace it with a new Option or SAR with a lower Option Price or grant price, or that has an economic effect that is the same as any such reduction or cancellation or (2) to cancel an outstanding Option or SAR having an Option Price or grant price above the then-current Fair Market Value of the Stock in exchange for the grant of another type of Award, without, in each such case, first obtaining approval of the stockholders of the Company of such action.

     (j) Stockholder Privileges. No Participant shall have any rights as a stockholder with respect to any shares of Stock covered by an Option until the Participant becomes the holder of record of such Stock. Except as provided in Section 4 hereof, no adjustments shall be made for dividends or other distributions or other rights as to which

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there is a record date preceding the date on which such Participant becomes the holder of record of such Stock.

     (k) Section 409A Avoidance. Once granted, no Stock Option shall be modified, extended, or renewed in any way that would cause the Stock Option to be subject to Internal Revenue Code Section 409A. The Option Period shall not be extended to any date that would cause the Stock Option to become subject to Internal Revenue Code Section 409A. The Option Price shall not be adjusted to reflect any dividends declared and paid on the Stock between the date of grant and the date the Stock Option is exercised; however, the right to one or more dividends declared and paid on the Stock between the date of grant and the date the Option is exercised may be set forth in a separate arrangement.

Section 7

7.1 Stock Appreciation Rights. The Committee is authorized to grant SARs to Participants either alone (“freestanding”) or in tandem with other Awards, including Performance Awards, Options, and Restricted Stock. Stock Appreciation Rights granted in tandem with any Award must be granted at the same time as the Award is granted. Stock Appreciation Rights granted in tandem with Options shall terminate and no longer be exercisable upon the termination or exercise of the related Stock Options Options granted in tandem with Stock Appreciation Rights shall terminate and no longer be exercisable upon the termination or exercise of the related Stock Appreciation Rights. The Committee shall establish the terms and conditions applicable to any Stock Appreciation Rights, which terms and conditions need not be uniform but may not be inconsistent with the terms of the Plan. Freestanding Stock Appreciation Rights shall generally be subject to terms and conditions substantially similar to those described in Section 4 and subsection 6.2 for Options, including, but not limited to, the requirements of subsections 6.2(b), (d), and (i) and subsection 4.7 regarding general adjustment rules, minimum price, duration, and prohibition on repricing.

7.2 Section 409A Avoidance. The SAR Price may be fixed on the date it is granted or the SAR Price may vary according to an objective formula specified by the Committee at the time of grant. However, the SAR Price can never be less than the Fair Market Value of the Stock on the date of grant. The SAR grant must specify the number of shares to which it applies, which must be fixed at the date of grant (subject to adjustment pursuant to Sections 4, 6, and 11). Once granted, no SAR shall be modified, extended, or renewed in any way that would cause the SAR to be subject to Internal Revenue Code Section 409A. The period during which the SAR may be exercised shall not be extended to any date that would cause the SAR to become subject to Internal Revenue Code Section 409A. The value of the SAR shall not be adjusted to reflect any dividends declared and paid on the Stock between the date of grant and the date the SAR is exercised; however, the right to one or more dividends declared and paid on the Stock between the date of grant and the date the SAR is exercised may be set forth in a separate arrangement.

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Section 8

Restricted Stock and Restricted Stock Units

8.1 Restriction Period. At the time an Award of Restricted Stock or Restricted Stock Units is made, the Committee shall establish the terms and conditions applicable to such Award, including the period of time (the “Restriction Period”) and attainment of performance goals during which certain restrictions established by the Committee shall apply to the Award. Each such Award, and designated portions of the same Award, may have a different Restriction Period, at the discretion of the Committee. Except as permitted or pursuant to Sections 12 and 13 hereof, the Restriction Period applicable to a particular Award shall not be changed. Restricted Stock or Restricted Stock Units may or may not be subject to Internal Revenue Code Section 409A. If they are subject to Internal Revenue Code Section 409A, the grant of the Restricted Stock or Restricted Stock Units must contain the provisions needed to comply with the requirements of Internal Revenue Code Section 409A, including but not limited to (i) the timing of any election to defer receipt of the Restricted Stock or Restricted Stock Units beyond the date of vesting, (ii) the timing of any payout election, and (iii) the timing of the settlement of Restricted Stock or a Restricted Stock Unit. Restricted Stock or Restricted Stock Units that are subject to Internal Revenue Code Section 409A may be adjusted to reflect any dividends declared and paid on the Stock between the date of grant and the date the Restricted Stock or Restricted Stock Unit vests, but only to the extent permitted in IRS guidance of general applicability.

8.2 Certificates for Stock. Restricted Stock shall be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Participant, the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, that the Company retain physical possession of the certificates, and that the Participant deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock represented by a stock certificate registered in the name of the Participant.

8.3 Restricted Stock Terms and Conditions. Participants shall have the right to enjoy all shareholder rights during the Restriction Period except that:

     (a) The Participant shall not be entitled to delivery of the Stock certificate until the Restriction Period shall have expired.

     (b) The Participant may not sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of the Stock during the Restriction Period.

     (c) A breach of the terms and conditions established by the Committee with respect to the Restricted Stock shall cause a forfeiture of the Restricted Stock and any dividends withheld thereon.

     (d) Dividends and Splits. As a condition to the grant of an Award of Restricted Stock, the Committee may specify whether any cash dividends paid on a share of Restricted Stock be automatically reinvested in additional shares of Restricted Stock or applied to the purchase of additional Awards under this

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Plan. Unless otherwise determined by the Committee, Stock distributed in connection with a Stock split or Stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Stock or other property has been distributed.

8.4 Restricted Stock Units. The Committee is authorized to grant Restricted Stock Units to Participants, which are rights to receive Stock at the end of a specified deferral period, subject to the following terms and conditions:

Award and Restrictions. Settlement of an Award of Restricted Stock Units shall occur upon expiration of the deferral period specified for such Restricted Stock Unit by the Committee (or, if permitted by the Committee, as elected by the Participant). In addition, Restricted Stock Units shall be subject to such restrictions (which may include a risk of forfeiture) as the Committee may impose, if any, which restrictions may lapse at the expiration of the deferral period or at earlier specified times (including based on achievement of performance goals and/or future service requirements), separately or in combination, in installments or otherwise, as the Committee may determine. Restricted Stock Units shall be satisfied by the delivery of cash or Stock in the amount equal to the Fair Market Value of the specified number of shares of Stock covered by the Restricted Stock Units, or a combination thereof, as determined by the Committee at the date of grant or thereafter.

8.5 Deferral of Receipt of Restricted Stock Units. With the consent of the Committee, a Participant who has been granted a Restricted Stock Unit may by compliance with the then applicable procedures under the Plan irrevocably elect in writing to defer receipt of all or any part of any distribution associated with that Restricted Stock Unit Award in accordance with either the terms and conditions of the Deferred Delivery Plan or the terms and conditions specified under the grant agreement and related documents. The terms and conditions of any such deferral, including, but not limited to, the period of time for, and form of, election; the manner and method of payout; and the use and form of Dividend Equivalents in respect of stock-based units resulting from such deferral, shall be as determined by the Committee. The Committee may, at any time and from time to time, but prospectively only except as hereinafter provided, amend, modify, change, suspend, or cancel any and all of the rights, procedures, mechanics, and timing parameters relating to such deferrals. In addition, the Committee may, in its sole discretion, accelerate the pay out of such deferrals (and any earnings thereon), or any portion thereof, either in a lump sum or in a series of payments, but only to the extent that the payment or the change in timing of the payment will not cause a violation of Internal Revenue Code Section 409A.

8.6 Bonus Stock and Awards in Lieu of Obligations. The Committee is authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu of obligations to pay cash or deliver other property under this Plan or under plans or compensatory arrangements, provided that, in the case of Participants subject to Section 16 of the Exchange Act, the amount of such grants remains within the discretion of the Committee

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to the extent necessary to ensure that acquisitions of Stock or other Awards are exempt from liability under Section 16(b) of the Exchange Act. Stock or Awards granted hereunder shall be subject to such other terms as shall be determined by the Committee. In the case of any grant of Stock to an officer of the Company or an Affiliate in lieu of salary or other cash compensation, the number of shares granted in place of such compensation shall be reasonable, as determined by the Committee.

8.7 Dividend Equivalents. The Committee is authorized to grant Dividend Equivalents to a Participant, entitling the Participant to receive cash, Stock, other Awards, or other property equal in value to dividends paid with respect to a specified number of shares of Stock, or other periodic payments. Dividend Equivalents may be awarded on a free-standing basis or in connection with another Award. The Committee may provide that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Stock, Awards, or other investment vehicles, and subject to risk of forfeiture, as the Committee may specify.

Section 9

Performance Awards

9.1 Establishment of Performance Goals for Company. Performance Goals applicable to a Performance Award shall be established by the Committee in its absolute discretion on or before the date of grant and within the time period prescribed by, and shall otherwise comply with the requirements of, Code Section 162(m)(4)(C), or any successor provision thereto, and the regulations thereunder, for performance-based compensation. Such Performance Goals may include or be based upon any of the following criteria, either in absolute amount, per share, or per barrel of oil equivalent (boe): pretax income or after tax income, operating profit, return on equity, capital or investment, earnings, book value, increase in cash flow return, sales or revenues, operating expenses (including, but not limited to, lease operating expenses, severance taxes and other production taxes, gathering and transportation, general and administrative costs, and other components of operating expenses), stock price appreciation, implementation or completion of critical projects or processes, production growth, reserve growth, and/or corporate acquisition goals based on value of assets acquired or similar objective measures.

Where applicable, the Performance Goals may be expressed in terms of attaining a specified level of a particular criteria or attaining a percentage increase or decrease in a particular criteria, and may be applied relative to internal goals or levels attained in prior years or related to other companies or indices or as ratios expressing relationship between Performance Goals, or any combination thereof, as determined by the Committee.

The Performance Goals may include a threshold level of performance below which no vesting will occur, levels of performance at which specified vesting will occur, and a maximum level of performance at which full vesting will occur.

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The Committee may in its discretion classify Participants into as many groups as it determines, and as to any Participant relate his/her Performance Goals partially, or entirely, to the measured performance, either absolutely or relatively, of an identified subsidiary, division, operating company, test strategy, or new venture of the Company and/or its Affiliates.

Notwithstanding any other provision of the Plan, payment or vesting of any Performance Award shall not be made until the applicable Performance Goals have been satisfied and any other material terms of such Award were in fact satisfied. The Committee shall certify in writing the attainment of each Performance Goal. Notwithstanding any provision of the Plan to the contrary, with respect to any Performance Award, (a) the Committee may not adjust, downwards or upwards, any amount payable, or other benefits granted, issued, retained, and/or vested pursuant to such an Award on account of satisfaction of the applicable Performance Goals and (b) the Committee may not waive the achievement of the applicable Performance Goals, except in the case of the Participant’s death or disability, or a Change of Control.

9.2 Levels of Performance Required to Earn Performance Awards. At or about the same time that Performance Goals are established for a specific period, the Committee shall in its absolute discretion establish the percentage of the Performance Awards granted for such Performance Period which shall be earned by the Participant for various levels of performance measured in relation to achievement of Performance Goals for such Performance Period.

9.3 Other Restrictions. The Committee shall determine the terms and conditions applicable to any Performance Award, which may include restrictions on the delivery of Stock payable in connection with the Performance Award and restrictions that could result in the future forfeiture of all or part of any Stock earned. The Committee may provide that shares of Stock issued in connection with a Performance Award be held in escrow and/or legended. Performance Awards may or may not be subject to Internal Revenue Code Section 409A. If a Performance Award is subject to Internal Revenue Code Section 409A, the Performance Award grant agreement shall contain the terms and conditions needed to comply with the requirements of Internal Revenue Code Section 409A, including but not limited to (i) the timing of any election to defer receipt of the Performance Award, (ii) the timing of any payout election, and (iii) the timing of the actual payment of the Performance Award. Performance Awards that are subject to Internal Revenue Code Section 409A may be adjusted to reflect any dividends declared and paid on the Stock between the date of grant and the date the Performance Award is paid, but only to the extent permitted in IRS guidance of general applicability.

9.4 Notification to Participants. Promptly after the Committee has established the Performance Goals with respect to a Performance Award, the Participant shall be provided with written notice of the Performance Goals so established.

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9.5 Measurement of Performance against Performance Goals. The Committee shall, as soon as practicable after the close of a Performance Period, determine (a) the extent to which the Performance Goals for such Performance Period have been achieved and (b) the percentage of the Performance Awards earned as a result.

These determinations shall be absolute and final as to the facts and conclusions therein made and be binding on all parties. Promptly after the Committee has made the foregoing determination, each Participant who has earned Performance Awards shall be notified. For all purposes of this Plan, notice shall be deemed to have been given the date action is taken by the Committee making the determination. Participants may not sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of all or any portion of their Performance Awards during the Performance Period.

9.6 Treatment of Performance Awards Earned. Upon the Committee’s determination that a percentage of any Performance Award has been earned for a Performance Period, Participants to whom such earned Performance Awards have been granted and who have been in the employ of the Company or Affiliates continuously from the date of grant until the end of the Performance Period, subject to the exceptions set forth in the Performance Award agreement and in Sections 10 and 12 hereof, shall be entitled, subject to the other conditions of this Plan, to payment in accordance with the terms and conditions of the Performance Awards. Performance Awards shall under no circumstances become earned or have any value whatsoever for any Participant who is not in the employ of the Company or its Affiliates continuously during the entire Performance Period for which such Performance Award was granted, except as provided in Sections 10 and 12.

9.7 Subsequent Performance Award Grants. Following the grant of Performance Awards with respect to a Performance Period, additional Participants may be designated by the Committee for grant of Performance Awards for such Performance Period subject to the same terms and conditions set forth for the initial grants, except that the Committee, in its sole discretion, may reduce the value of the amounts to which subsequent Participants may become entitled, prorated according to reduced time spent during the Performance Period, and the applicable Performance Award agreement shall be modified to reflect such reduction.

9.8 Stockholder Privileges. No Participant shall have any rights as a stockholder with respect to any shares of Stock covered by a Performance Award until the Participant becomes the holder of record of such Stock.

Section 10

Termination of Employment, Death, Disability, etc.

10.1 Termination of Employment. Except as provided herein, the treatment of an Award upon a termination of employment or any other service relationship by and

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between a Participant and the Company or an Affiliate shall be specified in the agreement controlling such Award.

10.2 Termination for Cause. If the employment of the Participant by the Company is terminated for cause, as determined by the Committee, all Awards to such Participant shall thereafter be void for all purposes. As used in subsections 9.1, 10.2, and 10.3 hereof, “cause” shall mean a gross violation, as determined by the Committee, of the Company’s established policies and procedures, provided that the effect of this subsection 10.2 shall be limited to determining the consequences of a termination and that nothing in this subsection 10.2 shall restrict or otherwise interfere with the Company’s discretion with respect to the termination of any employee.

10.3 Performance Awards. Except as set forth below, each Performance Award shall state that each such Award shall be subject to the condition that the Participant has remained an Eligible Person from the date of grant until the applicable vesting date as follows:

     (a) If the Participant voluntarily leaves the employment of the Company or an Affiliates, or if the employment of the Participant is terminated by the Company for cause or otherwise, any Performance Award to such Participant not previously vested shall thereafter be void and forfeited for all purposes.

     (b) A Participant shall become vested in all Performance Awards that have met the Performance Goals within the Performance Period on the date the Participant retires from employment with the Company on or after attaining retirement age (which for all purposes of this Plan is determined to be age 65, unless otherwise designated by the Committee at the time the Award is granted), on the date the Participant dies while employed by the Company, or on the date the Participant terminates service with the Company and the Affiliates due to permanent disability (as determined pursuant to the Company’s Long-Term Disability Plan or any successor plan, unless the Performance award is subject to Internal Revenue Code Section 409A, in which case “permanent disability” must also fall within the meaning specified in Internal Revenue Code Section 409A(a)(2)(C) or a more restrictive meaning established by the Committee) while employed by the Company. Such Participant shall not become entitled to any payment which may arise due to the occurrence of a Performance Goal after the Participant dies, terminates service due to permanent disability, or retires. Payment shall occur as soon as administratively convenient following the date the Participant dies, terminates service due to permanent disability, or retires, but in no event shall the payment occur later than March 15 in the calendar year immediately following the calendar year in which the Participant died, so terminates service, or retired. If the Participant dies before receiving payment, the payment shall be made to those entitled under the Participant’s will or, if there is no will, to the Participant’s estate.

10.4 Forfeiture Provisions. Subject to Sections 12 and 14, in the event a Participant terminates employment during a Restriction Period for the Participant’s Restricted Stock or Restricted Stock Units, such Awards will be forfeited; provided, however, that the

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Committee may provide for proration or full payout in the event of (a) death, (b) permanent disability, or (c) any other circumstances the Committee may determine.

Section 11

Tax Withholding

11.1 Withholding Requirement. The Company and any Affiliate is authorized to withhold from any Award granted, or any payment relating to an Award under this Plan, including from a distribution of Stock, amounts of withholding and other taxes or social security payments due or potentially payable in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company and Participants to satisfy obligations for the payment of withholding taxes and other tax or social security obligations relating to any Award. This authority shall include authority to withhold or receive Stock or other property and to make cash payments in respect thereof, in satisfaction of a Participant’s tax obligations, either on a mandatory or elective basis at the discretion of the Committee.

11.2 Withholding Requirement — Stock Options and SARs. The Company’s obligations to deliver shares of Stock upon the exercise of an Option or SAR shall be subject to the Participant’s satisfaction of all applicable federal, state, and local income and other tax and social security withholding requirements.

At the time the Committee grants an Option, it may, in its sole discretion, grant the Participant an election to pay all such amounts of required tax withholding, or any part thereof:

     (a) by the delivery to the Company or the Administrative Agent of a number of shares of Stock then owned by the Participant, the aggregate Fair Market Value of which (as of the Exercise Date) is not greater than the amount required to be withheld, provided that such shares have been held by the Participant for a period of at least six months;

     (b) by certification or attestation to the Company or the Administrative Agent of the Participant’s ownership (as of the Exercise Date) of a number of shares of Stock, the aggregate Fair Market Value of which (as of the Exercise Date) is not greater than the amount required to be withheld, provided that such shares of Stock have been owned by the Participant for a period of at least six months; or

     (c) by the Company or the Administrative Agent withholding from the shares of Stock otherwise issuable to the Participant upon exercise of the Option, a number of shares of Stock, the aggregate Fair Market Value of which (as of the Exercise Date) is not greater than the amount required to be withheld. Any such elections by Participants to have shares of Stock withheld for this purpose will be subject to the following restrictions:

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          (i) all elections shall be made on or prior to the Exercise Date; and

          (ii) all elections shall be irrevocable.

11.3 Section 16 Requirements. If the Participant is an officer or director of the Company within the meaning of Section 16 or any successor section(s) of the Exchange Act (“Section 16”), the Participant must satisfy the requirements of Section 16 and any applicable rules and regulations thereunder with respect to the use of shares of Stock to satisfy such tax withholding obligation.

11.4 Restricted Stock and Performance Award Payment and Tax Withholding. Each Restricted Stock and Performance Award agreement shall provide that, upon payment of any entitlement under such an Award, the Participant shall make appropriate arrangements with the Company to provide for the amount of minimum tax and social security withholding required by law, including without limitation Sections 3102 and 3402 or any successor section(s) of the Internal Revenue Code and applicable state and local income and other tax and social security laws. The withholding may be deducted from the Award. Any payment under such an Award shall be made in a proportion of cash and shares of Stock, determined by the Committee, such that the cash portion shall be sufficient to cover the withholding amount required by this Section. The cash portion of any payment shall be based on the Fair Market Value of the shares of Stock on the applicable date of vesting to which such tax withholding relates. Such cash portion shall be withheld by the Company to satisfy applicable tax and social security withholding requirements.

Section 12

Change of Control

12.1 In General. In the event of the occurrence of a Change of Control of the Company:

     (a) Without further action by the Committee or the Board,

          (i) all outstanding Options granted on or prior to December 31, 2009 shall automatically vest so as to make all such Options fully vested and exercisable as of the date of such Change of Control;

          (ii) all outstanding Options granted on or after January 1, 2010 shall fully vest upon the Participant’s Involuntary Termination or Voluntary Termination with Cause occurring on or after a Change of Control. Such newly vested Options shall be fully exercisable as of the date of the Involuntary Termination or Voluntary Termination with Cause on or after a Change of Control occurs.

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     (b) Without further action by the Committee or the Board,

          (i) all unvested Restricted Stock Awards and Restricted Stock Units granted on or prior to December 31, 2009 shall automatically vest. Such newly vested Restricted Stock Units shall be converted to Stock and the Participant shall be issued the requisite number of shares, after any withholding under Section 11, as soon as administratively practicable after the Change of Control occurs, unless the Participant had elected to defer Restricted Stock Units to the Deferred Delivery Plan in which case the Participant’s account in the Deferred Delivery Plan shall be credited with deferred Restricted Stock Units as of the date of the Change of Control;

          (ii) all unvested Restricted Stock Awards and Restricted Stock Units granted on or after January 1, 2010 shall fully vest upon the Participant’s Involuntary Termination or Voluntary Termination with Cause occurring on or after a Change of Control. Such newly vested Restricted Stock Units shall be converted to Stock and the Participant shall be issued the requisite number of shares, after any withholding under Section 11, as soon as administratively practicable after the Involuntary Termination or Voluntary Termination with Cause on or after a Change of Control occurs, unless the Participant had elected to defer Restricted Stock Units to the Deferred Delivery Plan in which case the Participant’s account in the Deferred Delivery Plan shall be credited with deferred Restricted Stock Units as of the date of the Involuntary Termination or Voluntary Termination with Cause on or after the Change of Control occurs.

     (c) Assuming the achievement of a Performance Goal, the entitlement to receive cash and Stock under any outstanding Performance Award grants shall vest automatically, without further action by the Committee or the Board, and shall become payable as follows:

          (i) For Performance Awards granted on or prior to December 31, 2009, if such Change of Control occurs subsequent to the achievement of a Performance Goal, any remainder of such payout amount shall vest as of the date of such Change of Control and shall be paid by the Company to the Participant within thirty (30) days of the date of such Change of Control in the manner set out in subsection 12.1 hereof.

          (ii) For Performance Awards granted on or prior to December 31, 2009, if the achievement of a Performance Goal occurs subsequent to the date of a Change of Control, the applicable payout amount shall vest in full for which the Performance Period has not yet ended and shall be paid by the Company to the Participant within thirty (30) days after the Performance Goal is reached. The payment will occur only if the Participant is employed at the time that the Performance Goal is reached

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or if the Performance Goal is reached after the Participant was terminated for any reason (or without reason) after the Change of Control.

          (iii) For Performance Awards granted on or after January 1, 2010, if such Change of Control occurs subsequent to the achievement of a Performance Goal, any remainder of such payout amount shall vest as of the date of the Participant’s Involuntary Termination or Voluntary Termination with Cause occurring on or after the date of such Change of Control and shall be paid by the Company to the Participant within thirty (30) days of the date of such Involuntary Termination or Voluntary Termination with Cause which occurs on or after the date of the Change of Control in the manner set out in subsection 12.1 hereof.

          (iv) For Performance Awards granted on or after January 1, 2010, if the achievement of a Performance Goal occurs subsequent to the date of a Change of Control, the applicable payout amount shall vest in full for which the Performance Period has not yet ended as of the date of the Participant’s Involuntary Termination or Voluntary Termination with Cause occurring on or after such Change of Control and shall be paid by the Company to the Participant within thirty (30) days after the later of (1) the date of the Participant’s Involuntary Termination or Voluntary Termination with Cause or (2) the date that the Performance Goal is reached. The payment will occur only if the Participant is employed at the time that the Performance Goal is reached or if the Performance Goal is reached after the Participant’s Involuntary Termination or Voluntary Termination with Cause occurring on or after the Change of Control.

     (d) To the extent that any Award is subject to Internal Revenue Code Section 409A, the Award shall contain appropriate provisions to comply with Internal Revenue Code Section 409A, which shall supersede the provisions of subsections (a), (b), and (c).

Section 13

Reorganization or Liquidation

In the event that the Company is merged or consolidated with another corporation and the Company is not the surviving corporation, or if all or substantially all of the assets or more than 20 percent of the outstanding voting stock of the Company is acquired by any other corporation, business entity or person, or in case of a reorganization (other than a reorganization under the United States Bankruptcy Code) or liquidation of the Company, then the Committee, or the board of directors of any corporation assuming the obligations of the Company, shall, as to the Plan and outstanding Awards make appropriate provision for the adoption and continuation of the Plan by the acquiring or successor corporation and for the protection of any holders of such outstanding Awards by the substitution on an equitable basis of appropriate stock of the Company or of the merged, consolidated, or

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otherwise reorganized corporation which will be issuable with respect to the Stock. Additionally, upon the occurrence of such an event and provided that a Performance Goal has occurred, upon written notice to the Participants, the Committee may accelerate the vesting and payment dates of the entitlement to receive cash and Stock under outstanding Awards so that all such existing entitlements are paid prior to any such event. If a Performance Goal has not yet been attained, the Committee in its discretion may make equitable payment or adjustment.

In its discretion, and on such terms and conditions as it deems appropriate, the Committee may provide, either by the terms of an agreement applicable to any Award or by resolution adopted prior to the occurrence of a Change of Control or an event described in this Section 13, that any outstanding Award (or portion thereof) shall be converted into a right to receive cash, on or as soon as practicable following the closing date or expiration date of the transaction resulting in the Change of Control or such event in an amount equal to the highest value of the consideration to be received in connection with such transaction for one share of Stock, or, if higher, the highest Fair Market Value of a share of Stock during the thirty (30) consecutive business days immediately prior to the closing date or expiration date of such transaction, less the per-share Option Price or grant price of SARs, as applicable to the Award, multiplied by the number of shares subject to such Award, or the applicable portion thereof.

Section 14

Rights of Employees and Participants

14.1 Employment. Neither anything contained in the Plan or any agreement nor the granting of any Award under the Plan shall confer upon any Participant any right with respect to the continuation of his or her employment by the Company or any Affiliate, or interfere in any way with the right of the Company or any Affiliate, at any time, to terminate such employment or to increase or decrease the level of the Participant’s compensation from the level in existence at the time of the Award.

An Eligible Person who has been granted an Award in one year shall not necessarily be entitled to be granted Awards in subsequent years.

14.2 Non-transferability. Except as otherwise determined at any time by the Committee as to any Awards other than ISOs, no right or interest of any Participant in an Award granted pursuant to the Plan shall be assignable or transferable during the lifetime of the Participant, either voluntarily or involuntarily, or subjected to any lien, directly or indirectly, by operation of law, or otherwise, including execution, levy, garnishment, attachment, pledge, bankruptcy, or court order; provided that the Committee may permit further transferability of Awards other than ISOs, on a general or a specific basis, and may impose conditions and limitations on any permitted transferability, subject to any applicable Restriction Period; provided further, however, that no Award may be transferred for value or other consideration without first obtaining approval thereof by the

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stockholders of the Company. In the event of a Participant’s death, a Participant’s rights and interests in any Award as set forth in an Award agreement, shall be transferable by testamentary will or the laws of descent and distribution, and payment of any entitlements due under the Plan shall be made to the Participant’s legal representatives, heirs, or legatees. If in the opinion of the Committee a person entitled to payments or to exercise rights with respect to the Plan is disabled from caring for his or her affairs because of mental condition, physical condition, or age, payment due such person may be made to, and such rights shall be exercised by, such person’s guardian, conservator, or other legal personal representative upon furnishing the Committee with evidence satisfactory to the Committee of such status. If any individual entitled to payment or to exercise rights with respect to the Plan is a minor, the Committee shall cause the payment to be made to (or the right to be exercised by) the custodian or representative who, under the state law of the minor’s domicile, is authorized to act on behalf of the minor or is authorized to receive funds on behalf of the minor. With respect to those Awards, if any, that are permitted to be transferred to another individual, references in the Plan to exercise or payment related to such Awards by or to the Participant shall be deemed to include, as determined by the Committee, the Participant’s permitted transferee. A Participant’s unexercised Option or SAR, or amounts due but remaining unpaid to such Participant, at the Participant’s death, shall be exercised or paid as designated by the Participant by will or by the laws of descent and distribution. In the event any Award is exercised by or otherwise paid to the executors, administrators, heirs or distributees of the estate of a deceased Participant, or the transferee of an Award, in any such case, pursuant to the terms and conditions of the Plan and the applicable Award agreement and in accordance with such terms and conditions as may be specified from time to time by the Committee, the Company shall be under no obligation to issue shares of Stock thereunder unless and until the Company is satisfied, as determined in the discretion of the Committee, that the person or persons exercising such Award, or to receive such payment, are the duly appointed legal representative of the deceased Participant’s estate or the proper legatees or distributees thereof, or the valid transferee of such Award, as applicable. Any purported assignment, transfer or encumbrance of an Award that does not comply with this Section 14.2 shall be void and unenforceable against the Company.

14.3 Noncompliance with Internal Revenue Code Section 409A. If an Award is subject to the requirements of Internal Revenue Code Section 409A, to the extent that the Company or an Affiliate takes any action that causes a violation of Internal Revenue Code Section 409A or fails to take reasonable actions required to comply with Internal Revenue Code Section 409A, in each case as determined by the Committee, the Company shall pay an additional amount to the Participant (or beneficiary) equal to the additional income tax imposed pursuant to Internal Revenue Code Section 409A on the Participant as a result of such violation, plus any taxes imposed on this additional payment.

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Section 15

Other Employee Benefits

The amount of any income deemed to be received by a Participant as a result of the payment under an Award or exercise shall not constitute “earnings” or “compensation” with respect to which any other employee benefits of such Participant are determined, including without limitation benefits under any pension, profit sharing, life insurance, or salary continuation plan.

Section 16

Amendment, Modification, and Termination

The Committee or the Board may at any time terminate, and from time to time may amend or modify the Plan, and the Committee or the Board may, to the extent permitted by the Plan, from time to time amend or modify the terms of any Award theretofore granted, including any Award agreement, in each case, retroactively or prospectively; provided, however, that no amendment or modification of the Plan may become effective without approval of the amendment or modification by the Company’s stockholders if stockholder approval is required to enable the Plan to satisfy an applicable statutory or regulatory requirements, unless the Company, on the advice of outside counsel, determines that stockholder approval is not necessary.

Notwithstanding any other provision of this Plan, no amendment, modification, or termination of the Plan or any Award shall adversely affect the previously accrued material rights or benefits of a Participant under any outstanding Award theretofore awarded under the Plan, without the consent of such Participant holding such Award, except to the extent necessary to avoid a violation of Internal Revenue Code Section 409A or the Board or the Committee determines, on advice of outside counsel or the Company’s independent accountants, that such amendment or modification is required for the Company, the Plan, or the Award to satisfy, comply with, or meet the requirements of any law, regulation, listing rule, or accounting standard applicable to the Company.

The Committee shall have the authority to adopt (without the necessity for further stockholder approval) such modifications, procedures, and subplans as may be necessary or desirable to comply with the provisions of the laws (including, but not limited to, tax laws and regulations) of countries other than the United States in which the Company may operate, so as to assure the viability of the benefits of the Plan to Participants employed in such countries.

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Section 17

Requirements of Law

17.1 Requirements of Law. The issuance of Stock and the payment of cash pursuant to the Plan shall be subject to all applicable laws, rules, and regulations, including applicable federal and state securities laws. The Company may require a Participant, as a condition of receiving payment under an Award, to give written assurances in substance and form satisfactory to the Company and its counsel to such effect as the Company deems necessary or appropriate in order to comply with federal and applicable state securities laws.

17.2 Section 16 Requirements. If a Participant is an officer or director of the Company within the meaning of Section 16 of the Exchange Act, Awards granted hereunder shall be subject to all conditions required under Rule 16b-3, or any successor rule(s) promulgated under the Exchange Act, to qualify the Award for any exemption from the provisions of Section 16 available under such Rule. Such conditions are hereby incorporated herein by reference and shall be set forth in the agreement with the Participant, which describes the Award.

17.3 Governing Law. The Plan and all agreements hereunder shall be construed in accordance with and governed by the laws of the State of Texas.

Section 18

Duration of the Plan

The Plan shall terminate on the ten year anniversary of the Effective Date. No grants shall be awarded after such termination; however, the terms of the Plan shall continue to apply to all Awards outstanding when the Plan terminates.

Dated: July 13, 2010; Effective December 31, 2009.

ATTEST:	APACHE CORPORATION
Cheri L. Peper	By:	Margery M. Harris
Cheri L. Peper		Margery M. Harris
Corporate Secretary		Vice President, Human Resources

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EX-10.5

Exhibit 10.5

APACHE CORPORATION
INCOME CONTINUANCE PLAN
(As Amended and Restated Effective as of January 1, 2009)

The Company desires to provide income continuance benefits to the following groups of its employees in case there is a change of control affecting the Company, for the reasons indicated:

     (i) Those 40 years of age and older, a protected class under federal and state age discrimination laws, because it has been determined that they typically have more difficulty in finding new employment than younger persons;

     (ii) Those who have been continuously employed by the Company for 10 years or more, because they have demonstrated their personal commitment to the success of the Company;

     (iii) Those whose special skills, experience or potential justify their inclusion in order to acquire or retain their services; and

     (iv) Those who are officers of the Company.

The Company adopted this Plan on January 10, 1986 in order to protect the income and other employee benefits of the Company’s Employees and in order to induce the Employees to remain in the employ of the Company for the ultimate benefit of the Company and its shareholders.

The Plan is intended to create a binding legal relationship between the Company and each Employee, and a copy of the Plan together with applicable conditions will be given to each Employee. It is also intended that this Plan comply with the requirements of Code §409A, and it shall be interpreted in this light.

Section 1. Definitions.

     (a) “Benefit Period” shall mean a period of time following an Employee’s Termination Date. An Employee’s Benefit Period is determined on his Termination Date and is equal to half the number of months of his continuous service with the Company on that date, up to a maximum Benefit Period of 24 months, with the following exceptions. The Benefit Period for an officer of the Company is 24 months. The Benefit Period may be extended to a maximum of 24 months, if the Company concludes the extension is reasonably required in order to induce an individual to accept employment or in order to retain an existing employee.

     (b) “Change of Control” shall mean the event occurring when a person, partnership or corporation together with all persons, partnerships or corporations acting in concert with each person, partnership or corporation, or any or all of them, acquires

more than 20% of the Company’s outstanding voting securities; provided that a Change of Control shall not occur if such persons, partnerships or corporations acquiring more than 20% of the Company’s voting securities is solicited to do so by the Company’s board of directors, upon its own initiative, and such persons, partnerships or corporations have not previously proposed to acquire more than 20% of the Company’s voting securities in an unsolicited offer made either to the Company’s board of directors or directly to the stockholders of the Company.

     (c) “COBRA Premium” shall mean 100% of the applicable premium, as defined in Code §4980B(f)(4).

     (d) “Code” shall mean the Internal Revenue Code of 1986, as amended, or any successor. References to a particular section of the Code shall also refer to any successor section.

     (e) “Committee” shall mean the administrative committee provided for in section 4.

     (f) “Company” shall mean Apache Corporation, a Delaware corporation, whose headquarters is in Houston, Texas, and, unless the context indicates otherwise, its wholly-owned subsidiaries and affiliates. “Affiliate” shall mean any and all entities that, together with Apache, would not cause any portion of this Plan to be treated as a multiple employer welfare arrangement pursuant to ERISA §3(40).

     (g) “Effective Date” shall mean the date on which a Change of Control takes place.

     (h) “Employee” shall mean each regular exempt or non-exempt employee of the Company on the Effective Date or the Termination Date who:

     (i) is 40 years of age or older; or

     (ii) has been continuously employed by the Company for 10 years or more; or

     (iii) has been designated by the Board of Directors as having special skills, experience or potential which warrant extension of the Plan to them; or

     (iv) is an officer of the Company.

     (i) “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

     (j) “Monthly Compensation” shall mean one-twelfth of the total of all compensation, including wages, salary, and any other incentive compensation, bonuses, commissions and non-salary and non-wage cash compensation, that was paid as consideration for the Employee’s services during the year immediately preceding the

2

Termination Date, or that would have been so paid at the Employee’s usual rate of compensation if the Employee had worked a full year.

     (k) “Participant” shall mean an Employee who has become entitled to the benefits under the Plan pursuant to section 2.

     (l) “Plan” shall mean the Income Continuance Plan of the Company, as amended.

     (m) “Separation from Service and Separate from Service” shall mean a separation from service within the meaning of Code §409A(a)(2)(A)(i). A Participant who has a Separation from Service “Separates from Service.” For purposes of this Plan, a Separation from Service occurs when the Company and the Participant both expect that the Participant’s level of services to permanently drop by more than 50% from his average level of services during the preceding 36 months (or, if less, the duration of his employment with the Company).

     (n) “Specified Employee” shall have the same meaning as in Code §409A(a)(2)(B)(i) and is determined using the default rules contained in the regulations and other guidance of general applicability issued pursuant to Code §409A.

     (o) “Termination Date” shall mean:

     (i) If an Employee’s Separation from Service is involuntary, his Termination Date is the date on which an authorized written or oral statement is conveyed to the Employee indicating that the Employee’s employment is terminated; or

     (ii) If an Employee’s Separation from Service in voluntary, his Termination Date is the date on which the Employee delivers a written notice to the Company or its successor advising of termination of employment.

Section 2. Eligibility for Benefits.

The benefits described in this Plan shall come into effect only if the Employee is “terminated” on or within two years after the Change of Control. For this purpose, an Employee is considered “terminated” in the following circumstances.

     (a) Involuntary Termination. Each of the following three conditions is satisfied.

          (i) The Company or its successor terminates an Employee for any reason on or after the Change of Control.

          (ii) The termination constitutes a Separation from Service.

          (iii) The termination does not result from an act of the Covered Employee that (A) constitutes common-law fraud, a felony, or a gross malfeasance of

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duty, and (B) is materially detrimental to the best interests of the Company or its successor.

     (b) Voluntary Termination with Cause. Either the facts and circumstances indicate that each of the following five conditions is satisfied or that the Participant’s termination is properly characterized as involuntary pursuant Treasury Regulation §1.409A-1(n)(2), other IRS guidance of general applicability, or an IRS private letter ruling applicable to the Participant.

          (i) The Employee Separates from Service of his own volition.

          (ii) The Employee’s Separation from Service occurs during the 24-month period beginning on the date of the Change of Control.

          (iii) One or more of the following conditions occurs without the Employee’s consent on or after the Change of Control:

               (A) There is a material diminution in the Employee’s base compensation, compared to his rate of base compensation on the date of the Change of Control.

               (B) There is a material diminution in the Employee’s authority, duties, or responsibilities.

               (C) There is a material diminution in the authority, duties, or responsibilities of the Employee’s supervisor, such as a requirement that the Employee (or his supervisor) report to a corporate officer or employee instead of reporting directly to the board of directors.

               (D) There is a material diminution in the budget over which the Employee retains authority.

               (E) There is a material change in the geographic location at which the Employee must perform his services, including, for example, the assignment of the Employee to a regular workplace that is more than 50 miles from his regular workplace on the date of the Change of Control.

          (iv) The Employee must notify the Company of the existence of one or more adverse conditions specified in paragraph (iii) within 90 days of the initial existence of the adverse condition. The notice must be provided in writing to Apache’s Vice President, Human Resources or his delegate. The notice may be provided by personal delivery or it may be sent by email, inter-office mail, regular mail (whether or not certified), fax, or any similar method. Apache’s Vice President, Human Resources or his delegate shall acknowledge receipt of the notice within 5 business days; the acknowledgement shall be sent to the Covered Employee by certified mail.

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          (v) The Company does not remedy the adverse condition within 30 days of being notified of the adverse condition.

Section 3. Benefits.

     (a) Income Continuation.

          (i) Timing of Payments, General. Except as provided for Specified Employees in paragraph (ii) or as reduced in paragraph (iii), each month the Participant will be paid his Monthly Compensation. The first payment will be made on the first 15th of the month that occurs after the Participant’s Separation from Service or as soon thereafter as is administratively practicable, and subsequent payments will be made on the 15th of each succeeding month. The number of payments the Participant receives is equal to the number of months in his Benefit Period.

          (ii) Exceptions for Specified Employees. This paragraph applies to the payments to a Participant who is a Specified Employee. The Specified Employee shall be paid as described in subsection (a) with the following exceptions for his first six payments.

               (A) No Deferral of Compensation. The payments under this Plan generally cease to be subject to a substantial risk of forfeiture when the Participant Separates from Service. If the payments cease to be subject to a substantial risk of forfeiture in one year and the Participant Separates from Service on or before October 15 of that year, the first six payments will be made at the times specified in subsection (a). If the payments cease to be subject to a substantial risk of forfeiture in one year and the Participant Separates from Service after October 15 of that year, regular payments will be made at the times specified in subsection (a) through February 15 in the year after the Separation from Service and the remainder of the first six payments will be paid on March 15 (or if March 15 is not a business day, the payment shall be made on the immediately preceding business day).

                    For example, if the Participant terminates on December 31, he will receive the regular payments on January 15 and February 15, and will receive four months’ worth of payments on March 15. His next payment will be on July 15.

                    For purposes of Treasury Regulation §§ 1.409A-1(b)(4)(i)(F) and 1.409A-2(b)(2), each payment from this Plan is considered a separate payment.

               (B) Limited Payments during First Six Months. This subparagraph applies only if subparagraph (A) does not apply to the Specified Employee, such as when his benefits cease to be subject to a substantial risk of forfeiture in a year earlier than the year of his Separation from Service. Each month, the sum of (1) the monthly payment under this paragraph (ii), (2) the amount of any gross-up under paragraphs (b)(iii) or (b)(iv), and (3) any payment from any other separation pay plan (other than those described in Treasury Regulation §1.409A-1(b)(9)(ii), (iv), or (v)) is limited to the lesser of one-third of the Participant’s annual

5

compensation for the year preceding the year in which he Separated from Service or one-third the of the annual limit in effect under Code §401(a)(17) for the calendar year containing the Separation from Service. For this purpose, “annual compensation” means the Participant’s annualized compensation based upon the annual rate of pay for services provided to Apache for the year preceding the year in which the Participant Separated from Service, adjusted for any increase during that year that was expected to continue indefinitely had the Participant not Separated from Service. If any monthly payments are limited by the foregoing, the reductions in each payment shall be aggregated and that exact sum shall be paid to the Specified Employee six months after his Separation from Service.

               (C) Reduction in Payments. The payments described in this subsection shall be reduced by the amount of any severance pay required by foreign law.

     (b) Continued Health Coverage.

          (i) General. The Participant shall continue to be covered by the Company’s medical plan, dental plan, vision plan, and employee assistance program after Separating from Service for the number of months in his Benefit Period. The Participant and his family members may also be able to continue their coverage even after the Benefit Period ends, pursuant to the continuation coverage rules under those plans. The benefits offered during the Benefit Period shall contain at least one alternative that is at least as valuable as the benefits offered immediately before the Change of Control. In addition, the Participant shall have the same coverage options as are available to current employees of the Company. The Participant may change his coverage from one alternative to another, and may add or drop coverage for his dependents or spouse, subject to the same rules as a current employee of the Company.

          (ii) Premiums. The Company may not charge a Participant for coverage under the employee assistance program. The Company may charge a premium for coverage under the medical, dental, and vision plans, but the maximum premium for the alternative(s) that are at least as valuable as the benefits offered immediately before the Change of Control shall not exceed what was charged under the schedule of premiums that was in effect immediately before the Change of Control. For example, if the premium was $64 per month for employee-only coverage and $200 per month for family coverage on the date of the Change of Control, and a male Participant marries a woman with children two months into their 24-month Benefit Period, their premium will be $200 per month for next 22 months for coverage that is at least as valuable as the family coverage benefits immediately before the Change of Control.

          (iii) Cafeteria Plan. Except as provided in paragraph (iv), the Company shall ensure that it maintains a cafeteria plan allows each Participant in this Plan to reduce their pay described in subsection (a) to pay their share of the premiums for medical, dental, and vision coverage generally on a pre-tax basis. If the cafeteria plan

6

fails one of its nondiscrimination tests, a highly paid Participant’s supposedly pre-tax deductions from his pay will generally be included in his taxable income. In this case, the Company shall pay the Participant a gross-up so that the highly paid ICP participant’s after-tax income equals what it would have if his deduction from his pay were made on a pre-tax basis.

          (iv) After-Tax Premiums. Each year, beginning with the year containing the Change of Control, the Committee shall determine whether each self-funded health plan is discriminatory. If a self-funded plan is discriminatory, each Participant who was a highly compensated individual (within the meaning of Code §105(h)(5)) shall pay the COBRA Premium for coverage with after-tax deductions from his pay described in subsection (a), and for purposes of Code §105 a separate self-funded health plan shall be considered to have been established for such highly compensated individuals for that year. If sufficient deductions were not properly withheld, the Participant is responsible for reimbursing the Company for the underwithholding. The Company shall pay a gross-up to each Participant who was a highly compensated individual (within the meaning of Code §105(h)(5)) so that his after-tax income equals what it would have if he only had to pay the amount described in paragraph (ii) for coverage and this amount was withheld on a pre-tax basis from his pay. In addition, the Committee may project during a year whether a self-funded plan will be discriminatory, and pay a gross-up to each Participant who is expected to be a highly compensated individual (within the meaning of Code §105(h)(5)) for that year so that his after-tax income equals what it would have if he only had to pay the amount described in paragraph (ii) for coverage and this amount were withheld on a pre-tax basis from his pay.

          (v) Gross-Up. If a Participant receives a gross-up under paragraph (iii) or (iv), the gross-up shall be paid as quickly as possible and no later than end of the calendar year following the calendar year in which the Participant’s right to the gross-up arose. However, if the gross-up is due to a tax audit or litigation addressing the existence or amount of a tax liability, the gross-up shall be paid as soon as administratively convenient after the litigation or audit is completed, and no later than the end of the calendar year following the calendar year in which the audit is completed or there is a final and non-appealable settlement or other resolution of the litigation.

     (c) Continued Life Insurance. The Company shall continue to provide term-life insurance for each Participant until (i) the Participant stops paying the premiums or (ii) the Benefit Period expires. The amount of the available coverage shall be at least as much as was provided to the Participant on the date of the Change of Control. The Participant-paid portion of the premiums shall be no larger than the premiums charged to current employees of the Company who perform the same types of tasks, at the same level, as the Participant performed immediately before the Change of Control.

     (d) Legal Expenses

          (i) Expenses That Are Not Subject to Code §409A. The Plan shall reimburse the Participant (or, if the Participant has died, his beneficiary, spouse, and

7

dependents — collectively, the “claimant” in this subsection) for all expenses, including attorneys’ fees, that the claimant incurs before the end of the calendar year containing the second anniversary of the Participant’s Separation from Service and that are incurred in enforcing the claimant’s rights against the Company or its successor under this Plan, regardless of the whether the action is successful. The Plan shall reimburse the claimant as soon as practicable and no later than the end of the calendar year containing the third anniversary of the Participant’s Separation from Service.

          (ii) Expenses That Are Subject to Code §409A. The Plan shall reimburse the claimant for all expenses, including attorneys’ fees, that he incurs after the calendar year containing the second anniversary of the Participant’s Separation from Service and before the third anniversary of the Participant’s death and that are incurred in enforcing the claimant’s rights against the Company or its successor under this Plan, regardless of the whether the action is successful.

     (e) Noncompliance with Code §409A. To the extent that the Company takes any action that causes a violation of Code §409A or fails to take reasonable actions required to comply with Code §409A, the Company shall pay an additional amount (the “gross-up”) to the individual(s) who are subject to the penalty tax under Code §409A(a)(1) that is sufficient to put him in the same after-tax position he would have been in had there been no violation of Code §409A. The Company shall not pay a gross-up if the cause of the violation of Code §409A is because the recipient failed to take reasonable actions (such as failing to timely provide the information required for tax withholding or failing to timely provide other information reasonably requested by the Committee — with the result that the delay in payment violates Code §409A). Any gross-up will be made as soon as administratively convenient after the Committee determines the gross-up is owed, and no later than the end of the calendar year immediately following the calendar year in which the additional taxes are remitted. However, if the gross-up is due to a tax audit or litigation addressing the existence or amount of a tax liability, the gross-up will be paid as soon as administratively convenient after the litigation or audit is completed, and no later than the end of the calendar year following the calendar year in which the audit is completed or there is a final and non-appealable settlement or other resolution of the litigation.

     (f) Death of Participant

          (i) Payments to Beneficiary. If the Participant dies during the Benefit Period, his Beneficiary shall be paid all remaining payments under subsection (a), (d), and (e), on the same schedule as they would have been paid to the Participant had he lived. See subsection (g) for possible delays. The amount paid to the Beneficiary will be reduced by the cost of health coverage of the surviving spouse and dependents. If the Beneficiary dies before receiving all such payments, any remaining payments shall be paid to the Beneficiary’s estate.

          (ii) Health Coverage. If the Participant dies during the Benefit Period, his spouse and dependents shall continue to receive the benefits identified in

8

subsection (b), at the price specified in subsection (b), for the remaining duration of the Benefit Period. A surviving spouse or dependent who is not covered by such plans when the Participant dies may elect to be covered by such plans whenever the Participant could have elected coverage for them had he not died. Any gross-up under subsection (b)(iii) or (b)(iv) shall be made the surviving spouse, if any, and otherwise to the dependents. (See section 9 for payments to a minor.)

          (iii) Beneficiary Designation. Each Participant shall designate one or more persons, trusts, or other entities as his Beneficiary to receive any amounts identified in paragraph (i). In the absence of an effective beneficiary designation as to part or all of a Participant’s interest in the Plan, such amount will be distributed to the Participant’s surviving spouse, if any, otherwise to the personal representative of the Participant’s estate.

          (iv) Special Rules for Spouses. A beneficiary designation may be changed by the Participant at any time and without the consent of any previously designated Beneficiary. However, if the Participant is married, his spouse will be his Beneficiary unless such spouse has consented to the designation of a different Beneficiary. To be effective, the spouse’s consent must be in writing, witnessed by a notary public, and filed with the Committee. If the Participant has designated his spouse as a primary or contingent Beneficiary, and the Participant and spouse later divorce (or their marriage is annulled), then the former spouse will be treated as having pre-deceased the Participant for purposes of interpreting a beneficiary designation that was completed prior to the divorce or annulment; this provision will apply only if the Committee is informed of the divorce or annulment before payment to the former spouse is authorized.

          (v) Disclaiming. Any individual or legal entity who is a Beneficiary may disclaim all or any portion of his interest in the Plan, provided that the disclaimer satisfies the requirements of Code §2518(b) and applicable state law. The legal guardian of a minor or legally incompetent person may disclaim for such person. The personal representative (or the individual or legal entity acting in the capacity of the personal representative according to applicable state law) may disclaim on behalf of a Beneficiary who has died. The amount disclaimed will be distributed as if the disclaimant had predeceased the individual whose death caused the disclaimant to become a Beneficiary.

     (g) Administrative Delays in Payments. The Committee may delay any payment from this Plan for as short a period as is administratively necessary. For example, a delay may be imposed upon all payments from the Plan when there is a change of recordkeeper or trustee, and a delay may be imposed on payments to any recipient until they have provided the information needed for tax withholding and tax reporting, as well as any other information reasonably requested by the Committee. However, no delay may last long enough for the Plan to be considered a “pension plan” within the meaning of ERISA §3(2).

9

     (h) Technical Note. If a Participant or Beneficiary has a taxable year different from the calendar year, the deadlines under Article II shall be adjusted to the latest date, as specified in IRS guidance of general applicability, that would permit compliance with Code §409A.

     (i) Cash Payment and Withholding. All payments from the Plan will be made in cash. The Plan will withhold any taxes or other amounts that it is required to withhold pursuant to any applicable law. The Plan will also withhold any amounts (such as medical premiums) that the recipient authorizes the Plan or the Company to withhold.

Section 4. Administration

     (a) Composition of the Committee.

          (i) Current. As of January 1, 2009, the Committee is comprised of the members of the Retirement Plan Advisory Committee.

          (ii) Before a Change of Control. Before a Change of Control, the board of directors of Apache shall appoint an administrative Committee consisting of no fewer than three individuals who may be, but need not be, Participants, officers, directors, or employees of the Company. Apache’s board of directors may remove Committee members at will. In the absence of any Committee members, Apache shall become the sole Committee member.

          (iii) After a Change of Control. This paragraph applies on and after the date of a Change of Control. The only individuals who are able to serve on the Committee after the date of the Change of Control are those who are not then employed by Apache, its successor, or any related legal entities. No Committee members may be added on or after the day of the Change of Control, except that, if the Committee is comprised solely of individuals, (A) the Committee may appoint a legal entity as a Committee member, who may generally resign by giving 60 days’ notice to the other Committee members, and (B) if the number of Committee members drops below three, the remaining member(s) may not resign until having appointed a legal entity or another individual as a Committee member. If all Committee members leave the Committee (if, for example, all Committee members die before the last one appoints a new Committee member or if the sole Committee member is a legal entity that goes out of business), the Committee shall automatically consist of the three Participants with the largest monthly payments from the Plan who are not then employed by Apache, its successor, or any related legal entities.

          (iv) Plan Administrator. The Committee is the Plan’s “administrator” within the meaning of ERISA §3(16)(A). The sole named fiduciaries of the Plan are the Committee and the trustees of any trusts from which Plan benefits may be paid.

     (b) Committee Duties. The Committee shall administer the Plan and shall have all discretion and powers necessary for that purpose, including, but not by way of

10

limitation, full discretion and power to interpret the Plan, to determine the eligibility, status, and rights of all persons under the Plan and, in general, to decide any dispute and all questions arising in connection with the Plan. The Committee shall direct the Company, the trustee of any rabbi trust established to pay Plan benefits, or both, as the case may be, concerning payments in accordance with the provisions of the Plan. The Committee shall maintain all Plan records except records of any trust. The Committee shall publish, file, or disclose — or cause to be published, filed, or disclosed — all reports and disclosures required by federal or state laws. The Committee may authorize one or more of its members or agents to sign instructions, notices, and determinations on its behalf.

     (c) Organization of Committee. The Committee shall adopt such rules as it deems desirable for the conduct of its affairs and for the administration of the Plan. It may appoint agents (who need not be members of the Committee) to whom it may delegate such powers as it deems appropriate, except that any dispute shall be determined by the Committee. The Committee may make its determinations with or without meetings. It may authorize one or more of its members or agents to sign instructions, notices, and determinations on its behalf. If a Committee decision or action affects a relatively small percentage of Plan Participants including a Committee member, such Committee member will not participate in the Committee decision or action. The action of a majority of the disinterested Committee members constitutes the action of the Committee.

     (d) Indemnification. The Committee and all of the agents and representatives of the Committee shall be indemnified and saved harmless by the Company against any claims, and the expenses of defending against such claims, resulting from any action or conduct relating to the administration of the Plan, except claims judicially determined to be attributable to gross negligence or willful misconduct.

     (e) Agent for Process. Apache’s Vice President, General Counsel, and Secretary shall be the agents of the Plan for service of all process.

     (f) Determination of Committee Final. The decisions made by the Committee are final and conclusive on all persons.

     (g) No Bonding. Neither the Committee nor any committee member is required to give any bond or other security in any jurisdiction in connection with the administration of the Plan, unless Apache determines otherwise before a Change of Control or any applicable federal or state law so requires.

Section 5. Terms of Plan; Termination.

This Plan is terminable at any time by the majority vote of the Board of Directors of the Company or its successor upon six months’ prior written notice delivered to all Employees, provided that the Company or its successor shall be prohibited from delivering notice of termination of the Plan after or within six months prior to a Change of Control.

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Section 6. Amendment.

This Plan can be amended at any time by the Company on the following conditions:

     (a) No amendment shall be adopted by the Company or its successor subsequent to the Effective Date, except to alleviate any material negative tax consequences to one or more actual or expected recipients of Plan benefits.

     (b) Immediately after adopting any amendment, the Company shall provide to Employees a written statement of this Plan, as amended, and no amendments shall be effective as to any Employee, until the Employee has received the statement. An Employee will be deemed to have received the written statement of the Plan if it is delivered in person or after 48 hours of dispatch by mail or other suitable means of delivery to the last known address of the Employee.

Section 7. Other Plans and Contracts.

It is the intention of the Company that the benefits provided for in this Plan are in addition to, and not in lieu of any other rights, privileges or benefits to which the Employee may now or hereafter be entitled under any contract, arrangement, plan or other policy applicable to any Employee with the Company or any other employer.

Section 8. Claims Procedure

     (a) General. Each claim for benefits will be processed in accordance with the procedures established by the Committee. The procedures will comply with the guidelines specified in this section. Claims for reimbursement under the medical, dental, and vision plans, the employee assistance program, and claims for life insurance shall be determined under the procedures specified in those plans; however, this Plan’s procedures shall determine eligibility for continued participation in such plans. The Committee may delegate its duties under this section.

     (b) Representatives. A claimant may appoint a representative to act on his behalf. The Plan will only recognize a representative if the Plan has received a written authorization signed by the claimant and on a form prescribed by the Committee, with the following exceptions. The Plan will recognize a claimant’s legal representative, once the Plan is provided with documentation of such representation. If the claimant is a minor child, the Plan will recognize the claimant’s parent or guardian as the claimant’s representative. Once an authorized representative is appointed, the Plan will direct all information and notification regarding the claim to the authorized representative and the claimant will be copied on all notifications regarding decisions, unless the claimant provides specific written direction otherwise.

     (c) Extension of Deadlines. The claimant may agree to an extension of any deadline that is mentioned in this section that applies to the Plan. The Committee or the

12

relevant decision-maker may agree to an extension of any deadline that is mentioned in this section that applies to the claimant.

     (d) Fees. The Plan may not charge any fees to a claimant for utilizing the claims process described in this section.

     (e) Filing a Claim. A claim is made when the claimant files a claim in accordance with the procedures specified by the Committee. Any communication regarding benefits that is not made in accordance with the Plan’s procedures will not be treated as a claim.

     (f) Initial Claims Decision. The Plan will decide a claim within a reasonable time up to 90 days after receiving the claim. The Plan will have a 90-day extension, but only if the Plan is unable to decide within 90 days for reasons beyond its control, the Plan notifies the claimant of the special circumstances requiring the need for the extension by the 90th day after receiving the claim, and the Plan notifies the claimant of the date by which the Plan expects to make a decision.

     (g) Notification of Initial Decision. The Plan will provide the claimant with written notification of the Plan’s full or partial denial of a claim, reduction of a previously approved benefit, or termination of a benefit. The notification will include a statement of the reason(s) for the decision; references to the plan provision(s) on which the decision was based; a description of any additional material or information necessary to perfect the claim and why such information is needed; a description of the procedures and deadlines for appeal; a description of the right to obtain information about the appeal procedures; and a statement of the claimant’s right to sue.

     (h) Appeal. The claimant may appeal any adverse or partially adverse decision. To appeal, the claimant must follow the procedures specified by the Committee. The appeal must be filed within 60 days of the date the claimant received notice of the initial decision. If the appeal is not timely and properly filed, the initial decision will be the final decision of the Plan. The claimant may submit documents, written comments, and other information in support of the appeal. The claimant will be given reasonable access at no charge to, and copies of, all documents, records, and other relevant information.

     (i) Appellate Decision. The Plan will decide the appeal of a claim within a reasonable time of no more than 60 days from the date the Plan receives the claimant’s appeal. The 60-day deadline will be extended by an additional 60 days, but only if the Committee determines that special circumstances require an extension, the Plan notifies the claimant of the special circumstances requiring the need for the extension by the 60th day after receiving the appeal, and the Plan notifies the claimant of the date by which the Plan expects to make a decision. If an appeal is missing any information from the claimant that is needed to decide the appeal, the Plan will notify the claimant of the missing information and grant the claimant a reasonable period to provide the missing information. If the missing information is not timely provided, the Plan will deny

13

the claim. If the missing information is timely provided, the 60-day deadline (or 120-day deadline with the extension) for the Plan to make its decision will be increased by the length of time between the date the Plan requested the missing information and the date the Plan received it.

     (j) Notification of Decision. The Plan will provide the claimant with written notification of the Plan’s appellate decision (positive or adverse). The notification of any adverse or partially adverse decision must include a statement of the reason(s) for the decision; reference to the plan provision(s) on which the decision was based; a description of the procedures and deadlines for a second appeal, if any; a description of the right to obtain information about the second-appeal procedures; a statement of the claimant’s right to sue; and a statement that the claimant is entitled to receive, free of charge and upon request, reasonable access to and copies of all documents, records, and other information relevant to the claim.

     (k) Arbitration. The claimant and the Plan may voluntarily enter into a binding arbitration to resolve any claim, in which case (i) the Plan and/or Company pays all the arbitration fees and costs, (ii) the Plan agrees that any statute of limitations or other defense based on timeliness is tolled during the time between the date the claimant completes and submits the forms that begin the arbitration process and the date of the arbitrator’s decision (which will only apply if the claimant files suit after receiving an adverse decision from the arbitrator), and (iii) the Plan provides the claimant, upon request, sufficient information relating to the arbitration to enable the claimant to make an informed judgment about whether to submit the dispute to arbitration, including a statement that the claimant’s decision to choose or not choose arbitration will have no effect on the claimant’s rights to any other benefits under the Plan, and information about the applicable rules, the claimant’s right to representation, the process for selecting the arbitrator, and the circumstances, if any, that may affect the arbitrator’s impartiality.

Section 9. Distributions Due Infants or Incompetents

If any person entitled to a distribution under the Plan is an infant, or if the Committee determines that any such person is incompetent by reason of physical or mental disability, whether or not legally adjudicated as incompetent, the Committee has the power to cause the distributions becoming due to such person to be made to another for his benefit, without responsibility of the Committee to see to the application of such distributions. Distributions made pursuant to such power will operate as a complete discharge of the Company, the trustee, the Plan, and the Committee.

Section 10. Use and Form of Words

When any words are used herein in the masculine gender, they are to be construed as though they were also used in the feminine gender in all cases where they would so apply, and vice versa. Whenever any words are used herein in the singular form, they

14

are to be construed as though they were also used in the plural form in all cases where they would so apply, and vice versa.

Section 11. Inalienability of Benefits

Except for disclaimers under section 3(f)(v), no Participant or Beneficiary has the right to assign, alienate, pledge, transfer, hypothecate, encumber, or anticipate his interest in any benefits under the Plan, nor are the benefits subject to garnishment by any creditor, nor may the benefits under the Plan be levied upon or attached. The preceding sentence does not apply to the enforcement of a federal tax levy made pursuant to Code §6331, the collection by the United States on a judgment resulting from an unpaid tax assessment, or any debt or obligation that is permitted to be collected from the Plan under federal law (such as the Federal Debt Collection Procedures Act of 1977).

Section 12. Applicable Law.

This Plan shall be interpreted to have been made in the State of Texas and the laws of the State of Texas shall control.

Dated July 14, 2010, effective January 1, 2009.

	APACHE CORPORATION
ATTEST:
/s/ Cheri L. Peper Cheri L. Peper Corporate Secretary	By:	/s/ Margery M. Harris Margery M. Harris Vice President

15

EX-10.6

Exhibit 10.6

APACHE CORPORATION
DEFERRED DELIVERY PLAN

As Amended and Restated July 13, 2010; Effective as of January 1, 2009

APACHE CORPORATION
DEFERRED DELIVERY PLAN

Apache established this Plan effective as of February 10, 2000. Apache is now amending and restating the Plan in its entirety effective as of January 1, 2009, except as otherwise provided herein.

Apache intends for this Plan to provide a select group of management or highly compensated employees of the Company with the opportunity to defer income, and, in conjunction with the 2007 Omnibus Equity Compensation Plan, to be appropriately rewarded when Apache’s shares increase in value, to induce such employees to remain in the employ of the Company, and to reward those employees for their valuable services to the Companies.

Apache intends that the Plan not be treated as a “funded” plan for purposes of either the Code or ERISA. Apache also intends for this Plan to comply with the requirements of Code §409A, and the Plan shall be interpreted in that light.

ARTICLE I DEFINITIONS

1.01	Definitions
	Defined terms used in this Plan shall have the meanings set forth below:

(a)	“Account” means the memorandum account maintained for each Participant that is credited with all Participant Deferrals and any contributions by the Company. Each Participant’s Account is divided into subaccounts, as determined by the Committee, and in general each award or deferral will be allocated to its own subaccount.
(b)	“Apache” means Apache Corporation or any successor thereto.
(c)	“Affiliated Entity” means any legal entity that is treated as a single employer with Apache pursuant to Code §414(b), §414(c), §414(m), or §414(o).
(d)	“Beneficiary” means a Participant’s beneficiary, as determined in section 5.04.
(e)	“Change of Control” means a change of control as defined in the Income Continuance Plan that is also described in Code §409A(a)(2)(A)(v).
(f)	“Code” means the Internal Revenue Code of 1986, as amended.
(g)	“Committee” means the Stock Option Plan Committee of Apache’s Board of Directors. The Committee shall be constituted at all times so as to permit the Plan to be administered by “non-employee directors” (as defined in Rule 16b-3 of the Securities Exchange Act of 1934, as amended).
(h)	“Company” means Apache and any Affiliated Entity that, with approval of the Board of Directors of Apache, has adopted the Plan.
(i)	“Company Deferrals” means the allocations to a Participant’s Account made pursuant to section 3.02.
(j)	“Compensation” means amounts deferrable under this Plan, as determined by the Committee. “Election Agreement” means an agreement made by an eligible employee whereby he elects the amount(s) to be withheld from his Compensation pursuant to section 3.01.
(k)	“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
(l)	“Fair Market Value” means the per share closing price of the Stock as reported on The New York Stock Exchange, Inc. Composite Transactions Reporting System for a particular date or, if the Stock is not so listed on such date, as reported on NASDAQ or on such other exchange or electronic trading system which, on the date in question, reports the largest number of traded shares of Stock, provided, however, that if on the date Fair Market Value is to be determined there are no transactions in the Stock, Fair Market Value shall be determined as of the immediately preceding date on which there were transactions in the Stock; provided further, however, that if the foregoing provisions are not applicable, the fair market value of a share of the Stock as determined by the Committee by the

Page 1 of 14

	reasonable application of such reasonable valuation method, consistently applied, as the Committee deems appropriate.
(m)	“Participant” means any eligible employee selected to participate in the Plan.
(n)	“Participant Deferrals” means the amounts of a Participant’s Compensation that elects to defer and have allocated to his Account pursuant to section 3.01.
(o)	“Plan” means the plan set forth in this document, as amended.
(p)	“Plan Year” means the calendar year.
(q)	“Separation from Service” has the same meaning as the term “separation from service” in Code §409A(a)(2)(A)(i), determined using the default rules in the regulations and other guidance of general applicability issued pursuant to Code §409A, except that a Separation from Service occurs only if both the Company and the Participant expect the Participant’s level of services to permanently drop by more than half. A Participant who has a Separation from Service “Separates from Service.”
(r)	“Spouse” means the individual of the opposite sex to whom a Participant is lawfully married according to the laws of the state of the Participant’s domicile.
(s)	“Stock” means the $0.625 par value common stock of Apache.
(t)	“Stock Units” mean investment units and any related units from dividend amounts. Each Stock Unit is equivalent to one share of Stock.
(u)	“Trust” means the trust or trusts, if any, created by the Company to provide funding for the distribution of benefits in accordance with the provisions of the Plan. The assets of any such Trust remain subject to the claims of the Company’s general creditors in the event of the Company’s insolvency.
(v)	“Trust Agreement” means the written instrument pursuant to which each separate Trust is created.
(w)	“Trustee” means one or more banks, trust companies, or insurance companies designated by the Company to hold and invest the Trust fund and to pay benefits and expenses as authorized by the Committee in accordance with the terms and provisions of the Trust Agreement.

1.02	Headings; Gender and Number
	The headings contained in the Plan are for reference purposes only and shall not affect in any way the meaning or interpretation of the Plan. Except when otherwise indicated by the context, the masculine gender shall also include the feminine gender, and the definition of any term herein in the singular shall also include the plural.

ARTICLE II ELIGIBILITY AND PARTICIPATION

2.01	Eligibility and Participation
	The Committee shall from time to time in its sole discretion select those employees of the Company who are eligible to participate in the Plan from among a select group of management or highly compensated employees.
2.02	Election
	Participants shall complete the election procedures specified by the Committee. The election procedures may include form(s) for the Participant to designate a Beneficiary, elect Participant Deferrals by entering into an Election Agreement with the Company, select a payment option for the eventual distribution of his Account or any subaccount, and provide such other information as the Committee may reasonably require.
2.03	Failure of Eligibility
	The Committee shall have the authority to determine that a Participant is no longer eligible to participate in the Plan. When a Participant becomes ineligible, all outstanding Election Agreements shall be cancelled. The determination of the Committee with respect to the termination of participation in the Plan shall be final and binding on all parties affected thereby. Any benefits vested hereunder at the time the Participant

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becomes ineligible to continue participation shall be distributed in accordance with the provisions of Article V.

ARTICLE III CONTRIBUTION DEFERRALS

3.01 Participant Deferrals

(a)

General. A Participant may elect to defer a portion of his Compensation by filing the appropriate Election Agreement with the Committee’s designee. The Committee has complete discretion to establish procedures for the completion of Election Agreements, including the acceptable forms and formats of the deferral election. The Committee has complete discretion to establish the election periods during which Participants may make Election Agreements, within the bounds described in subsection (b). The Committee may establish different election periods for different types of Compensation, different grants of Compensation, or different groups of Participants.

(b)

Deadlines for Election Agreements.

(i) Election Period. In order to make Participant Deferrals, a Participant must submit an Election Agreement during the election period established by the Committee. The election period must precede the Plan Year in which the services giving rise to the Compensation are performed, except in the following situations.

(A)	Performance-Based Compensation. If the Compensation is “performance-based compensation based on services performed over a period of at least 12 months” (within the meaning of Code §409A(a)(4)(B)(iii)), the election period must end at least six months before the end of the performance period.
(B)	New Participant. The election period for a new Participant must end no later than 30 days after he became eligible to participate in the Plan; the new Participant’s initial Election Agreement may only apply to Compensation for which he has not yet performed any services. However, a Participant who has a lapse in eligibility to participate in the Plan can only use this special 30-day election when he again becomes eligible to accrue benefits (other than investment earnings), (1) on the date of his new eligibility if he has received a complete payout of his benefits from his prior episode of participation, or (2) if his lapse in eligibility was at least 24 months in duration.
(C)	Unvested Deferrals. The election period for any Compensation that is subject to the condition that the Participant continue to provide services for Apache and Affiliated Entities for at least 12 months, such as many grants of restricted stock units, must end within 30 days of the date the Compensation is awarded, provided that (1) the award does not vest for 12 months following the end of the election period, (2) no event other than the Participant’s death or disability (within the meaning of Code §409A(2)(C)), or a Change of Control can cause vesting within the 12 months following the end of the election period, and (3) if the Participant’s death or disability, or the Change of Control occurs before the first anniversary of the end of the election period, the Election Agreement shall be cancelled.

(ii) Duration of and Cancellation of Election Agreements. The Committee has full discretion to determine which Compensation is subject to each Election Agreement. The Election Agreement becomes irrevocable by the Participant at the end of the election period. The Committee shall determine, at the time the Election Agreement is made, the circumstances in which the Election Agreement shall be cancelled, such as upon the Participant’s disability or upon a Change of Control. An Election Agreement is not affected by a hardship withdrawal from the Non-Qualified Retirement/Savings Plan of Apache Corporation. However, if the Participant takes a hardship withdrawal from the Apache Corporation 401(k) Savings Plan, all outstanding Election Agreements that apply to Compensation that would have been paid to the Participant within six months after the hardship withdrawal (if the Election Agreements had not been in effect) shall be cancelled and no further Participant Deferrals made pursuant to such Election Agreements.

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3.02	Company Deferrals
	Upon prior approval of the Committee, the Company may credit any amount to a Participant’s Account at any time.

ARTICLE IV INVESTMENT OF DEFERRALS AND ACCOUNTING; VOTING

4.01	Investments
	All amounts credited to a Participant’s Account shall be invested in Stock Units, with the number of Stock Units determined using the Fair Market Value of the Stock for the date as of which the amount is credited to the Participant’s Account. Amounts equal to any cash dividends declared on the Stock shall be credited to the Participant’s Account as of the payment date for such dividend in proportion to the number of Stock Units in the Participant’s Account as of the record date for such dividend. Such dividend amounts shall be invested in Stock Units, with the number of Stock Units determined using the Fair Market Value of the Stock on the dividend payment date, and such Stock Units shall vest pursuant to section 5.01. Nothing contained in this section shall be construed to require the Company or the Committee to fund any Participant’s Account.
4.02	Voting
	Participants shall have no right to vote any Stock Units prior to the date on which such Stock Units are subject to distribution and shares of Stock are issued therefor.

ARTICLE V DISTRIBUTIONS

5.01 Vesting

(a)	General. Each award of Compensation to a Participant shall vest in accordance with the terms of the award, which are determined by the Committee. Upon the death of a Participant, the award shall specify whether no vesting occurs, whether the next tranche or some other portion of the award vests, or whether the entire award vests.
(b)	Termination for Cause. If the employment of the Participant is terminated for cause as determined by the Company, the Participant’s entire Account balance, whether vested or not, shall be forfeited immediately. For this purpose, “cause” shall mean a gross violation, as determined by the Company, of the Company’s established policies and procedures.
(c)	Earnings. Stock Units attributable to dividend amounts credited to a Participant’s Account shall vest as the Stock Units on which the dividend amounts are calculated vest.
(d)	Change of Control. If a change of control, within the meaning of Apache’s Income Continuance Plan or any successor plan, of Apache occurs, all unvested Stock Units credited to Participants’ Accounts shall become automatically vested, without further action by the Committee or Apache’s board of directors.

5.02 Payouts of Company Deferrals.

(a)

Timing of Payout. The Committee may specify the timing of the distribution of any grant of Company Deferrals, or the Committee may allow a Participant to make a payout election for his Company Deferrals. If the Participant is given the opportunity to make a payout election, the deadline for the election is 30 days after the grant of a Company Deferral.

(b)

Payout Alternatives. A Participant shall receive a lump sum distribution of the subaccount(s) containing Company Deferrals six months after he Separates from Service, unless the Committee permits him to elect five installments and he so elects, in which case the first installment will be paid six months after his Separation from Service, or as soon as convenient after that date, and subsequent installments will be paid on the anniversary of the first installment, or as near to that date as is administratively convenient. If the Participant is given the opportunity to make a payout election, the deadline for the election is 30 days after the grant of a Company Deferral, or if later, December 31, 2008.

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(c)	Death or Change of Control. If there is a Change of Control or the Participant dies before receiving all installments, the remaining vested benefits shall be paid as specified in section 5.04 or 5.05, rather than as provided for in this section.
(d)	Small Accounts. See section 5.03(d) for payouts of small accounts.

5.03 Payouts of Participant Deferrals

(a) Election. Each subaccount containing Participant Deferrals shall be paid in a lump sum six months after the Participant’s Separation from Service unless the Committee, in its sole discretion, allows a Participant to elect, and the Participant does elect, toto have the Participant Deferrals under an Election Agreement paid to him in one of the following manners. Any payout election that the Participant is permitted make with respect to deferrals pursuant to an Election Agreement must be made by the end of the election period for that Election Agreement. The Committee has the discretion to reduce the possible payout alternatives from the three identified below..

(i)	In-Service Withdrawal, Single Payment. The subaccount for Participant Deferrals from an Election Agreement will be paid in a lump sum five years after the Stock Units vest, or as near to that date as is administratively convenient. For example, if the Stock Units under a particular Election Agreement vest over four years, the Participant will receive four annual lump sums. If the Participant Separates from Service before receiving all lump sums with respect to an Election Agreement, (A), if a lump sum is scheduled to be paid during the six months after the Separation from Service, it will be paid as scheduled, and (B) if any lump sum is scheduled to be paid more than six months after the Separation from Service, it will instead be paid 6 months after his Separation from Service, or as soon thereafter as is administratively convenient.
(ii)	In-Service Withdrawal, Limited Installments. This payout alternative is available only if all Stock Units relating to an Election Agreement either are vested at the time of the Election Agreement or are scheduled to vest on a single date; thus, for example, this alternative is not available for a restricted stock unit award where vesting is scheduled to occur over four years. The benefits will be paid in five annual installments, with the first installment paid five years after the Stock Units vest (or, if vested when granted, five years after the date of the grant), or as near to that date as is administratively convenient. Subsequent installments are paid on the anniversary of the first installment or as near to that date as is administratively convenient. The amount of each installment is equal to the number of remaining Stock Units associated the Election Agreement, divided by the number of remaining installments, rounded down to the nearest whole Stock Unit, except that the last installment is equal to the number of remaining vested Stock Units, with any fractional share paid in cash. If the Participant Separates from Service before receiving all installments with respect to an Election Agreement, (A), any installment payment scheduled to be paid during the six months after the Separation from Service will be paid as scheduled, and (B) any remaining installment(s) will instead be paid in a lump sum 6 months after his Separation from Service, or as soon thereafter as is administratively convenient.
(iii)	No In-Service Withdrawal. The subaccount for the Participant Deferrals from each Election Agreement will be paid out in a single payment or in five annual installments. The single payment or the first installment payment will be paid six months after the Participant’s Separation from Service or as soon thereafter as is administratively convenient; subsequent installments will be paid on each anniversary of the first installment, or as near thereto as administratively convenient. Each installment will be equal to the balance in the subaccount measured as short a period of time before the installment is paid as is administratively convenient, divided by the number of remaining annual installments, rounded down to the nearest whole Stock Unit, except that the last installment shall be equal to the number of remaining Stock Units, with any fractional share paid in cash.

(b) Existing Elections. If a Participant made an Election Agreement before 2009 for an award that vested over more than one year, such as the restricted stock unit grants made on September 11, 2007 that vest

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	over four years, and the Participant elected to defer such amounts for five years after vesting occurred with each amount paid in five installments, the payments scheduled to be made on or after January 1, 2009 will, in spite of the Participant’s previous election, be paid a lump sum on the fifth anniversary of date of the date such Stock Units vested, or, if later, in January of 2009. If the Participant Separates from Service before receiving all lump sums with respect to an Election Agreement, (i) if a lump sum is scheduled to be paid during the six months after the Separation from Service, it will be paid as scheduled, and (ii) if any lump sum is scheduled to be paid more than six months after the Separation from Service, it will instead be paid in January 2009 or if later six months after his Separation from Service, or as soon thereafter as is administratively convenient
(c)	Death or Change of Control. If there is a Change of Control or the Participant dies before receiving all vested Stock Units, the remaining vested Stock Units shall be paid as specified in section 5.04 or 5.05, rather than as originally scheduled.
(d)	Small Accounts. If the Fair Market Value of a Participant’s vested Account six months after he Separates from Service is less than $100,000, he shall receive a lump sum payment of the vested Account balance six months after the Separation from Service or as soon thereafter as is administratively convenient.

5.04	Distributions After Participant’s Death
	This section applies once a Participant dies.

(a)	Immediate Payment. When a Participant dies, his remaining vested Account balance shall be paid to each beneficiary in one lump sum four months after the Participant’s death, which should give each beneficiary adequate time to decide whether to disclaim. However, no payment may be made before the Committee’s designee has been furnished with proof of death and such other information as it may reasonably require, including information needed for tax reporting purposes. Such distribution shall be paid in whole shares of Stock, with any fractional shares paid in cash
(b)	Designating Beneficiaries. Each Participant shall designate one or more persons, trusts, or other entities as his Beneficiary to receive any amounts distributable hereunder after the Participant’s death, by furnishing the Committee with a beneficiary designation form. In the absence of an effective Beneficiary designation as to part or all of a Participant’s interest in the Plan, such amount will be distributed to the Participant’s surviving Spouse, if any, otherwise to the Participant’s estate. Unless the Participant’s beneficiary designation form specifies otherwise, if a Beneficiary dies after the Participant but before being paid by the Plan, the Plan shall pay the Beneficiary’s estate.
(c)	Changing Beneficiaries. A beneficiary designation may be changed by the Participant at any time and without the consent of any previously designated Beneficiary. However, if the Participant is married, his Spouse shall be his Beneficiary unless such Spouse has consented to the designation of a different Beneficiary. To be effective, the Spouse’s consent must be in writing, witnessed by a notary public, and filed with the Committee’s designee. If a Participant has designated his Spouse as a Beneficiary or as a contingent Beneficiary, and the Participant and that Spouse subsequently divorce, then the former Spouse will be treated as having pre-deceased the Participant for purposes of interpreting a beneficiary designation form completed prior to the divorce; this sentence shall apply only if the Committee’s designee is informed of the divorce before payment to the former Spouse is authorized.
(d)	Disclaimers. Any individual or legal entity who is a Beneficiary may disclaim all or any portion of his interest in the Plan, provided that the disclaimer satisfies the requirements of applicable state law and Code §2518(b). The legal guardian of a minor or legally incompetent person may disclaim for such person. The personal representative (or the individual or legal entity acting in the capacity of the personal representative according to applicable state law) may disclaim on behalf of a Beneficiary who has died. The amount disclaimed shall be distributed as if the disclaimant had predeceased the Participant.

5.05 Change of Control

(a) Former Employees.

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(i)	Separated More than Six Months. Each Participant who is not a “specified employee” (defined below) and each Participant who Separated from Service more than six months before the date of a Change of Control, including those who are already receiving installment payments, will be paid a single payment of his entire remaining vested Account balance on the date of the Change of Control or as soon thereafter as is administratively practicable.
(ii)	Recent Separations. Each Participant who is a specified employee and who Separated from Service less than six months before the Change of Control occurred will be paid a single payment of his entire Account balance six months after his Separation from Service, or as soon thereafter as is administratively practicable.
(iii)	Specified Employee. The term “specified employee” has the same meaning as the term “specified employee” in Code §409A(a)(2)(B)(i), and is determined using the default rules in the regulations and other guidance of general applicability issued pursuant to Code §409A.

(b) Current Employees. Each Participant who is an employee on the date of a Change of Control will be paid a lump sum of his entire vested Account balance on the date of the Change of Control or as soon thereafter as is administratively practicable.

5.06	Rehires. If a Participant Separated from Service and then becomes eligible to again accrue benefits, the payment of his benefits from his first episode of participation will not be affected by his subsequent participation. He will be treated as a new Participant for making payout elections for benefits accruing during his second episode of participation, except as otherwise provided in section 3.01.
5.07	Form of Distribution. Subject to section 5.08, each payment shall be made in whole shares of Stock, with each Stock Unit being converted into one share of Stock. Any fractional Stock Units will be converted into cash based on the Fair Market Value of a share of Stock on the day preceding the day the payment is processed. Upon a change of control as defined in the Income Continuance Plan or its successor, the payment for each Stock Unit shall be one share of Stock unless the material characteristics of the Stock were affected by the Change of Control, in which case the payment for each Stock Unit shall be in the form of cash equal to the fair market value, determined as of the date of the Change of Control, of the property an Apache shareholder receives upon the change of control in exchange for one of his Shares.
5.08	Withholding
	At the time of vesting or payment, as applicable, either the recipient shall pay the Plan cash sufficient to cover the required withholding or the Plan shall withhold from such payment any taxes or other amounts that are required to be withheld pursuant to any applicable law; any Stock Units withheld shall be converted into cash based on the Fair Market Value of a share of Stock (a) on the day preceding the day the payment is processed or (b) on the day the vesting occurs.
5.09	Divorce

(a)

General. If a Participant has divorced his Spouse, all or a portion of his Account may be allocated to his former Spouse. The Participant may be a former or current employee of the Company.

(b)

Contents of Order. The allocation will occur as soon as practicable after the Plan receives a judgment, decree, or order (collectively, an “order”) that (i) is made pursuant to a state domestic relations law or community property law, (ii) relates to the marital property rights of the former Spouse, (iii) unambiguously specifies the amount or percentage of the Participant’s Account that is to be allocated to the former Spouse, or unambiguously specifies the manner in which the amount or percentage is to be calculated, (iv) does not allocate any benefits that have already been allocated to a different former Spouse, (v) contains the name and last known mailing address of the Participant and eh former Spouse, (vi) the name of the Plan, (vii) does not contain any provision that violates subsections (c), (d), or (e), and (viii) contains the former Spouse’s Social Security number (or other similar taxpayer identification number) unless such number has been provided by the former Spouse to the Plan in a manner acceptable to the Committee.

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(c)	Payout Provisions. The vested portion of the amount allocated to the former Spouse will be paid to the former Spouse in a single payment as soon as administratively practicable after (i) the Plan has determined that the order meets the requirements of subsection (b), (ii) the Plan has communicated its interpretation of the order to the Participant and former Spouse, and given them a reasonable amount of time (such as 30 days) to object to the Plan’s interpretation, (and if there is a timely objection, the parties must submit a revised order or withdraw their objections), and (iii) the parties agree to the Plan’s interpretation of the order.
(d)	Not Fully Vested. If the former Spouse is allocated any unvested amounts, the Plan will establish a separate account for the former Spouse. Unvested amounts are forfeited at the same time as the Participant’s unvested amounts are forfeited. If an amount allocated to the former Spouse subsequently become vested, the newly-vested amount will be paid to the former Spouse in a single payment as soon as administratively practicable following the additional vesting. If the former Spouse dies before award is fully vested, the unvested amounts shall be returned to the Participant’s Account.
(e)	Source of Funds. The order may specify which subaccounts the former Spouse’s benefits shall be taken from; if the order is silent on this matter, the amount awarded to the former Spouse shall be taken from the Participant’s subaccounts in the order determined by the Committee and shall be taken on a pro rata basis from the vested portion of the Account and the unvested portion.

5.10	Administrative Delays in Payments
	The Committee may delay any payment from this Plan for as short a period as is administratively necessary. For example, a delay may be imposed upon all payments when there is a change of recordkeeper or trustee, and a delay may be imposed on payments to any recipient until the recipient has provided (a) the information needed to determine the appropriate tax withholding and tax reporting and (b) any other information reasonably requested by the Committee.
5.11	Noncompliance with Code §409A
	To the extent that the Company or the Committee takes any action that causes a violation of Code §409A or fails to take any reasonable action required to comply with Code §409A, Apache shall pay an additional amount (the “gross-up”) to the individual(s) who are subject to the penalty tax under Code §409A(a)(1); the gross-up will be sufficient to put the individual in the same after-tax position he would have been in had there been no violation of Code §409A. The Company shall not pay a gross-up if the cause of the violation of Code §409A is the due to the recipient’s action or due to the recipient’s failure to take reasonable actions (such as failing to timely provide the information required for tax withholding or failing to timely provide other information reasonably requested by the Committee — with the result that the delay in payment violates Code §409A). Any gross-up will be paid as soon as administratively convenient after the Committee determines the gross-up is owed, and no later than the end of the calendar year immediately following the calendar year in which the additional taxes are remitted. However, if the gross-up is due to a tax audit or litigation addressing the existence or amount of a tax liability, the gross-up will be paid as soon as administratively convenient after the litigation or audit is completed, and no later than the end of the calendar year following the calendar year in which the audit is completed or there is a final and non-appealable settlement or other resolution of the litigation.

ARTICLE VI ADMINISTRATION

6.01

Committee to Administer and Interpret Plan

The Plan shall be administered by the Committee. The Committee shall have all discretion and powers necessary for administering the Plan, including, but not by way of limitation, full discretion and power to interpret the Plan, to determine the eligibility, status and rights of all persons under the Plan and, in general, to decide any dispute. The Committee shall direct the Company, the Trustee, or both, as the case may be, concerning distributions in accordance with the provisions of the Plan. The Committee’s designee shall maintain all Plan records except records of any Trust. The Committee may delegate any of its administrative duties to a designee.

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6.02	Organization of Committee
	The Committee shall adopt such rules as it deems desirable for the conduct of its affairs and for the administration of the Plan. The Committee may appoint a designee and/or agent (who need not be a member of the Committee or an employee of the Company) to assist the Committee in administration of the Plan and to whom it may delegate such powers as the Committee deems appropriate, except that the Committee shall determine any dispute. The Committee may make its determinations with or without meetings. The Committee may authorize one or more of its members, designees or agents to sign instructions, notices and determinations on its behalf. The action of a majority of the Committee’s members shall constitute the action of the Committee.
6.03	Agent for Process
	Apache’s General Counsel and Apache’s Corporate Secretary shall each be an agent of the Plan for service of all process.
6.04	Determination of Committee Final
	The decisions made by the Committee shall be final and conclusive on all persons.

ARTICLE VII TRUST

7.01	Trust Agreement
	The Company may, but shall not be required to, adopt a separate Trust Agreement for the holding and administration of the funds contributed to Accounts under the Plan. The Trustee shall maintain and allocate assets to a separate account for each Participant under the Plan. The assets of any such Trust shall remain subject to the claims of the Company’s general creditors in the event of the Company’s insolvency.
7.02	Expenses of Trust
	The parties expect that any Trust created pursuant to section 7.01 will be treated as a “grantor” trust for federal and state income tax purposes and that, as a consequence, such Trust will not be subject to income tax with respect to its income. However, if the Trust is separately taxable, the Trustee shall pay all such taxes out of the Trust. All expenses of administering any such Trust shall be a charge against and shall be paid from the assets of such Trust.

ARTICLE VIII AMENDMENT AND TERMINATION

8.01	Amendment
	The Plan may be amended at any time and from time to time, retroactively or otherwise; however, no amendment shall reduce any vested benefit that has accrued on the effective date of such amendment. Each Plan amendment shall be in writing and shall be approved by the Committee and/or Apache’s Board of Directors. An officer of Apache to whom the Committee and/or Apache’s Board of Directors has delegated the authority to execute Plan amendments shall execute each such amendment or the Plan document restated to include all such Plan amendment(s).
	The Committee shall have the authority to adopt such modifications, procedures and subplans as may be necessary or desirable to comply with the provisions of the laws (including, but not limited to, tax laws and regulations) of countries other than the United States in which the Company may operate, so as to assure the viability of the benefits of the Plan to Participants employed in such countries. In only certain limited circumstances, as described in the Treasury Regulations and other guidance of general applicability issued pursuant to Code §409A, may the termination of a plan affect the timing of the payment of Plan benefits.
8.02	Successors and Assigns; Termination of Plan
	The Plan is binding upon Apache and its successors and assigns. The Plan shall continue in effect from year to year unless and until terminated by Apache’s Board of Directors. Any such termination shall operate only prospectively and shall not reduce any vested benefit that has accrued on the effective date of such termination.

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ARTICLE IX STOCK SUBJECT TO THE PLAN

9.01	Number of Shares
	Subject to Section 4.01, and to adjustment pursuant to Section 9.03 hereof, 350,000 shares of Stock (adjusted to 735,000 shares for (i) the Company’s five-percent stock dividend, record date March 12, 2003, paid April 2, 2003, and (ii) the Company’s two-for-one stock split, record date December 31, 2003, distributed January 14, 2004) are authorized for issuance under the Plan in accordance with the provisions of the Plan and subject to such restrictions or other provisions as the Committee may from time to time deem necessary. This authorization may be increased from time to time by approval of the Board and the stockholders of Apache if, in the opinion of counsel for the Company, such stockholder approval is required. Shares of Stock distributed under the terms of the Plan and shares of Stock equal to the number of Stock Units credited to Participants’ Accounts maintained under the Plan shall be applied to reduce the maximum number of shares of Stock remaining available for use under the Plan. However, shares of Stock represented by any Stock Units related to the deferral of income from any plan for which shares of Stock have been authorized for issuance, such as the 2007 Omnibus Equity Compensation Plan, shall retain their authorization under such plan, and shall not be applied to reduce the number of shares of Stock remaining available for use under the Plan. Apache, at all times during the existence of the Plan and while any Stock Units are credited to Participants’ Accounts maintained under the Plan, shall retain as Stock in Apache’s treasury at least the number of shares from time to time required under the provisions of the Plan, or otherwise assure itself of its ability to perform its obligations hereunder.
9.02	Other Shares of Stock
	The shares of Stock represented by any Stock Units from dividend amounts that are forfeited, and any shares of Stock that for any other reason are not issued to a Participant or are forfeited, shall again become available for use under the Plan.
9.03	Adjustments for Stock Split, Stock Dividend, Etc.
	If Apache shall at any time increase or decrease the number of its outstanding shares of Stock or change in any way the rights and privileges of such shares by means of the payment of a Stock dividend or any other distribution upon such shares payable in Stock, or through a Stock split, subdivision, consolidation, combination, reclassification or recapitalization involving the Stock, then in relation to the Stock that is affected by one or more of the above events, the numbers, rights and privileges of the following shall be increased, decreased or changed in like manner as if they had been issued and outstanding, fully paid and nonassessable at the time of such occurrence: (a) the shares of Stock remaining available for use under the Plan; and (b) the shares of Stock then represented by Stock Units credited to Participants’ Accounts maintained under the Plan.
9.04	Dividend Payable in Stock of Another Corporation, Etc.
	If Apache shall at any time pay or make any dividend or other distribution upon the Stock payable in securities or other property (except cash or Stock), a proportionate part of such securities or other property shall be set aside for Stock Units credited to Participants’ Accounts maintained under the Plan and delivered to any Participant upon distribution pursuant to the terms of the Plan. Prior to the time that any such securities or other property are delivered to a Participant in accordance with the foregoing, Apache shall be the owner of such securities or other property and shall have the right to vote the securities, receive any dividends payable on such securities, and in all other respects shall be treated as the owner. If securities or other property which have been set aside by Apache in accordance with this Section are not delivered to a Participant because all or part of his Stock Units are forfeited pursuant to the terms of the Plan, then the applicable portion of such securities or other property shall remain the property of Apache and shall be dealt with by Apache as it shall determine in its sole discretion.

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9.05	Other Changes in Stock
	In the event there shall be any change, other than as specified in Sections 9.03 and 9.04 hereof, in the number or kind of outstanding shares of Stock or of any stock or other securities into which the Stock shall be changed or for which it shall have been exchanged, and if the Committee shall in its discretion determine that such change equitably requires an adjustment in the number or kind of shares (a) remaining available for use under the Plan and/or (b) represented by Stock Units credited to Participants’ Accounts maintained under the Plan, then such adjustments shall be made by the Committee and shall be effective for all purposes of the Plan.
9.06	Rights to Subscribe
	If Apache shall at any time grant to the holders of its Stock rights to subscribe pro rata for additional shares thereof or for any other securities of Apache or of any other corporation, there shall be reserved with respect to the Stock Units credited to Participants’ Accounts maintained under the Plan the Stock or other securities which the Participant would have been entitled to subscribe for if immediately prior to such grant the shares of Stock represented by such Stock Units had been issued and outstanding. If, at the time of distribution under the terms of the Plan, the Participant subscribes for the additional shares or other securities, the price that is payable by the Participant for such additional shares or other securities shall be withheld from such distribution pursuant to Section 5.08 hereof.
9.07	General Adjustment Rules
	No adjustment or substitution provided for in this Article IX shall require Apache to sell or otherwise issue a fractional share of Stock. All benefits payable under the Plan shall be distributed in whole shares of Stock, with any fractional shares paid in cash.
9.08	Determination by the Committee, Etc.
	Adjustments under this Article IX shall be made by the Committee, whose determinations with regard thereto shall be final and binding upon all parties thereto.

ARTICLE X REORGANIZATION OR LIQUIDATION

In the event that Apache is merged or consolidated with another corporation and Apache is not the surviving corporation, or if all or substantially all of the assets or more than 20 percent of the outstanding voting stock of Apache is acquired by any other corporation, business entity or person, or in case of a reorganization (other than a reorganization under the United States Bankruptcy Code) or liquidation of the Company, and if the provisions of Section 9.07 hereof do not apply, the Committee, or the board of directors of any corporation assuming the obligations of the Company, shall, as to the Plan and any Stock Units credited to Participants’ Accounts maintained under the Plan, either (i) make appropriate provision for the adoption and continuation of the Plan by the acquiring or successor corporation and for the protection of any Stock Units credited to Participants’ Accounts maintained under the Plan by the substitution on a equitable basis of appropriate stock of Apache or of the merged, consolidated or otherwise reorganized corporation which will be issuable with respect to the Stock, provided that no additional benefits shall be conferred upon the Participants with respect to such Stock Units as a result of such substitution or (ii) to the extent permitted by the distribution rules under Code §409A, upon written notice to the Participants, provide that all distributions from the Plan shall be made within a specified number of days of the date of such notice. In the latter event, the Committee shall accelerate the vesting of all unvested Stock Units credited to Participants’ Accounts so that all such Stock Units become fully vested and, to the extent permitted by the distribution rules under Code §409A, all Stock Units are payable prior to or upon any such event.

ARTICLE XI MISCELLANEOUS

11.01

Funding of Benefits — No Fiduciary Relationship

Benefits shall be paid either out of the Trust or, if no Trust is in existence or if the assets in the Trust are insufficient to provide fully for such benefits, then such benefits shall be distributed by the Company out of its general assets. Nothing contained in the Plan shall be deemed to create any fiduciary relationship between the Company and the Participants. Notwithstanding anything herein to the contrary, to the extent that any

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	person acquires a right to receive benefits under the Plan, such right shall be no greater than the right of any unsecured general creditor of the Company, except to the extent provided in the Trust Agreement, if any.
11.02	Right to Terminate Employment
	The Company may terminate the employment of any Participant as freely and with the same effect as if the Plan were not in existence.
11.03	Inalienability of Benefits
	Except for disclaimers under section 5.04(d) and payments to a former Spouse pursuant to section 5.09, no Participant or Beneficiary has the right to assign, alienate, pledge, transfer, hypothecate, encumber, or anticipate his interest in any benefits under the Plan, nor are the benefits subject to garnishment by any creditor, nor may the benefits under the Plan be levied upon or attached. The preceding sentence does not apply to the enforcement of a federal tax levy made pursuant to Code §6331, the collection by the United States on a judgment resulting from an unpaid tax assessment, or any debt or obligation that is permitted to be collected from the Plan under federal law (such as the Federal Debt Collection Procedures Act of 1977).
11.04	Claims Procedure

(a)	General. Each claim for benefits shall be processed in accordance with the procedures that may be established by the Committee. The procedures shall comply with the guidelines specified in this section. The Committee may delegate its duties under this section.
(b)	Representatives. A claimant may appoint a representative to act on his behalf. The Plan shall only recognize a representative if the Plan has received a written authorization signed by the claimant and on a form prescribed by the Committee, with the following exceptions. The Plan shall recognize a claimant’s legal representative, once the Plan is provided with documentation of such representation. If the claimant is a minor child, the Plan shall recognize the claimant’s parent or guardian as the claimant’s representative. Once an authorized representative is appointed, the Plan shall direct all information and notification regarding the claim to the authorized representative and the claimant shall be copied on all notifications regarding decisions, unless the claimant provides specific written direction otherwise.
(c)	Extension of Deadlines. The claimant may agree to an extension of any deadline that is mentioned in this section that applies to the Plan. The Committee or the relevant decision-maker may agree to an extension of any deadline that is mentioned in this section that applies to the claimant.
(d)	Fees. The Plan may not charge any fees to a claimant for utilizing the claims process described in this section.
(e)	Filing a Claim. A claim is made when the claimant files a claim in accordance with the procedures specified by the Committee. Any communication regarding benefits that is not made in accordance with the Plan’s procedures will not be treated as a claim.
(f)	Initial Claims Decision. The Plan shall decide a claim within a reasonable time up to 90 days after receiving the claim. The Plan shall have a 90-day extension, but only if the Plan is unable to decide within 90 days for reasons beyond its control, the Plan notifies the claimant of the special circumstances requiring the need for the extension by the 90th day after receiving the claim, and the Plan notifies the claimant of the date by which the Plan expects to make a decision.
(g)	Notification of Initial Decision. The Plan shall provide the claimant with written notification of the Plan’s full or partial denial of a claim, reduction of a previously approved benefit, or termination of a benefit. The notification shall include a statement of the reason(s) for the decision; references to the plan provision(s) on which the decision was based; a description of any additional material or information necessary to perfect the claim and why such information is needed; a description of the procedures and deadlines for appeal; a description of the right to obtain information about the appeal procedures; and a statement of the claimant’s right to sue.

Page 12 of 14

(h)	Appeal. The claimant may appeal any adverse or partially adverse decision. To appeal, the claimant must follow the procedures specified by the Committee. The appeal must be filed within 60 days of the date the claimant received notice of the initial decision. If the appeal is not timely and properly filed, the initial decision shall be the final decision of the Plan. The claimant may submit documents, written comments, and other information in support of the appeal. The claimant shall be given reasonable access at no charge to, and copies of, all documents, records, and other relevant information.
(i)	Appellate Decision. The Plan shall decide the appeal of a claim within a reasonable time of no more than 60 days from the date the Plan receives the claimant’s appeal. The 60-day deadline shall be extended by an additional 60 days, but only if the Committee determines that special circumstances require an extension, the Plan notifies the claimant of the special circumstances requiring the need for the extension by the 60th day after receiving the appeal, and the Plan notifies the claimant of the date by which the Plan expects to make a decision. If an appeal is missing any information from the claimant that is needed to decide the appeal, the Plan shall notify the claimant of the missing information and grant the claimant a reasonable period to provide the missing information. If the missing information is not timely provided, the Plan shall deny the claim. If the missing information is timely provided, the 60-day deadline (or 120-day deadline with the extension) for the Plan to make its decision shall be increased by the length of time between the date the Plan requested the missing information and the date the Plan received it.
(j)	Notification of Decision. The Plan shall provide the claimant with written notification of the Plan’s appellate decision (positive or adverse). The notification of any adverse or partially adverse decision shall include a statement of the reason(s) for the decision; reference to the plan provision(s) on which the decision was based; a description of the procedures and deadlines for a second appeal, if any; a description of the right to obtain information about the second-appeal procedures; a statement of the claimant’s right to sue; and a statement that the claimant is entitled to receive, free of charge and upon request, reasonable access to and copies of all documents, records, and other information relevant to the claim.
(k)	Limitations on Bringing Actions in Court. Once an appellate decision that is adverse or partially adverse to the claimant has been made, the claimant may file suit in court only if he does so by the earlier of the following dates: (i) the one-year anniversary of the date of an appellate decision made on or before a Change of Control or the three-year anniversary of the date of an appellate decision made after a Change of Control, or (ii) the date on which the statute of limitations for such claim expires.

11.05	Disposition of Unclaimed Distributions
	It is the affirmative duty of each Participant to inform the Plan of, and to keep on file with the Plan, his current mailing address and the mailing address of his Spouse and any Beneficiaries. If a Participant fails to inform the Plan of these current mailing addresses, neither the Plan nor the Company is responsible for any late payment of benefits or loss of benefits. The Plan, the Committee, and the Company have no duty to search for a missing individual until the date of a Change of Control, at which point the Company has the duty to undertake reasonable measures to search for the proper recipient of any payment under the Plan that is scheduled to be paid on or after the date of the Change of Control. If the missing individual is not found within a year after a payment should have been made to him, all his benefits will be forfeited. If the missing individual later is found, the exact number of Stock Units forfeited will be restored to the Account as soon as administratively convenient, without any adjustment for dividends paid in the interim.
11.06	Distributions due Infants or Incompetents
	If any person entitled to a distribution under the Plan is an infant, or if the Committee determines that any such person is incompetent by reason of physical or mental disability, whether or not legally adjudicated an incompetent, the Committee shall have the power to cause the distributions becoming due to such person to be made to another for his benefit, without responsibility of the Committee to see to the application of such distributions. Distributions made pursuant to such power shall operate as a complete discharge of the Company, the Trustee, if any, and the Committee.

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11.07	Addresses
	Any notice, form, or election required or permitted to be given under the Plan shall be in writing and shall be given by first class mail, by Federal Express, UPS, or other carrier, by fax or other electronic means, or by personal delivery to the appropriate party, addressed:

(a)	If to the Company, to Apache Corporation at its principal place of business at 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400 (Attention: Corporate Secretary) or at such other address as may have been furnished in writing by the Company to a Participant; or
(b)	If to a Participant, at the address the Participant has furnished to the Company in writing.
(c)	If to a Beneficiary or former Spouse, at the address the Participant has furnished to the Company in writing, or at the address the Beneficiary or former Spouse subsequently provided in writing.

11.08	Statutory References
	Any reference to a specific section of the Code or other statute shall be deemed to refer to the cited section or to the appropriate successor section.
11.09	Governing Law
	The Plan and all Election Agreements shall be construed in accordance with the Code, ERISA (if applicable), and, to the extent applicable, the laws of the State of Texas excluding any conflicts-of-law provisions.

Executed July 13, 2010, effective as of January 1, 2009 except as otherwise specified herein.

ATTEST:	APACHE CORPORATION
/s/ Cheri L. Peper	/s/ Margery M. Harris
Cheri L. Peper	Margery M. Harris
Corporate Secretary	Vice President, Human Resources

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EX-10.7

Exhibit 10.7

APACHE CORPORATION
OUTSIDE DIRECTORS’ RETIREMENT PLAN
(As Amended and Restated July 14, 2010, effective as of January 1, 2009)

APACHE CORPORATION (the “Company”) established the Apache Corporation Outside Directors’ Retirement Plan (the “Plan”), effective as of December 15, 1992, to provide non-employee Directors of the Company (“Outside Directors”) with certain retirement and death payments. The purpose of the Plan is to advance the interests of the Company, its subsidiaries, and its stockholders by continuing to attract and retain outstanding individuals as Outside Directors and to stimulate the efforts of such individuals by giving suitable recognition to services which will contribute materially to the success of the Company.

It is the Company’s express intention that this Plan comply with the requirements of Code §409A, and the Plan shall be interpreted in that light.

ARTICLE I
Eligibility, Participation and Contributions

1.1 Eligibility and Participation.

     Each Outside Director begins to participate in the Plan as of the date his or her Service begins.

1.2 Contributions.

     All amounts payable under the Plan shall be paid from the general assets of the Company. Nothing contained in the Plan shall be deemed to create any fiduciary relationship between the Company and the participating Outside Director (“Participant”). The rights of a Participant under the Plan are no greater than the rights of an unsecured general creditor of the Company.

ARTICLE II
Retirement Payments

2.1 Definitions.

     The term “Separation from Service” has the same meaning as the term “separation from service” in Code §409A(a)(2)(A)(i). A Separation from Service is determined using the default rules in the regulations and other guidance of general applicability issued pursuant to Code §409A, including the special rules for a member of a board of directors found in Treasury Regulation §1.409A-1(h)(5) and §1.409A-1(c)(2)(ii). In general, a Separation from Service will occur when a Participant ceases to be a member of the Company’s Board of Directors.

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     The term “Specified Employee” has the same meaning as the term “specified employee” in Code §409A(a)(2)(B)(i), and is determined using the default rules in the regulations and other guidance of general applicability issued pursuant to Code §409A.

2.2 Retirement Payments.

     (a) Eligibility for Benefits. A Participant who Retires with four or more Quarters of Service is entitled to receive benefits under the Plan.

     (b) Amount of Benefits. The amount of benefits under the Plan is equal to the value of a series of quarterly payments, with each payment equal in amount to one-sixth of the Participant’s Annual Director’s Retainer, and with the number of quarterly payments equal to the number of the Participant’s Quarters of Service. As a consequence, each Participant will generally receive an annual benefit of 66²/₃% of his or her Annual Director’s Retainer.

     (c) “Annual Director’s Retainer” means the aggregate annual amount of an Outside Director’s board retainer fee payable pursuant to section 1 of the Company’s Non-Employee Directors’ Compensation Plan (or comparable section of any successor plan), whether or not all or a portion of such amount is deferred or delayed. Such amount will be determined as of the earlier of the date a Participant ceases to be an Outside Director or the date the Participant dies.

     (d) “Quarter of Service” means the aggregate total full months of Service as an Outside Director divided by three and rounded up to the next whole number, up to a maximum of 40 Quarters of Service.

     (e) “Retirement, Retired or Retires” means a Participant’s ceasing to hold office as an Outside Director, for any reason other than death.

     (f) “Service” means the aggregate total, not to exceed 120, of (i) the number of full months beginning on or after July 1, 1992 (whether or not consecutive) that a Participant held office as an Outside Director, whether or not a Participant at the time, and (ii) ¹/2 the number of full months prior to July 1, 1992 (whether or not consecutive) that a Participant held office as an Outside Director; provided, however, that a Participant who, as of December 15, 1992, has held office as an Outside Director for an aggregate total of 15 years shall automatically be credited with 120 full months of Service.

     (g) Episodic Participation. If a Participant has a Separation from Service and then becomes an Outside Director again, (i) the Participant’s benefits from his or her initial episode of participation shall be paid according to the terms of the Plan on the date of his or her Separation from Service and shall not be affected by any subsequent Service, and (ii) the Participant’s benefits from his or her later episodes of participation shall be calculated by ignoring his or her Service from earlier episodes of participation.

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In calculating the amount of benefits for the most recent episode of participation, the maximum Quarters of Service is 40, reduced by the number of Quarters of Service for which he or she earned benefits under this Plan from earlier episodes of participation.

2.3 Retirement Payments Following a Change of Control.

     In the event of a “change of control” of the Company, as defined in the Company’s Income Continuance Plan (as amended or the corresponding provisions of any successor plan), each then current Outside Director shall be eligible for the benefits described in section 2.2 even if the Outside Director has less than four Quarters of Service. If the change of control is a transaction described in §409A(a)(2)(A)(v) of the Internal Revenue Code of 1986, as amended (“Code”), each Participant shall be paid a single lump-sum payment on the date of the change of control, or as soon as practicable thereafter, equal to the net present value of the benefit to which the Participant is entitled, calculated in the manner described in section 2.5, as of the date of the change of control; however, if the Participant was a Specified Employee whose Separation from Service occurred less than six months before the change of control, he or she shall be paid a single lump-sum payment six months after the Separation from Service, or as soon as practicable thereafter, equal to the net present value of the benefit to which the Participant is entitled, calculated in the manner described in section 2.5, as of the date six months after the Separation from Service. If the change of control is not a transaction described in Code §409A(a)(2)(A)(v), each Participant shall be paid at the time(s) specified in section 2.4 or 2.5, whichever is applicable.

2.4 Quarterly Payments.

     A Participant may elect to be paid quarterly installments that are paid on the last day of each calendar quarter (or as near to that date as administratively practicable). See section 2.5 for the deadline for the Participant’s payout election. The first quarterly payment shall be made as of the last day of the calendar quarter after the date of the Participant’s Separates from Service, unless the Participant is a Specified Employee, in which case the first two quarterly payments shall be delayed until, and paid with, the third regularly scheduled quarterly payment.

2.5 Lump-Sum Payments.

     A Participant shall receive a single lump-sum payment unless the Participant elects quarterly installments. Participants on December 31, 2008 have already made their payout election. A new Participant’s payout election must be made within 30 days after the individual becomes an Outside Director. Once the deadline for making a payout election has passed, the payout election is irrevocable.

     The lump sum shall be paid as soon as administratively practicable after the Participant’s Separation from Service, unless the Participant is a Specified Employee, in which case the lump sum shall be paid as soon as administratively practicable after six

3

months after the Participant’s Separation from Service. The amount of the lump sum shall be calculated by the Committee as of the date of the Participant’s Separation from Service. The amount of the lump sum shall be equal to the net present value of the quarterly payments to which the Participant would otherwise be entitled, determined using an annual interest rate equal to the rate on ten-year treasury bonds/notes as reported in The Wall Street Journal published on or most recently prior to the date of the Participant’s Separation from Service.

2.6 Retirement before 2009.

     A Participant whose Separation from Service occurred between December 31, 2004 and January 1, 2009 shall receive his or her benefit in accordance with the terms of the Plan in effect at the time of the Separation from Service. A Participant who Retired before January 1, 2005 shall receive his or her benefit in accordance with the terms of the Plan at the time of the Retirement.

ARTICLE III
Death Payments

3.1 Death Benefits.

     (a) Eligibility for Death Benefits. If a Participant dies before receiving all of his or her benefits under Article II, the Participant’s Beneficiary, as determined in section 3.2, shall receive the remaining benefits. If a Participant elected quarterly payments, the Participant’s Beneficiary shall be paid a lump sum equal to the net present value of any remaining payments, calculated as of the date of the Participant’s death, and calculated in the manner specified in section 2.5. If a Participant is scheduled to receive a single lump-sum payment, but dies before doing so, the Participant’s Beneficiary shall be paid the lump sum.

     (b) Timing. Payment to the Beneficiary shall be made as soon as administratively practicable four months after the Participant’s death, which provides the Beneficiary with an opportunity to disclaim, except that no payment shall be made until the Company has been furnished with proof of death and such other information as it may reasonably require.

     (c) Beneficiary in Pay Status. The Beneficiary of a Participant who died on or before December 31, 2008 shall receive his or her death benefits in accordance with the terms of the Plan in effect on the date of the Participant’s death.

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3.2 Beneficiaries.

     (a) “Beneficiary” means the recipient of the Participant’s death benefits under section 3.1.

     (b) Designation. Each Participant shall designate one or more persons, trusts, or other entities as his or her Beneficiary. In the absence of an effective Beneficiary designation as to part or all of a Participant’s death benefits, the Participant’s surviving Spouse, if any, shall be the Participant’s Beneficiary, and in the absence of a surviving Spouse, the Participant’s estate shall be the Beneficiary. Unless the Participant’s Beneficiary designation form specifies otherwise, if a Beneficiary dies after the Participant but before being paid by the Plan, the Plan shall pay the Beneficiary’s estate.

     (c) Changing Beneficiaries. A Beneficiary designation may be changed by the Participant at any time and without the consent of any previously designated Beneficiary. However, if the Participant is married, the Participant’s Spouse shall be the Participant’s Beneficiary unless the Spouse has consented to the designation of a different Beneficiary. To be effective, the Spouse’s consent must have been made before January 1, 2005 or, if made on or after January 1, 2005, the Spouse’s consent must be in writing, witnessed by a notary public, and filed with the Company. If the Participant has designated his or her Spouse as a primary or contingent Beneficiary, and the Participant and Spouse later divorce (or their marriage is annulled), then the former Spouse will be treated as having pre-deceased the Participant for purposes of interpreting a Beneficiary designation form completed prior to the divorce or annulment; this provision will apply only if the Company is notified of the divorce or annulment before payment to the former Spouse is made.

     (d) “Spouse” shall mean the individual to whom a Participant is lawfully married according to the laws of the state of the Participant’s domicile.

     (e) Disclaimers. Any individual or legal entity who is a Beneficiary may disclaim all or any portion of his or her interest in the Plan, provided that the disclaimer satisfies the requirements of Code §2518(b) and applicable state law. The legal guardian of a minor or legally incompetent person may disclaim for such person. The personal representative (or the individual or legal entity acting in the capacity of the personal representative according to applicable state law) may disclaim on behalf of a Beneficiary who has died. The amount disclaimed shall be distributed as if the disclaimant had predeceased the individual whose death caused the disclaimant to become a Beneficiary.

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ARTICLE IV
Administration, Amendment and Termination

4.1 The Management Development and Compensation Committee.

     The Plan shall be administered by the Management Development and Compensation Committee (the “Committee”) of the Company’s Board of Directors. All administrative duties, including but not limited to, the power to interpret the Plan and to decide any dispute, shall be carried out by the Committee, which shall have full discretion and authority hereunder. All claims under the Plan shall be filed with the Company and shall be decided by the Committee. The decisions made by the Committee shall be final and binding on all persons having or claiming to have rights under the Plan.

4.2 Termination or Amendment of Plan.

     The Plan may be terminated or amended at any time through action of the Company’s Board of Directors. No termination or amendment, however, shall reduce the payments (a) to a Participant or Beneficiary where a Participant has already died or reached Retirement, (b) to which a Participant is or may become entitled, based on such Participant’s Service and Annual Director’s Retainer as determined on the effective date of such termination or amendment, or (c) to which a Participant is or may become entitled pursuant to section 2.3 as a result of a change of control. The termination of the Plan shall not affect the timing of any benefit payments; payments after the Plan has terminated will be made at the time(s) specified in Articles II and III.

ARTICLE V
Miscellaneous

5.1 Inalienability of Payments.

     No Participant shall have the right to assign, transfer, hypothecate, encumber or anticipate his or her interest in any payments under the Plan, nor shall the payments under the Plan be subject to any legal process to levy upon or attach such payments for any claim against the Participant, Spouse, or Beneficiary.

5.2 Notices.

     Any notice, form, or election required or permitted to be given under the Plan shall be in writing and shall be given by first class mail, by Federal Express, UPS, or other carrier, by fax or other electronic means, or by personal delivery to the appropriate party, addressed:

     (a) If to the Company, to Apache Corporation at its principal place of business at 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400 (Attention:

6

Corporate Secretary) or at such other address as may have been furnished in writing by the Company to a Participant; or

     (b) If to a Participant or Spouse, at the address the Participant has furnished to the Company in writing.

     (c) If to a Beneficiary, at the address the Participant has furnished to the Company in writing for such Beneficiary, unless the Beneficiary has furnished his or her own address to the Company.

Any such notice to a Participant, Spouse, or Beneficiary shall be deemed to have been given as of the third day after deposit in the United States Postal Service, postage prepaid, properly addressed as set forth above, in the case of a mailed notice, or as of the date delivered in the case of any other method of delivery.

5.3 Disposition of Unclaimed Payments.

     Any communication, statement or notice addressed to a Participant at his or her last post office address, as provided to the Company under section 5.2, will be binding on the Participant, Spouse, or Beneficiary for all purposes of the Plan. If the Company cannot ascertain the whereabouts of any person to whom a payment is due under the Plan within three years from the date such payment is due, such payment shall be cancelled on the records of the Plan and the amount thereof forfeited to the Company.

5.4 Administrative Delays.

     The Committee may delay any payment from this Plan for as short a period as is administratively necessary. For example, a delay may be imposed upon all payments from the Plan when there is a change of recordkeeper, and a delay may be imposed on payments to any recipient until they have provided the information needed for tax withholding and tax reporting, as well as any other information reasonably requested by the Committee.

5.5 409A Noncompliance.

     To the extent that the Company takes any action that causes a violation of Code §409A or fails to take reasonable actions required to comply with Code §409A, the Company shall pay an additional amount (the “gross-up”) to the individual(s) who are subject to the penalty tax under Code §409A(a)(1) that is sufficient to put the individual in the same after-tax position he or she would have been in had there been no violation of Code §409A. The Company shall not pay a gross-up if the cause of the violation of Code §409A is the recipient’s failure to take reasonable actions (such as failing to timely provide the information required for tax withholding or failing to timely provide other information reasonably requested by the Committee — with the result that the delay in payment violates Code §409A). Any gross-up will be made as soon as administratively convenient after the Committee determines the gross-up is owed, and no later than the

7

end of the calendar year immediately following the calendar year in which the additional taxes are remitted. However, if the gross-up is due to a tax audit or litigation addressing the existence or amount of a tax liability, the gross-up will be paid as soon as administratively convenient after the litigation or audit is completed, and no later than the end of the calendar year following the calendar year in which the audit is completed or there is a final and non-appealable settlement or other resolution of the litigation.

5.6 Gender.

     Any term herein used in the singular shall also include the plural, and the masculine gender shall also include the feminine gender, and vice versa.

5.7 Statutory References.

     Any reference to a specific section of the Code shall be deemed to refer to that section or to the appropriate successor section.

5.8 Governing Law.

     The Plan shall be governed by the laws of the State of Texas, ignoring any conflicts-of-law provisions.

Dated: July 14, 2010

ATTEST:		APACHE CORPORATION
By:	/s/ Cheri L. Peper	By:	/s/ Margery M. Harris
	Cheri L. Peper		Margery M. Harris
	Corporate Secretary		Vice President, Human Resources

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EX-12.1

EXHIBIT 12.1

APACHE CORPORATION
STATEMENT OF COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(In Thousands)

	Six Months Ended
	June 30,
	2010		2009			2009		2008		2007		2006		2005
EARNINGS (LOSS)
Pretax income (loss) from continuing operations	$	2,600,778	$	(1,666,708	)	$	326,391	$	932,392	$	4,672,612	$	4,009,595	$	4,206,254
Add: Fixed charges excluding capitalized interest		133,364		136,238			285,816		214,288		258,221		178,399		138,399
Adjusted Earnings (Loss)	$	2,734,142	$	(1,530,470	)	$	612,207	$	1,146,680	$	4,930,833	$	4,187,994	$	4,344,653
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Interest expense including capitalized interest (1)	$	151,492	$	156,277		$	309,619	$	280,457	$	308,235	$	217,454	$	175,419
Amortization of debt expense		2,782		2,773			5,553		3,689		3,310		2,048		3,748
Interest component of lease rental expenditures (2)		14,442		8,169			31,197		24,306		22,424		20,198		16,220
Fixed charges		168,716		167,219			346,369		308,452		333,969		239,700		195,387
Preferred stock dividend requirements (3)		—		3,607			12,105		7,438		9,437		8,922		9,105
Combined Fixed Charges and Preferred Stock Dividends (1)	$	168,716	$	170,826		$	358,474	$	315,890	$	343,406	$	248,622	$	204,492
Ratio of Earnings to Fixed Charges		16.21		—			1.77		3.72		14.76		17.47		22.24
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends		16.21		—			1.71		3.63		14.36		16.84		21.25

(1)	Interest expense related to the provisions for uncertainty in income taxes under ASC Topic 740, “Income Taxes” is not included in the computation of ratios of earnings to fixed charges and combined fixed charges and preferred stock dividends.
(2)	Represents the portion of rental expense assumed to be attributable to interest factors of related rental obligations determined at interest rates appropriate for the period during which the rental obligations were incurred. Approximately 32 to 34 percent applies to rental payments for all periods presented.
(3)	The Company does not receive a tax benefit for its preferred stock dividends. This amount represents the pre-tax earnings that would be required to cover its preferred stock dividends.

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, G. Steven Farris, certify that:

1.	I have reviewed this quarterly report on Form 10-Q/A of Apache Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ G. Steven Farris G. Steven Farris

Chairman and Chief Executive Officer

(principal executive officer)

Date: August 17, 2010

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Roger B. Plank, certify that:

1.	I have reviewed this quarterly report on Form 10-Q/A of Apache Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Roger B. Plank Roger B. Plank

President (principal financial officer)

Date: August 17, 2010

EX-32.1

EXHIBIT 32.1

APACHE CORPORATION

Certification of Principal Executive Officer
and Principal Financial Officer

     I, G. Steven Farris, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the quarterly report on Form 10-Q/A of Apache Corporation for the quarterly period ending June 30, 2010, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §78m or §78o (d)) and that information contained in such report fairly represents, in all material respects, the financial condition and results of operations of Apache Corporation.

/s/ G. Steven Farris
By:	G. Steven Farris
Title:	Chairman and Chief Executive Officer (principal executive officer)
Date:	August 17, 2010

     I, Roger B. Plank, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the quarterly report on Form 10-Q/A of Apache Corporation for the quarterly period ending June 30, 2010, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §78m or §78o (d)) and that information contained in such report fairly represents, in all material respects, the financial condition and results of operations of Apache Corporation.

/s/ Roger B. Plank
By:	Roger B. Plank
Title:	President (principal financial officer)
Date:	August 17, 2010