10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)
[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2006,
OR
[ ]	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

A Delaware Corporation IRS Employer No. 41-0747868

One Post Oak Central

2000 Post Oak Boulevard, Suite 100

Houston, Texas 77056-4400

Telephone Number (713) 296-6000

Securities Registered Pursuant to Section 12(b) of the Act:

	Name of Each Exchange
Title of Each Class	On Which Registered
Common Stock, $0.625 par value	New York Stock Exchange Chicago Stock Exchange NASDAQ National Market
Preferred Stock Purchase Rights	New York Stock Exchange Chicago Stock Exchange
Apache Finance Canada Corporation 7.75% Notes Due 2029 Irrevocably and Unconditionally Guaranteed by Apache Corporation	New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock, $0.625 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933. Yes [X]     No [ ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes [ ] No [X]

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 [X]     No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [ ]

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

Large accelerated filer [X]     Accelerated filer [ ]     Non-accelerated filer [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes [ ]     No  [X]

Aggregate market value of the voting and non-voting common equity held by non-affiliates of registrant as of June 30, 2006	$	22,470,650,953
Number of shares of registrant’s common stock outstanding as of January 31, 2007		330,958,433

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of registrant’s proxy statement relating to registrant’s 2007 annual meeting of stockholders have been incorporated by reference into Part III hereof.

TABLE OF CONTENTS

DESCRIPTION

Item		Page
PART I
1.	BUSINESS		1
1A.	RISK FACTORS		12
1B.	UNRESOLVED STAFF COMMENTS		16
2.	PROPERTIES		1
3.	LEGAL PROCEEDINGS		16
4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		16
PART II
5.	MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS		17
6.	SELECTED FINANCIAL DATA		19
7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		19
7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		43
8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		45
9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		46
9A.	CONTROLS AND PROCEDURES		46
9B.	OTHER INFORMATION		46
PART III
10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT		46
11.	EXECUTIVE COMPENSATION		47
12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT		47
13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS		47
14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES		47
PART IV
15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K		47

All defined terms under Rule 4-10(a) of Regulation S-X shall have their statutorily prescribed meanings when used in this report. Quantities of natural gas are expressed in this report in terms of thousand cubic feet (Mcf), million cubic feet (MMcf), billion cubic feet (Bcf) or trillion cubic feet (Tcf). Oil is quantified in terms of barrels (bbls); thousands of barrels (Mbbls) and millions of barrels (MMbbls). Natural gas is compared to oil in terms of barrels of oil equivalent (boe) or million barrels of oil equivalent (MMboe). Oil and natural gas liquids are compared with natural gas in terms of million cubic feet equivalent (MMcfe) and billion cubic feet equivalent (Bcfe). One barrel of oil is the energy equivalent of six Mcf of natural gas. Daily oil and gas production is expressed in terms of barrels of oil per day (b/d) and thousands or millions of cubic feet of gas per day (Mcf/d and MMcf/d, respectively) or millions of British thermal units per day (MMBtu/d). Gas sales volumes may be expressed in terms of one million British thermal units (MMBtu), which is approximately equal to one Mcf. With respect to information relating to our working interest in wells or acreage, “net” oil and gas wells or acreage is determined by multiplying gross wells or acreage by our working interest therein. Unless otherwise specified, all references to wells and acres are gross.

PART I

ITEMS 1 AND 2. BUSINESS AND PROPERTIES

General

Apache Corporation, a Delaware corporation formed in 1954, is an independent energy company that explores for, develops and produces natural gas, crude oil and natural gas liquids. In North America, our exploration and production interests are focused in the Gulf of Mexico, the Gulf Coast, East Texas, the Permian basin, the Anadarko basin and the Western Sedimentary basin of Canada. Outside of North America, we have exploration and production interests onshore Egypt, offshore Western Australia, offshore the United Kingdom in the North Sea (North Sea), and onshore Argentina. Our common stock, par value $0.625 per share, has been listed on the New York Stock Exchange (NYSE) since 1969, on the Chicago Stock Exchange (CHX) since 1960, and on the NASDAQ National Market (NASDAQ) since January 2004. On May 18, 2006, we filed certifications of our compliance with the listing standards of the NYSE and the NASDAQ, including our chief executive officer’s certification of compliance with the NYSE standards. Through our website, http://www.apachecorp.com, you can access electronic copies of the charters of the committees of our Board of Directors, other documents related to Apache’s corporate governance (including our Code of Business Conduct and Governance Principles), and documents Apache files with the Securities and Exchange Commission (SEC), including our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, as well as any amendments to these reports. Included in our annual and quarterly reports are the certifications of our chief executive officer and our chief financial officer that are required by applicable laws and regulations. Access to these electronic filings is available as soon as practicable after filing with the SEC. You may also request printed copies of our committee charters or other governance documents by writing to our corporate secretary at the address on the cover of this report.

We hold interests in many of our U.S., Canadian, and other International properties through subsidiaries, including Apache Canada Ltd., DEK Energy Company (DEKALB), Apache Energy Limited (AEL), Apache North America, Inc., and Apache Overseas, Inc. Properties referred to in this document may be held by those subsidiaries. We treat all operations as one line of business.

Our Growth Strategy

Apache’s goal is to grow a profitable oil and gas company for the long-term benefit of our shareholders. Our strategy is to build a portfolio of core areas which provide growth opportunities through both grass-roots drilling and acquisition activity. We now have operations in six countries — the United States, Canada, Egypt, the United Kingdom sector of the North Sea, Australia, and our newest core area — Argentina. Whether in our oldest region, the U.S. Central region, or our newest, we seek to grow profitably while building critical mass that supports sustainable, lower-risk, repeatable drilling opportunities, balanced by higher-risk, higher-reward exploration. We also seek a balance in terms of gas vs. oil, geologic risk, reserve life and political risk.

When acquisition opportunities are identified, operational and technical teams participate in the evaluation process, enabling our personnel to move in quickly to execute exploitation activities (including workovers, recompletions and drilling) that will increase production and reserves, reduce costs per unit produced and enhance profitability. Over time, we build teams that have the technical knowledge and sense of urgency to maximize value. Our local knowledge of producing basins and our proactive culture provide a platform for continued growth through strategic acquisitions and drilling.

We also periodically evaluate our existing assets to determine whether sales of certain assets will provide opportunities to redeploy our capital resources to rebalance our portfolio and generate better prospective rates of return. As a result of this process, in January 2006, we sold our 55 percent interest in the deepwater section of Egypt’s West Mediterranean Concession to Amerada Hess for $413 million, and in August we sold our China holdings to Australia-based ROC Oil Company Limited for $260 million. We reinvested these proceeds and purchased estimated proved reserves of 109 MMboe in Argentina.

More than a decade ago, recognizing that the United States was a mature oil and gas country, we added an international exploration component to our portfolio strategy, which provides exposure to larger reserve targets with

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which to grow production and reserves through drilling. Apache is also one of the leading acquirers of three-dimensional (3-D) seismic data in the industry today. Our technology experts have developed strategies for rapid and cost-effective acquisition and processing of 3-D data, enabling our technical teams to analyze large swaths of acreage and generate drilling prospects on an accelerated timetable.

Operating regions are given the autonomy necessary to make drilling and operating decisions and to act quickly. Management and incentive systems underscore high cash flow and rate-of-return targets, which are measured monthly, reviewed with senior management quarterly and utilized to determine annual performance rewards.

In the United States, the Gulf Coast region consistently delivers high returns on capital invested, as well as cash flow significantly in excess of our exploration and development spending there. Acquisitions play an important role because with steep decline rates, offshore reserves are generally short-lived and difficult to replace through drilling alone. The Central region brings the balance of long-lived reserves and consistent drilling results in the Permian basin of West Texas and New Mexico, East Texas and the Anadarko basin of western Oklahoma. Apache’s future growth in the United States is more likely to be achieved through a combination of drilling and acquisitions, rather than through drilling activity alone. Our $821 million Gulf of Mexico acquisition from BP and $269 million Permian basin acquisition from Amerada Hess, for example, complimented our active drilling program in 2006 and buttressed our growth in the U.S.

In Canada, we have almost seven million gross acres across the Provinces of British Columbia, Alberta, Saskatchewan and the Northwest Territories. We have a multi-year inventory of low-risk drilling opportunities in a number of Apache fields in Central Alberta, including Provost, Hatton and Nevis, and on acreage acquired in the Exxon Mobil Corporation (ExxonMobil) farm-in agreements of 2004 and 2005. With acquisition and land costs having risen significantly in Canada, these farm-ins provide a way for Apache to earn acreage through drilling with no upfront costs. ExxonMobil retains a royalty on fee lands and a convertible working interest on leasehold acreage, both of which vary dependent on activity levels. We also have opportunities to drill deeper exploration targets with higher reserve potential in Northwest Alberta and Northeast British Columbia.

In Egypt’s Western Desert, Apache’s 10.2 million gross acres encompass a sizable resource in the Cretaceous Upper Bahariya formations and outstanding exploration potential in deeper intervals from lower Cretaceous to Jurassic, established producing trends. The Qasr gas/condensate field, discovered in 2003, is the largest field ever found by Apache with more than 2 trillion cubic feet of gas and 60 million barrels of estimated recoverable reserves.

In Australia, we have expanded our exploration program to the high-potential Exmouth, Browse and Gippsland basins while continuing to exploit our acreage position and control of key infrastructure in the Carnarvon basin. In the Gippsland basin we actively acquired almost 1.8 million acres over the past three years and have generated a 10-well inventory of high potential exploration prospects to be drilled in 2008. Additionally, Apache and its partners are designing three development projects in the Exmouth basin that are in process of being sanctioned and approved by all parties.

Apache entered the North Sea in 2003 with our acquisition of the Forties field (Forties), the largest field ever discovered in the United Kingdom. As operator, through drilling and extensive improvements to the production infrastructure, we virtually doubled production — and significantly reduced per-unit operating costs — from the second quarter of 2003. Our 2007 plans include infill and extentional drilling activity at Forties to determine if we can extend the field to the west, as well as exploration drilling on acreage blocks obtained over the past couple of years. We currently have around 100 Forties field drilling locations in our inventory.

For several years we held small interests in Argentina with the long-term view of expanding there through acquisitions. In April 2006, we purchased Pioneer Natural Resources’ (Pioneer) interests in Neuquén and the Austral basins for $675 million and subsequently purchased our partner’s, Pan American Fueguina S.R.L. (Pan American), interests in Tierra del Fuego, gaining operatorship in the under-exploited, highly prospective Austral basin concessions. Through subsequent workovers, recompletions and development activities, we increased production on the acquired properties and have established Argentina as Apache’s latest core area. While we expect unique challenges with evolving governmental regulations, we anticipate growing reserves and production in Argentina.

We exited 2006 with a year-end debt-to-capitalization ratio of 22 percent despite record capital spending of $6.4 billion, excluding asset retirement costs. This flexibility enables us to quickly act on attractive acquisition

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transactions as they are identified, such as our agreement in January 2007 to acquire, through a joint venture interest, Permian basin assets from Anadarko Petroleum Company (Anadarko) for $1 billion. The transaction, which is subject to normal closing conditions and adjustments for matters such as preferential rights, is expected to close around the end of the first-quarter of 2007.

Apache has increased reserves in each of the last 21 years and production in 27 of the last 28 years. We believe our strategy and our diversified portfolio of assets provide a platform for profitable growth through drilling and acquisitions across the cycles of our dynamic industry.

In 2007, we are planning another active year of drilling. We revise our capital expenditure estimates throughout the year based on changing industry conditions and results to date. Therefore, accurately projecting annual capital spending is difficult at best. Our preliminary 2007 capital budget approaches $4.5 billion. While in most years capital budgets are expanded as the year unfolds, if commodity prices soften from year-end 2006 levels and service costs do not also decline; we plan to reduce our capital spending. Regarding potential acquisitions, we continually look for properties to which we believe we can add value and earn adequate rates of return and will take advantage of those acquisition opportunities as they arise.

Operating Highlights

Following the sale of our interest in China in the third quarter of 2006, our interests in six countries now comprise our reportable segments: the United States, Canada, Egypt, Australia, the North Sea, and Argentina. In the U.S., our exploration and production activities are spread between two regions: Gulf Coast and Central.

The following table sets out a brief comparative summary of certain key 2006 data for each area. More detailed information regarding oil, natural gas and natural gas liquids (NGLs) production and the average sales prices received in each geographic area for 2006, 2005, and 2004 is available later in this section under “Production, Pricing and Lease Operating Cost Data.” Also, further discussion and analysis of this data is available in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-K. For information concerning the revenues, expenses, operating income (loss) and total assets attributable to each of our reportable segments, see Note 13, Supplemental Oil and Gas Disclosures (Unaudited), and Note 12, Business Segment Information of Item 15 in this Form 10-K. For information regarding Oil and Gas Capital Expenditures for each of the last three years, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Capital Resources and Liquidity” in this Form 10-K.

								12/31/06		Percentage					2006
			Percentage			2006		Estimated		of Total			2006		Gross New
	2006		of Total			Production		Proved		Estimated			Gross New		Productive
	Production		2006			Revenue		Reserves		Proved			Wells		Wells
	(In MMboe)		Production			(In millions)		(In MMboe)		Reserves			Drilled		Drilled
Region/Country:
Gulf Coast		40.6		22.2	%	$	1,865		393.3		17.0	%		83		65
Central		27.3		14.9			1,162		551.2		23.8			374		363
Total U.S.		67.9		37.1			3,027		944.5		40.8			457		428
Canada		32.9		18.0			1,380		575.3		24.9			874		740
Total North America		100.8		55.1			4,407		1,519.8		65.7			1,331		1,168
Egypt		33.9		18.5			1,664		281.5		12.2			163		140
Australia		15.7		8.6			408		204.5		8.8			23		7
United Kingdom		21.5		11.8			1,355		196.8		8.5			5		4
Argentina		9.9		5.4			167		110.6		4.8			83		74
China		1.1		0.6			73		—		—			6		6
Total International		82.1		44.9			3,667		793.4		34.3			280		231
Total		182.9		100.0	%	$	8,074		2,313.2		100	%		1,611		1,399

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The following discussions include references to our plans for 2007. These only represent initial estimates and could vary significantly from actual results. In recent years, there have been large differences between our capital expenditure forecasts and our actual activity. During the year, we routinely adjust our level of spending based on results and changing industry conditions.

United States

Gulf Coast — The Gulf Coast region comprises our interests in and along the Gulf of Mexico, in the areas on-and offshore Louisiana and Texas. Apache is the largest held-by-production acreage holder and the second largest producer in Gulf waters less than 1,200 feet deep. For the third year in a row, the Gulf Coast was our leading region for both production volumes and revenues. Gulf Coast activities in 2006 focused on restoring production impacted by the 2005 hurricanes, while maintaining an active drilling program. This region performed 296 workover and recompletion operations during 2006 and completed 65 out of 83 total wells drilled as producers. Our drilling locations mostly included proved undeveloped reserves at platforms sustaining minimum or no hurricane damage with access to third-party transport facilities. In June 2006, we acquired producing properties, facilities and prospects on the Outer Continental Shelf of the Gulf of Mexico from BP plc (BP) for $845 million, adding an estimated 44.2 MMboe of proved reserves. The purchase price was allocated as follows: $747 million producing properties, $42 million prospects, $56 million facilities. As of year-end 2006, the Gulf Coast region accounted for 17 percent of our estimated proved reserves. Although actual annual capital expenditures may change considerably in 2007, we currently estimate investing approximately $900 million to drill over 90 wells and to continue our production enhancement and exploitation programs. In addition, we plan to spend an estimated $350 million on repair, redevelopment, and plugging and abandonment work required to repair damage caused by Hurricanes Katrina and Rita in 2005 that will not be covered by insurance.

Central — The Central Region includes assets in the Permian basin of West Texas and New Mexico, East Texas, and the Anadarko basin of western Oklahoma, where the Company got its start over 50 years ago. On January 5, 2006, the Company expanded its presence in the Permian basin by purchasing an estimated 31.5 MMboe of reserves in eight fields for $269 million from Amerada-Hess. In early 2007, we also entered into agreements to acquire additional Permian basin interests from Anadarko as described in more detail below under “Subsequent Events.” As of year-end 2006, the Central region accounted for approximately 24 percent of our estimated proved reserves, the second largest concentration in the Company. During 2006, we participated in drilling 374 wells, 363 of which were completed as productive. Apache performed 615 workovers and recompletions in the region during the year. We currently estimate spending approximately $570 million in 2007 on drilling and production enhancement projects.

Marketing — In general, most of our U.S. gas is sold on a monthly basis at either monthly or daily market prices. Our natural gas is sold primarily to Local Distribution Companies (LDCs), utilities, end-users, integrated major oil and gas companies and marketers. In an effort to increase sales to direct users of natural gas and to meet the needs of our customers, we also periodically sell some gas under long-term contracts at prices that fluctuate with market conditions. Approximately eight percent of our 2006 U.S. natural gas production was sold under long-term fixed-price physical contracts which expire in 2007 and 2008. See Item 7A, Quantitative and Qualitative Disclosures about Market Risk “Commodity Risk” in this Form 10-K.

Apache has historically marketed and continues to sell its U.S. crude oil to integrated major oil companies, purchasers, transporters, and refiners. The objective is to maximize the value of the crude oil sold by identifying the most economical markets and transportation routes available to move the crude oil via pipeline, truck or barge. Sales contracts are generally thirty (30) day evergreen contracts and renew automatically until canceled by either party. These contracts provide for sales at prices which fluctuate with daily oil market conditions, thus capturing the market value of the crude oil each day. We manage our credit risk by selling our oil to creditworthy counterparties and monitoring our exposure on a daily basis.

Canada

Overview — Our exploration and development activity in our Canadian region is concentrated in the Provinces of Alberta, British Columbia, Saskatchewan and to a lesser degree the Northwest Territories. The region comprises

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24.9 percent of our estimated proved reserves, the largest in the Company. We hold over 4.9 million net acres in Canada, the largest of our North American regions. Canada was our most active drilling area in 2006, with Apache participating in 874 wells, focused primarily on low-risk shallow development wells. We completed 740 as producers and conducted 274 workover and recompletion projects. Although actual annual capital expenditures may change with industry conditions and results, we currently estimate spending approximately $770 million in 2007 to drill approximately 380 wells, continue our exploitation program, albeit at a lower level, and continue developing our gas processing infrastructure. Our 2007 drilling program will include more deeper, higher risk-reward exploration wells and fewer shallow development wells.

Apache is also targeting fields such as Provost and Nevis in Alberta for coalbed methane (CBM) and in the process has emerged as one of Canada’s largest producers of CBM. The North and South Grant Lands obtained through farm-in agreements (discussed below) provide additional CBM potential.

In 2005, Apache signed a farm-in agreement with ExxonMobil covering approximately 650,000 acres of undeveloped properties in the Western Canadian province of Alberta. Under the agreement, Apache is to drill and operate 145 new wells over a 36-month period with upside potential for further drilling. ExxonMobil retains a royalty on fee lands and a convertible working interest on leasehold acreage, both of which vary dependent on activity levels. The agreement also allows Apache to test additional horizons on approximately 140,000 acres of property covered in a 2004 farm-in agreement with ExxonMobil. The 2004 farm-in agreement covered approximately 380,000 acres and stipulated drilling at least 250 wells over a two-year period beginning in October 2004. The 250 well commitment was met and the agreement was extended for an additional year. In 2006, Apache drilled 218 wells on the 2005 and 2004 farm-in acreage earning 93 additional acreage sections. Through the end of 2006, Apache has now drilled a total of 675 wells on the farm-in acreage from both agreements.

Marketing — Our Canadian natural gas sales focuses on sales to LDCs, utilities, end-users, integrated majors, supply aggregators and marketers. Our composite client portfolio is credit worthy and diverse. Improved North American natural gas pipeline connectivity has triggered a closer correlation between Canadian and United States natural gas prices. To diversify our market exposure and optimize pricing differences in the U.S. and Canada, we transport natural gas via our firm transportation contracts to California, the Chicago area, and eastern Canada. Our objective is to sell the majority of our production monthly, either into the first of the month market, or the daily market. Over 95 percent of our Canadian natural gas production is sold on a monthly basis at either monthly or daily market prices. Approximately two percent of our sales are long-term fixed-price sales. The longest term for these sales expires in 2011. The remainder is sold under long-term commitments to Canadian aggregators and end-users where the prices we receive under these contracts fluctuate monthly with market indices.

Our Canadian crude oil is primarily sold to refiners, integrated majors and marketers. To increase the market value of our condensate and heavier crudes, our condensate is either used or sold for blending purposes. We sell our crude oil and NGLs on Canadian Postings, which are market reflective prices that depend on worldwide crude oil prices and are adjusted for transportation and quality. In order to reach more purchasers and diversify our market, we transport crude on 12 pipelines to the major trading hubs within Alberta and Saskatchewan.

Egypt

Overview — In Egypt, our operations are conducted pursuant to production sharing contracts under which the contractor partner pays all operating and capital expenditure costs for exploration and development. A percentage of the production, usually up to 40 percent, is available to the contractor partners to recover operating and capital expenditure costs. In general, the balance of the production is allocated between the contractor partners and the Egyptian General Petroleum Corporation (EGPC) on a contractually defined basis. Apache is the second largest acreage holder and the most active driller in the Western Desert of Egypt. Egypt is the country with our largest single acreage position where, as of December 31, 2006, we held approximately 10.2 million gross acres in 19 separate concessions. Development leases within concessions generally have a 25-year life with extensions possible for additional commercial discoveries, or on a negotiated basis. Apache is the largest producer of liquid hydrocarbons and natural gas in the Western Desert. Egypt contributed approximately 21 percent of Apache’s production revenues and 19 percent of total production. Egypt accounted for 12 percent of total estimated proved reserves as of December 31, 2006. The Company reports all estimated proved reserves held under production sharing agreements utilizing the economic interest method, which excludes the host country’s share of reserves.

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In 2006, Apache had an active drilling program in Egypt, completing 140 of 163 wells, an 86 percent success rate, and conducted 390 workovers and recompletions. We currently plan to spend approximately $1 billion in 2007. Of this, $600 million will be for drilling and production enhancement work. We recently received approval to expand our Western Desert gas processing capacity and infrastructure to evacuate an additional 200 MMcf/d gas volumes driven by the Qasr field discovery. We project that this upgrade will take two years to complete at a total cost of $950 million, excluding actual gas well drilling costs and we have included $350 million in our capital expenditures for 2007.

On January 6, 2006, the Company completed the sale of its 55 percent interest in the deepwater section of Egypt’s West Mediterranean Concession to Amerada Hess for $413 million.

Please refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations “Critical Accounting Policies and Estimates, Allowance for Doubtful Accounts” in this Form 10-K for a discussion of our Egyptian receivables.

Marketing — We and our partners have sold our gas production to EGPC under an Industry Pricing Formula; which is a sliding scale based on Dated-Brent crude oil with a minimum of $1.50 per MMbtu and a maximum of $2.65 per MMbtu which corresponds to a Dated-Brent price of $21.00 per barrel. Generally, the Industry Pricing Formula applies to all new gas discovered and produced. In exchange for extension of the Khalda Concession lease in July 2004, Apache agreed to accept Industry Pricing on all production in excess of 100 MMcf/d, but preserved the higher price formula until 2013 on the initial 100 MMcf/d.

Oil from the Khalda Concession, the Qarun Concession and other nearby Western Desert blocks is either sold directly to EGPC or other third-parties. The oil sales are made either directly into the Egyptian oil pipeline grid, exported via one of two terminals on the north coast of Egypt, or sold to third parties (non-governmental) through the MIDOR refinery located in northern Egypt. Oil production that is presently sold to EGPC is sold on a spot basis at a “Western Desert” price (indexed to Brent). In 2006, we exported 28 cargoes (approximately 8.6 million barrels) of Western Desert crude oil from the El Hamra and Sidi Kerir terminals located on the northern coast of Egypt. These export cargoes were sold at market prices comparable to domestic sales to EGPC. Additionally, 24 cargoes representing 3.5 million barrels were sold in Egypt to other non-governmental purchasers at prevailing market prices. Export sales from both the Khalda and Qarun areas in the Western Desert have continued in 2007.

Australia

Overview — Our exploration activity in Australia is focused in the offshore Carnarvon, Gippsland, Browse, and Perth basins where Apache holds 6.8 million net acres in 35 Exploration Permits, 10 Production Licenses, and six Retention Leases. Production operations are concentrated in the Carnarvon basin which is the location of all 10 Production Licenses, nine of which are operated by Apache. In 2006, the region generated $408 million of production revenues producing 15.7 MMboe (8.6 percent of our total production) and accounted for 8.8 percent of our year-end estimated proved reserves. During the year we participated in drilling 23 wells; 18 exploration and five development wells. Four of the exploration wells and three of the development wells were productive for a 30 percent success rate.

Exploration successes in 2006 included the Theo and West Cycad oil discoveries and the Gnu and Bambra East gas finds. The West Cycad oil discovery was drilled in the Harriet Joint Venture (HJV) area and is slated to begin production in the first quarter of 2007. The successful Theo well was drilled in the Exmouth sub-basin and is scheduled to begin production in 2009. The Gnu well was drilled in the Reindeer/Caribou field and added significant new reserves. First production from the Reindeer/Caribou field is targeted for late 2008 or early 2009. The Bambra East well was a successful gas well in the HJV, which more than doubled the volume of gas attributed to the Bambra field area. Gas production from this asset will begin in 2007 subject to augmentation of existing infrastructure.

During 2007, our Australian region plans to expand the HJV oil and gas production through development of the 2006 discoveries and drilling three additional wells: Bambra 8, Doric 2 and Lee 3. We will monitor the effects of the increased water injection at Stag and possibly drill an additional producer. We will also begin the initial phase of development drilling at the Van Gogh field. A key factor for success in 2007 will be increasing gas production and

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reserves to fulfill the requirements of our sales contracts, exploration success and initiating the Theo field development and final sanctions thereof. We currently estimate spending approximately $460 million in 2007 to drill 30 exploration, appraisal and development wells and another $50 million for new facilities.

Marketing — In 2006, we executed three new gas sales contracts in Australia. As of December 31, 2006, Apache had a total of 22 active gas contracts with expiration dates ranging from April 2007 to July 2030. Generally, natural gas is sold in Western Australia under long-term, fixed-price contracts, many of which contain price escalation clauses based on the Australian consumer price index.

We continue to export all of our crude oil production into the international market at prices which fluctuate with world market conditions.

North Sea

Overview — In 2006, the North Sea region generated $1.35 billion of revenue, producing 21.5 million barrels of oil equivalent. We continued to develop our North Sea core area around the Forties field, including investments in upgrades to improve the operating efficiency of our platforms. Despite this, 2006 production was down 11 percent from 2005 primarily because of production interruptions associated with commissioning of major facility projects, and temporary shutdown of the Forties Pipeline System during the third quarter of 2006. Our focus in 2006 on infrastructure projects also displaced drilling operations needed to mitigate natural decline.

In 2006, we invested $329 million of capital in the North Sea region, including investments on drilling, recompletion and facility upgrades.

At Forties we commissioned a number of key facility projects to improve production efficiency and lower operating costs, including new power generation, a multi-platform distribution system, water injection upgrades and drilling rig modification. Also during 2006, seismic survey data acquired over Forties in 2005 was processed for inversion to identify bypassed oil in the main reservoir units and update the inventory of future drilling targets. We also drilled one appraisal well outside Forties, and had a second appraisal well and an exploration well in progress at the end of 2006.

There were no significant additions to North Sea acreage in 2006; however, in early 2007 Apache was awarded 62,320 acres from four licenses applied for in the UK 24th Licensing Round. In block 22/6a (Bacchus), Apache increased equity from 60 percent to 70 percent and became Operator (purchasing ExxonMobil’s 20 percent share and farming out 10 percent). A further 652 square kilometers of 3D seismic was acquired over six blocks of our acreage.

North Sea capital expenditures for 2007 are currently estimated at $480 million. After a year with minimal drilling, activity will significantly increase. In Forties, we will continue the development drilling program, with 15 new wells planned, and complete platform upgrades begun last year. Upgrades for 2007 include finalizing installation of additional produced water re-injection pumps and deep gas lift compressors, and commissioning of direct fluid export from Forties Bravo to Forties Charlie. These projects will enable Forties to meet stringent new environmental targets for produced water discharge to sea as well as enhance reservoir management capabilities, and should enhance runtime efficiency. Outside Forties, four exploration and appraisal wells are scheduled to be drilled in the first half of the year.

Marketing — In 2006, we entered into two new term contracts for the physical sale of Forties crude at prevailing market prices, which are composed of base market indices, adjusted for the higher quality of Forties crude relative to Brent and a premium to reflect the higher market value for term arrangements. Also in 2006, a new value adjustment formula (Quality Bank Adjustor) was implemented in BP’s Forties Pipeline System, through which Forties crude is shipped and commingled with crudes from other central North Sea fields. The original formula was challenged by Apache in June 2005, as it did not accurately value the Forties crude quality relative to the other crudes shipped on the Forties Pipeline System. The new agreed upon comingled stream on the formula better represents Forties crude value and effectively increases the volume allocated to Apache from the Forties Pipeline System.

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Argentina

Argentina became our newest core area following two significant acquisitions in 2006 that substantially increased our presence in the country. In the second quarter, we completed our purchase of Pioneer’s operations in Argentina for $675 million with estimated proved reserves of 22 MMbbls of liquid hydrocarbons and 297 Bcf of natural gas. In the third quarter, we acquired additional interests in (and now operate) seven concessions in the Tierra del Fuego Province from Pan American for total consideration of $429 million. Our oil and gas assets are located in the Neuquén, San Jorge and Austral basins of Argentina. In 2006, we had 9.9 MMboe of production and 110.6 MMboe of estimated proved reserves, approximately 5.4 percent and 4.8 percent, respectively, of Apache’s total production and reserves.

We plan to invest approximately $180 million drilling over 100 wells and spend an additional $60 million on production enhancement projects in 2007.

Marketing — In Argentina we extended our existing natural gas contracts to regulated markets through April 2007, per the Argentine Secretary of Energy’s request. We expect to reach a new agreement during the first-quarter of 2007 with the Argentine government, which will set the volumes to be delivered to the regulated market for the period 2007 through 2011. We also entered into four new term contracts up to two years in duration for a total of 22 MMcf/d. These four contracts enabled Apache to lock in higher priced contracts while awaiting a new agreement to cover the internal demand of Argentina for 2007 onward.

In October 2006, the Argentina government removed the export tax exempt status previously afforded the province of Tierra del Fuego through a Special Customs area exemption. The government has further assessed an export tax on all exports from Argentina based upon the price paid for natural gas imports from Bolivia. This tax reduces the value we are receiving under our contract with Methanex in Chile. We have entered into an interim agreement with Methanex to mitigate the effects of this tax and are working to reach an economically suitable final agreement. The Methanex contract represents less than 10 percent of our gas sales in Argentina.

Other International

China.  On August 8, 2006, the Company completed the sale of our 24.5 percent interest in the Zhao Dong block offshore the People’s Republic of China, to Australia-based ROC Oil Company Limited for $260 million, marking Apache’s exit from China. The transaction was effective July 1, 2006, and the Company recorded a gain of approximately $174 million in the third-quarter of 2006.

Subsequent Events

On January 18, 2007, the Company announced that it is acquiring controlling interest in 28 oil and gas fields in the Permian basin of West Texas from Anadarko Petroleum Corporation (Anadarko) for $1 billion. Apache estimates that these fields had proved reserves of 57 million barrels (MMbbls) of liquid hydrocarbons and 78 billion cubic feet (Bcf) of natural gas as of yearend 2006. The transaction will be effective the earlier of closing or March 31, 2007. Approximately 10 percent of the Permian basin properties are subject to third-party preferential purchase rights which, if exercised, would reduce the interests we purchase in those properties and the purchase price we would pay. The Company intends to fund the acquisition with debt. Apache and Anadarko are entering into a joint-venture arrangement to effect the transaction. In connection with the acquisition, the Company entered into cash flow hedges to protect against commodity price volatility. For the period of July 2007 through June 2010, the Company entered into hedges for a portion of both the oil and the natural gas with NYMEX based costless collars.

In anticipation of closing the Anadarko transaction, we completed a public offering in January 2007 of $500 million of 5.625-percent notes due 2017 and $1 billion of 6.0-percent notes due 2037. The net proceeds from the offering ($1.48 billion, net of original issue discounts and underwriting commissions) were used to repay a portion of our outstanding commercial paper, which was incurred to finance acquisitions we made in 2006 and for general corporate purposes.

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Drilling Statistics

Worldwide, in 2006, we participated in drilling 1,611 gross wells, with 1,399 (87 percent) completed as producers. We also performed more than 1,700 workovers and recompletions during the year. Historically, our drilling activities in the U.S. generally concentrate on exploitation and extension of existing, producing fields rather than exploration. As a general matter, our operations outside of the U.S. focus on a mix of exploration and exploitation wells. In addition to our completed wells, at year-end several wells had not yet reached completion: 76 in the U.S. (40.27 net); 10 in Canada (10 net); 18 in Egypt (17.12 net); three in Australia (2.06 net); and two in the North Sea (1.94 net).

The following table shows the results of the oil and gas wells drilled and tested for each of the last three fiscal years:

	Net Exploratory						Net Development						Total Net Wells
	Productive		Dry		Total		Productive		Dry		Total		Productive		Dry		Total
2006
United States		2.9		2.7		5.6		266.4		15.3		281.7		269.3		18.0		287.3
Canada		34.3		6.4		40.7		577.3		114.8		692.1		611.6		121.2		732.8
Egypt		11.8		8.9		20.7		122.7		10.4		133.1		134.5		19.4		153.9
Australia		1.2		9.3		10.5		1.0		1.3		2.3		2.2		10.6		12.8
North Sea		—		1.0		1.0		3.9		—		3.9		3.9		1.0		4.9
Argentina		9.3		5.3		14.6		60.8		2.0		62.8		70.1		7.3		77.4
Other International		—		—		—		1.5		—		1.5		1.5		—		1.5
Total		59.5		33.6		93.1		1,033.6		143.8		1177.4		1,093.1		177.5		1,270.6
2005
United States		5.0		3.1		8.1		248.8		24.1		272.9		253.8		27.2		281.0
Canada		273.4		107.6		381.0		1,057.0		—		1,057.0		1,330.4		107.6		1,438.0
Egypt		17.8		6.9		24.7		79.4		7.1		86.5		97.2		14.0		111.2
Australia		.7		6.8		7.5		11.8		4.8		16.6		12.5		11.6		24.1
North Sea		—		7.8		7.8		12.6		1.9		14.5		12.6		9.7		22.3
Argentina		6.3		3.0		9.3		15.6		1.0		16.6		21.9		4.0		25.9
Other International		—		—		—		3.7		.2		3.9		3.7		.2		3.9
Total		303.2		135.2		438.4		1,428.9		39.1		1,468.0		1,732.1		174.3		1,906.4
2004
United States		3.3		3.5		6.8		202.8		24.2		227.0		206.1		27.7		233.8
Canada		6.7		9.3		16.0		1,102.3		84.2		1,186.5		1,109.0		93.5		1,202.5
Egypt		9.5		6.5		16.0		91.5		4.5		96.0		101.0		11.0		112.0
Australia		4.0		7.5		11.5		3.4		1.2		4.6		7.4		8.7		16.1
North Sea		—		1.0		1.0		11.7		3.9		15.6		11.7		4.9		16.6
Argentina		—		—		—		1.2		—		1.2		1.2		—		1.2
Other International		—		—		—		3.7		.3		4.0		3.7		.3		4.0
Total		23.5		27.8		51.3		1,416.6		118.3		1,534.9		1,440.1		146.1		1,586.2

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Productive Oil and Gas Wells

The number of productive oil and gas wells, operated and non-operated, in which we had an interest as of December 31, 2006, is set forth below:

	Gas				Oil				Total
	Gross		Net		Gross		Net		Gross		Net
Gulf Coast		973		752		890		621		1,863		1,373
Central		3,113		1,609		5,219		3,337		8,332		4,946
Canada		7,980		6,915		2,453		995		10,433		7,910
Egypt		33		32		425		404		458		436
Australia		10		6		35		18		45		24
North Sea		—		—		59		57		59		57
Argentina		276		246		484		426		760		672
Total		12,385		9,560		9,565		5,858		21,950		15,418

Production, Pricing and Lease Operating Cost Data

The following table describes, for each of the last three fiscal years, oil, NGLs and gas production, average lease operating costs per boe (including severance and other taxes) and average sales prices for each of the countries where we have operations.

							Average
	Production						Lease		Average Sales Price
	Oil		NGLs		Gas		Operating		Oil		NGLs		Gas
Year Ended December 31,	(Mbbls)		(Mbbls)		(MMcf)		Cost per Boe		(Per bbl)		(Per bbl)		(Per Mcf)
2006
United States		24,394		2,915		243,442	$	10.66	$	54.22	$	38.44	$	6.54
Canada		7,561		798		147,579		9.54		59.90		35.40		6.09
Egypt		20,648		—		79,424		4.36		63.60		—		4.42
Australia		4,341		—		67,933		4.95		68.25		—		1.65
North Sea		21,368		—		752		27.00		63.04		—		10.64
Argentina		2,503		561		40,878		4.39		42.79		36.64		.99
Other International		1,156		—		—		4.67		62.73		—		—
Total		81,971		4,274		580,008	$	10.35	$	59.92	$	37.70	$	5.17
2005
United States		24,188		2,757		218,081	$	9.11	$	47.97	$	32.44	$	7.22
Canada		8,212		816		135,750		7.54		53.05		31.07		7.29
Egypt		20,126		—		60,484		3.85		53.69		—		4.59
Australia		5,613		—		45,003		7.17		57.61		—		1.72
North Sea		23,903		—		842		17.94		53.00		—		9.17
Argentina		424		—		1,137		6.54		37.54		—		1.14
Other International		2,968		—		—		3.79		44.24		—		—
Total		85,434		3,573		461,297	$	8.87	$	51.66	$	32.13	$	6.35
2004
United States		24,841		3,026		236,663	$	6.53	$	38.75	$	26.66	$	5.45
Canada		9,262		947		119,669		6.49		38.57		24.44		5.30
Egypt		19,099		—		50,412		3.37		37.35		—		4.35
Australia		9,214		—		43,227		7.11		41.96		—		1.65
North Sea		19,338		—		684		4.22		24.22		—		5.53
Argentina		207		—		1,394		6.46		32.89		—		.65
Other International		2,775		—		—		3.89		32.88		—		—
Total		84,736		3,973		452,049	$	5.73	$	35.24	$	26.13	$	4.91

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Gross and Net Undeveloped and Developed Acreage

The following table sets out our gross and net acreage position in each country where we have operations.

	Undeveloped Acreage				Developed Acreage
	Gross		Net		Gross		Net
	Acres		Acres		Acres		Acres
United States		1,526,857		939,911		2,965,614		1,829,626
Canada		3,900,899		2,712,924		2,944,150		2,192,895
Egypt		8,806,053		6,037,303		1,399,203		1,274,567
Australia		11,319,040		6,694,350		527,450		316,480
North Sea		1,468,159		1,244,358		29,924		29,174
Argentina		2,447,510		2,108,575		257,000		195,000
Total Company		29,468,518		19,737,421		8,123,341		5,837,742

As of December 31, 2006, we had 736,497, 2,918,890, and 1,802,281 net acres scheduled to expire by December 31, 2007, 2008 and 2009, respectively, if production is not established or we take no other action to extend the terms. We plan to continue the terms of many of these licenses and concession areas through operational or administrative actions and do not expect a significant portion of our net acreage position to expire before such actions occur.

The other international drilling statistics on the preceding page and the Production, Pricing and Lease Operating Cost Data above include activity in China, where Apache ceased operations in August 2006.

Estimated Proved Reserves and Future Net Cash Flows

As of December 31, 2006, Apache had total estimated proved reserves of 1,061 MMbbls of crude oil, condensate and NGLs and 7.5 Tcf of natural gas. Combined, these total estimated proved reserves are equivalent to 2.3 billion barrels of oil equivalent or 13.9 Tcf of natural gas. During 2006, the Company’s reserves grew nine percent with increases in all our countries. The Company’s reserves have increased for 21 consecutive years.

Proved oil and gas reserves are the estimated quantities of natural gas, crude oil, condensate and NGLs that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. The Company reports all estimated proved reserves held under production sharing arrangements utilizing the “economic interest” method, which excludes the host country’s share of reserves. Reserve estimates are considered proved if economical producibility is supported by either actual production or conclusive formation tests. Estimated reserves that can be produced economically through application of improved recovery techniques are included in the “proved” classification when successful testing by a pilot project or the operation of an active, improved recovery program in the reservoir provides support for the engineering analysis on which the project or program is based. Estimated proved developed oil and gas reserves can be expected to be recovered through existing wells with existing equipment and operating methods.

Apache emphasizes that its reported reserves are estimates which, by their nature, are subject to revision. The estimates are made using available geological and reservoir data, as well as production performance data. These estimates are reviewed throughout the year, and revised either upward or downward, as warranted by additional performance data.

Apache’s proved reserves are estimated at the property level and compiled for reporting purposes by a centralized group of experienced reservoir engineers who are independent of the operating groups. These engineers interact with engineering and geoscience personnel in each of Apache’s operating areas, and with accounting and marketing employees to obtain the necessary data for projecting future production, costs, net revenues and ultimate recoverable reserves. Reserves are reviewed internally with senior management and presented to Apache’s Board of Directors in summary form on a quarterly basis. Annually, each property is reviewed in detail by our centralized and operating region engineers to ensure forecasts of operating expenses, netback prices, production trends and development timing are reasonable.

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We engage Ryder Scott Company, L.P. Petroleum Consultants as independent petroleum engineers to review our estimates of proved hydrocarbon liquid and gas reserves and provide an opinion letter on the reasonableness of Apache’s internal projections. Ryder Scott opined that they were in acceptable agreement with the Company’s overall reserve estimates and that the reserves they reviewed conform to the SEC’s definition of proved reserves as set forth in Rule 210.4-10(a) of Regulation S-X. The independent reviews typically cover a large percentage of major value fields, international properties and new wells drilled during the year. During 2006, 2005 and 2004, their review covered 75, 74 and 79 percent of Apache’s worldwide estimated reserve value, respectively.

The Company’s estimates of proved reserves and proved developed reserves as of December 31, 2006, 2005 and 2004, changes in estimated proved reserves during the last three years, and estimates of future net cash flows and discounted future net cash flows from estimated proved reserves are contained in Note 13, Supplemental Oil and Gas Disclosures (Unaudited) of Item 15 in this Form 10-K. These estimated future net cash flows are based on prices on the last day of the year and are calculated in accordance with Statement of Financial Accounting Standards (SFAS) No. 69, “Disclosures about Oil and Gas Producing Activities.” Disclosure of this value and related reserves has been prepared in accordance with SEC Regulation S-X Rule 4-10.

Employees

On December 31, 2006, we had 3,150 employees. Only 25 of these employees are subject to collective bargaining agreements, all of whom are in Argentina.

Offices

Our principal executive offices are located at One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400. At year-end 2006, we maintained regional exploration and/or production offices in Tulsa, Oklahoma; Houston, Texas; Calgary, Alberta; Cairo, Egypt; Perth, Western Australia; Aberdeen, Scotland; and Buenos Aires, Argentina. Apache leases all of its primary office space. The current lease on our principal executive offices runs through December 31, 2013. For information regarding the Company’s obligations under its office leases, see the information appearing in the table in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Capital Resources and Liquidity, Contractual Obligations” and Note 10, Commitments and Contingencies, “Other Commitments and Contingencies, Contractual Obligations” of Item 15 in this Form 10-K.

Title to Interests

As is customary in our industry, a preliminary review of title records is made at the time we acquire properties, which may include opinions or reports of appropriate professionals or counsel. We believe that our title to all of the various interests set forth above is satisfactory and consistent with the standards generally accepted in the oil and gas industry, subject only to immaterial exceptions which do not detract substantially from the value of the interests or materially interfere with their use in our operations. The interests owned by us may be subject to one or more royalty, overriding royalty, and other outstanding interests (including disputes related to such interests) customary in the industry. The interests may additionally be subject to obligations or duties under applicable laws, ordinances, rules, regulations, and orders of arbitral or governmental authorities. In addition, the interests may be subject to burdens such as production payments, net profits interests, liens incident to operating agreements and current taxes, development obligations under oil and gas leases, and other encumbrances, easements, and restrictions, none of which detract substantially from the value of the interests or materially interfere with their use in our operations.

ITEM 1A.  RISK FACTORS

Our business activities and the value of our securities are subject to significant hazards and risks, including those described below. If any of such events should occur, our business, financial condition, liquidity and/or results of operations could be materially harmed, and holders and purchasers of our securities could lose part or all of their investments. Additional risks relating to our securities may be included in the prospectuses for securities we issue in the future.

12

Our Profitability is Highly Dependent on the Prices of Crude Oil, Natural Gas and Natural Gas Liquids, Which Have Historically Been Very Volatile

Our estimated proved reserves, revenues, profitability, operating cash flows and future rate of growth are highly dependent on the prices of crude oil, natural gas and NGLs, which are affected by numerous factors beyond our control. Historically, these prices have been very volatile. A significant downward trend in commodity prices would have a material adverse effect on our revenues, profitability and cash flow, and could result in a reduction in the carrying value of our oil and gas properties and the amounts of our estimated proved oil and gas reserves.

Our Commodity Hedging May Prevent Us From Benefiting Fully From Price Increases and May Expose Us to Other Risks

To the extent that we engage in hedging activities to protect ourselves from commodity price volatility, we may be prevented from realizing the benefits of price increases above the levels of the hedges.

Acquisitions or Discoveries of Additional Reserves are Needed to Avoid a Material Decline in Reserves and Production

The rate of production from oil and gas properties generally declines as reserves are depleted. Except to the extent that we find or acquire additional properties containing estimated proved reserves, conduct successful exploration and development activities or, through engineering studies, identify additional behind-pipe zones, secondary recovery reserves or tertiary recovery reserves, our estimated proved reserves will decline materially as reserves are produced. Future oil and gas production is, therefore, highly dependent upon our level of success in acquiring or finding additional reserves.

Our Drilling Activities May Not Be Productive

Drilling for oil and gas involves numerous risks, including the risk that we will not encounter commercially productive oil or gas reservoirs. The costs of drilling, completing and operating wells are often uncertain, and drilling operations may be curtailed, delayed or canceled as a result of a variety of factors including, but not limited to:

•  unexpected drilling conditions;

•  pressure or irregularities in formations;

•  equipment failures or accidents;

•  fires, explosions, blowouts and surface cratering;

•  marine risks such as capsizing, collisions and hurricanes;

•  other adverse weather conditions; and

•  shortages or delays in the delivery of equipment.

Certain future drilling activities may not be successful and, if unsuccessful, this failure could have an adverse effect on our future results of operations and financial condition. While all drilling, whether developmental or exploratory, involves these risks, exploratory drilling involves greater risks of dry holes or failure to find commercial quantities of hydrocarbons.

Risks Arising From the Failure to Fully Identify Potential Problems Related to Acquired Reserves or to Properly Estimate Those Reserves

One of our primary growth strategies is the acquisition of oil and gas properties. Although we perform a review of the acquired properties that we believe is consistent with industry practices, such reviews are inherently incomplete. It generally is not feasible to review in depth every individual property involved in each acquisition. Ordinarily, we will focus our review efforts on the higher-value properties and will sample the remainder. However, even a detailed review of records and properties may not necessarily reveal existing or potential problems, nor will it

13

permit a buyer to become sufficiently familiar with the properties to assess fully their deficiencies and potential. Inspections may not always be performed on every well, and environmental problems, such as ground water contamination, are not necessarily observable even when an inspection is undertaken. Even when problems are identified, we often assume certain environmental and other risks and liabilities in connection with acquired properties. There are numerous uncertainties inherent in estimating quantities of proved oil and gas reserves and actual future production rates and associated costs with respect to acquired properties, and actual results may vary substantially from those assumed in the estimates. In addition, there can be no assurance that acquisitions will not have an adverse effect upon our operating results, particularly during the periods in which the operations of acquired businesses are being integrated into our ongoing operations.

We Are Subject to Governmental Risks That May Impact Our Operations

Our operations have been, and at times in the future may be, affected by political developments and by federal, state, provincial and local laws and regulations such as restrictions on production, changes in taxes, royalties and other amounts payable to governments or governmental agencies, price controls and environmental protection laws and regulations.

Global Political and Economic Developments May Impact Our Operations

Political and economic factors in international markets may have a material adverse effect on our operations. On an equivalent-barrel basis, approximately 63 percent of our oil, NGLs and natural gas production in 2006 was outside the United States, and approximately 59 percent of our estimated proved oil and gas reserves on December 31, 2006 were located outside of the United States.

There are many risks associated with operations in international markets, including changes in foreign governmental policies relating to crude oil, NGLs, and natural gas pricing and taxation, other political, economic or diplomatic developments, changing political conditions and international monetary fluctuations. These risks include: political and economic instability or war; the possibility that a foreign government may seize our property with or without compensation; confiscatory taxation; legal proceedings and claims arising from our foreign investments or operations; a foreign government attempting to renegotiate or revoke existing contractual arrangements, or failing to extend or renew such arrangements; fluctuating currency values and currency controls; and constrained natural gas markets dependent on demand in a single or limited geographical area.

On December 23, 2004, Apache entered into a 20-year insurance contract with the Overseas Private Investment Corporation (OPIC) which provides $300 million of political risk insurance for the Company’s Egyptian operations. This policy insures us against (1) non-payment by EGPC of arbitral awards covering amounts owed Apache on past due invoices and (2) expropriation of exportable petroleum when actions taken by the Government of Egypt prevent Apache from exporting our share of production. See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Critical Accounting Policies and Estimates, Allowance for Doubtful Accounts” in this Form 10-K for additional discussion of our Egyptian receivables.

In addition to the contract with OPIC, the Company has acquired commercial political risk insurance covering significant portions of its investments in Egypt and Argentina. The insurance provides coverage for confiscation, nationalization, and expropriation risks and currency inconvertibility, and is written on multi-year contracts with highly rated international insurers.

Actions of the United States government through tax and other legislation, executive order and commercial restrictions can adversely affect our operating profitability in the U.S. as well as other countries. Various agencies of the United States and other governments have, from time to time, imposed restrictions which have limited our ability to gain attractive opportunities or even operate in various countries. These restrictions have in the past limited our foreign opportunities and may continue to do so in the future.

14

Weather and Climate May Have a Significant Impact on Our Revenues and Productivity

Demand for oil and natural gas are, to a significant degree, dependent on weather and climate, which impacts the price we receive for the commodities we produce. In addition, our exploration and development activities and equipment can be adversely affected by severe weather, such as hurricanes in the Gulf of Mexico, which may cause a loss of production from temporary cessation of activity or lost or damaged equipment. While our planning for normal climatic variation, insurance program, and emergency recovery plans mitigate the effects of the weather, not all such effects can be predicted, eliminated or insured against.

Costs Incurred Related to Environmental Matters

We, as an owner or lessee and operator of oil and gas properties, are subject to various 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.

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 also have established operational procedures and training programs designed to minimize the environmental impact of our field facilities. The costs incurred by these policies and procedures are inextricably connected to normal operating expenses such that we are unable to separate the expenses related to environmental matters; however, we do not believe any such additional expenses are material to our financial position or results of operations.

Apache manages its exposure to environmental liabilities on properties to be acquired by identifying existing problems and assessing the potential liability. The Company also conducts periodic reviews, on a company-wide basis, to identify changes in its environmental risk profile. These reviews evaluate whether there is a probable liability, its amount, and the likelihood that the liability will be incurred. The amount of any potential liability is determined by considering, among other matters, incremental direct costs of any likely remediation and the proportionate cost of our employees who are expected to devote a significant amount of time to any possible remediation effort. Our general policy is to limit any reserve additions to incidents or sites that are considered probable to result in an expected remediation cost exceeding $100,000.

We maintain insurance coverage, which we believe is customary in the industry, although we are not fully insured against all environmental risks. As described in Note 10, Commitments and Contingencies of Item 15, in this Form 10-K, on December 31, 2006, we had an accrued liability of $17 million for environmental remediation. We have not incurred any material environmental remediation costs in any of the periods presented and we are not aware of any future environmental remediation matters that would be material to our financial position or results of operations.

Although environmental requirements have a substantial impact upon the energy industry, generally these requirements do not appear to affect us any differently, or to any greater or lesser extent, than other upstream companies in the industry. We do not believe that compliance with federal, provincial, state, local or foreign country provisions regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, will have a material adverse effect upon the capital expenditures, earnings or competitive position of Apache or its subsidiaries; however, there is no assurance that changes in or additions to laws or regulations regarding the protection of the environment will not have such an impact.

Industry Competition

Strong competition exists in all sectors of the oil and gas exploration and production industry. We compete with major integrated and other independent oil and gas companies for acquisition of oil and gas leases, properties and reserves, equipment and labor required to explore, develop and operate those properties and the marketing of oil and natural gas production. Higher recent crude oil and natural gas prices have increased the costs of properties

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available for acquisition and there are a greater number of companies with the financial resources to pursue acquisition opportunities. Many of our competitors have financial and other resources substantially larger than those we possess and 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 drilling rights. In addition, many of our larger competitors may have a competitive advantage when responding to factors that affect demand for oil and natural gas production, such as changing worldwide prices and levels of production, the cost and availability of alternative fuels and the application of government regulations. We also compete in attracting and retaining personnel, including geologists, geo-physicists, engineers and other specialists.

Insurance Does Not Cover All Risks

Exploration for and production of oil and natural gas can be hazardous, involving unforeseen occurrences such as blowouts, cratering, fires and loss of well control, which can result in damage to or destruction of wells or production facilities, injury to persons, loss of life, or damage to property or the environment. We maintain insurance against certain losses or liabilities arising from our operations in accordance with customary industry practices and in amounts that management believes to be prudent; however, insurance is not available to us against all operational risks.

In response to large underwriting losses caused by Hurricanes Katrina and Rita, the insurance industry has reduced capacity for windstorm damage and substantially increased premium rates. As a result, there is no assurance that Apache will be able to arrange insurance to cover fully its Gulf of Mexico exposures at a reasonable cost when the current policies expire.

ITEM 1B.  UNRESOLVED SEC STAFF COMMENTS

As of December 31, 2006, we did not have any unresolved comments from the SEC staff that were received 180 or more days prior to yearend. We responded to comments from the SEC staff that we received in December 2006, and are awaiting final resolution. We do not believe the comments or our responses thereto materially impact any previous or prospective disclosures.

ITEM 3.  LEGAL PROCEEDINGS

See the information set forth in Note 10, Commitments and Contingencies of Item 15 and Item 1A, Risk Factors, “Costs Incurred Related to Environmental Matters” in this Form 10-K.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our security holders during the most recently ended fiscal quarter.

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PART II

ITEM 5.  MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

During 2006, Apache common stock, par value $0.625 per share, was traded on the New York and Chicago Stock exchanges, and the NASDAQ National Market under the symbol APA. The table below provides certain information regarding our common stock for 2006 and 2005. Prices were obtained from The New York Stock Exchange, Inc. Composite Transactions Reporting System. Per share prices and quarterly dividends shown below have been rounded to the indicated decimal place.

	2006								2005
	Price Range				Dividends Per Share				Price Range				Dividends Per Share
	High		Low		Declared		Paid		High		Low		Declared		Paid
First Quarter	$	76.25	$	63.17	$	.10	$	.10	$	65.90	$	47.45	$	.08	$	.08
Second Quarter		75.66		56.50		.10		.10		67.99		51.52		.08		.08
Third Quarter		72.40		59.18		.15		.10		78.60		64.85		.10		.08
Fourth Quarter		70.50		59.99		.15		.15		75.95		59.36		.10		.10

The closing price per share of our common stock, as reported on the New York Stock Exchange Composite Transactions Reporting System for January 31, 2007, was $72.97. On January 31, 2007, there were 330,958,433 shares of our common stock outstanding held by approximately 7,000 shareholders of record and approximately 319,000 beneficial owners.

We have paid cash dividends on our common stock for 42 consecutive years through December 31, 2006. When, and if, declared by our board of directors, future dividend payments will depend upon our level of earnings, financial requirements and other relevant factors.

In 1995, under our stockholder rights plan, each of our common stockholders received a dividend of one “preferred stock purchase right (a “right”)” for each 2.310 outstanding shares of common stock (adjusted for subsequent stock dividends and a two-for-one stock split) that the stockholder owned. These rights were originally scheduled to expire on January 31, 2006. Effective as of that date, the rights were reset to one right per share of common stock and the expiration was extended to January 31, 2016. Unless the rights have been previously redeemed, all shares of Apache common stock are issued with rights and, the rights trade automatically with our shares of common stock. For a description of the rights, please refer to Note 8, Capital Stock of Item 15 in this Form 10-K.

In 2003, our board of directors declared a two-for-one common stock split which was distributed on January 14, 2004 to holders of record on December 31, 2003. In connection with the stock split, the Company issued 166,254,667 shares.

Information concerning securities authorized for issuance under equity compensation plans is set forth under the caption “Equity Compensation Plan Information” in the proxy statement relating to the Company’s 2007 annual meeting of stockholders, which is incorporated herein by reference.

The following stock price performance graph is intended to allow review of stockholder returns, expressed in terms of the appreciation of the Company’s common stock relative to two broad-based stock performance indices. The information is included for historical comparative purposes only and should not be considered indicative of future stock performance. The graph compares the yearly percentage change in the cumulative total stockholder return on the Company’s common stock with the cumulative total return of the Standard & Poor’s Composite 500

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Stock Index and of the Dow Jones U.S. Exploration and Production Index (formerly Dow Jones Secondary Oils Stock Index) from December 31, 2001 through December 31, 2006.

Comparison of Five Year Cumulative Total Return
For the Year Ended December 31, 2006

	2001		2002		2003		2004		2005		2006
Apache Corporation		100		115.13		173.15		217.15		295.92		289.11
S & P’s Composite 500 Stock		100		77.9		100.25		111.15		116.61		135.03
DJ US Expl & Prod Index*		100		102.17		133.9		189.97		314.06		330.93

* formerly DJ Secondary Oil Stock Index

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ITEM 6.   SELECTED FINANCIAL DATA

The following table sets forth selected financial data of the Company and its consolidated subsidiaries over the five-year period ended December 31, 2006, which information has been derived from the Company’s audited financial statements. This information should be read in connection with, and is qualified in its entirety by the more detailed information in the Company’s financial statements of Item 15 in this Form 10-K.

	As of or For the Year Ended December 31,
	2006		2005		2004		2003		2002
	(In thousands, except per share amounts)
Income Statement Data
Total revenues	$	8,288,779	$	7,584,244	$	5,332,577	$	4,190,299	$	2,559,873
Income (loss) attributable to common stock		2,546,771		2,618,050		1,663,074		1,116,205		543,514
Net income (loss) per common share:
Basic		7.72		7.96		5.10		3.46		1.83
Diluted		7.64		7.84		5.03		3.43		1.80
Cash dividends declared per common share		.50		.36		.28		.22		.19
Balance Sheet Data
Total assets	$	24,308,175	$	19,271,796	$	15,502,480	$	12,416,126	$	9,459,851
Long-term debt		2,019,831		2,191,954		2,588,390		2,326,966		2,158,815
Preferred interests of subsidiaries		—		—		—		—		436,626
Shareholders’ equity		13,191,053		10,541,215		8,204,421		6,532,798		4,924,280
Common shares outstanding		330,737		330,121		327,458		324,497		302,506

For a discussion of significant acquisitions and divestitures, see Note 2 of Item 15 in this Form 10-K.

ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Apache Corporation (Apache or the Company) is an independent energy company whose principle business includes exploration, development and production of crude oil, natural gas and natural gas liquids. We operate in six countries: the United States, Canada, Egypt, Australia, offshore the United Kingdom in the North Sea, and Argentina.

In 2006, we earned $2.5 billion, within three percent of last year’s record earnings, despite a 19 percent decline in gas price realizations. Cash provided by operating activities totaled $4.3 billion, flat to 2005. We also set records for production and reserves with worldwide equivalent production increasing 10 percent, making 2006 the 27th out of the last 28 years that we have reported production growth. Reserves grew nine percent, increasing in every core area, marking the 21st consecutive year of reserve growth at Apache.

Our growth strategy focuses on economic growth through drilling, acquisitions, or a combination of both, depending on, among other things, costs levels, potential rates of return and the availability of acquisition opportunities. We utilize a portfolio approach to provide diversity in terms of geologic risk, geographic location, hydrocarbon mix (crude oil and natural gas) and reserve life. This strategy provides multiple avenues for growth. We took several steps in 2006 to balance and grow our asset base. Outside of North America, we divested two assets: the undeveloped deepwater section of Egypt’s West Mediterranean Concession and our interest in the Zhao Dong block offshore the People’s Republic of China. To rebalance our international portfolio, we bolstered our position in Argentina purchasing an estimated 109 MMboe of reserves in two separate transactions. After increasing our production on these properties through active operations, Argentina is now our newest core area and we operate an

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attractive property base that we believe has significant upside. In the U.S., we completed two strategic purchases strengthening our Permian basin and Gulf of Mexico positions. In January 2006, we purchased an estimated 31 MMboe of proved reserves in long life producing properties in the Permian basin of West Texas. The acquisition was balanced by purchasing 44 MMboe of shorter life, but higher rate-of-return reserves in the Gulf of Mexico. Worldwide, we purchased an estimated 196.5 MMboe of proved reserves. On the exploration and development side, we drilled 1,611 wells with an 87 percent success rate with active drilling programs in all core areas. We invested $3.7 billion in exploration and development activities, excluding asset retirement costs and capitalized interest, adding 224 MMboe in of estimated proved reserves. Our reserve life across our core areas spans from eight to twenty years, with a 46 percent oil and 54 percent natural gas mix, consistent with yearend 2005.

Apache’s profitability is a function of commodity prices, the cost to add reserves through drilling and acquisitions and the cost to produce our reserves. Trends in commodity prices directly impact oil and gas revenues and demand for services and thus, have a significant impact on drilling and operating costs. We closely monitor trends in drilling costs in each of our core areas and the prices paid to acquire producing properties and, when appropriate, adjust our capital budgets.

Commodity prices are driven by the prevailing worldwide price for crude oil, spot prices applicable to our United States and Canadian natural gas production and many other factors beyond our control. Historically, these prices have been volatile and unpredictable, and 2006 was no exception. Our 2006 crude oil price realizations averaged $59.92 per barrel, up 16 percent from 2005, ranging from an average monthly high of $68.59 per barrel in July to a low of $52.64 per barrel in October as demand waned in the U.S. with a delay in the onset of seasonal temperatures. Natural gas realizations were 19 percent lower than last year, averaging $5.17 per thousand cubic feet (Mcf), with a high of $8.05 per Mcf in January, and a low of $3.85 per Mcf in October.

A high drilling and operating cost environment once again challenged us in 2006, continuing the trend seen over the past few years. This upward trend is a reflection of increased demand driven by historically high commodity prices. In addition, repair activity from the 2005 Gulf of Mexico hurricanes also increased demand for services in the U.S., and accordingly, costs. Cost increases were reflected in nearly all of our drilling and lease operating cost components, including: rig rates, drill pipe costs, labor costs, chemical costs and the costs of power and fuel. The Company reviews costs for each core area on a routine basis and pursues alternatives in maintaining efficient levels of costs and expenses. Despite pressure from rising costs, 2006 margins, while down slightly from record 2005 levels, were the second highest in our 50-plus-year history. For purposes of this discussion, margins are calculated as follows:

	2006		2005		2004
	(In thousands, except margin)
Income before Income Taxes	$	4,009,595	$	4,206,524	$	2,663,083
Barrels of oil equivalent produced		182,913		165,890		164,050
Margin per boe produced	$	44.14	$	44.95	$	32.36

While the Company has made considerable progress recovering from the damage caused by Hurricanes Katrina and Rita, which struck in late August and late September 2005, the hurricanes had considerable impact on both 2006 and 2005 operations and results, and will impact 2007 operations. In addition to extensive damage to Apache’s onshore and offshore Gulf of Mexico production and transportation facilities, third-party pipelines, terminals and processing facilities, which the Company relies upon to transport and process its crude oil and natural gas also sustained substantial damage. For a discussion of the impact on 2006 and 2005 operations and results refer to Results of Operations and Oil and Gas Capital Expenditures in this Item 7.

Results of Operations

This section includes a discussion of our 2006 and 2005 results of operations and provides insight into unique events and circumstances for each of the Company’s six reportable segments. Please refer to Note 12, Business Segment Information of Item 15 in this Form 10-K for segment information.

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Acquisitions and Divestitures

2006 Acquisitions

U.S. Permian Basin

On January 5, 2006, the Company purchased Amerada Hess’s interest in eight fields located in the Permian basin of West Texas and New Mexico. The original purchase price was reduced from $404 million to $269 million because other interest owners exercised their preferential rights to purchase a number of the properties. The settlement price at closing of $239 million was adjusted for revenues and expenditures occurring between the effective date and the closing date of the acquisition. The acquired fields had estimated proved reserves of 27 MMbbls of liquid hydrocarbons and 27 Bcf of natural gas as of yearend 2005.

Argentina

On April 25, 2006, the Company acquired the operations of Pioneer Natural Resources (Pioneer) in Argentina for $675 million. The settlement price at closing, of $703 million, was adjusted for revenues and expenditures occurring between the effective date and closing date of the acquisition. The properties are located in the Neuquén, San Jorge and Austral basins of Argentina and had estimated net proved reserves of approximately 22 MMbbls of liquid hydrocarbons and 297 Bcf of natural gas as of December 31, 2005. Eight gas processing plants (five operated and three non-operated), 112 miles of operated pipelines in the Neuquén basin and 2,200 square miles of three-dimensional (3-D) seismic data were also included in the transactions. Apache financed the purchase with cash on hand and commercial paper.

The purchase price was allocated to the assets acquired and liabilities assumed based upon the estimated fair values as of the date of acquisition, as follows (in thousands):

Proved property	$	501,938
Unproved property		189,500
Gas Plants		51,200
Working capital acquired, net		11,256
Asset retirement obligation		(13,635	)
Deferred income tax liability		(37,630	)
Cash consideration	$	702,629

On September 19, 2006, Apache acquired additional interests in (and now operates) seven concessions in the Tierra del Fuego Province from Pan American Fueguina S.R.L. (Pan American) for total consideration of $429 million. The settlement price at closing of $396 million was adjusted for normal closing items, including revenues and expenses between the effective date and the closing date of the acquisition. Apache financed the purchase with cash on hand and commercial paper.

The total cash consideration allocated below includes working capital balances purchased, asset retirement obligations assumed and an obligation to deliver specific gas volumes in the future. The purchase price was allocated to the assets acquired and liabilities assumed based upon the estimated fair values as of the date of acquisition, as follows (in thousands):

Proved property	$	289,916
Unproved property		132,000
Gas plants		12,722
Working capital acquired, net		8,929
Asset retirement obligation		(1,511	)
Assumed obligation		(46,000	)
Cash consideration	$	396,056

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Offshore Gulf of Mexico

In June 2006, the Company acquired the remaining producing properties of BP plc (BP) on the Outer Continental Shelf of the Gulf of Mexico. The original purchase price was reduced from $1.3 billion for 18 producing fields to $845 million because other interest owners exercised their preferential rights to purchase five of the 18 fields. The purchase price consisted of $747 million of proved property, $42 million of unproved property and $56 million of facilities. The settlement price on the date of closing of $821 million was adjusted primarily for revenues and expenditures occurring between the April 1, 2006 effective date and the closing date of the acquisition. The acquired properties include 13 producing fields (nine of which are operated) with estimated proved reserves of 19.5 MMbbls of liquid hydrocarbons and 148 Bcf of natural gas. Apache financed the purchase with cash on hand and commercial paper.

Pending Acquisition — U.S. Permian Basin

On January 18, 2007, the Company announced that it is acquiring controlling interest in 28 oil and gas fields in the Permian basin of West Texas from Anadarko Petroleum Corporation (Anadarko) for $1 billion. Apache estimates that these fields had proved reserves of 57 million barrels (MMbbls) of liquid hydrocarbons and 78 billion cubic feet (Bcf) of natural gas as of yearend 2006. The transaction will be effective the earlier of closing or March 31, 2007. Approximately 10 percent of the Permian basin properties are subject to third-party preferential purchase rights which, if exercised, would reduce the interests we purchase in those properties and the purchase price we would pay. The Company intends to fund the acquisition with debt. Apache and Anadarko are entering into a joint-venture arrangement to effect the transaction. In connection with the acquisition, the Company entered into cash flow hedges to protect against commodity price volatility. For the period of July 2007 through June 2010, the Company entered into hedges for a portion of both the oil and the natural gas with NYMEX based costless collars.

2006 Divestitures

On January 6, 2006, the Company completed the sale of its 55 percent interest in the deepwater section of Egypt’s West Mediterranean Concession to Amerada Hess for $413 million. Apache did not have any proved reserves booked for these properties.

On August 8, 2006, the Company completed the sale of its 24.5 percent interest in the Zhao Dong block offshore, the People’s Republic of China, to Australia-based ROC Oil Company Limited for $260 million, marking Apache’s exit from China. The effective date of the transaction was July 1, 2006. The Company recorded a gain of $174 million in the third quarter of 2006.

2005 Acquisitions

In May 2005, Apache signed a farm-in agreement with Exxon Mobil Corporation (ExxonMobil) covering approximately 650,000 acres of undeveloped properties in the Western Canadian province of Alberta. Under the agreement, Apache is to drill and operate 145 new wells over a 36-month period with upside potential for further drilling. ExxonMobil will retain a royalty on fee lands and a convertible working interest on leasehold acreage. The agreement also allows Apache to test additional horizons on approximately 140,000 acres of property covered in a 2004 farm-in agreement with ExxonMobil.

Revenues

Our revenues are sensitive to changes in prices received for our products. A substantial portion of our production is sold at prevailing market prices which fluctuate in response to many factors that are outside of our control. Given the current tightly balanced supply-demand market, small variations in either supply or demand, or both, can have dramatic effects on prices we receive for our oil and natural gas production. Political instability and availability of alternative fuels could impact worldwide supply, while other economic factors could impact demand.

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Oil and Natural Gas Prices

While the market price received for crude oil and natural gas varies among geographic areas, crude oil trades in a worldwide market, whereas natural gas, which has a limited global transportation system, is subject to local supply and demand conditions. Consequently, price movements for all types and grades of crude oil generally move in the same direction, while natural gas price movements generally follow local market conditions.

Apache primarily sells its natural gas into four markets:

1)	North America, which has a common market and where supply and demand are currently tightly balanced, creating a volatile pricing environment;
2)	Australia, which has a local market with mostly fixed-price contracts;
3)	Egypt, which has a local market where the price received for our production is indexed to a weighted-average Dated-Brent crude oil price; most of which is subject to a ceiling of $2.65 per MMBtu at oil-prices of $21 per barrel or above; and
4)	Argentina, where the price we receive on a portion of our natural gas production is regulated by the government, at prices from $.38 to $1.40 per MMBtu. The volumes we are required to sell at regulated prices are set by the government and vary with seasonal factors. The remainder of the volumes are sold at market-driven prices, presently in excess of $2.00/MMBtu.

For specific marketing arrangements by segment, please refer to Item 1 and 2. Business and Properties of this Form 10-K.

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Revenues

The table below presents oil and gas production revenues, production and average prices received from sales of natural gas, oil and natural gas liquids for the most recent three years.

	For the Year Ended December 31,
	2006		2005		2004
Revenues (in thousands):
Oil	$	4,911,861	$	4,413,934	$	2,986,208
Natural gas		3,001,246		2,928,578		2,217,983
Natural gas liquids		161,146		114,779		103,826
Total	$	8,074,253	$	7,457,291	$	5,308,017
Oil Volume — Barrels per day:
United States		66,832		66,268		67,872
Canada		20,715		22,499		25,305
Egypt		56,570		55,141		52,183
Australia		11,892		15,379		25,174
North Sea		58,544		65,488		52,836
Argentina		6,857		1,163		566
China		3,167		8,132		7,583
Total		224,577		234,070		231,519
Average Oil Price — Per barrel:
United States	$	54.22	$	47.97	$	38.75
Canada		59.90		53.05		38.57
Egypt		63.60		53.69		37.35
Australia		68.25		57.61		41.96
North Sea		63.04		53.00		24.22
Argentina		42.79		37.54		32.89
China		62.73		44.24		32.88
Total		59.92		51.66		35.24
Natural Gas Volume — Mcf per day:
United States		666,965		597,481		646,619
Canada		404,325		371,917		326,965
Egypt		217,601		165,710		137,737
Australia		186,119		123,295		118,108
North Sea		2,061		2,306		1,871
Argentina		111,994		3,114		3,808
Total		1,589,065		1,263,823		1,235,108
Average Natural Gas Price — Per Mcf:
United States	$	6.54	$	7.22	$	5.45
Canada		6.09		7.29		5.30
Egypt		4.42		4.59		4.35
Australia		1.65		1.72		1.65
North Sea		10.64		9.17		5.53
Argentina		.97		1.14		.65
Total		5.17		6.35		4.91
NGL Volume — Barrels per day:
United States		7,985		7,553		8,268
Canada		2,187		2,235		2,588
Argentina		1,537		—		—
Total		11,709		9,788		10,856
Average NGL Price — Per barrel:
United States	$	38.54	$	32.44	$	26.66
Canada		35.40		31.07		24.44
Argentina		36.64		—		—
Total		37.70		32.13		26.13

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Contributions to Oil and Natural Gas Revenues

As with production and reserves, a consequence of geographic diversification is a shifting geographic mix of our oil revenues and natural gas revenues. For the reasons discussed in the Oil and Natural Gas Prices section above, contributions to oil revenues and gas revenues should be viewed separately.

The following table presents each segment’s oil revenues and gas revenues as a percentage of total oil revenues and gas revenues, respectively.

	Oil Revenues									Gas Revenues
	For the Year Ended December 31,									For the Year Ended December 31,
	2006			2005			2004			2006			2005			2004
United States		27	%		26	%		32	%		53	%		54	%		58	%
Canada		9	%		10	%		12	%		30	%		34	%		29	%
North America		36	%		36	%		44	%		83	%		88	%		87	%
Egypt		27	%		25	%		24	%		12	%		9	%		10	%
Australia		6	%		7	%		13	%		4	%		3	%		3	%
North Sea		27	%		29	%		16	%		—			—			—
Argentina		2	%		—			—			1	%		—			—
Other International		2	%		3	%		3	%		—			—			—
Total		100	%		100	%		100	%		100	%		100	%		100	%

Crude Oil Contribution

In 2006, oil revenue contributions outside of North America were 64 percent of our total consolidated oil revenues, equal to 2005 contributions. Except for Australia, all core regions saw oil revenue growth in 2006 when compared to 2005. Egypt and the United States saw their contributions rise as their 2006 revenue gains, relative to 2005, outpaced gains in our other regions, benefiting from both higher relative oil prices and production. Argentina’s contribution increase in 2006, compared to 2005, was virtually all attributable to the 2006 acquisitions discussed above, although the region also benefited from price improvement. The North Sea and Canada’s 2006 contributions fell because higher prices were somewhat neutralized by lower relative production and higher oil revenue in other core areas.

In 2005, oil revenue contributions from outside the U.S. rose six percent to 74 percent of our total consolidated oil revenues. Production growth and significantly higher price realizations drove the North Sea’s oil revenue contributions to 29 percent of consolidated oil revenues from 16 percent the prior year and were largely responsible for the growth of non-U.S. oil revenues. U.S. oil revenues made up 26 percent of 2005 oil revenues, down six percent from 2004, a consequence of the 2005 hurricane activity and the significant growth in North Sea production. Australia’s contribution to 2005 consolidated oil revenues fell to seven percent from 13 percent on a 39 percent decrease in production compared to 2004.

Crude Oil Revenues

Crude oil revenues in 2006 increased $498 million from 2005 to $4.9 billion. Price gains across all regions, which averaged $8.26 more per barrel than 2005, generated an additional $706 million of revenues. These additional revenues were partially offset by the effect on revenues from a four percent decline in production. All segments reported a significant increase in realized crude oil price, with Argentina, Egypt, and the U.S. also benefiting from production growth compared to 2005.

Egypt generated an additional $233 million of crude oil revenue in 2006 when compared to 2005. An 18 percent increase in crude oil price realizations, generated $200 million of the additional revenues, with the remainder coming from a three percent increase in production. While Egypt experienced production growth in many areas, the predominate contributor was the Khalda Concession which benefited from a full year of associated condensate related to increased Qasr field gas production.

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U.S. crude oil revenues for 2006 increased $162 million compared to 2005, with a 13 percent increase in crude oil price realizations contributing $151 million of the additional revenues. A small increase in 2006 oil production, relative to 2005, contributed the remaining $11 million. The third-quarter 2005 hurricanes reduced Apache’s 2006 average annual daily crude oil production 13,100 barrels per day (b/d), compared to 10,813 b/d in 2005. Shut-in production reduced the Company’s 2006 and 2005 crude oil revenues by approximately $297 million and $186 million, respectively. Central region production rose 18 percent, reflecting drilling and recompletion activity in the Permian basin and Southeast New Mexico, and the Amerada Hess acquired properties. Gulf Coast production was 10 percent below 2005 levels with downtime, hurricane production shut-ins and natural decline outpacing growth attributed to drilling and recompletion activity and the BP acquired properties. The Gulf Coast region’s fourth-quarter 2006 production averaged 43,995 b/d compared to 23,487 b/d in the comparable 2005 quarter, a testament to the progress in returning hurricane damaged properties to production during 2006, as well as the benefit of the BP acquired properties.

Argentina’s 2006 oil revenues increased $91 million over 2005 with $89 million of the increase associated with production growth, driven primarily by acquired properties and subsequent exploitation activities. Higher oil price realizations generated the other $2 million.

The North Sea’s 2006 crude oil revenues were $80 million higher than 2005 with $240 million of additional revenues generated from a 19 percent increase in price realizations, partially offset by lower production, which was down 11 percent on a comparative basis. Production was lower in 2006 primarily because of production interruptions associated with commissioning of major infrastructure projects and temporary unplanned shutdown of the third-party Forties Pipeline System during the third quarter of 2006. The focus in 2006 on upgrades also displaced drilling operations necessary to mitigate natural decline.

Canada’s 2006 oil revenues increased $17 million over 2005, with $56 million of additional revenues associated with higher price realizations, partially offset by lower production, which was down eight percent. Canada production was down in most areas as natural decline exceeded drilling and production enhancement activities.

Australia’s 2006 crude oil revenues were $27 million less than 2005, reflecting a 23 percent decline in production and an 18 percent increase in realized price. The production decrease resulted from normal field decline which offset a full year of associated condensate production from the John Brookes field and other development activities, mainly in the Bambra, Zephyrus and Stag areas.

China’s 2006 oil revenues were $59 million less than 2005, a consequence of the August 2006 divestiture.

Apache manages a small portion of its exposure to fluctuations in crude oil prices using financial derivatives. Approximately nine percent of our worldwide crude oil production was subject to financial derivative hedges in 2006, compared to six percent in 2005. (See Note 3, Hedging and Derivative Instruments, of this Form 10-K for a summary of the current derivative positions and terms.) These financial derivative instruments reduced our 2006 and 2005 worldwide realized prices $1.37 and $.68 per barrel, respectively.

Natural Gas Contribution

Our North American operations contributed 83 percent of 2006 consolidated natural gas revenues, down five percent from 2005. All core gas producing regions generated additional revenues in 2006 on production growth. However, these incremental production revenues were all but eliminated by the effect of lower prices, especially in our North American regions, where prices are typically higher, but more volatile, than our other regions. Revenues in the U.S. and Canada dropped in 2006 on a comparative basis, while all other core gas producing regions experienced an increase in revenue. Egypt’s contribution to 2006 consolidated gas revenues rose three percent in 2006, compared to 2005, while Australia’s contribution increased one percent. Argentina contributed one percent of consolidated gas revenues.

In 2005, 88 percent of Apache’s natural gas revenues came from North America, 54 percent from the U.S. and 34 percent from Canada. The U.S. contribution decreased four percent from 2004, primarily because of production declines, the impact Hurricanes Katrina and Rita had on U.S. Gulf of Mexico revenues, and the additional revenues generated by Canada and Egypt. Our U.S. Gulf Coast region, which contributed 63 percent of Apache’s U.S. 2005

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production, down six percent from 2004, is characterized by reservoirs which demonstrate high initial production rates followed by steep declines when compared to most other U.S. producing areas. Canada’s contribution was up five percent from 2004 resulting from 14 percent production growth and higher price gains, relative to other areas. Egypt’s contribution to total gas revenues decreased slightly to nine percent from 10 percent in 2004. Australia’s contribution to 2005 natural gas revenues remained the same as 2004 at three percent.

Natural Gas Revenues

Our 2006 consolidated natural gas revenues increased $73 million from the prior year with $614 million of additional revenues generated from production growth mostly offset by the effect of a 19 percent decline in realized prices. All core gas producing regions generated additional revenues in 2006 from production growth; however they were mostly offset by lower relative natural gas prices.

Egypt contributed $73 million more to 2006 consolidated natural gas revenues compared to 2005 on a 31 percent increase in production and a four percent decrease in realized gas prices. The year-over-year production growth came primarily from the Khalda concession, mostly attributable to a full year of production from the Qasr field.

Argentina’s 2006 natural gas revenues increased $38 million compared to 2005, with all of the additional revenues associated with production growth. As with oil, the production growth primarily came from acquired properties and subsequent exploitation activities.

Australia’s 2006 natural gas revenues were $35 million higher than 2005. Natural gas production increases added $38 million to revenues, while lower gas price realizations reduced revenues $3 million. The additional production was attributed to a full year of production from the John Brookes field.

U.S. natural gas revenues were $17 million higher in 2006 than 2005. U.S. natural gas production, up 12 percent, contributed $166 million of additional revenues, while a nine percent price decline lowered revenues $149 million, when compared to 2005. The 2005 hurricanes reduced Apache’s 2006 average annual daily natural gas production 37 MMcf/d compared to 59 MMcf/d in 2005. Shut-in production from the hurricanes reduced the Company’s 2006 and 2005 natural gas revenues by approximately $95 million and $211 million, respectively. Central region production rose 16 percent from 2005, benefiting from drilling and recompletion activity, primarily in Central and Western Oklahoma, in East Texas, and from acquired properties. Gulf Coast region production was nine percent above year-ago levels on the BP acquired properties, hurricane restoration, and drilling and recompletion activity, principally in the Chauvin, Ship Shoal and South Timbalier fields.

Canada’s 2006 natural gas revenues decreased $91 million from 2005. An additional $72 million of revenues generated from a nine percent increase in production were more than offset by the impact of a 16 percent decrease in realized natural gas prices. Canada’s production growth was concentrated in the North and South Grant Lands and Kabob areas, with activity in other areas more than offset by natural decline.

Our 2005 natural gas revenues increased $711 million with a $1.44 per Mcf increase in our average natural gas price realizations generating an additional $652 million of revenues. Higher production added the remaining $59 million. While all of our operating segments reported an increase in natural gas price realizations, most of the additional revenues attributable to price came from the U.S. and Canada as prices skyrocketed following the Gulf of Mexico hurricanes. The additional revenues attributable to production were primarily generated in Egypt, where natural gas production increased 20 percent, reflecting the success of our drilling program. Canada and Australia also contributed to increased production revenues with production growth of 14 percent and four percent, respectively. Canada’s increase was from new wells, while Australia’s increase was driven by higher customer demand and new contractual sales. Partially offsetting these additional production revenues was an eight percent decrease in U.S. production, primarily in the Gulf Coast region, related to the impact of the 2005 hurricanes and natural decline in mature fields.

The majority of our worldwide gas sales contracts are indexed to prevailing local market prices. As a result Apache uses a variety of strategies to manage its exposure to fluctuations in natural gas prices including fixed-price contracts and derivatives. In the U.S. and Canada most of our gas is sold on a monthly basis at either monthly or daily market prices; however, during 2006 and 2005, approximately eight percent and 10 percent of our U.S. natural

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gas production, respectively, was subject to long-term, fixed-price physical contracts. These contracts provide a measure of protection to the Company in the event of decreasing natural gas prices. These fixed-price contracts reduced our 2006 and 2005 worldwide realized natural gas prices by $.10 per Mcf and $.19 per Mcf, respectively. In Australia, nearly all of our natural gas production is subject to long-term fixed-price contracts that are periodically adjusted for changes in Australia’s consumer price index. The majority of Egypt’s gas is sold to Egyptian General Petroleum Corporation (EGPC) under an Industry Pricing Formula tied to Dated Brent crude oil with a maximum price of $2.65 per MMbtu. However, in certain concessions Apache has retained a higher gas price formula until 2013 for up to 100 MMcf/d produced.

Approximately eight percent of our worldwide natural gas production was subject to financial derivative hedges for 2006 compared to nine percent in 2005. These financial derivative instruments reduced our 2006 and 2005 consolidated realized prices $.05 per Mcf and $.15 per Mcf, respectively. (See Note 3, Hedging and Derivative Instruments of Item 15 in this Form 10-K for a summary of current derivative positions and terms.)

Costs

The tables below compare our costs on an absolute dollar basis and an equivalent unit of production (boe) basis. Our discussion may reference either expenses on a boe basis or expenses on an absolute dollar basis, or both, depending on their relevance.

	Year Ended December 31,						Year Ended December 31,
	2006		2005		2004		2006		2005		2004
	(In millions)						(Per boe)
Depreciation, depletion and amortization:
Oil and gas property and equipment	$	1,699	$	1,325	$	1,149	$	9.29	$	7.99	$	7.01
Other assets		118		91		73		.64		.55		.44
Asset retirement obligation accretion		89		54		46		.48		.32		.28
Lease operating costs		1,362		1,041		864		7.45		6.27		5.27
Gathering and transportation costs		104		100		82		.57		.60		.50
Severance and other taxes		554		453		94		3.03		2.73		.57
General and administrative expenses		211		198		173		1.16		1.20		1.06
China litigation		—		—		71		—		—		.43
Financing costs, net		142		116		117		.78		.70		.71
Total	$	4,279	$	3,378	$	2,669	$	23.40	$	20.36	$	16.27

Depreciation, Depletion and Amortization

Apache’s Depreciation, Depletion and Amortization (DD&A) of oil and gas properties is calculated using the Units of Production Method (UOP). The UOP calculation in simplest terms multiplies the percentage of estimated proved reserves produced each quarter times the costs of those reserves. The result is to recognize expense at the same pace that the reservoirs are actually depleting. The costs in the UOP calculation include both the net capitalized amounts on the balance sheet, and the estimated future costs to access and develop reserves needing additional facilities, equipment or downhole work in order to produce. Under the full-cost method of accounting, the DD&A calculation is prepared separately for each country in which Apache operates. Absolute DD&A determines the expense reported each period, while the cost per unit of production (DD&A rate) provides insight into the overall costs of the Company’s reserves growth. Current costs incurred to drill or acquire additional reserves that are higher than the historical cost level raises the overall DD&A rate. Conversely, if reserves are added in the current period at a rate per unit less than existing levels, they average down the Company’s DD&A rate. Changes from period to period in absolute DD&A expense are determined by production levels, the mix of production (high cost country versus a low cost country) and the impact of recent spending (higher or lower DD&A rates).

Our 2006 full-cost DD&A expense totaled $1.7 billion, $374 million more than 2005. Our 2006 full-cost DD&A rate of $9.29 per boe was $1.30 per boe more than 2005, reflecting rising acquisition costs, higher

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abandonment cost estimates, rising industry-wide drilling and finding costs, especially in the U.S. and Canada, and incremental future development costs associated with recent acquisitions and newly identified development projects. The increase in costs, including increased estimates of future development costs, is related to increased demand for drilling and associated services, a consequence of both higher oil and gas prices and additional demand resulting from the ongoing need to repair damage caused by hurricanes Katrina and Rita in 2005. The increase in 2006 DD&A, relative to 2005 was mitigated by a decline in Egypt resulting from the January 2006 sale of Egypt’s deepwater acreage. Our 2006 full-cost DD&A expense was $73 million lower because of the production shut-in for hurricane damage.

Our 2005 full-cost DD&A expense totaled $1.3 billion, $176 million more than 2004. Our 2005 full-cost DD&A rate of $7.99 per boe was $.98 per boe more than 2004, driven by rising industry-wide drilling costs, especially in the U.S., Canada, the North Sea and Egypt. Higher commodity prices experienced throughout 2005, as well as the affect of the 2005 U.S. hurricanes, led to increased demand for drilling services and thus higher current drilling costs and higher estimated future development costs. The North Sea’s impact on our consolidated rate reflects the continuation of facility upgrades undertaken during 2005 to improve the overall efficiency of platforms. Our 2005 full-cost DD&A expense was $57 million lower because of the production shut-in for hurricane damage.

Depreciation of other assets increased $27 million in 2006, reflecting ongoing development of infrastructure in Canada that began in 2005 to accommodate development on the acquired ExxonMobil acreage, and the Qasr field support facilities in Egypt, including completion of the Tarek gas plant inter-connect.

Depreciation of other assets increased $18 million in 2005, reflecting new infrastructure built in Canada to accommodate development on acreage acquired from ExxonMobil in 2004 and new Qasr natural gas facilities in Egypt.

Impairments

We assess all of our unproved properties for possible impairment on a quarterly basis based on geological trend analysis, dry holes or relinquishment of acreage. When impairment occurs, costs associated with these properties are generally transferred to our proved property base where they become subject to amortization. Impairments in international areas without proved reserves are charged to earnings upon determination that impairment has occurred.

Goodwill is subject to a periodic fair-value-based impairment assessment. Goodwill totaled $189 million on December 31, 2006, and no impairment was recorded in 2006, 2005 or 2004. For further discussion, see Note 1, Summary of Significant Accounting Policies of Item 15 in this Form 10-K.

Lease Operating Costs

Lease operating expenses (LOE) are comprised of several components: direct operating costs, repair and maintenance, workover costs and ad valorem taxes.

LOE rates are driven by the underlying commodity price levels, whether oil or gas is produced, level of workover activity and geographical location of the properties. Commodity prices have a significant impact on operating cost elements; both directly and indirectly. They directly impact costs such as power, fuel, chemicals and ad valorem taxes, which are commodity price based. The remaining elements, which include among other things, labor, services and equipment, are indirectly impacted by high price environments which drive up activity and demand and therefore, increase costs. All components of LOE have been rising throughout the industry for several years with historically strong oil and gas prices. Also, oil is inherently more expensive to produce than natural gas. Repair and maintenance costs are higher on offshore properties and in areas with remote plants and facilities. Workovers allow us to exploit our existing reserve base by accelerating production, taking advantage of high prices. Fluctuations in exchange rates impact the Company’s LOE, with a weakening U.S. dollar adding to per unit costs and a stronger U.S. dollar lowering per unit costs.

The Company reviews production costs in each of its core areas on a monthly basis and pursues alternatives to maintain efficient levels of costs. The following discussion will focus on per unit operating costs as management believes this is the most informative method of analyzing LOE trends.

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Rising per unit cost remained a challenge in 2006 with LOE averaging $7.45 per boe, $1.18 per boe higher than 2005. The 2005 hurricanes increased our worldwide rate by $.44 and $.41 per boe in 2006 and 2005, respectively, a reflection of shut-in production and additional expenses in excess of our insurance coverage. The remainder of the increase was driven by industry-wide cost increases, as discussed above, workover activity, a weaker U.S. dollar relative to the Canadian dollar and British Pound and higher non-hurricane related repair costs in our U.S. Gulf Coast and Canadian regions.

Regionally, 2006 LOE was up from 2005 as follows:

U.S. — The U.S. added $.63 per boe to the 2006 worldwide rate. The Central region added $.04 per boe, with production growth nearly outpacing increases in costs, while the Gulf Coast region added $.59 per boe. In addition to the impact of industry-wide cost increases, activity levels soared in the Gulf of Mexico as producers continue to repair and restore production following the 2005 hurricanes. This increase in demand on top of an already tight-supply market for boats, helicopters, divers, labor, equipment and parts to complete repairs, pushed costs even higher in the region. The region’s fourth-quarter 2006 LOE included approximately $26 million for repairs in excess of insurance coverage. We will incur an estimated $60 million of additional LOE expenses to complete the repairs during the first half of 2007. The 2006 rate increase was also impacted by additional workover activity, higher insurance rates and more non-hurricane repair costs, relative to 2005.

Canada — Canada added $.40 per boe to the 2006 worldwide rate. Higher costs added $.46 per boe, however, higher production offset $.06 of that increase. Twenty-two percent of the increase in Canada’s rate was attributed to the strengthening Canadian dollar. The balance related to a higher level of workover activity, higher repair and maintenance costs, reclamation and restoration projects undertaken during 2006 and the general rise in costs, including increases in power rates, contract labor and fuel.

Egypt — Egypt added $.02 to the 2006 worldwide rate as a $32 million increase in costs, including increased workover activity, was mostly offset by associated production growth.

Australia — Australia reduced the 2006 worldwide rate $.11 per boe with production growth more than offsetting associated incremental operating costs.

North Sea — The North Sea added $.37 per boe to the 2006 consolidated rate, with approximately two-thirds of the increase in rate related to lower relative production, the strengthening British Pound and an increase in pension liabilities. The balance of the increase in costs related to major 2006 turnaround activity, higher fuel rates and usage as major projects were commissioned, and higher maintenance and repair activity, relative to 2005.

Argentina — Argentina reduced the 2006 consolidated rate $.19 per boe with production growth related to the 2006 acquisitions more than offsetting associated incremental operating costs.

On a per unit produced basis, 2005 LOE averaged $6.27 per boe, $1.00 per boe higher than 2004. Production shut-ins and additional insurance costs associated with the 2005 hurricanes added $.41 to the 2005 rate. The remaining increase reflects higher service costs associated with rising commodity prices and the associated increase in demand for services, an increase in workover activity, higher repair and maintenance costs and the impact a weaker U.S. dollar had on Canadian LOE. The slight strengthening against the Australian dollar and British pound had less impact on LOE.

Regionally, 2005 LOE was up as follows:

U.S. — The U.S. added $.77 per boe to the 2005 consolidated rate with nearly one-third of the impact attributed to the additional insurance costs and production shut-ins caused by the 2005 hurricanes. Higher contract labor costs, workover activity, repair and maintenance, and various other commodity-price driven service costs accounted for the remaining impact. Gulf Coast region LOE included approximately $30 million for insurance deductibles and additional premiums assessed by OIL.

Australia — Australia added $.15 per boe to the 2005 consolidated rate on a 20 percent drop in equivalent production. Australia also saw a rise in insurance cost. Lower production added $.13 per boe to the 2005 consolidated rate, while additional costs added $.02 per boe.

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Canada — Canada added $.21 per boe to the 2005 consolidated rate increase, with costs adding $.27 per boe, partially offset by the impact of higher volumes, which reduced the rate $.06 per boe. 2005 costs were up $44 million from 2004, with 42 percent attributable to the strengthening Canadian dollar. The balance related to various other costs associated with an increase in activity and the general rise in costs, including higher contract labor, power and fuel, repair and maintenance and workover costs.

Egypt — Egypt’s 2005 costs were $23 million higher than 2004 on higher diesel fuel costs, an increase in workover activity, higher labor costs and insurance costs. The diesel fuel costs were previously subsidized by the Egyptian government. Egypt added $.04 per boe to the consolidated rate increase, with higher costs adding $.14 per boe and increased volumes lowering the rate $.10 per boe.

North Sea — The North Sea reduced the 2005 consolidated rate $.16 per boe on a 24 percent increase in production, partially offset by a two percent increase in costs. North Sea costs were up on increased repair and maintenance activity.

Gathering and Transportation Costs

Apache generally sells oil and natural gas under two types of agreements, typical in our industry. Both types of agreements include a transportation charge. One is a netback arrangement, under which Apache sells oil or natural gas at the wellhead and collects a price, net of transportation incurred by the purchaser. In this case, the Company records sales at the price received from the purchaser, which is net of transportation costs. Under the other arrangement, Apache sells oil or natural gas at a specific delivery point, pays transportation to a third-party carrier and receives from the purchaser a price with no transportation deduction. In this case, the Company records the transportation cost as gathering and transportation costs. The Company’s treatment of transportation costs is pursuant to Emerging Issues Task Force Issue 00-10, “Accounting for Shipping and Handling Fees and Costs” and as a result a portion of our transporting costs is reflected in sales prices and a portion is reflected as Gathering and Transportation Costs rendering the separately identified transportation costs incomplete.

In both the U.S. and Canada, Apache sells oil and natural gas under both types of arrangements. In the North Sea, Apache pays transportation to a third-party carrier and receives a purchase price with no transportation deduction. In Australia, oil and natural gas are sold under netback arrangements. In Egypt, our oil and natural gas production has historically been sold to EGPC under netback arrangements. During 2005 and 2006, Apache exported a portion of its Egyptian crude oil under both types of arrangements. Future export cargoes may be sold at the loading port or Apache may arrange shipping and receive prices which include transportation. The following table presents gathering and transportation costs paid directly by Apache to third-party carriers for each of the periods presented.

	For the Year Ended December 31,
	2006		2005		2004
	(In millions)
U.S.	$	32	$	30	$	28
Canada		34		33		31
North Sea		26		28		22
Egypt		11		8		—
Argentina		1		—		—
Other International		—		1		1
Total Gathering and Transportation	$	104	$	100	$	82

These costs are primarily related to the transportation of natural gas in our North American operations, North Sea crude oil sales and Egyptian crude oil exports. The four percent increase in costs for 2006 was driven primarily by U.S. production growth and Egyptian crude exports.

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Transportation costs in 2005 increased 22 percent from 2004 driven primarily by the North Sea’s production growth and Egyptian crude exports. Apache began exporting Egyptian crude in the second half of 2004 and first incurred third-party transportation charges in early 2005.

Severance and Other Taxes

Severance and other taxes are primarily comprised of severance taxes on properties onshore and in state or provincial waters in the U.S. and Australia, and the United Kingdom (U.K.) Petroleum Revenue Tax (PRT). Severance taxes are generally based on a percentage of oil and gas production revenues, while the U.K. PRT is assessed on net receipts (revenues less qualifying operating costs and capital spending) from the Forties field in the U.K. North Sea. We are also subject to the Australian Petroleum Resources Rent Tax (PRRT), and various Canadian taxes including the Freehold Mineral Tax, Saskatchewan Capital Tax and Saskatchewan Resource Surtax. The Canadian Federal Large Corporation Tax was phased out in 2006. The table below presents a comparison of these expenses.

	For the Year Ended December 31,
	2006		2005		2004
	(In millions)
Severance taxes	$	124	$	139	$	127
U.K. PRT		394		285		(61	)
Canadian taxes		16		22		23
Other		20		7		5
Total Severance and Other Taxes	$	554	$	453	$	94

Severance and other taxes totaled $554 million in 2006, $101 million greater than 2005. U.K. PRT increased $109 million in 2006 on a six percent increase in revenue and a 21 percent decrease in qualifying capital spending. Australia’s severance taxes declined on lower revenues associated with lower oil production. Canada’s severance taxes decreased $6 million with the phase out of the federal large corporation tax. Other taxes increased $13 million on additional U.S. franchise taxes, consistent with our growth and a $5 million special profits charge levied on petroleum revenues by the Chinese government.

In 2005, severance and other taxes increased $359 million. U.K. PRT increased $346 million in 2005 on significantly higher oil price realizations and higher production. U.S. severance taxes increased $36 million on higher oil and gas prices. Australia’s taxes decreased $24 million reflecting lower excise tax on declining production from the Legendre field.

General and Administrative Expenses

General and administrative expenses (G&A) averaged $1.16 per boe for 2006, $.04 per boe less than 2005. Absolute costs increased $13 million to $211 million. The additional cost in 2006 was primarily associated with expansion of international operations in conjunction with acquisitions and increasing insurance costs.

G&A of $1.20 per boe in 2005 increased $.14 per boe over 2004. Absolute costs increased $25 million, or 14 percent. Nearly three-fourths of the increase in year-over-year costs related to the impact of Apache’s stock-based compensation programs. Stock-based compensation costs increased relative to the prior year because of new stock option grants issued in 2005, a new targeted stock plan approved by stockholders in May 2005, and the impact Apache’s rising common stock price had on stock-based compensation expense. The balance of the G&A increase was primarily attributed to the increased cost of insurance, a consequence of the hurricanes, higher charitable contributions and higher Sarbanes-Oxley compliance audit fees.

Financing Costs, Net

The major components of financing costs, net, include interest expense and capitalized interest.

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Net financing costs for 2006 were $26 million higher than in 2005. Gross interest expense increased $42 million in 2006 as a result of a higher average debt balance and higher short-term interest rates. Capitalized interest increased $4 million, a result of a higher average unproved property balance. Interest income rose $10 million compared to 2005 on higher cash balances. Our weighted-average cost of borrowing on December 31, 2006 was 6.3 percent compared to 6.7 percent on December 31, 2005.

Net financing costs in 2005 were slightly lower than 2004. Gross interest expense increased $7 million in 2005, on a higher average debt balance. This was mostly offset by a $6 million increase in the amount of interest capitalized as a result of a higher average unproved property balance. Our weighted-average cost of borrowing was 6.7 percent on December 31, 2005 and 6.1 percent on December 31, 2004.

Provision for Income Taxes

Income tax expense for 2006 totaled $1.5 billion, $125 million less than 2005. The effective tax rate for 2006 was 36.3 percent, down from 37.6 percent in 2005. The 2006 effective rate was impacted by a combination of federal and provincial tax rate reductions enacted by Canada during the second quarter of 2006, a 10 percent increase in the oil and gas company supplemental tax enacted by the U.K. during the third quarter of 2006 and the gain recognized on the sale of China, as discussed below. Currency fluctuations had a negligible impact on the 2006 effective tax rate.

The effective income tax rate for 2006 was impacted by the gain recognized in conjunction with divestment of operations in China. The Company intends to permanently reinvest earnings of its foreign subsidiaries and as such, has not recorded U.S. income tax expense on any undistributed foreign earnings, including the gain from the China sale.

Income tax expense in 2005 of $1.6 billion was $590 million or 20 percent higher than 2004. The higher taxes were driven by higher taxable income related to increased oil and gas revenues in 2005, compared to 2004. Our effective tax rate was 37.6 percent in 2005 compared to 37.3 percent in 2004. Currency fluctuations added $13 million of additional deferred tax expense to 2005 and $58 million to 2004. For a discussion of Apache’s sensitivity to foreign currency fluctuations, please refer to Item 7A, Quantitative and Qualitative Disclosures about Market Risk, “Foreign Currency Risk” of this Form 10-K.

Capital Resources and Liquidity

Financial Indicators

	At December 31,
Millions of dollars except as indicated	2006			2005			2004
Current ratio		.65			.99			1.05
Net cash provided by operating activities	$	4,313		$	4,332		$	3,232
Total debt		3,822			2,192			2,588
Shareholders’ equity		13,191			10,541			8,204
Percent of total debt to capitalization		22	%		17	%		24	%
Floating-rate debt/total debt		43	%		—			15	%

Overview

Apache’s primary uses of cash are exploration, development and acquisition of oil and gas properties, costs and expenses necessary to maintain continued operations, repayment of principal and interest on outstanding debt and payment of dividends.

Our business, as with other extractive industries, is a depleting one in which each barrel produced must be replaced or the Company, and a critical source of our future liquidity, will shrink. Cash investments are continuously required to fund exploration and development projects and acquisitions which are necessary to offset the inherent declines in production and proven reserves. See Item 1 and 2, Business and Properties, “Risks Factors,” in this Form 10-K. Future success in maintaining and growing reserves and production will be highly dependent on having

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adequate capital resources available, on our success in both exploration and development activities and on acquiring additional reserves.

Our 2006 yearend reserve life index indicates an average decline of 7.9 percent per year. This projection is based on prices at yearend 2006, except in those instances where future natural gas and oil sales are covered by physical contract terms providing for higher or lower prices, estimates of investments required to develop estimated proved undeveloped reserves, and costs and taxes reflected in our standardized measure in Note 13, Supplemental Oil and Gas Disclosures (Unaudited) of Item 15 in this Form 10-K.

The Company funds its exploration and development activities primarily through net cash provided by operating activities (cash flow) and budgets capital expenditures based on projected cash flow. Our cash flow, both in the short and long-term, is impacted by highly volatile oil and natural gas prices, production levels, industry trends impacting operating expenses and our ability to continue to acquire or find high-margin reserves at competitive prices. For these reasons, we only forecast, for internal use by management, an annual cash flow. Longer-term cash flow and capital spending projections are not used by management to operate our business. The annual cash flow forecasts are revised monthly in response to changing market conditions and production projections. Apache routinely adjusts capital expenditure budgets in response to the adjusted cash flow forecasts and market trends in drilling and acquisitions costs.

The Company has historically utilized internally generated cash flow, committed and uncommitted credit facilities and access to both debt and equity capital markets for all other liquidity and capital resources needs. Because of the liquidity and capital resources alternatives available to Apache, including internally generated cash flows, Apache’s management believes that its short-term and long-term liquidity will be adequate to fund operations, including its capital spending program, repayment of debt maturities and any amounts that may ultimately be paid in connection with contingencies.

The Company’s ratio of current assets to current liabilities was .65 on December 31, 2006 compared to .99 at the end of 2005. Current liabilities increased 74 percent ($1.6 billion) in 2006 versus a 15 percent ($328 million) increase in current assets. Changes in our current debt particularly impacted the ratio. The Company had $1.6 billion of commercial paper outstanding at the end of 2006 that was subsequently reduced with proceeds from $1.5 billion of long-term debt issued in January 2007. Also, another $173 million of debt is payable in 2007. The current ARO liability of $377 million, an increase of $283 million over 2005, reflects the cost expected to be incurred over the next 12 months to abandon the platforms damaged by Hurricanes Katrina and Rita. The increase in current liabilities was partially offset by overall decreases in our current derivative payable, the U.K. PRT liability, accrued income taxes, and accounts payable of $186 million, $175 million, $118 million and $70 million, respectively. Collectively, the increase in liabilities more than offset the higher current asset balances. The current derivative receivable increased $123 million, reflecting changes in oil and gas strip pricing. Current accounts receivables increased $207 million, or 14 percent, most of which was related to oil receivables impacted by higher oil prices. The remaining current asset categories, inventories, cash and drilling advances, decreased $45 million from 2005.

Net Cash Provided by Operating Activities

Apache’s net cash provided by operating activities totaled $4.3 billion in both 2006 and 2005. For a detailed discussion of commodity prices, production, costs and expenses, please refer to the Results of Operations section of this Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations. For a detailed discussion of changes in current assets and current liabilities please refer to the discussion under the Overview of this Capital and Liquidity section.

Apache’s net cash provided by operating activities during 2005 totaled $4.3 billion, up from $3.2 billion in 2004. The increase in 2005 cash flow was attributed primarily to the significant increase in commodity prices. The Company’s average realized oil and natural gas prices increased 47 percent and 29 percent, respectively; a reflection of higher worldwide commodity prices. Higher production also added to our 2005 cash flow relative to 2004, albeit to a much less extent. These increases in cash flow were partially offset by higher production costs attributable to the effect of increased commodity prices, costs related to Hurricanes Katrina and Rita and an increase in exchange rates in Canada.

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Historically, fluctuations in commodity prices have been the primary reason for the Company’s short-term changes in cash flow from operating activities. Sales volume changes have also impacted cash flow in the short-term, but have not been as volatile as commodity prices. Apache’s long-term cash flow from operating activities is dependent on commodity prices, reserve replacement and the level of costs and expenses required for continued operations.

Debt

We exited 2006 with a debt-to-capitalization ratio of approximately 22 percent, compared to 17 percent at the end of 2005. Yearend 2006 outstanding current and long-term debt totaled $3.8 billion, $1.6 billion higher than yearend 2005. The increase was associated with the issuance of commercial paper in conjunction with $2.4 billion of acquisitions. The Company’s outstanding debt consisted of notes and debentures maturing in the years 2007 through 2096. Approximately $1.8 billion of our total debt is due in 2007. This debt consists of $1.6 billion of commercial paper, that was subsequently reduced with $1.5 billion of long-term debt issued in January 2007, and $170 million of Apache Finance Australia 6.5-percent notes and various money market lines of credit in Argentina and the U.S. The $1.6 billion of commercial paper is fully supported by available borrowing capacity under committed credit facilities which expire in 2011. An additional $100 million in debt matures in 2009 with the remaining $1.9 billion maturing thereafter.

On January 26, 2007, the Company issued $500 million principal amount, $499.5 million net of discount, of senior unsecured 5.625-percent notes maturing January 15, 2017. The Company also issued $1.0 billion principal amount, $993 million net of discount, of senior unsecured 6.0-percent notes maturing January 15, 2037. The notes are redeemable, as a whole or in part, at Apache’s option, subject to a make-whole premium. The proceeds were used to repay a portion of the Company’s outstanding commercial paper and for general corporate purposes. Please refer to Note 5 Debt, Subsequent Debt of Item 15 in this Form 10-K.

In May 2006, the Company amended its existing five-year revolving U.S. credit facility which was scheduled to mature on May 28, 2009. The amendment: (a) extended the maturity to May 28, 2011, (b) increased the size of the facility from $750 million to $1.5 billion, and (c) reduced the facility fees from .08 percent to .06 percent and reduced the margin over LIBOR on loans from .27 percent to .19 percent. The lenders also extended the maturity dates of the $150 million Canadian facility, the $150 million Australian facility and $385 million of the $450 million U.S. credit facility, for an additional year to May 12, 2011 from May 12, 2010. The Company also increased commercial paper availability to $1.95 billion from $1.20 billion.

By yearend 2006, the Company extended the maturity of another $50 million of commitments under the $450 million U.S. credit facility for an additional year. As a result, $435 million will mature on May 12, 2011, and $15 million will mature on May 12, 2010.

The financial covenants of the credit facilities require the Company to maintain a debt-to-capitalization ratio of not greater than 60 percent at the end of any fiscal quarter. The negative covenants include restrictions on the Company’s ability to create liens and security interests on our assets, with exceptions for liens typically arising in the oil and gas industry, purchase money liens and liens arising as a matter of law, such as tax and mechanics liens. The Company may incur liens on assets located in the U.S., Canada and Australia of up to five percent of the Company’s consolidated assets. There are no restrictions on incurring liens in countries other than the U.S., Canada and Australia. There are also restrictions on Apache’s ability to merge with another entity, unless the Company is the surviving entity, and a restriction on our ability to guarantee debt of entities not within our consolidated group.

There are no clauses in the facilities that permit the lenders to accelerate payments or refuse to lend based on unspecified material adverse changes (MAC clauses). The credit facility agreements do not have drawdown restrictions or prepayment obligations in the event of a decline in credit ratings. However, the agreements allow the lenders to accelerate payments and terminate lending commitments if Apache Corporation, or any of its U.S., Canadian and Australian subsidiaries, defaults on any direct payment obligation in excess of $100 million or has any unpaid, non-appealable judgment against it in excess of $100 million. The Company was in compliance with the terms of the credit facilities as of December 31, 2006.

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Stock Transactions

On April 19, 2006, the Company announced that its Board of Directors authorized the purchase of up to 15 million shares of the Company’s common stock representing a market value of approximately $1 billion on the date of announcement. The Company may buy shares from time to time on the open market, in privately negotiated transactions, or a combination of both. The timing and amounts of any purchases will be at the discretion of Apache’s management. The Company initiated the purchase program on May 1, 2006, after the Company’s first-quarter 2006 earnings information was disseminated in the market. Through December 31, 2006, the Company purchased 2,500,000 shares at an average price of $69.74 per share.

Oil and Gas Capital Expenditures

The Company funded its exploration and development (E&D) capital expenditures, gathering, transportation and marketing (GTM) investments, capitalized interest and asset retirement costs of $4.4 billion, $4.4 billion and $2.7 billion in 2006, 2005 and 2004, respectively, primarily with internally generated cash flow of $4.3 billion, $4.3 billion and $3.2 billion.

The Company uses a combination of internally generated cash flow, borrowings under the Company’s lines of credit and commercial paper program and, from time to time, issues of public debt or common stock to fund its significant acquisitions. During 2005 and 2004, the Company primarily used internally generated cash flow or its lines of credit and commercial paper program, which were subsequently paid down with internally generated cash flow. In 2006, the Company primarily used its commercial paper program to fund its’ significant acquisitions. The commercial paper was subsequently repaid with the proceeds from the issuance of $1.5 billion of senior unsecured notes in January 2007.

The following table presents a summary of the Company’s Capital Expenditures for each of our reportable segments for the past three years.

	Year Ended December 31,
	2006		2005		2004
	(In thousands)
Exploration and Development:
United States	$	1,532,959	$	1,072,040	$	755,056
Canada		1,056,614		1,188,096		756,912
Egypt		454,892		352,324		301,912
Australia		179,892		217,816		138,694
North Sea		329,498		489,072		362,054
Argentina		115,570		25,963		4,674
Other International		12,288		22,521		21,819
	$	3,681,713	$	3,367,832	$	2,341,121
Capitalized Interest	$	61,301	$	56,988	$	50,748
Gathering Transmission and Processing Facilities	$	248,589	$	392,872	$	138,738
Asset Retirement Costs (ARC)	$	228,384	$	532,505	$	37,758
ARC — Acquired	$	162,228	$	14,164	$	156,195
Acquisitions:
Oil and gas properties	$	2,310,853	$	39,228	$	1,063,851
Gas gathering, transmission and processing facilities		117,579		—		—
	$	2,428,432	$	39,228	$	1,063,851

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Capital expenditures, excluding ARC, totaled $6.4 billion in 2006, up 66 percent or $2.6 billion from 2005 driven by an increase in acquisition activity. The Company invested $3.7 billion on exploration and development activities in 2006 up nine percent from 2005 including drilling 1,611 wells.

In the U.S., we invested $1.5 billion on exploration and development activities. Our Gulf Coast region invested approximately $1 billion on drilling, recompletions, and platform and production support facilities, including $50 million of associated hurricane redevelopment capital in excess of insurance coverage. The region drilled 60 wells in the Gulf of Mexico and 23 wells onshore, with a 78 percent success rate, despite ongoing hurricane repair activity. The Central region had its most active year ever investing $540 million including the drilling of 374 wells with a 97 percent success rate. The region added to its inventory of opportunities to grow production with the addition of Amerada Hess’s Permian basin properties in Texas and New Mexico at the beginning of 2006 and will do so again with the close of the acquisition of additional Permian basin properties from Anadarko in the first quarter of 2007.

Canada’s drilling program accounted for more than half of the Company’s wells drilled. The region invested $1.1 billion in 2006 on exploration and development activities and drilled 874 wells with an 85 percent success rate. Twenty-five percent of those wells were on the undeveloped acreage Apache obtained through farm-in agreements with ExxonMobil.

We invested $329 million in the North Sea; $112 million of which was on facility upgrades intended to improve the operating efficiency and drilling capability in the Forties field. Four of the five exploration and development wells drilled during 2006 were productive. We completed the Forties power generation and gas ring in 2006, which reduced fuel oil generating costs and improved production reliability. We also started the upgrade of our produced water re-injection system, upgraded the primary gas-lift compression system and replaced instrumentation and control systems on several platforms. At the end of 2006, we were in the process of upgrading drilling equipment on all existing Forties’ platforms that will extend the reach of our drilling equipment, allowing us to determine if the bounds of the Forties field can be extended to the west. The latter project should be completed by the end of the first quarter of 2007.

Egypt had another active and successful exploration and development program investing $455 million and drilling 163 wells of which 86 percent were productive as we continued development of the Qasr field.

In Australia, we invested $180 million in exploration and development activities as we participated in drilling 23 wells; 18 exploration wells and five development wells. Four of the exploration wells and three of the development wells were productive for a success rate of 30 percent.

Our 2006 exploration and development activities in Argentina increased by $90 million over 2005 as we invested $116 million drilling 83 wells, 16 exploratory and 67 development, with a 89% success rate.

The Company invested $249 million in gathering, transmission and processing facilities in 2006 compared to $393 million in 2005. In Canada we invested $130 million in processing plants, $106 million of which was to construct five additional gas processing plants to support production from wells drilled on the acreage we earned from ExxonMobil. Egypt invested $108 million to complete the Tarek gas plant pipeline inter-connect and on expansion of gas processing facilities to alleviate the processing capacity bottleneck throttling deliverability.

In 2006 we also recorded $391 million in asset retirement costs. The Gulf Coast region recorded an additional $232 million to reflect the estimated abandonment costs to be incurred resulting from the hurricane activity, in addition to the approximately $492 million recorded in 2005. This cost to abandon the 11 operated and 12 non-operated platforms lost or severely damaged during the 2005 storms is expected to be incurred by the end of 2009 (See Note 4, Asset Retirement Obligations of Item 15 in this Form 10-K). We also recorded $162 million in asset retirement costs associated with our 2006 acquisition activity.

On the acquisition front we invested a record $2.4 billion in 2006, closing four significant transactions; one in the Gulf of Mexico, one in West Texas and two in Argentina. Acquisition activity fluctuates from year-to-year based on the availability of acquisition opportunities that fit the Company’s strategy.

In 2005, the Company had its most active drilling year ever, drilling 2,383 wells investing $3.4 billion on exploration and development activities, a 44 percent increase from 2004. Approximately two-thirds of our 2005

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exploration and development expenditures were invested in Canada and the U.S., where nearly 69 percent of Apache’s 2005 year-end estimated proved reserves were located. Exploration and development expenditures in 2005 for Canada and the U.S. increased 57 percent and 42 percent, respectively, over 2004. Canada was our most active region, drilling 1,674 wells, 82 percent of which were shallow development wells. Canada was also very active in the undeveloped acreage Apache obtained through two farm-in agreements with ExxonMobil. The Central region was the second most active region, drilling 364 wells, with a 97 percent success rate. In the Gulf Coast region, despite the disruptions caused by the Gulf of Mexico hurricanes, we drilled 114 wells, including 66 offshore. Seventy-seven percent of our Gulf Coast wells were productive. In the North Sea, we drilled a total of 23 wells, including 18 Forties field wells, and invested approximately $198 million of maintenance capital to continue to improve the operating efficiency of the Forties field. In Egypt, we drilled 121 wells of which 86 percent were productive. We continued development of the Qasr field, where gross production averaged 128 MMcf/d in December 2005. In Australia, we participated in drilling 36 wells; 26 exploration wells and 10 development wells. China’s capital expenditures were flat compared to 2004 as they continued their development drilling program.

In 2005 Apache also invested $393 million in gathering, transmission and processing facilities investing $180 million constructing 11 gas processing plants in Canada, six of which were completed by yearend, $182 million in Egypt developing Qasr field facilities and $31 million on facility upgrades in Australia.

We incurred $547 million in asset retirement costs in 2005, most of which was attributed to the hurricane activity in the Gulf of Mexico escalating our abandonment obligations.

The Company spent $39 million on acquisitions in 2005 compared to $1.1 billion in 2004, as the high-price commodity market in 2005 limited the number of attractive acquisition opportunities. Those that were pursued closed in the first quarter of 2006. Acquisition expenditures typically vary year-to-year based on the availability of opportunities that fit Apache’s overall strategy.

For 2007, we plan another active year of drilling. Because we revise our estimates of exploration and development capital expenditures frequently throughout the year based on industry conditions, year-to-year results and the relative levels of commodity prices and service costs, accurately projecting future expenditures is difficult at best. At the end of 2006 we had a fairly active drilling program underway; however, if commodity prices soften and service costs do not decline accordingly, Apache will not hesitate to reduce activity until margins are back in line. Our 2007 preliminary estimate of exploration and development capital and oil and gas processing facilities and pipelines is approximately $4.5 billion. We generally do not project estimates for acquisitions because their timing is unpredictable. We continually look for properties in which we believe we can add value and earn adequate rates of return and will take advantage of those opportunities as they arise.

Cash Dividend Payments

The Company has paid cash dividends on its common stock for 42 consecutive years through 2006. Future dividend payments will depend on the Company’s level of earnings, financial requirements and other relevant factors. Common dividends paid during 2006 rose 33 percent to $148 million, reflecting the increase in common shares outstanding and the higher common stock dividend rate. The Company increased its quarterly cash dividend 50 percent, to 15 cents per share from 10 cents per share, effective with the November 2006 dividend payment.

During 2006 and 2005, Apache paid a total of $6 million in dividends each year on its Series B Preferred Stock issued in August 1998. See Note 8, Capital Stock of Item 15 in this Form 10-K. Common dividends paid during 2005 rose 32 percent to $112 million, reflecting the increase in common shares outstanding and the higher common stock dividend rate.

Contractual Obligations

We are subject to various financial obligations and commitments in the normal course of operations. These contractual obligations represent known future cash payments that we are required to make and relate primarily to long-term debt, operating leases, pipeline transportation commitments and international commitments. The Company expects to fund these contractual obligations with cash generated from operating activities. The following

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table summarizes the Company’s contractual obligations as of December 31, 2006. See Note 10, Commitments and Contingencies of Item 15 in this Form 10-K for further information regarding these obligations.

	Note
Contractual Obligations	Reference		Total		2007		2008		2009		2010		2011		Thereafter
	(In thousands)
Debt		Note 5	$	3,821,925	$	1,802,094	$	353	$	99,809	$	—	$	—	$	1,919,669
Operating leases and other commitments		Note 10		815,685		384,651		127,037		46,536		36,787		32,844		187,830
International lease commitments		Note 10		239,556		104,987		59,884		48,328		26,357		—		—
Other International purchase commitments		Note 10		389,744		310,944		78,800		—		—		—		—
Operating costs associated with pre-existing volumetric production payments on acquired properties		Note 2		32,330		24,088		8,242		—		—		—		—
Total Contractual Obligations(a)(b)			$	5,299,240	$	2,626,764	$	274,316	$	194,673	$	63,144	$	32,844	$	2,107,499

(a)	This table does not include the estimated liability for dismantlement, abandonment and restoration costs of oil and gas properties of $1.7 billion. The Company records a separate liability for the fair value of this asset retirement obligation. See Note 4, Asset Retirement Obligation of Item 15 in this Form 10-K for further discussion.
(b)	This table does not include the Company’s pension or postretirement benefit obligations. See Note 10, Commitments and Contingencies of Item 15 in this Form 10-K for further discussion.

Apache is also subject to various contingent obligations that become payable only if certain events or rulings were to occur. The inherent uncertainty surrounding the timing of and monetary impact associated with these events or rulings prevents any meaningful accurate measurement, which is necessary to assess any impact on future liquidity. Such obligations include environmental contingencies and potential settlements resulting from litigation. Apache’s management feels that it has adequately reserved for its contingent obligations including approximately $17 million for environmental remediation and approximately $7 million for various legal liabilities, in addition to the $71 million, plus interest, we accrued for the Texaco China B.V. litigation. See Note 10, Commitments and Contingencies of Item 15 in this Form 10-K for a detailed discussion of the Company’s environmental and legal contingencies.

The Company accrued approximately $34 million as of December 31, 2006, for an insurance contingency because of our involvement with Oil Insurance Limited (OIL). Apache is a member of this insurance pool which insures specific property, pollution liability and other catastrophic risks of the Company. As part of its membership, the Company is contractually committed to pay termination fees were we to elect to withdraw from OIL. Apache does not anticipate withdrawal from the insurance pool; however, the potential termination fee is calculated annually based on past losses and the liability reflecting this potential charge has been accrued as required.

As discussed under Note 2, Acquisitions and Divestitures of Item 15 in this Form 10-K, Apache assumed obligations for pre-existing volumetric production payments (VPPs) in the 2004 acquisition of properties from Anadarko and the 2003 acquisition of properties from Shell. Under the terms of the VPP agreements, Apache is scheduled to deliver a total of 4.7 MMboe in 2007 and 1.6 MMboe in 2008 to Morgan Stanley as owner of the VPP interests. Morgan Stanley is entitled to the first production and may demand up to 90 percent of the production from the assets encumbered by each VPP in any given month to satisfy the VPP interests. However, they have no right to look to other assets or production of Apache beyond that encumbered in the acquisition. Apache does not record the reserves and production volumes attributable to the VPPs. As of December 31, 2006, Apache has booked a total of 87.4 MMboe of reserves attributable to the Anadarko and Shell transactions. The VPPs are non-operating interests,

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free of costs incurred for operations and production. Apache provided a liability for these costs as reflected in the preceding table.

Upon closing of our 2003 acquisition of the North Sea properties, Apache assumed BP’s abandonment obligation for those properties and such costs were considered in determining the purchase price. The purchase of the properties, however, did not relieve BP of its liabilities if Apache fails to satisfy the abandonment obligation. Although not currently required, to ensure Apache’s payment of these costs, Apache agreed to deliver a letter of credit to BP if the rating of our senior unsecured debt is lowered by both Moody’s and Standard and Poor’s from the Company’s current ratings of A3 and A-, respectively. Any such letter of credit would be in an amount equal to the net present value of future abandonment costs of the North Sea properties as of the date of any such ratings change. If Apache is required to provide a letter of credit, it will expire if either rating agency restores its rating to the present level. The letter of credit amount would be 134 million British pounds, an amount that represents the letter of credit requirement through March 2008, and will be negotiated annually based on Apache’s future abandonment obligation estimates.

The Company’s future liquidity could be impacted by a significant downgrade of its credit ratings by Standard and Poor’s and Moody’s. The Company’s credit facilities do not require the Company to maintain a minimum credit rating. The negative covenants associated with our debt are outlined in greater detail under “Capital Resources and Liquidity, Debt” in this section of this Form 10-K. In addition, generally under our commodity hedge agreements, Apache may be required to post margin or terminate outstanding positions if the Company’s credit ratings decline significantly.

Off-Balance Sheet Arrangements

Apache does not currently utilize any off-balance sheet arrangements with unconsolidated entities to enhance liquidity and capital resource positions. Apache entered into a partnership with ExxonMobil to obtain additional interests in specific West Texas and New Mexico oil and gas properties acquired from ExxonMobil in September 2004. Apache concluded that they were not the primary beneficiary of the partnership and, therefore, proportionately consolidated only the Company’s portion of the oil and gas properties.

Critical Accounting Policies and Estimates

Full-Cost Method of Accounting for Oil and Gas Operations

The accounting for our business is subject to special accounting rules that are unique to the oil and gas industry. There are two allowable methods of accounting for oil and gas business activities: the successful-efforts method and the full-cost method. There are several significant differences between these methods. Under the successful-efforts method, costs such as geological and geophysical (G&G), exploratory dry holes and delay rentals are expensed as incurred, where under the full-cost method these types of charges would be capitalized to their respective full-cost pool. In the measurement of impairment of oil and gas properties, the successful-efforts method of accounting follows the guidance provided in Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” where the first measurement for impairment is to compare the net book value of the related asset to its undiscounted future cash flows using commodity prices consistent with management expectations. Under the full-cost method, the net book value (full-cost pool) is compared to the future net cash flows discounted at 10 percent using commodity prices in effect on the last day of the reporting period (ceiling limitation). If the full-cost pool is in excess of the ceiling limitation, the excess amount is charged through income.

We have elected to use the full-cost method to account for our investment in oil and gas properties. Under this method, the Company capitalizes all acquisition, exploration and development costs for the purpose of finding oil and gas reserves, including salaries, benefits and other internal costs directly attributable to these finding activities. Although some of these costs will ultimately result in no additional reserves, we expect the benefits of successful wells to more than offset the costs of any unsuccessful ones. In addition, gains or losses on the sale or other disposition of oil and gas properties are not recognized unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves of oil and natural gas attributable to a country. As a result, we believe that the full-cost method of accounting better reflects the true economics of exploring for and

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developing oil and gas reserves. Our financial position and results of operations would have been significantly different had we used the successful-efforts method of accounting for our oil and gas investments. Generally, the application of the full-cost method of accounting for oil and gas property results in higher capitalized costs and higher DD&A rates compared to similar companies applying the successful efforts methods of accounting.

Reserve Estimates

Our estimate of proved reserves is based on the quantities of oil and gas which geological and engineering data demonstrate, with reasonable certainty, to be recoverable in future years from known reservoirs under existing economic and operating conditions. The Company reports all estimated proved reserves held under production sharing arrangements utilizing the “economic interest” method, which excludes the host country’s share of reserves. The accuracy of any reserve estimate is a function of the quality of available data, engineering and geological interpretation, and judgment. For example, we must estimate the amount and timing of future operating costs, severance taxes, development costs, and workover costs, all of which may in fact vary considerably from actual results. In addition, as prices and cost levels change from year to year, the estimate of proved reserves also changes. Any significant variance in these assumptions could materially affect the estimated quantity and value of our reserves. As such, our reserve engineers review and revise the Company’s reserve estimates at least annually.

Despite the inherent imprecision in these engineering estimates, our reserves are used throughout our financial statements. For example, since we use the units-of-production method to amortize our oil and gas properties, the quantity of reserves could significantly impact our DD&A expense. Our oil and gas properties are also subject to a “ceiling” limitation based in part on the quantity of our proved reserves. Finally, these reserves are the basis for our supplemental oil and gas disclosures.

We engage an independent petroleum engineering firm to review our estimates of proved hydrocarbon liquid and gas reserves. During 2006, 2005 and 2004, their review covered 75, 74 and 79 percent of the reserve value, respectively.

Costs Excluded

Under the full-cost method of accounting, oil and gas properties include costs that are excluded from capitalized costs being amortized. These amounts represent investments in unproved properties and major development projects. Apache excludes these costs on a country-by-country basis until proved reserves are found or until it is determined that the costs are impaired. All costs excluded are reviewed at least quarterly by the Company’s accounting, exploration and engineering staffs to determine if impairment has occurred. Nonproducing leases are evaluated based on the progress of the Company’s exploration program to date. Exploration costs are transferred to the DD&A pool upon completion of drilling individual wells. If geological and geophysical (G&G) costs cannot be associated with specific properties, they are included in the amortization base as incurred. The amount of any impairment is transferred to the capitalized costs being amortized (the DD&A pool) or a charge is made against earnings for those international operations where a proved reserve base has not yet been established. Impairments transferred to the DD&A pool increase the DD&A rate for that country. For international operations where a reserve base has not yet been established, all costs associated with a prospect or play would be considered quarterly for impairment upon full evaluation of such prospect or play. This evaluation considers among other factors, seismic data, requirements to relinquish acreage, drilling results, remaining time in the commitment period, remaining capital plans, and political, economic, and market conditions.

Allowance for Doubtful Accounts

We routinely assess the recoverability of all material trade and other receivables to determine their collectibility. Many of our receivables are from joint interest owners on properties we operate. Thus, we may have the ability to withhold future revenue disbursements to recover any non-payment of joint interest billings. Our crude oil and natural gas receivables are typically collected within two months. We accrue a reserve on a receivable when, based on the judgment of management, it is probable that a receivable will not be collected and the amount of any reserve may be reasonably estimated.

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Beginning in 2001, we experienced a gradual decline in the timeliness of receipts from EGPC for our Egyptian oil and gas sales. Deteriorating economic conditions in Egypt lessened the availability of U.S. dollars, resulting in a one to two month delay in receipts from EGPC. During 2006, we experienced wide variability in the timing of cash receipts. We have not established a reserve for these Egyptian receivables because we continue to get paid, albeit late, and have no indication that we will not be able to collect our receivable.

Asset Retirement Obligation

The Company has significant obligations to remove tangible equipment and restore land or seabed at the end of oil and gas production operations. Apache’s removal and restoration obligations are primarily associated with plugging and abandoning wells and removing and disposing of offshore oil and gas platforms. Estimating the future restoration and removal costs is difficult and requires management to make estimates and judgments because most of the removal obligations are many years in the future and contracts and regulations often have vague descriptions of what constitutes removal. Asset removal technologies and costs are constantly changing, as are regulatory, political, environmental, safety and public relations considerations.

Inherent in the present value calculation are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the present value of the existing Asset Retirement Obligation liability, a corresponding adjustment is made to the oil and gas property balance.

Income Taxes

Our oil and gas exploration and production operations are currently located in six countries. As a result, we are subject to taxation on our income in numerous jurisdictions. We record deferred tax assets and liabilities to account for the expected future tax consequences of events that have been recognized in our financial statements and our tax returns. We routinely assess the realizability of our deferred tax assets. If we conclude that it is more likely than not that some portion or all of the deferred tax assets will not be realized under accounting standards, the tax asset would be reduced by a valuation allowance. We consider future taxable income in making such assessments. Numerous judgments and assumptions are inherent in the determination of future taxable income, including factors such as future operating conditions (particularly as related to prevailing oil and gas prices).

The Company regularly assesses and, if required, establishes accruals for tax contingencies that could result from assessments of additional tax by taxing jurisdictions in countries where the Company operates. Tax reserves have been established, and include any related interest, despite the belief by the Company that certain tax positions have been fully documented in the Company’s tax returns. These reserves are subject to a significant amount of judgment and are reviewed and adjusted on a periodic basis in light of changing facts and circumstances considering the progress of ongoing tax audits, case law and any new legislation. The Company believes that the reserves established are adequate in relation to the potential for any additional tax assessments.

Derivatives

Apache uses derivative contracts on a limited basis to manage its exposure to oil and gas price volatility and foreign currency volatility. The Company accounts for the contracts in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” The estimated fair values of Apache’s derivative contracts within the scope of this statement are carried on the Company’s consolidated balance sheet. For oil and gas derivative contracts designated and qualifying as cash flow hedges, realized gains and losses are recognized in oil and gas production revenues when the forecasted transaction occurs. For foreign currency forward contracts designated and qualifying as cash flow hedges, realized gains and losses are generally recognized in lease operating expense when the forecasted transaction occurs. SFAS No. 133 requires that gains and losses from the change in fair value of derivative instruments that do not qualify for hedge accounting be “marked-to-market” and reported in current period income, rather than in the period in which the hedged transaction is settled. Realized gains and losses on derivative contracts not qualifying as cash flow hedges are reported in “Other” under “Revenues and Other” of the Statement of Consolidated Operations.

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The fair value estimate of Apache’s derivative contracts requires judgment; however, the Company’s derivative contracts are either exchange traded or valued by reference to commodities and currencies that are traded in highly liquid markets. As such, the ultimate fair value is determined by references to readily available public data. Option valuations are verified against independent third-party quotations. See Item 7A, Quantitative and Qualitative Disclosures about Market Risk, “Commodity Risk” in this Form 10-K for commodity price sensitivity information and the Company’s policies related to the use of derivatives.

Stock-Based Compensation

Consistent with the Company’s desire to reflect the ultimate cost of stock-based compensation on the income statement, Apache early adopted the provisions of SFAS No. 123-R “Share-Based Payment” upon the FASB’s issuance of the revised statement in the fourth quarter 2004. Stock-based compensation awards that vest during the year are reflected in the Company’s net income. Awards granted in future periods will be valued on the date of grant and expensed using a straight-line basis over the required service period.

The Company chose to adopt the statement under the “Modified Retrospective” approach as prescribed under SFAS No. 123-R. Under this approach, the Company is required to expense all options and stock-based compensation that vested during the year of adoption based on the fair value of the stock compensation determined on the date of grant. Had the Company not early adopted SFAS No. 123-R under this transition approach, 2004 net income would have been lower by $89 million ($56 million after tax) or $.17 per diluted share. Normally, net income would be negatively impacted by adopting SFAS No. 123-R under this transition method. However, the Company’s 2000 Share Appreciation Plan, which triggered in 2004, has a fair market value-based expense recorded under the provisions of SFAS No. 123-R that is substantially less than the intrinsic value cost that would have been recorded under the provisions of APB Opinion No. 25. Please refer to Note 8, Capital Stock of Item 15 of this Form 10-K for a detailed description of the 2000 Share Appreciation Plan and costs associated with our stock compensation plans.

Also, inherent in expensing stock options and other stock-based compensation under SFAS No. 123-R are several judgments and estimates that must be made. These include determining the underlying valuation methodology for stock compensation awards and the related inputs utilized in each valuation, such as the Company’s expected stock price volatility, expected term of the employee option, expected dividend yield, the expected risk-free interest rate, the underlying stock price and the exercise price of the option. Changes to these assumptions could result in different valuations for individual share awards and will be carefully scrutinized for each material grant. For option valuations, Apache utilizes the Black-Scholes option pricing model. For valuing the Share Appreciation Plan awards, the Company utilizes a Monte Carlo simulation model developed by a third party.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Commodity Risk

The major market risk exposure is in the pricing applicable to our oil and gas production. Realized pricing is primarily driven by the prevailing worldwide price for crude oil and spot prices applicable to our United States and Canadian natural gas production. Prices received for oil and gas production have been and remain volatile and unpredictable. Monthly average oil price realizations, including the impact of fixed-price contracts and hedges, ranged from a low of $52.64 per barrel to a high of $68.59 per barrel during 2006. Average gas price realizations, including the impact of fixed-price contracts and hedges, ranged from a monthly low of $3.85 per Mcf to a monthly high of $8.05 per Mcf during the same period. Based on the Company’s 2006 worldwide oil and gas production levels, a $1.00 per barrel change in the weighted-average realized price of oil would increase or decrease revenues by $82 million and a $.10 per Mcf change in the weighted-average realized price of gas would increase or decrease revenues by $55 million.

If oil and gas prices decline significantly, even if only for a short period of time, it is possible that non-cash write-downs of our oil and gas properties could occur under the full-cost accounting method allowed by the Securities Exchange Commission (SEC). Under these rules, we review the carrying value of our proved oil and gas properties each quarter on a country-by-country basis to ensure that capitalized costs of proved oil and gas properties, net of accumulated depreciation, depletion and amortization, and deferred income taxes do not exceed

43

the “ceiling.” This ceiling is the present value of estimated future net cash flows from proved oil and gas reserves, discounted at 10 percent, plus the lower of cost or fair value of unproved properties included in the costs being amortized, net of related tax effects. If capitalized costs exceed this ceiling, the excess is charged to additional DD&A expense. The calculation of estimated future net cash flows is based on the prices for crude oil and natural gas in effect on the last day of each fiscal quarter except for volumes sold under long-term contracts. Write-downs required by these rules do not impact cash flow from operating activities; however, as discussed above, sustained low prices would have a material adverse effect on future cash flows.

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. 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.

Apache has historically only hedged long-term oil and gas prices related to a portion of its expected production associated with acquisitions; however, in 2006, the Company’s Board of Directors authorized management to hedge a portion of production generated from the Company’s drilling program. In 2006, financial derivative hedges represented approximately eight percent of the total worldwide natural gas and nine percent of the total worldwide crude oil production. At year end, hedges in place were primarily related to North America production and represent approximately 12 percent of worldwide production for natural gas and crude oil.

On December 31, 2006, the Company had open natural gas derivative positions with a fair value of $87 million. A 10 percent increase in natural gas prices would reduce the fair value by approximately $58 million, while a 10 percent decrease in prices would increase the fair value by approximately $60 million. The Company also had open crude oil derivative positions with a fair value of $40 million. A 10 percent increase in oil prices would reduce the fair value by approximately $104 million, while a 10 percent decrease in prices would increase the fair value by approximately $107 million. These fair value changes assume volatility based on prevailing market parameters at December 31, 2006. See Note 3, Hedging and Derivative Instruments of Item 15 in this Form 10-K for notional volumes and terms associated with the Company’s derivative contracts.

Apache conducts its risk management activities for its commodities under the controls and governance of its risk management policy. The Risk Management Committee, comprising the Chief Financial Officer, Controller, Treasurer and other key members of Apache’s management, approve and oversee these controls, which have been implemented by designated members of the treasury department. The treasury and accounting departments also provide separate checks and reviews on the results of hedging activities. Controls for our commodity risk management activities include limits on credit, limits on volume, segregation of duties, delegation of authority and a number of other policy and procedural controls.

Governmental Risk

Apache’s U.S. and international operations have been, and at times in the future may be, affected by political developments and by federal, state and local laws and regulations impacting production levels, taxes, environmental requirements and other assessments including a potential Windfall Profits Tax.

Weather and Climate Risk

Demand for oil and natural gas are, to a significant degree, dependent on weather and climate, which impacts the price we receive for the commodities we produce. In addition, our exploration and development activities and equipment can be adversely affected by severe weather, such as hurricanes in the Gulf of Mexico, which may cause a loss of production from temporary cessation of activity or lost or damaged equipment. While our planning for normal climatic variation, insurance program, and emergency recovery plans mitigate the effects of the weather, not all such effects can be predicted, eliminated or insured against.

In response to large underwriting losses caused by Hurricanes Katrina and Rita, the insurance industry has reduced capacity for windstorm damage and substantially increased premium rates. As a result, there is no

44

assurance that Apache will be able to arrange insurance to cover fully its Gulf of Mexico exposures at a reasonable cost when the current policies expire.

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 gas production is sold under fixed-price Australian dollar contracts. Over half the costs incurred for Australian operations are paid in Australian dollars. In Canada, the majority of oil and gas production is sold under Canadian dollar contracts. The majority of the costs incurred are paid in Canadian dollars. The North Sea production is sold under U.S. dollar contracts and the majority of costs incurred are paid in British pounds. In contrast, all oil and gas production in Egypt is sold for U.S. dollars and the majority of the costs incurred are denominated in U.S. dollars. Argentina revenues and expenditures are largely denominated in U.S. dollars but translated into pesos at the then current exchange rate. Revenue and disbursement transactions denominated in Australian dollars, Canadian dollars, British pounds, Egyptian pounds or Argentine pesos are converted to U.S. dollar equivalents based on the exchange rate as of the transaction date.

Foreign currency gains and losses also come about when monetary assets and liabilities denominated in foreign currencies are translated at the end of each month. A 10 percent strengthening or weakening of the Australian dollar, Canadian dollar, British pound, Egyptian pound, or Argentine peso as of December 31, 2006, would result in a foreign currency net loss or gain of approximately $112 million.

Interest Rate Risk

On December 31, 2006, the Company’s debt with fixed interest rates represented approximately 57 percent of total debt. As a result, the interest expense on approximately 43 percent of Apache’s debt will fluctuate based on short-term interest rates. A 10 percent change in floating interest rates on year-end floating debt balances would change annual interest expense by approximately $9.2 million.

Forward-Looking Statements and Risk

Certain statements in this report, including statements of the future plans, objectives, and expected performance of the Company, are forward-looking statements that are dependent upon certain events, risks and uncertainties that may be outside the Company’s control, and which could cause actual results to differ materially from those anticipated. Some of these include, but are not limited to, capital expenditure projections, the market prices of oil and gas, economic and competitive conditions, inflation rates, legislative and regulatory changes, financial market conditions, political and economic uncertainties of foreign governments, future business decisions and other uncertainties, all of which are difficult to predict.

There are numerous uncertainties inherent in estimating quantities of proved oil and gas reserves and in projecting future rates of production and the timing of development expenditures. The total amount or timing of actual future production may vary significantly from reserve and production estimates. The drilling of exploratory wells can involve significant risks, including those related to timing, success rates and cost overruns. Lease and rig availability, complex geology and other factors can affect these risks. Although Apache makes use of futures contracts, swaps, options and fixed-price physical contracts to mitigate risk, fluctuations in oil and gas prices, or a prolonged continuation of low prices may substantially adversely affect the Company’s financial position, results of operations and cash flows.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary financial information required to be filed under this item are presented on pages F-1 through F-57 of this Form 10-K, and are incorporated herein by reference.

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ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

The financial statements for the fiscal years ended December 31, 2006, 2005 and 2004, included in this report, have been audited by Ernst & Young LLP, independent public auditors, as stated in their audit report appearing herein.

ITEM 9A.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

G. Steven Farris, the Company’s President, Chief Executive Officer and Chief Operating Officer, and Roger B. Plank, the Company’s Executive Vice President and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2006, 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 were effective, providing effective means to insure that information we are required to disclose under applicable laws and regulations is recorded, processed, summarized, and reported in a timely manner. We also made no changes in internal controls over financial reporting during the quarter ending December 31, 2006 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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.

Management’s Report on Internal Control Over Financial Reporting

The management report called for by Item 308(a) of Regulation S-K is incorporated herein by reference to Report of Management on Internal Control Over Financial Reporting, included on Page F-1 in Item 15 of this report.

The independent auditors attestation report called for by Item 308(b) of Regulation S-K is incorporated by reference to Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting, included on Page F-3 in Item 15 of this report.

Changes in Internal Control Over Financial Reporting

There was no change in our internal controls over financial reporting during the quarter ending December 31, 2006, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 9B.  OTHER INFORMATION

None.

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information set forth under the captions “Nominees for Election as Directors,” “Continuing Directors,” “Executive Officers of the Company,” and “Securities Ownership and Principal Holders” in the proxy statement relating to the Company’s 2007 annual meeting of stockholders (the Proxy Statement) is incorporated herein by reference.

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Code of Business Conduct

Pursuant to Rule 303A.10 of the NYSE and Rule 4350(n) of the NASDAQ, we are required to adopt a code of business conduct and ethics for our directors, officers and employees. In February 2004, the Board of Directors adopted the Code of Business Conduct (Code of Conduct), which also meets the requirements of a code of ethics under Item 406 of Regulation S-K. You can access the Company’s Code of Conduct on the Investor Relations page of the Company’s website at http://www.apachecorp.com. Any stockholder who so requests may obtain a printed copy of the Code of Conduct by submitting a request to the Company’s Corporate Secretary. Changes in and waivers to the Code of Conduct for the Company’s Directors, Chief Executive Officer and certain senior financial officers will be posted on the Company’s website within five business days and maintained for at least 12 months.

ITEM 11.  EXECUTIVE COMPENSATION

The information set forth under the captions “Summary Compensation Table,” “Grants of Plan Based Awards,” “Outstanding Equity Awards at Fiscal Year-End,” “Option Exercises and Stock Vested,” “Non-Qualified Deferred Compensation,” “Employment Contracts and Termination of Employment and Change-in-Control Arrangements” and “Director Compensation” in the Proxy Statement is incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information set forth under the captions “Securities Ownership and Principal Holders” and “Equity Compensation Plan Information” in the Proxy Statement is incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information set forth under the caption “Certain Business Relationships and Transactions” in the Proxy Statement is incorporated herein by reference.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information set forth under the caption “Independent Public Accountants” in the Proxy Statement is incorporated herein by reference.

PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Documents included in this report:

1. Financial Statements

Report of management	F-1
Report of independent registered public accounting firm	F-2
Report of independent registered public accounting firm	F-3
Statement of consolidated operations for each of the three years in the period ended December 31, 2006	F-4
Statement of consolidated cash flows for each of the three years in the period ended December 31, 2006	F-5
Consolidated balance sheet as of December 31, 2006 and 2005	F-6
Statement of consolidated shareholders’ equity for each of the three years in the period ended December 31, 2006	F-7
Notes to consolidated financial statements	F-8

2. Financial Statement Schedules

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Financial statement schedules have been omitted because they are either not required, not applicable or the information required to be presented is included in the Company’s financial statements and related notes.

3. Exhibits

Exhibit
No.				Description
	2	.1	—	Agreement and Plan of Merger among Registrant, YPY Acquisitions, Inc. and The Phoenix Resource Companies, Inc., dated March 27, 1996 (incorporated by reference to Exhibit 2.1 to Registrant’s Registration Statement on Form S-4, Registration No. 333-02305, filed April 5, 1996).
	2	.2	—	Purchase and Sale Agreement by and between BP Exploration & Production Inc., as seller, and Registrant, as buyer, dated January 11, 2003 (incorporated by reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K, dated and filed January 13, 2003, SEC File No. 001-4300).
	2	.3	—	Sale and Purchase Agreement by and between BP Exploration Operating Company Limited, as seller, and Apache North Sea Limited, as buyer, dated January 11, 2003 (incorporated by reference to Exhibit 2.2 to Registrant’s Current Report on Form 8-K, dated and filed January 13, 2003, SEC File No. 001-4300).
	3	.1	—	Restated Certificate of Incorporation of Registrant, dated February 11, 2004, as filed with the Secretary of State of Delaware on February 12, 2004 (incorporated by reference to Exhibit 3.1 to Registrant’s Annual Report on Form 10-K for year ended December 31, 2003, SEC File No. 001-4300).
	*3	.2	—	Bylaws of Registrant, as amended December 14, 2006.
	4	.1	—	Form of Certificate for Registrant’s Common Stock (incorporated by reference to Exhibit 4.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, SEC File No. 001-4300).
	4	.2	—	Form of Certificate for Registrant’s 5.68% Cumulative Preferred Stock, Series B (incorporated by reference to Exhibit 4.2 to Amendment No. 2 on Form 8-K/A to Registrant’s Current Report on Form 8-K, dated and filed April 18, 1998, SEC File No. 001-4300).
	4	.3	—	Rights Agreement, dated January 31, 1996, between Registrant and Norwest Bank Minnesota, N.A., rights agent, relating to the declaration of a rights dividend to Registrant’s common shareholders of record on January 31, 1996 (incorporated by reference to Exhibit(a) to Registrant’s Registration Statement on Form 8-A, dated January 24, 1996, SEC File No. 001-4300).
	4	.4	—	Amendment No. 1, dated as of January 31, 2006, to the Rights Agreement dated as of December 31, 1996, between Apache Corporation, a Delaware corporation, and Wells Fargo Bank, N.A. (successor to Norwest Bank Minnesota, N.A.) (incorporated by reference to Exhibit 4.4 to Registrant’s Amendment No. 1 to Registration Statement on Form 8-A, dated January 31, 2006, SEC File No. 001-4300).
	4	.5	—	Senior Indenture, dated February 15, 1996, between Registrant and JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank, as trustee, governing the senior debt securities and guarantees (incorporated by reference to Exhibit 4.6 to Registrant’s Registration Statement on Form S-3, dated May 23, 2003, Reg. No. 333-105536).
	4	.6	—	First Supplemental Indenture to the Senior Indenture, dated as of November 5, 1996, between Registrant and JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank, as trustee, governing the senior debt securities and guarantees (incorporated by reference to Exhibit 4.7 to Registrant’s Registration Statement on Form S-3, dated May 23, 2003, Reg. No. 333-105536).
	4	.7	—	Form of Indenture among Apache Finance Pty Ltd, Registrant and The Chase Manhattan Bank, as trustee, governing the debt securities and guarantees (incorporated by reference to Exhibit 4.1 to Registrant’s Registration Statement on Form S-3, dated November 12, 1997, Reg. No. 333-339973).
	4	.8	—	Form of Indenture among Registrant, Apache Finance Canada Corporation and The Chase Manhattan Bank, as trustee, governing the debt securities and guarantees (incorporated by reference to Exhibit 4.1 to Amendment No. 1 to Registrant’s Registration Statement on Form S-3, dated November 12, 1999, Reg. No. 333-90147).

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Exhibit
No.				Description
	*10	.1	—	Form of Amended and Restated Credit Agreement, dated as of May 9, 2006, among Registrant, the Lenders named therein, JPMorgan Chase Bank, as Administrative Agent, Citibank, N.A. and Bank of America, N.A., as Co-Syndication Agents, and BNP Paribas and UBS Loan Finance LLC, as Co-Documentation Agents.
	10	.2	—	Form of Credit Agreement, dated as of May 12, 2005, among Registrant, the Lenders named therein, JPMorgan Chase Bank, N.A., as Global Administrative Agent, J.P. Morgan Securities Inc. and Banc of America Securities, LLC, as Co-Lead Arrangers and Joint Bookrunners, Bank of America, N.A. and Citibank, N.A., as U.S. Co-Syndication Agents, and Calyon New York Branch and Société Générale, as U.S. Co-Documentation Agents (excluding exhibits and schedules) (incorporated by reference to Exhibit 10.01 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, SEC File No. 001-4300).
	10	.3	—	Form of Credit Agreement, dated as of May 12, 2005, among Apache Canada Ltd, a wholly-owned subsidiary of Registrant, the Lenders named therein, JPMorgan Chase Bank, N.A., as Global Administrative Agent, RBC Capital Markets and BMO Nesbitt Burns, as Co-Lead Arrangers and Joint Bookrunners, Royal Bank of Canada, as Canadian Administrative Agent, Bank of Montreal and Union Bank of California, N.A., Canada Branch, as Canadian Co-Syndication Agents, and The Toronto-Dominion Bank and BNP Paribas (Canada), as Canadian Co-Documentation Agents (excluding exhibits and schedules) (incorporated by reference to Exhibit 10.02 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, SEC File No. 001-4300).
	10	.4	—	Form of Credit Agreement, dated as of May 12, 2005, among Apache Energy Limited, a wholly-owned subsidiary of Registrant, the Lenders named therein, JPMorgan Chase Bank, N.A., as Global Administrative Agent, Citigroup Global Markets Inc. and Deutsche Bank Securities Inc., as Co-Lead Arrangers and Joint Bookrunners, Citisecurities Limited, as Australian Administrative Agent, Deutsche Bank AG, Sydney Branch, and JPMorgan Chase Bank, as Australian Co-Syndication Agents, and Bank of America, N.A., Sydney Branch, and UBS AG, Australia Branch, as Australian Co-Documentation Agents (excluding exhibits and schedules) (incorporated by reference to Exhibit 10.03 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, SEC File No. 001-4300).
	10	.5	—	Form of Five-Year Credit Agreement, dated May 28, 2004, among Registrant, the Lenders named therein, JPMorgan Chase Bank, as Administrative Agent, Citibank N.A. and Bank of America, N.A., as Co-Syndication Agents, and Barclays Bank PLC and UBS Loan Finance LLC. as Co-Documentation Agents (excluding exhibits and schedules) (incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, SEC File No. 001-4300).
	10	.6	—	Form of First Amendment to Combined Credit Agreements, dated May 28, 2004, among Registrant, Apache Energy Limited, Apache Canada Ltd., the Lenders named therein, JP Morgan Chase Bank, as Global Administrative Agent, Bank of America, N.A., as Global Syndication Agent, and Citibank, N.A., as Global Documentation Agent (excluding exhibits and schedules) (incorporated by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, SEC File No. 001-4300).
	10	.7	—	Concession Agreement for Petroleum Exploration and Exploitation in the Khalda Area in Western Desert of Egypt by and among Arab Republic of Egypt, the Egyptian General Petroleum Corporation and Phoenix Resources Company of Egypt, dated April 6, 1981 (incorporated by reference to Exhibit 19(g) to Phoenix’s Annual Report on Form 10-K for year ended December 31, 1984, SEC File No. 1-547).
	10	.8	—	Amendment, dated July 10, 1989, to Concession Agreement for Petroleum Exploration and Exploitation in the Khalda Area in Western Desert of Egypt by and among Arab Republic of Egypt, the Egyptian General Petroleum Corporation and Phoenix Resources Company of Egypt incorporated by reference to Exhibit 10(d)(4) to Phoenix’s Quarterly Report on Form 10-Q for quarter ended June 30, 1989, SEC File No. 1-547).

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Exhibit
No.				Description
	10	.9	—	Farmout Agreement, dated September 13, 1985 and relating to the Khalda Area Concession, by and between Phoenix Resources Company of Egypt and Conoco Khalda Inc. (incorporated by reference to Exhibit 10.1 to Phoenix’s Registration Statement on Form S-1, Registration No. 33-1069, filed October 23, 1985).
	10	.10	—	Amendment, dated March 30, 1989, to Farmout Agreement relating to the Khalda Area Concession, by and between Phoenix Resources Company of Egypt and Conoco Khalda Inc. (incorporated by reference to Exhibit 10(d)(5) to Phoenix’s Quarterly Report on Form 10-Q for quarter ended June 30, 1989, SEC File No. 1-547).
	10	.11	—	Amendment, dated May 21, 1995, to Concession Agreement for Petroleum Exploration and Exploitation in the Khalda Area in Western Desert of Egypt between Arab Republic of Egypt, the Egyptian General Petroleum Corporation, Repsol Exploration Egypt S.A., Phoenix Resources Company of Egypt and Samsung Corporation (incorporated by reference to Exhibit 10.12 to Registrant’s Annual Report on Form 10-K for year ended December 31, 1997, SEC File No. 001-4300).
	10	.12	—	Concession Agreement for Petroleum Exploration and Exploitation in the Qarun Area in Western Desert of Egypt, between Arab Republic of Egypt, the Egyptian General Petroleum Corporation, Phoenix Resources Company of Qarun and Apache Oil Egypt, Inc., dated May 17, 1993 (incorporated by reference to Exhibit 10(b) to Phoenix’s Annual Report on Form 10-K for year ended December 31, 1993, SEC File No. 1-547).
	10	.13	—	Agreement for Amending the Gas Pricing Provisions under the Concession Agreement for Petroleum Exploration and Exploitation in the Qarun Area, effective June 16, 1994 (incorporated by reference to Exhibit 10.18 to Registrant’s Annual Report on Form 10-K for year ended December 31, 1996, SEC File No. 001-4300).
	†10	.14	—	Apache Corporation Corporate Incentive Compensation Plan A (Senior Officers’ Plan), dated July 16, 1998 (incorporated by reference to Exhibit 10.13 to Registrant’s Annual Report on Form 10-K for year ended December 31, 1998, SEC File No. 001-4300).
	†10	.15	—	Apache Corporation Corporate Incentive Compensation Plan B (Strategic Objectives Format), dated July 16, 1998 (incorporated by reference to Exhibit 10.14 to Registrant’s Annual Report on Form 10-K for year ended December 31, 1998, SEC File No. 001-4300).
	*†10	.16	—	Apache Corporation 401(k) Savings Plan, dated January 1, 2007.
	*†10	.17	—	Apache Corporation Money Purchase Retirement Plan, dated January 1, 2007.
	*†10	.18	—	Non-Qualified Retirement/Savings Plan of Apache Corporation, amended and restated as of January 1, 2005.
	†10	.19	—	Apache Corporation 1990 Stock Incentive Plan, as amended and restated September 13, 2001 (incorporated by reference to Exhibit 10.01 to Registrant’s Quarterly Report on Form 10-Q, as amended by Form 10-Q/A, for the quarter ended September 30, 2001, SEC File No. 001-4300).
	†10	.20	—	Apache Corporation 1995 Stock Option Plan, as amended and restated September 15, 2005, effective as of January 1, 2005 (incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, SEC File No. 001-4300).
	†10	.21	—	Apache Corporation 2000 Share Appreciation Plan, as amended and restated September 15, 2005, effective as of January 1, 2005 (incorporated by reference to Exhibit 10.4 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, SEC File No. 001-4300).
	†10	.22	—	Apache Corporation 1996 Performance Stock Option Plan, as amended and restated September 13, 2001 (incorporated by reference to Exhibit 10.03 to Registrant’s Quarterly Report on Form 10-Q, as amended by Form 10-Q/A, for the quarter ended September 30, 2001, SEC File No. 001-4300).
	†10	.23	—	Apache Corporation 1998 Stock Option Plan, as amended and restated September 15, 2005, effective as of January 1, 2005 (incorporated by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, SEC File No. 001-4300).
	†10	.24	—	Apache Corporation 2000 Stock Option Plan, as amended and restated September 15, 2005, effective as of January 1, 2005 (incorporated by reference to Exhibit 10.3 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, SEC File No. 001-4300).

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Exhibit
No.				Description
	†10	.25	—	Apache Corporation 2003 Stock Appreciation Rights Plan, dated and effective May 1, 2003 (incorporated by reference to Exhibit 10.31 to Registrant’s Annual Report on Form 10-K for year ended December 31, 2003, SEC File No. 001-4300).
	†10	.26	—	Apache Corporation 2005 Stock Option Plan, dated February 3, 2005 (incorporated by reference to Appendix B to the Proxy Statement relating to Apache’s 2005 annual meeting of stockholders, as filed with the Commission on March 28, 2005, Commission File No. 001-4300).
	†10	.27	—	Apache Corporation 2005 Share Appreciation Plan, dated February 3, 2005 (incorporated by reference to Appendix C to the Proxy Statement relating to Apache’s 2005 annual meeting of stockholders, as filed with the Commission on March 28, 2005, Commission File No. 001-4300).
	†10	.28	—	1990 Employee Stock Option Plan of The Phoenix Resource Companies, Inc., as amended through September 29, 1995, effective April 9, 1990 (incorporated by reference to Exhibit 10.33 to Registrant’s Annual Report on Form 10-K for year ended December 31, 1996, SEC File No. 001-4300).
	†10	.29	—	Apache Corporation Income Continuance Plan, as amended and restated May 3, 2001 (incorporated by reference to Exhibit 10.30 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001, SEC File No. 001-4300).
	†10	.30	—	Apache Corporation Deferred Delivery Plan, as amended and restated September 15, 2005, effective as of January 1, 2005 (incorporated by reference to Exhibit 10.5 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, SEC File No. 001-4300).
	†10	.31	—	Apache Corporation Executive Restricted Stock Plan, as amended and restated December 14, 2005, effective January 1, 2005 (incorporated by reference to Exhibit 10.36 to Registrant’s Annual Report on Form 10-K for year ended December 31, 2005, SEC File No. 001-4300).
	†10	.32	—	Apache Corporation Non-Employee Directors’ Compensation Plan, as amended and restated September 15, 2005, effective as of January 1, 2005 (incorporated by reference to Exhibit 10.7 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, SEC File No. 001-4300).
	†10	.33	—	Apache Corporation Outside Directors’ Retirement Plan, as amended and restated May 4, 2006, effective as of January 1, 2006 (incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, SEC File No. 001-4300).
	†10	.34	—	Apache Corporation Equity Compensation Plan for Non-Employee Directors, as amended and restated February 5, 2004 (incorporated by reference to Exhibit 10.38 to Registrant’s Annual Report on Form 10-K for year ended December 31, 2003, SEC File No. 001-4300).
	†10	.35	—	Amended and Restated Employment Agreement, dated December 5, 1990, between Registrant and Raymond Plank (incorporated by reference to Exhibit 10.39 to Registrant’s Annual Report on Form 10-K for year ended December 31, 1996, SEC File No. 001-4300).
	†10	.36	—	First Amendment, dated April 4, 1996, to Restated Employment Agreement between Registrant and Raymond Plank (incorporated by reference to Exhibit 10.40 to Registrant’s Annual Report on Form 10-K for year ended December 31, 1996, SEC File No. 001-4300).
	†10	.37	—	Amended and Restated Employment Agreement, dated December 20, 1990, between Registrant and John A. Kocur (incorporated by reference to Exhibit 10.10 to Registrant’s Annual Report on Form 10-K for year ended December 31, 1990, SEC File No. 001-4300).
	†10	.38	—	Employment Agreement, dated June 6, 1988, between Registrant and G. Steven Farris (incorporated by reference to Exhibit 10.6 to Registrant’s Annual Report on Form 10-K for year ended December 31, 1989, SEC File No. 001-4300).
	†10	.39	—	Amended and Restated Conditional Stock Grant Agreement, dated September 15, 2005, effective January 1, 2005, between Registrant and G. Steven Farris (incorporated by reference to Exhibit 10.06 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, SEC File No. 001-4300).
	10	.40	—	Amended and Restated Gas Purchase Agreement, effective July 1, 1998, by and among Registrant and MW Petroleum Corporation, as seller, and Producers Energy Marketing, LLC, as buyer (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, dated June 18, 1998, filed June 23, 1998, SEC File No. 001-4300).

51

Exhibit
No.				Description
	10	.41	—	Deed of Guaranty and Indemnity, dated January 11, 2003, made by Registrant in favor of BP Exploration Operating Company Limited (incorporated by reference to Registrant’s Current Report on Form 8-K, dated and filed January 13, 2003, SEC File No. 001-4300).
	*12	.1	—	Statement of Computation of Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Stock Dividends.
	14	.1	—	Code of Business Conduct (incorporated by reference to Exhibit 14.1 to Registrant’s Annual Report on Form 10-K for year ended December 31, 2003, SEC File No. 001-4300).
	*21	.1	—	Subsidiaries of Registrant
	*23	.1	—	Consent of Ernst & Young LLP
	*23	.2	—	Consent of Ryder Scott Company L.P., Petroleum Consultants
	*24	.1	—	Power of Attorney (included as a part of the signature pages to this report)
	*31	.1	—	Certification of Chief Executive Officer
	*31	.2	—	Certification of Chief Financial Officer
	*32	.1	—	Certification of Chief Executive Officer and Chief Financial Officer

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

NOTE: Debt instruments of the Registrant defining the rights of long-term debt holders in principal amounts not exceeding 10 percent of the Registrant’s consolidated assets have been omitted and will be provided to the Commission upon request.

(b) See (a) 3. above.

(c) See (a) 2. above.

52

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

APACHE CORPORATION

/s/  G. STEVEN FARRIS

G. Steven Farris

President, Chief Executive Officer and
Chief Operating Officer

Dated: February 28, 2007

POWER OF ATTORNEY

The officers and directors of Apache Corporation, whose signatures appear below, hereby constitute and appoint G. Steven Farris, Roger B. Plank, P. Anthony Lannie, Rebecca A. Hoyt, and Jeffrey B. King, and each of them (with full power to each of them to act alone), the true and lawful attorney-in-fact to sign and execute, on behalf of the undersigned, any amendment(s) to this report and each of the undersigned does hereby ratify and confirm all that said attorneys shall do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Title	Date
/s/  G. STEVEN FARRIS G. Steven Farris	Director, President, Chief Executive Officer and Chief Operating Officer (Principal Executive Officer)	February 28, 2007
/s/  ROGER B. PLANK Roger B. Plank	Executive Vice President and Chief Financial Officer (Principal Financial Officer)	February 28, 2007
/s/  REBECCA A. HOYT Rebecca A. Hoyt	Vice President and Controller (Principal Accounting Officer)	February 28, 2007
/s/  RAYMOND PLANK Raymond Plank	Chairman of the Board	February 28, 2007
/s/  FREDERICK M. BOHEN Frederick M. Bohen	Director	February 28, 2007
/s/  RANDOLPH M. FERLIC Randolph M. Ferlic	Director	February 28, 2007
/s/  EUGENE C. FIEDOREK Eugene C. Fiedorek	Director	February 28, 2007
/s/  A. D. FRAZIER, JR A. D. Frazier, Jr.	Director	February 28, 2007
/s/  PATRICIA ALBJERG GRAHAM Patricia Albjerg Graham	Director	February 28, 2007

Name	Title	Date
/s/  JOHN A. KOCUR John A. Kocur	Director	February 28, 2007
/s/  GEORGE D. LAWRENCE George D. Lawrence	Director	February 28, 2007
/s/  F. H. MERELLI F. H. Merelli	Director	February 28, 2007
/s/  RODMAN D. PATTON Rodman D. Patton	Director	February 28, 2007
/s/  CHARLES J. PITMAN Charles J. Pitman	Director	February 28, 2007
/s/  JAY A. PRECOURT Jay A. Precourt	Director	February 28, 2007

REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of the Company is responsible for the preparation and integrity of the consolidated financial statements appearing in this annual report on Form 10-K. The financial statements were prepared in conformity with accounting principles generally accepted in the United States and include amounts that are based on management’s best estimates and judgments.

Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934 (“Exchange Act”). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements. Our internal control over financial reporting is supported by a program of internal audits and appropriate reviews by management, written policies and guidelines, careful selection and training of qualified personnel and a written code of business conduct adopted by our Company’s Board of Directors, applicable to all Company Directors and all officers and employees of our Company and subsidiaries.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework.  Based on our assessment, management believes that the Company maintained effective internal control over financial reporting as of December 31, 2006.

The Company’s independent auditors, Ernst & Young LLP, a registered public accounting firm, are appointed by the Audit Committee of the Company’s Board of Directors. Ernst & Young LLP have audited and reported on the consolidated financial statements of Apache Corporation and subsidiaries, management’s assessment of the effectiveness of the Company’s internal control over financial reporting and the effectiveness of the Company’s internal control over financial reporting. The reports of the independent auditors follow this report on pages F-2 and F-3.

G. Steven Farris

President, Chief Executive Officer

and Chief Operating Officer

Roger B. Plank

Executive Vice President and Chief Financial Officer

Rebecca A. Hoyt

Vice President and Controller

(Chief Accounting Officer)

Houston, Texas

February 28, 2007

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of Apache Corporation:

We have audited the accompanying consolidated balance sheets of Apache Corporation and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Apache Corporation and subsidiaries as of December 31, 2006 and 2005 and the consolidated results of their operations and their cash flows for each of the three years ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

As described in Note 1 and Note 8 to the consolidated financial statements, during 2004, the Company adopted the modified prospective provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(revised), “Share-Based Payment.” In addition, as described in Note 1 and Note 10 to the Consolidated Financial Statements, the Company adopted the provisions of SFAS No. 158, “Employees Accounting for Defined Benefit Plans and Other Postretirement Plans.”

We also have audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Apache Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2007 expressed an unqualified opinion thereon.

ERNST & YOUNG LLP

Houston, Texas

February 28, 2007

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of Apache Corporation:

We have audited management’s assessment, included in the accompanying Report of Management on Internal Control over Financial Reporting, that Apache Corporation and subsidiaries maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Apache Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Apache Corporation and subsidiaries maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Apache Corporation and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Apache Corporation and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006 and our report dated February 28, 2007 expressed an unqualified opinion thereon.

ERNST & YOUNG LLP

Houston, Texas

February 28, 2007

F-3

APACHE CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED OPERATIONS

	For the Year Ended December 31,
	2006			2005			2004
	(In thousands, except per common share data)
REVENUES AND OTHER:
Oil and gas production revenues	$	8,074,253		$	7,457,291		$	5,308,017
Gain on China divestiture		173,545			—			—
Other		40,981			126,953			24,560
		8,288,779			7,584,244			5,332,577
OPERATING EXPENSES:
Depreciation, depletion and amortization		1,816,359			1,415,682			1,222,152
Asset retirement obligation accretion		88,931			53,720			46,060
Lease operating costs		1,362,374			1,040,475			864,378
Gathering and transportation costs		104,322			100,260			82,261
Severance and other taxes		553,978			453,258			93,748
General and administrative		211,334			198,272			173,194
China litigation provision		—			—			71,216
Financing costs:
Interest expense		217,454			175,419			168,090
Amortization of deferred loan costs		2,048			3,748			2,471
Capitalized interest		(61,301	)		(56,988	)		(50,748	)
Interest income		(16,315	)		(5,856	)		(3,328	)
		4,279,184			3,377,990			2,669,494
INCOME BEFORE INCOME TAXES		4,009,595			4,206,254			2,663,083
Provision for income taxes		1,457,144			1,582,524			993,012
INCOME BEFORE CHANGE IN ACCOUNTING PRINCIPLE		2,552,451			2,623,730			1,670,071
Cumulative effect of change in accounting principle, net of income tax		—			—			(1,317	)
NET INCOME		2,552,451			2,623,730			1,668,754
Preferred stock dividends		5,680			5,680			5,680
INCOME ATTRIBUTABLE TO COMMON STOCK	$	2,546,771		$	2,618,050		$	1,663,074
BASIC NET INCOME PER COMMON SHARE:
Before change in accounting principle	$	7.72		$	7.96		$	5.10
Cumulative effect of change in accounting principle		—			—			—
	$	7.72		$	7.96		$	5.10
DILUTED NET INCOME PER COMMON SHARE:
Before change in accounting principle	$	7.64		$	7.84		$	5.04
Cumulative effect of change in accounting principle		—			—			(.01	)
	$	7.64		$	7.84		$	5.03

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

F-4

APACHE CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED CASH FLOWS

	For the Year Ended December 31,
	2006			2005			2004
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	2,552,451		$	2,623,730		$	1,668,754
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization		1,816,359			1,415,682			1,222,152
Provision for deferred income taxes		751,457			598,927			444,906
Asset retirement obligation accretion		88,931			53,720			46,060
Gain on sale of China operations		(173,545	)		—			—
Other		32,380			52,274			43,482
Changes in operating assets and liabilities, net of effects of acquisitions:
(Increase) decrease in receivables		(153,616	)		(504,038	)		(296,383	)
(Increase) decrease in inventories		10,238			11,295			(659	)
(Increase) decrease in drilling advances and other		66,323			(144,154	)		(35,761	)
(Increase) decrease in deferred charges and other		(126,869	)		(26,454	)		(35,328	)
Increase (decrease) in accounts payable		(136,663	)		97,447			182,454
Increase (decrease) in accrued expenses		(475,021	)		214,491			28,431
Increase (decrease) in advances from gas purchasers		(25,601	)		(22,108	)		(18,331	)
Increase (decrease) in deferred credits and noncurrent liabilities		86,082			(38,542	)		(18,258	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		4,312,906			4,332,270			3,231,519
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment		(3,891,639	)		(3,715,856	)		(2,456,488	)
Acquisition of BP plc properties		(833,820	)		—			—
Acquisition of Pioneer’s Argentine operations		(704,809	)		—			—
Acquisition of Amerada Hess properties		(229,134	)		—			—
Acquisition of Pan American properties		(396,056	)		—			—
Acquisition of ExxonMobil properties		—			—			(348,173	)
Acquisition of Anadarko properties		—			—			(531,963	)
Proceeds from China divestiture		264,081			—			—
Proceeds from sale of Egypt properties		409,203			—			—
Additions to gas gathering, transmission and processing facilities		(248,589	)		—			—
Proceeds from sales of oil and gas properties		4,740			79,663			4,042
Other, net		(149,559	)		(95,649	)		(78,431	)
NET CASH USED IN INVESTING ACTIVITIES		(5,775,582	)		(3,731,842	)		(3,411,013	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt borrowings		1,779,963			153,368			544,824
Payments on debt		(150,266	)		(549,530	)		(283,400	)
Dividends paid		(154,143	)		(117,395	)		(90,369	)
Common stock activity		31,963			18,864			21,595
Treasury stock activity, net		(166,907	)		6,620			12,472
Cost of debt and equity transactions		(2,061	)		(861	)		(2,303	)
Other		35,791			6,273			54,265
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		1,374,340			(482,661	)		257,084
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(88,336	)		117,767			77,590
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		228,860			111,093			33,503
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	140,524		$	228,860		$	111,093

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

F-5

APACHE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

	December 31,
	2006			2005
	(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	140,524		$	228,860
Receivables, net of allowance		1,651,664			1,444,545
Inventories		320,386			209,670
Drilling advances		78,838			146,047
Derivative instruments		139,756			16,319
Prepaid assets and other		159,103			116,636
		2,490,271			2,162,077
PROPERTY AND EQUIPMENT:
Oil and gas, on the basis of full cost accounting:
Proved properties		29,107,921			23,836,789
Unproved properties and properties under development, not being amortized		1,284,743			795,706
Gas gathering, transmission and processing facilities		1,725,619			1,359,477
Other		358,605			312,970
		32,476,888			26,304,942
Less: Accumulated depreciation, depletion and amortization		(11,130,636	)		(9,513,602	)
		21,346,252			16,791,340
OTHER ASSETS:
Goodwill, net		189,252			189,252
Deferred charges and other		282,400			129,127
	$	24,308,175		$	19,271,796
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	644,889		$	714,598
Accrued operating expense		70,551			66,609
Accrued exploration and development		534,924			460,203
Accrued compensation and benefits		127,779			125,022
Accrued interest		30,878			32,564
Accrued income taxes		2,133			120,153
Current debt		1,802,094			274
Asset retirement obligation		376,713			93,557
Derivative instruments		70,128			256,115
United Kingdom Petroleum Revenue Tax		—			174,491
Other		151,523			142,978
		3,811,612			2,186,564
LONG-TERM DEBT		2,019,831			2,191,954
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes		3,618,989			2,580,629
Advances from gas purchasers		43,167			68,768
Asset retirement obligation		1,370,853			1,362,358
Derivative instruments		—			152,430
Other		252,670			187,878
		5,285,679			4,352,063
COMMITMENTS AND CONTINGENCIES (Note 10) SHAREHOLDERS’ EQUITY:
Preferred stock, no par value, 5,000,000 shares authorized — Series B, 5.68% Cumulative Preferred Stock, 100,000 shares issued and outstanding		98,387			98,387
Common stock, $0.625 par, 430,000,000 shares authorized, 339,783,392 and 336,997,053 shares issued, respectively		212,365			210,623
Paid-in capital		4,269,795			4,170,714
Retained earnings		8,898,577			6,516,863
Treasury stock, at cost, 9,045,967 and 6,875,823 shares, respectively		(256,739	)		(89,764	)
Accumulated other comprehensive loss		(31,332	)		(365,608	)
		13,191,053			10,541,215
	$	24,308,175		$	19,271,796

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

F-6

APACHE CORPORATION AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED SHAREHOLDERS’ EQUITY

																Accumulated
				Series B												Other			Total
	Comprehensive			Preferred		Common		Paid-In		Retained			Treasury			Comprehensive			Shareholders’
	Income			Stock		Stock		Capital		Earnings			Stock			Income (Loss)			Equity
	(In thousands)
BALANCE AT DECEMBER 31, 2003				$	98,387	$	207,818	$	4,038,007	$	2,445,698		$	(105,169	)	$	(151,943	)	$	6,532,798
Comprehensive income (loss):
Net income	$	1,668,754			—		—		—		1,668,754			—			—			1,668,754
Commodity hedges, net of income tax expense of $13,742		22,461			—		—		—		—			—			22,461			22,461
Comprehensive income	$	1,691,215
Cash dividends:
Preferred					—		—		—		(5,680	)		—			—			(5,680	)
Common ($.28 per share)					—		—		—		(91,433	)		—			—			(91,433	)
Five percent common stock dividend					—		—		—		—			—			—			—
Common shares issued					—		1,502		25,030		—			—			—			26,532
Treasury shares issued, net					—		—		8,312		—			7,844			—			16,156
Compensation expense					—		—		34,462		—			—			—			34,462
Other					—		—		371		—			—			—			371
BALANCE AT DECEMBER 31, 2004					98,387		209,320		4,106,182		4,017,339			(97,325	)		(129,482	)		8,204,421
Comprehensive income (loss):
Net income	$	2,623,730			—		—		—		2,623,730			—			—			2,623,730
Commodity hedges, net of income tax benefit of $128,990		(236,126	)		—		—		—		—			—			(236,126	)		(236,126	)
Comprehensive income	$	2,387,604
Cash dividends:
Preferred					—		—		—		(5,680	)		—			—			(5,680	)
Common ($.36 per share)					—		—		—		(118,526	)		—			—			(118,526	)
Common shares issued					—		1,303		21,125		—			—			—			22,428
Treasury shares issued, net					—		—		2,736		—			7,561			—			10,297
Compensation expense					—		—		40,528		—			—			—			40,528
Other					—		—		143		—			—			—			143
BALANCE AT DECEMBER 31, 2005					98,387		210,623		4,170,714		6,516,863			(89,764	)		(365,608	)		10,541,215
Comprehensive income (loss):
Net income	$	2,552,451			—		—		—		2,552,451			—			—			2,552,451
Post retirement, net of income tax benefit of $2,816		(6,116	)		—		—		—		—			—			(6,116	)		(6,116	)
Commodity hedges, net of income tax expense of $187,162		340,392			—		—		—		—			—			340,392			340,392
Comprehensive income	$	2,886,727
Cash dividends:
Preferred					—		—		—		(5,680	)		—			—			(5,680	)
Common ($.50 per share)					—		—		—		(165,059	)		—			—			(165,059	)
Common shares issued					—		1,742		54,917		—			—			—			56,659
Treasury shares purchased, net					—		—		1,968		—			(166,967	)		—			(164,999	)
Compensation expense					—		—		42,085		—			—			—			42,085
Other					—		—		111		2			(8	)		—			105
BALANCE AT DECEMBER 31, 2006				$	98,387	$	212,365	$	4,269,795	$	8,898,577		$	(256,739	)	$	(31,332	)	$	13,191,053

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

F-7

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations — Apache Corporation (Apache or the Company) is an independent energy company that explores for, develops and produces natural gas, crude oil and natural gas liquids. The Company’s North American exploration and production activities are divided into two U.S. operating regions (Central and Gulf Coast) and a Canadian region. Approximately 66 percent of the Company’s proved reserves are located in North America. Outside of North America, Apache has exploration and production interests in Egypt, offshore Western Australia, offshore the United Kingdom in the North Sea (North Sea) and Argentina.

The Company’s future financial condition and results of operations will depend upon prices received for its oil and natural gas production and the costs of finding, acquiring, developing and producing reserves. The vast majority of the Company’s production is sold under market-sensitive contracts. Prices for oil and natural gas are subject to fluctuations in response to changes in supply, market uncertainty and a variety of other factors beyond the Company’s control. These factors include worldwide political instability (especially in the Middle East), the foreign supply of oil and natural gas, the price of foreign imports, the level of consumer demand, and the price and availability of alternative fuels.

Principles of Consolidation — The accompanying consolidated financial statements include the accounts of Apache and its subsidiaries after elimination of intercompany balances and transactions. The Company consolidates all investments in which the Company, either through direct or indirect ownership, has more than a 50 percent voting interest. In addition, Apache consolidates all variable interest entities where it is the primary beneficiary. The Company’s interests in oil and gas exploration and production ventures and partnerships are proportionately consolidated.

Cash Equivalents — The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. These investments are carried at cost, which approximates fair value.

Allowance for Doubtful Accounts — The Company routinely assesses the recoverability of all material trade and other receivables to determine their collectibility. Many of Apache’s receivables are from joint interest owners on properties Apache operates. Thus, Apache may have the ability to withhold future revenue disbursements to recover any non-payment of joint interest billings. Generally, the Company’s crude oil and natural gas receivables are collected within two months. Beginning in 2001, however, the Company experienced a gradual decline in the timeliness of receipts from the Egyptian General Petroleum Corporation (EGPC). Deteriorating economic conditions in Egypt lessened the availability of U.S. dollars, resulting in an additional one to two month delay in receipts from EGPC. During 2006, we experienced wide variability in the timing of cash receipts from EGPC. We have not established a reserve for these Egyptian receivables because we continue to get paid, albeit late, and we have no indication that we will not be able to collect our receivable.

The Company accrues a reserve on a receivable when, based on the judgment of management, it is probable that a receivable will not be collected and the amount of any reserve may be reasonably estimated. As of December 31, 2006 and 2005, the Company had an allowance for doubtful accounts of $23 million and $22 million, respectively.

Marketable Securities — The Company accounts for investments in debt and equity securities in accordance with Statement of Financial Accounting Standards (SFAS) No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” Investments in debt securities classified as “held to maturity” are recorded at amortized cost. Investments in debt and equity securities classified as “available for sale” are recorded at fair value with unrealized gains and losses recognized in other comprehensive income, net of income taxes. The Company utilizes the average-cost method in computing realized gains and losses, which are included in Revenues and Other in the statements of consolidated operations.

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APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Inventories — Inventories consist principally of tubular goods and production equipment, stated at the lower of weighted-average cost or market, and oil produced but not sold, stated at the lower of cost (a combination of production costs and depreciation, depletion and amortization (DD&A) expense) or market.

Property and Equipment — The Company uses the full-cost method of accounting for its investment in oil and gas properties. Under this method, the Company capitalizes all acquisition, exploration and development costs incurred for the purpose of finding oil and gas reserves, including salaries, benefits and other internal costs directly attributable to these activities. Historically, total capitalized internal costs in any given year have not been material to total oil and gas costs capitalized in such year. Apache capitalized $146 million, $141 million and $107 million of these internal costs in 2006, 2005 and 2004, respectively. Costs associated with production and general corporate activities, however, are expensed in the period incurred. Interest costs related to unproved properties and properties under development are also capitalized to oil and gas properties. The Company also includes the present value of its dismantlement, restoration and abandonment costs within the capitalized oil and gas property balance (see Note 4, Asset Retirement Obligation). Unless a significant portion of the Company’s proved reserve quantities in a particular country are sold (greater than 25 percent), proceeds from the sale of oil and gas properties are accounted for as a reduction to capitalized costs, and gains and losses are not recognized.

Apache computes the DD&A expense of oil and gas properties on a quarterly basis using the unit-of-production method based upon production and estimates of proved reserve quantities. The costs to be amortized include estimated future expenditures to be incurred in developing proved reserves as well as estimated dismantlement and abandonment costs, net of salvage value, that have not yet been capitalized as asset retirement costs. Unproved properties are excluded from the amortizable base until evaluated. The cost of exploratory dry wells is transferred to proved properties and thus subject to amortization immediately upon determination that a well is dry in those countries where proved reserves exist. If geological and geophysical (G&G) costs cannot be associated with specific properties, they are included in the amortization base as incurred.

In performing its quarterly ceiling test, the Company limits, on a country-by-country basis, the capitalized costs of proved oil and gas properties, net of accumulated DD&A and deferred income taxes, to the estimated future net cash flows from proved oil and gas reserves discounted at 10 percent, net of related tax effects, plus the lower of cost or fair value of unproved properties included in the costs being amortized. If capitalized costs exceed this limit, the excess is charged as additional DD&A expense. The Company calculates future net cash flows by applying end-of-the-period prices except in those instances where future natural gas or oil sales are covered by physical contract terms or by derivative contracts that qualify, and are accounted for, as cash flow hedges. Prior to 2007, Canadian provincial tax credits were included in the estimated future net cash flows. Effective January 1, 2007, the Alberta government eliminated the Royalty Tax program. The future cash flows associated with settling asset retirement obligations that have been accrued on the balance sheet are excluded from estimated future net cash flows. See Note 14, Supplemental Oil and Gas Disclosures (Unaudited) “Future Net Cash Flows” for a discussion on calculation of estimated future net cash flows.

Given the volatility of oil and gas prices, it is reasonably possible that the Company’s estimate of discounted future net cash flows from proved oil and gas reserves could change in the near term. If oil and gas prices decline significantly, even if only for a short period of time, it is possible that write-downs of oil and gas properties could occur.

Unproved properties are assessed quarterly for possible impairments or reductions in value. If a reduction in value has occurred, the impairment is transferred to proved properties.

Buildings, equipment and gas gathering, transmission and processing facilities are depreciated on a straight-line basis over the estimated useful lives of the assets, which range from three to 20 years. Accumulated depreciation for these assets totaled $582 million and $467 million at December 31, 2006 and 2005, respectively.

Goodwill — Goodwill totaled $189 million at December 31, 2006 and 2005, with approximately $103 million and $86 million recorded to the Canadian and Egyptian reporting units, respectively. Each geographic area was

F-9

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

assessed as a reporting unit. Goodwill of each reporting unit is tested for impairment on an annual basis, or more frequently if an event occurs or circumstances change that would reduce the fair value of the reporting unit below its carrying amount. No impairment of goodwill was recognized during 2006, 2005 or 2004.

Accounts Payable — Included in accounts payable at December 31, 2006 and 2005, are liabilities of approximately $204 million and $125 million, respectively, representing the amount by which checks issued, but not presented to the Company’s banks for collection, exceeded balances in applicable bank accounts.

Revenue Recognition — Oil and gas revenues are recognized when production is sold to a purchaser at a fixed or determinable price, when delivery has occurred and title has transferred, and if collectibility of the revenue is probable. Cash received relating to future revenues is deferred and recognized when all revenue recognition criteria are met.

Apache uses the sales method of accounting for gas production imbalances. The volumes of gas sold may differ from the volumes to which Apache is entitled based on its interests in the properties. These differences create imbalances that are recognized as a liability only when the properties’ estimated remaining reserves net to Apache will not be sufficient to enable the underproduced owner to recoup its entitled share through production. The Company’s recorded liability is reflected in other non-current liabilities. No receivables are recorded for those wells where Apache has taken less than its share of production. Gas imbalances are reflected as adjustments to proved gas reserves and future cash flows in the unaudited supplemental oil and gas disclosures.

The Company’s Egyptian operations are conducted pursuant to production sharing contracts under which contractor partners pay all operating and capital costs for exploring and developing the concessions. A percentage of the production, usually up to 40 percent, is available to the contractor partners to recover all operating and capital costs. The balance of the production is split among the contractor partners and EGPC on a contractually defined basis.

Apache markets its own U.S. natural gas production. As the Company’s production fluctuates because of operational issues, it is occasionally necessary for the Company to purchase gas (“third-party gas”) to fulfill its sales obligations and commitments. Both the costs and sales proceeds of this third-party gas are reported on a net basis in oil and gas production revenues. The costs of third-party gas netted against the related sales proceeds totaled $160 million, $158 million and $107 million, for 2006, 2005 and 2004, respectively.

Derivative Instruments and Hedging Activities — Apache periodically enters into derivative contracts to manage its exposure to foreign currency risk and commodity price risk. These derivative contracts, which are generally placed with major financial institutions that the Company believes are minimal credit risks, may take the form of forward contracts, futures contracts, swaps or options. The oil and gas reference prices, upon which the commodity derivative contracts are based, reflect various market indices that have a high degree of historical correlation with actual prices received by the Company for its oil and gas production.

Apache accounts for its derivative instruments in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended. SFAS No. 133 establishes accounting and reporting standards requiring that all derivative instruments, other than those that meet the normal purchases and sales exception, be recorded on the balance sheet as either an asset or liability measured at fair value (which is generally based on information obtained from independent parties). SFAS No. 133 also requires that changes in fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Hedge accounting treatment allows unrealized gains and losses on cash flow hedges to be deferred in other comprehensive income. Realized gains and losses from the Company’s oil and gas cash flow hedges, including terminated contracts, are generally recognized in oil and gas production revenues when the forecasted transaction occurs. Realized gains and losses on foreign currency cash flow hedges are generally recognized in lease operating expense when the forecasted transaction occurs. Gains and losses from the change in fair value of derivative instruments that do not qualify for hedge accounting are reported in current period income as “Other” under Revenue and Other in the Statement of Consolidated Operations. If at any time the likelihood of occurrence of a hedged forecasted transaction ceases to be

F-10

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

“probable,” hedge accounting under SFAS No. 133 will cease on a prospective basis and all future changes in the fair value of the derivative will be recognized directly in earnings. Amounts recorded in other comprehensive income prior to the change in the likelihood of occurrence of the forecasted transaction will remain in other comprehensive income until such time as the forecasted transaction impacts earnings. If it becomes probable that the original forecasted production will not occur, then the derivative gain or loss would be reclassified from accumulated other comprehensive income into earnings immediately. Hedge effectiveness is measured at least quarterly based on the relative changes in fair value between the derivative contract and the hedged item over time, and any ineffectiveness is immediately reported under Revenues and Other in the statement of consolidated operations.

Income Taxes — We record deferred tax assets and liabilities to account for the expected future tax consequences of events that have been recognized in our financial statements and our tax returns. We routinely assess the realizability of our deferred tax assets. If we conclude that it is more likely than not that some portion or all of the deferred tax assets will not be realized under accounting standards, the tax asset is reduced by a valuation allowance. We consider future taxable income in making such assessments. Numerous judgments and assumptions are inherent in the determination of future taxable income, including factors such as future operating conditions (particularly as related to prevailing oil and gas prices.)

Earnings from Apache’s international operations are permanently reinvested; therefore, the Company does not recognize U.S. deferred taxes on the unremitted earnings of its international subsidiaries. If it becomes apparent that some or all of the unremitted earnings will be remitted, the Company would then reflect taxes on those earnings.

Foreign Currency Translation — The U.S. dollar has been determined to be the functional currency for each of Apache’s international operations. The functional currency is determined country-by-country based on relevant facts and circumstances of the cash flows, commodity pricing environment, and financing arrangements in each country.

The Company accounts for foreign currency gains and losses in accordance with SFAS No. 52 “Foreign Currency Translation.” Foreign currency translation gains and losses related to deferred taxes are recorded as a component of its provision for income taxes. The Company recorded a deferred tax benefit of $5 million in 2006 and $13 million and $58 million of additional deferred tax expense in 2005 and 2004, respectively (see Note 6, Income Taxes). All other foreign currency gains and losses are reflected included in “Other” under Revenues and Other in the Statement of Consolidated Operations. The Company’s other foreign currency gains and losses as “Other” under Revenues and Other in the Statement of Consolidated Operations, netted to a loss of $15 million in 2006, a gain of $11 million in 2005 and a loss of $5 million in 2004.

Prior to October 1, 2002, the Company’s Canadian subsidiaries’ functional currency was the Canadian dollar. Translation adjustments resulting from translating the Canadian subsidiaries’ financial statements into U.S. dollar equivalents were reported separately and accumulated in other comprehensive income. Currency translation adjustments held in other comprehensive income on the balance sheet will remain there indefinitely unless there is a substantially complete liquidation of the Company’s Canadian operations.

Insurance Coverage — The Company currently carries $400 million of property damage and business interruption coverage for windstorm losses in the Gulf of Mexico. Of this amount, $250 million is provided through Oil Insurance Limited (OIL) and is available on a per occurrence basis, but is subject to being prorated if total member claims for a single event exceed $500 million. The company also carries an additional $150 million of coverage for windstorm damage through the commercial market.

During the 2005 hurricane season, the Company utilized OIL to write physical damage insurance of $250 million per insurable event with a $7.5 million deductible. The available coverage was prorated for all members of the mutual, if the total claims for any one event exceeded $1 billion. Claims for damage caused by Hurricane Katrina exceeded the $1 billion limit, and the Company expects recoveries to be reduced by approximately 50 percent. Claims for damage caused by Hurricane Rita also exceeded the limitation, and the Company

F-11

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

expects recoveries to be reduced approximately 30 percent. The Company also carried a supplementary $100 million of physical damage insurance for which it is expecting full recovery. The Company also carried a $150 million of business interruption insurance through its commercial policy to cover deferred and lost oil and natural gas production revenues.

The Company collected $150 million of business interruption proceeds for Hurricanes Katrina and Rita through the end of 2006 and recorded $375 million for physical damage and removal of wreckage insurance claims, $42 million of which has been collected.

The Company recognizes an insurance receivable when collection of the receivable is deemed probable. Any recognition of an insurance receivable is recorded by crediting and offsetting the original charge. Any differential arising between insurance recoveries and insurance receivables is recorded as a capitalized cost or as an expense, consistent with its original treatment.

Net Income Per Common Share — The Company’s basic earnings per share (EPS) amounts have been computed based on the average number of shares of common stock outstanding for the period. Diluted EPS reflects the potential dilution, using the treasury stock method that could occur if options were exercised and if restricted stock were fully vested.

Diluted EPS also includes the impact of unvested Share Appreciation Plans. For awards in which the share price goals have already been achieved, shares are included in diluted EPS using the treasury stock method. For those awards in which the share price goals have not been achieved, the number of contingently issuable shares included in the diluted EPS is based on the number of shares, if any, using the treasury stock method, that would be issuable if the market price of the Company’s stock at the end of the reporting period exceeded the share price goals under the terms of the plan.

Stock-Based Compensation — On December 31, 2006, the Company had several stock-based employee compensation plans, which include Stock Option Plans, the Performance Plan, Share Appreciation Plans and restricted stock. These plans are defined and described more fully in Note 8, Capital Stock. The Company accounts for these plans under the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended and revised. Stock compensation awards granted are valued on the date of grant and are expensed on a straight-line basis over the required service period.

During the fourth quarter of 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123-R, a revision to SFAS No. 123, which requires all companies to expense stock-based compensation. The rule was effective for the first fiscal year that began after June 15, 2005. Apache early adopted this statement in 2004 electing to transition under the “Modified Retrospective Approach” as allowed under SFAS No. 123-R. Under this approach, the Company is required to expense all options and stock-based compensation that vested in the year of adoption based on the fair value of the stock compensation determined at the date of grant. Stock vesting in years prior to 2004 was expensed in accordance with the rules applied by the Company during such period. Had the Company not early adopted SFAS No. 123-R, 2004 net income would have been lower by $89 million ($56 million after tax), or $.17 per share on both a basic and diluted per share basis. Normally, net income would be negatively impacted by adopting SFAS No. 123-R. However, the Company’s 2000 Share Appreciation Plan, which certain awards were triggered in 2004, has a fair-market-value-based expense recorded under the provisions of SFAS No. 123-R that is substantially less than the intrinsic-value base cost of approximately $175 million that would have been recorded under the accounting rules of APB No. 25.

In addition to the expensing provisions discussed above, SFAS No. 123-R requires the Company to begin estimating expected future forfeitures under each stock compensation plan and to start valuing the Company’s liability-based compensation plan (Stock Appreciation Rights) under a fair value approach instead of the previously applied intrinsic valuation. The effects of changing the forfeiture estimates on existing stock plans and the valuation methodology for the Company’s liability plans resulted in Apache recording a Cumulative Effect of Change in Accounting Principle in 2004 totaling $2.1 million ($1.3 million after tax). SFAS No. 123-R also requires the

F-12

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow rather than as an operating cash flow, as historically reported. The Company classified $49 million, $27 million and $32 million as financing cash inflows in 2006, 2005 and 2004, respectively, that would have been classified as operating cash inflows had the Company not adopted the Statement.

Use of Estimates — Preparation of financial statements in conformity with accounting principles generally accepted in the U.S., requires management to make estimates and assumptions that affect; the reported amounts of assets and liabilities, related 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. Certain accounting policies involve judgments and uncertainties to such an extent that there is reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used. Apache evaluates its estimates and assumptions on a regular basis. The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions used in preparation of its financial statements. Significant estimates with regard to these financial statements include the estimate of proved oil and gas reserve quantities and the related present value of estimated future net cash flows therefrom. See Note 13 — Supplemental Oil and Gas Disclosure (Unaudited).

Treasury Stock — The Company follows the weighted-average-cost method of accounting for treasury stock transactions.

Impact of Recently Issued Accounting Standards — In July 2006, the FASB issued FASB Interpretation No. 48 (FIN No. 48). FIN No. 48 clarifies the accounting for income taxes, by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN No. 48 also provides guidance on derecognizing, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. The Company will adopt FIN No. 48 as of January 1, 2007, as required. The cumulative effect of adopting FIN No. 48 will be recorded as a change to opening retained earnings in the first quarter of 2007. Management currently estimates that, upon adoption, a cumulative adjustment of less than $50 million will be charged to retained earnings to increase reserves for uncertain tax positions. This estimate is subject to revision as management completes its analysis.

In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is continuing to assess the potential impacts this statement might have on Apache’s Consolidated Financial Statements and related footnotes.

Also in September 2006, the FASB issued SFAS No. 158 “Employers’ Accounting for Defined Benefit Plans and Other Postretirement Plans.” The statement requires employers to recognize any over-funded or under-funded status of a defined benefit postretirement plan as an asset or liability in their Consolidated Financial Statements. Unrealized components of net periodic benefit costs are reflected in other comprehensive income, net of tax. SFAS No. 158 requires recognition of the funded status and related disclosures as of the end of the fiscal year ending after December 15, 2006. At yearend, the Company recorded an adjustment to accumulated other comprehensive income in Shareholders’ Equity of $10.6 million ($6.1 million after tax). The adjustment reflects the recognition of the Company’s unfunded status for both the Company’s pension plan and post retirement benefit plan. Refer to Note 10, Commitments and Contingencies for additional disclosures.

Reclassifications — Certain other prior-period amounts have been reclassified to conform with current year presentations.

F-13

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2.  ACQUISITIONS AND DIVESTITURES

2006 Acquisitions

U.S. Permian Basin

On January 5, 2006, the Company purchased Amerada Hess’s interest in eight fields located in the Permian basin of West Texas and New Mexico. The original purchase price was reduced from $404 million to $269 million because other interest owners exercised their preferential rights on a number of the properties. The settlement price on the date of closing of $239 million was adjusted primarily for revenues and expenditures occurring between the closing date and the effective date of the acquisition. Apache estimates that these fields had proved reserves of 27 MMbbls of liquid hydrocarbons and 27 Bcf of natural gas as of yearend 2005.

Argentina

On April 25, 2006, the Company acquired the operations of Pioneer National Resources (Pioneer) in Argentina for $675 million. The settlement price at closing, of $703 million, was adjusted for revenues and expenditures occurring between the effective date and closing date of the acquisition. The properties are located in the Neuquén, San Jorge and Austral basins of Argentina and had estimated net proved reserves of approximately 22 MMbbls of liquid hydrocarbons and 297 Bcf of natural gas as of December 31, 2005. Eight gas processing plants (five operated and three non-operated), 112 miles of operated pipelines in the Neuquén basin and 2,200 square miles of three-dimensional (3-D) seismic data are also included in the transaction. Apache financed the purchase with cash on hand and commercial paper.

The purchase price was allocated to the assets acquired and liabilities assumed based upon the estimated fair values as of the date of acquisition, as follows (in thousands):

Proved property	$	501,938
Unproved property		189,500
Gas Plants		51,200
Working capital acquired, net		11,256
Asset retirement obligation		(13,635	)
Deferred income tax liability		(37,630	)
Cash consideration	$	702,629

On September 19, 2006, Apache acquired additional interests in (and now operates) seven concessions in the Tierra del Fuego Province from Pan American Fueguina S.R.L. (Pan American) for total consideration of $429 million. The settlement price at closing of $396 million was adjusted for normal closing items, including revenues and expenses between the effective date and the closing date of the acquisition. Apache financed the purchase with cash on hand and commercial paper.

The total cash consideration allocated below includes working capital balances purchased, asset retirement obligations assumed and an obligation to deliver specific gas volumes in the future. The purchase price was

F-14

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

allocated to the assets acquired and liabilities assumed based upon the estimated fair values as of the date of acquisition, as follows (in thousands):

Proved property	$	289,916
Unproved property		132,000
Gas plants		12,722
Working capital acquired, net		8,929
Asset retirement obligation		(1,511	)
Assumed obligation		(46,000	)
Cash consideration	$	396,056

Offshore Gulf of Mexico

On June 21, 2006, the Company completed its acquisition of the remaining producing properties of BP plc (BP) on the Outer Continental Shelf of the Gulf of Mexico. The original purchase price was reduced from $1.3 billion to $845 million because other interest owners exercised their preferential rights to purchase five of the original 18 producing fields. The settlement price on the date of closing of $821 million was adjusted primarily for revenues and expenditures occurring between the closing date and the effective date of the acquisition. The effective date of the purchase was April 1, 2006. The properties include 13 producing fields (nine of which are operated) with estimated proved reserves of 19.5 MMbbls of liquid hydrocarbons and 148 Bcf of natural gas. Apache financed the purchase with cash on hand and commercial paper.

Pending Acquisition — U.S. Permian Basin

On January 18, 2007, the Company announced that it is acquiring controlling interest in 28 oil and gas fields in the Permian basin of West Texas from Anadarko Petroleum Corporation (Anadarko) for $1 billion. Apache estimates that these fields had proved reserves of 57 million barrels (MMbbls) of liquid hydrocarbons and 78 billion cubic feet (Bcf) of natural gas as of yearend 2006. The transaction will be effective the earlier of closing or March 31, 2007. Approximately 10 percent of the Permian basin properties are subject to third-party preferential purchase rights which, if exercised, would reduce the interests we purchase in those properties and the purchase price we would pay. The Company intends to fund the acquisition with debt. Apache and Anadarko are entering into a joint-venture arrangement to effect the transaction. In connection with the acquisition, the Company entered into cash flow hedges to protect against commodity price volatility. For the period of July 2007 through June 2010, the Company entered into hedges for a portion of both the oil and the natural gas with NYMEX based costless collars.

2005 Acquisitions

In May, 2005, Apache signed a farm-in agreement with Exxon Mobil Corporation (ExxonMobil) covering approximately 650,000 acres of undeveloped properties in the Western Canadian province of Alberta. Under the agreement, Apache has the right to earn acreage sections by drilling an initial well on each such section. ExxonMobil will retain a royalty on fee lands and a working interest on leasehold acreage. The agreement also allows Apache to test additional horizons on approximately 140,000 acres of property covered in a 2004 farm-in agreement with ExxonMobil.

2004 Acquisitions

During the third quarter of 2004, Apache entered into separate arrangements with ExxonMobil that provided for property transfers and joint operating and exploration activity across a broad range of prospective and mature

F-15

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

properties in (1) Western Canada, (2) West Texas and New Mexico, and (3) onshore Louisiana and the Gulf of Mexico-Outer Continental Shelf. Apache’s participation included cash payments of approximately $347 million, subject to normal post closing adjustments. The following details these transactions:

Western Canada.  In August 2004, Apache signed a farm-in agreement with ExxonMobil covering approximately 380,000 gross acres of undeveloped properties in the Western Canadian Province of Alberta. Under the agreement, Apache has the right to earn acreage sections by drilling an initial well on each such section. By drilling at least 250 wells during the initial two-year earning period under the agreement, Apache received a one-year extension in which to earn additional sections. As to any sections earned by Apache, ExxonMobil will retain a royalty on fee lands and a working interest on leasehold acreage, both of which will vary dependent on activity levels. The agreement also allows Apache to test additional horizons on approximately 140,000 acres of property covered in a 2004 farm-in agreement with ExxonMobil. In addition, during the term of this agreement, Apache is required to carry ExxonMobil’s retained working interest with respect to certain drilling, capping, completion, equipping and tie-in costs associated with wells drilled on leasehold acreage.

West Texas and New Mexico.  In September 2004, Apache acquired interests from ExxonMobil in 23 mature producing oil and gas fields in West Texas and New Mexico for $318 million. Apache separately contributed approximately $29 million into a partnership to obtain additional interests in the properties. ExxonMobil will retain interests in the properties through the partnership, including the right to receive, on certain fields, 60 percent of the oil proceeds above $30 per barrel in 2004, $29 per barrel in 2005 and $28 per barrel during the period from 2006 thru 2009.

The partnership is subject to the provisions of FASB Interpretation No. 46 “variable interest entities” (FIN No. 46). Apache has concluded that it is not the primary beneficiary of the partnership as defined in that interpretation and will proportionately consolidate its partnership portion of the oil and gas properties. Under the partnership agreement, the Company’s subsidiaries are also subject to environmental and legal claims that could arise in the ordinary course of business. Apache is operating the oil and gas properties under contract for the partnership.

Louisiana and Gulf of Mexico-Outer Continental Shelf.  In September 2004, Apache and ExxonMobil entered into joint exploration agreements to explore Apache’s acreage in South Louisiana and the Gulf of Mexico-Outer Continental Shelf. The agreements provide for an initial term of five years, with the potential for an additional five years based on expenditures by ExxonMobil. Pursuant to the agreement covering South Louisiana, Apache leased 50 percent of its interests below certain producing or productive formations in the acreage to ExxonMobil, subject to retention of a 20 percent royalty interest. Pursuant to the agreement covering the Gulf of Mexico-Outer Continental Shelf, no assignments will be made until a prospect has been proposed and the initial well has been drilled. Apache will retain all rights in each prospect above certain producing or productive formations and further will retain a three percent overriding royalty interest in any property assigned to ExxonMobil.

Gulf of Mexico — Outer Continental Shelf.  On August 20, 2004, Apache signed a definitive agreement to acquire all of Anadarko’s Gulf of Mexico-Outer Continental Shelf properties (excluding certain deepwater properties) for $537 million, subject to normal post-closing adjustments, including preferential rights. The transaction was effective as of October 1, 2004, and included interests in 74 fields covering 232 offshore blocks (approximately 664,000 acres) and 104 platforms. Eighty-nine of the blocks were undeveloped at the time of the acquisition. Apache operates 49 of the fields with approximately 70 percent of the production.

Prior to Apache’s purchase from Anadarko, Morgan Stanley Capital Group, Inc. (Morgan Stanley) paid Anadarko $646 million to acquire an overriding royalty interest in these properties. Anadarko’s sale of an overriding royalty interest to Morgan Stanley is commonly known in the industry as a volumetric production payment (VPP), the obligations of which Apache assumed along with its purchase. Under the terms of the VPP, Morgan Stanley is to receive a fixed volume of oil and natural gas production (20 MMboe) over four years beginning in October 2004. The VPP represents a non-operating interest that is free of costs incurred for operations

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

and production. Morgan Stanley is entitled to first production and may receive up to 90 percent of the production from the assets encumbered by the VPP, but Morgan Stanley may look only to the acquired properties for delivery of the scheduled volumes. The VPP is scheduled to terminate on August 31, 2008, but may be extended if all scheduled VPP volumes have not been delivered to Morgan Stanley and the properties are still producing. The VPP includes restrictions on the Company’s ability to sell the properties subject to the VPP or resign as operator of VPP properties it currently operates. Upon termination of the VPP, all rights, titles and interests revert back to Apache. The Company does not record the reserves and production volumes attributable to the VPP.

The $537 million purchase price agreed to in the definitive agreement was subsequently adjusted for the exercise of preferential rights by third parties and other normal post-closing adjustments. After adjusting for these items, Apache paid $532 million for the properties and recorded estimated proved reserves of 60 MMboe, of which 50 percent was natural gas. In addition, an $84 million liability for the future cost to produce and deliver the VPP volumes was recorded by the Company. This liability will be settled through a reduction of lease operating expenses as the volumes are produced and delivered to Morgan Stanley. Apache also recorded abandonment obligations for the properties of approximately $134 million and other obligations assumed from Anadarko in the amount of $27 million. Apache allocated $122 million of the purchase price to unproved property. The purchase price was funded by borrowings under the Company’s lines of credit and commercial paper program.

Divestitures

On August 8, 2006, the Company completed the sale of its 24.5 percent interest in the Zhao Dong block offshore, the People’s Republic of China, to Australia-based ROC Oil Company Limited for $260 million, marking Apache’s exit from China. The effective date of the transaction was July 1, 2006, and the Company booked a gain of $174 million in the third quarter.

On January 6, 2006, the Company completed the sale of its 55 percent interest in the deepwater section of Egypt’s West Mediterranean Concession to Amerada Hess for $413 million. Proceeds from the sale were accounted for as a reduction of capitalized costs. Apache did not have any proved reserves booked for these properties.

3.  HEDGING AND DERIVATIVE INSTRUMENTS

Apache uses a variety of strategies to manage its exposure to fluctuations in crude oil and natural gas commodity prices. The Company’s hedging policy allows management to enter into hedges in connection with investments such as acquisitions. The success of an acquisition is significantly influenced by the Company’s ability to achieve targeted production at forecasted prices and commodity hedges effectively reduce price risk on a portion of the acquired production. During the third quarter of 2006, the Company’s Board of Directors authorized management to enter into derivative contracts on a portion of production generated from the 2006 drilling program. Hedge positions entered into for the drilling program were designed to protect the underlying investment economics of the program.

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APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of December 31, 2006, the total outstanding positions of Apache’s natural gas and crude oil cash flow hedges were as follows:

									Weighted
Costless Collars		Total Volumes			Floor Price		Ceiling Price		Average		Fair Value
Production Period	Instrument Type	(MMBtu/Bbl/GJ)			Range		Range		Floor/Ceiling		Asset/(Liability)
											(In thousands)
2007	Gas Collars (NYMEX)		53,770,000	MMBtu	$	5.25 — 8.65	$	5.85 — 11.00	$	6.96 / 8.69	$	30,588
	Gas Collars (PEPL)		23,725,000	MMBtu	$	6.85 — 7.00	$	9.52 — 10.15	$	6.88 / 9.67	$	26,929
	Gas Collars (AECO)		3,650,000	GJ	$	6.24 — 6.24	$	8.15 — 8.15	$	6.24 / 8.15	$	3,004
	Oil Collars (NYMEX)		6,473,500	Bbl	$	33.00 — 75.00	$	39.25 — 85.00	$	59.78 / 70.62	$	(12,102	)
2008	Gas Collars (NYMEX)		25,620,000	MMBtu	$	7.50 — 8.15	$	10.47 — 10.80	$	7.96 / 10.56	$	14,236
	Gas Collars (PEPL)		23,790,000	MMbtu	$	6.90 — 7.00	$	9.55 — 10.05	$	6.91 / 9.74	$	13,251
	Gas Collars (AECO)		3,660,000	GJ	$	6.24 — 6.24	$	8.13 — 8.13	$	6.24 / 8.13	$	674
	Oil Collars (NYMEX)		4,575,000	Bbl	$	69.00 — 69.00	$	79.65 — 81.50	$	69.00 / 80.39	$	22,213

		Total
Fixed Price Swaps		Volumes		Fixed Price		Average		Fair Value
Production Period	Instrument Type	(MMBtu/Bbl)		Range		Fixed Price		Asset/(Liability)
								(In thousands)
2007	Gas Fixed — Price		1,761,000	$	5.46 — 5.71	$	5.57	$	(1,722	)
	Swap Oil Fixed — Price Swap		4,458,000	$	36.78 — 73.26	$	70.29	$	22,931
2008	Oil Fixed — Price Swap		4,392,000	$	66.85 — 70.90	$	69.21	$	7,131

U.S. natural gas and crude oil prices in the above table are settled against the NYMEX index, except for 23,725,000 MMBtu and 23,790,000 MMBtu of gas collars in 2007 and 2008, respectively, which are settled against the Panhandle Eastern Pipe-Line index. These hedges are valued using actively quoted prices and quotes obtained from reputable third-party financial institutions. The above prices represent a weighted average of several contracts entered into on a per million British thermal units (MMBtu), per gigajoule (GJ) or per barrel (Bbl) basis for gas and oil derivatives.

The Canadian natural gas prices shown in the above table are converted to U.S. dollars utilizing December 31, 2006 exchange rates. They are settled against the AECO Index, and valued using actively quoted prices and quotes obtained from reputable third-party financial institutions.

A reconciliation of the components of accumulated other comprehensive income (loss) in the Statement of Consolidated Shareholders’ Equity related to Apache’s commodity derivative activity is presented in the table below:

	Gross			After Tax
	(In thousands)
Unrealized gain (loss) on derivatives at December 31, 2005	$	(398,229	)	$	(256,858	)
Net losses realized into earnings		133,653			86,206
Net change in derivative fair value		393,901			254,186
Unrealized gain (loss) on derivatives at December 31, 2006	$	129,325		$	83,534

Differences between the fair values and the unrealized loss on derivatives before income taxes recognized in accumulated other comprehensive income (loss) are primarily related to premiums, recognition of unrealized gains and losses on certain derivatives that did not qualify for hedge accounting and hedge ineffectiveness. Based on applicable market prices as of yearend 2006, the Company recorded an unrealized gain in other comprehensive income (loss) of $129 million ($84 million after tax), representing oil and gas derivative hedges. Any gain or loss will be realized in future earnings contemporaneously with the related sales of natural gas and crude oil production applicable to specific hedges. Approximately $72 million ($46 million after tax) of the $129 million unrealized as of December 31, 2006, applies to the next 12 months. However, these amounts are likely to vary materially as a

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APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

result of changes in market conditions. The contracts designated as hedges qualified and continue to qualify for hedge accounting in accordance with SFAS No. 133, as amended.

4.  ASSET RETIREMENT OBLIGATION

Asset retirement obligations (ARO), associated with retiring tangible long-lived assets, are recognized as a liability in the period in which a legal obligation is incurred and becomes determinable. This liability is offset by a corresponding increase in the carrying amount of the underlying asset. The cost of the tangible asset, including the initially recognized ARO, is depleted such that the cost of the ARO is recognized over the useful life of the asset. The ARO is recorded at fair value, and accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value. The fair value of ARO is measured using expected future cash outflows discounted at the company’s credit-adjusted risk-free interest rate.

Inherent in the fair value calculation of ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the asset balance.

The following table is a reconciliation of the asset retirement obligation liability:

	2006			2005
	(In thousands)
Asset retirement obligation at beginning of period	$	1,455,915		$	932,004
Liabilities incurred		298,899			87,794
Liabilities settled		(306,945	)		(84,445	)
Accretion expense		88,931			53,720
Revisions in estimated liabilities		210,766			466,842
Asset retirement obligation as of December 31,	$	1,747,566		$	1,455,915

The majority of Apache’s asset retirement obligations relate to plugging and abandonment of oil and gas properties. The Company records an abandonment liability associated with its oil and gas wells, facilities and platforms when those assets are placed in service or acquired, which for 2006 and 2005 is reflected above in liabilities incurred. Liabilities settled relate to individual properties plugged and abandoned or sold during the period.

Revisions to the estimated liability normally result from annual reassessments of the expected cash outflows and assumptions inherent in the ARO calculation. However, during the third quarter of 2005, nine of the Company’s offshore platforms in the Gulf of Mexico were toppled, two platforms were severely damaged and 12 non-operated structures were destroyed by Hurricanes Katrina and Rita. Upon completing an assessment of hurricane related costs during the fourth quarter 2005, the Company increased its discounted ARO liability on the affected properties to $492 million. The revision reflects increased costs and acceleration in expected timing to abandon the platforms. During 2006, the Company increased its estimate another $232 million for hurricane related abandonment. The ultimate costs to abandon the affected platforms and properties will continue to be revised as more complete information surrounding the damage, timing and cost estimates is obtained from third parties and from actual costs incurred.

As of December 31, 2006, approximately $377 million of the estimated abandonment costs was classified as a current liability.

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APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5.  DEBT

	December 31,
	2006			2005
	(In thousands)
Apache:
Money market lines of credit	$	10,500		$	—
Commercial paper		1,560,000			—
6.25-percent debentures due 2012, net of discount		398,270			398,006
7-percent notes due 2018, net of discount		148,713			148,639
7.625-percent notes due 2019, net of discount		149,256			149,222
7.7-percent notes due 2026, net of discount		99,684			99,678
7.95-percent notes due 2026, net of discount		178,710			178,683
7.375-percent debentures due 2047, net of discount		148,035			148,028
7.625-percent debentures due 2096, net of discount		149,176			149,175
		2,842,344			1,271,431
Subsidiary and other obligations:
Argentina money market lines of credit		58,757			—
Fletcher notes		4,252			4,526
Apache Finance Australia 6.5-percent notes due 2007, net of discount		169,837			169,678
Apache Finance Australia 7-percent notes due 2009, net of discount		99,809			99,733
Apache Finance Canada 4.375-percent notes due 2015, net of discount		349,756			349,732
Apache Finance Canada 7.75-percent notes due 2029, net of discount		297,170			297,128
		979,581			920,797
Total debt		3,821,925			2,192,228
Less: current maturities		(1,802,094	)		(274	)
Long-term debt	$	2,019,831		$	2,191,954

In May 2006, the Company amended its existing five-year revolving U.S. credit facility which was scheduled to mature on May 28, 2009. The amendment: (a) extended the maturity to May 28, 2011, (b) increased the size of the facility from $750 million to $1.5 billion, and (c) reduced the facility fees from .08 percent to .06 percent and reduced the margin over LIBOR on loans from .27 percent to .19 percent. The lenders also extended the maturity dates of the $150 million Canadian facility, the $150 million Australian facility and $385 million of the $450 million U.S. credit facility, for an additional year to May 12, 2011 from May 12, 2010. The Company also increased commercial paper availability to $1.95 billion from $1.20 billion.

By year end 2006, the Company extended the maturity of another $50 million of commitments under the $450 million U.S. credit facility for an additional year. As a result, $435 million will mature on May 12, 2011, and $15 million will mature on May 12, 2010.

As detailed above, the Company currently has $2.25 billion of syndicated bank credit facilities. The financial covenants of the credit facilities require the Company to maintain a debt-to-capitalization ratio of not greater than 60 percent at the end of any fiscal quarter. The negative covenants include restrictions on the Company’s ability to create liens and security interests on our assets, with exceptions for liens typically arising in the oil and gas industry, purchase money liens and liens arising as a matter of law, such as tax and mechanics liens. The Company may incur

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APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

liens on assets located in the U.S., Canada and Australia of up to five percent of the Company’s consolidated assets, which approximated $1.2 billion as of December 31, 2006. There are no restrictions on incurring liens in countries other than the U.S., Canada and Australia. There are also restrictions on Apache’s ability to merge with another entity, unless the Company is the surviving entity, and a restriction on our ability to guarantee debt of entities not within our consolidated group.

There are no clauses in the facilities that permit the lenders to accelerate payments or refuse to lend based on unspecified material adverse changes (MAC clauses). The credit facility agreements do not have drawdown restrictions or prepayment obligations in the event of a decline in credit ratings. However, the agreements allow the lenders to accelerate payments and terminate lending commitments if Apache Corporation, or any of its U.S., Canadian and Australian subsidiaries, defaults on any direct payment obligation in excess of $100 million or has any unpaid, non-appealable judgment against it in excess of $100 million. The Company was in compliance with the terms of the credit facilities as of December 31, 2006. The Company’s debt-to-capitalization ratio as of December 31, 2006 was 22 percent.

At the Company’s option, the interest rate for the facilities is based on (i) the greater of (a) The JP Morgan Chase Bank prime rate or (b) the federal funds rate plus one-half of one percent or (ii) the London Inter-bank Offered Rate (LIBOR) plus a margin determined by the Company’s senior long-term debt rating. The $1.5 billion and the $450 million credit facilities (U.S. credit facilities) also allow the Company to borrow under competitive auctions.

At December 31, 2006, the margin over LIBOR for committed loans was .19 percent on the $1.5 billion facility and .23 percent on the other three facilities. If the total amount of the loans borrowed under the $1.5 billion facility equals or exceeds 50 percent of the total facility commitments, then an additional .05 percent will be added to the margins over LIBOR. If the total amount of the loans borrowed under all of the other three facilities equals or exceeds 50 percent of the total facility commitments, then an additional .10 percent will be added to the margins over LIBOR. The Company also pays quarterly facility fees of .06 percent on the total amount of the $1.5 billion facility and .07 percent on the total amount of the other three facilities. The facility fees vary based upon the Company’s senior long-term debt rating. The U.S. credit facilities are used to support Apache’s commercial paper program. The available borrowing capacity under the credit facilities at December 31, 2006 was $690 million.

The Company has certain uncommitted money market lines of credit which are used from time to time for working capital purposes. As of December 31, 2006, $58.8 million was drawn on facilities in Argentina and $10.5 million was drawn on these facilities.

The Company has a $1.95 billion commercial paper program which enables Apache to borrow funds for up to 270 days at competitive interest rates. As of December 31, 2006, the Company has issued $1.56 billion in commercial paper. The weighted-average interest rate for commercial paper was 5.15 percent in 2006 and 3.03 percent in 2005.

On May 15, 2003, Apache Finance Canada Corporation (Apache Finance Canada) issued $350 million of 4.375 percent, 12-year, senior unsecured notes in a private placement. On March 4, 2004, the Company completed an exchange offer with the holders of the notes, issuing publicly traded, registered notes of the same principal amount and with the same interest rates, payment terms and maturity. The notes are irrevocably and unconditionally guaranteed by Apache and are redeemable, as a whole or in part, at Apache Finance Canada’s option, subject to a make-whole premium. Interest is payable semi-annually on May 15 and November 15 of each year, commencing on November 15, 2003. The proceeds of the original note offering were used to reduce bank debt and outstanding commercial paper and for general corporate purposes.

The Company does not have the right to redeem any of its notes or debentures (other than the Apache Corporation 6.25-percent notes due April 15, 2012, the Apache Finance Australia 6.5-percent notes due 2007 and the Apache Finance Canada 4.375-percent notes due 2015) prior to maturity. Under certain conditions, the

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APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Company has the right to advance maturity on the 7.7-percent notes, 7.95-percent notes, 7.375-percent debentures and 7.625-percent debentures.

The notes issued by Apache Finance Pty Ltd (Apache Finance Australia) and Apache Finance Canada are irrevocably and unconditionally guaranteed by Apache and, in the case of Apache Finance Australia, by Apache North America, Inc., an indirect wholly-owned subsidiary of the Company. Under certain conditions related to changes in relevant tax laws, Apache Finance Australia and Apache Finance Canada have the right to redeem the notes prior to maturity. The Apache Finance Australia 6.5-percent notes and the Apache Finance Canada 4.375-percent notes may be redeemed at the Company’s option subject to a make-whole premium (see Note 15 — Supplemental Guarantor Information).

The $12 million of discounts on the Company’s debt as of December 31, 2006, is amortized over the life of the debt issuances as additional interest expense.

As of December 31, 2006 and 2005, the Company had approximately $21 million and $18 million, respectively, of unamortized deferred loan costs associated with its various debt obligations. These costs are included in deferred charges and other in the accompanying consolidated balance sheet and are being amortized to expense over the life of the related debt.

The indentures for the notes described above place certain restrictions on the Company, including limits on Apache’s ability to incur debt secured by certain liens and its ability to enter into certain sale and leaseback transactions. Upon certain change in control, all of these debt instruments would be subject to mandatory repurchase, at the option of the holders.

Aggregate Maturities of Debt

	(In thousands)
2007	$	1,802,094
2008		353
2009		99,809
2010		—
2011		—
Thereafter		1,919,669
	$	3,821,925

The debt maturing in 2007 consists of $1.6 billion of commercial paper that was subsequently reduced with $1.5 million of long-term debt issued in January 2007, and $170 million of Apache Finance Australia 6.5-percent notes and various money market lines of credit in Argentina and the U.S. The $1.6 billion of commercial paper is fully supported by available borrowing capacity under U.S. committed credit facilities which expire in 2011.

The Company made cash payments for interest, net of amounts capitalized totaling $150 million in 2006 and $107 million in both 2005 and 2004.

Subsequent Debt

On January 26, 2007, the Company issued $500 million principal amount, $499.5 million net of discount, of senior unsecured 5.625-percent notes maturing January 15, 2017. The Company also issued $1.0 billion principal amount, $993 million net of discount, of senior unsecured 6.0-percent notes maturing January 15, 2037. The notes are redeemable, as a whole or in part, at Apache’s option, subject to a make-whole premium. The proceeds were used to repay a portion of the Company’s outstanding commercial paper and for general corporate purposes.

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APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

6.   INCOME TAXES

Income before income taxes is composed of the following:

	For the Year Ended December 31,
	2006		2005		2004
	(In thousands)
United States	$	1,265,915	$	1,502,467	$	1,120,906
Foreign		2,743,680		2,703,787		1,542,177
Total	$	4,009,595	$	4,206,254	$	2,663,083

The total provision for income taxes consists of the following:

	For the Year Ended December 31,
	2006		2005			2004
	(In thousands)
Current taxes:
Federal	$	65,068	$	291,604		$	145,164
State		7,106		(2,424	)		4,330
Foreign		633,513		694,417			398,612
Deferred taxes		751,457		598,927			444,906
Total	$	1,457,144	$	1,582,524		$	993,012

A reconciliation of the U.S. federal statutory income tax amounts to the effective amounts is shown below:

	For the Year Ended December 31,
	2006			2005			2004
	(In thousands)
Statutory income tax	$	1,403,358		$	1,472,189		$	932,079
State income tax, less federal benefit		24,191			12,579			28,023
Taxes related to foreign operations		131,370			147,059			86,263
Realized tax basis in investment		(4,387	)		(9,282	)		(16,923	)
Canadian tax rate reduction		(161,073	)		(28,611	)		(31,350	)
United Kingdom tax rate increase		63,395			—			—
Current and deferred taxes related to currency fluctuations		(4,891	)		13,332			58,049
Domestic benefit from tax law change		(2,644	)		(9,853	)		—
Australian consolidation benefit from tax law change		—			(9,649	)		(50,713	)
Benefit of previously unrecognized Canadian losses		—			—			(18,226	)
All other, net		7,825			(5,240	)		5,810
	$	1,457,144		$	1,582,524		$	993,012

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APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The net deferred tax liability is comprised of the following:

	December 31,
	2006			2005
	(In thousands)
Deferred tax assets:
Deferred income	$	(5,578	)	$	(5,968	)
State net operating loss carryforwards		(9,475	)		(13,439	)
Foreign net operating loss carryforwards		(27,818	)		(6,154	)
Tax credits		(18,828	)		—
Accrued expenses and liabilities		(31,644	)		(5,773	)
Other		(1,528	)		(9,492	)
Total deferred tax assets		(94,871	)		(40,826	)
Valuation allowance		—			—
Net deferred tax assets		(94,871	)		(40,826	)
Deferred tax liabilities:
Other deferred tax liabilities		9,419			—
Depreciation, depletion and amortization		3,618,989			2,621,455
Total deferred tax liabilities		3,628,408			2,621,455
Net deferred income tax liability	$	3,533,537		$	2,580,629

Approximately $32 million of the net deferred tax assets is classified as current. The December 31, 2006, $9 million of “Other deferred tax liabilities” is classified as current.

The Company has not recorded deferred income taxes on the undistributed earnings of its foreign subsidiaries as management intends to permanently reinvest such earnings. As of December 31, 2006, the undistributed earnings of the foreign subsidiaries amounted to approximately $10.2 billion. Upon distribution of these earnings in the form of dividends or otherwise, the Company may be subject to U.S. income taxes and foreign withholding taxes. It is not practical, however, to estimate the amount of taxes that may be payable on the eventual remittance of these earnings after consideration of available foreign tax credits. Presently, limited foreign tax credits are available to reduce the U.S. taxes on such amounts if repatriated.

At December 31, 2006, the Company had state net operating loss carryforwards of $192 million and foreign net operating loss carryforwards of $6 million in Canada and $28 million in Argentina. The Company also had $41 million of corporate income tax net operating loss carryforwards and $19 million of supplemental tax net operating loss carryforwards in the U.K. The state net operating losses will expire over the next 20 years, if they are not otherwise utilized. The foreign net operating loss in Canada has a seven-year carryover period, while the Argentina net operating loss has a five-year carryover period. The net operating losses in the U.K. have an indefinite carryover period.

The Company’s tax return filings are subject to review by various taxing authorities in the jurisdictions in which the Company operates. Currently, the Company is under audit by the U.S. Internal Revenue Service (IRS) for the 2002 through 2005 income tax years. The Company is in administrative appeals with the IRS regarding the 2002 and 2003 tax years and is in the process of responding to normal requests for information in respect of the Federal income tax returns for 2004 and 2005. The Company believes that it has adequately provided for income taxes and any related interest which may become payable in future years. However, the resolution of unagreed tax issues in the Company’s open tax years cannot be predicted with absolute certainty and differences may occur.

F-24

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table provides information related to cash payments for income taxes, net of refunds.

	For the Year Ended December 31,
	2006		2005		2004
	(In thousands)
Cash payments for income taxes, net of refunds	$	828,000	$	977,000	$	466,000

For the year ended December 31, 2006, approximately 99 percent of the cash payments for income taxes was related to the 2006 tax year, while for the year ended December 31, 2005, approximately 92 percent was related to the 2005 tax year and for the year ended December 31, 2004, 99 percent was related to the 2004 tax year.

7.  ADVANCES FROM GAS PURCHASERS

Advances from gas purchasers represent cash received by Apache prior to 2000 for future natural gas deliveries. It also includes cash received in 2001 upon the termination of gas price swaps related to these future deliveries. These proceeds will be recognized in monthly sales based on the portion of the proceeds applicable to each production month over the remaining life of the contracts. On December 31, 2006 and 2005, advances of $43 million and $69 million, respectively, were outstanding.

8.  CAPITAL STOCK

Common Stock Outstanding

	2006			2005		2004
Balance, beginning of year		330,121,230			327,457,503		324,497,176
Treasury shares issued (acquired), net		(2,170,144	)		579,179		66,080
Shares issued for:
Stock-based compensation plans		2,786,339			2,084,548		2,897,327
Fractional shares repurchased		—			—		(3,080	)
Balance, end of year		330,737,425			330,121,230		327,457,503

On April 19, 2006, the Company announced that its Board of Directors authorized the purchase of up to 15 million shares of the Company’s common stock representing a market value of approximately $1 billion on the date of the announcement. The Company may buy shares from time to time on the open market, in privately negotiated transactions, or a combination of both. The timing and amounts of any purchases will be at the discretion of Apache’s management. The Company initiated the purchase program on May 1, 2006, after the Company’s first-quarter 2006 earnings information was disseminated in the market. Through December 31, 2006, the Company purchased 2,500,000 shares at an average price of $69.74 per share.

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APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Net Income Per Common Share

A reconciliation of the components of basic and diluted net income per common share for the years ended December 31, 2006, 2005 and 2004 is presented in the table below:

	2006						2005						2004
	Income		Shares		Per Share		Income		Shares		Per Share		Income		Shares		Per Share
	(In thousands, except per share amounts)
Basic:
Income attributable to common stock	$	2,546,771		330,083	$	7.72	$	2,618,050		328,929	$	7.96	$	1,663,074		326,046	$	5.10
Effect of Dilutive Securities:
Stock options and other	$	—		3,128	$	—	$	—		4,820	$	—	$	—		4,431	$	—
Diluted:
Income attributable to common stock, including assumed conversions	$	2,546,771		333,211	$	7.64	$	2,618,050		333,749	$	7.84	$	1,663,074		330,477	$	5.03

Stock Compensation Plans

As of December 31, 2006, the Company had several stock-based compensation plans, which include stock options, stock appreciation rights, restricted stock, and performance-based share appreciation plans. A description of the Company’s stock-based compensation plans and related costs follows. For 2006, 2005 and 2004, stock-based compensation expensed was $35 million, $61 million and $43 million ($23 million, $40 million and $27 million after-tax), respectively. Costs related to the plans are capitalized or expensed based on the nature of the employee’s activities.

	2006		2005		2004
	(In millions)
Stock-based compensation expensed:
General and administrative	$	22	$	40	$	25
Lease operating costs		13		21		18
Stock-based compensation capitalized		14		29		19
	$	49	$	90	$	62

Stock Options

As of December 31, 2006, officers and employees held options to purchase shares of the Company’s common stock under one or more of the employee stock option plans adopted in 1995, 1998, 2000 and 2005 (collectively, the Stock Option Plans). New shares of company stock will be issued for employee option exercises; however, under the 2000 Stock Option Plan, shares of treasury stock are used for employee option exercises. Under the Stock Option Plans, the exercise price of each option equals the market price of Apache’s common stock on the date of grant. Options generally become exercisable ratably over a four-year period and expire after 10 years. The Stock Option Plans allow for accelerated vesting if there is a change in control (as defined in each plan). All of the stock option plans, except for the 2000 Stock Option Plan, were submitted to and approved by the Company’s stockholders.

On October 31, 1996, the Company also established the 1996 Performance Stock Option Plan (the Performance Plan) for substantially all full-time employees, excluding officers and certain key employees. Under the Performance Plan, the exercise price of each option equals the market price of Apache common stock on the date of grant. All options become exercisable after nine and one-half years and expire 10 years from the date of grant. Under the terms of the Performance Plan, no grants were made after December 31, 1998.

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APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A summary of the status of the Stock Option Plans and the Performance Plan is presented in the table and narrative below as of December 31, 2006, 2005 and 2004 (shares in thousands):

	2006					2005					2004
				Weighted					Weighted					Weighted
				Average		Shares			Average		Shares			Average
	Shares			Exercise		Under			Exercise		Under			Exercise
	Under Option			Price		Option			Price		Option			Price
Outstanding, beginning of year		7,480		$	30.55		7,342		$	21.33		9,141		$	20.59
Granted		1,805			71.63		2,066			56.27		290			44.73
Exercised		(2,021	)		18.99		(1,804	)		21.38		(1,913	)		20.35
Forfeited or expired		(293	)		57.56		(124	)		44.99		(176	)		25.39
Outstanding, end of year(1)		6,971			43.41		7,480			30.55		7,342			21.33
Expected to vest(1)		3,024			59.50		3,613			36.21		2,783			25.19
Exercisable, end of year(1)		3,612			28.41		3,465			24.00		4,250			20.36
Available for grant, end of year		1,705					3,275					2,819
Weighted average fair value of options granted during the year	$	24.38				$	19.32				$	14.45

(1) As of December 31, 2006, the remaining contractual life for options outstanding, expected to vest, and exercisable is 6.3 years, 6.3 years and 4.5 years, respectively. The aggregate intrinsic value of options outstanding, expected to vest and exercisable at yearend was $161 million, $21 million and $138 million, respectively.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model. Assumptions used in the valuation are disclosed in the following table. Expected volatilities are based on implied volatilities of traded options on the Company’s stock, historical volatility of the Company’s stock, and other factors. The expected dividend yield is based on historical yields on the date of grant. The expected term of options granted represents the period of time that the options are expected to be outstanding and is derived from historical exercise behavior, current trends and values derived from lattice-based models. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant.

	2006			2005			2004
Expected volatility		27.79	%		33.60	%		36.10	%
Expected dividend yields		.57	%		.56	%		.55	%
Expected term (in years)		5.5			5.5			4.5
Risk-free rate		4.98	%		3.82	%		3.65	%

The intrinsic value of options exercised during 2006 was approximately $101 million and the Company realized an additional tax benefit of approximately $32 million for the amount of intrinsic value in excess of compensation cost recognized. As of December 31, 2006, the total compensation cost related to non-vested options not yet recognized was $62 million, which will be recognized over the remaining vesting period of the options.

Stock Appreciation Rights

During 2003 and 2004, the Company issued a total of 1,802,210 and 1,328,400, respectively, of stock appreciation rights (SARs) to non-executive employees in lieu of stock options. None were issued in 2005 or 2006. The SARs vest ratably over four years and will be settled in cash upon exercise throughout their 10-year life. The weighted-average exercise price of the SARs was $42.68 and $28.78 for those issued in 2004 and 2003,

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APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

respectively. The number of SARs outstanding as of December 31, 2006 was 2,057,581, of which 1,147,473 were exercisable. Because the SARs are cash settled, the Company records compensation expense on the vested SARs outstanding based on the fair value of the SARs at the end of each period. As of yearend, the weighted-average fair value of SARs outstanding was $36.01 based on the Black-Scholes valuation methodology using assumptions comparable to those discussed above. During 2006, 282,570 SARs were exercised and approximately 85,000 were forfeited. The aggregate of cash payments made to settle SARs exercised in 2006 was not material.

Restricted Stock

On May 5, 2002, Apache’s Board of Directors approved an executive restricted stock plan for all executive officers and certain key employees. At the time of grant, participants in the executive restricted stock plan may elect to defer income from restricted stock vesting into the Deferred Delivery Plan. The Company awarded 149,500, 155,300 and 87,500 restricted shares at a per share market price of $71.52, $55.90 and $42.68 in 2006, 2005 and 2004, respectively. The value of the stock issued was established by the market price on the date of grant and will be recorded as compensation expense ratably over the four-year vesting terms. During 2006, 2005 and 2004, $6.1 million, $4.3 million and $2.8 million, respectively, was charged to expense as shares vested. As of December 31, 2006, there was $14 million of total unrecognized compensation cost related to approximately 318,175 unvested shares. The weighted-average remaining life of unvested shares is approximately 3.5 years.

				Weighted-Average
				Grant-Date
Restricted Stock	Shares			Fair Value
Non-vested at January 1, 2006		319,943		$	44.51
Granted		149,500			71.52
Vested		(133,323	)		38.51
Forfeited		(17,945	)		54.66
Non-vested at December 31, 2006		318,175			59.14

In December 1998, the Company granted a conditional stock award to an executive of the Company for a total of 100,000 shares (230,992 shares after adjustment for subsequent stock dividends and a stock split) of the Company’s common stock. The award was composed of five annual installments, commencing on January 1, 1999 and each successive January through January 1, 2003. Vesting occurs on the fifth anniversary following each installment. Under the terms of the award, forty percent of the conditional grants are paid in cash at the market value of the Company’s stock on the date of payment and the balance is issued in Apache common stock. The first three periodic installments vested on January 1, 2004, January 1, 2005 and January 1, 2006. The latter two annual installments will vest on January 1, 2007 and 2008, respectively.

2005 Share Appreciation Plan

On May 5, 2005, the Company’s stockholders approved the 2005 Share Appreciation Plan that provides incentives for employees to double Apache’s share price to $108 by the end of 2008, with an interim goal of $81 to be achieved by the end of 2007. To achieve the trigger price, the Company’s stock price must close at or above the stated threshold for 10 days out of any 30 consecutive trading days by the end of the stated period. Under the plan, if the first threshold is achieved, approximately 1.4 million shares would be awarded for an intrinsic cost of $113 million. Achieving the second threshold would result in approximately 2.1 million shares awarded for an intrinsic cost of $230 million. Shares ultimately issued would be reduced for any minimum tax withholding requirements. Under the terms of this targeted stock plan, awards are payable in four equal installments, beginning with the date the trigger stock price is met and on each succeeding anniversary date.

Current accounting practices dictate that, regardless of whether these thresholds are ultimately achieved, the Company will recognize the fair value cost at the grant date based on numerous assumptions, including an estimate

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APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

of the likelihood that Apache’s stock price will achieve these thresholds and the expected forfeiture rate. As a result, the Company will recognize expense and capitalized costs of approximately $81 million over the expected service life of the plan. For 2006 and 2005, $12.1 million ($7.8 million after tax) and $6.6 million ($4.3 million after tax) was expensed, respectively. In 2006 and 2005, $6.2 million and $3.4 million was capitalized, respectively. No material forfeitures occurred during 2006.

A summary of the number of shares contingently issuable as of December 31, 2006 and 2005 is presented in the table below:

	Shares Subject to
	Conditional Grants
	2006			2005
	(In thousands)
Outstanding, beginning of year		3,438			—
Granted		447			3,580
Issued		—			—
Forfeited or cancelled		(356	)		(142	)
Outstanding, end of year(1)		3,529			3,438
Weighted-average fair value of conditional grants — Share Price Goals(2)	$	26.20		$	25.11

(1)	Represents shares issuable upon attainment of $81 and $108 per share price goals of 1,395,030 shares and 2,134,100 shares, respectively, in 2006 and 1,374,060 shares and 2,063,890 shares, respectively, in 2005.
(2)	The fair value of each Share Price Goal conditional grant is estimated as of the date of grant using a Monte Carlo simulation with the following weighted-average assumptions used for grants in 2006 and 2005, respectively: (i) risk-free interest rate of 3.93 and 3.81 percent; (ii) expected volatility of 28.17 and 28.30 percent; and (iii) expected dividend yield of .56 and .56 percent.

2000 Share Appreciation Plan

In October 2000, the Company adopted the 2000 Share Appreciation Plan under which grants were made to substantially all full-time employees, including officers. The 2000 Share Appreciation Plan provided for issuance of up to an aggregate of 8.08 million shares of Apache common stock, based on attainment of one or more of three share price goals (Share Price Goals) and/or a separate production goal (Production Goal). Generally, shares are issued in three installments over 24 months after achievement of each goal. The shares of Apache common stock contingently issuable under the 2000 Share Appreciation Plan were excluded from the computation of income per common share until the stated goals were met as described below.

The Share Price Goals were based on achieving a closing price of $43.29, $51.95 and $77.92 per share on any 10 days out of any 30 consecutive trading days prior to January 1, 2005. Apache’s share price exceeded the first threshold ($43.29) under this plan on April 28, 2004. As such, the Company issued 913,000 shares of its common stock, after minimum tax withholding requirements, which were distributed in three annual installments in May 2004, 2005 and 2006, respectively. Also, on October 26, 2004, Apache’s share price exceeded the second threshold of $51.95. Accordingly, Apache issued 2.3 million additional shares of its common stock, after minimum tax withholding requirements, in three equal installments in November 2004, 2005 and 2006, respectively. The third share-price threshold ($77.92) did not trigger and the related grants were cancelled as of December 31, 2004. A

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APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

summary of the number of shares contingently issued under the Share Price Goals as of December 31, 2006, 2005 and 2004 is presented in the table below:

	Shares Subject to
	Conditional Grants
	2006			2005			2004
	(In thousands)
Outstanding, beginning of year		1,442			3,008			6,324
Granted		—			—			15
Issued		(1,398	)		(1,483	)		(1,531	)
Forfeited or cancelled		(44	)		(83	)		(1,800	)
Outstanding, end of year(1)		—			1,442			3,008
Weighted-average fair value of conditional grants — Share Price Goals(2)	$	N/A		$	N/A		$	19.74

(1)	The outstanding shares at the end of 2005 and 2004 represent those shares remaining to be issued as a result of attainment of the $43.29 and $51.95 per share price goals. The remaining shares were issued net of minimum tax withholding as employees fulfilled the one-year remaining service period requirement in 2006.
(2)	The fair value of each Share Price Goal conditional grant is estimated as of the date of grant using a Monte Carlo simulation with the following weighted-average assumptions used for grants in 2004: (i) risk-free interest rate of 3.04 percent; (ii) expected volatility of 35.97 percent; and (iii) expected dividend yield of .96 percent.

Timing of expense recognition under the 2000 Share Appreciation Plan was based on the accounting policies in place for each year the plan was outstanding and vesting (See Note 1, Summary of Significant Accounting Policies). The shares were initially granted in 2000 and were not expensed under APB Opinion No. 25. In 2004, Apache adopted SFAS No. 123-R retrospectively, to January 1, 2004, and expensed stock based compensation vesting during the year. Under SFAS No. 123-R expense amounts are determined based on the fair value of the plan on the date of grant and for 2006, 2005 and 2004, respectively, the Company recorded $1.1 million ($.7 million after-tax), $6.3 million ($4.1 million after-tax) and $13.1 million ($8.2 million after-tax) of expense, net of capitalized amounts for this plan of $.6 million, $3.5 million and $6.5 million.

The Production Goal was not attained prior to January 1, 2005 and, therefore, no shares were issued under that goal and the related grants were cancelled as of December 31, 2004.

Preferred Stock

The Company has five million shares of no par preferred stock authorized, of which 25,000 shares have been designated as Series A Junior Participating Preferred Stock (the Series A Preferred Stock) and 100,000 shares have been designated as the 5.68 percent Series B Cumulative Preferred Stock (the Series B Preferred Stock).

Rights to Purchase Series A Preferred Stock

In December 1995, the Company declared a dividend of one right (a Right) for each 2.31 shares (adjusted for subsequent stock dividends and a two-for-one stock split) of Apache common stock outstanding on January 31, 1996. Each full Right entitles the registered holder to purchase from the Company one ten-thousandth (1/10,000) of a share of Series A Preferred Stock at a price of $100 per one ten-thousandth of a share, subject to adjustment. The Rights are exercisable 10 calendar days following a public announcement that certain persons or groups have acquired 20 percent or more of the outstanding shares of Apache common stock or 10 business days following commencement of an offer for 30 percent or more of the outstanding shares of Apache common stock. In addition, if a person or group becomes the beneficial owner of 20 percent or more of Apache’s outstanding common stock (flip in event); each Right will become exercisable for shares of Apache’s common stock at 50 percent of the then

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APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

market price of the common stock. If a 20 percent shareholder of Apache acquires Apache, by merger or otherwise, in a transaction where Apache does not survive or in which Apache’s common stock is changed or exchanged (flip over event), the Rights become exercisable for shares of the common stock of the company acquiring Apache at 50 percent of the then market price for Apache common stock. Any Rights that are or were beneficially owned by a person who has acquired 20 percent or more of the outstanding shares of Apache common stock and who engages in certain transactions or realizes the benefits of certain transactions with the Company will become void. If an offer to acquire all of the Company’s outstanding shares of common stock is determined to be fair by Apache’s board of directors, the transaction will not trigger a flip in event or a flip over event. The Company may also redeem the Rights at $.01 per Right at any time until 10 business days after public announcement of a flip in event. These rights were originally scheduled to expire on January 31, 2006. Effective as of that date, the rights were reset to one right per share of common stock and the expiration was extended to January 31, 2016. Unless the Rights have been previously redeemed, all shares of Apache common stock issued by the Company after January 31, 1996 will include Rights. Unless and until the Rights become exercisable, they will be transferred with and only with the shares of Apache common stock.

Series B Preferred Stock

In August 1998, Apache issued 100,000 shares ($100 million) of Series B Preferred Stock in the form of one million depositary shares, each representing one-tenth (1/10) of a share of Series B Preferred Stock, for net proceeds of $98 million. The Series B Preferred Stock has no stated maturity, is not subject to a sinking fund and is not convertible into Apache common stock or any other securities of the Company. Apache has the option to redeem the Series B Preferred Stock at $1,000 per preferred share on or after August 25, 2008. Holders of the shares are entitled to receive cumulative cash dividends at an annual rate of $5.68 per depositary share when, and if, declared by Apache’s board of directors.

Comprehensive Income

Components of accumulated other comprehensive income (loss) consists of the following:

	For the Year Ended December 31,
	2006			2005			2004
				(In thousands)
Currency translation adjustments	$	(108,750	)	$	(108,750	)	$	(108,750	)
Unrealized gain (loss) on derivatives (Note 3)		83,534			(256,858	)		(20,732	)
Unfunded pension and post retirement benefit plan		(6,116	)		—
Accumulated other comprehensive loss	$	(31,332	)	$	(365,608	)	$	(129,482	)

F-31

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

9.  FINANCIAL INSTRUMENTS

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments at December 31, 2006 and 2005. See Note 3, Hedging and Derivative Instruments for a discussion of the Company’s derivative instruments.

	2006				2005
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
			(In thousands)
Long-term debt:
Apache
Money market lines of credit	$	10,500	$	10,500	$	—	$	—
Commercial paper		1,560,000		1,560,000		—		—
6.25-percent debentures		398,270		415,304		398,006		430,120
7-percent notes		148,713		167,021		148,639		168,750
7.625-percent notes		149,256		175,374		149,222		176,775
7.7-percent notes		99,684		119,036		99,678		126,490
7.95-percent notes		178,710		218,254		178,683		234,828
7.375-percent debentures		148,035		173,271		148,028		188,700
7.625-percent debentures		149,176		172,943		149,175		193,680
Subsidiary and other obligations
Argentina money market lines of credit		58,757		58,757		—		—
Fletcher notes		4,252		4,252		4,526		4,652
Apache Finance Australia 6.5-percent notes		169,837		171,411		169,678		175,151
Apache Finance Australia 7-percent notes		99,809		103,329		99,733		106,160
Apache Finance Canada 4.375-percent notes		349,756		322,959		349,732		336,805
Apache Finance Canada 7.75-percent notes		297,170		363,519		297,128		390,540

The fair value of the notes and debentures is based upon an estimate provided to the Company by an independent investment banking firm. The carrying amount of the commercial paper and money market lines of credit approximated fair value because the interest rates are variable and reflective of market rates. The Company’s trade receivables and trade payables are by their very nature short-term. The carrying values included in the accompanying consolidated balance sheet approximate fair value at December 31, 2006 and 2005.

10.  COMMITMENTS AND CONTINGENCIES

Litigation

Texaco China B.V.

Apache recorded a reserve in the second quarter of 2004 to fully reflect a pre-tax $71 million international arbitration award to Texaco China B.V. (Texaco China). The arbitration award was subject to interest at nine percent until May 6, 2005, the date following the federal district court ruling discussed below. On May 6, 2005, the interest rate dropped to 3.33 percent. Apache accrued $3.2 million of interest expense in 2004, $3.8 million in 2005 and $593,000 in the first quarter of 2006. In September 2001, Texaco China initiated an arbitration proceeding against Apache China Corporation LDC (Apache China), later adding Apache Bohai Corporation LDC (Apache Bohai) to the arbitration. In the arbitration Texaco China claimed damages, plus interest, arising from Apache Bohai’s alleged failure to drill three wells, prior to re-assignment of the interest to Texaco China. Apache believes that the finding of the arbitrator is unsupported by the facts and the law, and Apache filed an application to vacate the award in federal court. Texaco China filed an application to confirm the award in the same court. On May 5, 2005, the federal district court ruled in favor of Texaco China. The Company appealed that decision to the circuit court of appeals. In January 2005, while awaiting the decision of the U.S. federal courts, Texaco China also filed a proceeding against Apache

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APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

China and Apache Bohai in the People’s Republic of China to recognize the award, apparently seeking the same relief as sought in U.S. federal court. The parties subsequently agreed to stay enforcement of the arbitration award in China and elsewhere pending the final, determinative outcome of all possible appeals in the U.S. federal courts. On February 27, 2007, the Fifth Circuit Court of Appeals affirmed the trial court’s decision in favor of Texaco China. Apache is considering its remaining appeal options.

Predator

In December 2000, certain subsidiaries of the Company and Murphy Oil Corporation (Murphy) filed a lawsuit in Canada charging The Predator Corporation Ltd. (Predator) and others with misappropriation and misuse of confidential well data to obtain acreage offsetting a significant natural gas discovery in the Ladyfern area of northeast British Columbia made by Apache Canada Ltd. (Apache Canada) and Murphy during 2000. In February 2001, Predator filed a counterclaim seeking more than C$6 billion and later reduced this amount to approximately C$3.6 billion. In September 2004, the Canadian court granted Apache Canada’s motion for summary judgment on the counterclaim, dismissing more than C$3 billion of Predator’s claims against Apache Canada and Murphy, and dismissing all claims against both Murphy’s president and Apache Canada’s president. Predator appealed the summary judgment. On February 28, 2006, the Court of Appeal of Alberta dismissed Predator’s appeal. Predator did not seek review by the Supreme Court of Canada. The trial court also granted Apache Canada’s request for costs and disbursements in the approximate amount of C$700,000, which Predator paid. In September 2006 the trial court rendered a judgment (the Judgment) in favor of Murphy and Apache’s claim against Predator and dismissed Predator’s C$365 million remaining counterclaim against Murphy and Apache. The parties entered into a settlement agreement not to appeal the judgment, thereby making the judgment final. As a result, Apache recognized approximately $8 million of revenue in the third quarter of 2006.

Grynberg

In 1997, Jack J. Grynberg began filing lawsuits against other natural gas producers, gatherers, and pipelines claiming that the defendants have under paid royalty to the federal government and Indian tribes by mis-measurement of the volume and heating content of natural gas and are responsible for acts of others who mis-measured natural gas. In 2004, Grynberg filed suit against Apache making the same claims he had made previously against others in the industry. With the addition of Apache, there are more than 300 defendants to these actions. The Grynberg lawsuits have been consolidated through a federal Multi-District Litigation (MDL) action located in Wyoming federal court for discovery and pre-trial purposes. The defendants in the MDL, jointly and/or separately, filed motions to dismiss based upon certain statutory requirements Grynberg is required to prove to proceed with these qui tam lawsuits. On October 20, 2006, the multi-district Judge ruled in favor of Apache and other defendants on these motions to dismiss, dismissing Grynberg’s lawsuit against Apache and others. Grynberg has appealed the ruling. Although Grynberg purports to be acting on behalf of the government, the federal government has declined to join in the cases. While an adverse judgment against Apache is possible, Apache does not believe the plaintiff’s claims have merit and plans to vigorously pursue its defenses against these claims. Exposure related to this lawsuit is not currently determinable.

Egypt Tax Authority

As of the end of 2004, the Egyptian Tax Authority (ETA) had issued claims for back taxes against various Apache subsidiaries in Egypt totaling approximately $113.4 million (at current exchange rates) relating to periods as far back as 1994. In July 2005, the ETA made a new claim for approximately $85 million of additional taxes for the 1994-1999 tax years. All of the ETA tax claims, have now been finally resolved in Apache’s favor with no liability.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Argentine Environmental Claims

In connection with the Pioneer acquisition, 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. PNRA is cooperating with the proceedings, although it from time to time challenges whether certain assessed fines, which could exceed $100,000, are appropriate. 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 the contaminated sites, of the superficial and underground waters, and of the soil that was degraded as a result of deforestation, (ii) if the remediation is not possible, payment of an indemnification for the material and moral damages in an unspecified amount claimed from defendants operating in the Neuquén basin, of which PNRA is a small portion, (iii) adoption of all of 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.

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 for contamination and cleanup. Many of these lawsuits claim small amounts, while others assert claims in excess of a 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

A class action lawsuit has been filed styled Barasich, et al., individually and as representatives of all those similarly situated vs. Columbia Gulf Transmission Co., et al, No. 05-4161, United States District Court, Eastern District of Louisiana, against all oil and gas and pipeline companies that drilled or dredged in the marshes of South Louisiana. The lawsuit claims defendants were negligent by constructing canals and conducting oil and gas operations, which plaintiffs contend is the sole and/or almost the sole cause of the alleged destruction of the marshes in South Louisiana, which plaintiffs blame for all and/or substantially all loss of life and destruction of property which was incurred from Hurricane Katrina. Apache was not named, but if a defendant class is certified, would fall within the definition alleged. Apache believes such claims are without merit, and if joined will undertake an active defense to such claims.

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 whose homes and businesses were damaged by Hurricane Katrina are requesting class certification. They 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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. A motion has been filed to amend the lawsuit and add additional defendants, including Apache. Apache has not yet been served.

Insurance Claims

In connection with damage related to Hurricanes Katrina and Rita in 2005, Apache has filed claims with OIL Insurance Ltd. (“OIL”), who provided Apache’s first level of property damage insurance coverage (“OIL Coverage”) and with its principal commercial insurance underwriters, who provided Apache with property damage insurance coverage in excess of OIL Coverage, business interruption insurance coverage, and liability coverage (collectively “Excess Coverage”). Through December 31, 2006, we have received payments of $37 million from OIL for property damage and $150 million from underwriters providing Excess Coverage for business interruption (the entire amount of the business interruption coverage) and $5 million for property damage. In addition, Apache has $87 million of outstanding claims under its Excess Coverage for property damage and anticipates additional claims of $13 million, which is the remainder of the coverage for property damage (collectively the “Remaining Claims”). In addition, Apache’s liability policy with certain underwriters who provided Excess Coverage includes an endorsement providing $165 million per occurrence for wreck removal costs and expenses. Similarly, Apache has a second layer of liability coverage from certain underwriters which provides an additional $100 million of excess coverage per occurrence which includes the same endorsement for wreck removal costs and expenses (the “Second Excess Coverage”). Apache informed the lead underwriter on the Excess Coverage policy and the Second Excess Coverage policy, of our plans to make a claim under the wreck removal coverage, and the lead underwriter has requested that Apache not make such claims in return for payment of the Remaining Claims and a waiver of the underwriters’ alleged right to seek repayment of the amounts already paid to Apache for property damage and business interruption. On account of this request from the lead underwriter, Apache filed an action styled “Apache Corporation v. Houston Casualty Company, and Certain Underwriters at Interest” in the District Court of Harris County in Houston, Texas seeking a declaratory judgment that the underwriters providing Excess Coverage are obligated to pay the Remaining Claims and have no right to seek repayment of any previously paid amounts, regardless of any final resolution of Apache’s right to recovery under the wreck removal endorsement.

General

The Company is involved in other litigation and is subject to governmental and regulatory controls arising in the ordinary course of business. The Company has an accrued liability of approximately $7 million for other legal contingencies that are probable of occurring and can be reasonably estimated. It is management’s opinion that the loss for any such other litigation matters and claims that are reasonably possible to occur will not have a material adverse affect on the Company’s financial position or results of operations.

Other Commitments and Contingencies

Environmental

The Company, as an owner or lessee and operator of oil and gas properties, is subject to various 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 and subject the lessee to

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

liability for pollution damages. In some instances, the Company may be directed to suspend or cease operations in the affected area. We maintain insurance coverage, which we believe is customary in the industry, although we are not fully insured against all environmental risks.

Apache manages its exposure to environmental liabilities on properties to be acquired by identifying existing problems and assessing the potential liability. The Company also conducts periodic reviews, on a company-wide basis, to identify changes in its environmental risk profile. These reviews evaluate whether there is a probable liability, its amount, and the likelihood that the liability will be incurred. The amount of any potential liability is determined by considering, among other matters, incremental direct costs of any likely remediation and the proportionate cost of employees who are expected to devote a significant amount of time directly to any possible remediation effort. As it relates to evaluations of purchased properties, depending on the extent of an identified environmental problem, the Company may exclude a property from the acquisition, require the seller to remediate the property to Apache’s satisfaction, or agree to assume liability for the remediation of the property. The Company’s general policy is to limit any reserve additions to any incidents or sites that are considered probable to result in an expected remediation cost exceeding $100,000. Any environmental costs and liabilities that are not reserved for are treated as an expense when actually incurred. In our estimation, neither these expenses nor expenses related to training and compliance programs are likely to have a material impact on our financial condition. As of December 31, 2006, the Company had an undiscounted reserve for environmental remediation of approximately $17 million. Apache is not aware of any environmental claims existing as of December 31, 2006, 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.

International Lease Concessions

The Company, through its subsidiaries, has acquired or has been conditionally or unconditionally granted exploration rights in Egypt, Australia, the North Sea and Argentina. In order to comply with the contracts and agreements granting these rights, the Company, through various wholly-owned subsidiaries, is committed to expend approximately $240 million through 2010.

Contractual Obligations

The Company has leases for buildings, facilities and equipment with varying expiration dates through 2035. Net rental expense was $23 million, $20 million, and $17 million for 2006, 2005 and 2004, respectively.

The Company has additional purchase commitments in Egypt, not included in the table below, for pipeline and gas plant construction totaling $390 million through 2008.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of December 31, 2006, minimum rental commitments under long-term operating leases, net of sublease rental income, drilling rigs and long-term pipeline transportation commitments, ranging from one to 29 years, are as follows:

	Net Minimum Commitments
							Pipeline
	Total		Leases		Drilling Rigs		Transmission
			(In thousands)
2007	$	384,651	$	15,016	$	333,366	$	36,269
2008		127,037		14,655		82,670		29,712
2009		46,536		15,205		13,425		17,906
2010		36,787		15,066		3,849		17,872
2011		32,844		15,173		—		17,671
Thereafter		187,830		34,390		—		153,440
	$	815,685	$	109,505	$	433,310	$	272,870

Retirement and Deferred Compensation Plans

The Company provides a 401(k) savings plan for employees which allows participating employees to elect to contribute up to 25 percent of their salaries (50 percent effective January 1, 2006), with Apache making matching contributions up to a maximum of six percent of each employee’s salary. In addition, the Company annually contributes six percent of each participating employee’s compensation, as defined, to a money purchase retirement plan. The 401(k) plan and the money purchase retirement plan are subject to certain annually-adjusted, government-mandated restrictions which limit the amount of each employee’s contributions.

For certain eligible employees, the Company also provides a non-qualified retirement/savings plan which allows the deferral of up to 50 percent of each employee’s salary, and which accepts employee contributions and the Company’s matching contributions in excess of the above-referenced restrictions on the 401(k) savings plan and money purchase retirement plan. Additionally, Apache Energy Limited, Apache Canada Ltd. and Apache North Sea Limited maintain separate retirement plans, as required under the laws of Australia, Canada and the United Kingdom, respectively.

Vesting in the Company’s contributions to the 401(k) savings plan, the money purchase retirement plan and the non-qualified retirement/savings plan occurs at the rate of 20 percent for every full-year of employment. Upon a change in control of ownership, vesting is immediate. Total costs under all plans were $41 million, $39 million and $31 million for 2006, 2005 and 2004, respectively.

Apache also provides a funded noncontributory defined benefit pension plan (U.K. Pension Plan) covering existing BP North Sea employees hired by the Company as part of the BP acquisition. The pension plan provides defined benefits based on years of service and final average salary. The plan is closed to newly hired employees.

Apache also has a postretirement benefit plan covering substantially all of its U.S. employees. The postretirement benefit plan provides for medical benefits up until the age of 65. The plan is contributory with participants’ contributions adjusted annually. The postretirement benefit plan does not pay benefits once participants become eligible for Medicare and is not affected by the Medicare Modernization Act of 2003.

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APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following tables set forth the benefit obligation, fair value of plan assets and funded status as of December 31, 2006 and 2005 and the underlying weighted average actuarial assumptions used for the U.K. Pension Plan and U.S. postretirement benefit plan. Apache uses a measurement date of December 31 for its pension and postretirement benefit plans.

	2006						2005
	Pension			Postretirement			Pension			Postretirement
	Benefits			Benefits			Benefits			Benefits
				(In thousands)
Change in Projected Benefit Obligation
Projected benefit obligation beginning of period	$	103,367		$	16,053		$	88,726		$	11,039
Service cost		7,189			1,517			6,286			1,399
Interest cost		5,218			899			4,463			812
Foreign currency exchange rate changes		14,920			—			(10,864	)		—
Amendments		—			—			—			—
Actuarial losses/(gains)		(3,303	)		(1,106	)		14,893			2,848
Effect of curtailment and settlements		—			—			—			—
Benefits paid		(1,764	)		(320	)		(137	)		(129	)
Retiree contributions		—			183			—			84
Projected benefit obligation at end of year		125,627			17,226			103,367			16,053
Change in Plan Assets
Fair value of plan assets at beginning of period		90,886			—			82,022			—
Actual return on plan assets		5,661			—			13,780			—
Foreign currency exchange rate changes		13,253			—			(9,756	)		—
Employer contributions		4,785			137			4,977			45
Benefits paid		(1,764	)		(320	)		(137	)		(129	)
Retiree contributions		—			183			—			84
Fair value of plan assets at end of year		112,821			—			90,886			—
Reconciliation of Funded Status
Funded status of plan		(12,806	)		(17,226	)		(12,481	)		(16,053	)
Unrecognized actuarial (gain)/loss		N/A			N/A			7,576			6,385
Unrecognized prior service cost		N/A			N/A			—			—
Unrecognized net transition obligation		N/A			N/A			—			485
Plan benefit asset/(obligation)		(12,806	)		(17,226	)		(4,905	)		(9,183	)
Pretax Amounts Recognized in Accumulated Other Comprehensive Income
Net actuarial loss		5,228			4,989			N/A			N/A
Prior service cost		—			—			N/A			N/A
Transition obligation		—			441			N/A			N/A
		5,228			5,430			N/A			N/A
Weighted Average Assumptions used as of December 31
Discount rate		5.10	%		5.77	%		4.70	%		5.50	%
Salary increases		4.10	%		N/A			3.80	%		N/A
Expected return on assets		6.50	%		N/A			5.75	%		N/A
Healthcare cost trend
— Initial		N/A			9.00	%		N/A			9.00	%
— Ultimate in 2011		N/A			5.00	%		N/A			5.00	%

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APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of December 31, 2006 and 2005, the accumulated benefit obligation for the pension plan was $90 million and $76 million, respectively.

Apache’s defined benefit pension plan assets are held by a non-related Trustee who has been instructed to invest the assets in an equal blend of equity securities and low-risk debt securities. The Company believes this blend of investments will provide a reasonable rate of return and ensure that the benefits promised to members are provided. The plan’s assets do not include any equity or debt securities of Apache. A breakout of previous allocations for plan asset holdings and the target allocation for the Company’s plan assets are summarized below.

				Percentage of Plan Assets at
	Target Allocation			Year-End
	2006			2006			2005
Asset Category
Equity securities		50	%		54	%		51	%
Debt securities		50	%		46	%		49	%
Total		100	%		100	%		100	%

The following tables set forth the components of the net periodic cost and the underlying weighted average actuarial assumptions used for the pension and postretirement benefit plans as of December 31, 2006, 2005 and 2004.

	2006						2005						2004
	Pension			Postretirement			Pension			Postretirement			Pension			Postretirement
	Benefits			Benefits			Benefits			Benefits			Benefits			Benefits
							(In thousands)
Components of Net Periodic Benefit Costs
Service cost	$	7,189		$	1,517		$	6,286		$	1,399		$	5,507		$	969
Interest cost		5,218			899			4,463			812			3,661			628
Expected return on assets		(5,750	)		—			(4,822	)		—			(3,589	)		—
Amortization of:
Transition obligation		—			44			—			44			—			44
Actuarial (gain)/loss		—			290			—			331			—			250
Net periodic benefit cost	$	6,657		$	2,750		$	5,927		$	2,586		$	5,579		$	1,891
Weighted Average Assumptions used to determine Net Periodic Benefit Costs for the Years ended December 31
Discount rate		4.70	%		5.50	%		5.30	%		5.75	%		5.50	%		6.25	%
Salary increases		3.80	%		N/A			3.80	%		N/A			3.75	%		N/A
Expected return on assets		5.75	%		N/A			6.00	%		N/A			6.25	%		N/A
Healthcare cost trend
— Initial		N/A			9.00	%		N/A			9.00	%		N/A			10.00	%
— Ultimate in 2010		N/A			5.00	%		N/A			5.00	%		N/A			5.00	%

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APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Assumed health care cost trend rates effect amounts reported for postretirement benefits. A one-percentage-point change in assumed health care cost trend rates would have the following effects:

	Postretirement Benefits
	1% Increase		1% Decrease
	(In thousands)
Effect on service and interest cost components	$	316	$	(273	)
Effect on postretirement benefit obligation		1,992		(1,744	)

Apache expects to contribute approximately $6 million to its pension plan and $402,000 to its postretirement benefit plan in 2007. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

	Pension		Postretirement
	Benefits		Benefits
	(In thousands)
2007	$	822	$	402
2008		1,330		566
2009		1,370		760
2010		1,390		992
2011		1,429		1,249
Years 2012 — 2016		18,202		10,022

11.   MAJOR CUSTOMERS

In 2006, purchases by BP accounted for 20 percent of the Company’s oil and gas production revenues.

In 2005, purchases by BP and Shell each accounted for 16 percent of the Company’s oil and gas production revenues.

In 2004, purchases by EGPC and BP accounted for 17 percent and 15 percent, respectively, of the Company’s oil and gas production revenues.

Concentration of Credit Risk

The Company’s revenues are derived principally from uncollateralized sales to customers in the oil and gas industry; therefore, customers may be similarly affected by changes in economic and other conditions within the industry. Apache has not experienced significant credit losses on such sales. Apache sells a large portion of its Egyptian crude oil and natural gas to EGPC for U.S. dollars. Beginning in 2001, we experienced a gradual decline in timeliness of receipts from EGPC for our Egyptian oil and gas sales. Deteriorating economic conditions during 2001 in Egypt lessened the availability of U.S. dollars, resulting in a one to two month delay in receipts from EGPC. During 2006, we experienced variability in the timing of cash receipts from EGPC. We have not established a reserve for these Egyptian receivables because we continue to get paid, albeit late, and have no indication that we will not be able to collect our receivable.

12.  BUSINESS SEGMENT INFORMATION

Apache has interests in six countries: the United States, Canada, Egypt, Australia, offshore the United Kingdom (U.K.) in the North Sea and Argentina. The Company divested its interest in China effective July 1, 2006. Apache’s reportable segments are primarily in the business of crude oil and natural gas exploration and production. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates segment performance based on profit or loss from oil and gas operations before income and expense items incidental to oil and gas operations and income taxes. Apache’s

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APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

reportable segments are managed separately based on their geographic locations. Financial information by operating segment is presented below:

													Other
	United States		Canada		Egypt		Australia		North Sea		Argentina		International		Total
							(In thousands)
2006
Oil and gas production revenues	$	3,027,227	$	1,379,626	$	1,664,103	$	408,453	$	1,355,139	$	167,195	$	72,510	$	8,074,253
Operating Expenses:
Depreciation, depletion and amortization		765,564		365,369		247,354		147,413		179,625		93,025		18,009		1,816,359
Asset retirement obligation accretion		65,357		8,506		—		2,527		11,808		733		—		88,931
Lease operating costs		619,346		305,323		147,656		57,942		185,902		40,807		5,398		1,362,374
Gathering and transportation costs		31,810		34,246		10,995		—		26,387		763		121		104,322
Severance and other taxes		116,624		16,115		—		19,524		394,487		2,559		4,669		553,978
Operating Income (Loss)	$	1,428,526	$	650,067	$	1,258,098	$	181,047	$	556,930	$	29,308	$	44,313		4,148,289
Other Income (Expense):
Other																40,981
General and administrative																(211,334	)
Gain on China divestiture																173,545
Financing costs, net																(141,886	)
Income Before Income Taxes															$	4,009,595
Net Property and Equipment	$	10,139,918	$	5,411,726	$	1,806,901	$	1,184,180	$	1,544,778	$	1,258,749	$	—	$	21,346,252
Total Assets	$	11,486,070	$	5,821,685	$	2,423,655	$	1,322,501	$	1,839,150	$	1,404,382	$	10,732	$	24,308,175
Additions to Net Property and Equipment	$	3,159,613	$	1,250,355	$	569,316	$	218,345	$	335,055	$	1,311,804	$	11,794	$	6,856,282
2005
Oil and gas production revenues	$	2,824,522	$	1,450,801	$	1,358,183	$	400,791	$	1,274,470	$	17,220	$	131,304	$	7,457,291
Operating Expenses:
Depreciation, depletion and amortization		580,294		266,780		221,230		102,139		187,315		7,214		50,710		1,415,682
Asset retirement obligation accretion		31,657		6,811		—		2,414		12,709		129		—		53,720
Lease operating costs		477,780		229,592		116,160		55,666		146,015		4,012		11,250		1,040,475
Gathering and transportation costs		29,954		33,309		7,991		—		28,248		—		758		100,260
Severance and other taxes		107,300		22,279		—		38,386		285,293		—		—		453,258
Operating Income (Loss)	$	1,597,537	$	892,030	$	1,012,802	$	202,186	$	614,890	$	5,865	$	68,586		4,393,896
Other Income (Expense):
Other																126,953
General and administrative																(198,272	)
Financing costs, net																(116,323	)
Income Before Income Taxes															$	4,206,254
Net Property and Equipment	$	7,745,703	$	4,526,113	$	1,894,141	$	1,113,181	$	1,391,048	$	42,875	$	78,279	$	16,791,340
Total Assets	$	8,690,410	$	4,952,561	$	2,509,970	$	1,318,233	$	1,625,168	$	60,047	$	115,407	$	19,271,796
Additions to Net Property and Equipment	$	1,656,780	$	1,454,636	$	541,732	$	252,787	$	467,421	$	36,589	$	22,545	$	4,432,490

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APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

														Other
	United States		Canada		Egypt		Australia		North Sea			Argentina		International		Total
							(In thousands)
2004
Oil and gas production revenues	$	2,332,064	$	1,014,097	$	932,767	$	458,006	$	472,091		$	7,723	$	91,269	$	5,308,017
Operating Expenses:
Depreciation, depletion and amortization		554,598		204,181		176,307		118,183		126,667			2,581		39,635		1,222,152
Asset retirement obligation accretion		25,531		6,078		—		2,277		12,048			126		—		46,060
Lease operating costs		376,608		186,043		92,791		52,309		143,453			2,390		10,784		864,378
Gathering and transportation costs		28,324		30,741		—		—		22,619			—		577		82,261
Severance and other taxes		67,544		22,766		—		64,345		(61,361	)		454		—		93,748
Operating Income (Loss)	$	1,279,459	$	564,288	$	663,669	$	220,892	$	228,665		$	2,172	$	40,273		2,999,418
Other Income (Expense):
Other																	24,560
General and administrative																	(173,194	)
Financing costs, net																	(116,485	)
China litigation provision																	(71,216	)
Income Before Income Taxes																$	2,663,083
Net Property and Equipment	$	6,754,515	$	3,338,990	$	1,573,639	$	951,704	$	1,112,451		$	22,617	$	106,443	$	13,860,359
Total Assets	$	7,394,542	$	3,633,469	$	1,948,833	$	1,131,026	$	1,244,419		$	34,154	$	116,037	$	15,502,480
Additions to Net Property and Equipment	$	2,050,025	$	816,198	$	392,300	$	178,280	$	369,542		$	4,712	$	21,875	$	3,832,932

F-42

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

13.  SUPPLEMENTAL OIL AND GAS DISCLOSURES (Unaudited)

Oil and Gas Operations

The following table sets forth revenue and direct cost information relating to the Company’s oil and gas exploration and production activities. Apache has no long-term agreements to purchase oil or gas production from foreign governments or authorities.

														Other
	United States		Canada		Egypt		Australia		North Sea			Argentina		International		Total
							(In thousands)
2006
Oil and gas production revenues	$	3,027,227	$	1,379,626	$	1,664,103	$	408,453	$	1,355,139		$	167,195	$	72,510	$	8,074,253
Operating costs:
Depreciation, depletion and amortization(1)		742,981		355,446		247,354		146,406		178,682			91,562		17,991		1,780,422
Asset retirement obligation accretion		65,357		8,506		—		2,527		11,808			733		—		88,931
Lease operating expenses		619,346		305,323		147,656		57,942		185,902			40,807		5,398		1,362,374
Gathering and transportation costs		31,810		34,246		10,995		—		26,387			763		121		104,322
Production taxes(2)		104,535		8,982		—		19,524		394,487			2,559		—		530,087
Income tax		519,435		215,147		603,887		61,898		278,937			10,770		16,170		1,706,244
		2,083,464		927,650		1,009,892		288,297		1,076,203			147,194		39,680		5,572,380
Results of operations	$	943,763	$	451,976	$	654,211	$	120,156	$	278,936		$	20,001	$	32,830	$	2,501,873
Amortization rate per boe	$	10.90	$	9.97	$	6.23	$	8.48	$	8.31		$	9.08	$	15.56	$	9.29
2005
Oil and gas production revenues	$	2,824,522	$	1,450,801	$	1,358,183	$	400,791	$	1,274,470		$	17,220	$	131,304	$	7,457,291
Operating costs:
Depreciation, depletion and amortization(1)		556,922		261,195		221,230		100,798		186,675			7,214		50,678		1,384,712
Asset retirement obligation accretion		31,657		6,811		—		2,414		12,709			129		—		53,720
Lease operating expenses		477,780		229,592		116,160		55,666		146,015			4,012		11,250		1,040,475
Gathering and transportation costs		29,954		33,309		7,991		—		28,248			—		758		100,260
Production taxes(2)		99,009		9,112		—		38,386		285,293			—		—		431,800
Income tax		578,366		332,435		486,145		69,199		246,212			2,053		22,644		1,737,054
		1,773,688		872,454		831,526		266,463		905,152			13,408		85,330		4,748,021
Results of operations	$	1,050,834	$	578,347	$	526,657	$	134,328	$	369,318		$	3,812	$	45,974	$	2,709,270
Amortization rate per boe	$	8.78	$	7.71	$	6.34	$	6.82	$	7.76		$	11.75	$	17.07	$	7.99
2004
Oil and gas production revenues	$	2,332,064	$	1,014,097	$	932,767	$	458,006	$	472,091		$	7,723	$	91,269	$	5,308,017
Operating costs:
Depreciation, depletion and amortization(1)		531,593		200,155		176,307		117,098		126,237			2,582		39,604		1,193,576
Asset retirement obligation accretion		25,531		6,078		—		2,277		12,048			126		—		46,060
Lease operating expenses		376,608		186,043		92,791		52,309		143,453			2,390		10,784		864,378
Gathering and transportation costs		28,324		30,741		—		—		22,619			—		577		82,261
Production taxes(2)		62,791		9,551		—		64,345		(61,361	)		454		—		75,780
Income tax		490,206		233,949		318,561		75,472		98,511			760		13,300		1,230,759
		1,515,053		666,517		587,659		311,501		341,507			6,312		64,265		3,492,814
Results of operations	$	817,011	$	347,580	$	345,108	$	146,505	$	130,584		$	1,411	$	27,004	$	1,815,203
Amortization rate per boe	$	7.88	$	6.28	$	5.60	$	6.53	$	6.49		$	5.87	$	14.27	$	7.01

(1)	This amount only reflects DD&A of capitalized costs of oil and gas proved properties and, therefore, does not agree with DD&A reflected on Note 12, Business Segment Information.
(2)	This amount only reflects amounts directly related to oil and gas producing properties and, therefore, does not agree with severance and other taxes reflected on Note 12, Business Segment Information.

F-43

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Costs Incurred In Oil And Gas Property Acquisition, Exploration, And Development Activities

														Other
	United States		Canada		Egypt		Australia		North Sea			Argentina		International		Total
							(In thousands)
2006
Acquisitions:
Proved	$	1,246,748	$	5,859	$	—	$	23,981	$	—		$	800,673	$	—	$	2,077,261
Unproved		71,260		—		—		—		3,060			321,500		—		395,820
Exploration		102,711		212,700		84,404		127,246		110,465			76,503		2,028		716,057
Development		1,660,523		891,008		376,877		58,573		219,033			39,067		10,260		3,255,341
Costs incurred(1)	$	3,081,242	$	1,109,567	$	461,281	$	209,800	$	332,558		$	1,237,743	$	12,288	$	6,444,479
(1) Includes capitalized interest and asset retirement costs as follows:
Capitalized interest	$	29,300	$	21,793	$	6,389	$	3,819	$	—		$	—	$	—	$	61,301
Asset retirement costs	$	348,057	$	25,301	$	—	$	2,108	$	—		$	15,146	$	—	$	390,612
2005
Acquisitions:
Proved	$	22,126	$	27,037	$	—	$	—	$	—		$	—	$	—	$	49,163
Unproved		2,721		—		—		—		—			1,508		—		4,229
Exploration		67,343		286,421		67,028		94,385		24,867			22,491		—		562,535
Development		1,551,702		947,247		293,021		136,782		440,045			3,472		22,521		3,394,790
Costs incurred(1)	$	1,643,892	$	1,260,705	$	360,049	$	231,167	$	464,912		$	27,471	$	22,521	$	4,010,717
(1) Includes capitalized interest and asset retirement costs as follows:
Capitalized interest	$	25,600	$	17,336	$	7,725	$	2,727	$	3,600		$	—	$	—	$	56,988
Asset retirement costs	$	532,784	$	31,021	$	—	$	10,624	$	(27,760	)	$	—	$	—	$	546,669
2004
Acquisitions:
Proved	$	1,081,760	$	9,839	$	—	$	—	$	1,677		$	—	$	—	$	1,093,276
Unproved		126,770		—		—		—		—			—		—		126,770
Exploration		85,375		179,990		62,771		53,736		15,002			4,277		—		401,151
Development		718,924		602,755		245,704		86,706		352,171			398		21,818		2,028,476
Costs incurred(1)	$	2,012,829	$	792,584	$	308,475	$	140,442	$	368,850		$	4,675	$	21,818	$	3,649,673
(1) Includes capitalized interest and asset retirement costs as follows:
Capitalized interest	$	21,000	$	15,152	$	6,563	$	1,748	$	6,285		$	—	$	—	$	50,748
Asset retirement costs	$	183,915	$	10,681	$	—	$	—	$	(643	)	$	—	$	—	$	193,953

Capitalized Costs

The following table sets forth the capitalized costs and associated accumulated depreciation, depletion and amortization, including impairments, relating to the Company’s oil and gas production, exploration and development activities:

																			Other
	United States			Canada			Egypt			Australia			North Sea			Argentina			International			Total
										(In thousands)
2006
Proved properties	$	15,994,802		$	6,179,127		$	2,238,035		$	1,708,255		$	2,032,133		$	955,137		$	432		$	29,107,921
Unproved properties		332,263			339,157			139,857			63,327			73,046			337,093			—			1,284,743
		16,327,065			6,518,284			2,377,892			1,771,582			2,105,179			1,292,230			432			30,392,664
Accumulated DD&A		(6,347,121	)		(1,536,844	)		(1,219,794	)		(778,006	)		(563,550	)		(104,194	)		999			(10,548,510	)
	$	9,979,944		$	4,981,440		$	1,158,098		$	993,576		$	1,541,629		$	1,188,036		$	1,431		$	19,844,154
2005
Proved properties	$	12,983,185		$	5,117,868		$	2,193,279		$	1,512,215		$	1,735,646		$	46,264		$	248,332		$	23,836,789
Unproved properties		264,147			291,120			132,509			49,566			38,675			11,129			8,560			795,706
		13,247,332			5,408,988			2,325,788			1,561,781			1,774,321			57,393			256,892			24,632,495
Accumulated DD&A		(5,607,170	)		(1,208,397	)		(1,008,660	)		(645,244	)		(384,868	)		(14,559	)		(177,290	)		(9,046,188	)
	$	7,640,162		$	4,200,591		$	1,317,128		$	916,537		$	1,389,453		$	42,834		$	79,602		$	15,586,307

F-44

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Costs Not Being Amortized

The following table sets forth a summary of oil and gas property costs not being amortized at December 31, 2006, by the year in which such costs were incurred. There are no individually significant properties or significant development projects included in costs not being amortized. The majority of the evaluation activities are expected to be completed within five to ten years.

									2003
	Total		2006		2005		2004		and Prior
					(In thousands)
Property acquisition costs	$	908,757	$	453,059	$	127,212	$	148,428	$	180,058
Exploration and development		351,745		151,470		111,349		52,314		36,612
Capitalized interest		24,241		5,692		8,118		2,547		7,884
Total	$	1,284,743	$	610,221	$	246,679	$	203,289	$	224,554

Oil and Gas Reserve Information

We engage Ryder Scott Company, L.P. Petroleum Consultants as independent petroleum engineers to review our estimates of proved hydrocarbon liquid and gas reserves and provide an opinion letter on the reasonableness of Apache’s internal projections. Ryder Scott opined that they were in acceptable agreement with the Company’s overall reserve estimates and that the reserves they reviewed conform to the SEC’s definition of proved reserves as set forth in Rule 210.4-10 (a) of Regulation S-X. The independent reviews typically cover a large percentage of major value fields, international properties and new wells drilled during the year. During 2006, 2005 and 2004, their review covered 75, 74 and 79 percent of Apache’s worldwide estimated reserve value, respectively.

F-45

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

There are numerous uncertainties inherent in estimating quantities of proved reserves and projecting future rates of production and timing of development expenditures. The following reserve data only represent estimates and should not be construed as being exact.

	Crude Oil, Condensate and Natural Gas Liquids																								Natural Gas
																						(Millions of cubic feet)
	(Thousands of barrels)																																															Total
																																																(Thousand
																																																barrels of
	United												North												United												North											oil
	States			Canada			Egypt			Australia			Sea			Argentina			China			Total			States			Canada			Egypt			Australia			Sea			Argentina			China		Total			equivalent)
Proved developed reserves:
December 31, 2003		265,135			91,501			54,881			26,999			147,880			845			6,448			593,689			1,565,855			1,411,877			337,844			218,745			3,902			2,750			—		3,540,973			1,183,851
December 31, 2004		320,752			87,914			57,084			18,919			172,260			910			4,811			662,650			1,722,803			1,479,271			474,028			158,789			6,804			2,364			—		3,844,059			1,303,327
December 31, 2005		313,580			87,012			59,197			22,550			189,385			1,573			3,393			676,690			1,711,060			1,799,102			605,687			649,972			7,475			2,594			—		4,775,890			1,472,672
December 31, 2006		343,743			102,417			58,366			20,197			178,364			25,378			—			728,464			1,840,105			1,591,157			664,818			584,236			6,840			438,391			—		5,125,547			1,582,722
Total proved reserves:
Balance December 31, 2003		389,365			168,406			73,173			53,102			147,880			1,140			10,822			843,888			2,029,392			1,605,683			550,967			683,273			3,902			2,751			—		4,875,968			1,656,549
Extensions, discoveries and
other additions		26,600			1,106			26,865			10,422			45,261			229			(43	)		110,440			291,303			542,779			452,509			54,272			3,575			1,007			—		1,345,445			334,681
Purchases of minerals in-place		84,375			165			—			—			389			—			—			84,929			268,386			17,273			—			—			12			—			—		285,671			132,541
Revisions of previous estimates		(13,588	)		(1,207	)		(2,955	)		2			(4	)		(2	)		(346	)		(18,100	)		53,816			(61,695	)		(18,572	)		1			—			1			—		(26,449	)		(22,508	)
Production		(27,867	)		(10,209	)		(19,099	)		(9,214	)		(19,338	)		(207	)		(2,775	)		(88,709	)		(236,660	)		(119,669	)		(50,412	)		(43,228	)		(685	)		(1,395	)		—		(452,049	)		(164,050	)
Sales of properties		(408	)		—			—			—			—			—			—			(408	)		(657	)		—			—			—			—			—			—		(657	)		(518	)
Balance December 31, 2004		458,477			158,261			77,984			54,312			174,188			1,160			7,658			932,040			2,405,580			1,984,371			934,492			694,318			6,804			2,364			—		6,027,929			1,936,695
Extensions, discoveries and
other additions		27,055			16,531			37,431			2,623			44,977			880			427			129,924			388,844			526,876			241,420			175,502			1,441			1,350			—		1,335,433			352,496
Purchases of minerals in-place		2,020			1,874			—			—			—			—			—			3,894			17,792			5,749			—			—			—			—			—		23,541			7,818
Revisions of previous estimates		4,039			2,591			(4,396	)		—			1			45			(110	)		2,170			23,470			(13,717	)		(35,071	)		—			72			17			—		(25,229	)		(2,035	)
Production		(26,945	)		(9,028	)		(20,126	)		(5,613	)		(23,904	)		(424	)		(2,968	)		(89,008	)		(218,080	)		(135,749	)		(60,484	)		(45,003	)		(842	)		(1,137	)		—		(461,295	)		(165,890	)
Sales of properties		(3,078	)		(32	)		—			—			—			—			—			(3,110	)		(51,419	)		(938	)		—			—			—			—			—		(52,357	)		(11,836	)
Balance December 31, 2005		461,568			170,197			90,893			51,322			195,262			1,661			5,007			975,910			2,566,187			2,366,592			1,080,357			824,817			7,475			2,594			—		6,848,022			2,117,248
Extensions, discoveries and
other additions		12,354			18,430			18,535			23,517			21,777			3,422			3,386			101,421			253,707			248,549			151,086			46,860			118			36,986			—		737,306			224,305
Purchases of minerals in-place		53,853			643			—			—			—			28,351			—			82,847			195,552			1,500			—			—			—			484,707			—		681,759			196,473
Revisions of previous estimates		(2,009	)		63			31			24			—			147			(19	)		(1,763	)		(74,225	)		(102,922	)		3,965			4			—			1,858			—		(171,320	)		(30,317	)
Production		(27,308	)		(8,359	)		(20,648	)		(4,341	)		(21,369	)		(3,064	)		(1,156	)		(86,245	)		(243,441	)		(147,579	)		(79,424	)		(67,934	)		(753	)		(40,878	)		—		(580,009	)		(182,913	)
Sales of properties		(3,187	)		—			—			—			—			(724	)		(7,218	)		(11,129	)		(2,418	)		(421	)		—			—			—			—			—		(2,839	)		(11,602	)
Balance December 31, 2006		495,271			180,974			88,811			70,522			195,670			29,793			—			1,061,041			2,695,362			2,365,719			1,155,984			803,747			6,840			485,267			—		7,512,919			2,313,194

As of December 31, 2006, 2005 and 2004, on a barrel of equivalent basis 32, 30 and 33 percent of our estimated worldwide reserves, respectively, were classified as proved undeveloped. Approximately 22 percent of our year-end 2006 estimated proved developed reserves are classified as proved not producing. These reserves relate to zones that are either behind pipe, or that have been completed but not yet produced, or zones that have been produced in the past, but are not now producing because of mechanical reasons. These reserves may be regarded as less certain than producing reserves because they are frequently based on volumetric calculations rather than performance data. Future production associated with behind pipe reserves is scheduled to follow depletion of the currently producing zones in the same wellbores. It should be noted that additional capital may have to be spent to access these reserves. The capital and economic impact of production timing are reflected in this Note 14, under “Future Net Cash Flows.” The Company reports all estimated proved reserves held under production sharing agreements utilizing the economic interest method, which excludes the host country’s share of reserves.

F-46

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Future Net Cash Flows

Future cash inflows are based on year-end oil and gas prices except in those instances where future natural gas or oil sales are covered by physical contract terms providing for higher or lower amounts. Operating costs, production and ad valorem taxes and future development costs are based on current costs with no escalation.

The following table sets forth unaudited information concerning future net cash flows for oil and gas reserves, net of income tax expense. Income tax expense has been computed using expected future tax rates and giving effect to tax deductions and credits available, under current laws, and which relate to oil and gas producing activities. This information does not purport to present the fair market value of the Company’s oil and gas assets, but does present a standardized disclosure concerning possible future net cash flows that would result under the assumptions used.

	United
	States			Canada(1)			Egypt			Australia			North Sea			Argentina			China			Total
							(In thousands)
2006
Cash inflows	$	42,809,947		$	22,835,940		$	9,000,743		$	5,747,306		$	11,736,209		$	1,775,939		$	—		$	93,906,084
Production costs		(10,930,520	)		(7,602,015	)		(1,101,859	)		(1,804,495	)		(6,905,086	)		(427,363	)		—			(28,771,338	)
Development costs		(3,207,033	)		(1,888,896	)		(1,554,931	)		(985,414	)		(672,059	)		(190,508	)		—			(8,498,841	)
Income tax expense		(8,862,385	)		(5,049,325	)		(2,466,836	)		(883,814	)		(1,624,701	)		(298,424	)		—			(19,185,485	)
Net cash flows		19,810,009			8,295,704			3,877,117			2,073,583			2,534,363			859,644			—			37,450,420
10 percent discount rate		(9,910,108	)		(4,714,251	)		(1,404,781	)		(850,124	)		(923,183	)		(278,584	)		—			(18,081,031	)
Discounted future net cash flows(2)	$	9,899,901		$	3,581,453		$	2,472,336		$	1,223,459		$	1,611,180		$	581,060		$	—		$	19,369,389
2005
Cash inflows	$	47,315,554		$	29,305,244		$	8,545,414		$	4,298,054		$	10,879,416		$	77,752		$	251,906		$	100,673,340
Production costs		(10,164,938	)		(7,299,065	)		(972,441	)		(1,132,858	)		(6,345,449	)		(22,743	)		(42,027	)		(25,979,521	)
Development costs		(2,355,717	)		(1,189,550	)		(1,072,391	)		(537,257	)		(650,721	)		(3,305	)		(34,553	)		(5,843,494	)
Income tax expense		(11,098,793	)		(6,232,460	)		(2,307,759	)		(715,294	)		(1,355,266	)		(5,746	)		(39,906	)		(21,755,224	)
Net cash flows		23,696,106			14,584,169			4,192,823			1,912,645			2,527,980			45,958			135,420			47,095,101
10 percent discount rate		(11,617,808	)		(7,868,888	)		(1,537,495	)		(723,140	)		(787,319	)		(8,598	)		(23,504	)		(22,566,752	)
Discounted future net cash flows(2)	$	12,078,298		$	6,715,281		$	2,655,328		$	1,189,505		$	1,740,661		$	37,360		$	111,916		$	24,528,349
2004
Cash inflows	$	32,557,246		$	17,140,078		$	6,233,328		$	3,065,332		$	6,783,414		$	37,659		$	286,304		$	66,103,361
Production costs		(8,185,633	)		(7,451,626	)		(818,876	)		(891,117	)		(4,098,870	)		(12,339	)		(76,941	)		(21,535,402	)
Development costs		(1,620,421	)		(584,160	)		(596,249	)		(422,045	)		(569,435	)		(3,795	)		(21,425	)		(3,817,530	)
Income tax expense		(7,342,348	)		(2,461,911	)		(1,790,617	)		(423,263	)		(617,244	)		(4,268	)		(38,046	)		(12,677,697	)
Net cash flows		15,408,844			6,642,381			3,027,586			1,328,907			1,497,865			17,257			149,892			28,072,732
10 percent discount rate		(7,414,246	)		(3,177,411	)		(1,165,331	)		(568,722	)		(418,169	)		(3,740	)		(29,035	)		(12,776,654	)
Discounted future net cash flows(2)	$	7,994,598		$	3,464,970		$	1,862,255		$	760,185		$	1,079,696		$	13,517		$	120,857		$	15,296,078

1)	Prior to 2007, Canadian provincial tax credits were included in the estimated future net cash flows. Effective January 1, 2007, the Alberta government eliminated the Royalty Tax Credit program.
2)	Estimated future net cash flows before income tax expense, discounted at 10 percent per annum, totaled approximately $29.6 billion, $35.9 billion and $22.2 billion as of December 31, 2006, 2005 and 2004, respectively.

F-47

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table sets forth the principal sources of change in the discounted future net cash flows:

	For the Year Ended December 31,
	2006			2005			2004
				(In thousands)
Sales, net of production costs	$	(6,192,148	)	$	(5,990,000	)	$	(4,383,289	)
Net change in prices and production costs		(5,765,792	)		13,133,104			1,119,906
Discoveries and improved recovery, net of related costs		3,256,269			5,572,707			4,404,964
Change in future development costs		(665,840	)		(635,122	)		103,481
Revision of quantities		(439,936	)		(298,487	)		(242,005	)
Purchases of minerals in-place		2,161,922			201,719			2,051,068
Accretion of discount		3,592,933			2,226,336			1,660,486
Change in income taxes		1,119,235			(4,426,510	)		(2,091,187	)
Sales of properties		(73,817	)		(121,773	)		(5,825	)
Change in production rates and other		(2,151,786	)		(429,703	)		900,635
	$	(5,158,960	)	$	9,232,271		$	3,518,234

Impact of Pricing

The estimates of cash flows and reserve quantities shown above are based on year-end oil and gas prices, except in those cases where future natural gas or oil sales are covered by physical contracts at specified prices. Forward price volatility is largely attributable to supply and demand perceptions for natural gas and oil.

Under full-cost accounting rules, the Company reviews the carrying value of its proved oil and gas properties each quarter on a country-by-country basis. Under these rules, capitalized costs of proved 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 at 10 percent, plus the lower of cost or fair value of unproved properties included in the costs being amortized, net of related tax effects (the “ceiling”). These rules generally require pricing future oil and gas production at the unescalated oil and gas prices at the end of each fiscal quarter and require a write-down if the “ceiling” is exceeded. Given the volatility of oil and gas prices, it is reasonably possible that the Company’s estimate of discounted future net cash flows from proved oil and gas reserves could change in the near term. If oil and gas prices decline significantly, even if only for a short period of time, it is possible that write-downs of oil and gas properties could occur in the future.

F-48

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

14. SUPPLEMENTAL QUARTERLY FINANCIAL DATA (Unaudited)

	First		Second		Third		Fourth		Total
			(In thousands, except per share amounts)
2006
Revenues	$	1,999,102	$	2,061,518	$	2,261,481	$	1,966,678	$	8,288,779
Expenses, net		1,338,181		1,337,893		1,614,417		1,445,837		5,736,328
Net income	$	660,921	$	723,625	$	647,064	$	520,841	$	2,552,451
Income attributable to common stock	$	659,501	$	722,205	$	645,644	$	519,421	$	2,546,771
Net income per common share(1):
Basic	$	2.00	$	2.19	$	1.96	$	1.57	$	7.72
Diluted	$	1.97	$	2.17	$	1.94	$	1.56	$	7.64
2005
Revenues	$	1,662,288	$	1,759,231	$	2,061,052	$	2,101,673	$	7,584,244
Expenses, net		1,101,805		1,171,201		1,374,057		1,313,451		4,960,514
Net income	$	560,483	$	588,030	$	686,995	$	788,222	$	2,623,730
Income attributable to common stock	$	559,063	$	586,610	$	685,575	$	786,802	$	2,618,050
Net income per common share(1):
Basic	$	1.70	$	1.79	$	2.08	$	2.39	$	7.96
Diluted	$	1.67	$	1.76	$	2.05	$	2.35	$	7.84

(1) The sum of the individual quarterly net income per common share amounts may not agree with year-to-date net income per common share as each quarterly computation is based on the weighted average number of common shares outstanding during that period. All potentially dilutive securities were included in each quarterly computation of diluted net income per common share, as none were antidilutive.

15.   SUPPLEMENTAL GUARANTOR INFORMATION

Prior to 2001, Apache Finance Australia was a finance subsidiary of Apache with no independent operations. In this capacity, it issued approximately $270 million of publicly traded notes that are fully and unconditionally guaranteed by Apache and, beginning in 2001, Apache North America, Inc. The guarantors of Apache Finance Australia have joint and several liabilities. Similarly, Apache Finance Canada was also a finance subsidiary of Apache and had issued approximately $300 million of publicly traded notes that were fully and unconditionally guaranteed by Apache.

Generally, the issuance of publicly traded securities would subject those subsidiaries to the reporting requirements of the Securities and Exchange Commission. Since these subsidiaries had no independent operations and qualified as “finance subsidiaries,” they were exempted from these requirements.

During 2001, Apache contributed stock of its Australian and Canadian operating subsidiaries to Apache Finance Australia and Apache Finance Canada, respectively. As a result of these contributions, they no longer qualify as finance subsidiaries. As allowed by the SEC rules, the following condensed consolidating financial statements are provided as an alternative to filing separate financial statements.

Each of the companies presented in the condensed consolidating financial statements is wholly owned and has been consolidated in Apache Corporation’s consolidated financial statements for all periods presented. As such, the 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.

F-49

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Year Ended December 31, 2006

											All Other
											Subsidiaries
	Apache		Apache		Apache			Apache			of Apache			Reclassifications
	Corporation		North America		Finance Australia			Finance Canada			Corporation			& Eliminations			Consolidated
					(In thousands)
REVENUES AND OTHER:
Oil and gas production revenues	$	2,920,731	$	—	$	—		$	—		$	5,382,157		$	(228,635	)	$	8,074,253
Equity in net income (loss) of affiliates		1,795,327		33,997		41,733			277,944			(45,977	)		(2,103,024	)		—
Gain on China divestiture		—		—		—			—			173,545			—			173,545
Other		94,369		—		(63	)		—			(53,325	)		—			40,981
		4,810,427		33,997		41,670			277,944			5,456,400			(2,331,659	)		8,288,779
OPERATING EXPENSES:
Depreciation, depletion and amortization		752,930		—		—			—			1,063,429			—			1,816,359
Asset retirement obligation accretion		65,357		—		—			—			23,574			—			88,931
Lease operating costs		614,154		—		—			—			976,855			(228,635	)		1,362,374
Gathering and transportation costs		31,618		—		—			—			72,704			—			104,322
Severance and other taxes		108,193		—		—			—			445,785			—			553,978
General and administrative		161,625		—		—			—			49,709			—			211,334
Financing costs, net		118,429		—		18,003			56,444			(50,990	)		—			141,886
		1,852,306		—		18,003			56,444			2,581,066			(228,635	)		4,279,184
INCOME (LOSS) BEFORE INCOME TAXES		2,958,121		33,997		23,667			221,500			2,875,334			(2,103,024	)		4,009,595
Provision (benefit) for income taxes		405,670		—		(10,330	)		(18,203	)		1,080,007			—			1,457,144
NET INCOME		2,552,451		33,997		33,997			239,703			1,795,327			(2,103,024	)		2,552,451
Preferred stock dividends		5,680		—		—			—			—			—			5,680
INCOME ATTRIBUTABLE TO COMMON STOCK	$	2,546,771	$	33,997	$	33,997		$	239,703		$	1,795,327		$	(2,103,024	)	$	2,546,771

F-50

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Year Ended December 31, 2005

											All Other
											Subsidiaries
	Apache		Apache		Apache			Apache			of Apache			Reclassifications
	Corporation		North America		Finance Australia			Finance Canada			Corporation			& Eliminations			Consolidated
					(In thousands)
REVENUES AND OTHER:
Oil and gas production revenues	$	2,784,339	$	—	$	—		$	—		$	5,002,331		$	(329,379	)	$	7,457,291
Equity in net income of affiliates		1,636,571		34,622		46,839			275,191			(49,699	)		(1,943,524	)		—
Other		125,812		—		(25	)		—			1,166			—			126,953
		4,546,722		34,622		46,814			275,191			4,953,798			(2,272,903	)		7,584,244
OPERATING EXPENSES:
Depreciation, depletion and amortization		575,748		—		—			—			839,934			—			1,415,682
Asset retirement obligation accretion		31,657		—		—			—			22,063			—			53,720
Lease operating costs		477,780		—		—			—			892,074			(329,379	)		1,040,475
Gathering and transportation costs		30,025		—		—			—			70,235			—			100,260
Severance and other taxes		103,381		—		—			1			349,876			—			453,258
General and administrative		167,011		—		—			—			31,261			—			198,272
Financing costs, net		76,004		—		18,050			56,440			(34,171	)		—			116,323
		1,461,606		—		18,050			56,441			2,171,272			(329,379	)		3,377,990
INCOME (LOSS) BEFORE INCOME TAXES		3,085,116		34,622		28,764			218,750			2,782,526			(1,943,524	)		4,206,254
Provision (benefit) for income taxes		461,386		—		(5,858	)		(18,959	)		1,145,955			—			1,582,524
NET INCOME		2,623,730		34,622		34,622			237,709			1,636,571			(1,943,524	)		2,623,730
Preferred stock dividends		5,680		—		—			—			—			—			5,680
INCOME ATTRIBUTABLE TO COMMON STOCK	$	2,618,050	$	34,622	$	34,622		$	237,709		$	1,636,571		$	(1,943,524	)	$	2,618,050

F-51

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Year Ended December 31, 2004

												All Other
												Subsidiaries
	Apache			Apache		Apache			Apache			of Apache			Reclassifications
	Corporation			North America		Finance Australia			Finance Canada			Corporation			& Eliminations			Consolidated
						(In thousands)
REVENUES AND OTHER:
Oil and gas production revenues	$	2,313,901		$	—	$	—		$	—		$	3,295,849		$	(301,733	)	$	5,308,017
Equity in net income of affiliates		978,881			51,888		63,859			152,823			33,641			(1,281,092	)		—
Other		47,321			—		(25	)		—			(22,736	)		—			24,560
		3,340,103			51,888		63,834			152,823			3,306,754			(1,582,825	)		5,332,577
OPERATING EXPENSES:
Depreciation, depletion and amortization		551,057			—		—			—			671,095			—			1,222,152
Asset retirement obligation accretion		25,531			—		—			—			20,529			—			46,060
Lease operating costs		375,894			—		—			—			790,217			(301,733	)		864,378
Gathering and transportation costs		28,317			—		—			—			53,944			—			82,261
Severance and other taxes		65,559			—		—			(208	)		28,397			—			93,748
General and administrative		138,058			—		—			—			35,136			—			173,194
China litigation provision		—			—		—			—			71,216			—			71,216
Financing costs, net		86,980			—		18,047			40,363			(28,905	)		—			116,485
		1,271,396			—		18,047			40,155			1,641,629			(301,733	)		2,669,494
INCOME (LOSS) BEFORE INCOME TAXES		2,068,707			51,888		45,787			112,668			1,665,125			(1,281,092	)		2,663,083
Provision (benefit) for income taxes		398,636			—		(6,101	)		(85,767	)		686,244			—			993,012
INCOME (LOSS) BEFORE CHANGE IN ACCOUNTING PRINCIPLE		1,670,071			51,888		51,888			198,435			978,881			(1,281,092	)		1,670,071
Cumulative effect of change in accounting principle, net of income tax		(1,317	)		—		—			—			—			—			(1,317	)
NET INCOME		1,668,754			51,888		51,888			198,435			978,881			(1,281,092	)		1,668,754
Preferred stock dividends		5,680			—		—			—			—			—			5,680
INCOME ATTRIBUTABLE TO COMMON STOCK	$	1,663,074		$	51,888	$	51,888		$	198,435		$	978,881		$	(1,281,092	)	$	1,663,074

F-52

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2006

													All Other
													Subsidiaries
	Apache			Apache			Apache			Apache			of Apache			Reclassifications
	Corporation			North America			Finance Australia			Finance Canada			Corporation			& Eliminations			Consolidated
							(In thousands)
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	1,508,882		$	—		$	(20,706	)	$	(21,372	)	$	2,846,102		$	—		$	4,312,906
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment		(1,834,732	)		—			—			—			(2,056,907	)		—			(3,891,639	)
Acquisition of BP p.l.c. properties		(833,820	)		—			—			—			—			—			(833,820	)
Acquisition of Pioneer’s Argentine operations					—			—			—			(704,809	)		—			(704,809	)
Acquisition of Amerada Hess properties		(229,134	)		—			—			—			—			—			(229,134	)
Acquisition of Pan American Fueguina S.R.L. properties					—			—			—			(396,056	)		—			(396,056	)
Additions to gas gathering, transmission and processing facilities		(53,656	)		—			—			—			(194,933	)		—			(248,589	)
Proceeds from China divestiture		—			—			—			—			264,081			—			264,081
Proceeds from sale of Egyptian properties		—			—			—			—			409,203			—			409,203
Proceeds from sales of oil and gas properties		—			—			—			—			4,740			—			4,740
Investment in and advances to subsidiaries, net		6,270			(18,050	)		—			—			(41,333	)		53,113			—
Other, net		120,997			—			—			—			(270,556	)		—			(149,559	)
NET CASH USED IN INVESTING ACTIVITIES		(2,824,075	)		(18,050	)		—			—			(2,986,570	)		53,113			(5,775,582	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt borrowings		1,714,813			—			2,654			1,651			21,685			39,160			1,779,963
Payments on debt		(143,900	)		—			—			—			(6,366	)		—			(150,266	)
Dividends paid		(154,143	)		—			—			—			—			—			(154,143	)
Common stock activity		31,963			18,050			18,050			19,721			36,452			(92,273	)		31,963
Treasury stock activity, net		(166,907	)		—			—			—			—			—			(166,907	)
Cost of debt and equity transactions		(2,061	)		—			—			—			—			—			(2,061	)
Other		35,791			—			—			—			—			—			35,791
NET CASH PROVIDED BY FINANCING ACTIVITIES		1,315,556			18,050			20,704			21,372			51,771			(53,113	)		1,374,340
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		363			—			(2	)		—			(88,697	)		—			(88,336	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		3,785			—			2			1			225,072			—			228,860
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	4,148		$	—		$	—		$	1		$	136,375		$	—		$	140,524

F-53

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2005

													All Other
													Subsidiaries
													of Apache
	Apache			Apache			Apache			Apache			Apache			Reclassifications
	Corporation			North America			Finance Australia			Finance Canada			Corporation			& Eliminations			Consolidated
							(In thousands)
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	1,976,399		$	—		$	(21,000	)	$	(40,186	)	$	2,417,057		$	—		$	4,332,270
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment		(1,572,043	)		—			—			—			(2,143,813	)		—			(3,715,856	)
Proceeds from sales of oil and gas properties		78,468			—			—			—			1,195			—			79,663
Investment in and advances to subsidiaries, net		26,088			(18,050	)		—			—			(60,908	)		52,870			—
Other, net		(23,612	)		—			—			—			(72,037	)		—			(95,649	)
NET CASH USED IN INVESTING ACTIVITIES		(1,491,099	)		(18,050	)		—			—			(2,275,563	)		52,870			(3,731,842	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings		153,087			—			2,950			554			(49,058	)		45,835			153,368
Payments on long-term debt		(548,700	)		—			—			—			(830	)		—			(549,530	)
Dividends paid		(117,395	)		—			—			—			—			—			(117,395	)
Common stock activity		18,864			18,050			18,050			39,630			22,975			(98,705	)		18,864
Treasury stock activity, net		6,620			—			—			—			—			—			6,620
Cost of debt and equity transactions		(861	)		—			—			—			—			—			(861	)
Other		6,273			—			—			—			—			—			6,273
NET CASH PROVIDED BY FINANCING ACTIVITIES		(482,112	)		18,050			21,000			40,184			(26,913	)		(52,870	)		(482,661	)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS		3,188			—			—			(2	)		114,581			—			117,767
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR		597			—			2			3			110,491			—			111,093
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	3,785		$	—		$	2		$	1		$	225,072		$	—		$	228,860

F-54

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2004

													All Other
													Subsidiaries
	Apache			Apache			Apache			Apache			of Apache			Reclassifications
	Corporation			North America			Finance Australia			Finance Canada			Corporation			& Eliminations			Consolidated
										(In thousands)
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES	$	1,486,100		$	—		$	(17,500	)	$	(356,371	)	$	2,119,290		$	—		$	3,231,519
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment		(900,464	)		—			—			—			(1,556,024	)		—			(2,456,488	)
Acquisitions		(880,136	)		—			—			—			—			—			(880,136	)
Proceeds from sales of oil and gas properties		3,210			—			—			—			832			—			4,042
Investment in and advances to subsidiaries, net		62,069			(18,050	)		—			—			(373,353	)		329,334			—
Other, net		(27,003	)		—			—			—			(51,428	)		—			(78,431	)
NET CASH USED IN INVESTING ACTIVITIES		(1,742,324	)		(18,050	)		—			—			(1,979,973	)		329,334			(3,411,013	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings		544,561			—			(550	)		347,550			(184,717	)		(162,020	)		544,824
Payments on long-term debt		(283,400	)		—			—			—			—			—			(283,400	)
Dividends paid		(90,369	)		—			—			—			—			—			(90,369	)
Common stock activity		21,595			18,050			18,050			8,823			122,391			(167,314	)		21,595
Treasury stock activity, net		12,472			—			—			—			—			—			12,472
Cost of debt and equity transactions		(2,303	)		—			—			—			—			—			(2,303	)
Other		54,265			—			—			—			—			—			54,265
NET CASH PROVIDED BY FINANCING ACTIVITIES		256,821			18,050			17,500			356,373			(62,326	)		(329,334	)		257,084
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS		597			—			—			2			76,991			—			77,590
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		—			—			2			1			33,500			—			33,503
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	597		$	—		$	2		$	3		$	110,491		$	—		$	111,093

F-55

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

CONDENSED CONSOLIDATING BALANCE SHEET

For the Year Ended December 31, 2006

											All Other
											Subsidiaries
	Apache		Apache		Apache			Apache			of Apache			Reclassifications
	Corporation		North America		Finance Australia			Finance Canada			Corporation			& Eliminations			Consolidated
	(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	4,148	$	—	$	—		$	1		$	136,375		$	—		$	140,524
Receivables, net of allowance		824,404		—		861			—			826,399			—			1,651,664
Inventories		30,580		—		—			—			289,806			—			320,386
Drilling advances and other		374,067		—		—			—			3,630			—			377,697
		1,233,199		—		861			1			1,256,210			—			2,490,271
PROPERTY AND EQUIPMENT, NET		9,960,531		—		—			—			11,385,721			—			21,346,252
OTHER ASSETS:
Intercompany receivable, net		1,013,099		—		(6,355	)		(253,715	)		(753,029	)		—			—
Goodwill, net		—		—		—			—			189,252			—			189,252
Equity in affiliates		7,761,686		279,129		511,806			1,908,263			(1,171,863	)		(9,289,021	)		—
Deferred charges and other		122,893		—		—			3,985			155,522			—			282,400
	$	20,091,408	$	279,129	$	506,312		$	1,658,534		$	11,061,813		$	(9,289,021	)	$	24,308,175
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	381,780	$	—	$	—		$	57		$	263,052		$	—		$	644,889
Other accrued expenses		958,294		—		2,599			38,201			365,535			—			1,364,629
Current Debt		1,570,500		—		169,837			—			61,757			—			1,802,094
		2,910,574		—		172,436			38,258			690,344			—			3,811,612
LONG-TERM DEBT		1,271,845		—		99,809			646,926			1,251			—			2,019,831
DEFERRED CREDITS AND OTHER
NONCURRENT LIABILITIES:
Income taxes		1,631,847		—		(45,062	)		4,273			2,027,931			—			3,618,989
Advances from gas purchasers		43,167		—		—			—			—			—			43,167
Asset retirement obligation		932,844		—		—			—			438,009			—			1,370,853
Other		110,078		—		—			—			142,592			—			252,670
		2,717,936		—		(45,062	)		4,273			2,608,532			—			5,285,679
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY		13,191,053		279,129		279,129			969,077			7,761,686			(9,289,021	)		13,191,053
	$	20,091,408	$	279,129	$	506,312		$	1,658,534		$	11,061,813		$	(9,289,021	)	$	24,308,175

F-56

APACHE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

CONDENSED CONSOLIDATING BALANCE SHEET

For the Year Ended December 31, 2005

											All Other
											Subsidiaries
	Apache		Apache		Apache			Apache			of Apache			Reclassifications
	Corporation		North America		Finance Australia			Finance Canada			Corporation			& Eliminations			Consolidated
					(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	3,785	$	—	$	2		$	1		$	225,072		$	—		$	228,860
Receivables, net of allowance		516,208		—		—			—			928,337			—			1,444,545
Inventories		30,276		—		—			—			179,394			—			209,670
Drilling advances and other		188,607		—		—			—			90,395			—			279,002
		738,876		—		2			1			1,423,198			—			2,162,077
PROPERTY AND EQUIPMENT, NET		7,680,469		—		—			—			9,110,871			—			16,791,340
OTHER ASSETS:
Intercompany receivable, net		1,058,228		—		(3,936	)		(254,216	)		(800,076	)		—			—
Goodwill, net		—		—		—			—			189,252			—			189,252
Equity in affiliates		5,833,283		315,460		558,215			1,609,007			(1,183,600	)		(7,132,365	)		—
Deferred charges and other		44,974		—		—			4,301			79,852			—			129,127
	$	15,355,830	$	315,460	$	554,281		$	1,359,093		$	8,819,497		$	(7,132,365	)	$	19,271,796
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	378,247	$	—	$	—		$	946		$	335,405		$	—		$	714,598
Accrued expenses and other		687,125		—		5,619			38,343			740,879			—			1,471,966
		1,065,372		—		5,619			39,289			1,076,284			—			2,186,564
LONG-TERM DEBT		1,271,431		—		269,411			646,860			4,252			—			2,191,954
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes		1,140,457		—		(36,209	)		4,782			1,471,599			—			2,580,629
Advances from gas purchasers		68,768		—		—			—			—			—			68,768
Asset retirement obligation		972,024		—		—			—			390,334			—			1,362,358
Oil and gas derivative instruments		152,430		—		—			—			—			—			152,430
Other		144,133		—		—			—			43,745			—			187,878
		2,477,812		—		(36,209	)		4,782			1,905,678			—			4,352,063
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY		10,541,215		315,460		315,460			668,162			5,833,283			(7,132,365	)		10,541,215
	$	15,355,830	$	315,460	$	554,281		$	1,359,093		$	8,819,497		$	(7,132,365	)	$	19,271,796

F-57

Board of Directors

Frederick M. Bohen (3)(5)

Former Executive Vice President and

Chief Operating Officer,

The Rockefeller University

G. Steven Farris (1)

President, Chief Executive Officer and

Chief Operating Officer,

Apache Corporation

Randolph M. Ferlic, M.D.  (1)(2)

Founder and Former President,

Surgical Services of the Great Plains, P.C.

Eugene C. Fiedorek (2)

Private Investor, Former Managing Director,

EnCap Investments L.C.

A. D. Frazier, Jr. (3)(5)

Chairman and Chief Executive Officer,

Danka Business Systems PLC

Patricia Albjerg Graham(4)

Charles Warren Research Professor Emerita

of the History of American Education,

Harvard University

John A. Kocur (1)(3)

Attorney at Law; Former Vice Chairman of the Board,

Apache Corporation

George D. Lawrence (1)(3)

Private Investor; Former Chief Executive Officer,

The Phoenix Resource Companies, Inc.

F. H. Merelli (1)(2)

Chairman of the Board, Chief Executive Officer

and President, Cimarex Energy Co.

Rodman D. Patton (2)

Former Managing Director,

Merrill Lynch Energy Group

Charles J. Pitman (4)

Former Regional President — Middle East/Caspian/Egypt/India, BP Amoco plc;

Sole Member, Shaker Mountain Energy Associates, LLC

Raymond Plank (1)

Founder and Chairman of the Board,

Apache Corporation

Jay A. Precourt (4)

Chairman of the Board, Hermes Consolidated, Inc.

(1)	Executive Committee
(2)	Audit Committee
(3)	Management Development and Compensation Committee
(4)	Corporate Governance and Nominating Committee
(5)	Stock Option Plan Committee

Officers

Raymond Plank

Chairman of the Board

G. Steven Farris

President, Chief Executive Officer and

Chief Operating Officer

Michael S. Bahorich

Executive Vice President — Exploration and Production Technology

John A. Crum

Executive Vice President

Rodney J. Eichler

Executive Vice President and General Manager,

Apache Egypt Companies

Roger B. Plank

Executive Vice President and Chief Financial Officer

Floyd R. Price

Executive Vice President — Eurasia, Latin America

and New Ventures

Jon A. Jeppesen

Senior Vice President

P. Anthony Lannie

Senior Vice President and General Counsel

Sarah B. Teslik

Senior Vice President — Policy and Governance

Jeffrey M. Bender

Vice President — Human Resources

Michael J. Benson

Vice President — Security

Thomas P. Chambers

Vice President — Corporate Planning

John J. Christmann

Vice President — Business Development

Matthew W. Dundrea

Vice President and Treasurer

Robert J. Dye

Vice President — Investor Relations

Rebecca A. Hoyt

Vice President and Controller

Anthony R. Lentini, Jr.

Vice President — Public and International Affairs

Janine J. McArdle

Vice President — Oil and Gas Marketing

W. Kregg Olson

Vice President — Corporate Reservoir Engineering

Jon W. Sauer

Vice President — Tax

Cheri L. Peper

Corporate Secretary

Shareholder Information

Stock Data

					Dividends
	Price Range				per Share
	High		Low		Declared		Paid
2006
First Quarter	$	76.25	$	63.17	$	.10	$	.10
Second Quarter		75.66		56.50		.10		.10
Third Quarter		72.40		59.18		.15		.10
Fourth Quarter		70.50		59.99		.15		.15
2005
First Quarter	$	65.90	$	47.45	$	.08	$	.08
Second Quarter		67.99		51.52		.08		.08
Third Quarter		78.60		64.85		.10		.08
Fourth Quarter		75.95		59.36		.10		.10

The Company has paid cash dividends on its common stock for 42 consecutive years through December 31, 2006. Future dividend payments will depend upon the Company’s level of earnings, financial requirements and other relevant factors.

Apache common stock is listed on the New York and Chicago stock exchanges and the NASDAQ National Market (symbol APA). At December 31, 2006, the Company’s shares of common stock outstanding were held by approximately 7,000 shareholders of record and 319,000 beneficial owners. Also listed on the New York Stock Exchange are:

•  Apache Finance Canada’s 7.75% notes, due 2029 (symbol APA 29)

Corporate Offices

One Post Oak Central

2000 Post Oak Boulevard

Suite 100

Houston, Texas 77056-4400

(713) 296-6000

Independent Public Accountants

Ernst & Young LLP

Five Houston Center

1401 McKinney Street, Suite 1200

Houston, Texas 77010-2007

Stock Transfer Agent and Registrar

Wells Fargo Bank, N.A.

Attn: Shareowner Services

P.O. Box 64854

South St. Paul, Minnesota 55164-0854

(651) 450-4064 or (800) 468-9716

Communications concerning the transfer of shares, lost certificates, dividend checks, duplicate mailings or change of address should be directed to the stock transfer agent. Shareholders can access account information on the web site: http://www.shareowneronline.com

Dividend Reinvestment Plan

Shareholders of record may invest their dividends automatically in additional shares of Apache common stock at the market price. Participants may also invest up to an additional $25,000 in Apache shares each quarter through this service. All bank service fees and brokerage commissions on purchases are paid by Apache. A prospectus describing the terms of the Plan and an authorization form may be obtained from the Company’s stock transfer agent, Wells Fargo Bank, N.A.

Direct Registration

Shareholders of record may hold their shares of Apache common stock in book-entry form. This eliminates costs related to safekeeping or replacing paper stock certificates. In addition, shareholders of record may request electronic movement of book-entry shares between your account with the Company’s stock transfer agent and your broker. Stock certificates may be converted to book-entry shares at any time. Questions regarding this service may be directed to the Company’s stock transfer agent, Wells Fargo Bank, N.A.

Annual Meeting

Apache will hold its annual meeting of shareholders on Wednesday, May 2, 2007, at 10 a.m. in the Ballroom, Hilton Houston Post Oak, 2001 Post Oak Boulevard, Houston, Texas. Apache plans to web cast the annual meeting live; connect through the Apache web site: http://www.apachecorp.com

Stock Held in “Street Name”

The Company maintains a direct mailing list to ensure that shareholders with stock held in brokerage accounts receive information on a timely basis. Shareholders wanting to be added to this list should direct their requests to Apache’s Public and International Affairs Department, 2000 Post Oak Boulevard, Suite 100, Houston, Texas, 77056-4400, by calling (713) 296-6157 or by registering on Apache’s web site: http://www.apachecorp.com

Form 10-K Request

Shareholders and other persons interested in obtaining, without cost, a copy of the Company’s Form 10-K filed with the Securities and Exchange Commission may do so by writing to Cheri L. Peper, Corporate Secretary, 2000 Post Oak Boulevard, Suite 100, Houston, Texas, 77056-4400.

Investor Relations

Shareholders, brokers, securities analysts or portfolio managers seeking information about the Company are welcome to contact Robert J. Dye, Vice President of Investor Relations, at (713) 296-6662.

Members of the news media and others seeking information about the Company should contact Apache’s Public and International Affairs Department at (713) 296-6107.

Web site: http://www.apachecorp.com

EXHIBIT INDEX

Exhibit
No.				Description
	2	.1	—	Agreement and Plan of Merger among Registrant, YPY Acquisitions, Inc. and The Phoenix Resource Companies, Inc., dated March 27, 1996 (incorporated by reference to Exhibit 2.1 to Registrant’s Registration Statement on Form S-4, Registration No. 333-02305, filed April 5, 1996)
	2	.2	—	Purchase and Sale Agreement by and between BP Exploration & Production Inc., as seller, and Registrant, as buyer, dated January 11, 2003 (incorporated by reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K, dated and filed January 13, 2003, SEC File No. 001-4300)
	2	.3	—	Sale and Purchase Agreement by and between BP Exploration Operating Company Limited, as seller, and Apache North Sea Limited, as buyer, dated January 11, 2003 (incorporated by reference to Exhibit 2.2 to Registrant’s Current Report on Form 8-K, dated and filed January 13, 2003, SEC File No. 001-4300)
	3	.1	—	Restated Certificate of Incorporation of Registrant, dated February 11, 2004, as filed with the Secretary of State of Delaware on February 12, 2004 (incorporated by reference to Exhibit 3.1 to Registrant’s Annual Report on Form 10-K for year ended December 31, 2003, SEC File No. 001-4300)
	*3	.2	—	Bylaws of Registrant, as amended December 14, 2006
	4	.1	—	Form of Certificate for Registrant’s Common Stock (incorporated by reference to Exhibit 4.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, SEC File No. 001-4300)
	4	.2	—	Form of Certificate for Registrant’s 5.68% Cumulative Preferred Stock, Series B (incorporated by reference to Exhibit 4.2 to Amendment No. 2 on Form 8-K/A to Registrant’s Current Report on Form 8-K, dated and filed April 18, 1998, SEC File No. 001-4300)
	4	.3	—	Rights Agreement, dated January 31, 1996, between Registrant and Norwest Bank Minnesota, N.A., rights agent, relating to the declaration of a rights dividend to Registrant’s common shareholders of record on January 31, 1996 (incorporated by reference to Exhibit(a) to Registrant’s Registration Statement on Form 8-A, dated January 24, 1996, SEC File No. 001-4300)
	4	.4	—	Amendment No. 1, dated as of January 31, 2006, to the Rights Agreement dated as of December 31, 1996, between Apache Corporation, a Delaware corporation, and Wells Fargo Bank, N.A. (successor to Norwest Bank Minnesota, N.A.) (incorporated by reference to Exhibit 4.4 to Registrant’s Amendment No. 1 to Registration Statement on Form 8-A, dated January 31, 2006, SEC File No. 001-4300)
	4	.5	—	Senior Indenture, dated February 15, 1996, between Registrant and JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank, as trustee, governing the senior debt securities and guarantees (incorporated by reference to Exhibit 4.6 to Registrant’s Registration Statement on Form S-3, dated May 23, 2003, Reg. No. 333-105536)
	4	.6	—	First Supplemental Indenture to the Senior Indenture, dated as of November 5, 1996, between Registrant and JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank, as trustee, governing the senior debt securities and guarantees (incorporated by reference to Exhibit 4.7 to Registrant’s Registration Statement on Form S-3, dated May 23, 2003, Reg. No. 333-105536)
	4	.7	—	Form of Indenture among Apache Finance Pty Ltd, Registrant and The Chase Manhattan Bank, as trustee, governing the debt securities and guarantees (incorporated by reference to Exhibit 4.1 to Registrant’s Registration Statement on Form S-3, dated November 12, 1997, Reg. No. 333-339973)
	4	.8	—	Form of Indenture among Registrant, Apache Finance Canada Corporation and The Chase Manhattan Bank, as trustee, governing the debt securities and guarantees (incorporated by reference to Exhibit 4.1 to Amendment No. 1 to Registrant’s Registration Statement on Form S-3, dated November 12, 1999, Reg. No. 333-90147)
	*10	.1	—	Form of Amended and Restated Credit Agreement, dated as of May 9, 2006, among Registrant, the Lenders named therein, JPMorgan Chase Bank, as Administrative Agent, Citibank, N.A. and Bank of America, N.A., as Co-Syndication Agents, and BNP Paribas and UBS Loan Finance LLC, as Co-Documentation Agents

Exhibit
No.				Description
	10	.2	—	Form of Credit Agreement, dated as of May 12, 2005, among Registrant, the Lenders named therein, JPMorgan Chase Bank, N.A., as Global Administrative Agent, J.P. Morgan Securities Inc. and Banc of America Securities, LLC, as Co-Lead Arrangers and Joint Bookrunners, Bank of America, N.A. and Citibank, N.A., as U.S. Co-Syndication Agents, and Calyon New York Branch and Société Générale, as U.S. Co-Documentation Agents (excluding exhibits and schedules) (incorporated by reference to Exhibit 10.01 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, SEC File No. 001-4300)
	10	.3	—	Form of Credit Agreement, dated as of May 12, 2005, among Apache Canada Ltd, a wholly-owned subsidiary of Registrant, the Lenders named therein, JPMorgan Chase Bank, N.A., as Global Administrative Agent, RBC Capital Markets and BMO Nesbitt Burns, as Co-Lead Arrangers and Joint Bookrunners, Royal Bank of Canada, as Canadian Administrative Agent, Bank of Montreal and Union Bank of California, N.A., Canada Branch, as Canadian Co-Syndication Agents, and The Toronto-Dominion Bank and BNP Paribas (Canada), as Canadian Co-Documentation Agents (excluding exhibits and schedules) (incorporated by reference to Exhibit 10.02 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, SEC File No. 001-4300)
	10	.4	—	Form of Credit Agreement, dated as of May 12, 2005, among Apache Energy Limited, a wholly-owned subsidiary of Registrant, the Lenders named therein, JPMorgan Chase Bank, N.A., as Global Administrative Agent, Citigroup Global Markets Inc. and Deutsche Bank Securities Inc., as Co-Lead Arrangers and Joint Bookrunners, Citisecurities Limited, as Australian Administrative Agent, Deutsche Bank AG, Sydney Branch, and JPMorgan Chase Bank, as Australian Co-Syndication Agents, and Bank of America, N.A., Sydney Branch, and UBS AG, Australia Branch, as Australian Co-Documentation Agents (excluding exhibits and schedules) (incorporated by reference to Exhibit 10.03 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, SEC File No. 001-4300)
	10	.5	—	Form of Five-Year Credit Agreement, dated May 28, 2004, among Registrant, the Lenders named therein, JPMorgan Chase Bank, as Administrative Agent, Citibank N.A. and Bank of America, N.A., as Co-Syndication Agents, and Barclays Bank PLC and UBS Loan Finance LLC. as Co-Documentation Agents (excluding exhibits and schedules) (incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, SEC File No. 001-4300)
	10	.6	—	Form of First Amendment to Combined Credit Agreements, dated May 28, 2004, among Registrant, Apache Energy Limited, Apache Canada Ltd., the Lenders named therein, JP Morgan Chase Bank, as Global Administrative Agent, Bank of America, N.A., as Global Syndication Agent, and Citibank, N.A., as Global Documentation Agent (excluding exhibits and schedules) (incorporated by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, SEC File No. 001-4300)
	10	.7	—	Concession Agreement for Petroleum Exploration and Exploitation in the Khalda Area in Western Desert of Egypt by and among Arab Republic of Egypt, the Egyptian General Petroleum Corporation and Phoenix Resources Company of Egypt, dated April 6, 1981 (incorporated by reference to Exhibit 19(g) to Phoenix’s Annual Report on Form 10-K for year ended December 31, 1984, SEC File No. 1-547)
	10	.8	—	Amendment, dated July 10, 1989, to Concession Agreement for Petroleum Exploration and Exploitation in the Khalda Area in Western Desert of Egypt by and among Arab Republic of Egypt, the Egyptian General Petroleum Corporation and Phoenix Resources Company of Egypt incorporated by reference to Exhibit 10(d)(4) to Phoenix’s Quarterly Report on Form 10-Q for quarter ended June 30, 1989, SEC File No. 1-547)
	10	.9	—	Farmout Agreement, dated September 13, 1985 and relating to the Khalda Area Concession, by and between Phoenix Resources Company of Egypt and Conoco Khalda Inc. (incorporated by reference to Exhibit 10.1 to Phoenix’s Registration Statement on Form S-1, Registration No. 33-1069, filed October 23, 1985)
	10	.10	—	Amendment, dated March 30, 1989, to Farmout Agreement relating to the Khalda Area Concession, by and between Phoenix Resources Company of Egypt and Conoco Khalda Inc. (incorporated by reference to Exhibit 10(d)(5) to Phoenix’s Quarterly Report on Form 10-Q for quarter ended June 30, 1989, SEC File No. 1-547)

Exhibit
No.				Description
	10	.11	—	Amendment, dated May 21, 1995, to Concession Agreement for Petroleum Exploration and Exploitation in the Khalda Area in Western Desert of Egypt between Arab Republic of Egypt, the Egyptian General Petroleum Corporation, Repsol Exploration Egypt S.A., Phoenix Resources Company of Egypt and Samsung Corporation (incorporated by reference to Exhibit 10.12 to Registrant’s Annual Report on Form 10-K for year ended December 31, 1997, SEC File No. 001-4300)
	10	.12	—	Concession Agreement for Petroleum Exploration and Exploitation in the Qarun Area in Western Desert of Egypt, between Arab Republic of Egypt, the Egyptian General Petroleum Corporation, Phoenix Resources Company of Qarun and Apache Oil Egypt, Inc., dated May 17, 1993 (incorporated by reference to Exhibit 10(b) to Phoenix’s Annual Report on Form 10-K for year ended December 31, 1993, SEC File No. 1-547)
	10	.13	—	Agreement for Amending the Gas Pricing Provisions under the Concession Agreement for Petroleum Exploration and Exploitation in the Qarun Area, effective June 16, 1994 (incorporated by reference to Exhibit 10.18 to Registrant’s Annual Report on Form 10-K for year ended December 31, 1996, SEC File No. 001-4300)
	†10	.14	—	Apache Corporation Corporate Incentive Compensation Plan A (Senior Officers’ Plan), dated July 16, 1998 (incorporated by reference to Exhibit 10.13 to Registrant’s Annual Report on Form 10-K for year ended December 31, 1998, SEC File No. 001-4300)
	†10	.15	—	Apache Corporation Corporate Incentive Compensation Plan B (Strategic Objectives Format), dated July 16, 1998 (incorporated by reference to Exhibit 10.14 to Registrant’s Annual Report on Form 10-K for year ended December 31, 1998, SEC File No. 001-4300).
	*†10	.16	—	Apache Corporation 401(k) Savings Plan, dated January 1, 2007
	*†10	.17	—	Apache Corporation Money Purchase Retirement Plan, dated January 1, 2007
	*†10	.18	—	Non-Qualified Retirement/Savings Plan of Apache Corporation, amended and restated as of January 1, 2005
	†10	.19	—	Apache Corporation 1990 Stock Incentive Plan, as amended and restated September 13, 2001 (incorporated by reference to Exhibit 10.01 to Registrant’s Quarterly Report on Form 10-Q, as amended by Form 10-Q/A, for the quarter ended September 30, 2001, SEC File No. 001-4300)
	†10	.20	—	Apache Corporation 1995 Stock Option Plan, as amended and restated September 15, 2005, effective as of January 1, 2005 (incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, SEC File No. 001-4300)
	†10	.21	—	Apache Corporation 2000 Share Appreciation Plan, as amended and restated September 15, 2005, effective as of January 1, 2005 (incorporated by reference to Exhibit 10.4 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, SEC File No. 001-4300)
	†10	.22	—	Apache Corporation 1996 Performance Stock Option Plan, as amended and restated September 13, 2001 (incorporated by reference to Exhibit 10.03 to Registrant’s Quarterly Report on Form 10-Q, as amended by Form 10-Q/A, for the quarter ended September 30, 2001, SEC File No. 001-4300)
	†10	.23	—	Apache Corporation 1998 Stock Option Plan, as amended and restated September 15, 2005, effective as of January 1, 2005 (incorporated by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, SEC File No. 001-4300)
	†10	.24	—	Apache Corporation 2000 Stock Option Plan, as amended and restated September 15, 2005, effective as of January 1, 2005 (incorporated by reference to Exhibit 10.3 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, SEC File No. 001-4300)
	†10	.25	—	Apache Corporation 2003 Stock Appreciation Rights Plan, dated and effective May 1, 2003 (incorporated by reference to Exhibit 10.31 to Registrant’s Annual Report on Form 10-K for year ended December 31, 2003, SEC File No. 001-4300)
	†10	.26	—	Apache Corporation 2005 Stock Option Plan, dated February 3, 2005 (incorporated by reference to Appendix B to the Proxy Statement relating to Apache’s 2005 annual meeting of stockholders, as filed with the Commission on March 28, 2005, Commission File No. 001-4300)
	†10	.27	—	Apache Corporation 2005 Share Appreciation Plan, dated February 3, 2005 (incorporated by reference to Appendix C to the Proxy Statement relating to Apache’s 2005 annual meeting of stockholders, as filed with the Commission on March 28, 2005, Commission File No. 001-4300)

Exhibit
No.				Description
	†10	.28	—	1990 Employee Stock Option Plan of The Phoenix Resource Companies, Inc., as amended through September 29, 1995, effective April 9, 1990 (incorporated by reference to Exhibit 10.33 to Registrant’s Annual Report on Form 10-K for year ended December 31, 1996, SEC File No. 001-4300)
	†10	.29	—	Apache Corporation Income Continuance Plan, as amended and restated May 3, 2001 (incorporated by reference to Exhibit 10.30 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001, SEC File No. 001-4300)
	†10	.30	—	Apache Corporation Deferred Delivery Plan, as amended and restated September 15, 2005, effective as of January 1, 2005 (incorporated by reference to Exhibit 10.5 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, SEC File No. 001-4300)
	†10	.31	—	Apache Corporation Executive Restricted Stock Plan, as amended and restated December 14, 2005, effective January 1, 2005 (incorporated by reference to Exhibit 10.36 to Registrant’s Annual Report on Form 10-K for year ended December 31, 2005, SEC File No. 001-4300)
	†10	.32	—	Apache Corporation Non-Employee Directors’ Compensation Plan, as amended and restated September 15, 2005, effective as of January 1, 2005 (incorporated by reference to Exhibit 10.7 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, SEC File No. 001-4300)
	†10	.33	—	Apache Corporation Outside Directors’ Retirement Plan, as amended and restated May 4, 2006, effective as of January 1, 2006 (incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, SEC File No. 001-4300)
	†10	.34	—	Apache Corporation Equity Compensation Plan for Non-Employee Directors, as amended and restated February 5, 2004 (incorporated by reference to Exhibit 10.38 to Registrant’s Annual Report on Form 10-K for year ended December 31, 2003, SEC File No. 001-4300)
	†10	.35	—	Amended and Restated Employment Agreement, dated December 5, 1990, between Registrant and Raymond Plank (incorporated by reference to Exhibit 10.39 to Registrant’s Annual Report on Form 10-K for year ended December 31, 1996, SEC File No. 001-4300)
	†10	.36	—	First Amendment, dated April 4, 1996, to Restated Employment Agreement between Registrant and Raymond Plank (incorporated by reference to Exhibit 10.40 to Registrant’s Annual Report on Form 10-K for year ended December 31, 1996, SEC File No. 001-4300)
	†10	.37	—	Amended and Restated Employment Agreement, dated December 20, 1990, between Registrant and John A. Kocur (incorporated by reference to Exhibit 10.10 to Registrant’s Annual Report on Form 10-K for year ended December 31, 1990, SEC File No. 001-4300)
	†10	.38	—	Employment Agreement, dated June 6, 1988, between Registrant and G. Steven Farris (incorporated by reference to Exhibit 10.6 to Registrant’s Annual Report on Form 10-K for year ended December 31, 1989, SEC File No. 001-4300)
	†10	.39	—	Amended and Restated Conditional Stock Grant Agreement, dated September 15, 2005, effective January 1, 2005, between Registrant and G. Steven Farris (incorporated by reference to Exhibit 10.06 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, SEC File No. 001-4300)
	10	.40	—	Amended and Restated Gas Purchase Agreement, effective July 1, 1998, by and among Registrant and MW Petroleum Corporation, as seller, and Producers Energy Marketing, LLC, as buyer (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, dated June 18, 1998, filed June 23, 1998, SEC File No. 001-4300)
	10	.41	—	Deed of Guaranty and Indemnity, dated January 11, 2003, made by Registrant in favor of BP Exploration Operating Company Limited (incorporated by reference to Registrant’s Current Report on Form 8-K, dated and filed January 13, 2003, SEC File No. 001-4300)
	*12	.1	—	Statement of Computation of Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Stock Dividends
	14	.1	—	Code of Business Conduct (incorporated by reference to Exhibit 14.1 to Registrant’s Annual Report on Form 10-K for year ended December 31, 2003, SEC File No. 001-4300)
	*21	.1	—	Subsidiaries of Registrant
	*23	.1	—	Consent of Ernst & Young LLP
	*23	.2	—	Consent of Ryder Scott Company L.P., Petroleum Consultants

Exhibit
No.				Description
	*24	.1	—	Power of Attorney (included as a part of the signature pages to this report)
	*31	.1	—	Certification of Chief Executive Officer
	*31	.2	—	Certification of Chief Financial Officer
	*32	.1	—	Certification of Chief Executive Officer and Chief Financial Officer

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

EX-3.2

Exhibit 3.2

BYLAWS OF
APACHE CORPORATION
(As Amended December 14, 2006)

ARTICLE I.

NAME OF CORPORATION

     The name of the corporation is Apache Corporation.

ARTICLE II.

OFFICES

     SECTION 1. The principal office of the corporation shall be in the City of Wilmington, County of New Castle, State of Delaware, and the name of its resident agent in charge thereof is The Corporation Trust Company.

     SECTION 2. The corporation may have such other offices either within or without the State of Delaware as the board of directors may designate or as the business of the corporation may from time to time require.

ARTICLE III.

SEAL

     The corporate seal shall have inscribed upon it the name of the corporation and other designations as the board of directors from time to time determine. There may be alternate seals of the corporation.

ARTICLE IV.

MEETINGS OF STOCKHOLDERS

     SECTION 1. PLACE OF MEETINGS. All meetings of the stockholders of the corporation shall be held at the office of the corporation in the City of Houston, Texas, or at any other place within or without the State of Delaware that shall be stated in the notice of the meeting.

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     SECTION 2. ANNUAL MEETINGS. The annual meeting of stockholders of the corporation shall be held at the place and time within or without the State of Delaware that may be designated by the board of directors, on the last Thursday in April in each year or on such other date as may be designated by the board of directors, if not a legal holiday, and if a legal holiday, then at the same time on the next succeeding business day for the purpose of electing directors and for the transaction of any other business that may properly come before the meeting.

     SECTION 3. SPECIAL MEETINGS OF THE STOCKHOLDERS. Special meetings of the stockholders of the corporation, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the chairman of the board or the chief executive officer and shall be called by the chairman of the board, chief executive officer, or secretary at the request in writing of a majority of the board of directors. The request shall state the purpose or purposes of the proposed meeting.

     SECTION 4. NOTICE OF MEETING. Written or printed notice stating the place, day and hour of the meeting and in the case of special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than 50 days before the date of the meeting either personally, by mail or other lawful means by or at the direction of the chairman of the board, the chief executive officer, or the secretary to each stockholder of record entitled to vote at the meetings. If mailed, the notice shall be deemed to be delivered when deposited in the United States Postal Service, addressed to the stockholder at his address as it appears on the stock transfer books of the corporation with postage thereon prepaid.

     SECTION 5. CLOSING OF TRANSFER BOOKS FOR FIXING OF RECORD DATE. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or adjournment thereof, the board of directors may close the stock transfer books of the corporation for a period not exceeding 50 days preceding the date of any meeting of stockholders. In lieu of closing the stock transfer books, the board of directors may fix in advance a date, not exceeding 50 days preceding the date of any meeting of stockholders, as a record date for the determination of the stockholders entitled to notice of and to vote at the meeting and any adjournment thereof, and only the stockholders as shall be stockholders of record on the date so fixed shall be entitled to the notice of and to vote at the meeting and any adjournment thereof.

     SECTION 6. VOTING LISTS. The officer or agent having charge of the stock transfer books for shares of the corporation shall prepare and make, at least ten days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The list shall be open to the examination of any stockholder during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the election is to be held and which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held, and the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and subject to

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the inspection of any stockholder who may be present. Upon the willful neglect or refusal of the board of directors of the corporation to produce a list at any meeting of the stockholders at which an election is to be held in accordance with this Section 6, they shall be ineligible to hold any office at such election.

     SECTION 7. VOTING RIGHTS. At each meeting of the stockholders of the corporation, every stockholder having the right to vote thereat shall be entitled to vote in person or by proxy, but no proxy shall be voted after three years from its date unless the proxy provides for a longer period. Except as otherwise provided by law or the Certificate of Incorporation, each stockholder shall have one vote for each share of stock having voting power registered in his name. The vote at an election for directors, and upon the demand of any stockholder, the vote upon any question before a meeting of the stockholders, shall be by written ballot. All elections shall be had and all questions decided by a plurality vote except where by statute, by provision in the Certificate of Incorporation or these bylaws it is otherwise provided.

     Prior to any meeting, but subsequent to the date fixed by the board of directors pursuant to Section 5 of Article IV of these bylaws, any proxy may submit his proxy to the secretary for examination. The certificate of the secretary as to the regularity of the proxy and as to the number of shares held by the persons who severally and respectively executed such proxies shall be received as prima facie evidence of the number of shares represented by the holder of the proxy for the purpose of establishing the presence of a quorum at the meeting and of organizing the same.

     SECTION 8. QUORUM. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, initially present in person or represented by proxy, shall be requisite, and shall constitute a quorum of all meetings of the stockholders for the transaction of business except as otherwise provided by law, by the Certificate of Incorporation, or by these bylaws. If, however, a majority shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or by proxy, shall have power to adjourn the meeting from time to time, without notice, other than announcement at the meeting, until the requisite amount of voting stock shall be present. At the adjourned meeting at which the requisite amount of voting stock shall be represented, any business may be transacted which might have been transacted at the meeting as originally notified.

     SECTION 9. INSPECTORS. At each meeting of the stockholders, the polls shall be opened and closed. The proxies and the ballots shall be received and taken in charge and all questions touching the qualifications of voters and the validity of proxies and the acceptance or rejection of votes shall be decided by three inspectors. The inspectors shall be appointed by the board of directors before or at the meeting, or if no appointment shall have been made, then by the presiding officer at the meeting. If, for any reason any of the inspectors previously appointed shall fail to attend or refuse or be unable to serve, inspectors in place of any so failing to attend or refusing or unable to serve shall be appointed in like manner.

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     SECTION 10. WAIVER OF NOTICE. Whenever any notice whatever is required to be given pursuant to the provisions of a statute, the Certificate of Incorporation or these bylaws of the corporation, a waiver thereof in writing signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

     SECTION 11. STOCKHOLDER ACTION. Any action required or permitted to be taken by the stockholders must be effected at a duly called annual or special meeting of stockholders and may not be effected by any consent in writing by stockholders.

     SECTION 12. NOTICE OF STOCKHOLDER BUSINESS. At an annual meeting of the stockholders, only business shall be conducted that has been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors, (b) otherwise properly brought before the meeting by or at the direction of the board of directors, or (c) otherwise properly brought before the meeting by a stockholder, which stockholder must have given timely notice thereof in writing to the secretary of the corporation. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the corporation not less than 120 days prior to the meeting. A stockholders’ notice to the secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (w) a brief description of the business desired to be brought before the annual meeting, (x) the name and address, as they appear on the corporation’s books, of the stockholder proposing the business, (y) the class and number of shares of the corporation which are beneficially owned by the stockholder, and (z) any material interest of the stockholder in the business. Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 12. The chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 12, and if he should so determine, he shall so declare to the meeting and any business not properly brought before the meeting shall not be transacted. This section sets forth only the procedure by which business may be properly brought before an annual meeting of stockholders and does not in any way grant additional rights to stockholders beyond those currently afforded them by law.

     SECTION 13. NOTICE OF STOCKHOLDER NOMINEES. Only persons who are nominated in accordance with the procedures set forth in this Section 13 shall be eligible for election as directors. Nominations of persons for election to the board of directors of the corporation may be made at a meeting of stockholders, by or at the direction of the board of directors or by any stockholder of the corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 13. Any nominations, other than those made by or at the direction of the board of directors, shall be made pursuant to timely notice in writing to the secretary of the corporation. To be timely, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the corporation not less

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than 120 days prior to the meeting. The stockholder’s notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of the corporation which are beneficially owned by the person, and (iv) any other information relating to the person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including without limitation the person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the corporation’s books, of the stockholder and (ii) the class and number of shares of the corporation which are beneficially owned by the stockholder. At the request of the board of directors, any person nominated by the board of directors for election as a director shall furnish to the secretary of the corporation that information required to be set forth in a stockholder’s notice of nomination which pertains to the nominee. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth in this Section 13. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by these bylaws, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. This section sets forth only the procedure by which nominations for directors may be made and does not in any way grant additional rights to stockholders beyond those currently afforded them by law.

ARTICLE V.

DIRECTORS

     SECTION 1. GENERAL POWERS. The property, business and affairs of the corporation shall be managed by its board of directors which may exercise all powers of the corporation and do all lawful acts and things as are not by statute or by the Certificate of Incorporation or by these bylaws directed or required to be exercised or done by the stockholders.

     SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The directors shall be elected in the manner set forth in Article Ninth of the Certification of Incorporation of the corporation; however, if the corporation has outstanding any shares of one or more series of stock with conditional rights to elect a set number of directors, and if the conditions precedent to the exercise of any such rights arise, the number of directors of the corporation shall be automatically increased to permit the exercise of the voting rights of each such series of stock. The term of office of directors shall be three years except as provided in Article Ninth of the Certificate of Incorporation of the corporation. Directors need not be stockholders or residents of the State of Delaware. A majority of the directors shall be “independent” under the criteria set by any applicable law, regulation and/or listing standard.

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     At any meeting for the election of directors at which a quorum is present, each director shall be elected by the vote of a majority of the votes cast representing shares present in person or by proxy and entitled to vote at the meeting. However, if the number of nominees on the ballot for any election of directors exceeds the number of directors to be elected, then the directors shall be elected by the vote of a plurality of the votes cast representing shares present in person or by proxy and entitled to vote on the election of directors.

     For the purposes hereof, a majority of the votes cast means that the number of shares voted “for” a director must exceed the number of votes cast “against” the election of that director. “Votes cast” shall not include abstentions. Ballots will not give stockholders the option to “withhold” votes from the election of directors, but rather will give the choice to vote “for” or “against” each director or to abstain.

     Promptly (and in any event within 10 days) after each meeting for the election of directors, each incumbent director who did not receive a majority of the votes cast representing shares present in person or by proxy and entitled to vote at such meeting shall submit to the board of directors an irrevocable letter of resignation, which shall become effective upon acceptance by the board of directors. The board of directors will determine whether to accept or reject such resignation, or what other action should be taken, and publicly disclose and explain its decision on the corporation’s web site within 90 days from the date of the certification of election results. Any director not elected shall not participate in the board of director’s decision with respect to his or her resignation.

     If the board of directors determines to accept the resignation of an unsuccessful incumbent, then the board of directors may fill the resulting vacancy pursuant to Article V, Section 3 of these bylaws or may decrease the size of the board of directors pursuant to the provisions of Article Ninth of the Certificate of Incorporation of the corporation. If the board of directors elects to fill the resulting vacancy, the corporate governance and nominating committee will promptly recommend a candidate to the board of directors to fill the office formerly held by the unsuccessful incumbent. The board of directors shall promptly consider and act upon the corporate governance and nominating committee’s recommendation. The corporate governance and nominating committee, in making its recommendation, and the board of directors, in acting on such recommendation, may consider any factors or other information that they determine appropriate and relevant.

     SECTION 3. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Any vacancies on the board of directors or any newly created directorships shall be filled by the board of directors in the manner set forth in Article Ninth of the Certificate of Incorporation of the corporation.

     SECTION 4. CATASTROPHE. During any emergency period following a national catastrophe due to enemy attack, or act of God, a majority of the surviving members of the board who have not been rendered incapable of acting due to physical or mental incapacity

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or due to the difficulty of transportation to the place of the meeting shall constitute a quorum for the purpose of filling vacancies on the board of directors and among the elected and appointed officers of the corporation.

     SECTION 5. PLACE OF MEETINGS. The directors of the corporation may hold their meetings, both regular and special, at a place or places within or without the State of Delaware that the board of directors may from time to time determine.

     SECTION 6. FIRST MEETING. The first meeting of the board of directors following the annual meeting of stockholders shall be held at the time and place that shall be fixed by the chairman of the board or the chief executive officer and shall be called in the same manner as a special meeting.

     SECTION 7. REGULAR MEETINGS. Regular meetings of the board of directors may be held without notice at the time and place that shall from time to time be determined by the board of directors.

     SECTION 8. SPECIAL MEETINGS. Special meetings of the board of directors may be called by the chairman of the board or the chief executive officer on three days notice to each director, either personally or by mail, by telegram, or by facsimile or other lawful means; special meetings of the board of directors shall be called by the chairman of the board, chief executive officer, or secretary in like manner and upon like notice upon the written request of two directors.

     SECTION 9. QUORUM. At all meetings of the board of directors, a majority of the directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting, at which there is a quorum present, shall be the act of the board of directors, except as may be otherwise specifically provided by statute, the Certificate of Incorporation or by these bylaws. If at any meeting of the board of directors there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time without notice, other than by announcement at the meeting, until a sufficient number of directors to constitute a quorum shall attend. At any adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the original meeting as originally notified.

     SECTION 10. BUSINESS TO BE CONDUCTED. Unless otherwise indicated in the notice, any and all business may be transacted at a regular or special meeting of the board of directors. In the event a special meeting of the board of directors is held without notice, any and all business may be transacted at the meeting provided all directors are present.

     SECTION 11. ORDER OF BUSINESS. At all meetings of the board of directors, business shall be transacted in the order that from time to time the board may determine by resolution. At all meetings of the board of directors the chairman of the board or in his absence the vice chairman, or in their absence the chief executive officer shall preside. In

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the absence of the chairman and vice chairman of the board and the chief executive officer, the directors present shall elect any director as chairman of the meeting.

     SECTION 12. COMPENSATION OF DIRECTORS. Directors of the corporation shall receive the compensation for their services that the board of directors may from time to time determine and all directors shall be reimbursed for their expenses of attendance at each regular or special meeting of the board or any committee thereof.

     SECTION 13. COMMITTEES. The board of directors may by resolution passed by a majority of the board, in addition to the executive committee, designate one or more committees. Each such committee shall consist of one or more of the directors of the corporation, such number to be set by resolution of the board of directors, or as otherwise provided in Section 14 below. Any committee, to the extent provided in the resolution, shall have and may exercise the powers of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it. Any committee or committees shall have the name or names that may be determined from time to time by resolution adopted by the board of directors. Other than for a committee of one director, the chairman of the board and the chief executive officer shall be ex officio members of any board committee except the audit committee, the management development and compensation committee, and the stock option plan committee.

     SECTION 14. EXECUTIVE COMMITTEE.

     A. MEMBERS. The executive committee shall consist of such number of directors as set by resolution of the board of directors, with a minimum of four members, and shall include the chairman and vice chairman of the board and the chief executive officer as ex officio members, together with the other members of the board of directors, as may be the case, designated by the board of directors.

     B. TERM OF OFFICE. Each of the elected members of the executive committee shall be elected for a one year term and shall serve until his successor shall have been duly elected and qualified.

     C. ELECTION. The election of members of the executive committee shall be held each year at the first meeting of the board of directors following the annual meeting of stockholders. Should a member of the executive committee for any reason be unable to serve for the term to which he was elected, the vacancy shall be filled by the board of directors at its next meeting following the occurrence of such vacancy.

     D. COMPENSATION. Each member of the executive committee shall receive the compensation that the board of directors shall from time to time determine and shall be reimbursed for their expenses of attendance at regular or special meetings.

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     E. CHAIRMAN AND SECRETARY OF THE EXECUTIVE COMMITTEE. The chairman and secretary of the executive committee shall be elected by members of the executive committee.

     F. MEETINGS. Regular meetings of the executive committee may be held without call or notice of the time and place that the executive committee determines. Special meetings of the executive committee may be called by any member, either personally or by mail, by telegram, by facsimile or other lawful means forwarded not later than 48 hours prior to the date and time set forth for the meeting. Upon request of any member, the secretary of the corporation shall give the required notice calling the meeting.

     G. QUORUM. At any meeting of the executive committee, a majority of the committee members shall constitute a quorum. Any action of the executive committee to be effective must be authorized by the affirmative votes of a majority of committee members.

     H. RULES. The executive committee shall fix its own rules of procedure, provided the same do not contravene the provisions of the law, the Certificate of Incorporation or these bylaws.

     I. AUTHORITY AND RESPONSIBILITY.

(a) The executive committee is vested with the authority to exercise the full power of the board of directors, within the policies established by the board of directors to govern the conduct of the business of the corporation, in the intervals between meetings of the board of directors.

(b) The executive committee, in addition to the general authority vested in it, may be vested with other specific powers and authority by resolution of the board of directors.

     J. REPORTS. All action by the executive committee shall be reported to the board of directors at its meeting next succeeding the action, and shall be subject to revision or alteration by the board of directors; provided, however, that no rights or acts of third parties shall be affected by any such revision or alteration.

     SECTION 15. AUDIT COMMITTEE.

     A. The Audit Committee shall be governed by the Audit Committee Charter, as adopted, amended, modified or supplemented from time to time by the board of directors, which shall set forth the membership, authority and responsibilities of the Audit Committee. The Audit Committee Charter shall be issued, modified, amended, supplemented or repealed only by a majority vote of the full board of directors.

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SECTION 16. MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE

     A. The Management Development and Compensation (“MD&C”) Committee shall be governed by the MD&C Committee Charter, as adopted, amended, modified or supplemented from time to time by the board of directors, which shall set forth the membership, authority and responsibilities of the MD&C Committee. The MD&C Committee Charter shall be issued, modified, amended, supplemented or repealed only by a majority vote of the full board of directors.

     SECTION 17. STOCK OPTION PLAN COMMITTEE

     A. MEMBERS. The stock option plan committee shall include only directors of the corporation who qualify as “outside directors” pursuant to Section 162(m) or any successor section(s) of the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

     B. TERM OF OFFICE. Each of the elected members of the stock option plan committee shall be elected for a one year term and shall serve until a successor shall have been duly elected and qualified.

     C. ELECTION. The election of members of the stock option plan committee shall be held each year at the first meeting of the board of directors following the annual meeting of stockholders. Should a member of the stock option plan committee for any reason be unable to serve for the term to which he was elected, the vacancy shall be filled by the board of directors at its next meeting.

     D. COMPENSATION. Each member of the stock option plan committee shall receive the compensation the board of directors determines and shall be reimbursed for their expenses for attendance at regular or special meetings.

     E. CHAIRMAN AND SECRETARY OF THE STOCK OPTION PLAN COMMITTEE. The chairman and secretary of the stock option plan committee shall be elected by the members of the stock option plan committee.

     F. MEETINGS. Regular meetings of the stock option plan committee may be held without call or notice of the time and place that the stock option plan committee determines. Special meetings of the stock option plan committee may be called by any member, either personally or by mail, by telegram, by facsimile or other lawful means forwarded not later than 48 hours prior to the date and time set forth for the meeting. Upon request of any member, the secretary of the corporation shall give the required notice calling the meeting.

     G. QUORUM. At any meeting of the stock option plan committee, a majority of committee members shall constitute a quorum, provided that such quorum shall not be less

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than two members. Any action of the stock option plan committee to be effective must be authorized by the affirmative votes of a majority of committee members.

     H. RULES. The stock option plan committee shall determine its own rules of procedure, provided the rules do not contravene the provisions of the law, the Certificate of Incorporation or these bylaws.

     I. AUTHORITY AND RESPONSIBILITY. The stock option plan committee has two principal responsibilities:

(a) to monitor and report on the corporation’s stock option plans; and

(b) to establish any performance goals under which compensation in the form of stock option grants is paid to employees of the corporation, and to make such grants of stock options, in the discretion of the stock option plan committee, on the terms and conditions set forth in the option plans or otherwise established by the stock option plan committee.

     J. REPORTS. All action by the stock option plan committee shall be reported to the board of directors at its next meeting, and is subject to ratification by the board of directors.

     SECTION 18. CORPORATE GOVERNANCE AND NOMINATING COMMITTEE.

     A. The Corporate Governance and Nominating Committee shall be governed by the Corporate Governance and Nominating Committee Charter, as adopted, amended, modified or supplemented from time to time by the board of directors, which shall set forth the membership, authority and responsibilities of the Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee Charter shall be issued, modified, amended, supplemented or repealed only by a majority vote of the full board of directors.

     SECTION 19. ELECTION OF OFFICERS. At the first meeting of the board of directors in each year, at which a quorum shall be present, following the annual meeting of the stockholders of the corporation, the board of directors shall proceed to the election of the officers of the corporation, except regional or staff officers who are subject to appointment in accordance with Section 20 of Article VI of these bylaws.

     SECTION 20. ACTION WITHOUT MEETING. Any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if prior to the action a written consent thereto is signed by all members of the board of directors or of the committee, as the case may be, and such written consent is filed with the minutes of the proceedings of the board of directors or committee.

     SECTION 21. WAIVER OF NOTICE. Whenever any notice whatever is required to be given pursuant to the provisions of a statute, the Certificate of Incorporation or these

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bylaws of the corporation, a waiver thereof in writing signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

ARTICLE VI.

OFFICERS

     SECTION 1. OFFICERS. The officers of the corporation shall be a chairman of the board, vice chairman of the board, chief executive officer, president, one or more executive vice presidents, one or more senior vice presidents, one or more vice presidents, secretary, treasurer, controller and such assistant vice presidents, assistant secretaries, assistant treasurers and assistant controllers as the board of directors may provide for and elect. The chairman of the board and the vice chairman of the board shall be members of the board of directors. Any two or more offices may be held by the same person. The board of directors may appoint such other officers as they shall deem necessary, who shall have the authority and shall perform the duties that from time to time may be prescribed by the board of directors. In its discretion, the board of directors by a vote of a majority thereof may leave unfilled for any period that it may fix by resolution any office except those of president, treasurer and secretary.

     SECTION 2. ELECTION. The board of directors at their first meeting after each annual meeting of the stockholders or at any regular or special meeting shall elect, as may be required, a chairman of the board, vice chairman of the board, chief executive officer, president, and one or more executive vice presidents, senior vice presidents, vice presidents, a secretary, treasurer, controller, and assistant vice presidents, assistant secretaries, assistant treasurers, and assistant controllers.

     SECTION 3. TENURE. The officers of the corporation elected by the board of directors shall hold office for one year and until their successors are chosen and qualify in their stead. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors.

     SECTION 4. SALARIES. The salaries of the officers of the corporation shall be recommended by the management development and compensation committee and approved by the board of directors.

     SECTION 5. VACANCIES. If the office of any officer of the corporation becomes vacant by reason of death, resignation, disqualification or otherwise, the directors by a majority vote, may choose his successor or successors.

     SECTION 6. RESIGNATION. Any officer may resign his office at any time, such resignation to be made in writing and take effect at the time of receipt by the corporation, unless some time be fixed in the resignation and then from that time. The acceptance of a resignation shall not be required to make it effective.

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     SECTION 7. DELEGATION OF DUTIES. Duties of officers may be delegated in case of the absence of any officer of the corporation or for any reason that the board of directors may deem sufficient. The board of directors may delegate the powers or duties of the officer to any other officer or to any director, except as otherwise provided by statute, for the time being, provided a majority of the entire board of directors concurs therein.

     SECTION 8. CHAIRMAN OF THE BOARD. The chairman of the board shall participate in the management of the corporation’s business and affairs and shall also see that all the policies and resolutions of the board of directors are carried into effect, subject, however, to the right of the board of directors to delegate any specific powers, and shall perform such duties as shall be specifically assigned from time to time by the board of directors, except such as may be by statute exclusively conferred to any other officer or officers of the corporation. He shall preside at all meetings of stockholders and the board of directors at which he may be present.

     SECTION 9. VICE CHAIRMAN OF THE BOARD. The vice chairman shall preside at all meetings of the board of directors and stockholders at which he may be present and from which the chairman of the board may be absent, and shall perform such other duties as shall be specifically assigned from time to time by the board of directors or the chairman of the board, except such as may be by statute exclusively conferred to any other officer or officers of the corporation.

     SECTION 10. CHIEF EXECUTIVE OFFICER. The chief executive officer shall be the chief executive officer of the corporation and shall have, subject to the direction of the board of directors, general control and management of the corporation’s business and affairs and shall also see that all the policies and resolutions of the board of directors are carried into effect, subject, however, to the right of the board of directors to delegate any specific powers, except such as may be by statute exclusively conferred on the president or to any other officer or officers of the corporation. He shall preside at all meetings of stockholders and the board of directors at which he may be present and from which the chairman and vice chairman of the board may be absent.

     SECTION 11. PRESIDENT. The president shall be the chief operating officer and shall perform those duties that shall be specifically assigned to him from time to time by the board of directors. In the absence of the chief executive officer or in the event of his death, inability or refusal to act, the president shall perform the duties of the chief executive officer, and when so acting shall have the powers of and be subject to all the restrictions upon the chief executive officer.

     SECTION 12. EXECUTIVE VICE PRESIDENTS, SENIOR VICE PRESIDENTS, AND VICE PRESIDENTS. In the absence of the president or in the event of his death, inability or refusal to act, the senior executive vice president present shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. In the absence of the president and all executive or senior vice presidents, or in the event of their deaths, inability or refusal to act, a vice president designated by the board of directors, or in case the board of directors has failed

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to act, designated by the chief executive officer, shall perform the duties of the president and when so acting shall have all the powers of and be subject to all the restrictions upon the president. The executive vice presidents, the senior vice presidents, and all other vice presidents shall perform those duties consistent with these bylaws and that may be specifically designated by the president or by the board of directors.

     SECTION 13. ASSISTANT VICE PRESIDENTS. The assistant vice presidents shall perform those duties, not inconsistent with these bylaws, the Certificate of Incorporation or statute that may be specifically designated by the board of directors or the president. In the absence of the executive vice presidents, senior vice presidents, or vice presidents, an assistant vice president (or in the event there be more than one assistant vice president, the assistant vice presidents in the order designated at the time of their election, or in the absence of any designation, then in the order of their election) shall perform the duties of the executive vice presidents, senior vice presidents or vice presidents, and when so acting, shall have all the powers of and be subject to all restrictions upon the executive vice presidents, the senior vice presidents, and vice presidents.

     SECTION 14. SECRETARY. The secretary shall attend and keep all the minutes of all meetings of the board of directors and all meetings of the stockholders and, when requested by the board of directors, of any committees of the board of directors. He shall give, or cause to be given, notice of all meetings of the stockholders and board of directors and when so ordered by the board of directors, shall affix the seal of the corporation thereto; he shall have charge of all of those books and records that the board of directors may direct, all of which shall, at all reasonable times, be open to the examination of any director at the office of the corporation during business hours; he shall, in general, perform all of the duties incident to the office of secretary subject to the control of the board of directors or of the president, under whose supervision he shall be, and shall do and perform any other duties that may from time to time be assigned to him by the board of directors.

     SECTION 15. ASSISTANT SECRETARIES. In the absence of the secretary or in the event of his death, inability or refusal to act, the assistant secretary (or in the event there be more than one assistant secretary, the assistant secretaries in the order designated at the time of their election, or in the absence of any designation, then in the order of their election) shall perform the duties of the secretary, and when so acting shall have all the powers of and be subject to all the restrictions upon the secretary and shall perform any other duties that may from time to time be assigned to him by the board of directors, the president or the secretary.

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     SECTION 16. TREASURER. The treasurer shall have custody of and be responsible for all funds and securities of the corporation, receive and give receipts for money due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in those banks or depositories that shall be selected and designated by the board of directors and shall in general perform all of the duties incident to the office of treasurer and any other duties that may be assigned to him by the president or by the board of directors. If required by the board of directors, the treasurer shall give bond for the faithful discharge of his duties in the sum and with the surety or sureties as the board of directors shall determine.

     SECTION 17. ASSISTANT TREASURERS. In the absence of the treasurer or in the event of his death, inability or refusal to act, the assistant treasurer (or in the event there be more than one assistant treasurer, the assistant treasurers in the order designated at the time of their election, or in the absence of any designation, then in the order of their election) shall perform the duties of the treasurer and when so acting shall have all the powers and be subject to all the restrictions upon the treasurer, and shall perform any other duties that from time to time may be assigned to him by the president, treasurer or the board of directors. The assistant treasurers shall, if required by the board of directors, give bonds for the faithful discharge of their duties in the sums and with the surety or sureties that the board of directors shall determine.

     SECTION 18. CONTROLLER. The controller shall maintain adequate records of all assets, liabilities and transactions of the corporation; see that adequate audits thereof are currently and regularly made; and, in conjunction with other officers and department heads, initiate and enforce measures and procedures whereby the business of the corporation shall be conducted with the maximum safety, efficiency and economy. Except as otherwise determined by the board of directors, or lacking a determination by the board of directors, then by the president, his duties and powers shall extend to all subsidiary corporations and, so far as may be practicable, to all affiliate corporations. He shall have any other powers and perform other duties that may be assigned to him by the president or by the board of directors. If required by the board of directors, the controller shall give bond for the faithful discharge of his duties in the sum and with the surety or sureties as the board of directors shall determine.

     SECTION 19. ASSISTANT CONTROLLERS. In the absence of the controller or in the event of his death, inability or refusal to act, the assistant controller (or in the event there be more than one assistant controller, the assistant controllers, in the order designated at the time of their election, or in the absence of any designation, then in the order of their election) shall perform the duties of the controller and when so acting shall have all the powers and be subject to all the restrictions upon the controller, and shall perform any other duties that from time to time may be assigned to him by the president, controller or the board of directors. The assistant controllers shall, if required by the board of directors, give bonds for the faithful discharge of their duties in the sums and with the surety or sureties that the board of directors shall determine.

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     SECTION 20. REGIONAL OR STAFF VICE PRESIDENTS.

     A. ELECTION. One or more regional or staff vice presidents may be appointed by the chief executive officer, or the authority for such appointments may be delegated by the chief executive officer to the president of the corporation.

     B. TENURE. The regional or staff vice presidents appointed by the chief executive officer or the president of the corporation shall hold office for one year and until their successors are chosen and qualify in their stead. Any regional or staff vice president so appointed may be removed at any time by the chief executive officer or the president of the corporation.

     C. DUTIES. The regional or staff vice presidents shall do and perform those duties that shall from time to time be specifically designated or assigned by the chief executive officer or the president of the corporation; however, the regional or staff vice presidents shall not perform “policy-making functions” as defined pursuant to Section 16 or any successor section(s) of the Securities Exchange Act of 1934, as amended, and shall be deemed not to be subject to such Section 16 and the rules and regulations promulgated thereunder.

ARTICLE VII.

INDEMNIFICATION OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS

     SECTION 1. The board of directors shall cause the corporation to indemnify any person (and that person’s heirs and personal representatives) who was or is a party or is threatened or expected to be made a party to any threatened, pending or completed action, suit, arbitration or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, partner or agent of another corporation, partnership (including a partnership in which the corporation is a partner), joint venture, trust or other enterprise, against expenses (including, but not limited to, attorneys’ fees, expert fees, bonds, prospective or retroactive insurance premiums or costs, litigation, appeal and court costs and out-of-pocket expenses of such person during any investigation hearing, arbitration, trial, or appeal of any such action, suit or proceeding, including any interest payable thereon), judgments, damages, arbitration awards, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit, arbitration or proceeding, including any interest payable thereon, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best

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interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

     SECTION 2. The board of directors shall indemnify any person (and that person’s heirs and personal representatives) who was or is a party or is threatened or expected to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee, partner or agent of another corporation, partnership (including a partnership in which the corporation is a partner), joint venture, trust or other enterprise against expenses (including, but not limited to, attorneys’ fees, expert fees, bonds, prospective or retroactive insurance premiums or costs, litigation, appeal and court costs, and out-of-pocket expenses of such person during any investigation, hearing, trial or appeal of any such action or suit, including any interest payable thereon), actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

     SECTION 3. To the extent that a present or past director, officer, employee or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit, arbitration or proceeding referred to in Sections 1 and 2, or in defense of claim, issue or matter therein, he shall be indemnified against expenses (including, but not limited to, attorneys’ fees, expert fees, bonds, prospective or retroactive insurance premiums or costs, litigation, appeal, and court costs, and out-of-pocket expenses of such person during any investigation, hearing, arbitration, trial or appeal of any such action, suit or proceeding) actually and reasonably incurred by him in connection therewith, including any interest payable thereon.

     SECTION 4. The board of directors shall cause the corporation to advance to any person covered by Sections 1 or 2 the expenses (including, but not limited to, attorneys’ fees, expert fees, bonds, prospective or retroactive insurance premiums or costs, litigation, appeal, and court costs and out-of-pocket expenses, of such person during any investigation, hearing, arbitration, trial or appeal of any such action, suit, arbitration or proceeding) incurred by that person in defending a threatened, pending, or completed civil, criminal, administrative, or investigative action suit, arbitration, or proceeding, including any interest payable thereon, in advance of the final disposition of such action, suit or proceeding.

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     SECTION 5. Any advance by the board of directors under Section 4 above to any employee or agent who is not a present or past director or officer of the corporation shall be conditional upon evidence of compliance with the terms and conditions, if any, deemed appropriate and specified by the board of directors for such advance if such employee or agent is determined ultimately to be not legally entitled to indemnification from the corporation.

     SECTION 6. Any advance authorized by the board of directors under Section 4 above to a present or past officer or director shall be conditional upon prior receipt by the corporation of a written undertaking from that officer or director to repay such advance if he is determined ultimately to be not legally entitled to indemnification from the corporation. Such undertaking shall be in the form of a simple agreement by the officer or director to repay advances made to him in the event that it is determined ultimately that he is not legally entitled to indemnification by the corporation. Such undertaking shall specifically state that no bond, collateral or other security shall be required by the officer or director to insure its performance and that no interest on any amount advanced shall be required to be paid to the corporation if the officer or director is determined ultimately to be not legally entitled to indemnification from the corporation.

     SECTION 7. The board of directors, in its sole discretion, may establish and may fund in advance and from time to time, in whole or in part, a separate provision or provisions, which may be in the form of a trust fund, periodic or advance retainers to counsel, or otherwise as the board of directors may determine in each instance, to be used as payment and/or advances of indemnification obligations under this Article VII to officers, directors, employees and agents of the corporation; provided, however, that any amount which is contributed to such fund shall not in any way be construed to be a limitation on the amount of indemnification and/or advances of the corporation.

     SECTION 8. The board of directors shall cause the corporation to pay to any director, officer, employee or agent all expenses (including, but not limited to, attorneys’ fees, expert fees, bonds, prospective or retroactive insurance premiums or costs, litigation, appeal, and court costs, and out-of-pocket expenses of such person during any investigation, hearing, arbitration, trial or appeal of any such action, suit, arbitration or proceeding, including any interest payable thereon), which may be incurred by such director, officer, employee or agent in enforcing his rights to indemnification (as set forth herein in Sections 1, 2 and 3) and/or advances (as set forth herein in Section 4) whether or not such director, officer, employee or agent is successful in enforcing such rights and whether or not suit or other proceedings are commenced.

     SECTION 9. Any amendment to this Article VII shall only apply prospectively and shall in no way affect the corporation’s obligations to indemnify and make advances to officers, directors, employees and agents as set forth in this Article VII for actions or events which occurred before any such amendment, and provided that any amendment to this Article VII shall require affirmative vote of four-fifths of the entire board of directors.

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     SECTION 10. Any indemnification granted under the provisions of Sections 1, 2, 3 and 8 above shall be subject to the provisions of subsections (d), (e), (f) and (g) of Section 145 of the General Corporation Law of the State of Delaware.

ARTICLE VIII.

CONTRACTS, LOANS, CHECKS AND DEPOSITS

     SECTION 1. CONTRACTS. The board of directors may authorize any officer or officers, agent or agents to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation. Such authority may be general or confined to specific instances.

     SECTION 2. LOANS. No loan shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name, unless authorized by resolution of the board of directors. Such authority may be general or confined to specific instances.

     SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other order or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents and in such manner that shall from time to time be determined by resolution of the board of directors.

     SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in the bank or banks or other depositories that the board of directors may elect.

ARTICLE IX.

VOTING OF STOCK OF OTHER CORPORATIONS

     Unless otherwise ordered by the board of directors, the chief executive officer shall have full power and authority on behalf of the corporation to act and vote at any meeting of stockholders of any corporation in which the corporation may hold stock, and at any such meeting, shall possess, and may exercise, any and all of the rights and powers incident to the ownership of the stock, which, as the owner thereof, the corporation might have possessed and exercised if present. The board of directors by resolution from time to time, may confer like powers upon any other person or persons.

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ARTICLE X.

NOTICES

     SECTION 1. FORM OF NOTICE. Whenever under the provisions of the statutes, the Certificate of Incorporation, or these bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but the notice may be given in writing by mail, which shall mean depositing same in a United States Postal Service post office or letter box, in a postage paid, sealed envelope, addressed to the stockholder or director at the address that appears on the books of the corporation or, in default of other address, to such director or stockholder at the United States Postal Service general post office in the City of Wilmington, Delaware, and the notice shall be deemed to be given at the time when the same shall be thus mailed or by any other means expressly provided for in these bylaws.

     SECTION 2. WAIVER OF NOTICE. Whenever any notice is required to be given under the provision of the statutes, the Certificate of Incorporation or these bylaws, a waiver thereof in writing signed by the person or persons entitled to the notice whether before or after the time stated therein shall be deemed equivalent thereto.

ARTICLE XI.

STOCK CERTIFICATES

     SECTION 1. CERTIFICATED AND UNCERTIFICATED SHARES. Shares of the capital stock of the corporation may be certificated or uncertificated, as provided by the laws of the State of Delaware. The certificates for shares of the capital stock of the corporation shall be in the form, not inconsistent with the Certificate of Incorporation, that shall be approved by the board of directors. The certificate shall be signed by the chairman of the board, chief executive officer, president or a vice president, and either the treasurer or an assistant treasurer, or the secretary or an assistant secretary, but where the certificate is signed by a transfer agent or an assistant transfer agent and a registrar, the signatures of the chairman of the board, chief executive officer, president, vice president, treasurer, assistant treasurer, secretary or assistant secretary may be facsimiles. All certificates shall be consecutively numbered, and the name of the person owning the shares represented thereby, with the number of shares and the date of issue shall be entered in the corporation’s books. No certificate shall be valid unless it is signed by the chairman of the board, chief executive officer, president, or a vice president, and either the treasurer or an assistant treasurer, or the secretary or an assistant secretary, but where the certificate is signed by a transfer agent or an assistant transfer agent and a registrar, the signatures of the chairman of the board, chief executive officer, president, vice president, treasurer, assistant treasurer, secretary or assistant secretary may be facsimiles. All certificates surrendered to the corporation shall be canceled, and no new certificates shall be issued until the former certificate for the same number of shares of the same class shall have been surrendered and canceled.

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     SECTION 2. TRANSFER OF SHARES. Shares of the capital stock of the corporation shall be transferred only on the books of the corporation by the holder thereof in person or by his attorney and, in the case of certificated shares, upon surrender and cancellation of certificates for the same number of shares.

     SECTION 3. REGULATIONS. The board of directors shall have authority to make any rules and regulations that they may deem expedient concerning the issue, transfer and registration of certificates for shares of the capital stock of the corporation. The board of directors may appoint one or more transfer agents or assistant transfer agents and one or more registrars of transfers and may require all certificates to bear the signature of the transfer agent or assistant transfer agent and a registrar of transfers. The board of directors may at any time terminate the appointment of any transfer agent or any assistant transfer agent or any registrar of transfers by the vote of a majority of the board of directors.

     SECTION 4. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS’ RIGHTS. The board of directors may close the stock transfer books of the corporation for a period not exceeding 50 days preceding the date of any meeting of stockholders, or the date for payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, or for a period not exceeding 50 days in connection with obtaining the consent of stockholders for any purpose. In lieu of closing the stock transfer books as aforesaid, the board of directors may fix a date not exceeding 50 days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining such consent, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any meeting and any adjournment thereof, or entitled to receive payment of any dividend, or to any allotment of rights, or to exercise the rights in respect of any change, conversion or exchange of capital stock, or to give such consent, and in such case the stockholders and only the stockholders that shall be stockholders of record on the date so fixed shall be entitled to the notice or to receive payment of the dividend, or to receive the allotment of rights, or to exercise the rights or to give such consent, as the case may be, notwithstanding any transfer of any stock on the books of the corporation after any record date fixed as aforesaid.

     SECTION 5. REGISTERED STOCKHOLDERS. The corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in the share or shares on the part of any other person whether or not it shall have express or other notice thereof except as otherwise provided by the laws of the State of Delaware.

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     SECTION 6. LOST CERTIFICATES. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact with the person claiming the certificate of stock to be lost or destroyed. When authorizing the issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of the lost or destroyed certificate or certificates, or his legal representative, to advertise the same in a manner that it shall require for each share of stock having voting power registered in his name and to give the corporation a bond in the sum that it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed.

     SECTION 7. DIVIDENDS. The board of directors may from time to time declare, and the corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and the Certificate of Incorporation.

     SECTION 8. RESERVE FUNDS. Before payment of any dividend there may be set aside out of any funds of the corporation available for dividends the sum or sums that the board of directors may from time to time in their absolute discretion think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for any other purpose that the directors shall think conducive to the interest of the corporation and the board of directors may modify or abolish the reserve in the manner in which it was created.

ARTICLE XII.

GENERAL PROVISIONS

     SECTION 1. FISCAL YEAR. The fiscal year of the corporation shall begin on the first day of January in each year.

     SECTION 2. INSPECTION OF BOOKS. The board of directors shall determine from time to time whether, and if allowed, when and under what conditions and regulations, the accounts and books of the corporation (except as may be by statute specifically open to inspection) or any of them, shall be open to the inspection of the stockholders, and a stockholder’s rights in this respect are, and shall be, restricted and limited accordingly.

     SECTION 3. GENDER. The use of the masculine gender in these bylaws shall be deemed to include the feminine gender.

Page 22

ARTICLE XIII.

AMENDMENTS TO AND SUSPENSION OF BYLAWS

     SECTION 1. AMENDMENTS. Subject to the provisions of Section 12 of Article IV, these bylaws may be altered or repealed at any regular meeting of the stockholders or at any special meeting of the stockholders at which a quorum is present or represented, provided notice of the proposed alteration or repeal be contained in the notice of the special meeting, by the affirmative vote of a majority of the stockholders entitled to vote at the meeting and present or represented thereat, or by the affirmative vote of a majority of the board of directors at any regular meeting of the board of directors or at any special meeting of the board of directors, if notice of the proposed alteration or repeal be contained in the notice of the special meeting.

     SECTION 2. SUSPENSION. Any provision of these bylaws may be suspended by vote of two-thirds of the votes cast upon the motion to suspend except that the suspension of the bylaw provision might be in contravention of any provision of any statute or of the Certificate of Incorporation.

* * *

Page 23

EX-10.1

Exhibit 10.1

[U.S. $1,500,000,000 FIVE-YEAR SENIOR REVOLVING CREDIT FACILITY]

AMENDED AND RESTATED CREDIT AGREEMENT

dated as of May 9, 2006

among

APACHE CORPORATION,

THE LENDERS PARTY HERETO,

JPMORGAN CHASE BANK, N.A.,
as Administrative Agent,

CITIBANK, N.A., and
BANK OF AMERICA, N.A.,
as Co-Syndication Agents,

and

BNP PARIBAS and
UBS LOAN FINANCE LLC,
as Co-Documentation Agents,

J.P. MORGAN SECURITIES INC.,
CITIGROUP GLOBAL MARKETS INC. and
BANC OF AMERICA SECURITIES, LLC,
as Co-Lead Arrangers and Joint Bookrunners

TABLE OF CONTENTS

	Page
ARTICLE I DEFINITIONS		1
SECTION 1.1 Defined Terms		1
SECTION 1.2 Classification of Loans and Borrowings		14
SECTION 1.3 Terms Generally		14
SECTION 1.4 Accounting Terms; GAAP		14
ARTICLE II THE CREDITS		14
SECTION 2.1 The Facility; Commitments		14
SECTION 2.2 Loans and Borrowings		15
SECTION 2.3 Requests for Revolving Borrowings		16
SECTION 2.4 Competitive Bid Procedure		16
SECTION 2.5 Funding of Borrowings		18
SECTION 2.6 Extension of Maturity Date and of Commitments		19
SECTION 2.7 Interest Elections		20
SECTION 2.8 Termination and Reduction of Commitments		22
SECTION 2.9 Repayment of Loans; Evidence of Debt		22
SECTION 2.10 Prepayment of Loans		23
SECTION 2.11 Fees		24
SECTION 2.12 Interest		24
SECTION 2.13 Alternate Rate of Interest		25
SECTION 2.14 Increased Costs		25
SECTION 2.15 Break Funding Payments		26
SECTION 2.16 Taxes		27
SECTION 2.17 Payments Generally; Pro Rata Treatment; Sharing of Set-offs		28
SECTION 2.18 Mitigation Obligations; Replacement of Lenders		29
SECTION 2.19 Currency Conversion and Currency Indemnity		30
SECTION 2.20 Additional Borrowers		31
ARTICLE III REPRESENTATIONS AND WARRANTIES		32
SECTION 3.1 Organization		32
SECTION 3.2 Authorization and Validity		32
SECTION 3.3 Government Approval and Regulation		33
SECTION 3.4 Pension and Welfare Plans		33

-i-

TABLE OF CONTENTS
(continued)

	Page
SECTION 3.5 Regulation U		33
SECTION 3.6 Taxes		33
SECTION 3.7 Subsidiaries; Restricted Subsidiaries		33
ARTICLE IV CONDITIONS		34
SECTION 4.1 Effectiveness		34
SECTION 4.2 All Loans		35
ARTICLE V AFFIRMATIVE COVENANTS		36
SECTION 5.1 Financial Reporting and Notices		36
SECTION 5.2 Compliance with Laws		37
SECTION 5.3 Maintenance of Properties		37
SECTION 5.4 Insurance		37
SECTION 5.5 Books and Records		37
SECTION 5.6 [Intentionally omitted]		38
SECTION 5.7 Use of Proceeds		38
ARTICLE VI FINANCIAL COVENANTS		38
SECTION 6.1 Ratio of Total Debt to Capital		38
ARTICLE VII NEGATIVE COVENANTS		38
SECTION 7.1 Liens		38
SECTION 7.2 Mergers		40
SECTION 7.3 Asset Dispositions		40
SECTION 7.4 Transactions with Affiliates		40
SECTION 7.5 Restrictive Agreements		40
SECTION 7.6 Guaranties		40
ARTICLE VIII EVENTS OF DEFAULT		41
SECTION 8.1 Listing of Events of Default		41
SECTION 8.2 Action if Bankruptcy		42
SECTION 8.3 Action if Other Event of Default		42
ARTICLE IX AGENTS		43
ARTICLE X MISCELLANEOUS		45
SECTION 10.1 Notices		45
SECTION 10.2 Waivers; Amendments		46

-ii-

TABLE OF CONTENTS
(continued)

	Page
SECTION 10.3 Expenses; Indemnity; Damage Waiver		47
SECTION 10.4 Successors and Assigns		48
SECTION 10.5 Survival		50
SECTION 10.6 Counterparts; Integration; Effectiveness		50
SECTION 10.7 Severability		51
SECTION 10.8 Right of Setoff		51
SECTION 10.9 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS		51
SECTION 10.10 Headings		52
SECTION 10.11 Confidentiality		52
SECTION 10.12 Interest Rate Limitation		53
SECTION 10.13 Joint and Several Obligations		54
SECTION 10.14 USA PATRIOT Act Notice		54
SECTION 10.15 NO ORAL AGREEMENTS		55

-iii-

TABLE OF CONTENTS
(continued)

SCHEDULES AND EXHIBITS

EXHIBITS:

Exhibit A	Form of Legal Opinion of Thompson & Knight LLP
Exhibit B	Form of Compliance Certificate
Exhibit C	Form of Assignment and Acceptance
Exhibit D	Form of Borrowing/Interest Election Request
Exhibit E	Form of Competitive Bid Quote Request
Exhibit F	Form of Notice of Competitive Bid Quote Request
Exhibit G	Form of Competitive Bid
Exhibit H	Form of Competitive Bid Accept/Reject Letter
Exhibit I	Form of Additional Borrower Counterpart

SCHEDULES:

Schedule 2.1	Commitments
Schedule 3.7	Subsidiaries; Restricted Subsidiaries
Schedule 7.1	Liens

-iv-

AMENDED AND RESTATED CREDIT AGREEMENT

     THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of May 9, 2006, is among APACHE CORPORATION, a Delaware corporation (“Apache” and, together with each other Person that becomes an Additional Borrower pursuant to Section 2.20, the “Borrower”), the LENDERS (as defined below) party hereto, JPMORGAN CHASE BANK, N.A., as Administrative Agent, CITIBANK, N.A. and BANK OF AMERICA, N.A., as Co-Syndication Agents, and BNP PARIBAS and UBS LOAN FINANCE LLC, as Co-Documentation Agents.

R E C I T A L S

     A. The Borrower, the Administrative Agent, and the other agents and lenders party thereto, have entered into that certain Credit Agreement, dated as of May 28, 2004 (the “Existing Credit Agreement”), pursuant to which the lenders party thereto agreed to make Loans (as defined in the Existing Credit Agreement and herein called, respectively, the “Existing 2004 Loans”).

     B. On the terms and subject to the conditions of this Agreement, all Existing 2004 Loans, if any, outstanding on the Effective Date (as hereinafter defined) shall, on the Effective Date, be renewed, restated, extended and converted into (but shall not be deemed to be repaid) Loans under this Agreement.

     C. The Company, the Lenders, the Administrative Agent, and the other agents party hereto hereby amend the Existing Credit Agreement and restate the Existing Credit Agreement in its entirety as follows:

ARTICLE I

Definitions

     SECTION 1.1 Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

     “ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

     “Accepting Lenders” is defined in Section 2.6(c).

     “Additional Borrower” means any Person which becomes a Borrower under this Agreement pursuant to Section 2.20.

     “Additional Borrower Counterpart” is defined in Section 2.20.

     “Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

     “Administrative Agent” means JPMorgan Chase Bank, N.A., in its capacity as Administrative Agent for the Lenders.

     “Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

     “Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

     “Agents” means each of the Administrative Agent, the Co-Syndication Agents, and Co-Documentation Agents.

     “Agreed Currency” is defined in Section 2.19(a).

     “Agreement” means this Amended and Restated Credit Agreement, as it may be amended, supplemented, restated or otherwise modified and in effect from time to time.

     “Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus ¹/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

     “Apache” is defined in the preamble.

     “Applicable Percentage” means, with respect to any Lender, the percentage of the total Commitments represented by such Lender’s Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments.

     “Applicable Rate” means, for any day, (i) with respect to any Eurodollar Loan, the applicable rate per annum set forth below under the caption “Eurodollar Margin” plus the Commitment Utilization Margin, if any, or (ii) with respect to the Facility Fees payable hereunder, the applicable rate per annum set forth below under the caption “Facility Fee”, in either case, based upon the ratings by Moody’s, S&P and Fitch, respectively, applicable on such date to the Index Debt:

	Facility Fee (in		Eurodollar Margin (in
Index Debt Ratings:	basis points)		basis points)
Category 1: ³A+/A1		4.5		10.5
Category 2: A/A2		5.0		15.0
Category 3: A-/A3		6.0		19.0
Category 4: BBB+/Baa1		7.0		23.0
Category 5: < BBB/Baa2		9.0		31.0

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     For purposes of the foregoing, (i) if either Moody’s, S&P or Fitch shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referred to in the penultimate sentence of this definition), then such rating agency shall be deemed to have established a rating in Category 5; (ii) if the ratings established or deemed to have been established by Moody’s, S&P and Fitch for the Index Debt shall fall within different Categories, the Applicable Rate shall be based on the highest two ratings, unless the highest two ratings shall fall within different Categories in which case the Applicable Rate shall be based on the lower of the highest two ratings; and (iii) if the ratings established or deemed to have been established by Moody’s, S&P and Fitch for the Index Debt shall be changed (other than as a result of a change in the rating system of Moody’s, S&P or Fitch), such change shall be effective as of the date on which it is first announced by the applicable rating agency. Each change in the Applicable Rate shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moody’s, S&P or Fitch shall change, or if any such rating agency shall cease to be in the business of rating corporate debt obligations, Borrower and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Rate shall be determined by reference to the rating most recently in effect prior to such change or cessation. Changes in the Applicable Rate will occur automatically without prior notice.

     “Assignment and Acceptance” means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.4), and accepted by the Administrative Agent, in substantially the form of Exhibit C or any other form approved by the Administrative Agent.

     “Authorized Officer” means, with respect to Apache, the Chairman, the President, the Executive Vice President and Chief Financial Officer and the Vice President and Treasurer of Apache, and any officer or employee of Apache specified as such to the Administrative Agent in writing by any of the aforementioned officers of Apache, and with respect to any Additional Borrower, the Chairman, the Vice Chairman, the President, the Executive Vice President and Chief Financial Officer and the Vice President and Treasurer of such Additional Borrower, and any officer or employee of such Additional Borrower specified as such to the Administrative Agent in writing by any of the aforementioned officers of such Additional Borrower.

     “Availability Period” means, with respect to any Lender, the period from and including the Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitment of such Lender; provided, however, that no Commitment of any Lender shall terminate prior to the Maturity Date except as provided in Sections 2.6, 2.8, 4.1, 8.2, 8.3 and 10.4.

     “Board” means the Board of Governors of the Federal Reserve System of the United States of America.

     “Borrower” means Apache Corporation, a Delaware corporation, and each other Person that becomes an Additional Borrower pursuant to Section 2.20.

3

     “Borrowing” means (a) Revolving Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect or (b) a Competitive Loan or group of Competitive Loans of the same Type made on the same date and as to which a single Interest Period is in effect.

     “Borrowing Request” means a request by Borrower for a Revolving Borrowing in accordance with Section 2.3, in substantially the form of Exhibit D or any other form approved by the Administrative Agent.

     “Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

     “Capital” means the consolidated shareholder’s equity of Borrower and its Subsidiaries plus the consolidated Debt of Borrower and its Subsidiaries.

     “CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601, et. seq., as amended from time to time.

     “Certificate of Extension” means a certificate of Borrower, executed by an Authorized Officer and delivered to the Administrative Agent, in a form acceptable to the Administrative Agent, which requests an extension of the then scheduled Maturity Date pursuant to Section 2.6.

     “Change in Law” means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.16(b), by any lending office of such Lender or by such Lender’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

     “Class”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans or Competitive Loans.

     “Code” means the Internal Revenue Code of 1986, as amended from time to time.

     “Co-Documentation Agents” means BNP Paribas and UBS Loan Finance LLC, in their capacity as co-documentation agents.

     “Commitment” means, with respect to each Lender, the commitment of such Lender to make Revolving Loans, as such commitment may be (a) reduced from time to time pursuant to Section 2.8, (b) reduced or increased from time to time pursuant to Section 2.6 or pursuant to assignments by or to such Lender pursuant to Section 10.4 and (c) terminated pursuant to Sections 4.1, 8.2 or 8.3. The amount of the Commitment represents such Lender’s maximum Revolving Credit Exposure hereunder. The initial amount of each Lender’s Commitment is set forth on Schedule 2.1, or in the Assignment and Acceptance pursuant to which such Lender shall

4

have assumed its Commitment, as applicable. The initial aggregate amount of the Lenders’ Commitments is $1,500,000,000.

     “Commitment Utilization” means, for any period, the ratio of (i) the aggregate principal amount of then outstanding Loans (other than any Competitive Loans) to (ii) the then aggregate amount of the Commitments.

     “Commitment Utilization Margin” means, on any date, if the Commitment Utilization is less than 50%, then an amount equal to zero basis points per annum (0 bps) and, if the Commitment Utilization is greater than or equal to 50%, then an amount equal to 5.0 basis points per annum. Changes in the Commitment Utilization Margin will occur automatically without prior notice.

     “Competitive Bid” means an offer by a Lender to make a Competitive Loan in accordance with Section 2.4, in substantially the form of Exhibit G or any other form approved by the Administrative Agent.

     “Competitive Bid Accept/Reject Letter” means a letter in substantially the form of Exhibit H or any other form approved by the Administrative Agent.

     “Competitive Bid Rate” means, with respect to any Competitive Bid, the Margin or the Fixed Rate, as applicable, offered by the Lender making such Competitive Bid.

     “Competitive Bid Request” means a request by Borrower for Competitive Bids in accordance with Section 2.4, in substantially the form of Exhibit E or any other form approved by the Administrative Agent.

     “Competitive Loan” means a Loan made pursuant to Section 2.4.

     “Consolidated Assets” means the total assets of the Borrower and its subsidiaries which would be shown as assets on a consolidated balance sheet of Borrower and its subsidiaries prepared in accordance with GAAP.

     “Consolidated Tangible Net Worth” means (i) the consolidated shareholder’s equity of Borrower and its Subsidiaries (determined in accordance with GAAP), less (ii) the amount of consolidated intangible assets of Borrower and its Subsidiaries, plus (iii) the aggregate amount of any non-cash write downs, on a consolidated basis, by Borrower and its Subsidiaries during the term hereof.

     “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

     “Controlled Group” means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with Borrower, are treated as a single employer under Section 414 (b) or 414 (c) of the Internal Revenue Code or Section 4001 of ERISA.

5

     “Co-Syndication Agents” means Citibank, N.A. and Bank of America, N.A., in their capacity as co-syndication agents.

     “Debt” of any Person means indebtedness, including capital leases, shown as debt on a consolidated balance sheet of such Person prepared in accordance with GAAP.

     “Declining Lenders” is defined in Section 2.6(c).

     “Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

     “dollars” or “$” refers to lawful money of the United States of America.

     “Effective Date” means a date agreed upon by Borrower and the Administrative Agent as the date on which the conditions specified in Section 4.1 of this Agreement are satisfied (or waived in accordance with Section 10.2 of this Agreement).

     “Effectiveness Notice” means a notice and certificate of Borrower properly executed by an Authorized Officer of Borrower addressed to the Lenders and delivered to the Administrative Agent, in sufficient number of counterparts to provide one for each such lender and each agent under this Agreement, whereby Borrower certifies satisfaction of all the conditions precedent to the effectiveness under Section 4.1 of this Agreement.

     “Environmental Laws” means all applicable federal, state or local statutes, laws, ordinances, codes, rules and regulations (including consent decrees and administrative orders) relating to public health and safety and protection of the environment.

     “Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time.

     “ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

     “ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an “accumulated

6

funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

     “Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate (or, in the case of a Competitive Loan, the LIBO Rate).

     “Event of Default” has the meaning assigned to such term in Article VIII.

     “Excluded Taxes” means, with respect to any Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by Borrower under Section 2.18(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender’s failure to comply with Section 2.16(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from Borrower with respect to such withholding tax pursuant to Section 2.16(a).

     “Existing Credit Facility” is defined in Recital A.

     “Existing 2004 Loans” is defined in Recital A.

     “Facility Fee” is defined in Section 2.11(a).

     “Federal Funds Effective Rate” means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received

7

by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

     “Fitch” means Fitch, Inc. and any affiliate or successor thereto that is a nationally recognized rating agency in the United States.

     “Fixed Rate” means, with respect to any Competitive Loan (other than a Eurodollar Competitive Loan), the fixed rate of interest per annum (expressed as a decimal to no more than four (4) decimal places) specified by the Lender making such Competitive Loan in its related Competitive Bid.

     “Fixed Rate Loan” means a Competitive Loan bearing interest at a Fixed Rate.

     “Foreign Lender” means any Lender that is not organized under the laws of, or resident, in the United States. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

     “GAAP” means generally accepted accounting principles as in effect from time to time, applied on a basis consistent with the most recent financial statements of Borrower and its Subsidiaries delivered to the Lenders pursuant hereto.

     “Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

     “Hazardous Material” means (a) any “hazardous substance,” as defined by CERCLA; (b) any “hazardous waste,” as defined by the Resource Conservation and Recovery Act; or (c) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance within the meaning of any other Environmental Law.

     “Indebtedness” of any Person means all (i) Debt, and (ii) guaranties or other contingent obligations in respect of the Debt of any other Person.

     “Indemnified Taxes” means Taxes other than Excluded Taxes.

     “Index Debt” means senior, unsecured, non-credit enhanced, long-term indebtedness for borrowed money of Borrower that is not guaranteed by any other Person or subject to any other credit enhancement.

     “Interest Election Request” means a request by Borrower to convert or continue a Revolving Borrowing in accordance with Section 2.7, in substantially the form of Exhibit D or any other form approved by the Administrative Agent.

     “Interest Payment Date” means (a) with respect to any ABR Loan, the last day of each March, June, September and December, (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a

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Eurodollar Borrowing with an Interest Period of more than three (3) months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three (3) months’ duration after the first day of such Interest Period, and (c) with respect to any Fixed Rate Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Fixed Rate Borrowing with an Interest Period of more than 90 days’ duration (unless otherwise specified in the applicable Competitive Bid Request), each day prior to the last day of such Interest Period that occurs at intervals of 90 days’ duration after the first day of such Interest Period, and any other dates that are specified in the applicable Competitive Bid Request as Interest Payment Dates with respect to such Borrowing.

     “Interest Period” means (a) with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day, or, with the consent of the Administrative Agent, such other day, in the calendar month that is one, two, three or six months (or, with the consent of each Lender, nine or twelve months) thereafter, as Borrower may elect, (b) with respect to any Fixed Rate Borrowing, the period (which shall not be less than seven (7) days or more than 360 days) commencing on the date of such Borrowing and ending on the date specified in the applicable Competitive Bid Request; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period pertaining to a Eurodollar Borrowing that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

     “Judgment Currency” is defined in Section 2.19(b).

     “Lenders” means the Persons listed on Schedule 2.1 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance.

     “LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as reasonably determined by the Administrative Agent and Borrower from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the

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London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.

     “Lien” means any mortgage, pledge, lien, encumbrance, charge, or security interest of any kind, granted or created to secure Indebtedness; provided, however, that, with respect to any prohibitions of Liens on Property, the following transactions shall not be deemed to create a Lien to secure Indebtedness; (i) production payments and (ii) liens required by statute and created in favor of U.S. governmental entities to secure partial, progress, advance, or other payments intended to be used primarily in connection with air or water pollution control.

     “Loan Document” means this Agreement, any Borrowing Request, any Interest Election Request, any Competitive Bid Quote Request, any Notice of Competitive Bid Quote Request, any Competitive Bid, any Competitive Bid Accept/Reject Letter, any Certificate of Extension, any Assignment and Acceptance, any Additional Borrower Counterpart, any election notice, the agreement with respect to fees described in Section 2.11(b), and each other agreement, document or instrument delivered by Borrower or any other Person in connection with this Agreement, as such may be amended from time to time.

     “Loans” means the loans made by the Lenders to Borrower pursuant to this Agreement.

     “Margin” means, with respect to any Competitive Loan bearing interest at a rate based on the LIBO Rate, the marginal rate of interest, if any, to be added to or subtracted from the LIBO Rate to determine the rate of interest applicable to such Loan, as specified by the Lender making such Loan in its related Competitive Bid.

     “Material Adverse Effect” means, as to any matter, that such matter could reasonably be expected to materially and adversely affect the assets, business, properties, condition (financial or otherwise) of Borrower and its Subsidiaries taken as a whole. No matter shall be considered to result, or be expected to result, in a Material Adverse Effect unless such matter causes Borrower and its Subsidiaries, on a consolidated basis, to suffer a loss or incur a cost equal to at least ten percent (10%) of Borrower’s Consolidated Tangible Net Worth.

     “Maturity Date” means the Original Maturity Date, or such other later date as may result from any extension requested by Borrower and consented to by some or all of the Lenders pursuant to Section 2.6.

     “Moody’s” means Moody’s Investors Service, Inc. and any successor thereto that is a nationally recognized rating agency in the United States.

     “Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

     “Notice of Competitive Bid Request” means a notice of request by Borrower for Competitive Bids sent by the Administrative Agent to each Lender in accordance with Section 2.4, in substantially the form of Exhibit F or any other form approved by the Administrative Agent.

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     “Obligations” means, at any time, the sum of (i) the outstanding principal amount of any Loans plus (ii) all accrued and unpaid interest and Facility Fees plus (iii) all other obligations of Borrower or any Subsidiary to any Lender or any Agent, whether or not contingent, arising under or in connection with any of the Loan Documents.

     “Original Maturity Date” means May 28, 2011.

     “Other Currency” is defined in Section 2.19(a).

     “Other Taxes” means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement.

     “PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

     “Pension Plan” means a “pension plan,” as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which a Borrower or any corporation, trade or business that is, along with a Borrower, a member of a Controlled Group, may have liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.

     “Person” means any natural person, corporation, limited liability company, unlimited liability company, joint venture, partnership, firm, association, trust, government, governmental agency or any other entity, whether acting in an individual, fiduciary or other capacity.

     “Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

     “Prime Rate” means the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank, N.A. as its prime rate in effect at its principal office in New York City which rate may not be the lowest rate offered; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.

     “Property” means (i) any property owned or leased by Borrower or any Subsidiary, or any interest of Borrower or any Subsidiary in property, which is considered by Borrower to be capable of producing oil, gas, or minerals in commercial quantities, (ii) any interest of Borrower or any Subsidiary in any refinery, processing or manufacturing plant owned or leased by Borrower or any manufacturing plant owned or leased by Borrower or any Subsidiary, (iii) any interest of Borrower or any Subsidiary in all present and future oil, gas, other liquid and gaseous hydrocarbons, and other minerals now or hereafter produced from any other Property or to which Borrower or any Subsidiary may be entitled as a result of its ownership of any Property, and

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(iv) all real and personal assets owned or leased by Borrower or any Subsidiary used in the drilling, gathering, processing, transportation, or marketing of any oil, gas, and other hydrocarbons or minerals, except (a) any such real or personal assets related thereto employed in transportation, distribution or marketing or (b) any interest of Borrower or any Subsidiary in, any refinery, processing or manufacturing plant, or portion thereof, which property described in clauses (a) or (b), in the opinion of the Board of Directors of Borrower, is not a principal plant or principal facility in relation to the activities of Borrower and its Subsidiaries taken as a whole.

     “Register” has the meaning set forth in Section 10.4.

     “Regulation U” means any of Regulations T, U or X of the Board from time to time in effect and shall include any successor or other regulations or official interpretations of said Board or any successor Person relating to the extension of credit for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System or any successor Person.

     “Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

     “Replacement Lenders” is defined in Section 2.6(c)(ii).

     “Required Lenders” means Lenders having in the aggregate 51% of the aggregate total Commitments, or, if the Commitments have been terminated, Lenders holding 51% of the aggregate unpaid principal amount of the outstanding Obligations.

     “Resource Conservation and Recovery Act” means the Resource Conservation and Recovery Act, 42 U.S.C. Section 690, et seq., as amended from time to time.

     “Restricted Subsidiary” means any Subsidiary of Borrower that owns any asset representing or consisting of an entitlement to production from, or other interest in, reserves of oil, gas or other minerals in place located in the United States, Canada or Australia, including, without limitation, Apache Canada Ltd., a corporation organized under the laws of the Province of Alberta, Canada, and Apache Energy Limited (ACN 009 301 964), a corporation organized under the laws of the State of Western Australia, Australia, or is otherwise designated by Borrower in writing to the Administrative Agent.

     “Revolving Credit Exposure” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s Revolving Loans at such time.

     “Revolving Loan” means a Loan made pursuant to Section 2.3.

     “S&P” means Standard & Poor’s and any successor thereto that is a nationally-recognized rating agency in the United States.

     “Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the applicable maximum reserve percentages (including any basic, marginal, special, emergency

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or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

     “subsidiary” means, with respect to any Person, any corporation or other similar entity of which more than 50% of the outstanding capital stock (or other equity) having ordinary voting power to elect a majority of the Board of Directors of such corporation or entity (irrespective of whether or not at the time capital stock or any other class or classes of such corporation or entity shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person.

     “Subsidiary” means any subsidiary of Borrower; provided, however, that in all events the following Persons shall not be deemed to be Subsidiaries of Borrower or any of its Subsidiaries: Apache Offshore Investment Partnership, a Delaware general partnership, Apache Offshore Petroleum Limited Partnership, a Delaware limited partnership, Main Pass 151 Pipeline Company, a Texas general partnership, and Apache 681/682 Joint Venture, a Texas joint venture.

     “Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

     “Transactions” means the execution, delivery and performance by Borrower of this Agreement and the other Loan Documents, the borrowing of Loans and the use of the proceeds thereof.

     “Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate, the Alternate Base Rate or, in the case of a Competitive Loan or Borrowing, the LIBO Rate or a Fixed Rate.

     “United States” or “U.S.” means the United States of America, its fifty states and the District of Columbia.

     “Unrestricted Subsidiary” means any Subsidiary of Borrower that is not a Restricted Subsidiary.

     “Welfare Plan” means a “welfare plan,” as such term is defined in Section 3(1) of ERISA.

     “Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

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     SECTION 1.2 Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a “Revolving Loan”) or by Type (e.g., a “Eurodollar Loan”) or by Class and Type (e.g., a “Eurodollar Revolving Loan”). Borrowings also may be classified and referred to by Class (e.g., a “Revolving Borrowing”) or by Type (e.g., a “Eurodollar Borrowing”) or by Class and Type (e.g., a “Eurodollar Revolving Borrowing”).

     SECTION 1.3 Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

     SECTION 1.4 Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if Borrower notifies the Administrative Agent that Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.

ARTICLE II

The Credits

     SECTION 2.1 The Facility; Commitments.

     (a) On the Effective Date, all outstanding Existing 2004 Loans, if any, shall be renewed, restated, extended and converted into (but shall not be deemed to be repaid) Loans under this Agreement; provided, however, that from and including the Effective Date, the

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Applicable Rate applicable with respect to such renewed, restated, extended and converted Existing 2004 Loans shall be determined pursuant to this Agreement.

     (b) Subject to the terms and conditions set forth herein, each Lender agrees to make Revolving Loans in U.S. Dollars to Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in (a) such Lender’s Revolving Credit Exposure exceeding such Lender’s Commitment or (b) the sum of the total Revolving Credit Exposures plus the aggregate principal amount of outstanding Competitive Loans exceeding the total Commitments. Subject to the conditions set forth herein, Borrower may borrow, prepay and reborrow Revolving Loans. Apache and any Additional Borrowers shall be jointly and severally liable for all Obligations.

     SECTION 2.2 Loans and Borrowings.

     (a) Each Revolving Loan shall be made as part of a Borrowing consisting of Revolving Loans made by the Lenders ratably in accordance with their respective Commitments. Each Competitive Loan shall be made in accordance with the procedures set forth in Section 2.4. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments and Competitive Bids of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required.

     (b) Subject to Section 2.13, (i) each Revolving Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as Borrower may request in accordance herewith, and (ii) each Competitive Borrowing shall be comprised entirely of Eurodollar Loans or Fixed Rate Loans as Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of Borrower to repay such Loan in accordance with the terms of this Agreement.

     (c) At the commencement of each Interest Period for any Eurodollar Revolving Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000 (including any continuation or conversion of existing Revolving Loans made in connection therewith). At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000 (including any continuation or conversion of existing Revolving Loans made in connection therewith); provided that an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments. Each Competitive Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of ten (10) Eurodollar Revolving Borrowings outstanding.

     (d) Notwithstanding any other provision of this Agreement, Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.

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     SECTION 2.3 Requests for Revolving Borrowings. To request a Revolving Borrowing, Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 1:00 p.m., New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.2:

     (i) the aggregate amount of the requested Borrowing;

     (ii) the date of such Borrowing, which shall be a Business Day;

     (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

     (iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”.

If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Revolving Borrowing, then Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.

     SECTION 2.4 Competitive Bid Procedure.

     (a) Subject to the terms and conditions set forth herein, from time to time during the Availability Period, Borrower may request Competitive Bids and may (but shall not have any obligation to) accept Competitive Bids and borrow Competitive Loans; provided that the sum of the total Revolving Credit Exposures plus the aggregate principal amount of outstanding Competitive Loans at any time shall not exceed the total Commitments. To request Competitive Bids, Borrower shall notify the Administrative Agent of such request by telephone, in the case of a Eurodollar Borrowing, not later than noon, New York City time, four Business Days before the date of the proposed Borrowing and, in the case of a Fixed Rate Borrowing, not later than 10:00 a.m., New York City time, one Business Day before the date of the proposed Borrowing; provided that Borrower may submit up to (but not more than) five (5) Competitive Bid Requests on the same day, but a Competitive Bid Request shall not be made within five Business Days after the date of any previous Competitive Bid Request, unless any and all such previous Competitive Bid Requests shall have been withdrawn or all Competitive Bids received in response thereto rejected. Each such telephonic Competitive Bid Request shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Competitive Bid

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Request and signed by Borrower. Each such telephonic and written Competitive Bid Request shall specify the following information in compliance with Section 2.2:

     (i) the aggregate amount of the requested Borrowing;

     (ii) the date of such Borrowing, which shall be a Business Day;

     (iii) whether such Borrowing is to be a Eurodollar Borrowing or a Fixed Rate Borrowing; and

     (iv) the Interest Period to be applicable to such Borrowing, which shall be a period contemplated by the definition of the term “Interest Period”.

Promptly following receipt of a Competitive Bid Request in accordance with this Section, the Administrative Agent shall notify the Lenders of the details thereof by telecopy to each Lender of a Notice of Competitive Bid Quote Request inviting the Lenders to submit Competitive Bids.

     (b) Each Lender may (but shall not have any obligation to) make one or more Competitive Bids to Borrower in response to a Competitive Bid Request. Each Competitive Bid by a Lender must be in a form approved by the Administrative Agent and must be received by the Administrative Agent by telecopy, in the case of a Eurodollar Competitive Borrowing, not later than noon, New York City time, three Business Days before the proposed date of such Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than 10:00 a.m., New York City time, on the proposed date of such Competitive Borrowing. Competitive Bids that do not conform substantially to the form approved by the Administrative Agent may be rejected by the Administrative Agent, and the Administrative Agent shall notify the applicable Lender as promptly as practicable. Each Competitive Bid shall specify (i) the principal amount (which shall be a minimum of $5,000,000 and an integral multiple of $1,000,000 and which may equal the entire principal amount of the Competitive Borrowing requested by Borrower) of the Competitive Loan or Loans that the Lender is willing to make, (ii) the Competitive Bid Rate or Rates at which the Lender is prepared to make such Loan or Loans (expressed as a percentage rate per annum in the form of a decimal to no more than four decimal places) and (iii) the Interest Period applicable to each such Loan and the last day thereof.

     (c) The Administrative Agent shall promptly notify Borrower by telecopy of a summary of the Competitive Bid Rate and the principal amount specified in each Competitive Bid and the identity of the Lender that shall have made such Competitive Bid.

     (d) Subject only to the provisions of this paragraph, Borrower may accept or reject any Competitive Bid. Borrower shall notify the Administrative Agent by telephone, confirmed by telecopy, in the form of a Competitive Bid Accept/Reject Letter, whether and to what extent it has decided to accept or reject each Competitive Bid, in the case of a Eurodollar Competitive Borrowing, not later than 1:00 p.m., New York City time, three Business Days before the date of the proposed Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than 11:00 a.m., New York City time, on the proposed date of the Competitive Borrowing; provided that (i) the failure of Borrower to give such notice shall be deemed to be a rejection of each Competitive Bid, (ii) Borrower shall not accept a Competitive Bid made at a particular Competitive Bid Rate if Borrower rejects a Competitive Bid made at a lower Competitive Bid

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Rate, (iii) the aggregate amount of the Competitive Bids accepted by Borrower shall not exceed the aggregate amount of the requested Competitive Borrowing specified in the related Competitive Bid Request, (iv) to the extent necessary to comply with clause (iii) above, Borrower may accept Competitive Bids at the same Competitive Bid Rate in part, which acceptance, in the case of multiple Competitive Bids at such Competitive Bid Rate, shall be made pro rata in accordance with the amount of each such Competitive Bid, and (v) except pursuant to clause (iv) above, no Competitive Bid shall be accepted for a Competitive Loan unless such Competitive Loan is in a minimum principal amount of $5,000,000 and an integral multiple of $1,000,000; provided further that if a Competitive Loan must be in an amount less than $5,000,000 because of the provisions of clause (iv) above, such Competitive Loan may be for a minimum of $1,000,000 or any integral multiple thereof, and in calculating the pro rata allocation of acceptances of portions of multiple Competitive Bids at a particular Competitive Bid Rate pursuant to clause (iv) the amounts shall be rounded to integral multiples of $1,000,000 in a manner determined by Borrower. A notice given by Borrower pursuant to this paragraph shall be irrevocable.

     (e) The Administrative Agent shall promptly notify each bidding Lender by telecopy whether or not its Competitive Bid has been accepted (and, if so, the amount and Competitive Bid Rate so accepted), and each successful bidder will thereupon become bound, subject to the terms and conditions hereof, to make the Competitive Loan in respect of which its Competitive Bid has been accepted.

     (f) If the Administrative Agent shall elect to submit a Competitive Bid in its capacity as a Lender, it shall submit such Competitive Bid directly to Borrower at least one quarter of an hour earlier than the time by which the other Lenders are required to submit their Competitive Bids to the Administrative Agent pursuant to paragraph (b) of this Section.

     SECTION 2.5 Funding of Borrowings.

     (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to Borrower by promptly crediting the amounts so received, in like funds, to an account of Borrower designated by Borrower from time to time in a written notice to the Administrative Agent executed by two Authorized Officers of Apache and two Authorized Officers of any Additional Borrower.

     (b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed time of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on the requested date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to Borrower to but excluding the date of payment to the Administrative

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Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate or a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of Borrower, the interest rate applicable to Loans made in such Borrowing. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing.

     SECTION 2.6 Extension of Maturity Date and of Commitments.

     (a) Subject to the other provisions of this Agreement and provided that no Event of Default has occurred and is continuing, the total Commitments shall be effective for an initial period from the Effective Date to the Original Maturity Date; provided that the Maturity Date, and concomitantly the total Commitments, may be extended for successive one year periods expiring on the date which is one (1) year from the then scheduled Maturity Date. If Borrower shall request in a Certificate of Extension delivered to the Administrative Agent at least 45 days prior to a date which is an anniversary of the Effective Date that the Maturity Date be extended for one year from the then scheduled Maturity Date, then the Administrative Agent shall promptly notify each Lender of such request and each Lender shall notify the Administrative Agent, no later than 30 days prior to such anniversary of the Effective Date, whether such Lender, in the exercise of its sole discretion, will extend the Maturity Date for such one year period. Any Lender which shall not timely notify the Administrative Agent whether it will extend the Maturity Date shall be deemed to not have agreed to extend the Maturity Date. No Lender shall have any obligation whatsoever to agree to extend the Maturity Date. Any agreement to extend the Maturity Date by any Lender shall be irrevocable, except as provided in Section 2.6(c).

     (b) If all Lenders notify the Administrative Agent pursuant to clause (a) of this Section 2.6 of their agreement to extend the Maturity Date, then the Administrative Agent shall so notify each Lender and Borrower, and such extension shall be effective without other or further action by any party hereto for such additional one year period.

     (c) If Lenders constituting at least the Required Lenders approve the extension of the then scheduled Maturity Date (such Lenders agreeing to extend the Maturity Date herein called the “Accepting Lenders”) and if one or more Lenders shall notify, or be deemed to notify, the Administrative Agent pursuant to clause (a) of this Section 2.6 that they will not extend the then scheduled Maturity Date (such Lenders herein called the “Declining Lenders”), then (A) the Administrative Agent shall promptly so notify Borrower and the Accepting Lenders, (B) the Accepting Lenders shall, upon Borrower’s election to extend the then scheduled Maturity Date in accordance with clause (i) or (ii) below, extend the then scheduled Maturity Date and (C) Borrower shall, pursuant to a notice delivered to the Administrative Agent, the Accepting Lenders and the Declining Lenders, no later than the tenth (10th) day following the date by which each Lender is required, pursuant to Section 2.6(a), to approve or disapprove the requested extension of the total Commitments, either:

     (i) elect to extend the Maturity Date and direct the Declining Lenders to terminate their Commitments, which termination shall become effective on the date which would have been the Maturity Date except for the operation of this Section. On the date which would have been the Maturity Date except for the operation of this

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Section, (x) Borrower shall deliver a notice of the effectiveness of such termination to the Declining Lenders with a copy to the Administrative Agent and (y) Borrower shall pay in full in immediately available funds all Obligations of Borrower owing to the Declining Lenders, including any amounts required pursuant to Section 2.15, and (z) upon the occurrence of the events set forth in clauses (x) and (y), the Declining Lenders shall each cease to be a Lender hereunder for all purposes, other than for purposes of Sections 2.14 through 2.17, Section 2.19 and Section 10.3, and shall cease to have any obligations or any Commitment hereunder, other than to the Agents pursuant to Article IX, and the Administrative Agent shall promptly notify the Accepting Lenders and Borrower of the new Commitments; or

     (ii) elect to extend the Maturity Date and, prior to or no later than the then scheduled Maturity Date, (A) to replace one or more of the Declining Lenders with another lender or lenders reasonably acceptable to the Administrative Agent (such lenders herein called the “Replacement Lenders”) and (B) Borrower shall pay in full in immediately available funds all Obligations of Borrower owing to any Declining Lenders which are not being replaced, as provided in clause (i) above; provided that (x) any Replacement Lender shall purchase, and any Declining Lender shall sell, such Declining Lender’s rights and obligations hereunder without recourse or expense to, or warranty by, such Declining Lender being replaced for a purchase price equal to the aggregate outstanding principal amount of the Obligations payable to such Declining Lender plus any accrued but unpaid interest on such Obligations and accrued but unpaid fees or other amounts owing in respect of such Declining Lender’s Loans and Commitments hereunder, and (y) upon the payment of such amounts referred to in clause(x) and the execution of an Assignment and Acceptance by such Replacement Lender and such Declining Lender, such Replacement Lender shall constitute a Lender hereunder and such Declining Lender being so replaced shall no longer constitute a Lender (other than for purposes of Sections 2.14 through 2.17, Section 2.19 and Section 10.3), and shall no longer have any obligations hereunder, other than to the Agents pursuant to Article IX; or

     (iii) elect to revoke and cancel the extension request in such Certificate of Extension by giving notice of such revocation and cancellation to the Administrative Agent (which shall promptly notify the Lenders thereof) no later than the tenth (10th) day following the date by which each Lender is required, pursuant to clause (a) of this Section, to approve or disapprove the requested extension of the Maturity Date, and concomitantly the total Commitments.

     If Borrower fails to timely provide the election notice referred to in this clause(c), Borrower shall be deemed to have revoked and cancelled the extension request in the Certificate of Extension and to have elected not to extend the Maturity Date.

     SECTION 2.7 Interest Elections.

     (a) Each Revolving Borrowing initially shall be of the Type specified in the applicable Borrowing Request (or an ABR Borrowing if no Type is specified) and, in the case of a Eurodollar Revolving Borrowing, shall have an initial Interest Period as specified in such Borrowing Request (or one month if no Interest Period is specified). Thereafter, Borrower may

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elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Revolving Borrowing, may elect Interest Periods therefor, all as provided in this Section. Borrower may, subject to the requirements of Section 2.2(c), elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Competitive Borrowings, which may not be converted or continued.

     (b) To make an election pursuant to this Section, Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.3 if Borrower were requesting a Revolving Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request signed by Borrower.

     (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.2:

     (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);

     (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

     (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

     (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.

If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then Borrower shall be deemed to have selected an Interest Period of one month’s duration.

     (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

     (e) If Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Revolving Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at

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the request of the Required Lenders, so notifies Borrower, then, so long as an Event of Default is continuing, (i) no outstanding Revolving Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid and provided the Indebtedness has not been accelerated pursuant to Section 8.3, each Eurodollar Revolving Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.

     SECTION 2.8 Termination and Reduction of Commitments.

     (a) Unless previously terminated, the Commitments shall terminate on the Maturity Date.

     (b) Borrower may at any time terminate, or from time to time reduce, the Commitments; provided that (i) each reduction of the Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $5,000,000 and (ii) Borrower shall not terminate or reduce the Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.10, the sum of the Revolving Credit Exposures plus the aggregate principal amount of outstanding Competitive Loans would exceed the total Commitments.

     (c) Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least two Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments delivered by Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments.

     SECTION 2.9 Repayment of Loans; Evidence of Debt.

     (a) Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Revolving Loan on the Maturity Date or, if earlier, the date on which the Commitment of such Lender relating to such Revolving Loan is terminated (except for termination of the Commitment of the assigning Lender pursuant to Section 10.4(b)), and (ii) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Competitive Loan on the last day of the Interest Period applicable to such Loan.

     (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

     (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period

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applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.

     (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of Borrower to repay the Loans in accordance with the terms of this Agreement.

     (e) Any Lender may request that Loans made by it be evidenced by one or more promissory notes. In such event, Borrower shall prepare, execute and deliver to such Lender promissory notes payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns and in a form approved by the Administrative Agent). Thereafter, the Loans evidenced by such promissory notes and interest thereon shall at all times (including after assignment pursuant to Section 10.4) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if any such promissory note is a registered note, to such payee and its registered assigns).

     SECTION 2.10 Prepayment of Loans.

     (a) Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (b) of this Section; provided that Borrower shall not have the right to prepay any Competitive Loan without the prior consent of the Lender thereof and compensation for break funding, to the extent required by Section 2.15.

     (b) Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Revolving Borrowing, not later than 1:00 p.m., New York City time, three Business Days before the date of prepayment or (ii) in the case of prepayment of an ABR Revolving Borrowing, not later than 11:00 a.m., New York City time, on the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.8, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.8. Promptly following receipt of any such notice relating to a Revolving Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Revolving Borrowing shall be in an amount that would be permitted in the case of an advance of a Revolving Borrowing of the same Type as provided in Section 2.2. Each prepayment of a Revolving Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.12 and compensation for break funding, to the extent required by Section 2.15.

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     SECTION 2.11 Fees.

     (a) Borrower agrees to pay to the Administrative Agent for the account of each Lender a facility fee (the “Facility Fee”), which shall accrue at the Applicable Rate on the daily amount of the Commitment of such Lender (whether used or unused) during the period from and including the Effective Date to but excluding the earlier to occur of (i) the date on which such Commitment terminates (except for termination of the Commitment of the assigning Lender pursuant to Section 10.4(b)) or (ii) the Maturity Date; provided that, if such Lender continues to have any Revolving Credit Exposure after its Commitment terminates, then such Facility Fee shall continue to accrue on the daily amount of such Lender’s Revolving Credit Exposure from and including the date on which its Commitment terminates to but excluding the date on which such Lender ceases to have any Revolving Credit Exposure. Accrued Facility Fees shall be payable in arrears on the first day of, April, July and October and the second day of January of each year and on the date on which the Commitments terminate, commencing on the first such date to occur after the date hereof; provided that any Facility Fees accruing after the date on which the Commitments terminate shall be payable on demand. All Facility Fees shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

     (b) Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between Borrower and the Administrative Agent.

     (c) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, in the case of Facility Fees, to the Lenders. Fees paid shall not be refundable under any circumstances.

     SECTION 2.12 Interest.

     (a) The Loans comprising each ABR Borrowing shall bear interest on the daily amount outstanding at the Alternate Base Rate.

     (b) The Loans comprising each Eurodollar Borrowing shall bear interest on the daily amount outstanding (i) in the case of a Eurodollar Revolving Loan, at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate, or (ii) in the case of a Eurodollar Competitive Loan, at the LIBO Rate for the Interest Period in effect for such Borrowing plus (or minus, as applicable) the Margin applicable to such Loan.

     (c) Each Fixed Rate Loan shall bear interest on the daily amount outstanding at the Fixed Rate applicable to such Loan.

     (d) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section.

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     (e) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans on the Maturity Date; provided that (i) interest accrued pursuant to paragraph (d) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment, (iii) in the event of any conversion of any Eurodollar Revolving Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion, and (iv) with respect to any Declining Lender, accrued interest shall be paid upon the termination of the Commitment of such Lender.

     (f) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to (i) the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate and (ii) the Fixed Rate, shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent demonstrable error.

     SECTION 2.13 Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurodollar Borrowing:

     (i) the Administrative Agent determines (which determination shall be conclusive absent demonstrable error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period; or

     (ii) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period;

then the Administrative Agent shall give notice thereof to Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Revolving Borrowing to, or continuation of any Revolving Borrowing as, a Eurodollar Borrowing shall be ineffective, (ii) if any Borrowing Request requests a Eurodollar Revolving Borrowing, such Borrowing shall be made as an ABR Borrowing and (iii) any request by Borrower for a Eurodollar Competitive Borrowing shall be ineffective; provided that (A) if the circumstances giving rise to such notice do not affect all the Lenders, then requests by Borrower for Eurodollar Competitive Borrowings may be made to Lenders that are not affected thereby and (B) if the circumstances giving rise to such notice affect only one Type of Borrowings, then the other Type of Borrowings shall be permitted.

     SECTION 2.14 Increased Costs.

     (a) If any Change in Law shall:

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     (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate); or

     (ii) impose on any Lender or the London interbank market any other condition affecting this Agreement or Eurodollar Loans or Fixed Rate Loans made by such Lender;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan or Fixed Rate Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.

     (b) If any Lender reasonably determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement or the Loans made by such Lender, to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy), then from time to time Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.

     (c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section (together with the calculation thereof) shall be delivered to Borrower and shall be conclusive absent demonstrable error. Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

     (d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s right to demand such compensation; provided that Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender notifies Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

     (e) Notwithstanding the foregoing provisions of this Section, a Lender shall not be entitled to compensation pursuant to this Section in respect of any Competitive Loan if the Change in Law that would otherwise entitle it to such compensation shall have been publicly announced prior to submission of the Competitive Bid pursuant to which such Loan was made.

     SECTION 2.15 Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan or Fixed Rate Loan other than on the last day of an Interest

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Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Revolving Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.10(b) and is revoked in accordance therewith), (d) the failure to borrow any Competitive Loan after accepting the Competitive Bid to make such Loan, or (e) the assignment of any Eurodollar Loan or Fixed Rate Loan other than on the last day of the Interest Period applicable thereto as a result of a request by Borrower pursuant to either Section 2.6, or Section 2.18 then, in any such event, Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive, together with the calculation thereof, pursuant to this Section shall be delivered to Borrower and to the Administrative Agent and shall be conclusive absent demonstrable error. Borrower shall pay to the Administrative Agent for the account of such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

     SECTION 2.16 Taxes.

     (a) Any and all payments by or on account of any obligation of Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent or Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions and (iii) Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

     (b) In addition, Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

     (c) Borrower shall pay the Administrative Agent and each Lender, within 10 days after written demand therefor, the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent or such Lender, as the case may be, on or with respect to any payment by or on account of any obligation of Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto (other than any such penalties or interest arising through the failure of the Administrative Agent or Lender to

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act as a reasonably prudent agent or lender, respectively), whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to Borrower by a Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent demonstrable error.

     (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by Borrower to a Governmental Authority, Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

     (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by Borrower as will permit such payments to be made without withholding or at a reduced rate.

     SECTION 2.17 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

     (a) Borrower shall make each payment required to be made by it hereunder (whether of principal, interest or fees, or of amounts payable under Section 2.14, 2.15 or 2.16, or otherwise) prior to 1:00 p.m., New York City time, on the date when due, in immediately available funds, without set-off or counterclaim. All such payments shall be made to the Administrative Agent, c/o Loan & Agency Services Group, JPMorgan Chase Bank, N.A., 1111 Fannin Street, 10^th Floor, Houston, Texas 77002-8069, Attention: Ms. Rose Salvacion, telephone no.: 713-750-2501, facsimile no.: 713-427-6307, except that payments pursuant to Sections 2.14, 2.16 and 10.3 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in dollars.

     (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties. If insufficient funds are received due to Borrower’s entitlement to withhold amounts on account of Excluded Taxes in relation to a particular Lender, such insufficiency shall not be subject to this Section 2.17(b) but shall be withheld from and shall only affect payments made to such Lender.

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     (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of Borrower in the amount of such participation.

     (d) Unless the Administrative Agent shall have received notice from Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that Borrower will not make such payment, the Administrative Agent may assume that Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

     (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.17(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such Section until all such unsatisfied obligations are fully paid.

     SECTION 2.18 Mitigation Obligations; Replacement of Lenders.

     (a) If any Lender requests compensation under Section 2.14, or if Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts

29

payable pursuant to Section 2.14 or 2.16, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

     (b) If any Lender requests compensation under Section 2.14, or if Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, or if any Lender defaults in its obligation to fund Loans hereunder, then Borrower may upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse or expense to, or warranty by, such Lender (in accordance with and subject to the restrictions contained in Section 10.4), all its interests, rights and obligations under this Agreement (other than any outstanding Competitive Loans held by it) to an assignee designated by Borrower which meets the requirements of Section 10.4(b) that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans (other than Competitive Loans), accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or Borrower (in the case of all other amounts), (iii) the assignee and assignor shall have entered into an Assignment and Acceptance, and (iv) in the case of any such assignment resulting from a claim for compensation under Section 2.14 or payments required to be made pursuant to Section 2.16, such assignment will result in a reduction in such compensation or payments.

     SECTION 2.19 Currency Conversion and Currency Indemnity.

     (a) Payments in Agreed Currency. Borrower shall make payment relative to any Obligation in the currency (the “Agreed Currency”) in which the Obligation was effected. If any payment is received on account of any Obligation in any currency (the “Other Currency”) other than the Agreed Currency (whether voluntarily or pursuant to an order or judgment or the enforcement thereof or the realization of any security or the liquidation of Borrower or otherwise howsoever), such payment shall constitute a discharge of the liability of Borrower hereunder and under the other Loan Documents in respect of such obligation only to the extent of the amount of the Agreed Currency which the relevant Lender or Agent, as the case may be, is able to purchase with the amount of the Other Currency received by it on the Business Day next following such receipt in accordance with its normal procedures and after deducting any premium and costs of exchange.

     (b) Conversion of Agreed Currency into Judgment Currency. If, for the purpose of obtaining or enforcing judgment in any court in any jurisdiction, it becomes necessary to convert into a particular currency (the “Judgment Currency”) any amount due in the Agreed Currency then the conversion shall be made on the basis of the rate of exchange prevailing on the next Business Day following the date such judgment is given and in any event Borrower shall be obligated to pay the Agents and the Lenders any deficiency in accordance with Section 2.19(c). For the foregoing purposes “rate of exchange” means the rate at which the relevant Lender or Agent, as applicable, in accordance with its normal banking procedures is able on the relevant

30

date to purchase the Agreed Currency with the Judgment Currency after deducting any premium and costs of exchange.

     (c) Circumstances Giving Rise to Indemnity. If (i) any Lender or any Agent receives any payment or payments on account of the liability of Borrower hereunder pursuant to any judgment or order in any Other Currency, and (ii) the amount of the Agreed Currency which the relevant Lender or Agent, as applicable, is able to purchase on the Business Day next following such receipt with the proceeds of such payment or payments in accordance with its normal procedures and after deducting any premiums and costs of exchange is less than the amount of the Agreed Currency due in respect of such obligations immediately prior to such judgment or order, then Borrower on demand shall, and Borrower hereby agrees to, indemnify and save the Lenders and the Agents harmless from and against any loss, cost or expense arising out of or in connection with such deficiency.

     (d) Indemnity Separate Obligation. The agreement of indemnity provided for in Section 2.19(c) shall constitute an obligation separate and independent from all other obligations contained in this Agreement, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by the Lenders or Agents or any of them from time to time, and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum in respect of an amount due hereunder or under any judgment or order.

     SECTION 2.20 Additional Borrowers.

     (a) A Person which is a Restricted Subsidiary which is a resident of, and domiciled in, the United States may become an Additional Borrower with respect hereto, and shall be bound by and entitled to the benefits and obligations of this Agreement as a Borrower hereunder to the same extent as any other Borrower, upon the fulfillment of the following conditions:

     (i) Resolutions and Officers’ Certificates. Such Person shall deliver all the items identified in Section 4.1(a) with respect to such Person.

     (ii) Certificate. An Authorized Officer of each Borrower shall have delivered to the Administrative Agent a certificate stating that such Person is a Restricted Subsidiary of the Parent which is resident of, and domiciled in, the United States.

     (iii) No Default. No Default or Event of Default shall have occurred and be continuing.

     (iv) Representations and Warranties. The representations and warranties in Article III hereto are true and correct with respect to such Person, mutatis mutandis, as of the date such Person executes the Additional Borrower Counterpart described in clause (v) below.

     (v) Additional Borrower Counterpart. Such Person shall execute an Additional Borrower Counterpart to this Agreement, substantially in the form of Exhibit I (the “Additional Borrower Counterpart”) or such other agreement in form and substance satisfactory to the Administrative Agent.

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     (vi) Opinions of Counsel. The Administrative Agent shall have received legal opinions, dated as of the date such Person executes the Additional Borrower Counterpart described above, addressed to the Agents and the Lenders, having substantially the same coverage as those opinions attached hereto as Exhibit A and in form and substance acceptable to the Administrative Agent, in its reasonable discretion.

     (vii) Approval. The Administrative Agent shall have approved the addition of such Person as an Additional Borrower, such approval not to be unreasonably withheld.

     (viii) USA Patriot Act Requirements and other Identification Requirements. Such Person shall provide information and documentation necessary to comply with Section 326 of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), and such other evidence as is reasonably requested by the Administrative Agent, on behalf of itself or any Lender, to comply with all necessary “know your customer” or other similar checks under all applicable laws and regulations.

     (ix) Notice. The Administrative Agent and each Lender shall have received prior written notice from an Authorized Officer of each then current Borrower of an Additional Borrower becoming party to this Agreement at least five (5) Business Days prior to the date selected for such Additional Borrower to become party to this Agreement.

     (b) Upon fulfillment of the conditions in this Section 2.20(a), the Administrative Agent will promptly notify each Lender and each Borrower of the date that such Person becomes an Additional Borrower hereunder.

ARTICLE III

Representations and Warranties

     In order to induce the Lenders and the Agents to enter into this Agreement and the Lenders to make Loans hereunder, Borrower represents and warrants unto the Agents and each Lender as set forth in this Article III.

     SECTION 3.1 Organization. Borrower is a corporation, and each of its Subsidiaries is a corporation or other legal entity, in either case duly incorporated or otherwise properly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority, permits and approvals, and is in good standing to conduct its business in each jurisdiction in which its business is conducted where the failure to so qualify would have a Material Adverse Effect.

     SECTION 3.2 Authorization and Validity. The execution, delivery and performance by Borrower of this Agreement and each other Loan Document executed or to be executed by it, are within Borrower’s corporate powers, have been duly authorized by all necessary corporate action on behalf of it, and do not (a) contravene Borrower’s articles of incorporation or other organizational documents, as the case may be; (b) contravene any material contractual restriction, law or governmental regulation or court decree or order binding on or affecting Borrower or any Subsidiary; or (c) result in, or require the creation or imposition of,

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any Lien, not permitted by Section 7.1, on any of Borrower’s or any Subsidiary’s properties. This Agreement constitutes, and each other Loan Document executed by Borrower will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of Borrower enforceable in accordance with their respective terms subject as to enforcement only to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditor rights generally and to general principles of equity.

     SECTION 3.3 Government Approval and Regulation. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person is required for the due execution, delivery or performance by Borrower of this Agreement or any other Loan Document. Neither Borrower nor any of its Subsidiaries is an “investment company,” within the meaning of the Investment Company Act of 1940, as amended, or a “holding company,” or a “subsidiary company” of a “holding company,” or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company,” within the meaning of the Public Utility Holding Company Act of 1935, as amended.

     SECTION 3.4 Pension and Welfare Plans. During the twelve-consecutive-month period prior to the date of the execution and delivery of this Agreement and prior to the date of any Borrowing hereunder, no steps have been taken to terminate any Pension Plan, and no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a lien under Section 302(f) of ERISA. No condition exists or event or transaction has occurred with respect to any Pension Plan which would result in the incurrence by Borrower or any member of the Controlled Group of any liability, fine or penalty in excess of $100,000,000. Neither Borrower nor any member of the Controlled Group has any contingent liability with respect to any post-retirement benefit under a Welfare Plan, other than liability for continuation coverage described in Part 6 of Title I of ERISA.

     SECTION 3.5 Regulation U. Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Loans will be used for a purpose which violates, or would be inconsistent with, Regulation U. Terms for which meanings are provided in Regulations U are used in this Section with such meanings.

     SECTION 3.6 Taxes. Borrower and each of its Subsidiaries has to the best knowledge of Borrower after due investigation filed all tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing, except any such taxes or charges which are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books or which the failure to file or pay could not reasonably be expected to have a Material Adverse Effect.

     SECTION 3.7 Subsidiaries; Restricted Subsidiaries. Schedule 3.7 hereto contains an accurate list of all of the presently existing Subsidiaries, including, without limitation, Restricted Subsidiaries, of Borrower as of the date of this Agreement, setting forth their respective jurisdictions of incorporation or organization and the percentage of their respective capital stock or, the revenue share attributable to the general and limited partnership interests, as the case may be, owned by Borrower or other Subsidiaries. All of the issued and outstanding

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shares of capital stock of such Subsidiaries which are corporations have been duly authorized and issued and are fully paid and non-assessable.

ARTICLE IV

Conditions

     SECTION 4.1 Effectiveness. This Agreement shall become effective upon the prior or concurrent satisfaction of each of the conditions precedent set forth in this Section 4.1.

(a)	Resolutions and Officers Certificates. The Administrative Agent shall have received from Borrower a certificate, dated the Effective Date, of the Secretary or Assistant Secretary of Borrower as to (i) resolutions of its governing board, then in full force and effect authorizing the execution, delivery and performance of this Agreement and each other Loan Document to be executed by it; (ii) the incumbency and signatures of those of its officers authorized to act with respect to this Agreement and each other Loan Document executed by it; and (iii) its articles of incorporation and bylaws; upon which certificates each Lender may conclusively rely until it shall have received a further certificate of an authorized officer of Borrower canceling or amending such prior certificate.
(b)	Opinions of Counsel. The Administrative Agent shall have received opinions, dated the Effective Date, addressed to the Administrative Agent, the other Agents and all Lenders, from Thompson & Knight LLP, counsel to Borrower, in substantially the form attached hereto as Exhibit A.
(c)	Closing Fees and Expenses. The Administrative Agent shall have received for its own account, or for the account of each Lender and other Agent, as the case may be, all fees, costs and expenses due and payable pursuant hereto.
(d)	Financial Statements. The Administrative Agent shall have received a certificate, signed by an Authorized Officer of Borrower, stating that the audited consolidated financial statements of Borrower and its Subsidiaries for fiscal year 2005 (the “2005 Financials”) fairly present Borrower’s financial condition and results of operations and that prior to the Effective Date no material adverse change in the condition or operations of Borrower and its Subsidiaries, taken as a whole, from that reflected in the 2005 Financials has occurred and is continuing.
(e)	Environmental Warranties. In the ordinary course of its business, Borrower conducts an ongoing review of the effect of existing Environmental Laws on the business, operations and properties of Borrower and its Subsidiaries, in the course of which it attempts to identify and evaluate associated liabilities and costs (including, without limitation, any capital or operating expenditures required for clean-up or closure of properties presently or previously owned, any capital or operating expenditures required to achieve or maintain compliance with environmental protection standards imposed by law or as a condition of any license, permit or contract, any related constraints on operating activities,

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including any periodic or permanent shutdown of any facility or reduction in the level of or change in the nature of operations conducted thereat and any actual or potential liabilities to third parties, including employees, and any related costs and expenses). On the basis of this review, the Administrative Agent shall have received a certificate, signed by an Authorized Officer of Borrower, stating that after such review Borrower has reasonably concluded that existing Environmental Laws are unlikely to have a Material Adverse Effect, or that Borrower has established adequate reserves in respect of any required clean-up.

(f)	Effectiveness Notice. The Administrative Agent shall have received the Effectiveness Notice.
(g)	Litigation. The Administrative Agent shall have received a certificate, signed by an Authorized Officer of Borrower, stating that no litigation, arbitration, governmental proceeding, Tax claim, dispute or administrative or other proceeding shall be pending or, to the knowledge of Borrower, threatened against Borrower or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect or which purports to affect the legality, validity or enforceability of this Agreement or any other Loan Document.
(h)	Conversion of Loans. Upon the effectiveness of this Agreement, all then outstanding Existing 2004 Loans, if any, shall be renewed, restated, extended and converted into (but shall not be deemed to be repaid) Loans under this Agreement; provided, however, that from and including the Effective Date, the Applicable Rate applicable with respect to such renewed, restated, extended and converted Existing 2004 Loans shall be determined pursuant to this Agreement.
(i)	Other Documents. The Administrative Agent shall have received such other instruments and documents as any of the Agents or their counsel may have reasonably requested.

The Administrative Agent shall notify Borrower, the other Agents and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 10.2) at or prior to 3:00 p.m., New York City time, on May 31, 2006 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time).

     SECTION 4.2 All Loans. The obligation of each Lender to fund any Loan which results in an increase in the aggregate outstanding principal amount of Loans under this Agreement on the occasion of any Borrowing shall be subject to the satisfaction of each of the conditions precedent set forth in this Section 4.2.

(a) Compliance with Warranties and No Default. Both before and after giving effect to any Borrowing, the following statements shall be true and correct: (1) the representations and warranties set forth in Article III shall be true and correct with the same effect as if then made (unless stated to relate solely to an earlier date, in

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which case such representations and warranties shall be true and correct as of such earlier date); and (b) no Default or Event of Default shall have then occurred and be continuing.

(b) Borrowings. The Administrative Agent shall have received a Borrowing Request for any Revolving Borrowing, or a Competitive Borrowing Request and a Competitive Bid Accept/Reject Letter for any Competitive Borrowing.

ARTICLE V

Affirmative Covenants

     Until the Commitments have expired or been terminated and all Obligations shall have been paid in full and unless the Required Lenders shall otherwise consent in writing, Borrower covenants and agrees with the Lenders that:

     SECTION 5.1 Financial Reporting and Notices. Apache will furnish, or will cause to be furnished, to each Lender and the Administrative Agent copies of the following financial statements, reports, notices and information:

(a)	within 90 days after the end of each Fiscal Year of Apache, a copy of the audited annual report for such fiscal year for Apache and its Subsidiaries, including therein consolidated balance sheets of Apache and its Subsidiaries as of the end of such fiscal year and consolidated statements of earnings and cash flow of Apache and its Subsidiaries for such fiscal year, in each case certified (without qualification) by independent public accountants of nationally recognized standing selected by Apache;
(b)	within 45 days after the end of each of the first three fiscal quarters of each fiscal year of Apache commencing with the fiscal quarter ending June 30, 2006, unaudited consolidated balance sheets of Apache and its Subsidiaries as of the end of such fiscal quarter and consolidated statements of earnings and cash flow of Apache and its Subsidiaries for such fiscal quarter and for the period commencing at the end of the previous fiscal year and ending with the end of such fiscal quarter, certified by an Authorized Officer of Apache;
(c)	together with the financial statements described in (a) and (b), above a compliance certificate, in substantially the form of Exhibit B or any other form approved by the Administrative Agent, executed by an Authorized Officer of Apache;
(d)	within five (5) days after the occurrence of each Default, a statement of an Authorized Officer of Apache setting forth details of such Default and the action which Borrower has taken and proposes to take with respect thereto;
(e)	promptly after the sending or filing thereof, copies of all material public filings, reports and communications from Borrower, and all reports and registration

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statements which Borrower or any of its Subsidiaries files with the Securities and Exchange Commission or any national securities exchange;

(f)

immediately upon becoming aware of the institution of any steps by Borrower or any other Person to terminate any Pension Plan, or the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a Lien under Section 302(f) of ERISA, or the taking of any action with respect to a Pension Plan which would reasonably be expected to result in the requirement that Borrower furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan which would reasonably be expected to result in the incurrence by Borrower of any liability, fine or penalty in excess of $100,000,000, or any material increase in the contingent liability of Borrower with respect to any postretirement Welfare Plan benefit, notice thereof; and

(g)

such other information respecting the financial condition or operations of Borrower or any of its Subsidiaries as any Lender through the Administrative Agent may from time to time reasonably request.

     SECTION 5.2 Compliance with Laws. Borrower will, and will cause each of its Subsidiaries to, comply in all material respects with all applicable laws, rules, regulations and orders where noncompliance therewith may reasonably be expected to have a Material Adverse Effect, except where the necessity of compliance therewith is contested in good faith by appropriate proceedings.

     SECTION 5.3 Maintenance of Properties. Borrower will, and will cause each of its Subsidiaries to, maintain, preserve, protect and keep valid title to, or valid leasehold interest in, all of its properties and assets, real and personal, tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights), free and clear of all Liens, charges or claims (including infringement claims with respect to patents, trademarks, copyrights and the like) except as permitted pursuant to Section 7.1 and except for imperfections and other burdens of title thereto as do not in the aggregate materially detract from the value thereof or for the use thereof in their businesses (taken as a whole).

     SECTION 5.4 Insurance. Borrower will, and will cause each of its Subsidiaries to, maintain or cause to be maintained with responsible insurance companies (subject to self-insured retentions) insurance with respect to its properties and business against such casualties and contingencies and of such types and in such amounts as is customary in the case of similar businesses.

     SECTION 5.5 Books and Records. Borrower will, and will cause each of its Subsidiaries to, keep books and records which accurately reflect all of its business affairs and transactions and permit the Administrative Agent and the other Agents and each Lender through the Administrative Agent or any of their respective authorized representatives, during normal business hours and at reasonable intervals, to visit all of its offices, to discuss its financial matters with its officers and to examine (and, at the expense of the Administrative Agent or such

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other Agent or Lender or, if a Default or Event of Default has occurred and is continuing, at the expense of Borrower, photocopy extracts from) any of its books or other records.

     SECTION 5.6 [Intentionally omitted].

     SECTION 5.7 Use of Proceeds. Borrower will, and will cause each Subsidiary to, use the proceeds of the Loans (i) to refinance existing Indebtedness of Borrower and its Subsidiaries, (ii) for Borrower’s and its Subsidiaries’ general corporate purposes, including any non-hostile acquisitions, or (iii) to backup Apache’s commercial paper facilities.

ARTICLE VI

Financial Covenants

     Until the Commitments have expired or been terminated and all Obligations shall have been paid in full and unless the Required Lenders shall otherwise consent in writing, Borrower covenants and agrees with the Lenders that:

     SECTION 6.1 Ratio of Total Debt to Capital. Apache will not permit its ratio (expressed as a percentage) of (i) the consolidated Debt of Apache and its Subsidiaries to (ii) Capital to be greater than 60% at the end of any fiscal quarter beginning with the fiscal quarter ending June 30, 2006.

ARTICLE VII

Negative Covenants

     Until the Commitments have expired or terminated and all Obligations have been paid in full and unless the Required Lenders shall otherwise consent in writing, Borrower covenants and agrees with the Lenders that:

     SECTION 7.1 Liens. Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon the stock, assets, or indebtedness of Borrower or any of its Subsidiaries to secure Indebtedness of Borrower or any other Person except:

(i)	Liens on any property or assets owned or leased by Borrower or any Subsidiary existing at the time such property or asset was acquired (or at the time such Person became a Subsidiary); provided that in the case of the acquisition of a Subsidiary such Lien only encumbers property or assets immediately prior to, or at the time of, the acquisition by Borrower of such Subsidiary;
(ii)	purchase money Liens so long as such Liens only encumber property or assets acquired with the proceeds of the purchase money indebtedness incurred in connection with such Lien;
(iii)	Liens granted by an Unrestricted Subsidiary on its assets to secure Indebtedness incurred by such Unrestricted Subsidiary;

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(iv)	Liens on assets of a Restricted Subsidiary securing Indebtedness of a Restricted Subsidiary owing to Borrower or to another Restricted Subsidiary or Liens on assets of an Unrestricted Subsidiary securing Indebtedness of an Unrestricted Subsidiary owing to Borrower, to a Restricted Subsidiary or to another Unrestricted Subsidiary;
(v)	Liens existing on the Effective Date set forth on Schedule 7.1;
(vi)	Liens arising under operating agreements;
(vii)	Liens reserved in oil, gas and/or mineral leases for bonus rental payments and for compliance with the terms of such leases;
(viii)	Liens pursuant to partnership agreements, oil, gas and/or mineral leases, farm-out agreements, division orders, contracts for the sale, delivery, purchase, exchange, or processing of oil, gas and/or other hydrocarbons, unitization and pooling declarations and agreements, operating agreements, development agreements, area of mutual interest agreements, forward sales of oil, natural gas and natural gas liquids, and other agreements which are customary in the oil, gas and other mineral exploration, development and production business and in the business of processing of gas and gas condensate production for the extraction of products therefrom;
(ix)	Liens on the stock or other ownership interests of or in any Unrestricted Subsidiary;
(x)	Liens for taxes, assessments or similar charges, incurred in the ordinary course of business, that are not yet due and payable or that are being contested as set forth in Section 3.6;
(xi)	pledges or deposits made in the ordinary course of business to secure payment of worker’s compensation, or to participate in any fund in connection with worker’s compensation, unemployment insurance, old-age pensions or other social security programs;
(xii)	Liens imposed by mandatory provisions of law such as for mechanics’, materialmen’s, warehousemen’s, carriers’, or other like Liens, securing obligations incurred in the ordinary course of business that are not yet due and payable;
(xiii)	Liens in renewal or extension of any of the foregoing permitted Liens, so long as limited to the property or assets encumbered and the amount of Indebtedness secured immediately prior to such renewal or extension; and
(xiv)	in addition to Liens permitted by clauses (i) through (xiii) above, Liens on property or assets of the Borrower and its Subsidiaries if the aggregate Indebtedness of all such Persons secured thereby does not exceed five percent (5%) of Borrower’s Consolidated Assets; provided that nothing in this definition

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shall in and of itself constitute or be deemed to constitute an agreement or acknowledgment by the Administrative Agent or any Lender that the Indebtedness subject to or secured by any such Lien ranks (apart from the effect of any Lien included in or inherent in any such Liens) in priority to the Obligations.

     SECTION 7.2 Mergers. Apache will not liquidate or dissolve, consolidate with, or merge into or with, any other Person, or sell, lease or otherwise transfer all or substantially all of its assets unless (a) Apache is the survivor of such merger or consolidation, and (b) no Default or Event of Default has occurred and is continuing or would occur after giving effect thereto.

     SECTION 7.3 Asset Dispositions. Borrower will not, and will not permit any of its Restricted Subsidiaries to, sell, transfer, lease, contribute or otherwise convey, or grant options, warrants or other rights with respect to all or substantially all of its assets. Notwithstanding the foregoing, nothing herein shall prohibit any transfer of any assets from any Borrower to any Subsidiary of such Borrower, from any Subsidiary of a Borrower to such Borrower or from a Subsidiary of a Borrower to another Subsidiary of such Borrower.

     SECTION 7.4 Transactions with Affiliates. Borrower will not, and will not permit any of its Subsidiaries to, enter into, or cause, suffer or permit to exist any arrangement or contract with any of its other Affiliates unless such arrangement or contract or group of arrangements or contracts, as the case may be, are conducted on an arms-length basis; provided, however, that this Section shall not apply to Apache Offshore Investment Partnership, a Delaware general partnership, Apache Offshore Petroleum Limited Partnership, a Delaware limited partnership, Main Pass 151 Pipeline Company, a Texas general partnership, and Apache 681/682 Joint Venture, a Texas joint venture.

     SECTION 7.5 Restrictive Agreements. Borrower will not, and will not permit any of its Subsidiaries to, enter into any agreement (excluding this Agreement, or any other Loan Document) limiting the ability of Borrower to amend or otherwise modify this Agreement or any other Loan Document. Borrower will not, and will not permit any of its Restricted Subsidiaries to, enter into any agreement which restricts or prohibits the ability of any Restricted Subsidiary to make any payments, directly or indirectly, to Borrower by way of dividends, advances, repayments of loans or advances, reimbursements of management and other intercompany charges, expenses and accruals or other returns on investments, or any other agreement or arrangement which restricts the ability of any such Restricted Subsidiary to make any payment, directly or indirectly, to Borrower.

     SECTION 7.6 Guaranties. Borrower will not, and will not permit any of its Restricted Subsidiaries to, guaranty any Indebtedness not included in the consolidated Debt of Borrower and its Subsidiaries in an aggregate outstanding principal amount at any time exceeding $100,000,000.

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ARTICLE VIII

Events of Default

     SECTION 8.1 Listing of Events of Default. Each of the following events or occurrences described in this Section 8.1 shall constitute an “Event of Default”:

(a)	Non-Payment of Obligations. Borrower shall default in the payment or prepayment when due of any principal of any Loan, or Borrower shall default (and such default shall continue unremedied for a period of five (5) Business Days) in the payment when due of any interest, fee or of any other obligation hereunder.
(b)	Breach of Warranty. Any representation or warranty of Borrower made or deemed to be made hereunder or in any other Loan Document or any other writing or certificate furnished by or on behalf of Borrower to the Administrative Agent, any other Agent or any Lender for the purposes of or in connection with this Agreement or any such other Loan Document is or shall be false or misleading when made in any material respect.
(c)	Non-Performance of Covenants and Obligations. Borrower shall default in the due performance and observance of any of its obligations under Section 7.2 or under Article VI.
(d)	Non-Performance of Other Covenants and Obligations. Borrower shall default in the due performance and observance of any other agreement contained herein or in any other Loan Document, and such default shall continue unremedied for a period of 30 days after notice thereof shall have been given to Borrower by the Administrative Agent or the Required Lenders.
(e)	Default on Other Indebtedness. A default shall occur in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any direct payment obligation of Borrower or any of its Restricted Subsidiaries in any amount in excess of $100,000,000.
(f)	Pension Plans. Any of the following events shall occur with respect to any Pension Plan: (a) the termination of a Pension Plan if, as a result of such termination, Borrower or any member of its Controlled Group could be required to make a contribution to such Pension Plan, or would reasonably expect to incur a liability or obligation to such Pension Plan, in excess of $100,000,000; or (b) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a lien under Section 302(f) of ERISA with respect to a liability or obligation in excess of $100,000,000.
(g)	Bankruptcy and Insolvency. Borrower or any of its Restricted Subsidiaries shall (a) become insolvent or generally fail to pay, or admit in writing its inability or unwillingness to generally pay, debts as they become due; (b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other

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custodian for Borrower, or any of its Restricted Subsidiaries, or any substantial part of the property of any thereof, or make a general assignment for the benefit of creditors; (c) in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for Borrower, or any of its Restricted Subsidiaries, or for a substantial part of the property of any thereof, and such trustee, receiver, sequestrator or other custodian shall not be discharged within 60 days, provided that Borrower and each Restricted Subsidiary hereby expressly authorizes the Administrative Agent, each other Agent and each Lender to appear in any court conducting any relevant proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; (d) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of Borrower or any of its Restricted Subsidiaries, and, if any such case or proceeding is not commenced by Borrower or such Restricted Subsidiary, such case or proceeding shall be consented to or acquiesced in by Borrower or such Restricted Subsidiary or shall result in the entry of an order for relief or shall remain for 60 days undismissed, provided that Borrower and each Restricted Subsidiary hereby expressly authorizes the Administrative Agent and each Lender to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; or (e) take any corporate or partnership action authorizing, or in furtherance of, any of the foregoing.

(h)

Judgments. Any judgment or order for the payment of money in an amount of $100,000,000 or more in excess of valid and collectible insurance in respect thereof or in excess of an indemnity with respect thereto reasonably acceptable to the Required Lenders shall be rendered against Borrower or any of its Restricted Subsidiaries and either (a) enforcement proceedings shall have been commenced by any creditor upon such judgment or order, or (b) such judgment shall have become final and non-appealable and shall have remained outstanding for a period of 60 consecutive days.

(i)

Change in Control. Any Person or group of Persons (within the meaning of Section 13 or 14 of the Securities Exchange Act) shall acquire beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act) of 33 1/3% or more of the outstanding shares of common stock of Borrower.

     SECTION 8.2 Action if Bankruptcy. If any Event of Default described in Section 8.1(g) shall occur, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other obligations hereunder shall automatically be and become immediately due and payable, without notice or demand.

     SECTION 8.3 Action if Other Event of Default. If any Event of Default (other than any Event of Default described in Section 8.2) shall occur for any reason, whether voluntary

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or involuntary, and be continuing, the Administrative Agent, upon the direction of the Required Lenders, shall by notice to Borrower declare all of the outstanding principal amount of the Loans and all other obligations hereunder to be due and payable and the Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Loans and other obligations shall be and become immediately due and payable, without further notice, demand or presentment, and the Commitments shall terminate.

ARTICLE IX

Agents

     Each of the Lenders hereby irrevocably appoints JPMorgan Chase Bank, N.A. as Administrative Agent, Citibank, N.A. and Bank of America, N.A. as Co-Syndication Agents, and BNP Paribas and UBS Loan Finance LLC as Co-Documentation Agents and authorizes each such Agent to take such actions on its behalf and to exercise such powers as are delegated to such Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto.

     Any bank serving as an Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent hereunder.

     The Agents shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (a) the Agents shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) each Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that such Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.2), and (c) except as expressly set forth herein, each Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as such Agent or any of its Affiliates in any capacity. Each Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.2) or in the absence of its own gross negligence or willful misconduct. Each Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to such Agent by Borrower or a Lender, and such Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to

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such Agent. None of the Persons identified on the facing page of this Agreement as the “Co-Lead Arrangers and Joint Bookrunners” (the “Arrangers”), the Co-Documentation Agents or the Co-Syndication Agents shall have any right, power, obligation, liability, responsibility or duty under this Agreement or any other Loan Document other than, except in the case of the Arrangers, those applicable to all Lenders as such.

     The Administrative Agent and the other Agents shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent and the other Agents also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent and the other Agents may consult with legal counsel (who may be counsel for Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

     Any Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by such Agent. Any Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of such Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as an Agent.

     Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Lenders and Borrower. Upon any such resignation, Borrower shall have the right, in consultation with the Required Lenders, to appoint one of the Lenders as a successor. If no successor shall have been so appointed by Borrower and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between Borrower and such successor. After the Administrative Agent’s resignation hereunder, the provisions of this Article and Section 10.3 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.

     Each Lender acknowledges that it has, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon any Agent or any other

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Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder.

ARTICLE X

Miscellaneous

     SECTION 10.1 Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:

     (a) if to Borrower, to:

Apache Corporation
2000 Post Oak Boulevard, Suite 100
Houston, Texas 77056-4400
Attention:	Matthew W. Dundrea
	Vice President and Treasurer
Telephone:	(713) 296-6640
Facsimile:	(713) 296-6458

          with a copy to:

Assistant Treasurer
Apache Corporation
2000 Post Oak Boulevard, Suite 100
Houston, Texas 77056-4400
Telephone:	(713) 296-6642
Facsimile:	(713) 296-6477

          and with copy to:

Vice President and General Counsel
Apache Corporation
2000 Post Oak Boulevard, Suite 100
Houston, Texas 77056-4400
Telephone:	(713) 296-6204
Facsimile:	(713) 296-6458

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     (b) if to the Administrative Agent, to:

JPMorgan Chase Bank, N.A.
Loan & Agency Services Group
1111 Fannin Street, 10th Floor
Houston, Texas 77002-8069
Attention:	Rose Salvacion
Telephone:	(713) 750-2501
Facsimile:	(713) 427-6307

with a copy to:
JPMorgan Chase Bank, N.A.
600 Travis, 20 Floor
Houston, Texas 77002
Attention:	Peter Licalzi
Telephone:	(713) 216-8869
Facsimile:	(713) 216-4117

     (c) if to any other Lender, to it at its address (or telecopy number) provided to the Administrative Agent and Borrower or as set forth in its Administrative Questionnaire.

Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.

     SECTION 10.2 Waivers; Amendments.

     (a) No failure or delay by the Administrative Agent or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by Borrower therefrom shall in any event be effective except in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent or any Lender may have had notice or knowledge of such Default at the time.

     (b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by Borrower and the Required Lenders or by Borrower and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender or the Commitments without the written consent of such Lender or each Lender, respectively, (ii) reduce the principal amount of

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any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.17(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, or (v) change any of the provisions of this Section or the definition of “Required Lenders” or any other provision hereof or thereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or thereunder or make any determination or grant any consent hereunder or thereunder, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder or thereunder without the prior written consent of the Administrative Agent.

     SECTION 10.3 Expenses; Indemnity; Damage Waiver.

     (a) Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Agents and their Affiliates, including the reasonable fees, charges and disbursements of counsel for the Agents, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of this Agreement or any amendments, modifications or waivers of the provisions hereof (whether or not the transactions contemplated hereby or thereby shall be consummated) and (ii) all reasonable out-of-pocket expenses incurred by the Agents or any Lender, including the fees, charges and disbursements of any counsel for the Agents or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement, including its rights under this Section, or in connection with the Loans made hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or this Agreement.

     (b) Borrower shall indemnify the Agents and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”), WHETHER OR NOT RELATED TO ANY NEGLIGENCE OF THE INDEMNITEE, against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the reasonable fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or the actual or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether brought by a third party or by the Borrower and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (i) resulted from the gross negligence or willful misconduct of such Indemnitee or (ii) arise in connection with any issue in litigation commenced by Borrower or any of its Subsidiaries against

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any Indemnitee for which a final judgment is entered in favor of Borrower or any of its Subsidiaries against such Indemnitee.

     (c) To the extent that Borrower fails to pay any amount required to be paid by it to the Administrative Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent.

     (d) To the extent permitted by applicable law, Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions or any Loan or the use of the proceeds thereof, except for any such claim arising from such Indemnitee’s gross negligence or willful misconduct.

     (e) All amounts due under this Section shall be payable not later than thirty (30) days after written demand therefor.

     SECTION 10.4 Successors and Assigns.

     (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

     (b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment to a Lender or an Affiliate of a Lender, each of Apache and the Administrative Agent must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender’s Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall be in increments of $1,000,000 and not less than $10,000,000 unless each of Borrower and the Administrative Agent otherwise consent, (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement, except that this clause (iii) shall not apply to rights in respect of outstanding Competitive Loans, (iv) the parties to each assignment shall execute and deliver to the

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Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500, and (v) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; and provided further that any consent of Apache otherwise required under this paragraph shall not be required if an Event of Default under Section 8.1 has occurred and is continuing. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.15, 2.16, 2.17, 2.19 and 10.3). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section.

     (c) The Administrative Agent, acting for this purpose as an agent of Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

     (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register and will provide prompt written notice to Borrower of the effectiveness of such Assignment. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

     (e) Any Lender may, without the consent of Borrower or the Administrative Agent, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement, and (iv) if such Participant is

49

not a Lender or an Affiliate of a Lender, such Lender shall have given notice to Borrower of the name of the Participant and the amount of such participation. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 10.2(b) that affects such Participant. Subject to paragraph (f) of this Section, Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.14, 2.15 and 2.16 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.8 as though it were a Lender, provided such Participant agrees to be subject to Section 2.17(c) as though it were a Lender.

     (f) A Participant shall not be entitled to receive any greater payment under Section 2.14, 2.15 or 2.16 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless Borrower shall expressly agree otherwise in writing. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.16 unless Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of Borrower, to comply with Section 2.16(e) as though it were a Lender.

     (g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender to a Federal Reserve Bank or, in the case of a Lender organized in a jurisdiction outside of the United States, a comparable Person, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

     SECTION 10.5 Survival. All covenants, agreements, representations and warranties made by Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid and so long as the Commitments have not expired or terminated. The provisions of Sections 2.14, 2.15, 2.16, 2.17, 2.19 and 10.3 and Article IX shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof.

     SECTION 10.6 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which

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shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.1, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.

     SECTION 10.7 Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

     SECTION 10.8 Right of Setoff. If an Event of Default shall have occurred and be continuing and the Obligations of Borrower shall have been accelerated, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of any Borrower against any of and all the obligations of each Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.

     SECTION 10.9 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.

     (a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

     (b) BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR, TO THE

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EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT THE AGENTS OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST BORROWER OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

     (c) BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT REFERRED TO IN THE FIRST SENTENCE OF PARAGRAPH (b) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

     (d) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

     SECTION 10.10 Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

     SECTION 10.11 Confidentiality. Each of the Agents and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory or self-regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (g) with the consent of Borrower or (h) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Section by any Person or (B) becomes available to any Agent or any Lender on a non-confidential basis from a source other than Borrower or any Person obligated to maintain the confidentiality of such Information. Prior to disclosing any Information under clause (c) above, the Agent or Lender required or asked to make such disclosure shall make a good faith effort to give Borrower prior notice of such

52

proposed disclosure to permit Borrower to attempt to obtain a protective order or other appropriate injunctive relief. For the purposes of this Section, “Information” means all information received from Borrower relating to Borrower or its business, other than any publicly available information and such information that is available to any Agent or any Lender on a non-confidential basis prior to disclosure by Borrower; provided that, in the case of information received from Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

     SECTION 10.12 Interest Rate Limitation. It is the intention of the parties hereto to conform strictly to applicable interest, usury and criminal laws and, anything herein to the contrary notwithstanding, the obligations of Borrower to a Lender or any Agent under this Agreement shall be subject to the limitation that payments of interest shall not be required to the extent that receipt thereof would be contrary to provisions of law applicable to such Lender or Agent limiting rates of interest which may be charged or collected by such Lender or Agent. Accordingly, if the transactions contemplated hereby would be illegal, unenforceable, usurious or criminal under laws applicable to a Lender or Agent (including the laws of any jurisdiction whose laws may be mandatorily applicable to such Lender or Agent notwithstanding anything to the contrary in this Agreement or any other Loan Document but subject to Section 2.12 hereof) then, in that event, notwithstanding anything to the contrary in this Agreement or any other Loan Document, it is agreed as follows:

     (i) the provisions of this Section shall govern and control;

     (ii) the aggregate of all consideration which constitutes interest under applicable law that is contracted for, taken, reserved, charged or received under this Agreement, or under any of the other aforesaid agreements or otherwise in connection with this Agreement by such Lender or Agent shall under no circumstances exceed the maximum amount of interest allowed by applicable law (such maximum lawful interest rate, if any, with respect to each Lender and the Agent herein called the “Highest Lawful Rate”), and any excess shall be cancelled automatically and if theretofore paid shall be credited to Borrower by such Lender or Agent (or, if such consideration shall have been paid in full, such excess refunded to Borrower);

     (iii) all sums paid, or agreed to be paid, to such Lender or Agent for the use, forbearance and detention of the indebtedness of Borrower to such Lender or Agent hereunder or under any Loan Document shall, to the extent permitted by laws applicable to such Lender or Agent, as the case may be, be amortized, prorated, allocated and spread throughout the full term of such indebtedness until payment in full so that the actual rate of interest is uniform throughout the full term thereof;

     (iv) if at any time the interest provided pursuant to this Section or any other clause of this Agreement or any other Loan Document, together with any other fees or compensation payable pursuant to this Agreement or any other Loan Document and deemed interest under laws applicable to such Lender or Agent, exceeds that amount

53

which would have accrued at the Highest Lawful Rate, the amount of interest and any such fees or compensation to accrue to such Lender or Agent pursuant to this Agreement shall be limited, notwithstanding anything to the contrary in this Agreement or any other Loan Document, to that amount which would have accrued at the Highest Lawful Rate, but any subsequent reductions, as applicable, shall not reduce the interest to accrue to such Lender or Agent pursuant to this Agreement below the Highest Lawful Rate until the total amount of interest accrued pursuant to this Agreement or such other Loan Document, as the case may be, and such fees or compensation deemed to be interest equals the amount of interest which would have accrued to such Lender or Agent if a varying rate per annum equal to the interest provided pursuant to any other relevant Section hereof (other than this Section), as applicable, had at all times been in effect, plus the amount of fees which would have been received but for the effect of this Section; and

     (v) with the intent that the rate of interest herein shall at all times be lawful, and if the receipt of any funds owing hereunder or under any other agreement related hereto (including any of the other Loan Documents) by such Lender or Agent would cause such Lender to charge Borrower a criminal rate of interest, the Lenders and the Agents agree that they will not require the payment or receipt thereof or a portion thereof which would cause a criminal rate of interest to be charged by such Lender or Agent, as applicable, and if received such affected Lender or Agent will return such funds to Borrower so that the rate of interest paid by Borrower shall not exceed a criminal rate of interest from the date this Agreement was entered into.

     SECTION 10.13 Joint and Several Obligations. Each Borrower has determined that it is in its best interest and in pursuance of its legitimate business purposes to induce the Lenders to extend credit to the Borrowers pursuant to this Agreement. Each Borrower acknowledges and represents that the availability of the Commitments to each of the Borrowers benefits each Borrower individually and that the Loans made will be for and inure to the benefit of each of the Borrowers individually and as a group. Accordingly, each Borrower shall be jointly and severally liable (as a principal and not as a surety, guarantor or other accommodation party) for each and every representation, warranty, covenant and obligation to be performed by the Borrowers under this Agreement and the other Loan Documents, and each Borrower acknowledges that in extending the credit provided herein the Agent and the Lenders are relying upon the fact that the Obligations of each Borrower hereunder are the joint and several obligations of a principal. The invalidity, unenforceability or illegality of this Agreement or any other Loan Document as to one Borrower or the release by the Agent or the Lenders of a Borrower hereunder or thereunder shall not affect the Obligations of the other Borrowers under this Agreement or the other Loan Documents, all of which shall otherwise remain valid and legally binding obligations of the other Borrowers.

     SECTION 10.14 USA PATRIOT Act Notice. Each Lender that is subject to the Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies each Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies each Borrower, which information includes the name and address of each Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify each Borrower in accordance with the Act.

54

     SECTION 10.15 NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

[SIGNATURES BEGIN ON FOLLOWING PAGE]

55

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

APACHE CORPORATION

By:

Name: Matthew W. Dundrea

Title: Vice President and Treasurer

JPMORGAN CHASE BANK, N.A., as Administrative Agent and as Lender

By:

Name:

Title:

CITIBANK, N.A., as a Co-Syndication Agent and as Lender

By:

Name:

Title:

BANK OF AMERICA, N.A., as a Co-Syndication Agent and as Lender

By:

Name:

Title:

[SIGNATURE PAGE TO
U.S. $1,500,000,000 FIVE-YEAR SENIOR REVOLVING CREDIT FACILITY]

S - 1

BNP PARIBAS, as a Co-Documentation Agent and as Lender

By:

Name:

Title:

By:

Name:

Title:

UBS LOAN FINANCE LLC, as a Co-Documentation Agent and as Lender

By:

Name:

Title:

By:

Name:

Title:

HARRIS NESBITT FINANCING, INC., as Lender

By:

Name:

Title:

[SIGNATURE PAGE TO
U.S. $1,500,000,000 FIVE-YEAR SENIOR REVOLVING CREDIT FACILITY]

S - 2

DEUTSCHE BANK AG NEW YORK BRANCH, as Lender

By:

Name: Marcus Tarkington

Title: Director

By:

Name: Rainer Meier

Title: Vice President

ROYAL BANK OF CANADA, as Lender

By:

Name:

Title:

UNION BANK OF CALIFORNIA, N.A., as Lender

By:

Name:

Title:

By:

Name:

Title:

WACHOVIA BANK, NATIONAL ASSOCIATION, as Lender

By:

Name:

Title:

[SIGNATURE PAGE TO
U.S. $1,500,000,000 FIVE-YEAR SENIOR REVOLVING CREDIT FACILITY]

S - 3

ABN AMRO BANK N.V., as Lender

By:

Name:

Title:

By:

Name:

Title:

BAYERISCHE LANDESBANK — CAYMAN ISLANDS BRANCH, as Lender

By:

Name:

Title:

By:

Name:

Title:

CALYON NEW YORK BRANCH, as Lender

By:

Name:

Title:

By:

Name:

Title:

[SIGNATURE PAGE TO
U.S. $1,500,000,000 FIVE-YEAR SENIOR REVOLVING CREDIT FACILITY]

S - 4

WILLIAM STREET COMMITMENT CORPORATION, as Lender

By:

Name:

Title:

HSBC BANK USA, NATIONAL ASSOCIATION, as Lender

By:

Name:

Title:

MORGAN STANLEY BANK, as Lender

By:

Name:

Title:

THE ROYAL BANK OF SCOTLAND PLC, as Lender

By:

Name:

Title:

SOCIÉTÉ GÉNÉRALE, as Lender

By:

Name:

Title:

[SIGNATURE PAGE TO
U.S. $1,500,000,000 FIVE-YEAR SENIOR REVOLVING CREDIT FACILITY]

S - 5

SUMITOMO MITSUI BANKING CORPORATION, as Lender

By:

Name: William M. Ginn

Title: General Manager

MIZUHO CORPORATE BANK, LTD., as Lender

By:

Name:

Title:

WELLS FARGO BANK, NA, as Lender

By:

Name:

Title:

BARCLAYS BANK PLC, as Lender

By:

Name:

Title:

[SIGNATURE PAGE TO
U.S. $1,500,000,000 FIVE-YEAR SENIOR REVOLVING CREDIT FACILITY]

S - 6

TORONTO DOMINION (TEXAS) LLC, as Lender

By:

Name:

Title:

AMEGY BANK NATIONAL ASSOCIATION, as Lender

By:

Name:

Title:

[SIGNATURE PAGE TO
U.S. $1,500,000,000 FIVE-YEAR SENIOR REVOLVING CREDIT FACILITY]

S - 7

EX-10.16

Exhibit 10.16

APACHE CORPORATION

401(k) SAVINGS PLAN

Table of Contents

ARTICLE I DEFINITIONS	1
1.1 Account Owner	1
1.2 Accounts	1
1.3 Affiliated Entity	1
1.4 Alternate Payee	1
1.5 Annual Addition	1
1.6 Catch-Up Contributions	2
1.7 Code	2
1.8 Committee	2
1.9 Company	2
1.10 Company Contributions	2
1.11 Company Discretionary Contributions	2
1.12 Company Matching Contributions	2
1.13 Company Stock	2
1.14 Compensation	2
1.15 Covered Employee	4
1.16 Disability	4
1.17 Domestic Relations Order	4
1.18 Employee	5
1.19 ERISA	5
1.20 Five-Percent Owner	5
1.21 401(k) Contributions	5
1.22 Highly Compensated Employee	5
1.23 Key Employee	6
1.24 Lapse in Apache Employment	6
1.25 Limitation Year	6
1.26 Non-Highly Compensated Employee	6
1.27 Non-Key Employee	6
1.28 Normal Retirement Age	6
1.29 NQ Plan	6
1.30 Participant	6
1.31 Participant Contributions	6
1.32 Period of Service	6
1.33 Plan Year	6
1.34 QDRO	6
1.35 QMAC	6
1.36 QNECs	6
1.37 Required Beginning Date	7
1.38 Rollover Contribution	7
1.39 Spouse	7
1.40 Termination of Employment	7
1.41 Termination From Service Date	7
1.42 Valuation Date	7
ARTICLE II PARTICIPATION	7
2.1 Participation — Required Service	7
2.2 Enrollment Procedure	8
ARTICLE III CONTRIBUTIONS	8
3.1 Company Contributions	8
3.2 Participant Contributions	9
3.3 Return of Contributions	12
3.4 Limitation on Annual Additions	12
3.5 Contribution Limits for Highly Compensated Employees (ADP Test)	13
3.6 Contribution Limits for Highly Compensated Employees (ACP Test)	14
3.7 QNECs	16
3.8 QMACs	16
ARTICLE IV INTERESTS IN THE TRUST FUND	17
4.1 Participants’ Accounts	17
4.2 Valuation of Trust Fund	17
4.3 Allocation of Increase or Decrease in Net Worth	18
ARTICLE V AMOUNT OF BENEFITS	18
5.1 Vesting Schedule	18
5.2 Vesting After a Lapse in Apache Employment	19
5.3 Calculating Service	19
5.4 Forfeitures	20
5.5 Transfers — Portability	21
ARTICLE VI DISTRIBUTION OF BENEFITS	21
6.1 Beneficiaries	21
6.2 Consent	22
6.3 Distributable Amount	22
6.4 Manner of Distribution	22
6.5 In-Service Withdrawals	23
6.6 Time of Distribution	24
6.7 Direct Rollover Election	25
ARTICLE VII LOANS	26
7.1 Availability	26
7.2 Number of Loans	26
7.3 Loan Amount	26
7.4 Interest	27
7.5 Repayment	27
7.6 Default	27
7.7 Administration	27
ARTICLE VIII ALLOCATION OF RESPONSIBILITIES — NAMED FIDUCIARIES	28
8.1 No Joint Fiduciary Responsibilities	28
8.2 The Company	28
8.3 The Trustee	28

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8.4 The Committee — Plan Administrator	28
8.5 Committee to Construe Plan	28
8.6 Organization of Committee	29
8.7 Agent for Process	29
8.8 Indemnification of Committee Members	29
8.9 Conclusiveness of Action	29
8.10 Payment of Expenses	29
ARTICLE IX TRUST AGREEMENT – INVESTMENTS	29
9.1 Trust Agreement	29
9.2 Plan Expenses	29
9.3 Investments	30
ARTICLE X TERMINATION AND AMENDMENT	30
10.1 Termination of Plan or Discontinuance of Contributions	30
10.2 Allocations upon Termination or Discontinuance of Company Contributions	30
10.3 Procedure Upon Termination of Plan or Discontinuance of Contributions	31
10.4 Amendment by Apache	31
ARTICLE XI PLAN ADOPTION BY AFFILIATED ENTITIES	32
11.1 Adoption of Plan	32
11.2 Agent of Affiliated Entity	32
11.3 Disaffiliation and Withdrawal from Plan	32
11.4 Effect of Disaffiliation or Withdrawal	32
11.5 Actions Upon Disaffiliation or Withdrawal	32
ARTICLE XII TOP-HEAVY PROVISIONS	33
12.1 Application of Top-Heavy Provisions	33
12.2 Determination of Top-Heavy Status	33
12.3 Special Vesting Rule	33
12.4 Special Minimum Contribution	33
12.5 Change in Top-Heavy Status	34
ARTICLE XIII MISCELLANEOUS	34
13.1 Right To Dismiss Employees — No Employment Contract	34
13.2 Claims Procedure	34
13.3 Source of Benefits	35
13.4 Exclusive Benefit of Employees	35
13.5 Forms of Notices	35
13.6 Failure of Any Other Entity to Qualify	36
13.7 Notice of Adoption of the Plan	36
13.8 Plan Merger	36
13.9 Inalienability of Benefits — Domestic Relations Orders	36
13.10 Payments Due Minors or Incapacitated Individuals	39
13.11 Uniformity of Application	39
13.12 Disposition of Unclaimed Payments	39
13.13 Applicable Law	39
ARTICLE XIV MATTERS AFFECTING COMPANY STOCK	39
14.1 Voting, Etc.	39
14.2 Notices	40
14.3 Retention/Sale of Company Stock and Other Securities	40
14.4 Tender Offers	40
14.5 Stock Rights	40
14.6 Other Rights Appurtenant to the Company Stock	41
14.7 Information to Trustee	41
14.8 Information to Account Owners	41
14.9 Expenses	42
14.10 Former Account Owners	42
14.11 No Recommendations	42
14.12 Trustee to Follow Instructions	42
14.13 Confidentiality	43
14.14 Investment of Proceeds	43
14.15 Independent Fiduciary	43
14.16 Method of Communications	44
ARTICLE XV UNIFORMED SERVICES EMPLOYMENT AND REEMPLOYMENT RIGHTS ACT OF 1994	44
15.1 General	44
15.2 While a Serviceman	44
15.3 Expiration of USERRA Reemployment Rights	45
15.4 Return From Uniformed Service	46
Appendix A — Participating Companies
Appendix B — Hadson Energy Resources Company
Appendix C — Corporate Transactions
Appendix D —DEKALB Energy Company / Apache Canada Ltd

ii

APACHE CORPORATION
401(k) SAVINGS PLAN

PREAMBLE

Apache Corporation, a Delaware corporation (“Apache”), maintains this profit sharing plan (the “Plan”), which is intended to be qualified under Code §401(a), and which contains a cash or deferred arrangement that is intended to be qualified under Code §401(k).

The Plan is hereby amended and restated as set forth below, effective January 1, 2007, except for those provisions that have their own specific effective dates.

Each Appendix to this Plan is a part of the Plan document. It is intended that an Appendix will be used to (1) describe which business entities are actively participating in the Plan, (2) describe any special participation, eligibility, vesting, or other provisions that apply to the employees of a business entity, (3) describe any special provisions that apply to Participants affected by a designated corporation transaction, and (4) describe any special distribution rules that apply to directly transferred benefits from other plans.

ARTICLE I

Definitions

The following words and phrases shall have the meaning set forth below:

1.1	Account Owner
	“Account Owner” means a Participant who has an Account balance, an Alternate Payee who has an Account balance, or a beneficiary who has obtained an interest in the Account(s) of the previous Account Owner because of the previous Account Owner’s death.
1.2	Accounts
	“Accounts” means the various Participant accounts established pursuant to section 4.1.
1.3	Affiliated Entity
	“Affiliated Entity” means:

(a)

For all purposes of the Plan except those listed in subsection (b), the term “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).

(b)

For purposes of determining Annual Additions under section 1.5, limiting Annual Additions to a Participant’s Account(s) under section 3.4, and construing the defined terms as they are used in sections 1.5 and 3.4 (such as “ Compensation” and “Employee”), the term “Affiliated Entity” means any legal entity that is treated as a single employer with Apache pursuant to Code §414(m) or §414(o), and any legal entity that would be an Affiliated Entity pursuant to Code §414(b) or §414(c) if the phrase “more than 50%” were substituted for the phrase “at least 80%” each place it occurs in Code §1563(a)(1).

1.4	Alternate Payee
	“Alternate Payee” means a Participant’s Spouse, former spouse, child, or other dependent who is recognized by a QDRO as having a right to receive all, or a portion of, the benefits payable under this Plan with respect to such Participant.
1.5	Annual Addition
	“Annual Addition” means the allocations to a Participant’s Account(s) for any Limitation Year, as described in detail below.

(a) Annual Additions shall include: (i) Company Contributions (except as provided in paragraphs (b)(iii) and (b)(v)) to this Plan and Company contributions to any other defined contribution plan maintained by the Company or any Affiliated Entity, including Company Matching Contributions forfeited to satisfy the ACP test of section 3.6, (ii) after-tax contributions to any other defined contribution plan

Page 1 of 47

maintained by the Company or an Affiliated Entity; (iii) 401(k) Contributions to this Plan and similar contributions to any other defined contribution plan maintained by the Company or an Affiliated Entity, including any such contributions distributed to satisfy the ADP test of section 3.5; (iv) forfeitures allocated to a Participant’s Account(s) in this Plan and any other defined contribution plan maintained by the Company or any Affiliated Entity (except as provided in paragraphs (b)(iii) and (b)(v) below); (v) all amounts paid or accrued to a welfare benefit fund as defined in Code §419(e) and allocated to the separate account (under the welfare benefit fund) of a Key Employee to provide post-retirement medical benefits; and (vi) contributions allocated on the Participant’s behalf to any individual medical account as defined in Code §415(l)(2).

(b)

Annual Additions shall not include: (i) Rollover Contributions to this Plan or rollovers to any other defined contribution plan maintained by the Company or an Affiliated Entity; (ii) repayments of loans made to a Participant from a qualified plan maintained by the Company or any Affiliated Entity; (iii) repayments of forfeitures for rehired Participants, as described in Code §411(a)(7)(B) and §411(a)(3)(D); (iv) direct transfers of employee contributions from one qualified plan to any qualified defined contribution plan maintained by the Company or any Affiliated Entity; (v) repayments of forfeitures of missing individuals pursuant to section 13.12; or (vi) salary deferrals within the meaning of Code §414(u)(2)(C) or §414(v)(6)(B).

1.6	Catch-Up Contributions
	“Catch-Up Contributions” means those contributions made to the Plan by the Company, at the election of the Participant pursuant to subsection 3.2(b) that meet the requirements of Code §414(v).
1.7	Code
	“Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations and rulings in effect thereunder from time to time.
1.8	Committee
	“Committee” means the administrative committee provided for in section 8.4.
1.9	Company
	“Company” means Apache, any successor thereto, and any Affiliated Entity that adopts the Plan pursuant to Article XI. Each Company is listed in Appendix A.
1.10	Company Contributions
	“Company Contributions” means all contributions to the Plan made by the Company pursuant to section 3.1 for the Plan Year.
1.11	Company Discretionary Contributions
	“Company Discretionary Contributions” means all contributions to the Plan made by the Company pursuant to subsection 3.1(a) for the Plan Year.
1.12	Company Matching Contributions
	“Company Matching Contributions” means all contributions to the Plan made by the Company pursuant to subsection 3.1(b) for the Plan Year.
1.13	Company Stock
	“Company Stock” means shares of the $0.625 par value common stock of Apache.
1.14	Compensation
	“Compensation” means:

(a) Code §415 Compensation. For purposes of determining the limitation on Annual Additions under section 3.4 and the minimum contribution under section 12.4 when the Plan is top-heavy, Compensation shall mean those amounts reported as “wages, tips, other compensation” on Form W-2 by the Company or an Affiliated Entity and elective contributions that are not includable in the

Page 2 of 47

	Employee’s income pursuant to Code §125, §132(f)(4), §402(e)(3), §402(h), §403(b), §408(p), §414(u)(2)(C), §414(v)(6)(B), or §457. For purposes of section 3.4, Compensation shall be measured over a Limitation Year. For purposes of section 12.4, Compensation shall be measured over a Plan Year.
(b)	Code §414(q) Compensation. For purposes of identifying Highly Compensated Employees and Key Employees, Compensation shall mean those amounts reported as “wages, tips, other compensation” on Form W-2 by the Company or an Affiliated Entity, and elective contributions that are not includable in the Employee’s income pursuant to Code §125, §132(f)(4), §402(e)(3), §402(h), §403(b), §408(p), §414(u)(2)(C), §414(v)(6)(B), or §457. Compensation shall be measured over a Plan Year. Compensation shall include only amounts paid to the Employee, and shall not include any additional amounts accrued by the Employee.
(c)	Code §414(s) Compensation. For purposes of the ADP and ACP tests under sections 3.5 and 3.6, and for purposes of allocating QNECs under subsection 3.7(c) and QMACs under subsection 3.8(c), Compensation shall mean any definition of compensation for a Plan Year, as selected by the Committee, that satisfies the requirements of Code §414(s) and the regulations promulgated thereunder. The definition of Compensation used in one Plan Year may differ from the definition used in another Plan Year.
(d)	Benefit Compensation. For purposes of determining and allocating Company Discretionary Contributions under subsection 3.1(a), Compensation shall generally mean regular compensation paid by the Company.

(i) Specifically, Compensation shall include:

(A)	Regular salary or wages,
(B)	Overtime pay,
(C)	The regular annual bonus (unless all or a portion is excluded by the Committee before the regular annual bonus is paid) and any other bonus designated by the Committee,
(D)	Salary reductions pursuant to this Plan,
(E)	Salary reductions that are excludable from an Employee’s gross income pursuant to Code §125 or §132(f)(4), and
(F)	Amounts contributed as salary deferrals to the NQ Plan.

(ii) Compensation shall exclude:

(A)	Commissions,
(B)	Severance pay,
(C)	Moving expenses,
(D)	Any gross-up of moving expenses to account for increased income or employment taxes,
(E)	Foreign service premiums paid as an inducement to work outside of the United States,
(F)	Credits or benefits under this Plan (except as provided in subparagraph (i)(D)) and credits or benefits under the Apache Corporation Money Purchase Retirement Plan,
(G)	Other contingent compensation,
(H)	Any amount 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,
(I)	Contributions to any other fringe benefit plan (including, but not limited to, overriding royalty payments or any other exploration-related payments),

Page 3 of 47

(J)	Any bonus other than (1) a regular annual bonus not otherwise excluded by the Committee and (2) a bonus specifically included as Compensation by the Committee, in each case pursuant to subparagraph (i)(C), and
(K)	Except as provided under subparagraph (i)(F), any benefit accrued under, or any payment from, any nonqualified plan of deferred compensation.

(iii) Compensation shall be measured over that portion of a Plan Year while the Employee is a Covered Employee. Compensation shall include only amounts paid to the Employee during the Plan Year, and shall not include any amounts accrued by but not paid to the Employee during the Plan Year.

(e)

Deferral Compensation. For purposes of determining Participant Contributions under section 3.2 and for purposes of determining and allocating Company Matching Contributions under subsection 3.1(b), Compensation shall mean Compensation as defined in subsection (d), with the following modifications. Compensation shall be measured over each pay period after the Employee has satisfied the eligibility requirements of subsection 2.1(a). Compensation shall include only amounts paid while the Employee is a Covered Employee. Compensation shall only include those amounts paid in cash.

(f)

Limit on Compensation. For purposes of calculating the minimum contribution required in top-heavy years under subsection (a), for all purposes of subsections (c) and (d), and for purposes of determining the maximum allocation of Company Matching Contributions under subsection (e), the Compensation taken into account for the Plan Year shall not exceed the dollar limit specified in Code §401(a)(17) in effect for the Plan Year.

1.15	Covered Employee
	“Covered Employee” means any Employee of the Company, with the following exceptions.

(a)	Any individual directly employed by an entity other than the Company shall not be a Covered Employee, even if such individual is considered a common-law employee of the Company or is treated as an employee of the Company pursuant to Code §414(n).
(b)	An Employee shall not be a Covered Employee unless he is either based in the U.S. or on the U.S. payroll.
(c)	An Employee included in a unit of Employees covered by a collective bargaining agreement shall not be a Covered Employee unless the collective bargaining agreement specifically provides for such Employee’s participation in the Plan.
(d)	An Employee whose job is classified as “temporary” shall be a Covered Employee only after he has worked for the Company and Affiliated Entities for six consecutive months.
(e)	An Employee shall not be a Covered Employee while he is classified as an “intern,” a “consultant,” or an “independent contractor.” An Employee may be classified as an “intern” only if he is currently enrolled (or the Company expects him to be enrolled within the next 12 months) in a high school, college, or university. An Employee may be classified as an intern even if he does not receive academic course credit from his school for this employment with the Company.
(f)	An individual who is employed pursuant to a written agreement with an agency or other third party for a specific job assignment or project shall not be a Covered Employee.

1.16	Disability
	“Disability” means a physical or mental condition that qualifies the Employee for long-term disability payments under Apache’s Long-Term Disability Plan.
1.17	Domestic Relations Order
	“Domestic Relations Order” means any judgment, decree, or order (including approval of a property settlement agreement) issued by a court of competent jurisdiction that relates to the provisions of child support, alimony or maintenance payments, or marital property rights to a Participant’s Spouse, former spouse, child, or other dependent and is made pursuant to a state domestic relations law (including a community property law).

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1.18	Employee
	“Employee” means each individual who performs services for the Company or an Affiliated Entity and whose wages are subject to withholding by the Company or an Affiliated Entity. The term “Employee” includes only individuals currently performing services for the Company or an Affiliated Entity, and excludes former Employees who are still being paid by the Company or an Affiliated Entity (whether through the payroll system, through overriding royalty payments, through exploration-related payments, severance, or otherwise). The term “Employee” also includes any individual who provides services to the Company or an Affiliated Entity pursuant to an agreement between the Company or an Affiliated Entity and a third party that employs the individual, but only if the individual has performed such services for the Company or an Affiliated Entity on a substantially full-time basis for at least one year and only if the services are performed under the primary direction or control by the Company or an Affiliated Entity; provided, however, that if the individuals included as Employees pursuant to the first part of this sentence constitute 20% or less of the Non-Highly Compensated Employees of the Company and Affiliated Entities, then any such individuals who are covered by a qualified plan that is a money purchase pension plan that provides a nonintegrated employer contribution rate for each participant of at least 10% of compensation, that provides for full and immediate vesting, and that provides immediate participation for each employee of the third party (other than those who perform substantially all of their services for the third party and other than those whose compensation from the third party during each of the four preceding plan years was less than $1000) shall not be considered an Employee.
1.19	ERISA
	“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations and rulings in effect thereunder from time to time.
1.20	Five-Percent Owner
	“Five-Percent Owner” means:

(a)	With respect to a corporation, any individual who owns (either directly or indirectly according to the rules of Code §318) more than 5% of the value of the outstanding stock of the corporation or stock processing more than 5% of the total combined voting power of all stock of the corporation.
(b)	With respect to a non-corporate entity, any individual who owns (either directly or indirectly according to rules similar to those of Code §318) more than 5% of the capital or profits interest in the entity.
(c)	An individual shall be a Five-Percent Owner for a particular year if such individual is a Five-Percent Owner at any time during such year.

1.21	401(k) Contributions
	“401(k) Contributions” means those contributions made to the Plan by the Company, at the election of the Participant pursuant to subsection 3.2(a), that are excludable from the Participant’s gross income under Code §401(k) and §402(e)(3).
1.22	Highly Compensated Employee
	“Highly Compensated Employee” means, for each Plan Year, an Employee who (a) was in the “top-paid group” during the immediately preceding Plan Year and had Compensation of $80,000 (as adjusted by the Secretary of the Treasury) or more during the immediately preceding Plan Year, or (b) is a Five-Percent Owner during the current Plan Year, or (c) was a Five-Percent Owner during the immediately preceding Plan Year. The term “top-paid group” means the top 20% of Employees when ranked on the basis of Compensation paid during the year. In determining the number of Employees in the top-paid group, the Committee may elect to exclude Employees with less than six (or some smaller number of) months of service at the end of the year, Employees who normally work less than 171/2 (or some fewer number of) hours per week, Employees who normally work less than six (or some fewer number of) months during any year, Employees younger than 21 (or some younger age) on the last day of the year, and Employees who are nonresident aliens who receive no earned income (within the meaning of Code §911(d)(2)) from Apache or an Affiliated Entity that constitutes income from sources within the United States (within the meaning of Code §861(a)(3)). Furthermore, an Employee who is a nonresident alien who receives no earned income (within the meaning of Code §911(d)(2)) from Apache or an Affiliated Entity that constitutes income from

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	sources within the United States (within the meaning of Code §861(a)(3)) during the year shall not be in the top-paid group for that year.
1.23	Key Employee
	“Key Employee” means an individual described in Code §416(i)(1) and the regulations promulgated thereunder.
1.24	Lapse in Apache Employment
	“Lapse in Apache Employment” means a Lapse in Apache Employment as defined in subsection 5.3(c).
1.25	Limitation Year
	“Limitation Year” means the calendar year.
1.26	Non-Highly Compensated Employee
	“Non-Highly Compensated Employee” means an Employee who is not a Highly Compensated Employee.
1.27	Non-Key Employee
	“Non-Key Employee” means an Employee who is not a Key Employee.
1.28	Normal Retirement Age
	“Normal Retirement Age” means age 65.
1.29	NQ Plan
	“NQ Plan” means the Non-Qualified Retirement/Savings Plan of Apache Corporation.
1.30	Participant
	“Participant” means any individual with an account balance under the Plan except beneficiaries and Alternate Payees. The term “Participant” shall also include any Covered Employee who has satisfied the eligibility requirements of section 2.1, but who does not yet have an account balance.
1.31	Participant Contributions
	“Participant Contributions” means 401(k) Contributions and Catch-Up Contributions.
1.32	Period of Service
	“Period of Service” means a Period of Service as defined in subsection 5.3(a).
1.33	Plan Year
	“Plan Year” means the 12-month period on which the records of the Plan are kept, which shall be the calendar year.
1.34	QDRO
	“QDRO,” which is an acronym for qualified domestic relations order, means a Domestic Relations Order that creates or recognizes the existence of an Alternate Payee’s right to, or assigns to an Alternate Payee the right to, receive all or a portion of the benefits payable with respect to a Participant under the Plan and with respect to which the requirements of Code §414(p) and ERISA §206(d)(3) are met.
1.35	QMAC
	“QMAC,” which is an acronym for qualified matching contribution, means any contribution to the Plan made by the Company that the Company designates as a QMAC, or any portion of the forfeitures designated as a QMAC under subsection 5.4(d). A QMAC must satisfy the requirements of section 3.8.
1.36	QNECs
	“QNEC,” which is an acronym for qualified non-elective contribution, means any contribution to the Plan made by the Company that the Company designates as a QNEC, or any portion of the forfeitures designated as a QNEC under subsection 5.4(d). A QNEC must satisfy the requirements of section 3.7.

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1.37	Required Beginning Date
	“Required Beginning Date” means:

(a)	Excepted as provided in subsections (b), (c), and (d), Required Beginning Date means April 1 of the calendar year following the later of (i) the calendar year in which the Participant attains age 701/2, or (ii) the calendar year in which the Participant terminates employment with Apache and all Affiliated Entities.
(b)	For a Participant who is both an Employee and a Five-Percent Owner of Apache or an Affiliated Entity, the term “Required Beginning Date” means April 1 of the calendar year following the calendar year in which the Five-Percent Owner attains age 701/2. If an Employee older than 701/2 becomes a Five-Percent Owner, his Required Beginning Date shall be April 1 of the calendar year following the calendar year in which he becomes a Five-Percent Owner.
(c)	Before January 1, 1997, an Employee who was not a Five-Percent Owner may have had a Required Beginning Date. Beginning January 1, 1997, such an Employee shall be treated as if he has not yet had a Required Beginning Date, with the result that his minimum required distributions under subsection 6.6(c) will be zero until his new Required Beginning Date. His new Required Beginning Date shall be determined pursuant to subsections (a) and (b).
(d)	If a Participant is rehired after his Required Beginning Date, and he is not a Five-Percent Owner, he shall be treated upon rehire as if he has not yet had a Required Beginning Date, with the result that his minimum required distributions under subsection 6.6(c) will be zero until his new Required Beginning Date. His new Required Beginning Date shall be determined pursuant to subsection (a).

1.38	Rollover Contribution
	“Rollover Contribution” means any contribution that is rolled over to this Plan pursuant to subsection 3.2(d).
1.39	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.
1.40	Termination of Employment
	“Termination of Employment” means a severance from employment within the meaning of Code §401(k)(2)(b)(i)(I), and which therefore generally means the date a Participant ceases to be an Employee.
1.41	Termination From Service Date
	“Termination From Service Date” means the Termination From Service Date defined in subsection 5.3(b).
1.42	Valuation Date
	“Valuation Date” means the last day of each Plan Year and any other dates as specified in section 4.2 as of which the assets of the Trust Fund are valued at fair market value and as of which the increase or decrease in the net worth of the Trust Fund is allocated among the Participants’ Accounts.

ARTICLE II
Participation

2.1 Participation — Required Service.

(a)	Participant Contributions. A Covered Employee shall be eligible to begin making Participant Contributions and receiving an allocation of Company Matching Contributions as of the first day of the first pay period of the month that begins after the day the Employee becomes a Covered Employee.
(b)	Company Discretionary Contributions. Each Covered Employee shall be eligible to participate in the Plan with respect to the Company Discretionary Contribution provided by subsection 3.1(a) on the day the Employee first becomes a Covered Employee.

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2.2

Enrollment Procedure.

Notwithstanding section 2.1, a Covered Employee shall not be eligible to participate in the Plan until after completing the enrollment procedures specified by the Committee. Such enrollment procedures may, for example, require the Covered Employee to complete and sign an enrollment form or to complete a voice-response telephone enrollment or an online enrollment. The Covered Employee shall provide all information requested by the Committee, such as the initial investment direction, the address and date of birth of the Employee, and the initial rate of the Participant Contributions. An election to make Participant Contributions shall not be effective until after the Covered Employee has properly completed the enrollment procedures. The Committee may require that the enrollment procedure be completed a certain number of days prior to the date that a Covered Employee actually begins to participate.

ARTICLE III
Contributions

The only contributions that can be made to the Plan are Company Contributions pursuant to section 3.1, Plan expenses that are paid by the Company or Account Owner, Participant Contributions and Rollover Contributions pursuant to section 3.2,, and loan repayments pursuant to Article VII.

3.1 Company Contributions.

(a)

Company Discretionary Contributions. For each Plan Year, the Company shall contribute to the Trust Fund such amount of Company Discretionary Contributions that the Company, in its sole discretion, determines to contribute. The Company may elect to treat any available forfeitures as Company Discretionary Contributions, pursuant to subsection 5.4(d). Company Discretionary Contributions shall be allocated to each “eligible Participant” in proportion to the eligible Participant’s Compensation. For purposes of this subsection, an “eligible Participant” is a Participant who was a Covered Employee on one or more days during the Plan Year and who was employed by the Company or an Affiliated Entity on the last business day of the Plan Year. Company Discretionary Contributions shall be allocated to Company Contributions Accounts, except for those Company Discretionary Contributions that are designated as QNECs pursuant to subsection 3.7(b), which shall be allocated to Participant Contributions Accounts.

(b)

Company Matching Contributions.

(i)	Standard Match. As of the last day of the Plan Year, the Committee shall make the final allocation of Company Matching Contributions (including such forfeitures occurring during the Plan Year that are treated as Company Matching Contributions pursuant to subsection 5.4(d)) to each Participant who made Participant Contributions during the Plan Year as follows. Each Participant’s allocation shall be equal to his Participant Contributions for the Plan Year, up to a maximum allocation of 6% of his Compensation. The Committee may make interim allocations of Company Matching Contributions during the Plan Year, reflecting the allocation earned thus far in the Plan Year.
(ii)	Additional Match. If the nondiscrimination tests described in sections 3.5 and 3.6 are not satisfied for a Plan Year, the Company may elect to contribute an additional amount, or it may elect to use any forfeitures occurring during the Plan Year, as an extra Company Matching Contribution for the Plan Year. The extra Company Matching Contribution may be designated as a QMAC pursuant to section 3.8. The extra Company Matching Contribution shall be allocated to all “eligible Participants” in proportion to the Company Matching Contribution allocated to such eligible Participants during the Plan Year under paragraph (i). For purposes of this paragraph only, an “eligible Participant” is any Non-Highly Compensated Employee who is a Covered Employee on the last day of the Plan Year.
(iii)	Coordination With Code §401(a)(17). Company Matching Contributions in a Plan Year shall accrue only on Participant Contributions up to 6% of the Code §401(a)(17) limit for that Plan Year. Any Company Matching Contributions allocated during the Plan Year in which they were accrued shall be allocated on a temporary basis only; the allocation shall become final after the Committee verifies that the allocation complies with the terms of the Plan, including the limits

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	of Code §401(a)(17). Any reduction in the allocation to comply with Code §401(a)(17), adjusted to reflect investment experience, shall be used as specified in subsection 5.4(d).
(iv)	Accounts. Company Matching Contributions shall be allocated to Company Contributions Accounts, except for those Company Matching Contributions that are designated as QMACs under section 3.8, which shall be allocated to Participant Contributions Accounts.

(c) Miscellaneous Contributions.

(i)	Forfeiture Restoration. The Company may make additional contributions to the Plan to restore amounts forfeited from the Company Contributions Accounts of certain rehired Participants, pursuant to section 5.4. This additional contribution shall be required only when the available forfeitures are insufficient to restore such forfeited amounts, as described in subsection 5.4(d). This contribution shall be allocated to the Participant’s Company Contributions Account.
(ii)	Top Heavy Contribution. The Company may make additional contributions to the Plan to satisfy the minimum contribution required by section 12.4. The Company may elect to use any available forfeitures for this purpose, pursuant to subsection 5.4(d).
(iii)	Missing Individuals. The Company may make additional contributions to the Plan to restore the forfeited benefit of any missing individual, pursuant to section 13.12. This additional contribution shall be required only when the available forfeitures are insufficient to restore such forfeited amounts, as described in subsection 5.4(d).
(iv)	Non-Discrimination Testing. The Company may make QNECs to the Plan to enable the Plan to satisfy the ADP and ACP tests of sections 3.5 and 3.6. The Company may elect to treat any available forfeitures as QNECs, pursuant to subsection 5.4(d). QNECs shall be allocated to Participant Contribution Accounts.
(v)	Returning Servicemen. The Company may make additional contributions to the Plan to provide make-up contributions for returning servicemen, pursuant to section 15.4.

(d) Contributions Contingent on Deductibility. The Company Contributions for a Plan Year (excluding forfeitures and contributions pursuant to paragraph 3.1(c)(v) shall not exceed the amount allowable as a deduction for Apache’s taxable year ending with or within the Plan Year pursuant to Code §404. The amount allowable as a deduction under Code §404 shall include carry forwards of unused deductions for prior years. If the Code §404 deduction limit would be exceeded for any Plan Year, the Plan contributions shall be reduced, in the following order, until the Plan contributions equal the Code §404 deduction limit: first, the Company Matching Contributions for those Highly Compensated Employees who are eligible to participate in the NQ Plan; second, all but $1 of the Company Discretionary Contributions for those Highly Compensated Employees who are eligible to participate in the NQ Plan; third, any remaining Company Matching Contribution; fourth, any remaining Company Discretionary Contributions. Company Contributions other than QNECs, QMACs, and contributions pursuant to paragraph 3.1(c)(v) shall be paid to the Trustee no later than the due date (including any extensions) for filing the Company’s federal income tax return for such year; QNECs and QMACs shall be paid to the Trustee no later than 12 months after the close of the Plan Year; and contributions subject to paragraph 3.1(c)(v) shall be paid to the Trustee as specified in section 15.4. Company Contributions may be made without regard to current or accumulated earnings and profits; nevertheless, this Plan is intended to qualify as a “profit sharing plan” as defined in Code §401(a). The Company may pay any contribution in the form of Company Stock or cash, as the Company determines.

3.2 Participant Contributions.

(a) 401(k) Contributions.

(i) General Rules. A Participant may elect to defer the receipt of a portion of his Compensation during the Plan Year and contribute such amounts to the Plan as 401(k) Contributions. The Committee shall determine the maximum 401(k) Contributions that a Participant may make and shall establish other administrative rules governing the 401(k) Contributions; for example, the Committee may require 401(k) Contributions to be made in whole percentages of

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Compensation, the Committee may allow different contribution percentages from bonuses than are allowed from regular pay, and the Committee may limit 401(k) Contributions (for the year or for the pay period or for a bonus) to a percentage of Compensation (for the year or for the pay period or for the bonus). The Company shall pay the amount deducted from the Participant’s Compensation to the Trustee promptly after the deduction is made. 401(k) Contributions shall be allocated to Participant Contributions Accounts.

(ii)

Limitations on 401(k) Contributions.

(A)

Limit for Apache Plans. The sum of 401(k) Contributions to this Plan and elective deferrals (as defined in Code §402(g)(3)) to any other plan maintained by the Company or an Affiliated Entity shall not exceed the dollar limit in effect under Code §402(g)(1)(B) in any calendar year. The Company shall inform the Committee if such limit has been exceeded, and the excess amount allocated to this Plan. The excess amount allocated to this Plan shall be reduced by any 401(k) Contributions returned pursuant to any other provision of this Article. Any remaining excess amount shall be recharacterized as a Catch-Up Contribution to the extent possible, and any remaining excess amount shall be returned to the Participant as soon as administratively possible, and in no event later than April 15 of the calendar year after the calendar year in which the excess occurred. Company Matching Contributions attributable to amounts returned under this subparagraph shall be forfeited. Unmatched 401(k) Contributions shall be returned first. The amount returned, recharacterized, or forfeited shall be adjusted to reflect the net increase or decrease in the net value of the Participant’s Account attributable thereto. The Committee may use any reasonable method to allocate this adjustment.

(B)

Participant Limit. If the sum of the 401(k) Contributions to this Plan and elective deferrals (as defined in Code §402(g)(3)) to any other plan exceed the dollar limit in effect under Code §402(g)(1)(B) in a calendar year, and the Participant is an Employee on the last day of the Plan Year and informs the Committee of the amount of the excess allocated to this Plan, then that amount will be reduced by any 401(k) Contributions for that calendar year that were returned pursuant to any other provision in this Article. Any remaining excess amount shall be recharacterized as a Catch-Up Contribution to the extent possible, and any remaining excess amount shall be returned to the Participant as soon as administratively possible, and in no event later than April 15 of the calendar year after the calendar year in which the excess occurred. Company Matching Contributions attributable to amounts returned under this subparagraph shall be forfeited. Unmatched 401(k) Contributions shall be returned first. The amount returned, recharacterized, or forfeited shall be adjusted to reflect the net increase or decrease in the net value of the Participant’s Account attributable thereto. The Committee may use any reasonable method to allocate this adjustment.

(b) Catch-Up Contributions.

(i)

General Rules. A Participant whose 49th birthday occurred before the first day of the Plan Year may elect to defer the receipt of a portion of his Compensation during the Plan Year and contribute such amounts to the Plan as Catch-Up Contributions. The Company shall pay the amount deducted from the Participant’s Compensation to the Trustee promptly after the deduction is made. The Committee shall determine after the end of each calendar year which Participant Contributions were Catch-Up Contributions and which were 401(k) Contributions. See sections 3.5 and 3.6 for instances in which Participant Contributions that would normally be characterized as 401(k) Contributions are in fact characterized as Catch-Up Contributions. Catch-Up Contributions shall be allocated to Participant Contributions Accounts.

(ii)

Limitations on Catch-Up Contributions.

(A) Limit for Apache Plans. The sum of Catch-Up Contributions to this Plan and similar deferrals under Code §414(v) to any other plan maintained by the Company or an Affiliated Entity shall not exceed the dollar limit in effect under Code §414(v)(2)(B)(i) in

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any calendar year. The Company shall inform the Committee if such limit has been exceeded, and the excess amount allocated to this Plan. The excess amount allocated to this Plan shall be reduced by any amounts returned pursuant to any other provision of this Article. Any remaining excess amount shall be returned to the Participant as soon as administratively possible, and in no event later than April 15 of the calendar year after the calendar year in which the excess occurred. Company Matching Contributions attributable to amounts returned under this subparagraph shall be forfeited. Unmatched Catch-Up Contributions shall be returned first. The amount returned or forfeited shall be adjusted to reflect the net increase or decrease in the net value of the Participant’s Account attributable thereto. The Committee may use any reasonable method to allocate this adjustment.

(B)

Participant Limit. If the sum of the Catch-Up Contributions to this Plan and similar deferrals under Code §414(v) to any other plan exceed the dollar limit in effect under Code §414(v)(2)(B)(i) in a calendar year, and the Participant is an Employee on the last day of the Plan Year and informs the Committee of the amount of the excess allocated to this Plan, then that amount will be reduced by any Catch-Up Contributions for that calendar year that were returned pursuant to any other provision in this Article and any remaining excess amount shall be returned to the Participant as soon as administratively possible, and in no event later than April 15 of the calendar year after the calendar year in which the excess occurred. Company Matching Contributions attributable to amounts returned under this subparagraph shall be forfeited. Unmatched Catch-Up Contributions shall be returned first. The amount returned or forfeited shall be adjusted to reflect the net increase or decrease in the net value of the Participant’s Account attributable thereto. The Committee may use any reasonable method to allocate this adjustment.

(c) Procedures. Participant Contributions shall be made according to rules prescribed by the Committee that are consistent with the rules in this subsection.

(i)	Authorization. Participant Contributions may only be made after the Company has received authorization from a Participant to deduct such contributions from his Compensation. Effective January 1, 2006, the Committee may establish procedures whereby a new Participant will be automatically enrolled in the Plan, and will make Participant Contributions at a certain level, unless he affirmatively elects otherwise; the Participant shall be provided with a reasonable opportunity of at least 30 days to elect a different rate of Participant Contribution or no Participant Contribution. Any authorization or deemed authorization may apply only to Compensation that is not then currently available to the Participant. Such authorization or deemed authorization shall remain in effect until revoked or changed by the Participant. If an Employee makes a hardship withdrawal from his Participant Contributions Account under section 6.5, his contribution rate shall be immediately reduced to 0%, and shall remain at 0% for at least 6 months. To be effective, any authorization, change of authorization, or notice of revocation must be filed with the Committee according to such restrictions and requirements as the Committee prescribes. The Committee shall establish procedures from time to time for Participants to change their contribution elections, which procedures shall be communicated to Participants. The Committee may establish different procedures for Participant Contributions from different types of Compensation, such as bonuses. A Participant who also participates in the NQ Plan may make a combined contribution election that applies to both this Plan and the NQ Plan; once made, such combined elections are irrevocable for the periods and the compensation described in the elections.
(ii)	Catch-Up Contributions. The Committee’s procedures for Catch-Up Contributions shall allow all Participants who can make Catch-Up Contributions the effective opportunity to make the same dollar amount of Catch-Up Contributions for the calendar year.
(iii)	Inadequate Paycheck. If the amounts withheld from a Participant’s paycheck (including, without limitation, loan repayments, Participant Contributions, taxes, contributions to the NQ Plan, and premium payments for various benefits) are greater than the paycheck, the Committee shall establish the order in which the deductions shall be applied, with the result that 401(k)

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Contributions or Catch-Up Contributions may be reduced below what the Participant had elected. The Committee’s procedures may also automatically increase a Participant’s 401(k) Contributions or Catch-Up Contributions in subsequent pay periods to make up for any missed contributions.

(d) Rollovers. The Plan may accept any rollover from or on behalf of a Covered Employee, subject to the following rules. The Committee shall decide from time to time which types of rollovers the Plan will accept, and the conditions under which the Plan will accept them. A rollover may be comprised of a direct transfer of an eligible rollover distribution from a qualified plan described in Code §401(a) (excluding after-tax contributions), a qualified annuity plan described in Code §403(a) (excluding after-tax contributions), an annuity contract described in Code §403(b) (excluding after-tax contributions), or an eligible plan under Code §457(b) that is maintained by an eligible employer described in Code §457(e)(1)(A) (which generally includes state or local governments). A rollover may also be comprised of the portion of a distribution from an individual retirement account or annuity described in Code §408(a) or §408(b) that is eligible to be rolled over and that would otherwise be included in the Covered Employee’s gross income. If the Plan accepts a contribution and subsequently determines that the contribution did not satisfy the conditions for the Plan to accept it, the Plan shall distribute such contribution, as well as the net increase or decrease in the net value of the Trust Fund attributable to the contribution, to the Covered Employee as soon as administratively practicable. All rollovers accepted under this subsection shall be allocated to Rollover Accounts.

3.3 Return of Contributions.

(a)	Mistake of Fact. Upon the request of the Company, the Trustee shall return to the Company, any Company Contribution made under a mistake of fact. The amount that shall be returned shall not exceed the excess of the amount contributed (reduced to reflect any decrease in the net worth of the appropriate Accounts attributable thereto) over the amount that would have been contributed without the mistake of fact. Appropriate reductions shall be made in the Accounts of Participants to reflect the return of any contributions previously credited to such Accounts. If the Company so requests, any contribution made under a mistake of fact shall be returned to the Company within one year after the date of payment.
(b)	Non-Deductible Contributions. Upon the request of the Company, the Trustee shall return to the Company, any Company Contribution or 401(k) Contribution that is not deductible under Code §404. The Company shall pay any returned 401(k) Contribution to the appropriate Participant or the Company’s NQ Plan, as appropriate, as soon as administratively practicable, subject to any withholding. All contributions under the Plan are expressly conditioned upon their deductibility for federal income tax purposes. The amount that shall be returned shall be the excess of the amount contributed (reduced to reflect any decrease in the net worth of the appropriate Accounts attributable thereto) over the amount that would have been contributed if there had not been a mistake in determining the deduction. Appropriate reductions shall be made in the Accounts of Participants to reflect the return of any contributions previously credited to such Accounts. Any contribution conditioned on its deductibility shall be returned within one year after it is disallowed as a deduction.
(c)	Effect of Correction. A contribution shall be returned under this section only to the extent that its return will not reduce the Account(s) of a Participant to an amount less than the balance that would have been credited to the Participant’s Account(s) had the contribution not been made.

3.4 Limitation on Annual Additions.

(a)

Limit. The Annual Additions to a Participant’s Account(s) in this Plan and to his accounts in any other defined contribution plans maintained by the Company or an Affiliated Entity for any Limitation Year shall not exceed in the aggregate the lesser of (i) $40,000 (as adjusted by the Secretary of the Treasury), or (ii) 100% of the Participant’s Compensation. The limit in clause (ii) shall not apply to any contribution for medical benefits (within the meaning of Code §419A(f)(2)) after separation from service that is treated as an Annual Addition.

(b)

Corrective Mechanism.

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(i)

Reduction in Annual Additions. A Participant’s Annual Additions shall be reduced, to the extent necessary to satisfy the foregoing limits, if the Annual Additions arose as a result of a reasonable error in estimating Compensation, as a result of the allocation of forfeitures, or as a result of other facts and circumstances as provided in the regulations under Code §415.

(ii)

Order of Reduction, Multiple Plans. Apache also maintains the Apache Corporation Money Purchase Retirement Plan, a money purchase pension plan. The Participant’s Annual Additions shall be reduced, to the extent necessary, in the following order. First, to the extent that the Annual Additions in a single plan exceed the limits of subsection (a), the Annual Additions in that plan shall be reduced, in the order specified in that plan, to the extent necessary to satisfy the limits of subsection (a). Then, if the Participant has Annual Additions in more than one plan and in the aggregate they exceed the limits of subsection (a), the Annual Additions will be reduced as follows.

(A)	If the Participant was eligible to participate in the NQ Plan on the last day of the Plan Year in which the excess Annual Addition occurred, the Annual Additions to the Apache Corporation Money Purchase Pension Plan will be reduced before the Annual Additions to this Plan are reduced.
(B)	If the Participant was not eligible to participate in the NQ Plan on the last day of the Plan Year in which the excess Annual Addition occurred, the Annual Additions to this Plan will be reduced before the Annual Additions to the Apache Corporation Money Purchase Retirement Plan are reduced.

(iii)

Order of Reduction, This Plan. If the Participant was eligible to participate in the NQ Plan on the last day of the Plan Year in which the excess Annual Addition occurred, the Annual Additions to this Plan shall be reduced in the following order: Company Discretionary Contributions; Company Matching Contributions; 401(k) Contributions; then Catch-Up Contributions. If the Participant was not eligible to participate in the NQ Plan on the last day of the Plan Year in which the excess Annual Addition occurred, the Annual Additions to this Plan shall be reduced in the following order: unmatched 401(k) Contributions; unmatched Catch-Up Contributions; matched 401(k) Contributions and the corresponding Company Matching Contributions; matched Catch-Up Contributions and the corresponding Company Matching Contributions; then Company Discretionary Contributions.

(iv)

Disposition of Excess Annual Additions. The Plan shall pay any reduction in 401(k) Contributions (adjusted to reflect the net increase or decrease in the net value of the Trust Fund attributable to the contributions) to the Participant as soon as administratively practicable, subject to any withholding. Any reduction of Company Contributions shall be placed in a suspense account in the Trust Fund and used to reduce future Company Contributions to the Plan. The following rules shall apply to such suspense account: (A) no further Company Contributions may be made if the allocation thereof would be precluded by Code §415; (B) any increase or decrease in the net value of the Trust Fund attributable to the suspense account shall not be allocated to the suspense account, but shall be allocated to the Accounts; and (C) all amounts held in the suspense account shall be allocated as of each succeeding allocation date on which forfeitures may be allocated pursuant to subsection 5.4(d) (and may be allocated more frequently if the Committee so directs), until the suspense account is exhausted.

3.5 Contribution Limits for Highly Compensated Employees (ADP Test).

(a)

Limits on Contributions. Notwithstanding any provision in this Plan to the contrary, the actual deferral percentage (“ADP”) test of Code §401(k)(3) shall be satisfied. Code §401(k) and the regulations issued thereunder are hereby incorporated by reference to the extent permitted by such regulations. In performing the ADP test for a Plan Year, the Plan will use that Plan Year’s data for the Non-Highly Compensated Employees.

(b)

Permissible Variations of the ADP Test. To the extent permitted by the regulations under Code §401(m) and §401(k), 401(k) Contributions, QMACs, and QNECs may be used to satisfy the ACP test of section 3.6 if they are not used to satisfy the ADP test. The Committee may elect to exclude from

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	the ADP test those Non-Highly Compensated Employees who, at the end of the Plan Year, had not attained age 21 and/or whose Period of Service was less than one year.
(c)	Advanced Limitation on 401(k) Contributions or Company Matching Contributions. The Committee may limit the 401(k) Contributions of any Highly Compensated Employee (or any Employee expected to be a Highly Compensated Employee) at any time during the Plan Year, with the result that his share of Company Matching Contributions may be limited. This limitation may be made, if practicable, whenever the Committee believes that the limits of this section or sections 3.4 or 3.6 will not be satisfied for the Plan Year.
(d)	Corrections to Satisfy Test. If the ADP test is not satisfied for the Plan Year, the Committee shall decide which one or more of the following methods shall be employed to satisfy the ADP test. All corrections shall be accomplished if possible before March 15 of the following Plan Year, and in no event later than 12 months after the close of the Plan Year.

(i)	The Committee may recommend to the Company and the Company may make QNECs and/or QMACs to the Plan, pursuant to subsections 3.7(c) and 3.8(c).
(ii)	The Committee may recommend to the Company and the Company may designate any Company Discretionary Contribution allocated to Non-Highly Compensated Employees as QNECs, pursuant to subsection 3.7(b).
(iii)	The Committee may recommend to the Company and the Company may designate any Company Matching Contributions allocated to Non-Highly Compensated Employees as QMACs, pursuant to section 3.8(b).
(iv)	401(k) Contributions of Highly Compensated Employees may be recharacterized as Catch-Up Contributions or returned to the Highly Compensated Employee, without the consent of either the Highly Compensated Employee or his Spouse, subject to the rules of subsection (f).

(e)

Order of Correction. The method described in subsection (c) shall be employed first, during the Plan Year. If that method is not used during the Plan Year, or if the net effect of such method was insufficient for the ADP test to be satisfied, the Company has the discretion to use any one or more of the methods described in paragraphs (d)(i), (d)(ii), and (d)(iii). If the Company does not choose to make the corrections described in paragraphs (d)(i), (d)(ii), and (d)(iii), or if such corrections are insufficient to satisfy the ADP test, then the correction method described in paragraph (d)(iv) shall be used.

(f)

Calculating the Amounts Returned or Recharacterized. If the ADP test is not satisfied, and 401(k) Contributions are returned or recharacterized pursuant to paragraph (d)(iv) above, the Committee shall determine the amount to be returned or recharacterized and shall then allocate that amount among the Highly Compensated Employees pursuant to Treasury Regulations. The correction for each Highly Compensated Employee shall occur in the following order, to the extent necessary: 401(k) Contributions shall be recharacterized as Catch-Up Contributions to the extent possible, then unmatched 401(k) Contributions shall be returned to the Participant, then matched 401(k) Contributions shall be returned to the Participant and the corresponding Company Matching Contribution shall be forfeited (unless the ACP test was performed before the ADP test, and the Company Matching Contribution has already been returned to the Participant pursuant to paragraph 3.6(c)(v)). The amount actually recharacterized or returned to each Highly Compensated Employee shall be adjusted to reflect as nearly as possible the actual increase or decrease in the net value of the Trust Fund attributable to the correction through the business day immediately preceding the date as of which the correction is processed.

3.6 Contribution Limits for Highly Compensated Employees (ACP Test).

(a) Limits on Contributions. Notwithstanding any provision in this Plan to the contrary, the actual contribution percentage (“ACP”) test of Code §401(m)(2) shall be satisfied. Code §401(m) and the regulations issued thereunder are hereby incorporated by reference to the extent permitted by such regulations. In performing the ACP test for a Plan Year, the Plan will use that Plan Year’s data for the Non-Highly Compensated Employees.

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(b)

Permissible Variations of the ACP Test. To the extent permitted by the regulations under Code §401(m) and §401(k), 401(k) Contributions, QMACs, and QNECs may be used to satisfy this test if not used to satisfy the ADP test of section 3.5. The Committee may elect to exclude from the ACP test those Non-Highly Compensated Employees who, at the end of the Plan Year, had not attained age 21 and/or whose Period of Service was for less than one year.

(c)

Corrections to Satisfy Test. If the ACP test is not satisfied, the Committee shall decide which one or more of the following methods shall be employed to satisfy the ACP test. All corrections shall be accomplished if possible before March 15 of the following Plan Year, and in no event later than 12 months after the close of the Plan Year.

(i)	The Committee may recommend to the Company and the Company may make QNECs or QMACs to the Plan, pursuant to subsections 3.7(c) and 3.8(c).
(ii)	The Committee may recommend to the Company and the Company may designate any portion of its Company Discretionary Contributions as QNECs, pursuant to subsection 3.7(b).
(iii)	The Committee may recommend to the Company and the Company may designate any portion of its Company Matching Contributions as QMACs, pursuant to subsection 3.8(b).
(iv)	The Committee may recommend to the Company and the Company may make extra Company Matching Contributions to the Plan, pursuant to paragraph 3.1(b)(ii).
(v)	The non-vested Company Matching Contributions allocated to Highly Compensated Employees as of any date during the Plan Year may be forfeited as of the last day of the Plan Year, and the vested Company Matching Contributions allocated to any Highly Compensated Employee for the Plan Year may be paid to such Highly Compensated Employee, without the consent of either the Highly Compensated Employee or his Spouse, subject to the rules of subsection (e).
(vi)	Those 401(k) Contributions that are taken into account for this ACP test for any Highly Compensated Employee may be returned to such Highly Compensated Employee, without the consent of either the Highly Compensated Employee or his Spouse, subject to the rules of subsection (e).

(d)

Order of Correction. The method described in subsection 3.5(c) shall be employed first, during the Plan Year. If that method is not used during the Plan Year, or if the net effect of such method was insufficient for the ACP test to be satisfied, the Company has the discretion to use any one or more of the methods described in paragraphs (c)(i), (c)(ii), (c)(iii) and (c)(iv). If the Company does not choose to make the corrections described in paragraphs (c)(i), (c)(ii), (c)(iii), and (c)(iv) or if such corrections are insufficient to satisfy the ACP test, then the correction methods described in paragraphs (c)(v) and (c)(vi) shall be used, as described in subsection (e).

(e)

Calculating the Corrective Reduction. If the correction methods described in paragraphs (c)(v) and (c)(vi) are to be used, the Committee shall determine the amount of the correction and then allocate that amount among the Highly Compensated Employees pursuant to Treasury Regulations. The correction under paragraph (c)(v) shall be accomplished by returning all of that Plan Year’s vested Company Matching Contributions to the Highly Compensated Employee before any unvested Company Matching Contributions are forfeited. The correction under paragraph (c)(vi) shall be accomplished in the following order, to the extent necessary: 401(k) Contributions shall be recharacterized as Catch-Up Contributions to the extent possible, then unmatched 401(k) Contributions shall be returned to the Participant, then matched 401(k) Contributions shall be returned to the Participant and the corresponding Company Matching Contribution shall be returned to the Participant if vested and forfeited if not vested. If the corrections under paragraphs (c)(v) and (c)(vi) are done in tandem, the correction shall be accomplished in the following order, to the extent necessary: 401(k) Contributions shall be recharacterized as Catch-Up Contributions to the extent possible, then unmatched 401(k) Contributions shall be returned to the Participant, then the vested Company Matching Contribution shall be paid to the Participant, then matched 401(k) Contributions shall be returned to the Participant and the corresponding unvested Company Matching Contribution shall be forfeited. The amount of the correction shall be adjusted to reflect as nearly as possible the actual

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increase or decrease in the net value of the Trust Fund attributable to the correction through the business day immediately preceding the date as of which the correction is processed.

3.7 QNECs.

(a)	Time of Payment. QNECs shall be paid to the Plan no later than 12 months after the close of the Plan Year to which they relate.
(b)	Source. The Company may designate as a QNEC all or any portion of the Company Discretionary Contribution that is allocated to Non-Highly Compensated Employees. The designation of Company Contributions as QNECs shall be made before such contributions are made to the Trust Fund. If the Company inadvertently designates any Highly Compensated Employee’s allocation as a QNEC, the designation shall be ineffective.
(c)	Allocation. The Company may make a contribution to the Plan, in addition to the Company Discretionary Contribution, that the Company designates as a QNEC. This subsection applies to such contributions. As of the last day of each Plan Year, the Committee shall allocate such QNECs for such Plan Year (including such forfeitures occurring during such Plan Year that are treated as QNECs pursuant to subsection 5.4(d)) to the Participant Contributions Accounts of those Non-Highly Compensated Employees who were Covered Employees on the last day of the Plan Year, as follows:

(i)	QNECs shall be allocated to the Participant Contributions Account of the Non-Highly Compensated Employee with the least Compensation, until either the QNECs are exhausted or the Non-Highly Compensated Employee has received the maximum QNEC allocation that can be taken into account in the ADP test or the ACP test, whichever is applicable.
(ii)	Any remaining QNECs shall be allocated to the Participant Contributions Account of the Non-Highly Compensated Employee with the next lowest Compensation, until either the QNECs are exhausted or the Non-Highly Compensated Employee has received the maximum QNEC allocation that can be taken into account in the ADP test or the ACP test, whichever is applicable.
(iii)	The procedure in paragraph (ii) shall be repeated until all QNECs have been allocated.

(d) Coordination with Top-Heavy Rules. All QNECs shall be treated in the same manner as a Company Discretionary Contribution for purposes of section 12.4.

3.8 QMACs.

(a)	Time of Payment. QMACs shall be paid to the Plan no later than 12 months after the close of the Plan Year to which they relate.
(b)	Source. The Company may designate as a QMAC all or any portion of the Company Matching Contributions that is allocated to Non-Highly Compensated Employees. The designation of Company Contributions as QMACs shall be made before such contributions are made to the Trust Fund. If the Company inadvertently designates any Highly Compensated Employee’s allocation as a QMAC, the designation shall be ineffective.
(c)	Allocation. The Company may make a contribution to the Plan, in addition to the Company Matching Contribution, that the Company designates as a QMAC. This subsection applies to such contributions. As of the last day of each Plan Year, the Committee shall allocate such QMACs for such Plan Year (including such forfeitures occurring during such Plan Year that are treated as QMACs pursuant to subsection 5.4(d)) to the Participant Contributions Accounts of those Non-Highly Compensated Employees who were Covered Employees on the last day of the Plan Year and who made Participant Contributions for the Plan Year, as follows:

(i)	QMACs shall be allocated to the Participant Contributions Account of the Non-Highly Compensated Employee with the least Compensation, until either the QMACs are exhausted or the Non-Highly Compensated Employee has received the maximum QMAC allocation that can be taken into account in the ADP test or the ACP test, whichever is applicable.
(ii)	Any remaining QMACs shall be allocated to the Participant Contributions Account of the Non-Highly Compensated Employee with the next lowest Compensation, until either the QMACs are

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	exhausted or the Non-Highly Compensated Employee has received the maximum QMAC allocation that can be taken into account in the ADP test or the ACP test, whichever is applicable.
(iii)	The procedure in paragraph (ii) shall be repeated until all QMACs have been allocated.

(d) Coordination with Top-Heavy Rules. All QMACs shall be treated in the same manner as a Company Discretionary Contribution for purposes of section 12.4.

ARTICLE IV
Interests in the Trust Fund

4.1	Participants’ Accounts.
	The Committee shall establish and maintain separate Accounts in the name of each Participant, but the maintenance of such Accounts shall not require any segregation of assets of the Trust Fund. Each Account shall contain the contributions specified below and the increase or decrease in the net worth of the Trust Fund attributable to such contributions.

(a)	Participant Contributions Account. A Participant Contributions Account shall be established for each Participant who makes Participant Contributions or who receives an allocation of QNECs or QMACs. The Committee may elect to establish subaccounts for the different types of contributions allocated to this Account.
(b)	Company Contributions Account. A Company Contributions Account shall be established for each Participant who receives an allocation of Company Discretionary Contributions that are not designated as QNECs or an allocation of Company Matching Contributions that are not designated as QMACs. The Committee may elect to establish subaccounts for the different types of contributions allocated to this Account.
(c)	Rollover Account. A Rollover Account shall be established for each Participant who makes a Rollover Contribution.

4.2 Valuation of Trust Fund.

(a)	General. The Trustee shall value the assets of the Trust Fund at least annually as of the last day of the Plan Year, and as of any other dates determined by the Committee, at their current fair market value and determine the net worth of the Trust Fund. In addition, the Committee may direct the Trustee to have a special valuation of the assets of the Trust Fund when the Committee determines, in its sole discretion, that such valuation is necessary or appropriate or in the event of unusual market fluctuations of such assets. Such special valuation shall not include any contributions made by Participants since the preceding Valuation Date, any Company Contributions for the current Plan Year, or any unallocated forfeitures. The Trustee shall allocate the expenses of the Trust Fund occurring since the preceding Valuation Date, pursuant to section 9.2, and then determine the increase or decrease in the net worth of the Trust Fund that has occurred since the preceding Valuation Date. The Trustee shall determine the share of the increase of decrease that is attributable to the non-separately accounted for portion of the Trust Fund and to any amount separately accounted for, as described in subsections (b) and (c).
(b)	Mandatory Separate Accounting. The Trustee shall separately account for (i) any individually directed investments permitted under section 9.3, and (ii) amounts subject to a Domestic Relations Order.
(c)	Permissible Separate Accounting. The Trustee may separately account for the following amounts to provide a more equitable allocation of any increase or decrease in the net worth of the Trust Fund:

(i)	the distributable amount of a Participant, pursuant to section 6.7, including any amount distributable to an Alternate Payee or to a beneficiary of a deceased Participant; and
(ii)	Company Matching Contributions made since the preceding Valuation Date;
(iii)	Participant Contributions that were received by the Trustee since the preceding Valuation Date;

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(iv)	Company Matching Contributions and 401(k) Contributions of Highly Compensated Employees that may need to be distributed or forfeited to satisfy the ADP and ACP tests of sections 3.5 or 3.6;
(v)	Rollovers that were received by the Trustee since the preceding Valuation Date;
(vi)	Any other amounts for which separate accounting will provide a more equitable allocation of the increase or decrease in the net worth of the Trust Fund.

4.3

Allocation of Increase or Decrease in Net Worth.

The Committee shall, as of each Valuation Date, allocate the increase or decrease in the net worth of the Trust Fund that has occurred since the preceding Valuation Date between the non-separately accounted for portion of the Trust Fund and the amounts separately accounted for that are identified in subsections 4.2(b) and 4.2(c). The increase or decrease attributable to the non-separately accounted for portion of the Trust Fund shall be allocated among the appropriate Accounts in the ratio that the dollar value of each such Account bore to the aggregate dollar value of all such Accounts on the preceding Valuation Date after all allocations and credits made as of such date had been completed. The Committee shall then allocate any amounts separately accounted for (including the increase or decrease in the net worth of the Trust Fund attributable to such amounts) to the appropriate Account(s) if such separate accounting is no longer necessary.

ARTICLE V
Amount of Benefits

5.1

Vesting Schedule.

A Participant shall have a fully vested and nonforfeitable interest in all his Account(s) upon his Normal Retirement Age if he is an Employee on such date, upon his death while an Employee or while on an approved leave of absence from the Company or an Affiliated Entity, or upon his termination of employment with the Company or an Affiliated Entity because of a Disability. In all other instances a Participant’s vested interest shall be calculated according to the following rules.

(a)	Participant Contributions Account and Rollover Account. A Participant shall be fully vested at all times in his Participant Contributions Account and his Rollover Account.
(b)	Company Contributions Account. A Participant shall become fully vested in his Company Contributions Account in accordance with the following schedule:

Period of Service	Vesting Percentage
Less than 1 year		0	%
At least 1 year, but less than 2 years		20	%
At least 2 years, but less than 3 years		40	%
At least 3 years, but less than 4 years		60	%
At least 4 years, but less than 5 years		80	%
5 or more years		100	%

(c)

Change of Control. The Company Contributions Accounts of all Participants shall be fully vested as of the effective date of a “change in control.” For purposes of this subsection, a “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 Apache’s outstanding voting securities; provided that a change of control shall not occur if such persons, partnerships, or corporations acquiring more than 20% of Apache’s voting securities is solicited to do so by Apache’s board of directors, upon its own initiative, and such persons, partnerships, or corporations have not previously proposed to acquire more than 20% of Apache’s voting securities in an unsolicited offer made either to Apache’s board of directors or directly to the stockholders of Apache.

(d)

Plan Termination. A Company Contributions Account shall be fully vested as described in section 10.1, which discusses the full or partial termination of the Plan or the complete discontinuance of contributions.

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5.2 Vesting After a Lapse in Apache Employment.

(a)	Separate Accounts. If a Participant is rehired before incurring a one-year Lapse in Apache Employment, he shall have only one Company Contributions Account, and its vested percentage shall be determined under section 5.1. If a Participant is rehired after incurring a one-year Lapse in Apache Employment, he shall have two Company Contribution Accounts, an “old” Company Contributions Account for the contributions from his earlier episode of employment, and a “new” Company Contributions Account for his later episode of employment. If both the old and new Company Contributions Accounts are fully vested, they shall be combined into a single Company Contributions Account.
(b)	Vesting of New Account. This subsection is effective January 1, 2006. The vested percentage of the new Company Contributions Account shall be determined based on all the Participant’s Periods of Service.
(c)	Vesting of Old Account. If the Participant’s Lapse in Apache Employment was for five years or longer, the vested percentage of the old Company Contributions Account shall be based solely on the Participant’s Period of Service from his first episode of employment. If the Participant’s Lapse in Apache Employment was for less than five years, the vested percentage of the old Company Contributions Account shall be determined by aggregating his Periods of Service from both episodes of employment.

5.3 Calculating Service.

(a) Period of Service.

(i)

General. A Participant’s Period of Service prior to January 1, 2005 shall be determined according to the provisions of the Plan in effect when the service was rendered. A Participant’s Period of Service begins on the date he first begins to perform duties as an Employee for which he is entitled to payment, and ends on his Termination From Service Date. In addition, a Participant’s Period of Service also includes the period between his Termination From Service Date and the day he again begins to perform duties for the Company or an Affiliated Entity for which he is entitled to payment, but only if such period is less than one year in duration.

(ii)

Additional Rules. The service-crediting provisions in this paragraph are more generous than required by the Code.

(A)	Leased Employees. For vesting purposes only, the Plan shall treat an individual as an Employee if he satisfies all the requirements specified in Code §414(n)(2) for being a leased employee of Apache’s or an Affiliated Entity’s, except for the requirement of having performed such services for at least one year.
(B)	Approved Leave. If the Employee is absent from the Company or Affiliated Entity for more than one year because of an approved leave of absence (either with or without pay) for any reason (including, but not limited to, jury duty) and the Employee returns to work at or prior to the expiration of his leave of absence, no Termination From Service Date will occur during the leave of absence.
(C)	Servicemen. See Article XV for special provisions that apply to Servicemen.
(D)	Corporate Transactions. See Appendix C for instances in which a new Employee’s Period of Service includes his prior employment with another company.
(E)	Contractors. If an “eligible contractor” becomes an Employee, his Period of Service shall include his previous continuous service as an eligible contractor, excluding any service provided before 2003. An “eligible contractor” is an individual who (A) performed services for Apache or an Affiliated Entity on a substantially full-time basis in the capacity of an independent contractor (for federal income tax purposes); (B) became an Employee within a month of ceasing to be an independent contractor working full-time for Apache or an Affiliated Entity; and (C) notified the Plan of his prior service as an independent contractor within two months of becoming an Employee (or, if later, by February 28, 2006 or other deadline established by the Committee).

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(b) Termination From Service Date.

(i)

Usual Rule. If the Employee quits, is discharged, retires, or dies, his Termination From Service Date occurs on the last day the Employee performs services for the Company or an Affiliated Entity, except for an Employee who incurs a Disability, in which case his Termination From Service Date does not occur, even if he quits, until the earlier of the one-year anniversary of the date his Disability or the date he recovers from his Disability.

(ii)

Other Absences. If an Employee is absent from the Company and Affiliated Entities for any reason other than a quit, discharge, or retirement, his “Termination From Service Date” is the earlier of (A) the date he quits, is discharged, retires, or dies, or (B) one year from the date the Employee is absent from the Company or Affiliated Entity for any other reason (such as vacation, holiday, sickness, disability, leave of absence, or temporary lay-off), with the following exception. If the Employee is absent from the Company or Affiliated Entity because of parental leave (which includes only the pregnancy of the Employee, the birth of the Employee’s child, the placement of a child with the Employee in connection with adoption of such child by the Employee, or the caring for such child immediately following birth or placement) on the first anniversary of the day the Employee was first absent, his Termination From Service Date does not occur until the second anniversary of the day he was first absent (and the period between the first and second anniversaries of the day he was first absent shall not be counted in his Period of Service).

(c) Lapse in Apache Employment. A Lapse in Apache Employment means the period commencing on an individual’s Termination from Service Date and ending on the date he again begins to perform services as an Employee.

5.4 Forfeitures.

(a) Exceptions to the Vesting Rules. The following rules supersede the vesting rules of section 5.1.

(i)	Excess Annual Additions. Annual Additions to a Participant’s Accounts and any increase or decrease in the net worth of the Participant’s Accounts attributable to such Annual Additions may be reduced to satisfy the limits described in section 3.4. Any reduction shall be used as specified in section 3.4.
(ii)	Excess Participant Contribution. Company Matching Contributions and any increase or decrease in the net worth of the Account(s) attributable to such contributions may be forfeited as of the last day of the Plan Year if the Participant Contribution that they matched was returned under paragraph 3.2(a)(ii) or 3.2(b)(ii) or subsection 3.5(d) or 3.6(c). Any such forfeiture shall be used as specified in subsection (d).
(iii)	Missing Individuals. A missing individual’s vested Accounts may be forfeited as of the last day of any Plan Year, as provided in section 13.12. Any such forfeiture shall be used as specified in subsection (d).
(iv)	Excess Match. Company Matching Contributions that would violate Code §401(a)(17), and any increase or decrease in the net worth of the Account(s) attributable to such contributions, may be forfeited as specified in subsection 3.1(b). Any such reduction shall be used as specified in subsection 3.1(b).

(b)	Regular Forfeitures. A Participant’s non-vested interest in his Company Contributions Account shall be forfeited at the end of the Plan Year in which he terminates employment. Any such forfeiture shall be used as specified in subsection (d).
(c)	Restoration of Forfeitures.

(i)	Missing Individuals. The forfeiture of a missing individual’s Account(s), as described in section 13.12, shall be restored to such individual if the individual makes a claim for such amount.
(ii)	Regular Forfeitures.

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(A)

Rehire Within 5 Years. If a Participant is rehired before incurring a five-year Lapse in Apache Employment, and the Participant has received a distribution of his entire vested interest in his Company Contributions Account (with the result that the Participant forfeited his non-vested interest in such Account), then the exact amount of the forfeiture shall be restored to the Participant’s Account. All the rights, benefits, and features available to the Participant when the forfeiture occurred shall be available with respect to the restored forfeiture. If such a Participant again terminates employment prior to becoming fully vested in his Company Contributions Account, the vested portion of his Company Contributions Account shall be determined by applying the vested percentage determined under section 5.1 to the sum of (x) and (y), then subtracting (y) from such sum, where: (x) is the value of the Participant’s Company Contributions Account as of the Valuation Date immediately following his most recent termination of employment; and (y) is the amount previously distributed to the Participant on account of the prior termination of employment.

(B)

Rehire After 5 Years. If a Participant is rehired after incurring a five-year Lapse in Apache Employment, then no amount forfeited from his Company Contributions Account shall be restored to that Account.

(iii) Method of Forfeiture Restoration. Forfeitures that are restored shall be accomplished by an allocation of the forfeitures under subsection (d) or by a special Company Contribution pursuant to paragraph 3.1(c)(i).

(d) Use of Forfeitures. The Committee shall decide how forfeitures are used. Forfeitures may be used (i) to restore Accounts as described in subsection (c), (ii) to pay those expenses of the Plan that are properly payable from the Trust Fund and that are not paid by the Company or Account Owners or charged to Accounts, or (iii) as any Company Contribution.

5.5

Transfers — Portability.

If any other employer adopts this or a similar profit sharing plan and enters into a reciprocal agreement with the Company that provides that (a) the transfer of a Participant from such employer to the Company (or vice versa) shall not be deemed a termination of employment for purposes of the plans, and (b) service with either or both employers shall be credited for purposes of vesting under both plans, then the transferred Participant’s Account shall be unaffected by the transfer, except, if deemed advisable by the Committee, it may be transferred to the trustee of the other plan.

ARTICLE VI
Distribution of Benefits

6.1 Beneficiaries.

(a)	Designating Beneficiaries. Each Account Owner shall file with the Committee a designation of the beneficiaries and contingent beneficiaries to whom the distributable amount (determined pursuant to section 6.2) shall be paid in the event of the Account Owner’s death. In the absence of an effective beneficiary designation as to any portion of the distributable amount after a Participant dies, such amount shall be paid to the Participant’s surviving Spouse, or, if none, to his estate. In the absence of an effective beneficiary designation as to any portion of the distributable amount after any non-Participant Account Owner dies, such amount shall be paid to the Account Owner’s estate. The Account Owner may change a beneficiary designation at any time and without the consent of any previously designated beneficiary.
(b)	Special Rule for Married Participants. If the Account Owner is a married Participant, his Spouse shall be the sole beneficiary unless the 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. Any spousal consent shall be effective only as to the Spouse who signed the consent.
(c)	Special Rule for Divorces. If an Account Owner has designated his spouse as a primary or contingent beneficiary, and the Account Owner and spouse later divorce (or their marriage is annulled), then the former spouse will be treated as having pre-deceased the Account Owner for purposes of interpreting a

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beneficiary designation form completed prior to the divorce or annulment. This subsection will apply only if the Committee is informed of the divorce or annulment 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 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.

6.2 Consent.

(a)

General. Except for distributions identified in subsection (b), distributions may be made only after the appropriate consent has been obtained under this subsection. Distributions to a Participant or to a beneficiary (other than a beneficiary of a deceased Alternate Payee) shall be made only with the Participant’s or beneficiary’s consent to the time of distribution. Distributions to an Alternate Payee or his beneficiary shall be made as specified in the QDRO and in accordance with section 13.9. To be effective, the consent must be filed with the Committee according to the procedures adopted by the Committee, within 180 days before the distribution is to commence. A consent once given shall be irrevocable after the distribution has been processed.

(b)

Exceptions to General Rule. Consent is not required for the following distributions:

(i)	Corrective distributions under Article III that are returned to the Participant because the contribution is not deductible by the Company or because the contribution would exceed the limits of Code §401(a)(17), §415(c)(1), §402(g), §401(k)(3), §401(m)(2), §401(m)(9), §414(v)(2)(B)(i), or any other limitation of the Code;
(ii)	Distributions required to comply with Code §401(a)(9);
(iii)	Cashouts of small Accounts, as described in subsection 6.6(d) or paragraphs 6.6(e)(i) or 13.9(f)(ii);
(iv)	Distributions required to comply with Code §401(a)(14);
(v)	Distributions of invalid rollovers pursuant to subsection 3.2(d);
(vi)	Distributions upon Plan termination pursuant to section 10.3; and
(vii)	Distributions that must occur by a deadline specified in the Plan.

6.3	Distributable Amount.
	The distributable amount of an Account Owner’s Account(s) is the vested portion of the Account(s) (as determined by Article V) as of the Valuation Date coincident with or next preceding the date distribution is made, reduced by (a) any amount that is payable to an Alternate Payee pursuant to section 13.9, (b) any amount withdrawn since such Valuation Date, and (c) the outstanding balance of any loan under Article VII. Furthermore, the Committee shall temporarily suspend or limit distributions (by reducing the distributable amount), as explained in subsection 13.9, when the Committee is informed that a Domestic Relations Order affecting the Participant’s Accounts is or may be in the process of becoming QDRO, while the Committee has suspended withdrawals because it believes that the Plan may have a cause of action against the Participant, or when the Plan has notice of a lien or other claim against the Participant.
6.4	Manner of Distribution.

(a) General. The distributable amount shall be paid in a single payment, except as otherwise provided in the remainder of this section. Distributions shall be in the form of cash except to the extent that an Account is invested in a fund containing primarily Company Stock, the distributee may elect to receive a distribution of whole shares of Company Stock. Fractional shares of Company Stock shall be converted to and paid in cash.

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(b)

Partial Withdrawals and Installments. Withdrawals are available to Employees as specified in section 6.5 and to those Employees over 701/2 who are Five-Percent Owners, as described in paragraph 6.6(c)(ii). Annual installments are available to beneficiaries as described in subsection 6.6(e).

(c)

Grandfather Rules. Installments were a distribution option under the Plan until June 30, 2001. Any Account Owner who could receive a distribution before July 1, 2001 and who elected before July 1, 2001 to receive the distribution in the form of installments shall receive the benefit so elected. An Account Owner who elected installments may elect to accelerate any or all remaining installment payments.

6.5	In-Service Withdrawals.
	An Employee may withdraw amounts from his Accounts only as provided in this section. An Employee may make withdrawals as follows.

(a)	Withdrawals for Employees Age 591/2 or Older. An Employee who has attained age 591/2 may at any time thereafter withdraw any portion of his Participant Contributions Account and any vested portion of his Company Contributions Account. The minimum withdrawal is $1,000 or the vested Account balance, whichever is less. Only two withdrawals are permitted during each Plan Year under this subsection. If the Employee is not fully vested in his Company Contributions Account at the time of a withdrawal under this subsection, the rules of subparagraph 5.4(c)(ii)(A) shall be applied when determining the vested portion of the Company Contributions Account at any time thereafter.
(b)	Rollover Account. An Employee may withdraw all or any portion of his Rollover Account at any time. The minimum withdrawal is $1,000 or the Rollover Account balance, whichever is less. Only two withdrawals from the Rollover Account are permitted during each Plan Year.
(c)	Participant Contributions Account. An Employee may withdraw all or any portion of his Participant Contributions, provided that the Employee has an immediate and heavy financial need, as defined in paragraph (i), the withdrawal is needed to satisfy the financial need, as explained in paragraph (ii), and the amount of the withdrawal does not exceed the limits in paragraph (iii).

(i)

Financial Need. The following expenses constitute an immediate and heavy financial need: (A) expenses for or necessary to obtain medical care that would be deductible by the Employee under Code §213(d) (determined without regard to whether the expenses exceed 7.5% of adjusted gross income); (B) costs directly related to the purchase of a principal residence of the Employee (excluding mortgage payments); (C) payment of tuition, related educational fees, and room and board expenses for up to the next 12 months of post-secondary education of the Employee or the Employee’s Spouse or the Employee’s children or dependents (within the meaning of Code §152, without regard to Code §152(b)(1), §152(b)(2), and §152(d)(1)(B)); (D) payments necessary to prevent the Employee from being evicted from his or her principal residence; (E) payments necessary to prevent the mortgage on the Employee’s principal residence from being foreclosed; (F) payment of burial or funeral expenses for the Employee’s deceased parent, Spouse, child or other dependent (within the meaning of Code §152, without regard to Code §152(b)(1), §152(b)(2), and §152(d)(1)(B)); (G) expenses for the repair of damage to the Employee’s principal residence that would qualify for the casualty deduction under Code §165 (determined without regard to whether the loss exceeds 10% of adjusted gross income); and (H) any other expense that, under IRS guidance of general applicability, is deemed to be on account of an immediate and heavy financial need. In addition, the Committee may determine, based on a review of all relevant facts and circumstances, that a particular expense or series of expenses of the Employee constitutes an immediate and heavy financial need. In addition, if any expense or series of expenses would constitute an immediate and heavy financial need if it occurred with respect to the Participant’s Spouse or dependent (within the meaning of Code §152), it shall constitute an immediate an immediate an heavy financial need if it occurs with respect to the Participant’s beneficiary (determined pursuant to section 6.1).

(ii)

Satisfaction of Need. The withdrawal is deemed to be needed to satisfy the Employee’s financial need if (A) the Employee has obtained all withdrawals and all non-taxable loans available from the Company’s and any Affiliated Entities’ plans of deferred compensation, qualified plans, stock options, stock purchase plans, and similar plans, and (B) for a period of at

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	least 6 months from the date the Employee receives the withdrawal, he ceases to make Participant Contributions and elective contributions to all plans of deferred compensation, qualified plans, stock options, stock purchase plans, and similar plans maintained by the Company or any Affiliated Entity.
(iii)	Maximum Withdrawal. An Employee may not withdraw more than the sum of the amount needed to satisfy his financial need and any taxes and penalties reasonably anticipated to result from the withdrawal. An Employee may not withdraw any amount in excess of his Participant Contributions unless he has attained age 591/2.

(d)	Compliance with Code §401(a)(9). See paragraph 6.6(b)(ii) for the required distributions to a Five-Percent Owner who is age 701/2 or older.
(e)	Form of Payment of Withdrawal. Withdrawals under subsection (c) shall be in cash. Withdrawals under subsections (a) and (b) shall be in cash, except that any portion of a Participant’s Accounts that is invested in Company Stock may, at the election of the Participant made at the time that notice of withdrawal is made to the Committee, be withdrawn in the form of whole shares of Company Stock.
(f)	Withdrawal Rules. An Employee may not withdraw any amount under this section that has been borrowed or that is subject to a QDRO. The Committee shall temporarily suspend or limit withdrawals under this section, as explained in section 13.9, when the Committee is informed that a QDRO affecting the Employee’s Accounts is in process or may be in process. The Committee shall issue such rules as to the frequency of withdrawals, and withdrawal procedures, as it deems appropriate. The Committee may postpone the withdrawal until after the next Valuation Date. The Committee may have a special valuation of the Trust Fund performed before a withdrawal is permitted. The Plan may charge a fee for the withdrawal as well as a fee for having a special valuation performed, as determined by the Committee in its sole discretion.

6.6 Time of Distribution.

(a)

Earliest Date of Distribution. Unless an earlier distribution is permitted by section 6.5 (relating to in-service withdrawals), the earliest date that a Participant may elect to receive a distribution is the date of his Termination of Employment or the date he incurs a Disability. This provision will always result in a distribution date that precedes the latest date of distribution specified in Code §401(a)(14). For purposes of Code §401(a)(14), if a Participant does not affirmatively elect a distribution, he shall be deemed to have elected to defer the distribution to a later date.

(b)

Latest Date of Distribution.

(i)

Former Employees. A Participant who is not an Employee shall receive a single payment of his distributable amount by his Required Beginning Date. If a Five-Percent Owner terminates employment after his Required Beginning Date, the Plan shall distribute the entire distributable amount to him as soon as administratively practicable after the termination of employment.

(ii)

Current Employees. An Employee who is not a Five-Percent Owner is not required to receive any distributions under this subsection. An Employee who is a Five-Percent Owner shall receive annual distributions of at least the minimum amount required to be distributed pursuant to Code §401(a)(9), which shall be calculated by using only the Participant’s life expectancy, which shall be recalculated each year. A Five-Percent Owner may request that his first minimum required distribution be distributed in the calendar year preceding his Required Beginning Date; the Committee shall comply with this request if administrating practicable to do so.

(c) Small Amounts.

(i)	$1000 or Less. If the aggregate value of the nonforfeitable portion of a Participant’s Accounts is $1,000 or less on any date after his Termination of Employment, the Participant shall receive a single payment of the distributable amount as soon as practicable, provided that the aggregate value is $1,000 or less when the distribution is processed.
(ii)	$1000 to $5000. If paragraph (i) does not apply and the aggregate value of the nonforfeitable portion of a Participant’s Accounts, ignoring his Rollover Account, is $5,000 or less on any date

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after his Termination of Employment, then as soon as practicable the Plan shall pay the distributable amount to an individual retirement account or annuity within the meaning of Code §408(a) or §408(b) (collectively, an “IRA”) for the Participant, unless the Participant affirmatively elects to receive the distribution directly or to have it paid in a direct rollover under section 6.7. The Committee shall select the trustee or custodian of the IRA as well as how the IRA shall be invested initially. The Plan shall notify the Participant (A) that the distribution has been made to an IRA and can be transferred to another IRA, (B) of the identity and contact information of the trustee or custodian of the IRA into which the distribution is made, and (C) of such other information as required to comply with Code §401(a)(31)(B)(i).

(iii)

Date Account Valued. The Committee may elect to check the value of the Participant’s Accounts on an occasional (rather than a daily) basis, to determine whether to apply the provisions of this subsection.

(d) Distribution Upon Participant’s Death.

(i)

Small Accounts. If the aggregate cash value of the nonforfeitable portion of a Participant’s Accounts is $5,000 or less at any time after the Participant’s death and before any beneficiary elects to receive a distribution under this subsection, then each beneficiary shall each receive a single payment of his share of the distributable amount as soon as administratively practicable, provided that the aggregate value is $5,000 or less when the distribution is processed. The Committee may elect to check the value of the Participant’s Accounts on an occasional (rather than a daily) basis, to determine whether to apply the provisions of this paragraph.

(ii)

Larger Accounts. If paragraph (i) does not apply, then each beneficiary may elect to have his distributable amount distributed in a single payment or in annual installments at any time after the Participant’s death, within the following guidelines. No distribution shall be processed until the beneficiary’s identity as a beneficiary is established. The entire distributable amount shall be distributed by the last day of the calendar year containing the fifth anniversary of the Participant’s death. A beneficiary who has elected installments may elect to accelerate any or all remaining payments. If the Participant was a Five-Percent Owner who began to receive the minimum required distributions under paragraph (b)(ii), the distribution to each beneficiary must be made at least as rapidly as required by the method used to calculate the minimum required distributions that was in effect when the Five-Percent Owner died.

(e) Alternate Payee. Distributions to an Alternate Payee shall be made in accordance with the provisions of the QDRO and pursuant to subsection 13.9.

6.7 Direct Rollover Election.

(a)

General Rule. A Participant, an Alternate Payee who is the Spouse or former Spouse of the Participant, , or any individual who is treated as the designated beneficiary of the Participant pursuant to Code §4014(a)(9)(E)) (collectively, the “distributee”) may direct the Trustee to pay all or any portion of his “eligible rollover distribution” to an “eligible retirement plan” in a “direct rollover.” This direct rollover option is not available to other Account Owners (beneficiaries who are not individuals and Alternate Payees who are not the Spouse or former Spouse of the Participant). Within a reasonable period of time before an eligible rollover distribution, the Committee shall inform the distributee of this direct rollover option, the appropriate withholding rules, other rollover options, the options regarding income taxation, and any other information required by Code §402(f). The distributee may waive the usual 30-day waiting period before receiving a distribution, and elect to receive his distribution as soon as administratively practicable after completing and filing his distribution election.

(b)

Definition of Eligible Rollover Distribution. An eligible rollover distribution is any distribution or in-service withdrawal other than (i) distributions required under Code §401(a)(9), (ii) distributions of amounts that have already been subject to federal income tax (such as defaulted loans or after-tax voluntary contributions), other than a direct transfer to (A) another retirement plan that meets the requirements of Code §401(a) or §403(a), or (B) an individual retirement account or annuity described in Code §408(a) or §408(b), (iii) installment payments in a series of substantially equal payments made at least annually and (A) made over a specified period of ten or more years, (B) made for the life or life

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	expectancy of the distributee, or (C) made for the joint life or joint life expectancy of the distributee and his designated beneficiary, (iv) a distribution to satisfy the limits of Code §415 or §402(g), (v) a deemed distribution of a defaulted loan from this Plan, to the extent provided in the regulations, (vi) a distribution to satisfy the ADP or ACP tests, (vii) any other actual or deemed distribution specified in the regulations issued under Code §402(c), or (viii) any hardship withdrawal by an Employee.
(c)	Definition of Eligible Retirement Plan. For an individual who is treated as the designated beneficiary of the Participant pursuant to Code §401(a)(9)(E), an eligible retirement plan is an individual retirement account or annuity described in Code §408(a) or §408(b) that is established for the purposes of receiving the distribution on behalf of the beneficiary, and that is treated as an inherited individual retirement account or annuity within the meaning of Code §408(d)(3)(C). For a Participant, an Alternate Payee who is the Spouse or former Spouse of the Participant, or a surviving Spouse of a deceased Participant, an eligible retirement plan is an individual retirement account or annuity described in Code §408(a) or §408(b), an annuity plan described in Code §403(a), an annuity contract described in Code §403(b), an eligible plan under Code §457(b) that is maintained by an eligible employer described in Code §457(e)(1)(A) (which generally includes state and local governments), or the qualified trust of a defined contribution plan described in Code §401(a), that accepts eligible rollover distributions.
(d)	Definition of Direct Rollover. A direct rollover is a payment by the Trustee to the eligible retirement plan specified by the distributee.

ARTICLE VII
Loans

The Committee is authorized, as one of the Plan fiduciaries responsible for investing Plan assets, to establish a loan program. The loan program shall become effective on the date determined by the Committee. The Committee shall administer the Plan’s loan program in accordance with the following rules.

7.1	Availability
	Loans are available only to Employees, Participants who are parties-in-interest (within the meaning of ERISA §3(14)), and beneficiaries who are parties-in-interest (collectively referred to in this section as “Borrowers”). The Committee shall temporarily reduce the amount a Participant may borrow or temporarily prevent the Participant from borrowing when, as described in section 13.9, the Committee is informed that a QDRO affecting the Participant’s Accounts is in process or may be in process. Loans shall be temporarily unavailable to a prospective Borrower while the Committee has suspended loans because the Committee believes that the Plan may have a cause of action against the Participant, as explained in subsection 13.9(h).
7.2	Number of Loans
	A Borrower may have no more than one loan outstanding. The Committee may change the maximum number of outstanding loans allowed at any time.
7.3	Loan Amount
	The Committee may establish a minimum loan amount of no more than $500. The Committee may require loans to be made in increments of no more than $100. The amount that a Borrower may borrow is subject to the following limits.

(a)	A Borrower may not borrow more than the sum of the balance in his Participant Contributions Account and the balance in his Rollover Account.
(b)	At the time the loan from this Plan is made, the aggregate outstanding balance of all the Borrower’s loans from all qualified plans maintained by the Company and Affiliated Entities, including the new loan from this Plan, shall not exceed 50% of the Borrower’s vested interest in all qualified plans maintained by the Company and Affiliated Entities.
(c)	For purposes of this paragraph, the term “one-year maximum” means the largest aggregate outstanding balance, on any day in the one-year period ending on the day before the new loan from this Plan is obtained, of all loans to the Borrower from all qualified plans maintained by the Company and Affiliated Entities. For purposes of this paragraph, the term “existing loans” means the aggregate

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outstanding balance, on the day the new loan is made to the Borrower, of all loans to the Borrower from all qualified plans maintained by the Company and Affiliated Entities, excluding the new loan from this Plan. If the existing loans are greater than or equal to the one-year maximum, then the new loan from this Plan shall not exceed $50,000 minus the existing loans. If the existing loans are less than the one-year maximum, then the new loan from this Plan shall not exceed $50,000 minus the one-year maximum.

	For purposes of applying the above limits, the vested portion of the Borrower’s accounts under this Plan and all other plans maintained by the Company and Affiliated Entities shall be determined without regard to any accumulated deductible employee contributions (as defined in Code §72(o)(5)(B)), and without regard to any amounts accrued while the Borrower was ineligible to obtain a loan (as described in subsection (a)). Notwithstanding the foregoing, the Committee may, in its sole discretion, establish lesser limits on the amounts that may be borrowed, which limits shall be applied in a non-discriminatory manner. The Committee shall temporarily reduce the amount a Participant may borrow or temporarily prevent the Participant from borrowing, as described in section 13.9, when the Committee is informed that a QDRO affecting the Participant’s Accounts is in process or may be in process. No loan shall be made of amounts that are required to be distributed prior to the end of the term of the loan.
7.4	Interest
	Each loan shall bear a reasonable rate of interest, which shall remain fixed for the duration of the loan. The Committee or its agent shall determine the reasonable rate of interest on the date the loan documents are prepared. The Committee shall have the authority to establish procedures from time to time for determining the rate of interest. In the absence of Committee action, the interest rate shall be equal to the prime lending rate, plus 1%, as published in the Wall Street Journal on the first day that such newspaper is published during the calendar quarter in which the loan documents are prepared.
7.5	Repayment.
	All loans shall be repaid, with interest, in substantially level amortized payments made not less frequently than quarterly. The maximum term for a loan is four years; the minimum term for a loan is one year. The Committee has the authority to decrease the minimum term for future loans and the authority to increase the maximum term for future loans to no more than five years. Loan repayments shall be accelerated, and all loans shall be payable in full on the date the Borrower separates from service (if the Borrower is an Employee), the date the Borrower becomes ineligible to borrow from the Plan under to section 7.1, and on any other date or any other contingency as determined by the Committee. If the Borrower is an Employee, loans shall be repaid through payroll withholding unless (a) the Employee is pre-paying his loan, in which case the pre-payment need not be through payroll withholding, or (b) the Employee is on an unpaid leave of absence, in which case he may pay any installment by personal check. Partial pre-payments are accepted.
7.6	Default
	A loan shall be in default if any installment is not paid by the end of the calendar quarter following the calendar quarter in which the installment was due. Upon default, the Committee may, in addition to all other remedies, apply the Borrower’s Plan accounts toward payment of the loan; however, the Trustee may not exercise such right of set-off with respect to the Borrower’s Participant Contributions Account until such account has become payable, pursuant to section 6.5 or 6.6.
7.7	Administration
	A Borrower shall apply for a loan by completing the application procedures specified by the Committee. Until changed by the Committee, a Borrower shall apply for a loan by calling the Trustee and completing a voice application. The loan shall be processed in accordance with reasonable procedures adopted from time to time by the Committee. The Committee may impose a loan application fee, a loan origination fee, a loan pre-payment fee, and loan maintenance fees. All loans shall be evidenced by a promissory note and shall be fully secured. No Borrower whose Plan accounts are so pledged may obtain distribution of any portion of the accounts that have been pledged. The rights of the Trustee under such pledge shall have priority over all claims of the Borrower, his beneficiaries, and creditors. Each loan shall be treated as a directed investment. Any increase or decrease in the net worth of the Trust Fund attributable to such loan shall be allocated solely to the Plan accounts of the Borrower.

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ARTICLE VIII
Allocation of Responsibilities — Named Fiduciaries

8.1	No Joint Fiduciary Responsibilities.
	The Trustee(s) and the Committee shall be the named fiduciaries under the Plan and Trust agreement and shall be the only named fiduciaries thereunder. The fiduciaries shall have only the responsibilities specifically allocated to them herein or in the Trust agreement. Such allocations are intended to be mutually exclusive and there shall be no sharing of fiduciary responsibilities. Whenever one named fiduciary is required by the Plan or Trust agreement to follow the directions of another named fiduciary, the two named fiduciaries shall not be deemed to have been assigned a shared responsibility, but the responsibility of the named fiduciary giving the directions shall be deemed his sole responsibility, and the responsibility of the named fiduciary receiving those directions shall be to follow them insofar as the instructions are on their face proper under applicable law.
8.2	The Company.
	The Company shall be responsible for: (a) making Company Contributions; (b) certifying to the Trustee the names and specimen signatures of the members of the Committee acting from time to time; (c) keeping accurate books and records with respect to its Employees and the appropriate components of each Employee’s Compensation and furnishing such data to the Committee; (d) selecting agents and fiduciaries to operate and administer the Plan and Trust; (e) appointing an investment manager if it determines that one should be appointed; and (f) reviewing periodically the performance of such agents, managers, and fiduciaries.
8.3	The Trustee.
	The Trustee shall be responsible for: (a) the investment of the Trust Fund to the extent and in the manner provided in the Trust agreement; (b) the custody and preservation of Trust assets delivered to it; and (c) the payment of such amounts from the Trust Fund as the Committee shall direct.
8.4	The Committee — Plan Administrator.
	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. If the board of directors does not appoint a Committee, Apache shall act as the Committee under the Plan. The members of the Committee shall hold office at the pleasure of the board of directors and shall service without compensation. The Committee shall be the Plan’s “administrator” as defined in section 3(16)(A) of ERISA. It shall be responsible for establishing and implementing a funding policy consistent with the objectives of the Plan and with the requirements of ERISA. This responsibility shall include establishing (and revising as necessary) short-term and long-term goals and requirements pertaining to the financial condition of the Plan, communicating such goals and requirements to the persons responsible for the various aspects of the Plan operations, and monitoring periodically the implementation of such goals and requirements. The Committee shall publish and file or cause to be published and filed or disclosed all reports and disclosures required by federal or state laws.
8.5	Committee to Construe Plan.

(a)

The Committee shall administer the Plan and shall have all discretion, power, and authority necessary for that purpose, including, but not by way of limitation, the full and absolute discretion and power to interpret the Plan, to determine the eligibility, status, and rights of all individuals under the Plan, and in general to decide any dispute and all questions arising in connection with the Plan. The Committee shall direct the Trustee concerning all distributions from the Trust Fund, in accordance with the provisions of the Plan, and shall have such other powers in the administration of the Trust Fund as may be conferred upon it by the Trust agreement. The Committee shall maintain all Plan records except records of the Trust Fund.

(b)

The Committee may adjust the Account(s) of any Participant, in order to correct errors and rectify omissions, in such manner as the Committee believes will best result in the equitable and nondiscriminatory administration of the Plan.

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8.6	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 shall not participate in the Committee decision or action. The action of a majority of the disinterested Committee members shall constitute the action of the Committee.
8.7	Agent for Process.
	Apache’s Vice President, General Counsel, and Secretary shall be the agents of the Plan for service of all process.
8.8	Indemnification of Committee Members.
	The Company shall indemnify and hold the members of the Committee, and each of them, harmless from the effects and consequences of their acts, omissions, and conduct in their official capacities, except to the extent that the effects and consequences thereof shall result from their own willful misconduct, breach of good faith, or gross negligence in the performance of their duties. The foregoing right of indemnification shall not be exclusive of the rights to which each such member may be entitled as a matter of law.
8.9	Conclusiveness of Action.
	Any action taken by the Committee on matters within the discretion of the Committee shall be conclusive, final and binding upon all participants in the Plan and upon all persons claiming any rights hereunder, including alternate payees and beneficiaries.
8.10	Payment of Expenses.
	The members of the Committee shall serve without compensation but their reasonable expenses shall be paid by the Company. The compensation or fees of accountants, counsel, and other specialists and any other costs of administering the Plan or Trust Fund may be paid by the Company or Account Owners or may be charged to the Trust Fund, to the extent permissible under ERISA.

ARTICLE IX
Trust Agreement – Investments

9.1	Trust Agreement.
	Apache has entered into a Trust agreement to provide for the holding, investment, and administration of the funds of the Plan. The Trust agreement shall be part of the Plan, and the rights and duties of any individual under the Plan shall be subject to all terms and provisions of the Trust agreement.
9.2	Plan Expenses.

(a)

General. Except as provided in subsection (b), (i) all taxes upon or in respect of the Plan and Trust shall be paid out of Plan assets, and all expenses of administering the Plan and Trust shall be paid out of Plan assets, to the extent permitted by law and to the extent such taxes and expenses are not paid by the Company or an Account Owner, and (ii) the Committee shall have full discretion to determine how each tax or expense that is not paid by the Company shall be paid and the Committee shall have full discretion to determine how each tax or expense that is paid out of Plan assets shall be allocated. No fiduciary shall receive any compensation for services rendered to the Plan if the fiduciary is being compensated on a full time basis by the Company or an Affiliated Entity.

(b)

Individual Expenses. To the extent not paid by the Company or an Account Owner, all expenses of individually directed transactions, including without limitation the Trustee’s transaction fee, brokerage commissions, transfer taxes, interest on insurance policy loans, and any taxes and penalties that may be imposed as a result of an individual’s investment direction, shall be assessed against the Account(s) of the Account Owner directing such transactions.

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9.3 Investments.

(a)	§404(c) Plan. The Plan is intended to be a plan described in ERISA §404(c). To the extent that an Account Owner exercises control over the investment of his Accounts, no person who is a fiduciary shall be liable for any loss, or by reason of any breach, that is the direct and necessary result of the Account Owner’s exercise of control.
(b)	Directed Investments. Accounts shall be invested, upon direction of each Account Owner made in a manner acceptable to the Committee, in any one or more of a series of investment funds designated by the Committee or to the extent permitted by the Committee in a brokerage arrangement. One or more such funds may, at the sole discretion of the Committee, consist primarily of shares of Company Stock. In addition, Company Stock may be an available investment alternative. If so directed by Account Owners, up to 100% of the Accounts under the Plan may be invested in Company Stock. To the extent that any Account is invested in Company Stock or in an investment funds consisting primarily of Company Stock, an Account Owner may sell such investment at any time, subject to reasonable administrative delays and any blackout periods imposed by the Committee (including blackout periods that apply to particular Participants to ensure compliance with the securities laws). The funds available for investment and the principal features thereof, including a general description of the investment objectives, the risk and return characteristics, and the type and diversification of the investment portfolio of each fund, shall be communicated to the Account Owners in the Plan from time to time. Any changes in such funds shall be immediately communicated to all Account Owners.
(c)	Absence of Directions. To the extent that an Account Owner fails to affirmatively direct the investment of his Accounts, the Committee shall direct the Trustee in writing concerning the investment of such Accounts. The Committee shall act by majority vote. Any dissenting member of the Committee shall, having registered his dissent in writing, thereafter cooperate to the extent necessary to implement the decision of the Committee.
(d)	Change in Investment Directions. Account Owners may change their investment directions, with respect to the investment of new contributions and with respect to the investment of existing amounts allocated to Accounts, on any business day, subject to any restrictions and limitations imposed by the Trustee, investment funds, or brokerage arrangement. The Committee shall establish procedures for giving investment directions, which shall be in writing and communicated to Account Owners.

ARTICLE X
Termination and Amendment

10.1	Termination of Plan or Discontinuance of Contributions.
	Apache expects to continue the Plan indefinitely, but the continuance of the Plan and the payment of contributions are not assumed as contractual obligations. Apache may terminate the Plan or discontinue contributions at any time. Upon the termination of the Plan or the complete discontinuance of contributions, each Participant’s Accounts shall become fully vested. Upon the partial termination of the Plan, the Accounts of all affected Participants shall become fully vested. The only Participants who are affected by a partial termination are those whose employment with the Company or Affiliated Entity is terminated as a result of the corporate event causing the partial termination; Employees terminated for cause and those who leave voluntarily are not affected by a partial termination.
10.2	Allocations upon Termination or Discontinuance of Company Contributions.
	Upon the termination or partial termination of the Plan or upon the complete discontinuance of contributions, the Committee shall promptly notify the Trustee of such termination or discontinuance. The Trustee shall then determine, in the manner prescribed in section 4.2, the net worth of the Trust Fund as of the close of the business day specified by the Committee. The Trustee shall advise the Committee of any increase or decrease in such net worth that has occurred since the preceding Valuation Date. After crediting to the Participant Contributions Account of each Participant any amount contributed since the preceding Valuation Date, the Committee shall thereupon allocate, in the manner described in section 4.3, among the remaining Plan Accounts, in the manner described in Articles III, IV and V, any Company Contributions or forfeitures occurring since the preceding Valuation Date.

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10.3	Procedure Upon Termination of Plan or Discontinuance of Contributions.
	If the Plan has been terminated or partially terminated, or if a complete discontinuance of contributions to the Plan has occurred, then after the allocations required under section 10.2 have been completed, the Trustee shall distribute or transfer the Account(s) of affected Account Owners as follows.

(a)	No Other Plan. If the Company and Affiliated Entities are not treated, pursuant to the Treasury Regulations under Code §401(k), as maintaining another “alternative defined contribution plan,” the Trustee shall distribute each Account Owner’s entire Account in a single payment, after complying with the requirements of section 6.7. For purposes of this section only, an “alternative defined contribution plan” means a defined contribution plan that is not an employee stock ownership plan within the meaning of Code §4975(e)(7) or §409(a)), a simplified employee pension within the meaning of Code §408(k), a SIMPLE IRA within the meaning of Code §408(p), a plan or contract that satisfies the requirements of Code §403(b), or a plan described in Code §457(b) or §457(f).
(b)	Other Plan Maintained. If the Company and Affiliated Entities are treated, pursuant to the Treasury Regulations under Code §401(k), as maintaining another “alternative defined contribution plan,” the Trustee shall (i) distribute the Accounts of each non-Participant Account Owner in a single payment, after complying with the requirements of section 6.7, and (ii) transfer the Accounts of each Participant to an alternative defined contribution plan. All the rights, benefits, features, and distribution restrictions with respect to the transferred amounts shall continue to apply to the transferred amounts unless a change is permitted pursuant to applicable IRS guidance of general applicability.
(c)	Form of Payment. A transfer made pursuant to this section may be in cash, in kind, or partly in cash and partly in kind. Any distribution made pursuant to this section may be in cash, in shares of Company Stock to the extent an Account is invested in Company Stock, or partly in cash and partly in shares of Company Stock. After all such distributions or transfers have been made, the Trustee shall be discharged from all obligation under the Trust; no Account Owner who has received any such distribution, or for whom any such transfer has been made, shall have any further right or claim under the Plan or Trust.

10.4 Amendment by Apache.

(a)	Amendment. Apache may at any time amend the Plan in any respect, without prior notice, subject to the following limitations. No amendment shall be made that would have the effect of vesting in the Company any part of the Trust Fund or of diverting any part of the Trust Fund to purposes other than for the exclusive benefit of Account Owners. The rights of any Account Owner with respect to contributions previously made shall not be adversely affected by any amendment. No amendment shall reduce or restrict, either directly or indirectly, the accrued benefit (within the meaning of Code §411(d)(6)) provided to any Account Owner before the amendment, except as permitted by the Code or IRS guidance of general applicability.
(b)	Amendment to Vesting Schedule. If the vesting schedule is amended, and it has the potential to provide slower vesting for one or more Participants, each such Participant with a three-year or longer Period of Service may elect to have his nonforfeitable percentage computed under the Plan without regard to such amendment. The period during which the election may be made shall commence with the date the amendment is adopted and shall end on the latest of: (i) 60 days after the amendment is adopted; (ii) 60 days after the amendment becomes effective; or (iii) 60 days after the Participant is issued written notice of the amendment by the Company or Committee. Furthermore, no amendment shall decrease the nonforfeitable percentage, measured as of the later of the date the amendment is adopted or effective, of any Account Owner’s Accounts.
(c)	Procedure. Each amendment shall be in writing. Each amendment shall be approved by Apache’s board of directors or by an officer of Apache who has the authority to amend the Plan. Each amendment shall be executed by an officer of Apache who has the authority to execute the amendment.

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ARTICLE XI
Plan Adoption by Affiliated Entities

11.1	Adoption of Plan.
	Apache may permit any Affiliated Entity to adopt the Plan and Trust for its Employees. Thereafter, such Affiliated Entity shall deliver to the Trustee a certified copy of the resolutions or other documents evidencing its adoption of the Plan and Trust. The Employees of the Affiliated Entity adopting the Plan shall not be eligible to invest their Accounts in Company Stock until compliance with the applicable registration and reporting requirements of the securities laws.
11.2	Agent of Affiliated Entity.
	By becoming a party to the Plan, each Affiliated Entity appoints Apache as its agent with authority to act for the Affiliated Entity in all transactions in which Apache believes such agency will facilitate the administration of the Plan. Apache shall have the sole authority to amend and terminate the Plan.
11.3	Disaffiliation and Withdrawal from Plan.

(a)	Disaffiliation. Any Affiliated Entity that has adopted the Plan and thereafter ceases for any reason to be an Affiliated Entity shall forthwith cease to be a party to the Plan.
(b)	Withdrawal. Any Affiliated Entity may, by appropriate action and written notice thereof to Apache, provide for the discontinuance of its participation in the Plan. Such withdrawal from the Plan shall not be effective until the end of the Plan Year.

11.4	Effect of Disaffiliation or Withdrawal.
	If at the time of disaffiliation or withdrawal, the disaffiliating or withdrawing entity, by appropriate action, adopts a substantially identical plan that provides for direct transfers from this Plan, then, as to Account Owners associated with such entity, no plan termination shall have occurred; the new plan shall be deemed a continuation of this Plan for such Account Owners. In such case, the Trustee shall transfer to the trustee of the new plan all of the assets held for the benefit of Account Owners associated with the disaffiliating or withdrawing entity, and no forfeitures or acceleration of vesting shall occur solely by reason of such action. Such payment shall operate as a complete discharge of the Trustee, and of all organizations except the disaffiliating or withdrawing entity, of all obligations under this Plan to Account Owners associated with the disaffiliating or withdrawing entity. A new plan shall not be deemed substantially identical to this Plan if it provides slower vesting than this Plan. Nothing in this section shall authorize the divesting of any vested portion of a Participant’s Account(s).
11.5	Actions Upon Disaffiliation or Withdrawal.

(a)

Distribution or Transfer. If an entity disaffiliates from Apache or withdraws from the Plan and the provisions of section 11.4 are not followed, then the following rules apply to the Account(s) of the Account Owners associated with the disaffiliating or withdrawing entity. The Account Owner’s Accounts shall remain in this Plan until a distribution is processed under the usual rules of Article VI, unless the disaffiliating or withdrawing entity maintains another qualified plan that accepts direct transfers from this Plan, in which case the Committee may transfer the Account Owner’s Accounts to the disaffiliating or withdrawing entity’s plan without the consent of the Account Owner.

(b)

Form of Transfer. A transfer made pursuant to this section may be in cash, in kind, or partly in cash and partly in kind. Any distribution made pursuant to this section may be in cash, in shares of Company Stock to the extent an Account is invested in Company Stock, or partly in cash and partly in shares of Company Stock. After such distribution or transfer has been made, no Account Owner who has received any such distribution, or for whom any such transfer has been made, shall have any further right or claim under the Plan or Trust.

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ARTICLE XII
Top-Heavy Provisions

12.1	Application of Top-Heavy Provisions.
	The provisions of this Article XII shall be applicable only if the Plan becomes “top-heavy” as defined below for any Plan Year. If the Plan becomes “top-heavy” for a Plan Year, the provisions of this Article XII shall apply to the Plan effective as of the first day of such Plan Year and shall continue to apply to the Plan until the Plan ceases to be “top-heavy” or until the Plan is terminated or otherwise amended.
12.2	Determination of Top-Heavy Status.
	The Plan shall be considered “top-heavy” for a Plan Year if, as of the last day of the prior Plan Year, the aggregate of the Account balances (as calculated according to the regulations under Code §416) of Key Employees under this Plan (and under all other plans required or permitted to be aggregated with this Plan) exceeds 60% of the aggregate of the Account balances (as calculated according to the regulations under Code §416) in this Plan (and under all other plans required or permitted to be aggregated with this Plan) of all current Employees and all former Employees who terminated employment within one year of the last day of the prior Plan Year. This ratio shall be referred to as the “top-heavy ratio”. For purposes of determining the account balance of any Participant, (a) the balance shall be determined as of the last day of the prior Plan Year, (b) the balance shall also include any distributions to the Participant during the one-year period ending on the last day of the prior Plan Year, and (c) the balance shall also include, for distributions made for a reason other than separation from service or death or disability, any distributions to the Participant during the five-year period ending on the last day of the prior Plan Year. This shall also apply to distributions under a terminated plan that, if it had not been terminated, would have been required to be included in an aggregation group. The Account balances of a Participant who had once been a Key Employee, but who is not a Key Employee during the Plan Year, shall not be taken into account. The following plans must be aggregated with this Plan for the top-heavy test: (a) a qualified plan maintained by the Company or an Affiliated Entity in which a Key Employee participated during this Plan Year or during the previous four Plan Years and (b) any other qualified plan maintained by the Company or an Affiliated Entity that enables this Plan or any plan described in clause (a) to meet the requirements of Code §401(a)(4) or §410. The following plans may be aggregated with this Plan for the top-heavy test: any qualified plan maintained by the Company or an Affiliated Entity that, in combination with the Plan or any plan required to be aggregated with this Plan when testing this Plan for top-heaviness, would satisfy the requirements of Code §401(a)(4) and §410. If one or more of the plans required or permitted to be aggregated with this Plan is a defined benefit plan, a Participant’s “account balance” shall equal the present value of the Participant’s accrued benefit. If the aggregation group includes more than one defined benefit plan, the same actuarial assumptions shall be used with respect to each such defined benefit plan. The foregoing top-heavy ratio shall be computed in accordance with the provisions of Code §416(g), together with the regulations and rulings thereunder.
12.3	Special Vesting Rule.
	Unless section 5.1 provides for faster vesting, the amount credited to the Participant’s Company Contributions Account shall vest in accordance with the following schedule during any top-heavy Plan Year:

Period of Service	Vesting Percentage
Less than 2 years		0	%
At least 2 years, but less than 3 years		20	%
At least 3 years, but less than 4 years		40	%
At least 4 years, but less than 5 years		60	%
At least 5 years, but less than 6 years		80	%
6 or more years		100	%

12.4

Special Minimum Contribution.

Notwithstanding the provisions of section 3.1, in every top-heavy Plan Year, a minimum allocation is required for each Non-Key Employee who both (a) performed one or more hours of service as an Employee during the Plan Year as a Covered Employee after satisfying the eligibility requirements of section 2.1, and (b) was an Employee on the last day of the Plan Year. The minimum allocation shall be a percentage of each Non-Key Employee’s Compensation. The percentage shall be the lesser of 3% or the largest percentage

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	obtained for any Key Employee by dividing his Annual Additions (to this Plan and any other plan aggregated with this Plan) for the Plan Year by his Compensation for the Plan Year. If the Participant participates in both this Plan and the Apache Corporation Money Purchase Retirement Plan, then the Participant’s minimum allocation shall be provided in the Apache Corporation Money Purchase Retirement Plan. If this minimum allocation is not otherwise satisfied for any Non-Key Employee, the Company shall contribute the additional amount needed to satisfy this requirement to such Non-Key Employee’s Company Contributions Account.
12.5	Change in Top-Heavy Status.
	If the Plan ceases to be a “top-heavy” plan as defined in this Article XII, and if any change in the benefit structure, vesting schedule, or other component of a Participant’s accrued benefit occurs as a result of such change in top-heavy status, the nonforfeitable portion of each Participant’s benefit attributable to Company Contributions shall not be decreased as a result of such change. In addition, each Participant with at least a three-year Period of Service on the date of such change, may elect to have the nonforfeitable percentage computed under the Plan without regard to such change in status. The period during which the election may be made shall commence on the date the Plan ceases to be a top-heavy plan and shall end on the later of (a) 60 days after the change in status occurs, (b) 60 days after the change in status becomes effective, or (c) 60 days after the Participant is issued written notice of the change by the Company or the Committee.

ARTICLE XIII
Miscellaneous

13.1	Right To Dismiss Employees — No Employment Contract.
	The Company and Affiliated Entities may terminate the employment of any employee as freely and with the same effect as if this Plan were not in existence. Participation in this Plan by an employee shall not constitute an express or implied contract of employment between the Company or an Affiliated Entity and the employee.
13.2	Claims Procedure.

(a)	General. Each claim for benefits shall be processed in accordance with the procedures that are 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.

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(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.
(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 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)	Discretionary Authority. The Committee shall have total discretionary authority to determine eligibility, status, and the rights of all individuals under the Plan and to construe any and all terms of the Plan.

13.3	Source of Benefits.
	All benefits payable under the Plan shall be paid solely from the Trust Fund, and the Company and Affiliated Entities assume no liability or responsibility therefor.
13.4	Exclusive Benefit of Employees.
	It is the intention of the Company that no part of the Trust, other than as provided in sections 3.3, 9.2, and 13.9 and Article VII hereof and the Trust Agreement, ever to be used for or diverted for purposes other than for the exclusive benefit of Participants, Alternate Payees, and their beneficiaries, and that this Plan shall be construed to follow the spirit and intent of the Code and ERISA.
13.5	Forms of Notices.
	Wherever provision is made in the Plan for the filing of any notice, election, or designation by a Participant, Spouse, Alternate Payee, or beneficiary, the action of such individual may be evidenced by the execution of such form as the Committee may prescribe for the purpose. The Committee may also prescribe alternate methods for filing any notice, election, or designation (such as telephone voice-response or e-mail).

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13.6	Failure of Any Other Entity to Qualify.
	If any entity adopts this Plan but fails to obtain or retain the qualification of the Plan under the applicable provisions of the Code, such entity shall withdraw from this Plan upon a determination by the Internal Revenue Service that it has failed to obtain or retain such qualification. Within 30 days after the date of such determination, the assets of the Trust Fund held for the benefit of the Employees of such entity shall be separately accounted for and disposed of in accordance with the Plan and Trust.
13.7	Notice of Adoption of the Plan.
	The Company shall provide each of its Employees with notice of the adoption of this Plan, notice of any amendments to the Plan, and notice of the salient provisions of the Plan prior to the end of the first Plan Year. A complete copy of the Plan shall also be made available for inspection by Employees or any other individual with an Account balance under the Plan.
13.8	Plan Merger.
	If this Plan is merged or consolidated with, or its assets or liabilities are transferred to, any other qualified plan of deferred compensation, each Participant shall be entitled to receive a benefit immediately after the merger, consolidation, or transfer that is equal to or greater than the benefit the Participant would have been entitled to receive immediately before the merger, consolidation, or transfer if this Plan had then been terminated.
13.9	Inalienability of Benefits — Domestic Relations Orders.

(a)	General. Except as provided in section 7.2, relating to Plan loans, subsection 6.1(d) relating to disclaimers, and subsections (b), (g), and (h) below, no Account Owner shall have any right to assign, alienate, transfer, or encumber his interest in any benefits under this Plan, nor shall such benefits be subject to any legal process to levy upon or attach the same for payment of any claim against any such Account Owner.
(b)	QDRO Exception. Subsection (a) shall apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a Participant pursuant to a Domestic Relations Order unless such Domestic Relations Order is a QDRO, in which case the Plan shall make payment of benefits in accordance with the applicable requirements of any such QDRO.
(c)	QDRO Requirements. In order to be a QDRO, the Domestic Relations Order must satisfy the requirements of Code §414(p) and ERISA §206(d)(3). In particular, the Domestic Relations Order: (i) must specify the name and the last known mailing address of the Participant; (ii) must specify the name and mailing address of each Alternate Payee covered by the order; (iii) must specify either the amount or percentage of the Participant’s benefits to be paid by the Plan to each such Alternate Payee, or the manner in which such amount or percentage is to be determined; (iv) must specify the number of payments or period to which such order applies; (v) must specify each plan to which such order applies; (vi) may not require the Plan to provide any type or form of benefit, or any option, not otherwise provided under the Plan, subject to the provisions of subsection (f); (vii) may not require the Plan to provide increased benefits (determined on the basis of actuarial value); and (viii) may not require the payment of benefits to an Alternate Payee if such benefits have already been designated to be paid to another Alternate Payee under another order previously determined to be a QDRO.
(d)	QDRO Payment Rules. In the case of any payment before an Employee has separated from service, a Domestic Relations Order shall not be treated as failing to meet the requirements of subsection (c) solely because such order requires that payment of benefits be made to an Alternate Payee (i) on or after the dates specified in subsection (f), (ii) as if the Employee had retired on the date on which such payment is to begin under such order (but taking into account only the Account balance on such date), and (iii) in any form in which such benefits may be paid under the Plan to the Employee. For purposes of this subsection, the Account balance as of the date specified in the QDRO shall be the vested portion of the Employee’s Account(s) on such date.
(e)	QDRO Review Procedures and Suspension of Benefits. The Committee shall establish reasonable procedures to determine the qualified status of Domestic Relations Orders and to administer distributions under QDROs. Such procedures shall be in writing and shall permit an Alternate Payee

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to designate a representative to receive copies of notices. The Committee may temporarily prevent the Participant from borrowing from his Accounts and shall temporarily suspend distributions and withdrawals from the Participant’s Accounts, except to the extent necessary to make the required minimum distributions under Code §401(a)(9), when the Committee receives a Domestic Relations Order or a draft of such an order that affects the Participant’s Accounts or when one or the following individuals informs the Committee, orally or in writing, that a QDRO is in process or may be in process: the Participant, a prospective Alternate Payee, or counsel for the Participant or a prospective Alternate Payee. The Committee shall promulgate reasonable and non-discriminatory rules regarding such suspensions, including but not limited to how long such suspensions remain in effect. The procedures may allow the Participant to borrow such amounts from the Plan, subject to the limits of Article VII, and the Participant to receive such distributions and withdrawals from the Plan, subject to the rules of Articles VI and VII, as are consented to in writing by all prospective Alternate Payees identified in the Domestic Relations Order or, in the absence of a Domestic Relations Order, as are consented to in writing by the prospective Alternate Payee(s) who informed the Committee that a QDRO was in process or may be in process. When the Committee receives a Domestic Relations Order it shall promptly notify the Participant and each Alternate Payee of such receipt and provide them with copies of the Plan’s procedures for determining the qualified status of the order. Within a reasonable period after receipt of a Domestic Relations Order, the Committee shall determine whether such order is a QDRO and notify the Participant and each Alternate Payee of such determination. During any period in which the issue of whether a Domestic Relations Order is a QDRO is being determined (by the Committee, by a court of competent jurisdiction, or otherwise), the Committee shall separately account for the amounts payable to the Alternate Payee if the order is determined to be a QDRO. If the order (or modification thereof) is determined to be a QDRO within 18 months after the date the first payment would have been required by such order, the Committee shall pay the amounts separately accounted for (plus any interest thereon) to the individual(s) entitled thereto. However, if the Committee determines that the order is not a QDRO, or if the issue as to whether such order is a QDRO has not been resolved within 18 months after the date of the first payment would have been required by such order, then the Committee shall pay the amounts separately accounted for (plus any interest thereon) to the individual(s) who would have been entitled to such amounts if there had been no order. Any determination that an order is a QDRO that is made after the close of the 18-month period shall be applied prospectively only. If the Plan’s fiduciaries act in accordance with fiduciary provision of ERISA in treating a Domestic Relations Order as being (or not being) a QDRO or in taking action in accordance with this subsection, then the Plan’s obligation to the Participant and each Alternate Payee shall be discharged to the extent of any payment made pursuant to the acts of such fiduciaries.

(f)

Rights of Alternate Payee. The Alternate Payee shall have the following rights under the Plan:

(i)

Single Payment. The only form of payment available to an Alternate Payee is a single payment of the distributable amount (measured at the time the payment is processed). If the Alternate Payee is awarded more than the distributable amount, the Alternate Payee shall initially receive a distribution of the distributable amount, with additional payments made as soon as administratively convenient after more of the amount awarded to the Alternate Payee becomes distributable.

(ii)

Timing of Distribution. Subject to the limits imposed by this paragraph, the Alternate Payee may choose (or the QDRO may specify) the date of the distribution. If the value of the nonforfeitable portion of an Alternate Payee’s Account (ignoring any portion of the Participant’s Rollover Account that was assigned to the Alternate Payee) is $5,000 or less, the Alternate Payee shall receive a single payment of the distributable amount as soon as practicable (without the Alternate Payee’s consent), provided that the value is $5,000 or less when the distribution is processed. Otherwise, the distribution to the Alternate Payee may occur at any time after the Committee determines that the Domestic Relations Order is a QDRO and before the Participant’s Required Beginning Date (unless the order is determined to be a QDRO after the Participant’s Required Beginning Date, in which case the distribution to the Alternate Payee shall be made as soon as administratively practicable after the order is determined to be a QDRO).

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(iii)	Death of Alternate Payee. The Alternate Payee may designate one or more beneficiaries, as specified in section 6.1. When the Alternate Payee dies, the Alternate Payee’s beneficiary shall receive a complete distribution of the distributable amount in a single payment as soon as administratively convenient.
(iv)	Investing. An Alternate Payee may direct the investment of his Account pursuant to section 9.3.
(v)	Claims. The Alternate Payee may bring claims against the Plan pursuant to section 13.2.

(g) Exception for Misconduct towards the Plan. Subsection (a) shall not apply to any offset of a Participant’s benefits against an amount that the Participant is ordered or required to pay to the Plan if the following conditions are met.

(i)	The order or requirement to pay must arise (A) under a judgment of conviction for a crime involving the Plan, (B) under a civil judgment (including a consent order or decree) entered by a court in an action brought in connection with a violation (or alleged violation) of part 4 of subtitle B of title I of ERISA, or (iii) pursuant to a settlement agreement between the Secretary of Labor and the Participant, or a settlement agreement between the Pension Benefit Guaranty Corporation and the Participant, in connection with a violation (or alleged violation) of part 4 of subtitle B of title I of ERISA by a fiduciary or any other person.
(ii)	The judgment, order, decree, or settlement agreement must expressly provide for the offset of all or part of the amount ordered or required to be paid to the Plan against the Participant’s benefits provided under the Plan.
(iii)	To the extent that the survivor annuity requirements of Code §401(a)(11) apply with respect to distributions from the Plan to the Participant, if the Participant is married at the time at which the offset is to be made, (A) either the Participant’s Spouse must have already waived his right to a qualified preretirement survivor annuity and a qualified joint and survivor annuity or the Participant’s Spouse must consent in writing to such offset with such consent witnessed by a notary public or representative of the Plan (or it is established to the satisfaction of a Plan representative that such consent may not be obtained by reason of circumstances described in Code §417(a)(2)(B)), or (B) the Participant’s Spouse is ordered or required in such judgment, order, decree, or settlement to pay an amount to the Plan in connection with a violation of part 4 of subtitle B of title I of ERISA, or (C) in such judgment, order, decree, or settlement, the Participant’s Spouse retains the right to receive a survivor annuity under a qualified joint and survivor annuity pursuant to Code §401(a)(11)(A)(i) and under a qualified preretirement survivor annuity provided pursuant to Code §401(a)(11)(A)(ii). The value of the Spouse’s survivor annuity in subparagraph (C) shall be determined as if the Participant terminated employment on the date of the offset, there was no offset, the Plan permitted commencement of benefits only on or after Normal Retirement Age, the Plan provided only the “minimum-required qualified joint and survivor annuity,” and the amount of the qualified preretirement survivor annuity under the Plan is equal to the amount of the survivor annuity payable under the “minimum-required qualified joint and survivor annuity.” For purposes of this paragraph only, the “minimum-required qualified joint and survivor annuity” is the qualified joint and survivor annuity which is the actuarial equivalent of the Participant’s accrued benefit (within the meaning of Code §411(a)(7)) and under which the survivor annuity is 50% of the amount of the annuity which is payable during the joint lives of the Participant and his Spouse.

The Committee shall temporarily prevent the Account Owner from borrowing from his Accounts and shall temporarily suspend distributions and withdrawals from his Accounts, except to the extent necessary to make the required minimum distributions under Code §401(a)(9), when the Committee has reason to believe that the Plan may be entitled to an offset of the Participant’s benefits described in this subsection. The Committee shall promulgate reasonable and non-discriminatory rules regarding such suspensions, including but not limited to how long such suspensions remain in effect

(h)

Exception for Federal Liens. Subsection (a) shall 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). The Committee may

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temporarily suspend distributions and withdrawals from an Account, except to the extent necessary to make the required minimum distributions under Code §401(a)(9), when the Committee has reason to believe that such a federal tax levy or other obligation has or will be received. The Committee shall promulgate reasonable and non-discriminatory rules regarding such suspensions, including but not limited to how long such suspensions remain in effect.

13.10	Payments Due Minors or Incapacitated Individuals.
	If any individual entitled to payment under the Plan is a minor, the Committee shall cause the payment to be made to the custodian or representative who, under the state law of the minor’s domicile, is authorized to receive funds on behalf of the minor. If any individual entitled to payment under this Plan has been legally adjudicated to be mentally incompetent or incapacitated, the Committee shall cause the payment to be made to the custodian or representative who, under the state law of the incapacitated individual’s domicile, is authorized to receive funds on behalf of the incapacitated individual. Payments made pursuant to such power shall operate as a complete discharge of the Trust Fund, the Trustee, and the Committee.
13.11	Uniformity of Application.
	The provisions of this Plan shall be applied in a uniform and non-discriminatory manner in accordance with rules adopted by the Committee, which rules shall be systematically followed and consistently applied so that all individuals similarly situated shall be treated alike.
13.12	Disposition of Unclaimed Payments.
	Each Participant, Alternate Payee, or beneficiary with an Account balance in this Plan must file with the Committee from time to time in writing his address, the address of each beneficiary (if applicable), and each change of address. Any communication, statement, or notice addressed to such individual at the last address filed with the Committee (or if no address is filed with the Committee then at the last address as shown on the Company’s records) will be binding on such individual for all purposes of the Plan. Neither the Committee nor the Trustee shall be required to search for or locate any missing individual. If the Committee notifies an individual that he is entitled to a distribution and also notifies him that a failure to respond may result in a forfeiture of benefits, and the individual fails to claim his benefits under the Plan or make his address known to the Committee within a reasonable period of time after the notification, then the benefits under the Plan of such individual shall be forfeited. Any amount forfeited pursuant to this section shall be allocated pursuant to subsection 5.4(d). If the individual should later make a claim for this forfeited amount, the Company shall, if the Plan is still in existence, make a special contribution to the Plan equal to the forfeiture, and such amount shall be distributed to the individual; if the Plan is not then in existence, the Company shall pay the amount of the forfeiture to the individual.
13.13	Applicable Law.
	This Plan shall be construed and regulated by ERISA, the Code, and, unless otherwise specified herein and to the extent applicable, the laws of the State of Texas excluding any conflicts-of-law provisions.

ARTICLE XIV
Matters Affecting Company Stock

14.1

Voting, Etc.

The shares of Company Stock in Accounts, whether or not vested, may be voted by the Account Owner to the same extent as if duly registered in the Account Owner’s name. The Trustee or its nominee in which the shares are registered shall vote the shares solely as agent of the Account Owner and in accordance with the instructions of the Account Owner. If no instructions are received, the Trustee shall vote the shares of Company Stock for which it has received no voting instructions in the same proportions as the Account Owners affirmatively directed their shares of Company Stock to be voted unless the Trustee determines that a pro rata vote would be inconsistent with its fiduciary duties under ERISA. If the Trustee makes such a determination, the Trustee shall vote the Company Stock as it determines to be consistent with its fiduciary duties under ERISA. Each Account Owner who has Company Stock allocated to his Accounts shall direct the Trustee concerning the tender (as provided below) and the exercise of any other rights appurtenant to the Company Stock. The Trustee shall follow the directions of the Account Owner with respect to the tender.

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14.2	Notices.
	Apache shall cause to be mailed or delivered to each Account Owner copies of all notices and other communications sent to the Apache shareholders at the same times so mailed or delivered by Apache to its other shareholders.
14.3	Retention/Sale of Company Stock and Other Securities.
	The Trustee is authorized and directed to retain the Company Stock and any other Apache securities acquired by the Trust except as follows:

(a)	In the normal course of Plan administration, the Trustee shall sell Company Stock to satisfy Plan administration and distribution requirements as directed by the Committee or in accordance with provisions of the Plan specifically authorizing such sales.
(b)	In the event of a transaction involving the Company Stock evidenced by the filing of Schedule 14D-1 with the Securities and Exchange Commission (“SEC”) or any other similar transaction by which any person or entity seeks to acquire beneficial ownership of 50% or more of the shares of Company Stock outstanding and authorized to be issued from time to time under Apache’s articles of incorporation (“tender offer”), the Trustee shall sell, convey, or transfer Company Stock pursuant to written instructions of Account Owners delivered to the Trustee in accordance with the following sections 14.4 through 14.15. For purposes of such provisions, the term “filing date” means the date relevant documents concerning a tender offer are filed with the SEC or, if such filing is not required, the date the Trustee receives actual notice that a tender offer has commenced.
(c)	If Apache makes any distribution of Apache securities with respect to the shares of Company Stock held in the Plan, other than additional shares of Company Stock (any such securities are hereafter referred to as “stock rights”), the Trustee shall sell, convey, transfer, or exercise such stock rights pursuant to written instructions of Account Owners delivered to the Trustee in accordance with the following sections of this Article.

14.4 Tender Offers.

(a)	Allocated Stock. In the event of any tender offer, each Account Owner shall have the right to instruct the Trustee to tender any or all shares of Company Stock, whether or not vested, that are allocated to his Accounts under the Plan on or before the filing date. The Trustee shall follow the instructions of the Account Owner. The Trustee shall not tender any Company Stock for which no instructions are received.
(b)	Unallocated Stock. The Trustee shall tender all shares of Company Stock that are not allocated to Accounts in the same proportion as the Account Owners directed the tender of Company Stock allocated to their Accounts unless the Trustee determines that a pro rata tender would be inconsistent with its fiduciary duties under ERISA. If the Trustee makes such a determination, the Trustee shall tender or not tender the unallocated Company Stock as it determines to be consistent with its fiduciary duties under ERISA.
(c)	Suspension of Share Purchases. In the event of a tender offer, the Trustee shall suspend all purchases of Company Stock pursuant to the Plan unless the Committee otherwise directs. Until the termination of such tender offer and pending such Committee direction, the Trustee shall invest available cash pursuant to the applicable provisions of the Plan and the Trust Agreement.
(d)	Temporary Suspension of Certain Cash Distributions. Notwithstanding anything in the Plan to the contrary, no option to receive cash in lieu of Company Stock shall be honored during the pendency of a tender offer unless the Committee otherwise directs.

14.5 Stock Rights.

(a) General. If Apache makes a distribution of stock rights with respect to the Company Stock held in the Plan and if the stock rights become exercisable or transferable (the date on which the stock rights become exercisable or transferable shall be referred to as the “exercise date”), each Account Owner shall determine whether to exercise the stock rights, sell the stock rights, or hold the stock rights allocated to his Accounts. The provisions of this section shall apply to all stock rights received with

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	respect to Company Stock held in Accounts, whether or not the Company Stock with respect to which the stock rights were issued are vested.
(b)	Independent Fiduciary. The Independent Fiduciary provided for in this section 14.15 below shall act with respect to the stock rights. All Account Owner directions concerning the exercise or disposition of the stock rights shall be given to the Independent Fiduciary, who shall have the sole responsibility of assuring that the Account Owners’ directions are followed.
(c)	Exercise of Stock Rights. If, on or after the exercise date, an Account Owner wishes to exercise all or a portion of the stock rights allocated to his Accounts, the Independent Fiduciary shall follow the Account Owner’s direction to the extent that there is cash or other liquid assets available in his Accounts to exercise the stock rights. Notwithstanding any other provision of the Plan, each Account Owner who has stock rights allocated to his Accounts shall have a period of five business days following the exercise date in which he may give instructions to the Committee to liquidate any of the assets held in his Accounts (except shares of Company Stock or assets such as guaranteed investment contracts or similar investments), but only if he does not have sufficient cash or other liquid assets in his Accounts to exercise the stock rights. The liquidation of any necessary investments pursuant to an Account Owner’s direction shall be accomplished as soon as reasonably practicable, taking into account any timing restrictions with respect to the investment funds involved. The cash obtained shall be used to exercise the stock rights, as the Account Owner directs. Any cash that is not so used shall be invested in a cash equivalent until the next date on which the Account Owner may change his investment directions under the Plan.
(d)	Sale of Stock Rights. On and after the exercise date, the Independent Fiduciary shall sell all or a portion of the stock rights allocated to Accounts, as the Account Owner shall direct.

14.6	Other Rights Appurtenant to the Company Stock.
	If there are any rights appurtenant to the Company Stock, other than voting, tender, or stock rights, each Account Owner shall exercise or take other appropriate action concerning such rights with respect to the Company Stock, whether or not vested, that is allocated to their Accounts in the same manner as the other holders of the Company Stock, by giving written instructions to the Trustee. The Trustee shall follow all such instructions, but shall take no action with respect to allocated Company Stock for which no instructions are received. The Trustee shall exercise or take other appropriate action concerning any such rights appurtenant to unallocated Company Stock.
14.7	Information to Trustee.
	Promptly after the filing date, the exercise date, or any other event that requires action with respect to the Company Stock, the Committee shall deliver or cause to be delivered to the Trustee or the Independent Fiduciary, as appropriate, a list of the names and addresses of Account Owners showing (i) the number of shares of Company Stock allocated to each Account Owner’s Accounts under the Plan, (ii) each Account Owner’s pro rata portion of any unallocated Company Stock, and (iii) each Account Owner’s share of any stock rights distributed by Apache. The Committee shall date and certify the accuracy of such information, and such information shall be updated periodically by the Committee to reflect changes in the shares of Company Stock and other assets allocated to Accounts.
14.8	Information to Account Owners.
	The Trustee or the Independent Fiduciary, as appropriate, shall distribute and/or make available to each affected Account Owner the following materials:

(a)

A copy of the description of the terms and conditions of any tender offer filed with the SEC on Schedule 14D-1, or any similar materials if such filing is not required, any material distributed to shareholders generally with respect to the stock rights, and any proxy statements and any other material distributed to shareholders generally with respect to any action to be taken with respect to the Company Stock.

(b)

If requested by Apache, a statement from Apache’s management setting forth its position with respect to a tender offer that is filed with the SEC on Schedule 14D-9 and/or a communication from Apache

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	given pursuant to 17 C.F.R. 240.14d-9(e), or any similar materials if such filing or communications are not required.
(c)	An instruction form prepared by Apache and approved by the Trustee or the Independent Fiduciary, to be used by an Account Owner who wishes to instruct the Trustee to tender Company Stock in response to the tender offer, to instruct the Independent Fiduciary to sell or exercise stock rights, or to instruct the Trustee or Independent Fiduciary with respect to any other action to be taken with respect to the Company Stock. The instruction form shall state that (i) if the Account Owner fails to return an instruction form to the Trustee by the indicated deadline, the Trustee will not tender any shares of Company Stock the Account Owner is otherwise entitled to tender, (ii) the Independent Fiduciary will not sell or exercise any right allocated to the Account except upon the written direction of the Account Owner, (iii) the Trustee or Independent Fiduciary will not take any other action that the Account Owner could have directed, and (iv) Apache acknowledges and agrees to honor the confidentiality of the Account Owner’s directions to the Trustee.
(d)	Such additional material or information as the Trustee or the Independent Fiduciary may consider necessary to assist the Account Owner in making an informed decision and in completing or delivering the instruction form (and any amendments thereto) to the Trustee or the Fiduciary on a timely basis.

14.9	Expenses.
	The Trustee and the Independent Fiduciary shall have the right to require payment in advance by Apache and the party making the tender offer of all reasonably anticipated expenses of the Trustee and the Independent Fiduciary, respectively, in connection with the distribution of information to and the processing of instructions received from Account Owners.
14.10	Former Account Owners.
	Apache shall furnish former Account Owners who have received distributions of Company Stock so recently as to not be shareholders of record with the information furnished pursuant to section 14.8. The Trustee and the Independent Fiduciary are hereby authorized to take action with respect to the Company Stock distributed to such former Account Owners in accordance with appropriate instructions from them. If the Trustee does not receive appropriate instructions, it shall take no action with respect to the distributed Company Stock.
14.11	No Recommendations.
	Neither the Committee, the Committee Fiduciary, the Trustee, nor the Independent Fiduciary shall express any opinion or give any advice or recommendation to any Account Owner concerning voting the Company Stock, any tender offer, stock rights, or the exercise of any other rights appurtenant to the Company Stock, nor shall they have any authority or responsibility to do so. Neither the Trustee nor the Independent Fiduciary has any duty to monitor or police the party making a tender offer or Apache in promoting or resisting a tender offer; provided, however, that if the Trustee or the Independent Fiduciary becomes aware of activity that on its face reasonably appears to the Trustee or Independent Fiduciary to be materially false, misleading, or coercive, the Trustee or the Independent Fiduciary, as the case may be, shall promptly demand that the offending party take appropriate corrective action. If the offending party fails or refuses to take appropriate corrective action, the Trustee or the Independent Fiduciary, as the case may be, shall communicate with affected Account Owners in such manner as it deems advisable.
14.12	Trustee to Follow Instructions.

(a) So long as the Trustee and the Independent Fiduciary, as the case may be, have determined that the Plan is in compliance with ERISA §404(c), the Trustee or the Independent Fiduciary shall tender, deal with stock rights, and act with respect to any other rights appurtenant to the Company Stock, pursuant to the terms and conditions of the particular transaction or event, and in accordance with instructions received from Account Owners. Except for voting, the Trustee or the Independent Fiduciary shall take no action with respect to Company Stock, stock rights, or other appurtenant rights for which no instructions are received, and such Company Stock, stock rights, or other appurtenant rights shall be treated like all other Company Stock, stock rights, or other appurtenant rights for which no instructions are received. The Trustee, or if an Independent Fiduciary has been appointed, the Independent Fiduciary, shall vote the allocated Company Stock that an Account Owner does not vote as specified in section 14.1.

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(b) If the Trustee or Independent Fiduciary determines that the Plan does not satisfy the requirements of ERISA §404(c), the Trustee or Independent Fiduciary shall follow the instructions of the Account Owner with respect to voting, tender, stock rights, or other rights appurtenant to the Company Stock unless the Trustee or Independent Fiduciary determines that to do so would be inconsistent with its fiduciary duties under ERISA. In such case, the Trustee or the Independent Fiduciary shall take such action as it determines to be consistent with its fiduciary duties under ERISA.

14.13 Confidentiality.

(a)	The Committee shall designate one of its members (the “Committee Fiduciary”) to receive investment directions and to transmit such directions to the Trustee or Independent Fiduciary, as the case may be. The Committee Fiduciary shall also receive all Account Owner instructions concerning voting, tender, stock rights, and other rights appurtenant to the Company Stock. The Committee Fiduciary shall communicate the instructions to the Trustee or the Fiduciary, as appropriate.
(b)	Neither the Committee Fiduciary, the Trustee, nor the Independent Fiduciary shall reveal or release any instructions received from Account Owners concerning the Company Stock to Apache, an Affiliated Entity, or the officers, directors, employees, agents, or representatives of Apache and Affiliated Entities, except to the extent necessary to comply with Federal or state law not preempted by ERISA. If disclosure is required by Federal or state law, the information shall be disclosed to the extent possible in the aggregate rather than on an individual basis.
(c)	The Committee Fiduciary shall be responsible for reviewing the confidentiality procedures from time to time to determine their adequacy. The Committee Fiduciary shall ensure that the confidentiality procedures are followed. The Committee Fiduciary shall also ensure that the Independent Fiduciary provided for in section 14.15 is appointed.
(d)	Apache, with the Trustee’s cooperation, shall take such action as is necessary to maintain the confidentiality of Account records including, without limitation, establishment of security systems and procedures which restrict access to Account records and retention of an independent agent to maintain such records. If an independent recordkeeping agent is retained, such agent must agree, as a condition of its retention by Apache, not to disclose the composition of any Accounts to Apache, an Affiliated Entity or an officer, director, employee, or representative of Apache or an Affiliated Entity.
(e)	Apache acknowledges and agrees to honor the confidentiality of the Account Owners’ instructions to the Committee Fiduciary, the Trustee, and the Independent Fiduciary. If Apache, by it own act or omission, breaches the confidentiality of Account Owner instructions, Apache agrees to indemnify and hold harmless the Committee Fiduciary, the Trustee, or the Independent Fiduciary, as the case may be, against and from all liabilities, claims and demands, damages, costs, and expenses, including reasonable attorneys’ fees, that the Committee Fiduciary, the Trustee, or the Independent Fiduciary may incur as a result thereof.

14.14	Investment of Proceeds.
	If Company Stock or the rights are sold pursuant to the tender offer or the provisions of the rights, the proceeds of such sale shall be invested in accordance with the provisions of the Plan and the Trust Agreement.
14.15	Independent Fiduciary.
	Apache shall appoint a fiduciary (the “Independent Fiduciary”) to act solely with respect to the Company Stock in situations which the Committee Fiduciary determines involve a potential for undue influence by Apache in connection with the Company Stock and the exercise of any rights appurtenant to the Company Stock. If the Committee Fiduciary so determines, it shall give written notice to the Independent Fiduciary, which shall have sole responsibility for assuring that Account Owners receive the information necessary to make informed decisions concerning the Company Stock, are free from undue influence or coercion, and that their instructions are followed to the extent proper under ERISA. The Independent Fiduciary shall act until it receives written notice to the contrary from the Committee Fiduciary.

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14.16

Method of Communications.

Several provisions in this Article specify that various communications to or from an Account Owner must be in writing. The Committee, the Committee Fiduciary, the Independent Fiduciary, the Company, and the Trustee, as appropriate, shall each have full authority to treat other forms of communication, such as electronic mail or telephone voice-response, as satisfying any “written” requirement specified in this Article, but only to the extent permitted by the IRS, the Department of Labor, and the Securities Exchange Commission, as appropriate.

ARTICLE XV
Uniformed Services Employment and Reemployment Rights Act of 1994

15.1 General.

(a)

Scope. The Uniformed Services Employment and Reemployment Rights Act of 1994 (the “USERRA”), which is codified at 38 USCA §§4301-4318, confers certain rights on individuals who leave civilian employment to perform certain services in the Armed Forces, the National Guard, the commissioned corps of the Public Health Service, or in any other category designated by the President of the United States in time of war or emergency (collectively, the “Uniformed Services”). An Employee who joins the Uniformed Services shall be referred to as a “Serviceman” in this Article. This Article shall be interpreted to provide such individuals with all the benefits required by the USERRA but no greater benefits than those required by the USERRA. This Article shall supersede any contrary provisions in the remainder of the Plan.

(b)

Rights of Servicemen. When a Serviceman leaves the Uniformed Services, he may have reemployment rights with the Company or Affiliated Entities, depending on many factors, including the length of his stay in the Uniformed Services and the type of discharge he received. When this Article speaks of the date a Serviceman’s potential USERRA reemployment rights expire, it means the date on which the Serviceman fails to qualify for reemployment rights (if, for example, he is dishonorably discharged, or remains in the Uniformed Services for more than 5 years) or, if the Serviceman obtains reemployment rights, the date his reemployment rights lapse because the Serviceman failed to timely exercise those rights.

15.2	While a Serviceman.
	In general, a Serviceman shall be treated as an Employee while he continues to receive wages from the Company or an Affiliated Entity, and once the Serviceman’s wages from the Company or Affiliated Entity cease, the Serviceman shall be treated as if he were on an approved, unpaid leave of absence.

(a)

Participant Contributions. For purposes of making Participant Contributions under section 3.2, if the Serviceman was a Covered Employee when he became a Serviceman, he shall continue to be treated as a Covered Employee while he continues to receive wages from the Company. As a consequence, (i) if he was a Covered Employee who had satisfied the requirements of Article II when he became a Serviceman, he may continue to make Participant Contributions from his wages from the Company, and (ii) if he had not satisfied the requirements of section 2.1 when he became a Serviceman, his service in the Uniformed Services shall be treated as service with the Company in determining when he will be able to begin making Participant Contributions under section 2.1, and if his wages from the Company continue beyond that eligibility date, the Serviceman may begin to make Participant Contributions on such date. A Serviceman may change his rate of contributions in the same manner as an Employee. A Serviceman’s Participant Contributions shall cease when his wages from the Company cease.

(b)

Company Contributions. Wages paid by the Company to a Serviceman shall be included in his Compensation as if the Serviceman were an Employee. A Serviceman’s Participant Contributions shall be matched according to the formula in paragraph 3.1(b)(i). If the Employee was a Covered Employee when he became a Serviceman and his wages continue through the last business day of a Plan Year, then (i) the Serviceman shall be treated as an “eligible Participant” under subsection 3.1(a) for that Plan Year (and shall therefore receive an allocation of any Company Discretionary Contribution); (ii) the Serviceman shall be treated as an “eligible Participant” under paragraph 3.1(b)(ii) for that Plan Year (and shall therefore receive an allocation of any additional match provided

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	under such paragraph); (iii) if he was a Non-Highly Compensated Employee when he became a Serviceman, he shall be eligible to receive an allocation of any QNECs and QMACs provided under subsections 3.7(c) and 3.8(c); and (iv) he shall be treated as an Employee under subsection 12.4(a) (and, if he is a Non-Key Employee, he shall therefore receive any minimum required allocation if the Plan is top-heavy).
(c)	Investments. If the Serviceman has an account balance in the Plan, he is an Account Owner and may therefore direct the investment of his Accounts pursuant to section 9.3 and Article XIV.
(d)	Loans. For purposes of borrowing from the Plan under Article VII, a Serviceman shall be treated as an Employee until the day on which his potential USERRA reemployment rights expire. If a Serviceman with an outstanding loan continues to receive wages from the Company or an Affiliated Entity after joining the Uniformed Services, his loan payments shall continue to be deducted from those wages. Once the Serviceman’s wages cease, his loan payments shall be suspended until the earlier of (i) his reemployment with the Company or an Affiliated Entity or (ii) the day on which his potential USERRA reemployment rights expire. The Serviceman may repay all or part of his loan at any time during the suspension. During the payment suspension, interest shall accrue on the unpaid balance of the loan. See subsections 15.3(b) and 15.4(c) for the resumption of loan payments for a reemployed Serviceman, and subsection 15.3(a) for the timing of the loan’s default if the Serviceman is not reemployed.
(e)	Distributions and Withdrawals. For purposes of Article VI (relating to distributions and in-service withdrawals), the Serviceman shall be treated as an Employee until the day on which his potential USERRA reemployment rights expire. See section 15.3 once his potential USERRA rights expire.
(f)	QDROs. QDROs shall be processed while the Participant is a Serviceman. The Committee has the discretion to establish special procedures under subsection 13.9(e) for Servicemen, by, for example, extending the usual deadlines to accommodate any practical difficulties encountered by the Serviceman that are attributable to his service in the Uniformed Services.
(g)	Rollovers. If the Serviceman was a Covered Employee when he became a Serviceman, the Serviceman may make Rollover Contributions pursuant to subsection 3.2(d) until the day on which his potential USERRA reemployment rights expire.

15.3 Expiration of USERRA Reemployment Rights.

(a)

Consequences. If a Serviceman is not reemployed before his potential USERRA reemployment rights expire, the Committee shall determine his Termination From Service Date by treating his service in the Uniformed Services as an approved leave of absence but treating the expiration of his potential USERRA reemployment rights as the failure to timely return from his leave of absence, with the consequence that his Termination From Service Date will generally be the date his potential USERRA rights expired. Once his Termination From Service Date has been determined, the Committee shall determine his vested percentage. For purposes of Article VI (relating to distributions), the day the Serviceman’s potential USERRA reemployment rights expired shall be treated as the day of his Termination from Service. For purposes of subsection 5.4(b) (relating to the timing of forfeitures), the Serviceman’s last day of employment shall be the day his potential USERRA reemployment rights expired. If the Serviceman has an outstanding loan from this Plan when his potential USERRA reemployment rights expire, his loan shall go into default on the last day of the calendar quarter after the calendar quarter in which his potential USERRA reemployment rights expired, unless, before the loan goes into default, he repays the loan or is rehired pursuant to subsection (b).

(b)

Rehire after Expiration of Reemployment Rights. If the Company or an Affiliated Company hires a former Serviceman after his potential USERRA reemployment rights have expired, he shall be treated like any other former employee who is rehired. If he had an outstanding loan and is reemployed before the loan goes into default pursuant to subsection (a), his loan payments shall be recalculated and the Company or Affiliated Entity shall immediately resume withholding the revised loan payments from his pay. The term of the loan when payments resume shall be equal to the remaining term of the loan when payments were suspended.

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15.4	Return From Uniformed Service.
	This section applies solely to a Serviceman who returns to employment with the Company or an Affiliated Entity because he exercised his reemployment rights under the USERRA.

(a)	Credit for Service. A Serviceman’s length of time in the Uniformed Services shall be treated as service with the Company for purposes of vesting and determining his eligibility to participate in the Plan upon reemployment.
(b)	Participation. If the Serviceman satisfies the eligibility requirements of section 2.1 before his reemployment, and he is a Covered Employee upon his reemployment, he may participate in the Plan immediately upon his return.
(c)	Loans. If the Serviceman’s loan payments were suspended under subsection 15.2(d) during his time in the Uniformed Services, his loan payments shall be recalculated and the Company or Affiliated Entity shall immediately resume withholding the revised loan payments from his pay. The term of the loan when payments resume shall be equal to the remaining term of the loan when payments were suspended.
(d)	Make-Up Participant Contributions. In addition to his regular Participant Contributions, a returning Serviceman shall be permitted to make additional contributions up to the amount of Participant Contributions he could have made if, instead of becoming a Serviceman, he had remained employed by the Company or Affiliated Entity and been paid his Deemed Compensation during that time. See subsection (h) for guidance on applying the various limits contained in the Code to the calculation of the maximum additional contribution the returning Serviceman may make. Such additional contributions may only be made within a period that begins on his reemployment date and whose duration is the lesser of five years or three times his length of time in the Uniformed Services. The additional contributions shall be withheld from his Compensation pursuant to the Serviceman’s election. The Committee shall establish administrative procedures for such elections. The additional contributions shall be allocated to Participant Contributions Accounts.
(e)	Make-Up Match. For each additional contribution that the Serviceman contributes pursuant to subsection (d), the Company shall promptly contribute to his Accounts an additional matching contribution. The additional matching contribution shall be equal to the Company Matching Contribution (including forfeitures treated as Company Matching Contributions) that he would have received if (i) his additional contributions were Participant Contributions made during his time in the Uniformed Services, and (ii) he was paid his Deemed Compensation during his time in the Uniformed Services. The Serviceman’s additional contributions shall be spread over the pay periods in which they could have occurred in such a way as to maximize the additional matching contribution. See subsection (h) for guidance on applying the various limits contained in the Code to the calculation of the additional matching contribution. The additional matching contribution shall be allocated to the Participant’s Company Contributions Account unless the additional matching contribution would have been designated a QMAC, in which case it shall be allocated to his Participant Contributions Account.
(f)	Make-Up Company Discretionary Contribution. The Company shall contribute an additional contribution to a Serviceman’s Accounts equal to the Company Discretionary Contribution (including any forfeitures treated as Company Discretionary Contributions) that would have been allocated to such Accounts if the Serviceman had remained employed during his time in the Uniformed Services, and had earned his Deemed Compensation during that time. See subsection (h) for guidance on applying the various limits contained in the Code to the calculation of the additional discretionary contribution. The additional discretionary contribution shall be allocated to the Participant’s Company Contributions Account unless the additional discretionary contribution would have been designated a QNEC, in which case it shall be allocated to his Participant Contributions Account.
(g)	Make-Up Miscellaneous Contributions. The Company shall contribute to the Serviceman’s Accounts any QNECs and QMACs that the Serviceman would have received pursuant to subsection 3.7(c) or 3.8(c), and any top-heavy minimum contribution he would have received pursuant to section 12.4, (including any forfeitures treated as QNECs, QMACs, or top-heavy minimum contributions) if he had remained employed during his time in the Uniformed Services, and had earned Deemed Compensation during that time. See subsection (h) for guidance on applying the various limits contained in the Code

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	to the calculation of the QNECs, QMACs, and top-heavy minimum contribution. These additional top-heavy minimum contributions shall be allocated to Company Contributions Accounts. The additional QNECs and QMACs shall be allocated to Participant Contributions Accounts.
(h)	Application of Limitations.

(i)

The make-up contributions under subsections (d), (e), (f), and (g) (the “Make-Up Contributions”) shall be ignored for purposes of determining the Company’s maximum contribution under subsection 3.1(d), the limits on Participant Contributions under paragraphs 3.2(a)(ii) and 3.2(b)(ii), the limits on Annual Additions under section 3.4, the ADP test of section 3.5, the ACP test of section 3.6, the non-discrimination requirements of Code §401(a)(4), and (if the Serviceman is a Key Employee) calculating the minimum required top-heavy contribution under section 12.4.

(ii)

In order to determine the maximum Make-Up Contributions, the following limitations shall apply.

(A)	The Serviceman’s “Aggregate Compensation” for each year shall be calculated. His Aggregate Compensation shall be equal to his actual Compensation, plus his Deemed Compensation that would have been paid during that year. Each type of Aggregate Compensation (for benefit purposes, deferral purposes, etc.) shall be determined separately.
(B)	The Serviceman’s Aggregate Compensation each Plan Year shall be limited to the dollar limit in effect for that Plan Year under Code §401(a)(17), for the purposes and in the manner specified in subsection 1.14(f).
(C)	The limits of subsection 3.1(d) (relating to the maximum contribution by the Company to the Plan) for each Plan Year shall be calculated by using the Serviceman’s Aggregate Compensation for that Plan Year, and by treating the Make-Up Contributions that are attributable to that Plan Year’s Deemed Compensation as having been made during that Plan Year.
(D)	The limits of paragraph 3.2(a)(ii) (relating to the maximum 401(k) Contributions) and paragraph 3.2(b)(ii) (relating to the maximum Catch-Up Contributions) for each calendar year shall be calculated by treating as 401(k) and Catch-Up Contributions his additional contributions pursuant to subsection (d) that are attributable to that calendar year’s Deemed Compensation.
(E)	The limits of section 3.4 (relating to the maximum Annual Additions to a Participant’s Accounts) shall be calculated for each Limitation Year by using the Serviceman’s Aggregate Compensation for that Limitation Year, and by treating as Annual Additions all the Make-Up Contributions that are attributable to that Limitation Year’s Deemed Compensation.
(F)	The Serviceman’s maximum Make-Up Contributions shall not be limited by the results of the Plan’s ADP test or ACP test for any Plan Year in which the Serviceman has Deemed Compensation, even if the Serviceman is treated as a Highly Compensated Employee (using his Aggregate Compensation) for that Plan Year.

(i) Deemed Compensation. A Serviceman’s Deemed Compensation is the Compensation that he would have received (including raises) had he remained employed by the Company or Affiliated Entity during his time in the Uniformed Services, unless it is not reasonably certain what his Compensation would have been, in which case his Deemed Compensation shall be based on his average rate of compensation during the 12 months (or, if shorter, his period of employment with the Company and Affiliated Entities) immediately before he entered the Uniformed Services. A Serviceman’s Deemed Compensation shall be reduced by any Compensation actually paid to him during his time in the Uniformed Services (such as vacation pay). Deemed Compensation shall cease when the Serviceman’s potential USERRA reemployment rights expire. Each type of Deemed Compensation (for benefit purposes, deferral purposes, etc.) shall be determined separately.

Page 47 of 47

	APACHE CORPORATION
Date:	By:
	Title:

Page 48 of 47

APPENDIX A

Participating Companies

The following Affiliated Entities were actively participating in the Plan as of the following dates:

	Participation	Participation
Business	Began As Of	Ended As Of
Apache International, Inc.	September 22, 1987	N/A
Apache Energy Resources Corporation (Known as Hadson Energy Resources Corporation before January 1, 1995)	January 1, 1994	December 31, 1995
Apache Canada Ltd.	May 17, 1995	N/A

— END OF APPENDIX A —

 A-1

APPENDIX B

Hadson Energy Resources Corporation

Introduction

Apache acquired Hadson Energy Resources Corporation (“HERC”) as of November 12, 1993. HERC and its wholly owned subsidiary, Hadson Energy Limited (“HEL”), maintained the Hadson Energy Resources Corporation Employee 401(k) Plan (the “HERC Plan”), a profit sharing plan containing a cash or deferred arrangement. The HERC Plan was terminated as of December 31, 1993, and amounts were transferred from the HERC Plan to this Plan.

The transferred amounts that are subject to the distribution restrictions of Code §401(k) shall be placed in the Participant Contributions Accounts. Any remaining transferred amounts that represent after-tax contributions, rollovers, or the associated investment earnings shall be placed in the Rollover Account. All remaining transferred amounts shall be placed in the Company Contributions Account.

— END OF APPENDIX B —

 B-1

APPENDIX C

Corporate Transactions

Over the years, Apache and its Affiliated Entities have engaged in numerous corporate transactions, both acquisitions and sales. This Appendix contains any special provisions that apply to employees affected by the corporate transaction, including both those who become Employees and those who cease to be Employees.

Sales

For an Employee who transferred to Natural Gas Clearinghouse (“NGC”) pursuant to the terms of the Employee Benefits Agreement effective April 1, 1990 between Apache and NGC, a Period of Service shall be calculated by treating as employment with Apache any period(s) of employment after April 1, 1990 with NGC or any business that is then treated as a single employer with NGC pursuant to Code §414(b), §414(c), §414(m), or §414(o).

Employees terminated in connection with the summer 1995 sale of certain properties to Citation 1994 Investment Limited Partnership are fully vested in their Plan Accounts as of September 1, 1995.

An Employee who transferred to Producers Energy Marketing LLC (“ProEnergy”) in the first half of 1996 is fully vested in his Plan Accounts as of the date of transfer. If such an individual becomes an Employee again, all new contributions to his Plan Accounts shall vest according to the regular rules.

Acquisitions

A Period of Service for vesting purposes for a New Employee (listed below) shall be determined by treating all periods of employment with the Former Employer Controlled Group as periods of employment with Apache. The “Former Employer Controlled Group” means the Former Employer (listed below), its predecessor company/ies, and any business while such business was treated as a single employer with the Former Employer or predecessor company pursuant to Code §414(b), §414(c), §414(m), or §414(o).

[Remainder of Page Intentionally Left Blank]

 C-1

The following individuals are “New Employees” and the following companies are “Former Employers”:

Former Employer	New Employees
Amoco Production Company (“Amoco”)	All individuals who became an Employee of the Company pursuant to the provisions of the Stock Purchase Agreement effective June 30, 1991, between Amoco Production Company, Apache, and others.
Hadson Energy Resources Corporation (“HERC”) and Hadson Energy Limited (“HEL”)	All individuals employed by HERC or HEL on November 12, 1993.
Crystal Oil Company (“Crystal”)	All individuals hired from Crystal or related companies within a week of the closing date on an asset purchase that was originally scheduled to close on December 31, 1994.
Texaco Exploration & Production, Inc. (“TEPI”)	All individuals hired from TEPI or related companies in late February and early March 1995 in connection with an acquisition of assets from TEPI at that time.
DEKALB Energy Company (“DEKALB”)	All individuals who became an employee of Apache on or after May 17, 1995 — their Period of Service shall include any periods of employment with DEKALB before May 17, 1995
The Phoenix Resource Companies, Inc. (“Phoenix”)	All individuals hired by Apache in 1996 who were Phoenix employees on May 20, 1996.
Crescendo Resources, L.P. (“Crescendo”)	All individuals hired from April 30, 2000 through June 1, 2000 from Crescendo and related companies in connection with an April 30, 2000 asset acquisition from Crescendo.
Collins & Ware (“C&W”) and Longhorn Disposal, Inc. (“Longhorn”)	All individuals hired from C&W and Longhorn and related companies in connection with a May 23, 2000 asset acquisition from C&W and Longhorn.
Occidental Petroleum Corporation (“Oxy”)	All individuals hired from Oxy and related companies in connection with an August 2000 asset acquisition from an Oxy subsidiary.
Private company (“Private”)	All individuals hired in January 2003 from Private and related companies in connection with an asset acquisition of certain property in Louisiana effective as of December 1, 2002.

—END OF APPENDIX C—

 C-2

APPENDIX D

DEKALB Energy Company / Apache Canada Ltd.

Introduction

Through a merger effective as of May 17, 1995, Apache then held 100% of the stock of DEKALB Energy Company (which has been renamed Apache Canada Ltd.). Apache Canada Ltd. has adopted this Plan, and Apache has approved its adoption, as of May 17, 1995, for the eligible employees of Apache Canada Ltd.

Capitalized terms in this Appendix have the same meanings as those given to them in the Plan. The regular terms of the Plan shall apply to the employees of Apache Canada Ltd., except as provided below.

Eligibility to Participate

Notwithstanding the definition of “Covered Employee,” an employee of Apache Canada Ltd. shall be a Covered Employee only if (1) he is either a U.S. citizen or a U.S. resident, and (2) he was employed by Apache or another Company immediately before becoming an employee of Apache Canada Ltd.

Compensation

If the payroll of the Apache Canada Ltd. employee is handled in the United States, then the definitions of Compensation the main body of the Plan apply. To the extent that the payroll of the Apache Canada Ltd. employee is handled outside of the United States, the following definitions of Compensation shall apply in lieu of the definitions found in the main body of the Plan:

(a)

Code §415 Compensation. For purposes of determining the limitation on Annual Additions under section 3.4 and the minimum contribution under section 12.4 when the Plan is top-heavy, Compensation shall mean foreign earned income (within the meaning of Code §911(b)) paid by the Company or an Affiliated Entity, and shall also include elective contributions that are not includable in the Employee’s income pursuant to Code §125, §132(f)(4), §402(e)(3), §402(h), §403(b), §408(p), §414(u)(2)(C), §414(v)(6)(B), or §457. For purposes of section 3.4, Compensation shall be measured over a Limitation Year. For purposes of section 12.4, Compensation shall be measured over a Plan Year.

(j)

Code §414(q) Compensation. For purposes of identifying Highly Compensated Employees and Key Employees, Compensation shall have the same meaning as in paragraph (a), except that Compensation shall be measured over a Plan Year and shall not include any amounts accrued by, but not paid to, the Employee during the Plan Year.

— END OF APPENDIX D —

 D-1

EX-10.17

Exhibit 10.17

APACHE CORPORATION

MONEY PURCHASE RETIREMENT PLAN

Table of Contents

ARTICLE I Definitions	1
1.1 Account	1
1.2 Account Owner	1
1.3 Affiliated Entity	1
1.4 Alternate Payee	1
1.5 Annual Addition	1
1.6 Code	2
1.7 Committee	2
1.8 Company	2
1.9 Company Contributions	2
1.10 Company Mandatory Contributions	2
1.11 Compensation	2
1.12 Covered Employee	3
1.13 Disability	4
1.14 Domestic Relations Order	4
1.15 Employee	4
1.16 ERISA	4
1.17 Five-Percent Owner	4
1.18 Highly Compensated Employee	5
1.19 Key Employee	5
1.20 Lapse in Apache Employment	5
1.21 Limitation Year	5
1.22 Non-Highly Compensated Employee	5
1.23 Non-Key Employee	5
1.24 Normal Retirement Age	5
1.25 Participant	5
1.26 Period of Service	5
1.27 Plan Year	6
1.28 QDRO	6
1.29 QJSA	6
1.30 QPSA	6
1.31 Required Beginning Date	6
1.32 Spouse	6
1.33 Termination from Service Date	6
1.34 Valuation Date	6
ARTICLE II Participation	7
2.1 Participation	7
2.2 Enrollment Procedure	7
ARTICLE III Contributions	7
3.1 Company Contributions	7
3.2 Participant Contributions	8
3.3 Return of Contributions	8
3.4 Limitation on Annual Additions	8
ARTICLE IV Interests in the Trust Fund	9
4.1 Participants’ Accounts	9
4.2 Valuation of Trust Fund	9
4.3 Allocation of Increase or Decrease in Net Worth	9
ARTICLE V Amount of Benefits	10
5.1 Vesting Schedule	10
5.2 Vesting After a Lapse in Apache Employment	10
5.3 Calculating Service	11
5.4 Forfeitures	12
5.5 Transfers — Portability	12
ARTICLE VI Distribution of Benefits	13
6.1 Beneficiaries	13
6.2 Distributable Amount	14
6.3 Manner of Distribution	14
6.5 Direct Rollover Election	17
ARTICLE VII Allocation of Responsibilities — Named Fiduciaries	17
7.1 No Joint Fiduciary Responsibilities	17
7.2 The Company	18
7.3 The Trustee	18
7.4 The Committee — Plan Administrator	18
7.5 Committee to Construe Plan	18
7.6 Organization of Committee	18
7.7 Agent for Process	19
7.8 Indemnification of Committee Members	19
7.9 Conclusiveness of Action	19
7.10 Payment of Expenses	19
ARTICLE VIII Trust Agreement – Investments	19
8.1 Trust Agreement	19
8.2 Plan Expenses	19
8.3 Investments	19
ARTICLE IX Termination and Amendment	20
9.1 Termination of Plan or Discontinuance of Contributions	20
9.2 Allocations upon Termination	20
9.3 Procedure Upon Termination of Plan	20
9.4 Amendment by Apache	21
ARTICLE X Plan Adoption by Affiliated Entities	21
10.1 Adoption of Plan	21
10.2 Agent of Affiliated Entity	21
10.3 Disaffiliation and Withdrawal from Plan	21
10.4 Effect of Disaffiliation or Withdrawal	21
10.5 Actions Upon Disaffiliation or Withdrawal	22
ARTICLE XI Top-Heavy Provisions	22
11.1 Application of Top-Heavy Provisions	22

i

11.2 Determination of Top-Heavy Status	22
11.3 Special Vesting Rule	23
11.4 Special Minimum Contribution	23
11.5 Change in Top-Heavy Status	23
ARTICLE XII Miscellaneous	23
12.1 Right to Dismiss Employees — No Employment Contract	23
12.2 Claims Procedure	23
12.3 Source of Benefits	25
12.4 Exclusive Benefit of Employees	25
12.5 Forms of Notices	25
12.6 Failure of Any Other Entity to Qualify	25
12.7 Notice of Adoption of the Plan	25
12.8 Plan Merger	25
12.9 Inalienability of Benefits — Domestic Relations Orders	25
12.10 Payments Due Minors or Incapacitated Individuals	28
12.11 Uniformity of Application	28
12.12 Disposition of Unclaimed Payments	28
12.13 Applicable Law	28
ARTICLE XIII Uniformed Services Employment and Reemployment Rights Act of 1994	29
13.1 General	29
13.2 While a Serviceman	29
13.3 Expiration of USERRA Reemployment Rights	29
13.4 Return From Uniformed Service	30
Appendix A — Participating Companies
Appendix B — DEKALB Energy Company / Apache Canada Ltd.
Appendix C — Corporate Transactions

ii

APACHE CORPORATION
MONEY PURCHASE RETIREMENT PLAN

PREAMBLE

Apache Corporation, a Delaware corporation (“Apache”), maintains this money purchase pension plan (the “Plan”), which is intended to be qualified under Code §401(a).

The Plan is hereby amended and restated as set forth below, effective January 1, 2007, except for those provisions that have their own specific effective dates.

Each Appendix to this Plan is a part of the Plan document. It is intended that an Appendix will be used to (1) describe which business entities are actively participating in the Plan, (2) describe any special participation, eligibility, vesting, or other provisions that apply to the employees of a business entity, (3) describe any special provisions that apply to Participants affected by a designated corporation transaction, and (4) describe any special distribution rules that apply to directly transferred benefits from other plans.

ARTICLE I Definitions

The following words and phrases shall have the meaning set forth below:

1.1	Account
	“Account” means the account established pursuant to section 4.1.
1.2	Account Owner
	“Account Owner” means a Participant who has an Account balance, an Alternate Payee who has an Account balance, or a beneficiary who has obtained an interest in the Account of the previous Account Owner because of the previous Account Owner’s death.
1.3	Affiliated Entity
	“Affiliated Entity” means:

(a)

For all purposes of the Plan except those listed in subsection (b), the term “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).

(b)

For purposes of determining Annual Additions under section 1.5, limiting Annual Additions to a Participant’s Account under section 3.4, and construing the defined terms as they are used in sections 1.5 and 3.4 (such as “ Compensation” and “Employee”), the term “Affiliated Entity” means any legal entity that is treated as a single employer with Apache pursuant to Code §414(m) or §414(o), and any legal entity that would be an Affiliated Entity pursuant to Code §414(b) or §414(c) if the phrase “more than 50%” were substituted for the phrase “at least 80%” each place it occurs in Code §1563(a)(1).

1.4	Alternate Payee
	“Alternate Payee” means a Participant’s Spouse, former spouse, child, or other dependent who is recognized by a QDRO as having a right to receive all, or a portion of, the benefits payable under this Plan with respect to such Participant.
1.5	Annual Addition
	“Annual Addition” means the allocations to a Participant’s Account for any Limitation Year, as described in detail below.

(a) Annual Additions shall include: (i) Company Contributions (except as provided in paragraphs (b)(iii) and (b)(v)) to this Plan and Company contributions to any other defined contribution plan maintained by the Company or any Affiliated Entity, (ii) after-tax contributions to any other defined contribution plan maintained by the Company or an Affiliated Entity; (iii) elective deferrals by the Participant, pursuant to Code §401(k), to any other defined contribution plan maintained by the Company or an

Page 1 of 31

Affiliated Entity; (iv) forfeitures allocated to a Participant’s Account in this Plan and any other defined contribution plan maintained by the Company or any Affiliated Entity (except as provided in paragraphs (b)(iii) and (b)(v) below); (v) all amounts paid or accrued to a welfare benefit fund as defined in Code §419(e) and allocated to the separate account (under the welfare benefit fund) of a Key Employee to provide post-retirement medical benefits; and (vi) contributions allocated on the Participant’s behalf to any individual medical account as defined in Code §415(l)(2).

(b)

Annual Additions shall not include: (i) rollovers to any defined contribution plan maintained by the Company or an Affiliated Entity; (ii) repayments of loans made to a Participant from a qualified plan maintained by the Company or any Affiliated Entity; (iii) repayments of forfeitures for rehired Participants, as described in Code §411(a)(7)(B) and §411(a)(3)(D); (iv) direct transfers of funds from one qualified plan to any qualified plan maintained by the Company or any Affiliated Entity; (v) repayments of forfeitures of missing individuals pursuant to section 12.12; or (vi) salary deferrals within the meaning of Code §414(u)(2)(C) or §414(v)(6)(B).

1.6	Code
	“Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations and rulings in effect thereunder from time to time.
1.7	Committee
	“Committee” means the administrative committee provided for in section 7.4.
1.8	Company
	“Company” means Apache, any successor thereto, and any Affiliated Entity that adopts the Plan pursuant to Article X. Each Company is listed in Appendix A.
1.9	Company Contributions
	“Company Contributions” means all contributions to the Plan made by the Company pursuant to section 3.1 for the Plan Year.
1.10	Company Mandatory Contributions
	“Company Mandatory Contributions” means all contributions to the Plan made by the Company pursuant to subsection 3.1(a) for the Plan Year.
1.11	Compensation
	“Compensation” means:

(a)	Code §415 Compensation. For purposes of determining the limitation on Annual Additions under section 3.4 and the minimum contribution under section 11.4 when the Plan is top-heavy, Compensation shall mean those amounts reported as “wages, tips, other compensation” on Form W-2 by the Company or an Affiliated Entity and elective contributions that are not includable in the Employee’s income pursuant to Code §125, §132(f)(4), §402(e)(3), §402(h), §403(b), §408(p), §414(u)(2)(C), §414(v)(6)(B), or §457. For purposes of section 3.4, Compensation shall be measured over a Limitation Year. For purposes of section 11.4, Compensation shall be measured over a Plan Year.
(b)	Code §414(q) Compensation. For purposes of identifying Highly Compensated Employees and Key Employees, Compensation shall mean those amounts reported as “wages, tips, other compensation” on Form W-2 by the Company or an Affiliated Entity, and elective contributions that are not includable in the Employee’s income pursuant to Code §125, §132(f)(4), §402(e)(3), §402(h), §403(b), §408(p), §414(u)(2)(C), §414(v)(6)(B), or §457. Compensation shall be measured over a Plan Year. Compensation shall include only amounts paid to the Employee, and shall not include any additional amounts accrued by the Employee.
(c)	Benefit Compensation. For purposes of determining and allocating Company Mandatory Contributions under paragraphs 3.1(a)(i) and 3.1(a)(ii), Compensation shall generally mean regular compensation paid by the Company.

Page 2 of 31

(i) Specifically, Compensation shall include:

(A)	Regular salary or wages,
(B)	Overtime pay,
(C)	The regular annual bonus (unless all or a portion is excluded by the Committee before the regular annual bonus is paid) and any other bonus designated by the Committee,
(D)	Salary reductions pursuant to the Apache Corporation 401(k) Savings Plan,
(E)	Salary reductions that are excludable from an Employee’s gross income pursuant to Code §125 or §132(f)(4), and
(F)	Amounts contributed as salary deferrals to the Non-Qualified Retirement/Savings Plan of Apache Corporation’.

(ii) Compensation shall exclude:

(A)	Commissions,
(B)	Severance pay,
(C)	Moving expenses,
(D)	Any gross-up of moving expenses to account for increased income or employment taxes,
(E)	Foreign service premiums paid as an inducement to work outside of the United States,
(F)	Credits or benefits under this Plan and credits or benefits under the Apache Corporation 401(k) Savings Plan (except as provided in subparagraph (i)(D)),
(G)	Other contingent compensation,
(H)	Any amount 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,
(I)	Contributions to any other fringe benefit plan (including, but not limited to, overriding royalty payments or any other exploration-related payments),
(J)	Any bonus other than (1) a regular annual bonus not otherwise excluded by the Committee and (2) a bonus specifically included as Compensation by the Committee, in each case pursuant to subparagraph 1.11(c)(i)(C), and
(K)	Except as provided under subparagraph (i)(F), any benefit accrued under, or any payment from, any nonqualified plan of deferred compensation.

(iii) Compensation shall be measured over that portion of a Plan Year while the Employee is a Covered Employee. Compensation shall include only amounts paid to the Employee during the Plan Year, and shall not include any amounts accrued by but not paid to the Employee during the Plan Year.

(d) Limit on Compensation. For purposes of calculating the minimum contribution required in top-heavy years under subsection (a) and for all purposes of subsection (c), the Compensation taken into account for the Plan Year shall not exceed the dollar limit specified in Code §401(a)(17) in effect for the Plan Year.

1.12	Covered Employee
	“Covered Employee” means any Employee of the Company, with the following exceptions.

(a) Any individual directly employed by an entity other than the Company shall not be a Covered Employee, even if such individual is considered a common-law employee of the Company or is treated as an employee of the Company pursuant to Code §414(n).

Page 3 of 31

(b)	An Employee shall not be a Covered Employee unless he is either based in the U.S. or on the U.S. payroll.
(c)	An Employee included in a unit of Employees covered by a collective bargaining agreement shall not be a Covered Employee unless the collective bargaining agreement specifically provides for such Employee’s participation in the Plan.
(d)	An Employee whose job is classified as “temporary” shall be a Covered Employee only after he has worked for the Company and Affiliated Entities for six consecutive months.
(e)	An Employee shall not be a Covered Employee while he is classified as an “intern,” a “consultant,” or an “independent contractor.” An Employee may be classified as an “intern” only if he is currently enrolled (or the Company expects him to be enrolled within the next 12 months) in a high school, college, or university. An Employee may be classified as an intern even if he does not receive academic course credit from his school for this employment with the Company.
(f)	An individual who is employed pursuant to a written agreement with an agency or other third party for a specific job assignment or project shall not be a Covered Employee.

1.13	Disability
	“Disability” means a physical or mental condition that qualifies the Employee for long-term disability payments under Apache’s Long-Term Disability Plan.
1.14	Domestic Relations Order
	“Domestic Relations Order” means any judgment, decree, or order (including approval of a property settlement agreement) issued by a court of competent jurisdiction that relates to the provisions of child support, alimony, or maintenance payments, or marital property rights to a Participant’s Spouse, former spouse, child, or other dependent and is made pursuant to a state domestic relations law (including a community property law).
1.15	Employee
	“Employee” means each individual who performs services for the Company or an Affiliated Entity and whose wages are subject to withholding by the Company or an Affiliated Entity. The term “Employee” includes only individuals currently performing services for the Company or an Affiliated Entity, and excludes former Employees who are still being paid by the Company or an Affiliated Entity (whether through the payroll system, through overriding royalty payments, through exploration-related payments, severance, or otherwise). The term “Employee” also includes any individual who provides services to the Company or an Affiliated Entity pursuant to an agreement between the Company or an Affiliated Entity and a third party that employs the individual, but only if the individual has performed such services for the Company or an Affiliated Entity on a substantially full-time basis for at least one year and only if the services are performed under the primary direction or control by the Company or an Affiliated Entity; provided, however, that if the individuals included as Employees pursuant to the first part of this sentence constitute 20% or less of the Non-Highly Compensated Employees of the Company and Affiliated Entities, then any such individuals who are covered by a qualified plan that is a money purchase pension plan that provides a nonintegrated employer contribution rate for each participant of at least 10% of compensation, that provides for full and immediate vesting, and that provides immediate participation for each employee of the third party (other than those who perform substantially all of their services for the third party and other than those whose compensation from the third party during each of the four preceding plan years was less than $1000) shall not be considered an Employee.
1.16	ERISA
	“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations and rulings in effect thereunder from time to time.
1.17	Five-Percent Owner
	“Five Percent Owner” means:

Page 4 of 31

(a)	With respect to a corporation, any individual who owns (either directly or indirectly according to the rules of Code §318) more than 5% of the value of the outstanding stock of the corporation or stock processing more than 5% of the total combined voting power of all stock of the corporation.
(b)	With respect to a non-corporate entity, any individual who owns (either directly or indirectly according to rules similar to those of Code §318) more than 5% of the capital or profits interest in the entity.
(c)	An individual shall be a Five-Percent Owner for a particular year if such individual is a Five-Percent Owner at any time during such year.

1.18	Highly Compensated Employee
	“Highly Compensation Employee” means, for each Plan Year, an Employee who (a) was in the “top-paid group” during the immediately preceding Plan Year and had Compensation of $80,000 (as adjusted by the Secretary of the Treasury) or more during the immediately preceding Plan Year, or (b) is a Five-Percent Owner during the current Plan Year, or (c) was a Five-Percent Owner during the immediately preceding Plan Year. The term “top-paid group” means the top 20% of Employees when ranked on the basis of Compensation paid during the year. In determining the number of Employees in the top-paid group, the Committee may elect to exclude Employees with less than six (or some smaller number of) months of service at the end of the year, Employees who normally work less than 171/2 (or some fewer number of) hours per week, Employees who normally work less than six (or some fewer number of) months during any year, Employees younger than 21 (or some younger age) on the last day of the year, and Employees who are nonresident aliens who receive no earned income (within the meaning of Code §911(d)(2)) from Apache or an Affiliated Entity that constitutes income from sources within the United States, within the meaning of Code §861(a)(3). Furthermore, an Employee who is a nonresident alien who receives no earned income (within the meaning of Code §911(d)(2)) from Apache or an Affiliated Entity that constitutes income from sources within the United States (within the meaning of Code §861(a)(3)) during the year shall not be in the top-paid group for that year.
1.19	Key Employee
	“Key Employee” means an individual described in Code §416(i)(1) and the regulations promulgated thereunder.
1.20	Lapse in Apache Employment
	“Lapse in Apache Employment” has the meaning described in subsection 5.3(c).
1.21	Limitation Year
	“Limitation Year” means the calendar year.
1.22	Non-Highly Compensated Employee
	“Non-Highly Compensated Employee” means an Employee who is not a Highly Compensated Employee.
1.23	Non-Key Employee
	“Non-Key Employee” means an Employee who is not a Key Employee.
1.24	Normal Retirement Age
	“Normal Retirement Age” means age 65.
1.25	Participant
	“Participant” means any individual with an account balance under the Plan except beneficiaries and Alternate Payees. The term “Participant” shall also include any individual who has accrued a benefit pursuant to subsection 3.1(a), but who does not yet have an Account balance.
1.26	Period of Service
	“Period of Service” has the meaning described in subsection 5.3(a).

Page 5 of 31

1.27	Plan Year
	“Plan Year” means the 12-month period on which the records of the Plan are kept, which shall be the calendar year.
1.28	QDRO
	“QDRO,” which is an acronym for qualified domestic relations order, means a Domestic Relations Order that creates or recognizes the existence of an Alternate Payee’s right to, or assigns to an Alternate Payee the right to, receive all or a portion of the benefits payable with respect to a Participant under the Plan and with respect to which the requirements of Code §414(p) and ERISA §206(d)(3) are met.
1.29	QJSA
	“QJSA,” which is an acronym for qualified joint and survivor annuity, means:

(a)	For a married Participant, a QJSA is an annuity that will provide equal monthly payments to the Participant for life, and if the Participant dies before his Spouse, the surviving Spouse shall receive monthly payments for her life, with each monthly payment equal to 50% of the monthly payment that the Participant received before his death.
(b)	For an unmarried Participant, a QJSA is an annuity that will provide equal monthly payments to the Participant for life.

1.30	QPSA
	“QPSA,” which is an acronym for qualified pre-retirement survivor annuity, means an annuity that will provide equal monthly payments to the surviving Spouse of a Participant, for the life of the surviving Spouse.
1.31	Required Beginning Date
	“Required Beginning Date” means:

(a)	Excepted as provided in subsections (b) and (c), Required Beginning Date means April 1 of the calendar year following the later of (i) the calendar year in which the Participant attains age 701/2, or (ii) the calendar year in which the Participant terminates employment with Apache and all Affiliated Entities.
(b)	For a Participant who is both an Employee and a Five-Percent Owner of Apache or an Affiliated Entity, the term “Required Beginning Date” means April 1 of the calendar year following the calendar year in which the Five-Percent Owner attains age 701/2. If an Employee older than 701/2 becomes a Five-Percent Owner, his Required Beginning Date shall be April 1 of the calendar year following the calendar year in which he becomes a Five-Percent Owner.
(c)	If a Participant is rehired after his Required Beginning Date, and he is not a Five-Percent Owner, he shall be treated upon rehire as if he has not yet had a Required Beginning Date, with the result that his minimum required distributions under subsection 6.4(c) will be zero until his new Required Beginning Date. His new Required Beginning Date shall be determined pursuant to subsection (a).

1.32	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.
1.33	Termination from Service Date
	“Termination from Service Date” has the meaning described in subsection 5.3(b).
1.34	Valuation Date
	“Valuation Date” means the last day of each Plan Year and any other dates as specified in section 4.2 as of which the assets of the Trust Fund are valued at fair market value and as of which the increase or decrease in the net worth of the Trust Fund is allocated among the Participants’ Accounts.

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ARTICLE II Participation

2.1	Participation.
	Each Covered Employee shall be eligible to participate in the Plan on the day he becomes a Covered Employee. A Covered Employee shall cease to accrue benefits in the Plan on the day he ceases to be a Covered Employee.
2.2	Enrollment Procedure.
	Notwithstanding section 2.1, a Covered Employee shall not be eligible to participate in the Plan until after completing the enrollment procedures specified by the Committee. Such enrollment procedures may, for example, require the Covered Employee to complete and sign an enrollment form or to complete an on-line enrollment. The Covered Employee shall provide all information requested by the Committee, such as the initial investment direction, the address and date of birth of the Employee, and the name, address, and date of birth of each beneficiary of the Employee. The Committee may require that the enrollment procedure be completed a certain number of days prior to the date any Company Contribution is allocated to the Covered Employee’s Account.

ARTICLE III Contributions

3.1 Company Contributions.

(a) Company Mandatory Contributions.

(i)

General. For each Plan Year, the Company shall contribute to the Trust Fund such amount of Company Mandatory Contributions as are necessary to fund the allocations described in this subsection. The Company may elect to treat any available forfeitures as Company Mandatory Contributions, pursuant to subsection 5.4(d).

(ii)

Regular Allocation. Each “eligible Participant” shall receive an allocation of Company Mandatory Contributions equal to 6% of the eligible Participant’s Compensation. For purposes of this subsection, an “eligible Participant” is a Participant who received credit for one Hour of Service as a Covered Employee during the Plan Year and who is employed by the Company or an Affiliated Entity on the last day of the Plan Year.

(b) Miscellaneous Contributions.

(i)	Forfeiture Restoration. The Company may make additional contributions to the Plan to restore amounts forfeited from the Accounts of certain rehired Participants, pursuant to section 5.4. This additional contribution shall be required only when the available forfeitures are insufficient to restore such forfeited amounts, as described in subsection 5.4(d).
(ii)	Top-Heavy Contribution. The Company may make additional contributions to the Plan to satisfy the minimum contribution required by section 11.4. The Company may elect to use any available forfeitures for this purpose, pursuant to subsection 5.4(d).
(iii)	Missing Individuals. The Company may make additional contributions to the Plan to restore the forfeited benefit of any missing individual, pursuant to section 12.12. This additional contribution shall be required only when the available forfeitures are insufficient to restore such forfeited amounts, as described in subsection 5.4(d).
(iv)	Returning Servicemen. The Company may make additional contributions to the Plan to provide make-up contributions for returning servicemen, pursuant to section 13.4. The Company may elect to use any available forfeitures for this purpose, pursuant to subsection 5.4(d).

(c) Contributions Contingent on Deductibility. The Company Contributions for a Plan Year (excluding forfeitures and contributions pursuant to paragraph 3.1(b)(iv)) shall not exceed the amount allowable as a deduction for Apache’s taxable year ending with or within the Plan Year pursuant to Code §404. Company Contributions (excluding contributions pursuant to paragraph 3.1(b)(iv) and any special contributions described in any paragraph of subsection 3.1(a) after paragraph (ii)) shall be paid to the Trustee no later than the due date (including any extensions) for filing the Company’s federal income

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tax return for such year. Company Contributions shall be made without regard to current or accumulated earnings and profits. The Company shall pay Company Contributions to the Trust Fund in the form of cash.

3.2	Participant Contributions.
	Participants may not contribute to this Plan. The Plan does not accept rollovers or direct transfers.
3.3	Return of Contributions.

(a)	Mistake of Fact. Upon the request of the Company, the Trustee shall return to the Company any Company Contribution made under a mistake of fact. The Trustee may not return any such contribution later than one year after the Trustee received the contribution. The amount returned shall not exceed the excess of the amount contributed (reduced to reflect any decrease in the net worth of the appropriate Accounts attributable thereto) over the amount that would have been contributed without the mistake of fact. Appropriate reductions shall be made in the Accounts of Participants to reflect the return of any contributions previously credited to such Accounts.
(b)	Non-Deductible Contributions. Upon the request of the Company, the Trustee shall return to the Company any Company Contribution that is not deductible under Code §404. All contributions under the Plan are expressly conditioned upon their deductibility for federal income tax purposes. The amount that shall be returned shall be the excess of the amount contributed (reduced to reflect any decrease in the net worth of the appropriate Accounts attributable thereto) over the amount that would have been contributed if there had not been a mistake in determining the deduction. Appropriate reductions shall be made in the Accounts of Participants to reflect the return of any contributions previously credited to such Accounts. Any contribution conditioned on its deductibility shall be returned only if it is returned within one year after it is disallowed as a deduction.
(c)	Effect of Correction. A contribution shall be returned under subsection (a) or (b) only to the extent that its return will not reduce the Account of a Participant to an amount less than the balance that would have been credited to the Participant’s Account had the contribution not been made.

3.4 Limitation on Annual Additions.

(a)

Limit. The Annual Additions to a Participant’s Account(s) in this Plan and to his accounts in any other defined contribution plans maintained by the Company or an Affiliated Entity for any Limitation Year shall not exceed in the aggregate the lesser of (i) $40,000 (as adjusted by the Secretary of the Treasury), or (ii) 100% of the Participant’s Compensation. The limit in clause (ii) shall not apply to any contribution for medical benefits (within the meaning of Code §419A(f)(2)) after separation from service that is treated as an Annual Addition.

(b)

Corrective Mechanism.

(i)

Reduction in Annual Additions. A Participant’s Annual Additions shall be reduced, to the extent necessary to satisfy the foregoing limits, if the Annual Additions arose as a result of a reasonable error in estimating Compensation, as a result of the allocation of forfeitures, or as a result of other facts and circumstances as provided in the regulations under Code §415.

(ii)

Order of Reduction, Multiple Plans. Apache also maintains the Apache Corporation 401(k) Savings Plan, a profit sharing plan containing a cash or deferred arrangement. The Participant’s Annual Additions shall be reduced, to the extent necessary, in the following order. First, to the extent that the Annual Additions in a single plan exceed the limits of subsection (a), the Annual Additions in that plan shall be reduced, in the order specified in that plan, to the extent necessary to satisfy the limits of subsection (a). Then, if the Participant has Annual Additions in more than one plan and in the aggregate they exceed the limits of subsection (a), the Annual Additions will be reduced as follows.

(A) If the Participant was eligible to participate in the Non-Qualified Retirement/Savings Plan of Apache Corporation on the last day of the Plan Year in which the excess Annual Addition occurred, the Annual Additions to this Plan will be reduced before the Annual Additions to the Apache Corporation 401(k) Savings Plan are reduced, in the order specified in that plan.

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(B) If the Participant was not eligible to participate in the Non-Qualified Retirement/Savings Plan of Apache Corporation on the last day of the Plan Year in which the excess Annual Addition occurred, the Annual Additions to the Apache Corporation 401(k) Savings Plan shall be reduced, in the order specified in that plan before the Annual Additions to this Plan are reduced.

(iii) Disposition of Excess Annual Additions. Any reduction of Company Contributions shall be placed in a suspense account in the Trust Fund and used to reduce future Company Contributions to the Plan. The following rules shall apply to such suspense account: (A) no further Company Contributions may be made if the allocation thereof would be precluded by Code §415; (B) any increase or decrease in the net value of the Trust Fund attributable to the suspense account shall not be allocated to the suspense account, but shall be allocated to the Accounts; and (C) all amounts held in the suspense account shall be allocated as of each succeeding allocation date on which forfeitures may be allocated pursuant to subsection 5.4(d) (and may be allocated more frequently if the Committee so directs), until the suspense account is exhausted.

ARTICLE IV Interests in the Trust Fund

4.1	Participants’ Accounts.
	The Committee shall establish and maintain a separate Account in the name of each Participant, but the maintenance of such Accounts shall not require any segregation of assets of the Trust Fund. Each Account shall contain the Company Contributions allocated to the Participant and the increase or decrease in the net worth of the Trust Fund attributable to such contributions.
4.2	Valuation of Trust Fund.

(a)	General. The Trustee shall value the assets of the Trust Fund at least annually as of the last day of the Plan Year, and as of any other dates determined by the Committee, at their current fair market value and determine the net worth of the Trust Fund. In addition, the Committee may direct the Trustee to have a special valuation of the assets of the Trust Fund when the Committee determines, in its sole discretion, that such valuation is necessary or appropriate or in the event of unusual market fluctuations of such assets. Such special valuation shall not include any contributions made by Participants since the preceding Valuation Date, any Company Contributions for the current Plan Year, or any unallocated forfeitures. The Trustee shall allocate the expenses of the Trust Fund occurring since the preceding Valuation Date, pursuant to section 8.2, and then determine the increase or decrease in the net worth of the Trust Fund that has occurred since the preceding Valuation Date. The Trustee shall determine the share of the increase of decrease that is attributable to the non-separately accounted for portion of the Trust Fund and to any amount separately accounted for, as described in subsections (b) and (c).
(b)	Mandatory Separate Accounting. The Trustee shall separately account for (i) any individually directed investments permitted under section 8.3, and (ii) amounts subject to a Domestic Relations Order.
(c)	Permissible Separate Accounting. The Trustee may separately account for the following amounts to provide a more equitable allocation of any increase or decrease in the net worth of the Trust Fund:

(i)	The distributable amount of a Participant, including any amount distributable to an Alternate Payee or to a beneficiary of a deceased Participant; and
(ii)	Company Contributions made since the preceding Valuation Date;
(iii)	Any other amounts for which separate accounting will provide a more equitable allocation of the increase or decrease in the net worth of the Trust Fund.

4.3	Allocation of Increase or Decrease in Net Worth.
	The Committee shall, as of each Valuation Date, allocate the increase or decrease in the net worth of the Trust Fund that has occurred since the preceding Valuation Date between the non-separately accounted for portion of the Trust Fund and the amounts separately accounted for that are identified in subsections 4.2(b)

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and 4.2(c). The increase or decrease attributable to the non-separately accounted for portion of the Trust Fund shall be allocated among the appropriate Accounts in the ratio that the dollar value of each such Account bore to the aggregate dollar value of all such Accounts on the preceding Valuation Date after all allocations and credits made as of such date had been completed. The Committee shall then allocate any amounts separately accounted for (including the increase or decrease in the net worth of the Trust Fund attributable to such amounts) to the appropriate Account.

ARTICLE V Amount of Benefits

5.1 Vesting Schedule.

(a) General Rule. Unless subsection (b), (c), or (d) provide for faster vesting, a Participant’s interest in his Account shall become vested in accordance with the following schedule:

Period of Service	Vesting Percentage
Less than 1 year		0	%
At least 1 year, but less than 2 years		20	%
At least 2 year, but less than 3 years		40	%
At least 3 year, but less than 4 years		60	%
At least 4 year, but less than 5 years		80	%
5 or more years		100	%

(b)	Full Vesting in Certain Circumstances. A Participant shall have a fully vested and nonforfeitable interest in his Account (i) upon his Normal Retirement Age if he is an Employee on such date, (ii) upon his death while an Employee or while on an approved leave of absence from the Company or an Affiliated Entity, or (iii) upon his termination of employment with the Company or an Affiliated Entity because of a Disability.
(c)	Change of Control. The Accounts of all Participants shall be fully vested as of the effective date of a “change in control.” For purposes of this subsection, a “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 Apache’s outstanding voting securities; provided that a change of control shall not occur if such persons, partnerships, or corporations acquiring more than 20% of Apache’s voting securities is solicited to do so by Apache’s board of directors, upon its own initiative, and such persons, partnerships, or corporations have not previously proposed to acquire more than 20% of Apache’s voting securities in an unsolicited offer made either to Apache’s board of directors or directly to the stockholders of Apache.
(d)	Plan Termination. A Company Contributions Account shall be fully vested as described in section 9.1, which discusses the full or partial termination of the Plan.

5.2 Vesting After a Lapse in Apache Employment.

(a)	Separate Accounts. If a Participant is rehired before incurring a one-year Lapse in Apache Employment, he shall have only one Account, and its vested percentage shall be determined under section 5.1. If a Participant is rehired after incurring a one-year Lapse in Apache Employment, he shall have two Accounts, an “old” Account for the contributions from his earlier episode of employment, and a “new” Account for his later episode of employment. If both the old and new Accounts are fully vested, they shall be combined into a single Account.
(b)	Vesting of New Account. This subsection is effective January 1, 2006. The vested percentage of the new Account shall be determined based on all the Participant’s Periods of Service.
(c)	Vesting of Old Account. If the Participant’s Lapse in Apache Employment was for five years or longer, the vested percentage of the old Account shall be based solely on the Participant’s Period of Service from his first episode of employment. If the Participant’s Lapse in Apache Employment was for less than five years, the vested percentage of the old Account shall be determined by aggregating his Periods of Service from both episodes of employment.

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5.3 Calculating Service.

(a) Period of Service.

(i)

General. A Participant’s Period of Service prior to January 1, 2005 shall be determined according to the provisions of the Plan in effect when the service was rendered. A Participant’s Period of Service begins on the date he first begins to perform duties as an Employee for which he is entitled to payment, and ends on his Termination From Service Date. In addition, a Participant’s Period of Service also includes the period between his Termination From Service Date and the day he again begins to perform duties for the Company or an Affiliated Entity for which he is entitled to payment, but only if such period is less than one year in duration.

(ii)

Additional Rules. The service-crediting provisions in this paragraph are more generous than required by the Code.

(A)	Leased Employees. For vesting purposes only, the Plan shall treat an individual as an Employee if he satisfies all the requirements specified in Code §414(n)(2) for being a leased employee of Apache’s or an Affiliated Entity’s, except for the requirement of having performed such services for at least one year.
(B)	Approved Leave. If the Employee is absent from the Company or Affiliated Entity for more than one year because of an approved leave of absence (either with or without pay) for any reason (including, but not limited to, jury duty) and the Employee returns to work at or prior to the expiration of his leave of absence, no Termination From Service Date will occur during the leave of absence.
(C)	Servicemen. See Article XIII for special provisions that apply to Servicemen.
(D)	Corporate Transactions. See Appendix C for instances in which a new Employee’s Period of Service includes his prior employment with another company.
(E)	Contractors. If an “eligible contractor” becomes an Employee, his Period of Service shall include his previous continuous service as an eligible contractor, excluding any service provided before 2003. An “eligible contractor” is an individual who (A) performed services for Apache or an Affiliated Entity on a substantially full-time basis in the capacity of an independent contractor (for federal income tax purposes); (B) became an Employee within a month of ceasing to be an independent contractor working full-time for Apache or an Affiliated Entity; and (C) notified the Plan of his prior service as an independent contractor within two months of becoming an Employee (or, if later, by February 28, 2006 or such other deadline established by the Committee).

(b) Termination From Service Date.

(i)

Usual Rule. If the Employee quits, is discharged, retires, or dies, his Termination From Service Date occurs on the last day the Employee performs services for the Company or an Affiliated Entity, except for an Employee who incurs a Disability, in which case his Termination From Service Date does not occur, even if he quits, until the earlier of the one-year anniversary of the date his Disability or the date he recovers from his Disability.

(ii)

Other Absences. If an Employee is absent from the Company and Affiliated Entities for any reason other than a quit, discharge, or retirement, his “Termination From Service Date” is the earlier of (A) the date he quits, is discharged, retires, or dies, or (B) one year from the date the Employee is absent from the Company or Affiliated Entity for any other reason (such as vacation, holiday, sickness, disability, leave of absence, or temporary lay-off), with the following exception. If the Employee is absent from the Company or Affiliated Entity because of parental leave (which includes only the pregnancy of the Employee, the birth of the Employee’s child, the placement of a child with the Employee in connection with adoption of such child by the Employee, or the caring for such child immediately following birth or placement) on the first anniversary of the day the Employee was first absent, his Termination From Service Date does not occur until the second anniversary of the day he was first absent

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(and the period between the first and second anniversaries of the day he was first absent shall not be counted in his Period of Service).

(c) Lapse in Apache Employment. A Lapse in Apache Employment means the period commencing on an individual’s Termination from Service Date and ending on the date he again begins to perform services as an Employee.

5.4 Forfeitures.

(a) Exceptions to the Vesting Rules. The following rules supersede the vesting rules of section 5.1.

(i)	Excess Annual Additions. Annual Additions to a Participant’s Accounts and any increase or decrease in the net worth of the Participant’s Accounts attributable to such Annual Additions may be reduced to satisfy the limits described in section 3.4. Any reduction shall be used as specified in section 3.4.
(ii)	Missing Individuals. A missing individual’s vested Accounts may be forfeited as of the last day of any Plan Year, as provided in section 13.12. Any such forfeiture shall be used as specified in subsection (d).

(b)	Regular Forfeitures. A Participant’s non-vested interest in his Account shall be forfeited at the end of the Plan Year in which the Participant terminates employment. Any such forfeiture shall be used as specified in subsection (d).
(c)	Restoration of Forfeitures.

(i)	Missing Individuals. The forfeiture of a missing individual’s Account(s), as described in section 13.12, shall be restored to such individual if the individual makes a claim for such amount.
(ii)	Regular Forfeitures.

(A)

Rehire Within 5 Years. If a Participant is rehired before incurring a five-year Lapse in Apache Employment, and the Participant has received a distribution of his entire vested interest in his Account (with the result that he forfeited his non-vested interest in such Account), then the exact amount of the forfeiture shall be restored to his Account. All the rights, benefits, and features available to the Participant when the forfeiture occurred shall be available with respect to the restored forfeiture. If such a Participant again terminates employment prior to becoming fully vested in his Account, the vested portion of his Account shall be determined by applying the vested percentage determined under section 5.1 to the sum of (x) and (y), then subtracting (y) from such sum, where: (x) is the value of his Account as of the Valuation Date immediately following his most recent termination of employment; and (y) is the amount previously distributed to the Participant on account of the prior termination of employment.

(B)

Rehire After 5 Years. If a Participant is rehired after incurring a five-year Lapse in Apache Employment, then no amount forfeited from his Account shall be restored to his Account.

(iii) Method of Forfeiture Restoration. Forfeitures that are restored shall be accomplished by an allocation of the forfeitures under subsection (d) or by a special Company Contribution pursuant to paragraph 3.1(b)(i).

(d) Use of Forfeitures. The Committee shall decide how forfeitures are used. Forfeitures may be used (i) to restore Accounts as described in subsection (c), (ii) to pay those expenses of the Plan that are properly payable from the Trust Fund and that are not paid by the Company or Account Owners or charged to Accounts, or (iii) as any Company Contribution.

5.5	Transfers — Portability.
	If any other employer adopts this or a similar money purchase pension plan and enters into a reciprocal agreement with the Company that provides that (a) the transfer of a Participant from such employer to the Company (or vice versa) shall not be deemed a termination of employment for purposes of the plans, and (b)

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service with either or both employers shall be credited for purposes of vesting under both plans, then the transferred Participant’s Account shall be unaffected by the transfer, except, if deemed advisable by the Committee, it may be transferred to the trustee of the other plan.

ARTICLE VI Distribution of Benefits

6.1 Beneficiaries.

(a)	Designating Beneficiaries. Each Account Owner shall file with the Committee a designation of the beneficiaries and contingent beneficiaries to whom the distributable amount (determined pursuant to section 6.2) shall be paid in the event of the Account Owner’s death. In the absence of an effective beneficiary designation as to any portion of the distributable amount after a Participant dies, such amount shall be paid to the Participant’s surviving Spouse, or, if none, to his estate. In the absence of an effective beneficiary designation as to any portion of the distributable amount after any non-Participant Account Owner dies, such amount shall be paid to the Account Owner’s estate. The Account Owner may change a beneficiary designation at any time and without the consent of any previously designated beneficiary.
(b)	Special Rule for Married Participants. If the Account Owner is a married Participant, his Spouse shall be the sole beneficiary unless the 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. The Spouse must also consent to waive the QPSA with respect to the benefits payable to another beneficiary, as described in subsection (c). The Spouse cannot revoke her consent to waive the QPSA. Any spousal consent shall be effective only as to the Spouse who signed the consent.
(c)	Waiver of QPSA.

(i)	General. In order for the QPSA to be waived, the Participant must be provided with an explanation of the QPSA and then elect to waive the QPSA (which the Participant may do by naming a beneficiary other than his Spouse) and the Spouse must consent to the Participant’s election.
(ii)	Spouse’s Consent. The Spouse’s consent must be in writing. The Spouse’s signature must be witnessed by a Committee representative of by a notary public. The Spouse must acknowledge the effect of the consent. The Spouse may limit her consent to a specific beneficiary or may allow the Participant to thereafter designate a different beneficiary. The Spouse may limit her consent to a specific form of benefit. (The Spouse’s consent is not needed if the Spouse cannot be located or in certain other special circumstances identified in IRS guidance of general applicability.)
(iii)	Timing of Waiver. The Participant may waive the QPSA, or revoke the QPSA waiver, at any time; however, if the Participant elects to waive the QPSA, with the consent of his Spouse, before the first day of the Plan Year in which the Participant attains age 35, the waiver shall become invalid on the first day of the Plan Year in which the Participant attains age 35.
(iv)	Explanation. The Committee shall provide the Participant with a written explanation that describes the terms and conditions of the QPSA, the Participant’s right to choose another beneficiary, the rights of the Participant’s Spouse to insist upon a QPSA, the Participant’s right to revoke his election, and such other information as may be required under IRS guidance of general applicability. The written explanation must be provided within the following time limits. If the Participant terminates employment prior to age 35, the explanation must be provided within the period beginning one year before and ending one year after the termination of employment. If the Participant terminates employment on or after age 35, the explanation must be provided within the one of the following periods (whichever period ends last): (i) the period beginning on the first day of the Plan Year in which the Participant attains age 32 and ending on the last day of the Plan Year in which the Participant attains age 34; (ii) the period beginning one year before, and ending one year after, the Participant first becomes eligible to participate in the Plan; and (iii) the period beginning one year before, and ending one year after, a married Participant is fully or partially vested in his Account (which will normally occur either

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when the Participant gets married or when the Participant completes a one-year Period of Service).

(d)

Special Rule for Divorces. If an Account Owner has designated his spouse as a primary or contingent beneficiary, and the Account Owner and spouse later divorce (or their marriage is annulled), then the former spouse will be treated as having pre-deceased the Account Owner for purposes of interpreting a beneficiary designation form completed prior to the divorce or annulment. This subsection (d) will apply only if the Committee is informed of the divorce or annulment before payment to the former spouse is authorized.

(e)

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 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.

6.2	Distributable Amount.
	The distributable amount of a Participant’s Account is the vested portion of the Account, reduced by any amount that is payable to an Alternate Payee pursuant to section 12.9. Furthermore, the Committee may temporarily suspend or limit distributions (by reducing the distributable amount), as explained in subsections 12.9(e), 12.9(g), or 12.9(h), (a) when the Committee is informed that a QDRO affecting the Participant’s Accounts is in process or may be in process, (b) while the Committee believes that the Plan may have a cause of action against the Participant, or (c) when the Plan has notice of a lien or other claim against the Participant’s Accounts.
6.3	Manner of Distribution.

(a) Participants. This subsection shall apply to distributions to Participants.

(i)

Form of Distribution. The distributable amount shall be paid in the form of either a single payment or a QJSA, except that a distribution of a small account under subsection 6.4(d) shall be paid in the form of a single payment. The distribution to a Participant shall be in the form of a QJSA unless the Participant elects a single payment and, if the Participant is married, his Spouse consents to the single payment.

(ii)

Consent of Participant and Spouse.

(A)

General. Except as provided in subparagraph (B), a distribution shall not be made unless the Participant consents to the timing of the distribution no more than 180 days before the distribution. If the Participant is married and chooses a single payment, the Participant’s Spouse must consent to both the form of payment and the time of the payment no more than 180 days before the payment, except as provided in subparagraph (B).

(B)

Exceptions to General Rule. The consent of the Participant is not required, nor is the consent of a married Participant’s Spouse required, for distributions of small amounts pursuant to subsection 6.4(d) or for the distribution of an annuity upon the Participant’s Required Beginning Date, as described in subsection 6.4(c).

(iii)

Method of Spouse’s Consent. The consent of a Participant’s Spouse must be in writing. The consent is not valid unless the Committee has provided the written explanation described in paragraph (iv). The Spouse must acknowledge the affect of his consent. The Spouse’s consent must be witnessed by a Committee member or by a notary public. The Spouse may limit his consent to a specific beneficiary or may allow the Participant to thereafter designate a different beneficiary. The Spouse may limit his consent to a specific form of benefit. (The Spouse’s consent is not needed if the Spouse cannot be located or in certain other special circumstances identified in IRS guidance.)

(iv)

Distribution Procedure.

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(A)	General. The Committee shall provide the Participant with a written explanation that contains the information required by the Code and Treasury Regulations, as explained in subparagraph (B). The timing of the explanation, the consent, and the distribution are discussed in subparagraph (C). The Participant may revoke his election at any time before the distribution is processed.
(B)	Contents of Explanation. The information in the explanation shall include, at a minimum, the terms and conditions of the QJSA, the Participant’s right to elect a single payment in lieu of a QJSA, the effect of the Participant electing a single payment in lieu of a QJSA, the right of the Participant’s Spouse to insist upon a QJSA, the Participant’s right to revoke his distribution election, and such other information as may be required under IRS guidance of general applicability.
(C)	Timing. The explanation shall be provided no more than 180 days before the annuity starting date. The explanation shall be provided no fewer than 30 days before the annuity starting date, unless all the following conditions are satisfied (1) the Participant affirmatively elects a single sum distribution (and the Participant’s Spouse, if any, consents), (2) the explanation mentions that the Participant has a right to at least 30 days to consider whether to waive the QJSA and consent to a single sum, and (3) the Participant is permitted to revoke an affirmative distribution election until the annuity starting date (or, if later, the 8th day after the Participant is provided with the explanation).
(D)	Annuity Starting Date. The annuity starting date, for a single sum payment, is the date the payment is processed, which may be any business day. The annuity starting date for a QJSA is the day as of which the annuity payments begin. The annuity starting date for an annuity must be the first day of a month, must occur on or after the Participant’s termination of employment or 62nd birthday, must occur after the date the explanation is provided, but may precede the date the Participant provides any affirmative distribution election. In any event, the first payment from the annuity shall not precede the 8th day after the explanation is provided.

(b)	Beneficiaries. The distributable amount that is left to a beneficiary shall be paid, at the election of the beneficiary, in the form of a single payment, installments (for non-Spouse beneficiaries), or an annuity (for Spouse beneficiaries), as described in subsection 6.4(e).
(c)	Alternate Payees. If the Alternate Payee is not the Participant’s Spouse or former spouse, the amount assigned to the Alternate Payee shall be paid in the form of a single payment. If the Alternate Payee is the Participant’s Spouse or former spouse, then unless the next sentence applies, the amount assigned to an Alternate Payee shall be paid, at the election of the Alternate Payee or as specified in the QDRO, in the form of either a single payment or an annuity for the life of the Alternate Payee. If the amount assigned to the Alternate Payee is $5,000 or less (calculated in accordance with the applicable Treasury regulations), then the Alternate Payee shall receive a single sum distribution.
(d)	Annuities. If the distribution is to be in the form of an annuity, the Plan shall purchase an annuity contract that satisfies the requirements specified in the Plan and in Code §401(a)(11) and §417, and shall distribute such contract to the distributee. The payments under an annuity shall begin as soon as administratively practicable after the annuity contract is distributed. The payments shall remain constant for the duration of the annuity, except for a QJSA where the Spouse outlives the Participant, in which case the payments are halved when the Participant dies.

6.4 Time of Distribution.

(a) Earliest Date of Distribution. Unless an earlier distribution is permitted by subsection (b) or required by subsection (c), the earliest date that a Participant may elect to receive a distribution is as follows.

(i)	Termination of Employment or Disability. A Participant may elect to receive a distribution as soon as practicable after he terminates employment or incurs a Disability.
(ii)	During Employment. A Participant may obtain a distribution while an Employee only if he has attained age 62. After attaining age 62, and while an Employee, the Participant may withdraw all or any portion of his vested Account. The minimum withdrawal shall be $1,000 or, if less,

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the balance of the Account. Only two withdrawals are permitted each Plan Year under this paragraph. After an Employee’s Required Beginning Date, subsection (c) shall apply instead of this paragraph.

(b)	Alternate Earliest Date of Distribution. Notwithstanding subsection (a), unless a Participant elects otherwise, his distribution shall commence no later than 60 days after the close of the latest of: (i) the Plan Year in which the Participant attains Normal Retirement Age; (ii) the Plan Year in which occurs the tenth anniversary of the year in which the Participant commenced participation in the Plan; and (iii) the Plan Year in which the Participant terminates employment with the Company and Affiliated Entities. If a Participant does not affirmatively elect a distribution, he shall be deemed to have elected to defer the distribution to a date later than that specified in the preceding sentence.
(c)	Latest Date of Distribution. The entire distributable amount shall be distributed to a Participant (i) in a single payment no later than his Required Beginning Date, or (ii) in a QJSA with payments beginning no later than his Required Beginning Date. The payment will be in the form of a QJSA unless the Participant elects a single payment and, if the Participant is married, his Spouse consents to the single payment.
(d)	Small Amounts. This section is effective as of March 28, 2005.

(i)	$1000 or Less. If the value of the nonforfeitable portion of a Participant’s Account is $1,000 or less at any time after the Participant’s termination of employment, the Participant shall receive a single payment of the distributable amount as soon as administratively practicable, provided that the value is $1,000 or less when the distribution is processed.
(ii)	$1000 to $5000. If paragraph (i) does not apply and the value of the nonforfeitable portion of a Participant’s Account is $5,000 or less on any date after his termination of employment, then as soon as practicable the Plan shall pay the distributable amount to an individual retirement account or annuity within the meaning of Code §408(a) or §408(b) (collectively, an “IRA”) for the Participant, unless the Participant affirmatively elects to receive the distribution directly or to have it paid in a direct rollover under section 6.5. The Committee shall select the trustee or custodian of the IRA as well as how the IRA shall be invested initially. The Plan shall notify the Participant (A) that the distribution has been made to an IRA and can be transferred to another IRA, (B) of the identity and contact information of the trustee or custodian of the IRA into which the distribution is made, and (C) of such other information as required to comply with Code §401(a)(31)(B)(i).
(iii)	Date Account Valued. The Committee may elect to check the value of the Participant’s Account on an occasional (rather than a daily) basis, to determine whether to apply the provisions of this subsection.

(e) Distribution Upon Participant’s Death.

(i)

Small Accounts. If the value of the nonforfeitable portion of a Participant’s Account is $5,000 or less at any time after the Participant’s death and before any beneficiary elects to receive a distribution under this subsection, then each beneficiary shall each receive a single payment of his share of the distributable amount as soon as administratively practicable, provided that the aggregate value is $5,000 or less when the distribution is processed. The Committee may elect to check the value of the Participants’ Accounts on an occasional (rather than a daily) basis to determine whether to apply the provisions of this subsection.

(ii)

Larger Accounts. If paragraph (i) does not apply, then each beneficiary may elect to have his distributable amount distributed at any time after the Participant’s death, within the following guidelines. The forms of permitted distribution are a lump sum, annual installments, and, for Spouse beneficiaries only, a QPSA. No distribution shall be processed until the beneficiary’s identity as a beneficiary is established. The entire distributable amount shall be distributed by the last day of the calendar year containing the fifth anniversary of the Participant’s death; if a Spouse beneficiary elects a QPSA, the annuity contract shall be distributed by the last day of the calendar year containing the fifth anniversary of the Participant’s death. A beneficiary who elects installments may elect to accelerate any or all remaining payments. In addition, if the

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Participant was a Five-Percent Owner who began to receive the minimum required distributions under subsection (c), the distribution to each beneficiary must be made at least as rapidly as required by the method used to calculate the minimum required distributions that was in effect when the Five-Percent Owner died.

(f) Alternate Payee. Distributions to Alternate Payees and their beneficiaries shall be made as specified in section 12.9.

6.5 Direct Rollover Election.

(a)	General Rule. A Participant, an Alternate Payee who is the Spouse or former Spouse of the Participant, or any individual who is treated as the designated beneficiary of the Participant pursuant to Code §4014(a)(9)(E) (collectively, the “distributee”) may direct the Trustee to pay all or any portion of his “eligible rollover distribution” to an “eligible retirement plan” in a “direct rollover.” This direct rollover option is not available to other Account Owners (beneficiaries who are not individuals and Alternate Payees who are not the Spouse or former Spouse of the Participant). Within a reasonable period of time before an eligible rollover distribution, the Committee shall inform the distributee of this direct rollover option, the appropriate withholding rules, other rollover options, the options regarding income taxation, and any other information required by Code §402(f). The distributee may waive the usual 30-day waiting period before receiving a distribution, and elect to receive his distribution as soon as administratively practicable after completing and filing his distribution election.
(b)	Definition of Eligible Rollover Distribution. An eligible rollover distribution is any distribution or in-service withdrawal other than (i) distributions required under Code §401(a)(9), (ii) distributions of amounts that have already been subject to federal income tax, other than a direct transfer to another retirement plan that meets the requirements of Code §401(a) or §403(a), or to an individual retirement account or annuity described in Code §408(a) or §408(b), (iii) installment payments in a series of substantially equal payments made at least annually and (A) made over a specified period of ten or more years, (B) made for the life or life expectancy of the distributee, or (C) made for the joint life or joint life expectancy of the distributee and his designated beneficiary, (iv) a distribution to satisfy the limits of Code §415, or (v) any other actual or deemed distribution specified in IRS guidance of general applicability issued under Code §402(c).
(c)	Definition of Eligible Retirement Plan. For an individual who is treated as the designated beneficiary of the Participant pursuant to Code §401(a)(9)(E), an eligible retirement plan is an individual retirement account or annuity described in Code §408(a) or §408(b) that is established for the purposes of receiving the distribution on behalf of the beneficiary, and that is treated as an inherited individual retirement account or annuity within the meaning of Code §408(d)(3)(C). For a Participant, an Alternate Payee who is the Spouse or former Spouse of the Participant, or a surviving Spouse of a deceased Participant, an eligible retirement plan is an individual retirement account or annuity described in Code §408(a) or §408(b), an annuity plan described in Code §403(a), an annuity contract described in Code §403(b), an eligible plan under Code §457(b) that is maintained by an eligible employer described in Code §457(e)(1)(A) (which generally includes state and local governments), or the qualified trust of a defined contribution plan described in Code §401(a), that accepts eligible rollover distributions.
(d)	Definition of Direct Rollover. A direct rollover is a payment by the Trustee to the eligible retirement plan specified by the distributee.

ARTICLE VII Allocation of Responsibilities — Named Fiduciaries

7.1

No Joint Fiduciary Responsibilities.

Trustee(s) and the Committee shall be the named fiduciaries under the Plan and Trust agreement and shall be the only named fiduciaries thereunder. The fiduciaries shall have only the responsibilities specifically allocated to them herein or in the Trust agreement. Such allocations are intended to be mutually exclusive and there shall be no sharing of fiduciary responsibilities. Whenever one named fiduciary is required by the Plan or Trust agreement to follow the directions of another named fiduciary, the two named fiduciaries shall not be deemed to have been assigned a shared responsibility, but the responsibility of the named fiduciary

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	giving the directions shall be deemed his sole responsibility, and the responsibility of the named fiduciary receiving those directions shall be to follow them insofar as the instructions are on their face proper under applicable law.
7.2	The Company.
	The Company shall be responsible for: (a) making Company Contributions; (b) certifying to the Trustee the names and specimen signatures of the members of the Committee acting from time to time; (c) keeping accurate books and records with respect to its Employees and the appropriate components of each Employee’s Compensation and furnishing such data to the Committee; (d) selecting agents and fiduciaries to operate and administer the Plan and Trust; (e) appointing an investment manager if it determines that one should be appointed; and (f) reviewing periodically the performance of such agents, managers, and fiduciaries.
7.3	The Trustee.
	The Trustee shall be responsible for: (a) the investment of the Trust Fund to the extent and in the manner provided in the Trust agreement; (b) the custody and preservation of Trust assets delivered to it; and (c) the payment of such amounts from the Trust Fund as the Committee shall direct.
7.4	The Committee — Plan Administrator.
	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. If the board of directors does not appoint a Committee, Apache shall act as the Committee under the Plan. The members of the Committee shall hold office at the pleasure of the board of directors and shall service without compensation. The Committee shall be the Plan’s “administrator” as defined in section 3(16)(A) of ERISA. It shall be responsible for establishing and implementing a funding policy consistent with the objectives of the Plan and with the requirements of ERISA. This responsibility shall include establishing (and revising as necessary) short-term and long-term goals and requirements pertaining to the financial condition of the Plan, communicating such goals and requirements to the persons responsible for the various aspects of the Plan operations, and monitoring periodically the implementation of such goals and requirements. The Committee shall publish and file or cause to be published and filed or disclosed all reports and disclosures required by federal or state laws.
7.5	Committee to Construe Plan.

(a)

The Committee shall administer the Plan and shall have all discretion, power, and authority necessary for that purpose, including, but not by way of limitation, the full and absolute discretion and power to interpret the Plan, to determine the eligibility, status, and rights of all individuals under the Plan, and in general to decide any dispute and all questions arising in connection with the Plan. The Committee shall direct the Trustee concerning all distributions from the Trust Fund, including the purchase of annuity contracts, in accordance with the provisions of the Plan, and shall have such other powers in the administration of the Trust Fund as may be conferred upon it by the Trust agreement. The Committee shall maintain all Plan records except records of the Trust Fund.

(b)

The Committee may adjust the Account of any Participant, in order to correct errors and rectify omissions, in such manner as the Committee believes will best result in the equitable and nondiscriminatory administration of the Plan.

7.6

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 the Committee shall determine any dispute. 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 small number of Participants including a Committee member, then such Committee member shall not participate in the Committee decision or action. The action of a majority of the disinterested Committee members shall constitute the action of the Committee.

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7.7	Agent for Process.
	Apache’s Vice President, General Counsel, and Secretary shall be the agents of the Plan for service of all process.
7.8	Indemnification of Committee Members.
	The Company shall indemnify and hold the members of the Committee, and each of them, harmless from the effects and consequences of their acts, omissions, and conduct in their official capacities, except to the extent that the effects and consequences thereof shall result from their own willful misconduct, breach of good faith, or gross negligence in the performance of their duties. The foregoing right of indemnification shall not be exclusive of the rights to which each such member may be entitled as a matter of law.
7.9	Conclusiveness of Action.
	Any action taken by the Committee on matters within the discretion of the Committee shall be conclusive, final and binding upon all participants in the Plan and upon all persons claiming any rights hereunder, including Alternate Payees and beneficiaries.
7.10	Payment of Expenses.
	The members of the Committee shall serve without compensation but the Company shall pay their reasonable expenses. The compensation or fees of accountants, counsel, and other specialists and any other costs of administering the Plan or Trust Fund may be paid by the Company or Account Owners or may be charged to the Trust Fund, to the extent permissible under the provisions of ERISA.

ARTICLE VIII Trust Agreement – Investments

8.1	Trust Agreement.
	Apache has entered into a Trust agreement to provide for the holding, investment, and administration of the funds of the Plan. The Trust agreement shall be part of the Plan, and the rights and duties of any individual under the Plan shall be subject to all terms and provisions of the Trust agreement.
8.2	Plan Expenses.

(a)

General. Except as provided in subsection (b), (i) all taxes upon or in respect of the Plan and Trust shall be paid out of Plan assets, and all expenses of administering the Plan and Trust shall be paid out of Plan assets, to the extent permitted by law and to the extent such taxes and expenses are not paid by the Company or an Account Owner, and (ii) the Committee shall have full discretion to determine how each tax or expense that is not paid by the Company shall be paid and the Committee shall have full discretion to determine how each tax or expense that is paid out of Plan assets shall be allocated. No fiduciary shall receive any compensation for services rendered to the Plan if the fiduciary is being compensated on a full time basis by the Company or an Affiliated Entity.

(b)

Individual Expenses. To the extent not paid by the Company or an Account Owner, all expenses of individually directed transactions, including without limitation the Trustee’s transaction fee, brokerage commissions, transfer taxes, interest on insurance policy loans, and any taxes and penalties that may be imposed as a result of an individual’s investment direction, shall be assessed against the Account of the Account Owner directing such transactions.

8.3 Investments.

(a)

§404(c) Plan. The Plan is intended to be a plan described in ERISA §404(c). To the extent that an Account Owner exercises control over the investment of his Accounts, no person who is a fiduciary shall be liable for any loss, or by reason of any breach, that is the direct and necessary result of the Account Owner’s exercise of control.

(b)

Directed Investments. Accounts shall be invested, upon the direction of each Account Owner made in a manner acceptable to the Committee, in any one or more of a series of investment funds designated by the Committee or to the extent permitted by the Committee in a brokerage arrangement. The funds available for investment and the principal features thereof, including a general description of the investment objectives, the risk and return characteristics, and the type and diversification of the

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	investment portfolio of each fund, shall be communicated to the Account Owners in the Plan from time to time. Any changes in such funds shall be immediately communicated to all Account Owners.
(c)	Absence of Directions. To the extent that an Account Owner fails to affirmatively direct the investment of his Accounts, the Committee shall direct the Trustee in writing concerning the investment of such Accounts. The Committee shall act by majority vote. Any dissenting member of the Committee shall, having registered his dissent in writing, thereafter cooperate to the extent necessary to implement the decision of the Committee.
(d)	Change in Investment Directions. Account Owners may change their investment directions, with respect to the investment of new contributions and with respect to the investment of existing amounts allocated to Accounts, on any business day, subject to any restrictions and limitations imposed by the Trustee, investment funds, or brokerage arrangement. The Committee shall establish procedures for giving investment directions, which shall be in writing and communicated to Account Owners.

ARTICLE IX Termination and Amendment

9.1	Termination of Plan or Discontinuance of Contributions.
	Apache expects to continue the Plan indefinitely, but the continuance of the Plan and the payment of contributions are not assumed as contractual obligations. Apache may terminate the Plan or discontinue contributions at any time. Upon the termination of the Plan, each Participant’s Account shall become fully vested. Upon the partial termination of the Plan, the Accounts of all affected Participants shall become fully vested. The only Participants who are affected by a partial termination are those whose employment with the Company or Affiliated Entity is terminated as a result of the corporate event causing the partial termination; Employees terminated for cause and those who leave voluntarily are not affected by a partial termination.
9.2	Allocations upon Termination.
	Upon the termination or partial termination of the Plan, the Committee shall promptly notify the Trustee of such termination. The Trustee shall promptly determine, in the manner prescribed in section 4.2, the net worth of the Trust Fund. The Trustee shall advise the Committee of any increase or decrease in such net worth that has occurred since the preceding Valuation Date. The Committee shall allocate, in the manner described in section 4.3, among the remaining Plan Accounts, in the manner described in Articles III, IV, and V, any Company Contributions or forfeitures occurring since the preceding Valuation Date.
9.3	Procedure Upon Termination of Plan.
	If the Plan has been terminated or partially terminated, then, after the allocations required under section 9.2 have been completed, the Trustee shall distribute or transfer the Accounts of affected Account Owners as follows.

(a)	No Other Plan. If the Company and Affiliated Entities are not treated, pursuant to the Treasury Regulations under Code §401(k), as maintaining another “alternative defined contribution plan,” the Trustee shall distribute each Account Owner’s Account in a single payment, after complying with the requirements of section 6.5. For purposes of this section only, an “alternative defined contribution plan” means a defined contribution plan that is not an employee stock ownership plan within the meaning of Code §4975(e)(7) or §409(a)), a simplified employee pension within the meaning of Code §408(k), a SIMPLE IRA within the meaning of Code §408(p), a plan or contract that satisfies the requirements of Code §403(b), or a plan described in Code §457(b) or §457(f).
(b)	Other Plan Maintained. If the Company and Affiliated Entities are treated, pursuant to the Treasury Regulations under Code §401(k), as maintaining another “alternative defined contribution plan,” the Trustee shall (i) distribute the Accounts of each non-Participant Account Owner in a single payment, after complying with the requirements of section 6.5, and (ii) transfer the Account of each Participant to an alternative defined contribution plan. All the rights, benefits, features, and distribution restrictions with respect to the transferred amounts shall continue to apply to the transferred amounts unless a change is permitted pursuant to applicable IRS guidance of general applicability.
(c)	Form of Payment. A transfer made pursuant to this section may be in cash, in kind, or partly in cash and partly in kind. Any distribution made pursuant to this section shall be in cash. After all such

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distributions or transfers have been made, the Trustee shall be discharged from all obligation under the Trust; no Participant, Spouse, Alternate Payee, or beneficiary who has received any such distribution, or for whom any such transfer has been made, shall have any further right or claim under the Plan or Trust.

9.4 Amendment by Apache.

(a)	Amendment. Apache may at any time amend the Plan in any respect, without prior notice, subject to the following limitations. No amendment shall be made that would have the effect of vesting in the Company any part of the Trust Fund or of diverting any part of the Trust Fund to purposes other than for the exclusive benefit of Account Owners. The rights of any Account Owner with respect to contributions previously made shall not be adversely affected by any amendment. No amendment shall reduce or restrict, either directly or indirectly, the accrued benefit (within the meaning of Code §411(d)(6)) to any Account Owner before the amendment, except as permitted by the Code or IRS guidance of general applicability.
(b)	Amendment to Vesting Schedule. If the vesting schedule is amended, each Participant with at least three Years of Service may elect, within the period specified in the following sentence after the adoption of the amendment, to have his nonforfeitable percentage computed under the Plan without regard to such amendment. The period during which the election may be made shall commence with the date the amendment is adopted and shall end on the latest of: (i) 60 days after the amendment is adopted; (ii) 60 days after the amendment becomes effective; or (iii) 60 days after the Participant is issued written notice of the amendment by the Company or Committee. Furthermore, no amendment shall decrease the nonforfeitable percentage, measured as of the later of the date the amendment is adopted or effective, of any Account Owner’s Account.
(c)	Procedure. Each amendment shall be in writing. Each amendment shall be approved by Apache’s board of directors or by an officer of Apache who has the authority to amend the Plan. Each amendment shall be executed by an officer of Apache who has the authority to execute the amendment.

ARTICLE X Plan Adoption by Affiliated Entities

10.1	Adoption of Plan.
	Apache may permit any Affiliated Entity to adopt the Plan and Trust for its Employees. Thereafter, such Affiliated Entity shall deliver to the Trustee a certified copy of the resolutions or other documents evidencing its adoption of the Plan and Trust.
10.2	Agent of Affiliated Entity.
	By becoming a party to the Plan, each Affiliated Entity appoints Apache as its agent with authority to act for the Affiliated Entity in all transactions in which Apache believes such agency will facilitate the administration of the Plan. Apache shall have the sole authority to amend and terminate the Plan.
10.3	Disaffiliation and Withdrawal from Plan.

(a)	Disaffiliation. Any Affiliated Entity that has adopted the Plan and thereafter ceases for any reason to be an Affiliated Entity shall forthwith cease to be a party to the Plan.
(b)	Withdrawal. Any Affiliated Entity may, by appropriate action and written notice thereof to Apache, provide for the discontinuance of its participation in the Plan. Such withdrawal from the Plan shall not be effective until the end of the Plan Year.

10.4

Effect of Disaffiliation or Withdrawal.

If at the time of disaffiliation or withdrawal, the disaffiliating or withdrawing entity, by appropriate action, adopts a substantially identical plan that provides for direct transfers from this Plan, then, as to Account Owners associated with such entity, no plan termination shall have occurred; the new plan shall be deemed a continuation of this Plan for such Account Owners. In such case, the Trustee shall transfer to the trustee of the new plan all of the assets held for the benefit of Account Owners associated with the disaffiliating or withdrawing entity, and no forfeitures or acceleration of vesting shall occur solely by reason of such action.

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Such payment shall operate as a complete discharge of the Trustee, and of all organizations except the disaffiliating or withdrawing entity, of all obligations under this Plan to Account Owners associated with the disaffiliating or withdrawing entity. A new plan shall not be deemed substantially identical to this Plan if it provides slower vesting than this Plan. Nothing in this section shall authorize the divesting of any vested portion of a Participant’s Account.

10.5

Actions Upon Disaffiliation or Withdrawal.

(a)

Distribution or Transfer. If an entity disaffiliates from Apache or withdraws from the Plan and the provisions of section 10.4 are not followed, then the following rules apply to the Account of an Account Owner associated with the disaffiliating or withdrawing entity. The Account Owner’s Account shall remain in this Plan until a distribution is processed under the usual rules of Article VI, unless the disaffiliating or withdrawing entity maintains another qualified plan that accepts direct transfers from this Plan, in which case the Committee may transfer the Account Owner’s Account to the disaffiliating or withdrawing entity’s plan without the consent of the Account Owner.

(b)

Form of Payment. A transfer made pursuant to this section may be in cash, in kind, or partly in cash and partly in kind. Any distribution made pursuant to this section shall be in cash. After such distribution or transfer has been made, no Account Owner who has received any such distribution, or for whom any such transfer has been made, shall have any further right or claim under the Plan or Trust.

ARTICLE XI Top-Heavy Provisions

11.1	Application of Top-Heavy Provisions.
	The provisions of this Article XII shall be applicable only if the Plan becomes “top-heavy” as defined below for any Plan Year. If the Plan becomes “top-heavy” for a Plan Year, the provisions of this Article XII shall apply to the Plan effective as of the first day of such Plan Year and shall continue to apply to the Plan until the Plan ceases to be “top-heavy” or until the Plan is terminated or otherwise amended.
11.2	Determination of Top-Heavy Status.
	The Plan shall be considered “top-heavy” for a Plan Year if, as of the last day of the prior Plan Year, the aggregate of the Account balances (as calculated according to the regulations under Code §416) of Key Employees under this Plan (and under all other plans required or permitted to be aggregated with this Plan) exceeds 60% of the aggregate of the Account balances (as calculated according to the regulations under Code §416) in this Plan (and under all other plans required or permitted to be aggregated with this Plan) of all current Employees and all former Employees who terminated employment within one year of the last day of the prior Plan Year. This ratio shall be referred to as the “top-heavy ratio.” For purposes of determining the account balance of any Participant, (a) the balance shall be determined as of the last day of the prior Plan Year, (b) the balance shall also include any distributions to the Participant during the one-year period ending on the last day of the prior Plan Year, and (c) the balance shall also include, for distributions made for a reason other than separation from service or death or disability, any distributions to the Participant during the five-year period ending on the last day of the prior Plan Year. This shall also apply to distributions under a terminated plan that, if it had not been terminated, would have been required to be included in an aggregation group. The Account balances of a Participant who had once been a Key Employee, but who is not a Key Employee during the Plan Year, shall not be taken into account. The following plans must be aggregated with this Plan for the top-heavy test: (a) a qualified plan maintained by the Company or an Affiliated Entity in which a Key Employee participated during this Plan Year or during the previous four Plan Years and (b) any other qualified plan maintained by the Company or an Affiliated Entity that enables this Plan or any plan described in clause (a) to meet the requirements of Code §401(a)(4) or §410. The following plans may be aggregated with this Plan for the top-heavy test: any qualified plan maintained by the Company or an Affiliated Entity that, in combination with the Plan or any plan required to be aggregated with this Plan when testing this Plan for top-heaviness, would satisfy the requirements of Code §401(a)(4) and §410. If one or more of the plans required or permitted to be aggregated with this Plan is a defined benefit plan, a Participant’s “account balance” shall mean the present value of the Participant’s accrued benefit. If the aggregation group includes more than one defined benefit plan, the same actuarial assumptions shall be used

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	with respect to each such defined benefit plan. The foregoing top-heavy ratio shall be computed in accordance with the provisions of Code §416(g), together with the regulations and rulings thereunder.
11.3	Special Vesting Rule.
	Unless section 5.1 provides for faster vesting, the Participant’s Account shall vest in accordance with the following schedule during any top-heavy Plan Year:

Period of Service	Vesting Percentage
Less than 2 years		0	%
At least 2 years, but less than 3 years		20	%
At least 3 years, but less than 4 years		40	%
At least 4 years, but less than 5 years		60	%
At least 5 years, but less than 6 years		80	%
6 or more years		100	%

11.4	Special Minimum Contribution.
	Notwithstanding the provisions of section 3.1, in every top-heavy Plan Year, a minimum allocation is required for each Non-Key Employee who both (a) performed one or more hours of service as a Covered Employee during the Plan Year, and (b) was an Employee on the last day of the Plan Year. The minimum allocation shall be a percentage of each Non-Key Employee’s Compensation. The percentage shall be the lesser of 3% or the largest percentage obtained for any Key Employee by dividing his Annual Additions (to this Plan and any other plan aggregated with this Plan) for the Plan Year by his Compensation for the Plan Year. If the Participant participates in both this Plan and the Apache Corporation 401(k) Savings Plan, then the Participant’s minimum allocation to this Plan shall be reduced by any allocation of company contributions (or forfeitures treated as company contributions) that he receives in that plan for the Plan Year.
11.5	Change in Top-Heavy Status.
	If the Plan ceases to be a “top-heavy” plan as defined in this Article XII, and if any change in the benefit structure, vesting schedule, or other component of a Participant’s accrued benefit occurs as a result of such change in top-heavy status, the nonforfeitable portion of each Participant’s benefit attributable to Company Contributions shall not be decreased as a result of such change. In addition, each Participant with at least a three-year Period of Service on the date of such change may elect to have the nonforfeitable percentage computed under the Plan without regard to such change in status. The period during which the election may be made shall commence on the date the Plan ceases to be a top-heavy plan and shall end on the later of (a) 60 days after the change in status occurs, (b) 60 days after the change in status becomes effective, or (c) 60 days after the Participant is issued written notice of the change by the Company or the Committee.

ARTICLE XII Miscellaneous

12.1	Right to Dismiss Employees — No Employment Contract.
	The Company and Affiliated Entities may terminate the employment of any employee as freely and with the same effect as if this Plan were not in existence. Participation in this Plan by an employee shall not constitute an express or implied contract of employment between the Company or an Affiliated Entity and the employee.
12.2	Claims Procedure.

(a)

General. Each claim for benefits shall be processed in accordance with the procedures that are 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

Page 23 of 31

	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.
(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 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)	Discretionary Authority. The Committee shall have total discretionary authority to determine eligibility, status, and the rights of all individuals under the Plan and to construe any and all terms of the Plan.

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12.3	Source of Benefits.
	All benefits payable under the Plan shall be paid solely from the Trust Fund, and the Company and Affiliated Entities assume no liability or responsibility therefor.
12.4	Exclusive Benefit of Employees.
	It is the intention of the Company that no part of the Trust, other than as provided in sections 3.3, 8.2, and 12.9 hereof and the Trust Agreement, ever to be used for or diverted for purposes other than for the exclusive benefit of Participants, Alternate Payees, and their beneficiaries, and that this Plan shall be construed to follow the spirit and intent of the Code and ERISA.
12.5	Forms of Notices.
	Wherever provision is made in the Plan for the filing of any notice, election, or designation by a Participant, Spouse, Alternate Payee, or beneficiary, the action of such individual may be evidenced by the execution of such form as the Committee may prescribe for the purpose. The Committee may also prescribe alternate methods for filing any notice, election, or designation (such as telephone voice-response or e-mail).
12.6	Failure of Any Other Entity to Qualify.
	If any entity adopts this Plan but fails to obtain or retain the qualification of the Plan under the applicable provisions of the Code, such entity shall withdraw from this Plan upon a determination by the Internal Revenue Service that it has failed to obtain or retain such qualification. Within 30 days after the date of such determination, the assets of the Trust Fund held for the benefit of the Employees of such entity shall be separately accounted for and disposed of in accordance with the Plan and Trust.
12.7	Notice of Adoption of the Plan.
	The Company shall provide each of its Employees with notice of the adoption of this Plan, notice of any amendments to the Plan, and notice of the salient provisions of the Plan prior to the end of the first Plan Year. A complete copy of the Plan shall also be made available for inspection by Employees and Account Owners.
12.8	Plan Merger.
	If this Plan is merged or consolidated with, or its assets or liabilities are transferred to, any other qualified plan of deferred compensation, each Participant shall be entitled to receive a benefit immediately after the merger, consolidation, or transfer that is equal to or greater than the benefit the Participant would have been entitled to receive immediately before the merger, consolidation, or transfer if this Plan had then been terminated.
12.9	Inalienability of Benefits — Domestic Relations Orders.

(a)	General. Except as provided in subsection 6.1(e), relating to disclaimers, and subsections (b), (g), and (h) below, no Account Owner shall have any right to assign, alienate, transfer, or encumber his interest in any benefits under this Plan, nor shall such benefits be subject to any legal process to levy upon or attach the same for payment of any claim against any such Account Owner.
(b)	QDRO Exception. Subsection (a) shall apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a Participant pursuant to a Domestic Relations Order unless such Domestic Relations Order is a QDRO, in which case the Plan shall make payment of benefits in accordance with the applicable requirements of any such QDRO.
(c)	QDRO Requirements. In order to be a QDRO, the Domestic Relations Order must satisfy the requirements of Code §414(p) and ERISA §206(d)(3). In particular, the Domestic Relations Order: (i) must specify the name and the last known mailing address of the Participant; (ii) must specify the name and mailing address of each Alternate Payee covered by the order; (iii) must specify either the amount or percentage of the Participant’s benefits to be paid by the Plan to each such Alternate Payee, or the manner in which such amount or percentage is to be determined; (iv) must specify the number of payments or period to which such order applies; (v) must specify each plan to which such order applies; (vi) may not require the Plan to provide any type or form of benefit, or any option, not otherwise provided under the Plan, subject to the provisions of subsection (f); (vii) may not require the Plan to provide increased benefits (determined on the basis of actuarial value); and (viii) may not

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	require the payment of benefits to an Alternate Payee if such benefits have already been designated to be paid to another Alternate Payee under another order previously determined to be a QDRO.
(d)	QDRO Payment Rules. In the case of any payment before an Employee has separated from service, a Domestic Relations Order shall not be treated as failing to meet the requirements of subsection (c) solely because such order requires that payment of benefits be made to an Alternate Payee (i) on or after the dates specified in subsection (f), (ii) as if the Employee had retired on the date on which such payment is to begin under such order (but taking into account only the Account balance on such date), and (iii) in any form in which such benefits may be paid under the Plan to the Employee. For purposes of this subsection, the Account balance as of the date specified in the QDRO shall be the vested portion of the Employee’s Account on such date.
(e)	QDRO Review Procedures and Suspension of Benefits. The Committee shall establish reasonable procedures to determine the qualified status of Domestic Relations Orders and to administer distributions under QDROs. Such procedures shall be in writing and shall permit an Alternate Payee to designate a representative to receive copies of notices. The Committee may temporarily suspend distributions and withdrawals from the Participant’s Accounts, except to the extent necessary to make the required minimum distributions under Code §401(a)(9), when the Committee receives a Domestic Relations Order or a draft of such an order that affects the Participant’s Accounts or when one or the following individuals informs the Committee, orally or in writing, that a QDRO is in process or may be in process: the Participant, a prospective Alternate Payee, or counsel for the Participant or a prospective Alternate Payee. The Committee shall promulgate reasonable and non-discriminatory rules regarding such suspensions, including but not limited to how long such suspensions remain in effect. The procedures may allow the Participant to receive such distributions and withdrawals from the Plan, subject to the rules of Article VI, as are consented to in writing by all prospective Alternate Payees identified in the Domestic Relations Order or, in the absence of a Domestic Relations Order, as are consented to in writing by the prospective Alternate Payee(s) who informed the Committee that a QDRO was in process or may be in process. When the Committee receives a Domestic Relations Order it shall promptly notify the Participant and each Alternate Payee of such receipt and provide them with copies of the Plan’s procedures for determining the qualified status of the order. Within a reasonable period after receipt of a Domestic Relations Order, the Committee shall determine whether such order is a QDRO and notify the Participant and each Alternate Payee of such determination. During any period in which the issue of whether a Domestic Relations Order is a QDRO is being determined (by the Committee, by a court of competent jurisdiction, or otherwise), the Committee shall separately account for the amounts payable to the Alternate Payee if the order is determined to be a QDRO. If the order (or modification thereof) is determined to be a QDRO within 18 months after the date the first payment would have been required by such order, the Committee shall pay the amounts separately accounted for (plus any interest thereon) to the individual(s) entitled thereto. However, if the Committee determines that the order is not a QDRO, or if the issue as to whether such order is a QDRO has not been resolved within 18 months after the date of the first payment would have been required by such order, then the Committee shall pay the amounts separately accounted for (plus any interest thereon) to the individual(s) who would have been entitled to such amounts if there had been no order. Any determination that an order is a QDRO that is made after the close of the 18-month period shall be applied prospectively only. If the Plan’s fiduciaries act in accordance with fiduciary provision of ERISA in treating a Domestic Relations Order as being (or not being) a QDRO or in taking action in accordance with this subsection, then the Plan’s obligation to the Participant and each Alternate Payee shall be discharged to the extent of any payment made pursuant to the acts of such fiduciaries.
(f)	Rights of Alternate Payee. The Alternate Payee shall have the following rights under the Plan:

(i) Small Accounts. If the value of the nonforfeitable portion of an Alternate Payee’s Account is $5,000 or less, the Alternate Payee shall receive a single payment of the distributable amount as soon as practicable, provided that the value is $5,000 or less when the distribution is processed. The Committee may elect to check the value of the Alternate Payee’s Account on an occasional (rather than a daily) basis, to determine whether this paragraph applies.

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(ii)	Single Payment or Annuity. This paragraph applies only if paragraph (i) does not apply. The only form of payment available to an Alternate Payee who is not the Spouse or former Spouse of the Participant is a single payment of the distributable amount (measured at the time the payment is processed). An Alternate Payee who is the Spouse or former Spouse of the Participant may choose between a single payment of the distributable amount or an annuity. If the Alternate Payee is awarded more than the distributable amount, the Alternate Payee shall initially receive a distribution of the distributable amount, with additional distributions made as soon as administratively convenient after more of the amount awarded to the Alternate Payee becomes distributable.
(iii)	Timing of Distribution. This paragraph applies only if paragraph (i) does not apply. Subject to the limits imposed by this paragraph, the Alternate Payee may choose (or the QDRO may specify) the date of the distribution. The distribution to the Alternate Payee may occur at any time after the Committee determines that the Domestic Relations Order is a QDRO and before the Participant’s Required Beginning Date (unless the order is determined to be a QDRO after the Participant’s Required Beginning Date, in which case the distribution to the Alternate Payee shall be made as soon as administratively practicable after the order is determined to be a QDRO).
(iv)	Death of Alternate Payee. The Alternate Payee may designate one or more beneficiaries, as specified in section 6.1. When the Alternate Payee dies, the Alternate Payee’s beneficiary shall receive a complete distribution of the distributable amount in a single payment as soon as administratively convenient.
(v)	Investing. An Alternate Payee may direct the investment of his Account pursuant to section 8.3.
(vi)	Claims. The Alternate Payee may bring claims against the Plan pursuant to section 12.2.

(g) Exception for Misconduct towards the Plan. Subsection (a) shall not apply to any offset of a Participant’s benefits against an amount that the Participant is ordered or required to pay to the Plan if the following conditions are met.

(i)	The order or requirement to pay must arise (A) under a judgment of conviction for a crime involving the Plan, (B) under a civil judgment (including a consent order or decree) entered by a court in an action brought in connection with a violation (or alleged violation) of part 4 of subtitle B of title I of ERISA, or (C) pursuant to a settlement agreement between the Secretary of Labor and the Participant, or a settlement agreement between the Pension Benefit Guaranty Corporation and the Participant, in connection with a violation (or alleged violation) of part 4 of subtitle B of title I of ERISA by a fiduciary or any other person.
(ii)	The judgment, order, decree, or settlement agreement must expressly provide for the offset of all or part of the amount ordered or required to be paid to the Plan against the Participant’s benefits provided under the Plan.
(iii)	If the Participant is married at the time at which the offset is to be made, (A) either the Participant’s Spouse must have already waived his right to a QPSA and QJSA or the Participant’s Spouse must consent in writing to such offset with such consent witnessed by a notary public or representative of the Plan (or it is established to the satisfaction of a Plan representative that such consent may not be obtained by reason of circumstances described in Code §417(a)(2)(B)), or (B) the Participant’s Spouse is ordered or required in such judgment, order, decree, or settlement to pay an amount to the Plan in connection with a violation of part 4 of subtitle B of title I of ERISA, or (C) in such judgment, order, decree, or settlement, the Participant’s Spouse retains the right to receive a survivor annuity under a qualified joint and survivor annuity pursuant to Code §401(a)(11)(A)(i) and under a qualified preretirement survivor annuity provided pursuant to Code §401(a)(11)(A)(ii). The value of the Spouse’s survivor annuity in subparagraph (C) shall be determined as if the Participant terminated employment on the date of the offset, there was no offset, the Plan permitted commencement of benefits only on or after Normal Retirement Age, the Plan provided only the “minimum-required qualified joint and survivor annuity,” and the amount of the qualified preretirement survivor annuity under the Plan is equal to the amount of the survivor annuity payable under the

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“minimum-required qualified joint and survivor annuity.” For purposes of this paragraph only, the “minimum-required qualified joint and survivor annuity” is the qualified joint and survivor annuity which is the actuarial equivalent of the Participant’s accrued benefit (within the meaning of Code §411(a)(7)) and under which the survivor annuity is 50% of the amount of the annuity which is payable during the joint lives of the Participant and his Spouse.

The Committee may temporarily suspend distributions and withdrawals from a Participant’s Account, except to the extent necessary to make the required minimum distributions under Code §401(a)(9), when the Committee has reason to believe that the Plan may be entitled to an offset of the Participant’s benefits described in this subsection. The Committee shall promulgate reasonable and non-discriminatory rules regarding such suspensions, including but not limited to how long such suspensions remain in effect.

(h)

Exception for Federal Liens. Subsection (a) shall 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). The Committee may temporarily suspend distributions and withdrawals from an Account, except to the extent necessary to make the required minimum distributions under Code §401(a)(9), when the Committee has reason to believe that such a federal tax levy or other obligation has or will be received. The Committee shall promulgate reasonable and non-discriminatory rules regarding such suspensions, including but not limited to how long such suspensions remain in effect.

12.10	Payments Due Minors or Incapacitated Individuals.
	If any individual entitled to payment under the Plan is a minor, the Committee shall cause the payment to be made to the custodian or representative who, under the state law of the minor’s domicile, is authorized to receive funds on behalf of the minor. If any individual entitled to payment under this Plan has been legally adjudicated to be mentally incompetent or incapacitated, the Committee shall cause the payment to be made to the custodian or representative who, under the state law of the incapacitated individual’s domicile, is authorized to receive funds on behalf of the incapacitated individual. Payments made pursuant to such power shall operate as a complete discharge of the Trust Fund, the Trustee, and the Committee.
12.11	Uniformity of Application.
	The provisions of this Plan shall be applied in a uniform and non-discriminatory manner in accordance with rules adopted by the Committee, which rules shall be systematically followed and consistently applied so that all individuals similarly situated shall be treated alike.
12.12	Disposition of Unclaimed Payments.
	Each Participant, Alternate Payee, or beneficiary with an Account balance in this Plan must file with the Committee from time to time in writing his address, the address of each beneficiary (if applicable), and each change of address. Any communication, statement, or notice addressed to such individual at the last address filed with the Committee (or if no address is filed with the Committee then at the last address as shown on the Company’s records) will be binding on such individual for all purposes of the Plan. Neither the Committee nor the Trustee shall be required to search for or locate any missing individual. If the Committee notifies an individual that he is entitled to a distribution and also notifies him that a failure to respond may result in a forfeiture of benefits, and the individual fails to claim his benefits under the Plan or make his address known to the Committee within a reasonable period of time after the notification, then the benefits under the Plan of such individual shall be forfeited. Any amount forfeited pursuant to this section shall be allocated pursuant to subsection 5.4(d). If the individual should later make a claim for this forfeited amount, the Company shall, if the Plan is still in existence, make a special contribution to the Plan equal to the forfeiture, and such amount shall be distributed to the individual; if the Plan is not then in existence, the Company shall pay the amount of the forfeiture to the individual.
12.13	Applicable Law.
	This Plan shall be construed and regulated by ERISA, the Code, and, unless otherwise specified herein and to the extent applicable, the laws of the State of Texas, excluding any conflicts-of-law provisions.

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ARTICLE XIII Uniformed Services Employment and Reemployment Rights Act of 1994

13.1 General.

(a)

Scope. The Uniformed Services Employment and Reemployment Rights Act of 1994 (the “USERRA”), which is codified at 38 USCA §§4301-4318, confers certain rights on individuals who leave civilian employment to perform certain services in the Armed Forces, the National Guard, the commissioned corps of the Public Health Service, or in any other category designated by the President of the United States in time of war or emergency (collectively, the “Uniformed Services”). An Employee who joins the Uniformed Services shall be referred to as a “Serviceman” in this Article. This Article shall be interpreted to provide such individuals with all the benefits required by the USERRA but no greater benefits than those required by the USERRA. This Article shall supersede any contrary provisions in the remainder of the Plan.

(b)

Rights of Servicemen. When a Serviceman leaves the Uniformed Services, he may have reemployment rights with the Company or Affiliated Entities, depending on many factors, including the length of his stay in the Uniformed Services and the type of discharge he received. When this Article speaks of the date a Serviceman’s potential USERRA reemployment rights expire, it means the date on which the Serviceman fails to qualify for reemployment rights (if, for example, he is dishonorably discharged, or remains in the Uniformed Services for more than 5 years) or, if the Serviceman obtains reemployment rights, the date his reemployment rights lapse because the Serviceman failed to timely exercise those rights.

13.2	While a Serviceman.
	In general, a Serviceman shall be treated as an Employee while he continues to receive wages from the Company or an Affiliated Entity, and once the Serviceman’s wages from the Company or Affiliated Entity cease, the Serviceman shall be treated as if he were on an approved, unpaid leave of absence.

(a)	Company Contributions. Wages paid by the Company to a Serviceman shall be included in his Compensation as if the Serviceman were an Employee. If the Employee was a Covered Employee when he became a Serviceman and his wages continue through the last day of a Plan Year, then (i) the Serviceman shall be treated as an “eligible Participant” under subsection 3.1(a) for that Plan Year (and shall therefore receive an allocation of Company Mandatory Contributions); and (ii) he shall be treated as an Employee under subsection 11.4(a) (and, if he is a Non-Key Employee, he shall therefore receive any minimum required allocation if the Plan is top-heavy).
(b)	Investments. If the Serviceman has an account balance in the Plan, he is an Account Owner and may therefore direct the investment of his Accounts pursuant to section 8.3.
(c)	Distributions and Withdrawals. For purposes of Article VI (relating to distributions), the Serviceman shall be treated as an Employee until the day on which his potential USERRA reemployment rights expire. See section 13.3 once his potential USERRA rights expire.
(d)	QDROs. QDROs shall be processed while the Participant is a Serviceman. The Committee has the discretion to establish special procedures under subsection 12.9(e) for Servicemen, by, for example, extending the usual deadlines to accommodate any practical difficulties encountered by the Serviceman that are attributable to his service in the Uniformed Services.

13.3 Expiration of USERRA Reemployment Rights.

(a) Consequences. If a Serviceman is not reemployed before his potential USERRA reemployment rights expire, the Committee shall determine his Termination from Service Date by treating his service in the Uniformed Services as an approved leave of absence but treating the expiration of his potential USERRA reemployment rights as the failure to timely return from his leave of absence, with the consequence that his Termination from Service Date will generally be the earlier of the date his potential USERRA rights expired or one year after the date he joined the Uniformed Services. Once his Termination from Service Date has been determined, the Committee shall determine his vested percentage. For purposes of Article VI (relating to distributions), the day the Serviceman’s potential USERRA reemployment rights expired shall be treated as the day he terminated employment with the Company and Affiliated Entities. For purposes of subsection 5.2(c) (relating to the timing of

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	forfeitures), the Serviceman’s last day of employment shall be the day his potential USERRA reemployment rights expired.
(b)	Rehire after Expiration of Reemployment Rights. If the Company or an Affiliated Company hires a former Serviceman after his potential USERRA reemployment rights have expired, he shall be treated like any other former employee who is rehired.

13.4	Return From Uniformed Service.
	This section applies solely to a Serviceman who returns to employment with the Company or an Affiliated Entity because he exercised his reemployment rights under the USERRA.

(a)	Credit for Service. A Serviceman’s length of time in the Uniformed Services shall be treated as service with the Company for purposes of vesting and determining his eligibility to participate in the Plan upon reemployment.
(b)	Participation. If the Serviceman satisfies the eligibility requirements of section 2.1 before his reemployment, and he is a Covered Employee upon his reemployment, he may participate in the Plan immediately upon his return.
(c)	Make-Up Company Mandatory Contribution. The Company shall contribute an additional contribution to a Serviceman’s Account equal to the Company Mandatory Contribution (including any forfeitures treated as Company Mandatory Contributions) that would have been allocated to such Account if the Serviceman had remained employed during his time in the Uniformed Services, and had earned his Deemed Compensation during that time. See subsection (e) for guidance on applying the various limits contained in the Code to the calculation of the additional mandatory contribution.
(d)	Make-Up Miscellaneous Contributions. The Company shall contribute to the Serviceman’s Accounts any top-heavy minimum contribution he would have received pursuant to section 11.4, (including any forfeitures treated as top-heavy minimum contributions) if he had remained employed during his time in the Uniformed Services, and had earned Deemed Compensation during that time. See subsection (e) for guidance on applying the various limits contained in the Code to the calculation of the top-heavy minimum contribution.
(e)	Application of Limitations.

(i)

The make-up contributions under subsections (c) and (d) (the “Make-Up Contributions”) shall be ignored for purposes of determining the Company’s maximum contribution under subsection 3.1(c), the limits on Annual Additions under section 3.4, the non-discrimination requirements of Code §401(a)(4), and (if the Serviceman is a Key Employee) calculating the minimum required top-heavy contribution under section 11.4.

(ii)

In order to determine the maximum Make-Up Contributions, the following limitations shall apply.

(A)	The Serviceman’s “Aggregate Compensation” for each year shall be calculated. His Aggregate Compensation shall be equal to his actual Compensation, plus his Deemed Compensation that would have been paid during that year. Each type of Aggregate Compensation (for benefit purposes, for purposes of determining whether the Serviceman is a Highly Compensated Employee, etc.) shall be determined separately.
(B)	The Serviceman’s Aggregate Compensation each Plan Year shall be limited to the dollar limit in effect for that Plan Year under Code §401(a)(17), for the purposes and in the manner specified in subsection 1.11(d).
(C)	The limits of subsection 3.1(c) (relating to the maximum contribution by the Company to the Plan) for each Plan Year shall be calculated by using the Serviceman’s Aggregate Compensation for that Plan Year, and by treating the Make-Up Contributions that are attributable to that Plan Year’s Deemed Compensation as having been made during that Plan Year.
(D)	The limits of section 3.4 (relating to the maximum Annual Additions to a Participant’s Accounts) shall be calculated for each Limitation Year by using the Serviceman’s

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Aggregate Compensation for that Limitation Year, and by treating as Annual Additions all the Make-Up Contributions that are attributable to that Limitation Year’s Deemed Compensation.

(f) Deemed Compensation. A Serviceman’s Deemed Compensation is the Compensation that he would have received (including raises) had he remained employed by the Company or Affiliated Entity during his time in the Uniformed Services, unless it is not reasonably certain what his Compensation would have been, in which case his Deemed Compensation shall be based on his average rate of compensation during the 12 months (or, if shorter, his period of employment with the Company and Affiliated Entities) immediately before he entered the Uniformed Services. A Serviceman’s Deemed Compensation shall be reduced by any Compensation actually paid to him during his time in the Uniformed Services (such as vacation pay). Deemed Compensation shall cease when the Serviceman’s potential USERRA reemployment rights expire. Each type of Deemed Compensation (for benefit purposes, for purposes of determining if the Serviceman is a Highly Compensated Employee, etc.) shall be determined separately.

	APACHE CORPORATION
Date:	By:
	Title:

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APPENDIX A

Participating Companies

The following Affiliated Entities were actively participating in the Plan as of the following dates:

	Participation	Participation
Business	Began As Of	Ended As Of
Apache International, Inc.	January 1, 1997	N/A
Apache Canada Ltd.	January 1, 1997	N/A

— END OF APPENDIX A —

 A-1

APPENDIX B

DEKALB Energy Company / Apache Canada Ltd.

Introduction

Through a merger effective as of May 17, 1995, Apache then held 100% of the stock of DEKALB Energy Company (which has been renamed Apache Canada Ltd.).

Capitalized terms in this Appendix have the same meanings as those given to them in the Plan. The regular terms of the Plan shall apply to the employees of Apache Canada Ltd., except as provided below.

Eligibility to Participate

Notwithstanding the definition of “Covered Employee,” an employee of Apache Canada Ltd. shall be a Covered Employee only if (1) he is either a U.S. citizen or a U.S. resident, and (2) he was employed by Apache or another Company immediately before becoming an employee of Apache Canada Ltd.

Compensation

If the payroll of the Apache Canada Ltd. employee is handled in the United States, then the definitions of Compensation in the main body of the Plan shall apply. To the extent that the payroll of the Apache Canada Ltd. employee is handled outside of the United States, the following definitions of Compensation shall apply in lieu of the definitions found in the main body of the Plan:

(a)

Code §415 Compensation. For purposes of determining the limitation on Annual Additions under section 3.4 and the minimum contribution under section 11.4 when the Plan is top-heavy, Compensation shall mean foreign earned income (within the meaning of Code §911(b)) paid by the Company or an Affiliated Entity, and elective contributions that are not includable in the Employee’s income pursuant to Code §125, §132(f)(4), §402(e)(3), §402(h), §403(b), §408(p), §414(u)(2)(C), §414(v)(6)(B), or §457. For purposes of section 3.4, Compensation shall be measured over a Limitation Year. For purposes of section 11.4, Compensation shall be measured over a Plan Year.

(b)

Code §414(q) Compensation. For purposes of identifying Highly Compensated Employees and Key Employees, Compensation shall have the same meaning as in paragraph (a), except that Compensation shall be measured over a Plan Year and shall not include any amounts accrued by, but not paid to, the Employee during the Plan Year.

— END OF APPENDIX B —

 B-1

APPENDIX C

Corporate Transactions

Over the years, the Company has engaged in numerous corporate transactions, both acquisitions and sales. This Appendix contains any special service-crediting provisions that apply to employees affected by the corporate transaction (both those who are hired by the Company and those whose employment is terminated).

Sales

The following Participants are fully vested in their Accounts in this Plan, on the following dates:

[none, as of January 1, 2006]

Acquisitions

A Period of Service for vesting purposes for a New Employee (listed below) shall be determined by treating all periods of employment with the Former Employer Controlled Group as periods of employment with Apache. The “Former Employer Controlled Group” means the Former Employer (listed below), its predecessor company/ies, and any business while such business was treated as a single employer with the Former Employer or predecessor company pursuant to Code §414(b), §414(c), §414(m), or §414(o).

The following individuals are “New Employees” and the following companies are “Former Employers”:

Former Employer	New Employees
Crescendo Resources, L.P. (“Crescendo”)	All individuals hired from April 30, 2000 through June 1, 2000 from Crescendo and related companies in connection with an April 30, 2000 asset acquisition from Crescendo.
Collins & Ware (“C&W”) and Longhorn Disposal, Inc. (“Longhorn”)	All individuals hired from C&W, Longhorn, and related companies in connection with a May 23, 2000 asset acquisition from C&W and Longhorn.
Occidental Petroleum Corporation (“Oxy”)	All individuals hired from Oxy and related companies in connection with an August 2000 asset acquisition from an Oxy subsidiary.
Private company (“Private”)	All individuals hired in January 2003 from Private and related companies in connection with an asset acquisition of certain property in Louisiana effective as of December 1, 2002.

—END OF APPENDIX C—

 C-1

EX-10.18

Exhibit 10.18

NON-QUALIFIED RETIREMENT/SAVINGS PLAN

OF

APACHE CORPORATION

Amended and restated as of January 1, 2005

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 Code	1
1.06 Committee	1
1.07 Company	1
1.08 Company Deferrals	1
1.09 Compensation	1
1.10 Employee	2
1.11 Enrollment Agreement	2
1.12 ERISA	2
1.13 Participant	2
1.14 Participant Deferrals	3
1.15 Payment Processing Date	3
1.16 Plan	3
1.17 Plan Year	3
1.18 Retirement Plan	3
1.19 Savings Plan	3
1.20 Separation from Service and Separate from Service	3
1.21 Spouse	3
1.22 Trust	3
1.23 Trust Agreement	3
1.24 Trustee	3
ARTICLE II ELIGIBILITY AND PARTICIPATION	3
2.01 Eligibility and Participation	3
2.02 Enrollment	4
2.03 Failure of Eligibility	4
ARTICLE III CONTRIBUTION DEFERRALS	4
3.01 Participant Deferrals	4
3.02 Company Deferrals	5
ARTICLE IV CREDITING OF ACCOUNTS	6
4.01 Accounts	6
4.02 Investments	6
ARTICLE V DISTRIBUTIONS	7
5.01 Vesting and Forfeitures	7
5.02 Rehires	7
5.03 Distribution Overview	8
5.04 Distributions After Separation from Service and In-Service Withdrawals	8
5.05 Age-70-and-Older Distributions	12
5.06 Payments After a Participant Dies	12
5.07 Change of Control	13
5.08 Hardship Withdrawals	13
5.09 Administrative Delays in Payments	14
5.10 Cash Payment and Withholding	14
ARTICLE VI ADMINISTRATION	14
6.01 The Committee — Plan Administrator	14
6.02 Committee Duties	14
6.03 Organization of Committee	14
6.04 Indemnification	15
6.05 Agent for Process	15
6.06 Determination of Committee Final	15
6.07 No Bonding	15
ARTICLE VII TRUST	15
7.01 Trust Agreement	15
7.02 Expenses of Trust	15
ARTICLE VIII AMENDMENT AND TERMINATION	15
8.01 Termination of Plan	15
8.02 Amendment	15
ARTICLE IX MISCELLANEOUS	16
9.01 Funding of Benefits — No Fiduciary Relationship	16
9.02 Right to Terminate Employment	16
9.03 Inalienability of Benefits	16
9.04 Claims Procedure	16
9.05 Disposition of Unclaimed Distributions	18
9.06 Distributions Due Infants or Incompetents	18
9.07 Use and Form of Words	18
9.08 Headings	18
9.09 Governing Law	18

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 January 1, 2005.

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. The Company intends that the Plan not be treated as a “funded” plan for purposes of either the Code or ERISA.

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 5.06.
1.05	Code
	“Code” means the Internal Revenue Code of 1986, as amended.
1.06	Committee
	“Committee” means the administrative committee provided for in section 6.01.
1.07	Company
	“Company” means Apache and any Affiliated Entity that, with approval of the Board of Directors of Apache, has adopted the Plan.
1.08	Company Deferrals
	“Company Deferrals” means the allocations to a Participant’s Account made pursuant to section 3.02.
1.09	Compensation
	“Compensation” generally means regular compensation paid by the Company.

(a) Inclusions. Specifically, Compensation includes:

(i) regular salary or wages,

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(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, and
(xiii)	any benefit accrued under, or any payment from, any nonqualified plan of deferred compensation.

(c) Timing Rules. 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. For purposes of making Participant Deferrals, a bonus under paragraph (a)(iii) that a new Participant receives during the first 12 months of his Plan participation is included in his Compensation only if the performance period for that bonus begins on or after the date he became eligible to participate in the Plan. For purposes of calculating Company Deferrals for 2006 and 2007, a bonus under paragraph (a)(iii) that a new Participant receives during the first 12 months of his Plan participation is included in his Compensation.

1.10	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.
1.11	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.
1.12	ERISA
	“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
1.13	Participant
	“Participant” means any eligible employee who has begun to participate in this Plan.

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1.14	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.
1.15	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.
1.16	Plan
	“Plan” means the plan set forth in this document, as it may be amended from time to time.
1.17	Plan Year
	“Plan Year” means the period during which the Plan records are kept. The Plan Year is the calendar year.
1.18	Retirement Plan
	“Retirement Plan” means the Apache Corporation Money Purchase Retirement Plan, as amended from time to time.
1.19	Savings Plan
	“Savings Plan” means Apache Corporation 401(k) Savings Plan, as amended from time to time.
1.20	Separation from Service and Separate from Service
	“Separation from Service” means 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.”
1.21	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.
1.22	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.
1.23	Trust Agreement
	“Trust Agreement” means the written instrument pursuant to which each separate Trust is created.
1.24	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.

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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 1.09(a)(iii)) and up to 75% of a bonus described in section 1.09(a)(iii). Effective for Enrollment Agreements entered into after June 30, 2006, the minimum deferral that a Participant may elect, for both this Plan and the Savings Plan combined, is 6% of his Compensation. Furthermore, effective for regular-pay deferral elections made after June 30, 2007, if the Participant does not elect the minimum deferral from a bonus described in section 1.09(a)(iii) (in his June election), he cannot make any deferrals from his regular pay during the next regular-pay 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.
(C)	2005 Transition Rule. The enrollment period for any Compensation payable in 2005 ends on December 31, 2004.

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(ii) Duration. The Enrollment Agreement will continue in effect until the end of the Plan Year unless it is earlier canceled or revised by the Committee pursuant to subsection (f), canceled because the Participant ceases to be eligible to participate in the Plan, or suspended 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)	Suspension of Participant Deferrals Following a Hardship Withdrawal. A Participant’s Enrollment Agreements will be suspended for six months following a hardship withdrawal from the Savings Plan or following a hardship withdrawal from this Plan pursuant to section 5.08. The Participant’s Enrollment Agreements will be reinstated once the suspension is over, unless there has been an intervening enrollment period during which the Participant could, and did, make one or more new Enrollment Agreements that would take effect once the suspension was over.
(f)	Committee-Initiated Changes in Enrollment Agreement. The Committee may adjust any Participant’s Enrollment Agreement for the remainder of any Plan Year by reducing the amount of the Participant’s future Participant Deferrals, provided that the Committee believes that such reduction will assist either the Retirement Plan or the Savings Plan in satisfying any legal requirement. 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 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, and (ii) the Committee’s procedures may also automatically increase a Participant’s Participant Deferrals in subsequent pay periods 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 matching contribution for this Plan for a Plan Year is $0 unless the Participant has made the maximum contributions to the Savings Plan that are excludable from the Participant’s gross income pursuant to Code §402(g), in which case 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.

Page 5 of 18

(ii)	Definitions.
	The “total match” is equal to the matching contribution to the Participant’s Account in this Plan plus the Company Matching Contribution allocated to the Participant’s accounts in the Savings Plan.
	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 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. The 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.

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 retirement-6 contribution 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

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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.

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:

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” occurs. For purposes of this paragraph, a “change of control” has the same meaning as in section 5.07.

(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 is rehired within six months after Separating from Service, payments under section 5.04 that were scheduled to commence six months after his initial Separation from

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	Service will instead not commence until he again Separates from Service. If a Participant is rehired more than six months after Separating from Service, the benefits from his earlier episode of employment will continue to be paid out as originally scheduled; the rehiring of the Participant will not affect the timing of any benefit payments from his earlier episode of employment.
(b)	Vesting. If a Participant is rehired 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 employment; (ii) his years of completed service for his new Account will include only his service from his second episode of employment; and (iii) his service during his second episode of employment will not increase the vesting of any benefits from his first episode of employment. If a Participant is rehired less than five years after Separating from Service, the Participant’s years of completed service for his benefits from his second episode of employment 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 5.06 or 5.07 require faster payment following the Participant’s death or a change of control or the Participant takes a hardship withdrawal under section 5.08.

5.03 Distribution Overview

(a) General. In general, a distribution 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, in the month and year(s) selected by the Participant. See sections 5.04(c)(iv) and 5.04(c)(v).
(iii)	The date the Participant dies. See section 5.06.
(iv)	The date of a change of control. See section 5.07.

(b)	Special Rule for Distributions After Age 70. Payments that began before December 31, 2004 because the Participant had attained age 70 will continue to be made pursuant to section 5.05.
(c)	Hardships. A Participant may take a withdrawal under section 5.08 if he has a financial hardship.

5.04 Distributions After Separation from Service and In-Service Withdrawals

(a)

General. A Participant who Separated from Service before December 31, 2005 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 5.06 or 5.07 will apply to such Participants (and accelerate any remaining payments) if there is a change of control or the Participant dies and (ii) section 5.08 will apply if the Participant has a financial hardship. This remainder of this section contains the rules for distributions following a Separation from Service that occurs on or after December 31, 2005.

(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

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	two to ten annual installments. To be effective, the Participant’s payout election must be provided to the Plan before or within 30 days after the date the Participant became a Participant. The single payment or the first installment payment will be paid on the first Payment Processing Date that occurs more than six months after the Participant’s Separation from Service. Subsequent installments will be paid each 12 months thereafter, unless the first installment is paid before December 31, 2006, in which case subsequent installments will be paid each January.
(ii)	Special 2005 Payout Election. A Participant may make a new payout election in 2005 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 Committee by December 31, 2005 or by such earlier deadline established by the Committee, and the Participant must be an Employee on the last business day of 2005. The single payment or the first installment payment will be paid on the first Payment Processing Date that occurs more than six months after the Participant’s Separation from Service; subsequent installments will be paid each January thereafter.
(iii)	Special 2006 Payout Election. A Participant may make a new payout election in 2006 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 by December 31, 2006 or by such earlier deadline established by the Committee, and the Participant must be an Employee on the last business day of 2006. The single payment or the first installment payment will be paid on the first Payment Processing Date that occurs more than six months after the Participant’s Separation from Service; subsequent installments will be paid each 12 months thereafter.
(iv)	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, or will be paid fewer installments than he elected.

(c) Distribution of Participant Deferrals.

(i)	Separation from Service During 2006. A Participant who Separates from Service before the last business day of 2006 will receive the balance of his Account attributable to Participant Deferrals in the same fashion as he receives the balance of his Account attributable to Company Deferrals under subsection (b).
(ii)	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. The unmatched Participant Deferrals as of December 31, 2006, if any, are equal to the Account balance attributable to Participant Deferrals as of December 31, 2006, minus 50% of the Account balance attributable to Company Deferrals as of December 31, 2006. Beginning in 2007, each Plan Year’s unmatched Participant 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.
(iii)	Matched Participant Deferrals. This paragraph is effective January 1, 2007. 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).

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(iv) Special Payout Election for Unmatched Pre-2007 Participant Deferrals. A Participant shall make a new payout election for the balance of his Account attributable to unmatched Participant Deferrals as of December 31, 2006. The payout election must be completed and received by the Plan by December 31, 2006 or by such earlier date established by the Committee. This payout election will apply only if the Participant is an Employee on the last business day of 2006. The Participant may choose from among the following payout alternatives for the subaccount containing his unmatched pre-2007 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 more than six months after the Participant’s Separation from Service; subsequent installments will be paid each 12 months thereafter.
(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 before January 2009.
(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 before January 2009.

If the Participant elects an in-service withdrawal under this paragraph, all payment(s) from that subaccount will occur on the selected date(s) if the Participant is still an Employee on the date of the first payment or if the Participant Separated from Service less than six months before the date of the first payment. If a Participant Separates from Service more than six months before the date of the first in-service withdrawal from that subaccount, the subaccount will be paid out in a single payment or in two to ten annual installments, as the Participant elects, with the single payment or the first installment paid on the first Payment Processing Date that occurs more than six months after the Participant’s Separation from Service, and subsequent installments paid each 12 months thereafter. See section 5.04(d)(ii) for the situations when a Participant will be paid a lump sum in spite of having elected installments.

(v)

Payout Elections for Unmatched Participant Deferrals After 2006. A Participant shall make a separate payout election for the unmatched Participant Deferrals made each Plan Year, beginning with the Participant Deferrals made in 2007. Newly eligible Participants must complete a payout election at the same time as their initial Enrollment Agreement. For other Participants, 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, except that the payout election for unmatched 2007 Participant Deferrals is December 31, 2006 or such earlier date established by the Committee. 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 more than six months after the Participant’s Separation from Service; subsequent installments will be paid each 12 months thereafter.
(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

Page 10 of 18

until the second year following the year in which the Participant Deferral occurred. For example, Participant Deferrals made in 2008 cannot be withdrawn pursuant to this paragraph until January 2011.

(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.

If the Participant elects an in-service withdrawal under this paragraph, all payment(s) from that subaccount will occur on the selected date(s) if the Participant is still an Employee on the date of the first payment or if the Participant Separated from Service less than six months before the date of the first payment. If a Participant Separates from Service more than six months before the date of the first in-service withdrawal from that subaccount, the subaccount will be paid out in a single payment or in two to ten annual installments, as the Participant elects, with the single payment or the first installment paid on the first Payment Processing Date that occurs more than six months after the Participant’s Separation from Service, and subsequent installments paid each 12 months thereafter. See section 5.04(d)(ii) for the situations when a Participant will be paid a lump sum in spite of having elected installments.

(d) Calculating Installment Payments.

(i)

Payments Starting Before 2007. This paragraph applies only to installments that begin on or before December 31, 2006. The minimum annual installment payment is $50,000, or, if less, the Participant’s remaining Account balance; this rule may result in the Participant receiving fewer installment payments than he elects. Each installment will be equal to the greater of (A) the minimum annual installment, or (B) the vested Account balance measured at the beginning of the Plan Year, divided by the number of remaining annual installments, except that the final installment will be the remaining balance.

(ii)

Payments Starting in 2007 or Afterwards. This paragraph applies only to installments that begin after December 31, 2006. If the value of the Participant’s Account — ignoring any subaccounts containing unmatched Participant Deferrals from which payments began before the Participant’s Separation from Service or from which payments will begin within six months after the Separation from Service — is less than $50,000 six months after the Participant’s Separation from Service, the Participant will be paid a lump sum of such portion of his Account on the first Payment Processing Date that occurs more than six months after the his Separation from Service. If the preceding sentence does not apply, each installment will be equal to the vested Account balance 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 5.07 will apply to determine the timing and amount of certain payments made on or after a change of control.
(ii)	Death. Section 5.06 will apply to determine the timing and amount of all payments made after the Participant dies.

Page 11 of 18

(iii)	Age 70. Section 5.05 will apply, instead of this section, to payments made to an Employee who attained age 70 before December 31, 2004.
(iv)	Hardships. A Participant may take a withdrawal under section 5.08 if he has a financial hardship.

5.05 Age-70-and-Older Distributions.

(a)

General. This section applies only to a Participant who, while an Employee, attained age 70 before December 31, 2004. After 2004, such a Participant will receive annual payments from the Plan. Payments will be made as soon as administratively convenient after the Company Deferrals under section 3.02 for the prior Plan Year have been determined (which usually does not occur until late February at the earliest). Each payment will be equal to the Participant’s Account balance as of the end of the prior Plan Year, including all amounts credited to the Participant’s Account as of any date in the prior Plan Year, and adjusted pursuant to Article IV to reflect investment experience until the date the payment is made. A payment will not include any amount credited to the Participant’s Account as of any date within the current Plan Year.

(b)

Coordination with Other Distribution Sections.

(i)	Death. Any payment after the Participant’s death will be determined under section 5.06.
(ii)	Separation from Service. When a Participant who has received one or more payments pursuant to subsection (a) Separates from Service, (A) any payments pursuant to subsection (a) that are scheduled to occur within six months after the Separation from Service will occur as scheduled, and (B) his remaining Account balance will be paid on the first Payment Processing Date that occurs more than six months after his Separation from Service.
(iii)	Change of Control. Section 5.07 will apply to determine the timing and amount of certain payments made on or after a change of control.
(iv)	Hardships. A Participant may take a withdrawal under section 5.08 if he has a financial hardship.

5.06 Payments After a Participant Dies

(a)	Payout. When a Participant dies, his remaining vested Account balance will be distributed to each of his Beneficiaries as soon as administratively convenient after his death (taking into account a reasonable time for any Beneficiary to disclaim 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), 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.

Page 12 of 18

(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.

5.07 Change of Control

(a)	Former Employees. Each Participant who is not an Employee on 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.
(b)	Employees. 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. 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, 5.06, or 5.08.
(c)	Definition. For purposes of this section, a “change of control” means an event that is both (i) described in Code §409A(a)(2)(A)(v) and (ii) that occurs 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 Apache’s outstanding voting securities; provided that a change of control will not occur if such persons, partnerships, or corporations acquiring more than 20% of Apache’s voting securities is solicited to do so by Apache’s board of directors, upon its own initiative, and such persons, partnerships, or corporations have not previously proposed to acquire more than 20% of Apache’s voting securities in an unsolicited offer made either to Apache’s board of directors or directly to the stockholders of Apache.

5.08	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.

(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 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)), or the Participant’s Beneficiary; loss of the Participant’s property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. 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).

Page 13 of 18

(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, any remaining hardship withdrawal may be taken from the Savings Plan.
(e)	Suspension of Participant Deferrals. The Participant’s Deferred Contributions will be suspended for six months from the date of the hardship withdrawal.
(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, amounts will be withdrawn from the subaccount(s) containing Company Deferrals.

5.09	Administrative Delays in Payments
	The Committee may delay any payment from this Plan for as short a period as is administratively practicable. 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 a Participant or Beneficiary if the Plan must wait for information from the Participant or Beneficiary in order to determine the appropriate withholding.
5.10	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 Committee may direct the Plan to withhold additional amounts from any payment, either because the Participant so requested or to repay the Participant’s debt or obligation to the Company or Affiliated Entities.

ARTICLE VI
ADMINISTRATION

6.01	The Committee — Plan Administrator
	The Committee members for the Plan are the same committee members who serve on the administrative committee for the Savings Plan. The Committee is the Plan’s “administrator” within the meaning of ERISA §3(16)(A).
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 decision or action affects a relatively small percentage of Plan Participants including a Committee member,

Page 14 of 18

	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
	The Committee shall appoint an agent 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 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
	The Company expects to continue the Plan indefinitely, but each Company may terminate its participation in the Plan at any time, and Apache may terminate the entire Plan at any time.
8.02	Amendment
	Apache may amend the Plan at any time and from time to time, retroactively or otherwise, on behalf of 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.
	Each amendment must be in writing. Each amendment must be approved by Apache’s Board of Directors or by an officer of Apache Corporation who is authorized by Apache’s Board of Directors to amend the Plan.

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Each amendment must be executed by an officer of Apache to whom Apache’s Board of Directors has delegated the authority 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 5.06(d) and amounts paid to the Company under section 5.10, no Participant or Beneficiary has the right to assign, transfer, hypothecate, encumber or anticipate his interest in any benefits under the Plan, nor may the benefits under the Plan be subject to any legal process to levy upon or attach the benefits for payment for any claim against the Participant, Beneficiary, or the spouse of the Participant or Beneficiary. If, notwithstanding the foregoing provision, any benefits are garnished or attached by the order of any court, the Company may bring an action for declaratory judgment in a court of competent jurisdiction to determine the proper recipient of the benefits to be distributed pursuant to the Plan. During the pendency of the action, any benefits that become distributable will be paid into the court as they become distributable, to be distributed by the court to the recipient it deems proper at the conclusion of the action.
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.
(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.

Page 16 of 18

(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.
(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 the appellate decision, or (ii) the date on which the statute of limitations for such claim expires.

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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 are responsible for any late payment of benefits or loss of benefits. Neither the Plan, the Committee, nor the Company has any duty to search for a missing individual. If the Plan does not find the missing individual, 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 or her 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
By:	/s/ Jeffrey M. Bender
Title:	Vice President, Human Resources
Date:	February 22, 2007

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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, PREFERRED STOCK DIVIDENDS
AND PREFERRED INTERESTS OF SUBSIDIARIES

(In thousands, except ratio data)

(Unaudited)	2006		2005		2004		2003		2002
EARNINGS
Pretax income from continuing operations before preferred interests of subsidiaries	$	4,009,595	$	4,206,254	$	2,663,083	$	1,930,925	$	915,194
Add: Fixed charges excluding capitalized interest and preferred interests requirements of consolidated subsidiaries		178,399		138,399		134,797		132,820		128,730
Adjusted Earnings	$	4,187,994	$	4,344,653	$	2,797,880	$	2,063,745	$	1,043,924
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Interest expense including capitalized interest (1)	$	217,454	$	175,419	$	168,090	$	173,045	$	155,667
Amortization of debt expense		2,048		3,748		2,471		2,163		1,859
Interest component of lease rental expenditures (2)		20,198		16,220		14,984		14,458		11,895
Preferred interest requirements of consolidated subsidiaries (3)		—		—		—		11,805		19,581
Fixed charges		239,700		195,387		185,545		201,471		189,002
Preferred stock dividend requirements (4)		8,922		9,105		9,058		9,968		17,540
Combined Fixed Charges and Preferred Stock Dividends	$	248,622	$	204,492	$	194,603	$	211,439	$	206,542
Ratio of Earnings to Fixed Charges		17.47		22.24		15.08		10.24		5.52
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends		16.84		21.25		14.38		9.76		5.05

(1)	The Company did not receive a tax benefit for $5 million of transaction costs written off to interest expense when the Company retired its preferred interests of subsidiaries in September 2003. Given the non-deductibility of the charge, $9 million of pre-tax income was required to cover the $5 million write-off. Accordingly, interest expense has been grossed up by $4 million.
(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 of rental payments applies for all periods presented.
(3)	The Company did not receive a tax benefit for a portion of its preferred interests of consolidated subsidiaries. This amount represents the pre-tax earnings that would be required to cover preferred interests requirements of consolidated subsidiaries. In September 2003, the Company retired its preferred interests of subsidiaries.
(4)	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-21.1

Exhibit 21.1

Page 1 of 3

Apache Corporation (a Delaware corporation)
Listing of Subsidiaries as of February 28, 2007

Exact Name of Subsidiary and Name	Jurisdiction of
under which Subsidiary does Business	Incorporation or Organization
Apache Corporation (New Jersey)		New Jersey
Apache Delaware LLC		Delaware
Apache Delaware III LLC		Delaware
Apache Delaware IV LLC		Delaware
Apache Delaware Investment LLC		Delaware
Apache Donard Corporation LDC		Cayman Islands
Apache East Ras Budran Corporation LDC		Cayman Islands
Apache Energy Limited		Western Australia
Apache Northwest Pty Ltd.		Western Australia
Apache East Spar Pty Limited		Western Australia
Apache Harriet Pty Limited		Victoria, Australia
Apache Kersail Pty Ltd		Victoria, Australia
Apache Miladin Pty Ltd		Victoria, Australia
Apache Nasmah Pty Ltd		Victoria, Australia
Apache Oil Australia Pty Limited		New South Wales, Australia
Apache Varanus Pty Limited		Queensland, Australia
Apache Finance Louisiana Corporation		Delaware
Apache Foundation		Minnesota
Apache Gathering Company		Delaware
Apache GOM Pipeline, Inc.		Delaware
Apache Golden Arrow Corporation LDC		Cayman Islands
Apache Helvellyn Corporation LDC		Cayman Islands
Apache Holdings, Inc.		Delaware
Apache Howgate Corporation LDC		Cayman Islands
Apache International LLC (formerly Apache International, Inc.)		Delaware
Apache North America, Inc.		Delaware
Apache Caribbean Holdings Corporation		St. Lucia
Apache Finance Australia Pty Limited		Australian Capital Territory
Apache Finance Pty Limited		Australian Capital Territory
Apache Australia Management Pty Limited		Victoria, Australia
Apache Australia Holdings Pty Limited		Western Australia
Apache Khalda Corporation LDC		Cayman Islands
Apache Qarun Corporation LDC		Cayman Islands
Apache Qarun Exploration Company LDC		Cayman Islands
Apache Yemen Corporation LDC		Cayman Islands
Apache Libya Corporation LDC		Cayman Islands
Apache Louisiana Holdings, LLC		Delaware
Apache Louisiana Minerals, Inc.		Delaware
Apache Midstream Enterprises, Inc.		Delaware
Apache Oil Corporation		Texas
Apache Overseas, Inc.		Delaware
Apache Abu Gharadig Corporation LDC		Cayman Islands
Apache Argentina Corporation LDC		Cayman Islands
Apache Asyout Corporation LDC		Cayman Islands
Apache Bohai Corporation LDC		Cayman Islands
Apache China Management LDC		Cayman Islands
Apache China Holdings LDC		Cayman Islands
Apache Darag Corporation LDC		Cayman Islands
Apache East Bahariya Corporation LDC		Cayman Islands
Apache El Diyur Corporation LDC		Cayman Islands

1

Exhibit 21.1

Page 2 of 3

Apache Corporation (a Delaware corporation)
Listing of Subsidiaries as of February 28, 2007

Exact Name of Subsidiary and Name	Jurisdiction of
under which Subsidiary does Business	Incorporation or Organization
Apache Enterprises LDC		Cayman Islands
Apache Faiyum Corporation LDC		Cayman Islands
Apache FC Argentina Company LDC		Cayman Islands
Apache Madera Corporation LDC		Cayman Islands
Apache Matruh Corporation LDC		Cayman Islands
Apache Mediterranean Corporation LDC		Cayman Islands
Apache Luxembourg Holdings I S.a.r.l		Luxembourg
Apache Luxembourg Holdings II S.a.r.l.		Luxembourg
Apache Luxembourg Holdings III LDC		Cayman Islands
Apache North El Diyur Corporation LDC		Cayman Islands
Apache North Sea Holdings LDC		Cayman Islands
Apache North Sea Management LDC		Cayman Islands
Apache International Holdings LLC		Delaware
Apache International Finance S.à r.l.		Luxembourg
Apache International Holdings II LLC		Delaware
Apache North Sea Investment		England and Wales
Apache North Sea Limited		England and Wales
Apache North Tarek Corporation LDC		Cayman Islands
Apache Petrolera Argentina S.A.		Argentina
Apache Poland Holding Company		Delaware
Apache Shushan Corporation LDC		Cayman Islands
Apache South Umbarka Corporation LDC		Cayman Islands
Apache Umbarka Corporation LDC		Cayman Islands
Apache West Kalabsha Corporation LDC		Cayman Islands
Apache West Kanayis Corporation LDC		Cayman Islands
Apache Permian Basin Corporation		Delaware
Apache Permian Basin Investment LLC		Delaware
Apache Perseverance Corporation LDC		Cayman Islands
Apache Ravensworth Corporation LDC		Cayman Islands
Apache Red Deer Corporation LDC		Cayman Islands
Apache Shady Lane Ranch Inc.		Wyoming
Apache Supel Corporation LDC		Cayman Islands
Apache Transfer Company		Delaware
Apache UK Limited		England and Wales
Apache Lowendal Pty Limited		Victoria, Australia
Apache West Texas Acquisition Corporation		Delaware
Texas and New Mexico Exploration LLC		Delaware
Apache West Texas Holdings, Inc.		Delaware
Apache West Texas Investment LLC		Delaware
Burns Manufacturing Company		Minnesota
Clear Creek Hunting Preserve, Inc.		Wyoming
Cottonwood Aviation, Inc. (formerly Apache Aviation, Inc.)		Delaware
DEK Energy Company		Delaware
DEK Energy Texas, Inc.		Delaware
Apache Finance Canada Corporation		Nova Scotia, Canada
Apache Canada Management Ltd		Alberta, Canada
Apache Canada Holdings Ltd		Alberta, Canada
Apache Canada Management II Ltd		Alberta, Canada
Apache Finance Canada II Corporation		Nova Scotia, Canada

2

Exhibit 21.1

Page 3 of 3

Apache Corporation (a Delaware corporation)
Listing of Subsidiaries as of February 28, 2007

Exact Name of Subsidiary and Name	Jurisdiction of
under which Subsidiary does Business	Incorporation or Organization
Apache Canada Ltd.		Alberta, Canada
Apache Canada Argentina Holdings ULC		Alberta, Canada
Apache Austria Investment LDC		Cayman Islands
Apache Canada Argentina Investment ULC		Alberta, Canada
Apache Natural Resources Petrolera Argentina S.R.L.		Argentina
TDF Oil and Gas Company LDC		Cayman Islands
Petrolera TDF Company S.R.L.		Argentina
TDF U.S. Petroleum LLC		Delaware
TDF O&G Company LDC		Cayman Islands
LF Oil and Gas Company LDC		Cayman Islands
Petrolera LF Company S.R.L.		Argentina
LF U.S. Petroleum LLC		Delaware
LF O&G Company LDC		Cayman Islands
Neuquen Oil and Gas Company LDC		Cayman Islands
Apache Energía Argentina S.R.L.		Argentina
PNRA U.S. Petroleum LLC		Delaware
Neuquen O&G Company LDC		Cayman Islands
Apache Austria Finance GmbH		Austria
Apache Austria Holding GmbH		Austria
Apache Canada Properties Ltd.		Alberta, Canada
Apache FC Capital Canada Inc.		Alberta, Canada
Apache FC Canada Enterprises Inc.		Alberta, Canada
DEPCO, Inc.		Texas
Heinold Holdings, Inc.		Delaware
GOM Operating Company		Delaware
GOM Shelf, LLC		Delaware
LeaCo New Mexico Exploration and Production LLC		Delaware
Nagasco, Inc.		Delaware
Apache Crude Oil Marketing, Inc.		Delaware
Apache Marketing, Inc.		Delaware
Apache Transmission Corporation — Texas		Texas
Nagasco Marketing, Inc.		Delaware
Nile Weavers, Inc.		Delaware
Phoenix Exploration Resources, Ltd.		Delaware
TEI Arctic Petroleum (1984) Ltd.		Alberta, Canada
Texas International Company		Delaware

3

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:

(1) Registration Statements (Form S-3 Nos. 333-57785, 333-75633, 333-32580, and 333-105536) of Apache Corporation and in the related Prospectuses,

(2) Registration Statement (Form S-4 No. 333-107934) of Apache Corporation and in the related Prospectus, and

(3) Registration Statements (Form S-8 Nos. 33-31407, 33-37402, 33-53442, 33-59721, 33-59723, 33-63817, 333-04059, 333-25201, 333-26255, 333-32557, 333-36131, 333-53961, 333-31092, 333-48758, 333-97403, 333-102330, 333-103758, 333-105871, 333-106213, 333-125232, 333-125233, and 333-135044) of Apache Corporation;

of our report dated February 28, 2007, with respect to the consolidated financial statements of Apache Corporation, our report dated February 28, 2007 with respect to Apache Corporation management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting of Apache Corporation, included in this Annual Report (Form 10-K) for the year ended December 31, 2006.

/s/ Ernst & Young LLP
ERNST & YOUNG LLP

Houston, Texas
February 28, 2007

EX-23.2

EXHIBIT 23.2

Consent of Ryder Scott Company, L.P.

As independent petroleum engineers, we hereby consent to the incorporation by reference in this Form 10-K of Apache Corporation to our Firm’s name and our Firm’s review of the proved oil and gas reserve quantities of Apache Corporation as of January 1, 2007, and to the incorporation by reference of our Firm’s name and review into Apache Corporation’s previously filed Registration Statements on Form S-3 (Nos. 333-57785, 333-75633, 333-32580, and 333-105536), on Form S-4 (No. 333-107934), and on Form S-8 (Nos. 33-31407, 33-37402, 33-53442, 33-59721, 33-59723, 33-63817, 333-04059, 333-25201, 333-26255, 333-32557, 333-36131, 333-53961, 333-31092, 333-48758, 333-97403, 333-102330, 333-103758, 333-105871, 333-106213, 333-125232, 333-125233 and 333-135044).

/s/ Ryder Scott Company, L.P.  

Ryder Scott Company, L.P. 

Houston, Texas
February 27, 2007

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, G. Steven Farris, certify that:

1.	I have reviewed this annual report on Form 10-K 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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

President, Chief Executive Officer and

Chief Operating Officer

Date: February 28, 2007

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Roger B. Plank, certify that:

1.	I have reviewed this annual report on Form 10-K 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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

Executive Vice President and Chief Financial Officer

Date: February 28, 2007

EX-32.1

EXHIBIT 32.1

APACHE CORPORATION

Certification of Chief Executive Officer
and Chief Financial Officer

     I, G. Steven Farris, certify that the Annual Report of Apache Corporation on Form 10-K for the year ended December 31, 2005, 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:	President, Chief Executive Officer and Chief Operating Officer
Date: February 28, 2007

     I, Roger B. Plank, certify that the Annual Report of Apache Corporation on Form 10-K for the year ending December 31, 2005, 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:	Executive Vice President and Chief Financial Officer
Date: February 28, 2007