finding

a

07AnnualReport

apachecorporation

way

Summary

apachecorporation

2000 Post Oak Boulevard, Suite 100Houston, Texas 77056

www.apachecorp.com

Julimar-1

Jade 1-x

Alexandrite 1-xstar Julimar-1 Australia discovery test flows 85 MMcf of gas per day

star Jade 1-x Well in Egypt’s Western Desert tests 26 MMcf of gas per day from Jurassic formation

star Alexandrite 1-x Egypt well tests 19.8 MMcf of gas, 4,045 barrels of condensate per day

star Brunello-1 Discovery on Australia block tests 73 MMcf of gas per day

star Ootla Apache tests commercial potential of vast shale play in British Columbia

discoveries07

Ootla

Brunello-1

explorationthrough innovation

When it comes to discovery, Apache Corporation took its

global exploration to new heights in 2007.

Apache’s portfolio of seven regions in six nations, including leasehold of 42 million acres, provided

a platform for 12 percent production growth, a 6 percent increase in proved reserves,

and a greater potential into the next decade.

Apache’s values – integrity, respect for human dignity and a sense of urgency –

along with a strong work ethic, an unwillingness to accept

conventional thinking and the determination

to overcome challenges are the keys

to “finding a way.”

�

2007a deliberate

and determined journey

“finding a way”embodies Apache Corporation’s 53-year quest to build a significant and profitable oil and gas company, providing energy to meet constantly increasing global demand for the long-term benefit of our shareholders.

From scraping together $250,000 to launch the company in 1954, to acquiring 1,050 square miles of

three-dimensional seismic data at the environmentally sensitive tip of South America during 2007,

Apache’s work ethic and its values have been the guiding principles behind “finding a way.”

In 2007, your company:

• Increased production 12 percent to

561,000 barrels of oil equivalent (boe)

per day, the 28th annual increase in the

last 29 years;

• Grew proved reserves by 6 percent to

2.4 billion boe, the 22nd consecutive year

of reserve growth;

• Earned a record $2.8 billion, or $8.39

per diluted common share. Excluding

the non-cash impact of foreign currency

fluctuations and tax rate changes

on deferred tax balances, Apache’s

2007 adjusted earnings* were $8.65 per

share, or 25 percent above 2006 adjusted

earnings; and

• Generated a record $6.2 billion of cash

from operations before changes in

operating assets and liabilities.*

*Non-GAAP

These are the year’s key statistics. The rest of the story lies in

the underlying asset value and future resource potential that

the company has built. With 42 million gross acres in seven core

operating regions, Apache has a deep inventory of opportunities

across our portfolio that will enable the company to continue to

grow profitably into the next decade.

Over the course of a half century, a company is confronted with countless challenges and constant change. Most of all, “finding a way” means not

giving in to conventional thinking while having the determination

to overcome any challenge to continue our record of profitable

growth. The difference between success and failure is measured in

inches, not miles, and to continue on our path of progress, we must

constantly find new opportunities to fuel our growth – most recently,

through exploration.

In 2007, our exploration and development program provided significant momentum for future growth. Apache’s “ACE” core growth areas of Australia, Canada and Egypt will further that momentum.

2

In Australia, we discovered natural gas with the Julimar-1 well on

the WA-356-P block in the Carnarvon Basin. With two additional

discoveries, Apache booked our share of 650 billion cubic feet

(Bcf) of estimated proved reserves. Five additional appraisal wells

are planned for 2008, and we believe the ultimate size of this gas

accumulation could be in the range of 2 to 4 trillion cubic feet

(Tcf). Apache is developing our Reindeer discovery at a time of strong

demand for Carnarvon Basin natural gas; industry prices recently

have risen to a multiple of the company’s average price of $1.89 per

thousand cubic feet (Mcf) in 2007. We hope to sanction the Julimar

gas development in late 2008.

In Canada, Apache had encouraging results in the Ootla area of

British Columbia, where we are continuing to test the commercial

and geological potential of the Muskwa Shale. With our partner,

EnCana, we have amassed 417,000 gross acres – the largest single

acreage position in this sizable emerging play.

In Egypt, we made several deep Jurassic oil and gas discoveries,

including the Jade, Alexandrite and Imhotep discoveries in the

Matruh Concession on the northern side of the Khalda area.

Behind each of these discoveries are teams of experienced, creative

geologists, geophysicists and engineers equipped with Apache’s

sense of urgency, the best technological tools, and a determination to

find a way to overcome obstacles.

For example, when the wheels of 3-D seismic survey equipment

became bogged down in the muddy terrain of Argentina’s Tierra del

Fuego, Apache’s exploration group brought in tracked vehicles used

in the Canadian Arctic Region to accelerate the completion of the

seismic survey in this environmentally sensitive area. This survey already is yielding results in added production.

Apache also tested a new method of acquiring 3-D seismic

information that speeds the job while increasing the quality of the

data. Using 12 large, independently controlled Vibroseis seismic

source trucks in Egypt’s Western Desert, we set a new record for acquiring data with more than 6,000 shots in just over eight hours.

One essential element of Apache’s progress over the last 53 years is

our commitment to long-term growth over short-term gratification.

It seems that every week, another large institution is crippled

by the impact of short-term thinking that disregards long-term

consequences. The sub-prime credit debacle that has dragged

the U.S. economy into recession is one such example. Essentially,

mortgage brokers and bankers were rewarded for taking excessive

risks by originating loans with little regard for the borrowers’ ability

to repay.

Apache employees thrive in a culture that values

and rewards them for growth that is both profitable

and sustainable.

As this report was being prepared, our employees

achieved a goal that, when established in 2005,

appeared to be an impossible dream: doubling the company’s share price by the end of 2008.

Since kicking off the 2005 Share Appreciation Plan,

our long-term shareholders have seen the value

of the company more than double, increasing

market capitalization by more than $19 billion. For

this achievement, 2,800 Apache employees will

receive approximately 2 million shares with total

value equal to about 1 percent of the market value

growth. More than 90 percent of the incentives

will be paid to non-executives, with employees

receiving shares equivalent to at least half of their

annual salaries. The shares will be paid in four

annual installments, providing a strong retention

incentive at a time when the competition for good

people is considerable.

�

A New Era For Energy

While Apache focuses on its long-term goals, we are faced with unprecedented short-term volatility in global crude oil markets. The phenomenal rise of

crude oil prices – from $61 per barrel in January

2007 to $110 per barrel in March 2008 – is the

product of many complex factors and signals the

emergence of a new competitive era for energy

across the globe.

Population growth and emerging economies such

as China and India have pushed oil demand from

65 million barrels per day to 85 million barrels

per day in 20 years. At current prices, the nations

of the world are spending more than $3 trillion

annually to secure crude oil. The fastest-growing

demand is from less-developed countries to fuel

progress and advance their standards of living.

For U.S. consumers, the recent rise in energy prices has been startling, because the nation had become accustomed to inexpensive energy after the price spikes in the 1970s and 1980s. At the end of the

1990s, energy took a smaller bite out of disposable

income than it did at the end of World War II.

While increased demand, turmoil in the oil-

rich Middle East and the weak U.S. dollar play

large roles in rising oil prices, many analysts

have concluded that the tremendous increase in

speculation in oil futures markets by hedge funds,

pension funds and other investors has become one

of the significant factors in setting oil prices.

Speculative trading brings liquidity to commodity

markets, allowing companies to hedge their

exposure to commodity prices. Apache has used

this strategy to lock in the economic returns of

acquisitions and development projects.

But large-scale speculation can hurt the economy

by distorting market signals regarding supply

and demand in the physical market and lead to

excessive price volatility. We believe today’s trading

volume of oil futures contracts – 15 times that of

physical demand – is excessive and has had an

undue influence on today’s lofty prices.

Raymond Plank

Chairman and Founder

G. Steven FarrisPresident, Chief Executive Officer and Chief Operating Officer

Our Role in the New Era

Apache’s primary responsibility is to find and develop oil and natural gas that will provide a competitive return for our shareholders, fuel economic growth, and help raise living standards. We applaud the recent trends

toward conservation and development of viable alternatives to fossil

fuels. However, these alternatives will not ebb the world’s demand

for fossil fuels for many years.

In 2007, in addition to our effective exploration program, we pushed

ahead on six large development projects that are expected to add

over 100,000 barrels of oil equivalent per day of new production

in 2009, 2010 and 2011. These projects include the Van Gogh and

Pyrenees oil developments and Reindeer and Julimar gas projects

offshore Western Australia, as well as expansion of the Salam gas

plant and secondary oil recovery projects in Egypt.

Apache has traversed enough price cycles over our 53 years to recognize that it would be imprudent to base our investment decisions on $100 per barrel oil. We use conservative price forecasts, and, when

appropriate, have employed hedges to protect the economic viability

of acquisitions and development projects with long lead times.

In addition to building a profitable corporation that provides

essential energy supplies, we have a responsibility to be stewards

of the environment in which we operate and to do our part

to improve living standards. Our operations in Egypt – where

we are the third-largest producer and an important source of

foreign investment – illustrate the many ways we try to meet

our responsibilities.

We provide direct employment for 2,000 Egyptians, $9 million in

revenue for the government each day, and energy supplies for the

growing economy. In the Western Desert, we are converting diesel

generators to cleaner-burning, less-expensive natural gas. We also

tapped the spirit of our workforce, along with the generosity of our

officers, employees, directors, industry colleagues and friends, to

build 200 one-room schools for girls from rural villages who had

not been able to attend school.

Elsewhere in this annual report, we describe other aspects of

Apache’s stewardship commitment, including some exciting

new initiatives.

At Apache, “finding a way” also means avoiding the beaten path. Our

initial investment in Egypt, at a time when other operators were

leaving, set the stage for the emergence of one of the company’s

core growth areas. We see similar opportunities for growth in

Australia, Canada and Argentina.

Apache’s 2007 was an outstanding year by most measures for our

shareholders and our skilled and dedicated team. Although we

anticipate turbulent times ahead as the U.S. economy struggles

to right itself, we remain dedicated to adding value for our

shareholders.

�

performancehighlights

2007 2006 2005

Financial HighlightsRevenues $9,978 $8,289 $7,584

Income Attributable to Common Stock 2,807 2,547 2,618

Diluted Net Income per Common Share 8.39 7.64 7.84

Cash from Operations before Changes in Operating Assets and Liabilities (a):

Net Cash Provided by Operating Activities 5,677 4,313 4,332

Changes in Operating Assets and Liabilities 518 755 412

Cash from Operations Before Changes in Operating Assets and Liabilities

$6,195 $5,068 $4,744

Total Assets $28,635 $24,308 $19,272

Long-Term Debt 4,012 2,020 2,192

Shareholders’ Equity 15,378 13,191 10,541

Cash Dividends paid per Common Share 0.60 0.45 0.34

Operational HighlightsOil and Gas Expenditures (including acquisitions, gas gathering, transmission and processing facilities and capitalized interest)

$5,802 $6,420 $3,857

Natural Gas Production (MMcf/d) 1,796 1,589 1,264

Oil and Condensate Production (Mbbls/d) 262 236 244

Proved Reserves (MMboe) 2,446 2,313 2,117

Year Ended December 31

(a) NON-GAAP FINANCIAL MEASURE:

The annual report discusses Apache’s cash from operations before changes in operating assets and liabilities. Management believes the information is useful for investors because it is used internally and widely accepted by those following the oil and gas industry as a financial indicator of a company’s ability to generate cash to internally fund exploration and development activities, fund dividend programs, and service debt. It is also used by research analysts to value and compare oil and gas exploration and production companies, and is frequently included in published research when providing investment recommendations. Cash from operations before changes in operating assets and liabilities, therefore, is an additional measure of liquidity, but is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing, or financing activities.

(dollars in millions, except per-share data)

�

Stellardiscoveries down under

making

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australiaWith 7.6 million acres and an active drilling program, Apache has several catalysts for growth in Australia. Development of the Van Gogh and Pyrenees oil fields in the Exmouth Basin are expected to add significant production volumes by the end of the decade, and the Julimar and Reindeer fields in the Carnarvon Basin are expected to contribute to future gas volumes.

In 2007, oil production increased 16 percent and gas

production rose 5 percent from the prior year. Proved

reserves increased 31 percent to an estimated 268 million

barrels of oil equivalent.

In 2008, Apache is planning to drill five additional wells at

Julimar – an April 2007 Carnarvon discovery with estimated

gross recoverable resource potential of 2 to 4 Tcf of natural

gas. Also in the Carnarvon, Apache plans to drill two key

exploration wells at Halyard and Marley.

The 2008 exploration program includes a seven-well

program planned in the Gippsland Basin, across a large

offshore acreage position adjacent to some of Australia’s most prolific producing fields. Estimated resource potential in this

program is more than 500 million barrels of oil equivalent.

Australia also provides a good example of

the evolution of international gas markets as

domestic users face competition for supply from

international markets through the development

of liquefied natural gas (LNG) facilities. Natural

gas prices in the Carnarvon Basin increased from

under $2 per Mcf to more than $7 per Mcf in the

past year as demand increased from the Western

Australia mining industry and large takeaway

capacity from LNG facilities. Apache expects

to sign a contract to sell gas from the Reindeer

development during 2008, with first production

in 2010.

Successful exploration and continuing development of several earlier

discoveries were highlights of Apache’s activities

in Australia.

7

Exploration and development activity in Apache’s Canadian Region reaches across 6.8 million gross acres in the provinces of Alberta, British Columbia, Saskatchewan and the Northwest Territories.

Production and reserves declined somewhat

in 2007 as a result of a reduction in capital

spending associated with cost inflation and

reduced gas-price realizations. The reduction

in capital did not reflect our belief in the vast

hydrocarbon potential in Western Canada.

Apache’s 2008 winter drilling program includes nine wells in

the Ootla area of British Columbia in the Muskwa Shale play

with 50-percent partner EnCana. The program is designed

to determine the commerciality of the play and will include

experiments with multi-stage fracture stimulation programs

to enhance flow rates. The potential recoverable resource from the combined holdings of 417,000 acres is an estimated 9 to 16 Tcf of gas net to Apache.

The region continues to target shallow gas accumulations,

including coal bed methane (CBM) in fields such as Provost and

Nevis; Apache is one of Canada’s largest producers of CBM.

With joint-venture partner EnCana, Apache is evaluating the

commercial potential of the Mannville coals in the Nevis and

Provost areas with net resource potential exceeding 1 Tcf. The

North and South Grant Lands obtained through farm-ins in

2004 and 2005 provide additional CBM potential.

In Canada, Apache’s 2007 drilling program targeted the Muskwa Shale in the Ootla area, shallow gas reserves and significant coal bed methane resource potential.

canada

�

northwestscouting the

calgary

�

bright futurein an ancient

land

cairo

�0�0

Growth in Apache’s Egypt Region continued in 2007, with net oil production increasing 7 percent and net gas production climbing 11 percent. The region is on track to achieve its goal of doubling operated production from 2005 levels by 2010.

Apache drilled several deep Jurassic oil and gas discoveries

with substantial flow rates during 2007, including the

Jade, Alexandrite, and Imhotep discoveries in the Matruh

Concession in the northern part of the Khalda area. Other

discoveries were recorded in the Northeast Abu Gharadig

Concession operated by Shell, and on the East Ras Budran

Concession, an onshore area near the Gulf of Suez, where a

well tested more than 1,900 barrels of oil per day. Appraisals

of all of these discoveries are planned during 2008.

The 2008 exploration program reaches across a range of plays

and prospects that highlights the extent of Apache’s portfolio,

including prospects from the shallow Upper Bahariya and Abu

Roash to the Cretaceous Alem el Bueib to the deep Jurassic

formations. The region plans to drill four wildcats on the 9-million-acre Tharwa farm-in acquired during 2007.

By year-end 2008, Apache expects to complete

construction of two new processing plants at the Salam gas plant which are expected to add net production of 90 MMcf to 100 Mcf of gas and 4,500 barrels of condensate per day. Continued expansion

of several water-flood projects, with additional

drilling and increased water injection capacity, is

expected to build toward net production of 20,000

barrels of oil per day.

Apache has exploration opportunities across its 19 million gross acres

in Egypt.

egypt

��

The Central Region drilled 335 productive wells in West Texas, New Mexico and Oklahoma.

Apache’s 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.

The Gulf Coast Region consistently delivers high returns on invested

capital and cash flow significantly in excess of its exploration and

development spending.

In 2007, the Central Region increased production 18 percent by

drilling 335 productive wells and augmented the region’s asset

base with the acquisition of producing properties in the Permian

Basin with estimated proved reserves of 70 million barrels of oil

equivalent. In 2008, the region will continue to actively exploit fields in the Permian Basin and Western Oklahoma.

The Gulf Coast Region, the company’s largest in terms of production

volume and revenues, comprises Apache’s interests in and along the

Gulf of Mexico, in the areas on- and offshore Louisiana and Texas.

Apache has been the largest held-by-production acreage holder and

the second-largest producer in Gulf waters less than 1,200 feet deep

since 2004.

Gulf Coast activities in 2007 focused on an active drilling program,

completing 65 out of 84 wells drilled, and restoring production

impacted by the 2005 hurricanes. In 2008, the region will continue to develop opportunities near the company’s extensive production base.

united states

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houston

tulsa

Reliablestreams of production

tapping

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Apache’s investments at the Forties Field were focused on enhancing the operating efficiency of the platforms and looking ahead to increasing the ultimate recovery from the largest field ever discovered in the United Kingdom sector of the North Sea, with an estimated 5 billion barrels of original oil in place.

Several key facilities projects were commissioned

during 2007, including new power generation and

multi-platform gas and power distribution systems,

export pumping, produced water-handling and

injection systems, and drilling rig-package upgrades.

Although operating efficiency improved 11 percent

from 2006, production was 8 percent below

2006 levels as drilling was deferred to focus on

completing topside projects. In 2008, completion of several facilities upgrades is planned, as well as 15 new wells that will add to the field’s productive capacity. The inventory of future drilling projects was updated with a newly reprocessed seismic survey that identified bypassed oil in the main reservoir units.

Improvements of topside facilities enhanced the operating efficiency of the Forties Field.

aberdeen

north sea

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Activity increased in Argentina in 2007, the first full year of operation for Apache’s newest core area.

At year’s end, the Seccion Baños 2004 – the first significant well drilled

from a 700-square-mile (1,800-square-kilometer), 3-D seismic survey

in Argentina’s Tierra del Fuego – commenced production at a daily rate

of 1,635 barrels of oil and 1.3 MMcf of gas from the Lower Cretaceous

Springhill sandstone. The discovery followed two wells that developed the

previously unexploited discovery at Cabo Nombre Sur, located offshore

4.2 miles (7 km) to the south of the latest well. On the mainland, Apache established the commerciality of two gas areas in the Neuquén Basin.

Apache receives low government-regulated pricing on a substantial

portion of its natural gas production – an average of 76 cents per Mcf.

Recently, we have signed contracts for the unregulated increment for

approximately $3 per Mcf, although for reduced volumes. In response

to gas shortages, the government has re-evaluated its gas pricing

regulations and recently announced a “new gas / old gas” policy similar

to U.S. regulations in the late 1970s. Gas shortages suggest that the

government eventually may allow even regulated prices to increase in

order to encourage more investments. No details have been published,

and the effectiveness of the new regulations remains unclear. However,

natural gas is in short supply and opportunities to find and develop it

are abundant.

In November 2007, Apache was awarded exploration rights on two blocks comprising 1 million net acres on the Chilean side of Tierra del Fuego. The acreage is adjacent to Apache’s 552,000 net acres on the Argentinean

side of the island and represents a natural extension of our expanding

exploration and production operations. Apache is finalizing the contracts

with the Chilean government and plans to acquire 3-D seismic data

in 2008.

Apache has found abundant opportunities for exploration and development drilling in Argentina’s producing basins.

tierra del fuego

buenos aires

argentina

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worldwideoperations

canadaNatural Gas ProductionLiquid Hydrocarbon ProductionProved ReservesWells Drilled/ProductiveGross Acreage

u.s. central regionNatural Gas ProductionLiquid Hydrocarbon Production

Proved ReservesWells Drilled/Productive

Gross Acreage

u.s. gulf coast regionNatural Gas ProductionLiquid Hydrocarbon Production

Proved ReservesWells Drilled/Productive

Gross Acreage

argentinaNatural Gas ProductionLiquid Hydrocarbon Production

Proved ReservesWells Drilled/Productive

Gross Acreage

2007

388 MMcf/day21,002 bbls/day567 MMboe348/2876.8 million

201 MMcf/day14,240 bbls/day

112 MMboe94/92

2.5 million

474 MMcf/day60,032 bbls/day

365 MMboe84/65

3.2 million

296 MMcf/day38,429 bbls/day

636 MMboe343/335

1.8 million

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north seaNatural Gas Production

Liquid Hydrocarbon ProductionProved Reserves

Wells Drilled/ProductiveGross Acreage

australiaNatural Gas ProductionLiquid Hydrocarbon ProductionProved ReservesWells Drilled/ProductiveGross Acreage

egyptNatural Gas ProductionLiquid Hydrocarbon Production

Proved ReservesWells Drilled/Productive

Gross Acreage

2 MMcf/day53,632 bbls/day

206 MMboe16/5

719,153

195 MMcf/day13,778 bbls/day268 MMboe24 /107.6 million

241 MMcf/day60,735 bbls/day

292 MMboe192/161

18.9 million

�7

consideringthe global

perspective

Stewardship

The dictionary defines stewardship as “the careful and responsible management of something entrusted to one’s care.” Apache’s commitment

to stewardship spans five decades and reaches

from environmental responsibility to the multi-

faceted goal of leaving the world a better place.

Environment

Because Apache is part of an industry that

derives benefit from the earth’s resources,

we maintain a commitment to operate in

an environmentally responsible manner

throughout the world.

Apache incorporates voluntary, cost-effective actions to reduce, sequester or offset greenhouse gas emissions. Apache has identified emission

reduction projects that are clearly economic to

implement, yet result in significant reductions

of greenhouse gases.

In 2007, Apache commissioned the innovative

Forties Field natural gas ring main system

that permitted replacement of diesel-burning

electric generators with more efficient, cleaner-

burning, natural gas electric generators. The

completion of a gas and power ring and the

installation of new electric generators increased

the efficiency of the field, cut gas flaring and

consumption of diesel fuel, and reduced

emissions of carbon dioxide (CO2) by about

25 percent.

Similarly, Apache is replacing diesel-powered

generators in Egypt’s Western Desert with gas-

powered units, another effort that will reduce

emissions by 3,900 tons while cutting costs by

$20 million per year.

In Canada, Apache’s Midale Field Enhanced Oil Recovery Project

is injecting 10 million tons of CO2 into oil reservoirs that would

have been emitted from a coal gasification plant in North Dakota.

Also in Canada, Apache injects a mixture of CO2 and hydrogen

sulfide (H2S) in an enhanced oil recovery project in the Keg

River oil reservoir. The project injects 32,000 tons of CO2 and has

enabled Apache to cease operation of a sulfur plant. In a related

development, the buoyant market for sulfur has enabled the

company to sell a stockpile of 200,000 tons of sulfur for use

in fertilizer.

Leaving the World a Better Place

Almost every week, across Apache’s operating regions, employees

are volunteering or providing financial support for a wide range

of educational, civic and charitable activities. The company’s

philanthropic activities place a special emphasis on education,

the environment, and the arts.

To foster the giving spirit, in 2007, Apache donated $683,000 to match contributions from 700 employees to the organizations of their choice.

One initiative, which joins Apache’s environmental stewardship

with its philanthropic activities, gained significant momentum

in 2007 and early 2008. The Apache Foundation Tree Program is now about one-third of the way toward achieving its goal of planting 1 million trees, with a focus in areas near significant

Apache operations.

Trees are an effective way to improve communities and the

environment by reducing sound, producing oxygen, storing

carbon, providing shade, reducing erosion and increasing

property values. In 2007, the foundation donated trees to

schools, communities and conservation programs.

Apache’s support for the Ucross Foundation in Wyoming reaches

back to its founding more than 25 years ago. The foundation is

best known in the arts through the more than 1,100 fellowships

that have been granted through its Artists-in-Residence program.

Alumni of this program have received Broadway’s Tony Awards,

Pulitzer Prizes and other national and international recognition.

Fund for Teachers is now in its eighth year of providing summer sabbaticals and growth experiences for teachers from pre-kindergarten

through high school across the nation. Teachers, chosen for the

creativity of proposals of their own design, return from their

experiences motivated to teach and transfer their enthusiasm and

commitment for lifetime learning to their bright-eyed pupils. Fund for

Teachers has created opportunities for more than 3,100 teachers, 550

of them in 2007, with awards of up to $5,000 each.

As noted earlier in this report, Apache partnered with Springboard –

Educating the Future, a U.S. non-profit; Egypt’s National Council for

Childhood and Motherhood; and Egyptian non-profit Sawiris Foundation

to build 200 schools to provide the first opportunity for many young

Egyptian girls – particularly in rural areas – to attend school and learn

to read, write and perform basic arithmetic.

Apache’s newest initiative grew from Chairman and Founder

Raymond Plank’s recent reunion with Dr. William T. Close, 65 years

after their first encounter in the U.S. Army Air Corps. Dr. Close, who

spent 16 years practicing medicine in Africa, provided keen insight

into the daily struggle to provide medical care in some of the poorest

nations in the world.

Dr. Close and a group of dedicated professionals are developing a

new program that will send talented U.S.-trained nursing educators

to poor countries for six to eight weeks, enabling them to immerse

themselves in the education system of the host country, and

providing an interactive experience that will be valuable for the

educators and the students. With the agreement of this great

humanitarian, this new initiative will be called the W.T. Close Fund

for Teaching Nurses.

As with any new venture, this program will need financial support to

grow. If you are interested in joining us, please call 800.705.6410 or

713.296.7490 or e-mail info@wtclosefundforteachingnurses.org.

To learn more about Apache’s outreach initiatives, please visit

this page on Apache’s Web site,

www.apachecorp.com/about_us/our_commitments, or go to the following Web sites:

www.ucrossfoundation.org, www.fundforteachers.org and www.springboarded.org. We invite you to join our employees,

directors, friends and others to support these worthy programs.

At Apache, stewardship is part of the culture and fabric. Raymond

Plank distills the concept with these words: “You should leave the world a better place than you found it.”

Apache’s Safety Commitment

As the company’s operations have

expanded across the globe, spreading

Apache’s safety culture has been an

important objective, building on a

foundation of field-driven empowerment

of workers to accept personal responsibility

for safety. Apache believes that work-

related injuries and illnesses are prevent-

able, and continues to foster safety

leadership throughout the organization,

engage employees and contractors in

worker competency programs, and perform

critical self-evaluations to detect potential

compliance issues.

The number of injuries experienced that

resulted in time away from work declined

14 percent in 2007 from 2006, and the

rate of recordable injuries was 7 percent

below 2006 levels. Driving safety programs

resulted in 34 percent fewer accidents in

2007 than in 2006.

Support for teacher sabbaticals through Fund for Teachers and the Apache Foundation’s tree-planting programs

are among the ways the company aims to leave the world a better place.

��

financialhighlights

Apache’s strategy is built on a diversified portfolio that is balanced geographically, geologically and by product mix (oil vs. gas).

With 42 million acres, Apache has an

asset base with opportunities that span

the globe. Operations are established

in areas with growing economies and

generally positive business and legal

environments. Our goal is to build core

areas that will support a sustainable

program of lower-risk, repeatable drilling

opportunities, balanced by higher-risk,

higher-reward exploration in core growth

areas such as Australia, Canada and Egypt.

140

120

100

80

60

40

20

03 04 05 06 07

Year-End Share Price ( $ dollars )

Investors benefited from Apache’s record performance

as Wall Street took notice of Apache’s visible catalysts

for continued growth into the next decade.20

2007 Reserves( MMboe )

U.S. Gulf Coast365

U.S. Central636

Canada567

North Sea206

Egypt292

Australia268

Argentina112

5%

8%

11%

12%

15%

23%

26%

2,446(total)

2007 Production( MMboe )

U.S. Gulf Coast51

U.S. Central32

Canada31

North Sea20

Egypt37

Australia17

Argentina17

8%

10%

8%

18%

25%

15%

16%

205(total)

Exploration & Development Capital( $ millions )

U.S. Gulf Coast994

U.S. Central637

Canada651

North Sea538

Egypt605

Australia516

Argentina287

7%

13%

12%

14%

24%

15%

15%4,228(total)

Apache’s seven core areas include five outside the United States that represent 60 percent of production and reserves.

No single basin contributes more than 25 percent of production. Virtually all core areas have large undeveloped acreage

with opportunities for future growth.

Drilling opportunities from Apache’s operating

regions are judged on rate of return using

conservative price assumptions. Cash flow

from the U.S. regions funds the company’s

international expansion.

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9

8

7

6

5

4

3

2

1

03 04 05 06 07

Earnings per Diluted

Common Share( $ )

40

35

30

25

20

15

10

5

03 04 05 06 07

Return on Equity( % )

30

25

20

15

10

5

03 04 05 06 07

Returns on Average

Capital Employed( % )

30

25

20

15

10

5

03 04 05 06 07

Capitalization ( $ billions )

Apache’s strong balance sheet, with debt at 22 percent

of capitalization, provides financial flexibility to pursue

its growth strategy in a time of economic uncertainty.

Apache’s balanced product mix and growing production

profile in a rising commodity price environment fueled

record earnings and strong returns.

equitydebt

10

9

8

7

6

5

4

3

2

1

03 04 05 06 07

Revenues( $ billions )

7

6

5

4

3

2

1

03 04 05 06 07

Net Cash Provided by Operating Activities( $ billions )

3000

2500

2000

1500

1000

500

03 04 05 06 07

Proved Reserves ( MMboe )

03 04 05 06 07

Annual Production ( MMboe )

250

225

200

175

150

125

100

75

50

25

Liquid hydrocarbons represent about half of Apache’s

2007 production but two-thirds of revenues. Apache

replaced 167 percent of its 2007 production, including

140 percent from drilling activity.

Strong commodity prices and record production fueled

revenue growth. Record cash from operations provided

funds for the company’s drilling program.

gasliquids

gasliquids

22

directorsboard of

corporateofficers

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, md [ 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 of the History of American Education Emerita, Harvard University

John a. Kocur [ 1 ] [ 3 ] [ 4 ]

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

Raymond Plank [ 1 ]

Founder and Chairman of the Board, Apache Corporation

[ 1 ] Executive Committee

[ 2 ] Audit Committee

[ 3 ] Management Development and

Compensation Committee

[ 4 ] Corporate Governance and

Nominating Committee

[ 5 ] Stock Option Plan Committee

Raymond PlankChairman of the Board

g. Steven FarrisPresident, Chief Executive Officer and Chief Operating Officer

Michael s. BahorichExecutive Vice President — Exploration and Production Technology

John a. CrumExecutive Vice President and President, Apache Canada Ltd.

Rodney j. EichlerExecutive Vice President and General Manager, Apache Egypt Companies

Roger b. PlankExecutive Vice President and Chief Financial Officer

Floyd r. PriceExecutive Vice President — Eurasia, Latin America and New Ventures

Jon a. JeppesonSenior Vice President

p. Anthony LannieSenior Vice President and General Counsel

w. Kregg OlsonSenior Vice President — Corporate Reservoir Engineering

Sarah b. TeslikSenior Vice President — Policy and Governance

Thomas p. ChambersVice President — Corporate Planning

John j. ChristmannVice President — Business Development

Matthew w. DundreaVice President and Treasurer

Robert j. DyeVice President — Investor Relations

Margery m. HarrisVice President — Human Resources

Rebecca a. HoytVice President and Controller

Janine j. McArdleVice President — Oil and Gas Marketing

Jon w. SauerVice President — Tax

Cheri l. PeperCorporate Secretary

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shareholderinformation 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 registrationShareholders 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 meetingApache will hold its annual meeting of shareholders at:

Ballroom, Hilton Houston Post Oak 2001 Post Oak Boulevard, Houston, Texas Thursday, May 8, 2008, 10 am

Apache plans to Web cast the annual meeting live; connect through the Apache Web site: 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 Affairs Department 2000 Post Oak Boulevard, Suite 100 Houston, Texas 77056-4400

or by calling 713.296.6157

or by registering on Apache’s Web site:

www.apachecorp.com

form 10-k requestShareholders 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 relationsShareholders, brokers, securities analysts or portfolio managers seeking information about the Company are welcome to contact:

Robert J. Dye, Vice President of Investor Relations 713.296.6662

Members of the news media and others seeking information about the Company should contact:

Bill Mintz, Director of Public Affairs, at 713.296.7276

web sitewww.apachecorp.com

The Company has paid cash dividends on its common stock for 43 consecutive years through December 31, 2007. 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 Stock Market (symbol APA). At December 31, 2007, the Company’s shares of common stock outstanding were held by approximately 7,000 shareholders of record and 363,000 beneficial owners. Also listed on the New York Stock Exchange are:

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

corporate officesOne Post Oak Central 2000 Post Oak Boulevard, Suite 100 Houston, Texas 77056-4400 713.296.6000

independent public accountantsErnst & Young llp Five Houston Center 1401 McKinney Street, Suite 1200 Houston, Texas 77010-2007

stock transfer agent and registrarWells Fargo Bank, N.A. Attn: Shareowner Services PO 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:

www.shareowneronline.com

High Low Declared Paid

2007

First Quarter $73.44 $63.01 $0.15 $0.15

Second Quarter 87.82 70.53 0.15 0.15

Third Quarter 91.25 73.41 0.15 0.15

Fourth Quarter 109.32 87.44 0.15 0.15

2006

First Quarter $76.25 $63.17 $0.10 $0.10

Second Quarter 75.66 56.50 0.10 0.10

Third Quarter 72.40 59.18 0.15 0.10

Fourth Quarter 70.50 59.99 0.15 0.15

Price RangeDividends per Share

2�

Julimar-1

Jade 1-x

Alexandrite 1-xstar Julimar-1 Australia discovery test flows 85 MMcf of gas per day

star Jade 1-x Well in Egypt’s Western Desert tests 26 MMcf of gas per day from Jurassic formation

star Alexandrite 1-x Egypt well tests 19.8 MMcf of gas, 4,045 barrels of condensate per day

star Brunello-1 Discovery on Australia block tests 73 MMcf of gas per day

star Ootla Apache tests commercial potential of vast shale play in British Columbia

discoveries07

finding

a

07AnnualReport

apachecorporation

way

Summary

apachecorporation

2000 Post Oak Boulevard, Suite 100Houston, Texas 77056

www.apachecorp.com