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Apache Corporation is an independent energy company that explores for, develops and produces natural gas, crude oil and natural gas liquids.
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Apache Corporation 2006 Summary Annual Report
COMMITTED
OUR COMMITMENTS
Apache’s employees are committed to our mission to build a dynamic, global exploration and production company to provide oil
and natural gas for the purpose of advancing the quality of human lives. In the center spread of the Summary Annual Report, we
have reproduced the signatures of many of our colleagues affirming our commitments:
· Finding and producing essential energy supplies that contribute to improved living standards throughout the world;
· Preserving and strengthening our unique culture with its foundation of urgency, integrity and mutual respect; and
· Pursuing Apache’s long-term profitable growth and building wealth for our shareholders.
We did not have space in this report for all of the signatures. Please visit Apache’s Web site, www.apachecorp.com, to see all of them.
Apache Corporation Profile
Established in 1954 with $250,000 of investor capital, Apache Corporation has grown to $24 billion in assets and has become one
of the world’s top independent oil and gas exploration and production companies. Apache’s U.S. operations are focused in some
of the nation’s most important producing basins, including the Outer Continental Shelf of the Gulf of Mexico, the Anadarko
Basin of Oklahoma, the Permian Basin of West Texas and New Mexico, the Texas-Louisiana Gulf Coast and East Texas. In
Canada, Apache is active in British Columbia, Alberta, Saskatchewan and the Northwest Territories. The company also has
exploration and production operations in the Carnarvon, Perth and Gippsland basins offshore Australia, Egypt’s Western Desert,
the United Kingdom sector of the North Sea and Argentina.
CONTENTS
Performance Highlights 1 ABBREVIATIONS
Fellow Shareholders:
Our 2006 Story 3 Mbbls Thousand Barrels
Strategic Review 13 MMbbls Million barrels
Mcf Thousand cubic feet (of gas)
Statement of Consolidated Operations 29
MMcf Million cubic feet
Statement of Consolidated Cash Flows 30
Bcf Billion cubic feet
Consolidated Balance Sheet 31 Tcf Trillion cubic feet
Statement of Consolidated Shareholders’ Equity 32 Boe Barrel of oil equivalent
Eleven-Year Statistical Summary 34 Mboe Thousand barrels of oil equivalent
Oil and Gas Reserve Information 36 MMboe Million barrels of oil equivalent
Future Net Cash Flows 38
Six Mcf of gas is the energy equivalent
Board of Directors and Corporate Officers 39
of one barrel of oil.
Corporate Information 40
PERFORMANCE HIGHLIGHTS
(dollars in millions, except per-share data) Year Ended December 31,
2006 2005 2004
Financial Highlights
Revenues $ 8,289 $ 7,584 $ 5,333
Income attributable to common stock 2,547 2,618 1,663
Diluted net income per common share 7.64 7.84 5.03
Cash from operations before changes in operating
assets and liabilities (a):
Net cash provided by operating activities $ 4,313 $ 4,332 $ 3,232
Changes in operating assets and liabilities 755 412 193
Cash from operations before changes in operating
assets and liabilities $ 5,068 $ 4,744 $ 3,425
Total assets $ 24,308 $ 19,272 $ 15,502
Long-term debt 2,020 2,192 2,588
Shareholders’ equity 13,191 10,541 8,204
Cash dividends paid per common share .45 .34 .26
Operational Highlights
Oil and gas capital expenditures (including acquisitions, capitalized interest
and asset retirement cost) $ 6,444 $ 4,011 $ 3,650
Natural gas production (MMcf/day) 1,589 1,264 1,235
Oil and condensate production (Mbbls/day) 236 244 242
Proved reserves (MMboe) 2,313 2,117 1,937
(a) NON-GAAP FINANCIAL MEASURE:
The annual report discusses Apache’s cash from operations before changes in operating assets and liabilities. It is presented because manage-
ment 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 lia-
bilities, 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.
This summary annual report contains certain “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995, including,
without limitation, expectations, beliefs, plans and objectives regarding Apache’s capital expenditures and exploration and development plans, and the
future prices of crude oil and natural gas. Among the important factors that could cause actual results to differ materially from those indicated by such for-
ward-looking statements are delays and difficulties in completing acquisitions and developing currently owned properties, the failure of exploratory drilling
to result in commercial wells, delays due to the limited availability of drilling equipment and personnel, fluctuations in oil and gas prices, general eco-
nomic conditions and the risk factors detailed from time to time in Apache’s periodic reports and registration statements filed with the Securities and
Exchange Commission (SEC).
1
PROVED 2500 0.5 DIVIDENDS OPERATIONS
RESERVES (DOLLARS)
(MMBOE)
GAS 2000 0.4
LIQUID HYDROCARBONS
US.G
RESERVES (MMboe) 7
1500 0.3 6 1
1. U.S. GULF COAST 393.25 17%
2. U.S. CENTRAL 551.24 24% 5
3. CANADA 575.26 25%
1000 0.2 4. NORTH SEA 196.81 9% 4 2
5. EGYPT 281.48 12%
6. AUSTRALIA 204.48 9% 3
0.1 7. ARGENTINA 110.67 5%
500
TOTAL 2,313.19
AU US.G
PRODUCTION* (MMboe) 7
6 1
1. U.S. GULF COAST 40.58 22%
2. U.S. CENTRAL 27.30 15%
3. CANADA 32.96 18% 5
ANNUAL 200 25 RETURN
4. NORTH SEA 21.49 12% 2
PRODUCTION ON 5. EGYPT 33.89 19%
(MMBOE) AVERAGE 6. AUSTRALIA 15.66 9% 4
3
GAS 20 CAPITAL 7. ARGENTINA 9.88 5%
LIQUID HYDROCARBONS 150 EMPLOYED NS
(PERCENT) TOTAL 181.76
15
100
10
50
5
EXPLORATION & DEVELOPMENT CAPITAL
EXPENDITURES* ($Millions)
E 6 7
U
1. U.S. GULF COAST 2,146.192 33% 5
2. U.S. CENTRAL 935.050 15% 1
3. CANADA 1,109.567 17% 4
4. NORTH SEA 332.558 5%
5. EGYPT 461.281 7%
6. AUSTRALIA 209.800 3% 2
3
7. ARGENTINA 1,237.743 19%
US
Can
TOTAL 6,432.191
CAPITALIZATION 20 5 NET CASH
($BILLIONS) PROVIDED BY
OPERATING
EQUITY
DEBT 4 ACTIVITIES
15 ($BILLIONS)
6 7
US.G
PRODUCTION REVENUE* ($Millions)
3 1
1. U.S. GULF COAST 1,866 23% 5
10 2. U.S. CENTRAL 1,162 15%
3. CANADA 1,380 17%
2 4. NORTH SEA 1,355 17% 2
5. EGYPT 1,664 21% 4
6. AUSTRALIA 408 5% 3
5 7. ARGENTINA 167 2%
1 NS
TOTAL 8,002
02 03 04 05 06 02 03 04 05 06 *Excluding China assets sold August 2006
2
FELLOW SHAREHOLDERS
Our 2006 Story
Apache’s 2006 story is one of progress in the face of new and recurring challenges:
• Near-record earnings ($2.55 billion or $7.64 per diluted share);
• Record production for the 27th time in 28 years;
• Record reserves for the 21st consecutive year, up 9 percent in 2006; and
• $5 billion cash from operations before changes in operating assets and liabilities.
This is not an aberration. A $10,000 investment in Apache at its founding 52 years ago would
now be worth $7.8 million, earning $17,289 in dividends each quarter.
Behind the numbers is the Apache team, with our sense of urgency driving growth by:
• Increasing daily production by 10 percent, passing the half-million-equivalent-barrels
milestone;
• Restoring output from hurricane-damaged facilities in the Gulf of Mexico;
• A commitment to double operated production in Egypt by 2010; and
• Drilling high-impact exploration wells in Canada, Australia, the North Sea and Egypt.
Our Challenges
While not an aberration, our success has never been guaranteed. Apache operates, and
has always operated, in a world full of risks:
• Despite vast improvements in equipment and technology, exploration and develop-
ment remain inherently risky and require expensive, multi-year commitments;
• The vast majority of the world’s remaining oil and gas is owned by foreign governments,
many of which have unfriendly political, legal or business environments;
• Environmental concerns, which we believe must be addressed, add another layer of
cost, complexity and uncertainty; and
• Unpredictable and continual shifts in U.S. regulatory policy – from energy policy
to corporate governance – make it hard to plan, staff and deliver on long-term projects.
3
4
U. S. G U L F C O A S T
Our Response
Apache’s survival and success over 52 years is not accidental. We continually assess and
address our challenges:
• We have steadily diversified. Apache has seven core areas, five outside the United States.
No single basin contributes more than 25 percent of our production. Each has unde-
veloped acreage for growth.
• We are leaders in using technology to improve exploration and shorten delivery times
and project lengths. In the Anadarko Basin of western Oklahoma we are using improved
drilling techniques to bring wells on more quickly, as well as better fracture stimulation
methods to improve performance, contributing to a 16 percent increase in our Central
Region’s 2006 production. In Egypt, our technical teams have shortened the time needed to
turn newly processed 3-D seismic into drilling prospects.
• We believe producing oil and gas contributes to improving standards of living. In addi-
tion to the economic contribution from direct employment, we create programs and chari-
ties that ensure that our presence benefits our host countries as well as our stakeholders.
In Egypt, through funds donated by Apache employees and directors, friends and other U.S.
firms to Springboard – Educating the Future, a non-profit, we have constructed 200 rural
schools for Egyptian girls who otherwise would not receive a basic education.
• We use innovative solutions to address unique problems. For example, in Canada we’ve
formed creative partnerships to deal with limited acquisition opportunities and rising land costs.
Apache strengthened its Gulf of Mexico operations in 2006 with its acquisition of 13 fields on
the Gulf of Mexico Shelf from BP. The company also acquired significant assets in the Permian Basin
and Argentina. Tim Custer, left, business development manager, and Mike Cavanaugh, corporate
reservoir engineering manager, review some of the acquired assets. Custer says: “Acquisitions
have been an important element in Apache’s growth. If we do our job right in identifying and
negotiating transactions, the technical and operating guys will be able to run with these
properties; pretty soon, they will be exceeding our forecasts.”
• We work to minimize our environmental footprint. We have reduced carbon dioxide
emissions in the North Sea by converting power generation from diesel to natural gas
5
6
(with the added benefit of saving $1 million a month). In Canada we have invested $200 mil-
lion to use and sequester carbon dioxide and extend the life of a mature field by 20 years. We
regularly work with environmental experts and explore ways to better protect our environment.
U. S. C E N T R A L
Working with Apache Foundation, we plant lots of trees, which offset greenhouse gas emis-
sions. It is, after all, a world we live in, too.
• We divest non-core assets with the same discipline we use to acquire new assets.
• We have a highly talented and stable work force. We aggressively recruit at all levels
throughout the organization -- from entry level and recent college graduates to experienced
professional and technical staff.
• Our board members and executives don’t just act like long-term owners; they are owners.
We are rare among large companies for having Apache’s founder as our chairman.
Founders bring long-term vision and commitment no stock option can buy; indeed,
Apache’s founder is voluntarily giving up options with a seven-figure value simply as a lead-
ership move to set the tone at the top for keeping costs down.
New Challenges
Many oil and gas exploration companies don’t make it because the existing challenges are so
formidable. But three new challenges are rapidly increasing the difficulties that even successful
U.S. companies face:
Central Region engineers Breezi Fischer, left, and Rick Crist are among 21 young engineers and
geoscientists who have joined Apache since 2001, working alongside seasoned veterans and bringing
new energy to Apache’s strong culture. Fischer says: “My team is finding new reserves and better
techniques to produce gas from plays that were not economic in order to make the most of resources
within the United States.”
• With oil and gas largely in non-U.S. hands and in increasingly short supply, many host gov-
ernments are seeking larger shares of the economic rent of oil operations on their territory.
In addition, these countries increasingly feel free to alter the terms of their contracts with
7
District Manager Brian Evert oversees Apache Canada’s carbon dioxide (CO2) flood project at Midale,
Saskatchewan. The enhanced oil recovery project will increase the field’s ultimate recovery by 60 million
barrels of oil. “Each property I work with contributes to the local community through employment,
local taxes, lease rentals to the landowners, contractors, suppliers, and community donations,” Evert
says. The Midale project, which utilizes CO2 from the Dakota Gasification Plant in Beulah, N.D., has
received international attention as a successful example of geologic sequestration of approximately
500,000 tons of CO2 (a greenhouse gas) per year.
exploration companies, making it harder to use profits in good years to offset bad years in
this notoriously cyclical industry.
• The embarrassment of failures which collectively makes up U.S. energy policy is increas-
ing. The laudable desire to encourage alternative sources of energy is creating a stampede
to subsidize first, think second. If Apache and other companies that find and produce oil
and gas upon which our economy depends are taxed to subsidize flights of fancy that may
never prove workable, we may harm our ability to operate in the short term and our ability
to shift to new energy sources over time.
CANADA
• More troubling, particularly to an industry with extremely long lead times and massive
fixed costs, is the extraordinary shift in U.S. legal, regulatory and judicial policy. The tradi-
tional system of decision making by officers and boards of directors is effectively being
replaced by decision making by shareholders. No public company can long survive in such
an environment. Apache is committed to protecting its shareholders. But management by
giant committee is not management, and planning by quarterly results is not planning.
Many of Apache’s best decisions were unpopular at the time they were made. This includes
our entry into Egypt: Once questioned by investors and analysts, it is now one of our best
growth areas.
A company that takes major risks, makes quick decisions, and operates in a highly technical
and ever-changing environment cannot survive without a board empowered to seek long-
term success and stand by management in tough times to get there.
If the United States wants to have oil and gas exploration companies – indeed, if the United
States wants to have public companies at all – it must resist the temptation to turn them into
smaller versions of our gridlocked political institutions.
8
In difficult years, as well as in easy ones, we at Apache have proved time and again that we
can deliver. We believe we have earned enough respect to be given fair room to operate.
Give us reasonable legal and regulatory environments, and we will continue to deliver to our
shareholders, royalty owners, employees and fellow citizens who depend on us and the
energy we produce.
Pat Brennan, left, Apache Egypt commercial manager, and Warren Ford, general manager of the
Apache-operated Khalda Petroleum Company joint venture, are members of the Apache team driving to
double the company’s operated production in Egypt by 2010. Ford says: “We make use of technology
as it becomes available and applicable. Some other companies hang back. We are always at the sharp
edge and it is paying back in our exploration and production results.”
The Bottom Line
Apache had a great year in 2006. We enter 2007 with a stronger base of core assets and
future potential than at any time in our 52-year history. Despite the obstacles we have
discussed, we expect Apache will continue to grow in 2007.
We hope you share our enthusiasm.
EGYPT
Raymond Plank G. Steven Farris
Chairman and Founder President, Chief Executive Officer and
Chief Operating Officer
10
12
STRATEGIC REVIEW
Apache’s 2006 operational results demonstrate how its diversified portfolio enables the com-
pany to deliver consistent and profitable results while exposing shareholders to upside poten-
tial from 38 million acres across seven regions -- a land position that could not be replicated
in today’s competitive environment.
AUSTRALIA
Senior Geophysical Advisor David Phelps (from left), Drilling Engineer Brett Lawrence, Chief
Facilities Engineer Simon Bingham, Senior Geologist Kerri Auld, and Senior Petroleum Engineer
Allan McDiarmid are planning development of Apache’s Van Gogh field, which is expected to com-
mence production in 2009 in the Exmouth Basin offshore Western Australia. Bingham says: “Apache
can only do this sort of development adjacent to the pristine internationally acclaimed Ningaloo
environmental conservation park because of its commitment to environmental excellence.”
In spite of rising service costs, recovery efforts in the Gulf of Mexico, and unplanned pro-
duction interruptions in the North Sea, Apache still increased production by 10 percent and
proved reserves by 9 percent. The company also took several steps to rebalance and grow its
asset base.
Apache enters 2007 with momentum from rising production in 2006 and a deep invento-
ry of drilling prospects. Production is forecasted to increase in the range of 6 to 10 percent
before considering the impact of the recently announced $1 billion acquisition of Anadarko’s
assets in the Permian Basin (expected to close in the first quarter) as well as any other acquisition
or divestiture activity. Apache also plans to drill a number of higher-risk, higher-potential-
reward exploration projects in the North Sea, Australia, Canada and Egypt in addition to
our consistently active drilling program.
Rising drilling expenses and other service costs were a major concern during 2006, particularly
in North America. Apache’s 2007 North America exploration and development budget has
been reduced, but international activity will increase to fund several large developments and
facilities projects in Egypt and Australia. Capital budgets are reviewed quarterly and are sub-
ject to adjustments based on the relative levels of commodity prices and service costs. In
recent months, service costs have moderated with the reduction in commodity prices. If service
costs start moving higher, Apache will reduce drilling activities to maintain margins.
13
Apache’s current portfolio – seven core areas in six nations – was developed one building
block at a time over the last two decades, starting from the Anadarko Basin in Western
Oklahoma, expanding to the Gulf of Mexico, then to Canada and Australia, Egypt, the
North Sea and – most recently – Argentina.
Each region has significant producing assets and large undeveloped acreage to provide
running room for the future, but no single region contributes more than 25 percent of pro-
duction or reserves. Natural gas now represents 53 percent of production, while oil is 47 per-
cent – a balanced product mix that provides upside potential in either market. Apache’s U.S.
NORTH SEA
regions provide substantial cash flow that is available for reinvestment in other areas with
greater exploration potential.
The growth of Apache’s reserve base in 2006 was the result of exploration and exploitation
of our core assets – 1,611 wells drilled with an 87 percent success rate – and strategic acquisi-
tions. Also, just as an investor rebalances a portfolio of holdings from time to time, Apache
sold certain assets that were non-strategic.
Apache North Sea Drilling Manager Derek Reynolds (left) is overseeing extensive Forties Field rig
upgrades that will equip rigs on each of the Forties platforms for modern and innovative drilling
techniques. “The drilling group is focused on advanced drilling techniques that will improve efficiency
and help extend the life of the Forties Field,” he says. Apache’s Phase 1 refurbishment of the Forties
platforms will be completed in 2007.
All told, Apache invested $6.4 billion in 2006 for acquisitions and exploration and devel-
opment activities, while divesting $673 million worth of non-core properties. Apache
replaced 213 percent of its production, adding 390 MMboe of proved reserves, half of which
were added through the drillbit. History has shown that acquisitions often lead to additional
reserves in future years as Apache’s technical teams identify new drilling opportunities.
Although many analysts and industry observers have argued that high commodity prices
create a difficult environment for acquisitions, Apache was able to complete several strategic
transactions that strengthened its core areas in the Gulf of Mexico and the Permian Basin
and established a new core area in Argentina.
Apache acquired eight Permian Basin fields with estimated reserves of 31 MMboe from
Hess, as well as 13 fields with 44 MMboe on the Gulf of Mexico Shelf from BP. In both cases,
the value was enhanced by Apache’s operational strength and familiarity with the assets.
14
In January 2007, Apache announced that it would acquire 28 Permian fields with 70 MMboe
of proved reserves from Anadarko Petroleum for $1 billion.
Two acquisitions totaling $1.1 billion completed during 2006 provided a strategic property
base in Argentina with 111 MMboe of estimated reserves. The new core area now represents
5 percent of Apache’s reserve base and has significant upside potential.
On the divestiture side, Apache sold its 24.5 percent interest in the Zhao Dong block in
China for $260 million and the undeveloped deepwater West Mediterranean Concession in
ARGENTINA
Egypt’s Nile Delta for $413 million. The Zhao Dong block was not a core asset in the com-
pany’s portfolio; Apache’s capital is better utilized elsewhere. Selling the West Med
Fernando Araujo, who started with Apache in Egypt, is operations manager of Apache’s
newest core area, Argentina. Apache completed two acquisitions with 111 million boe of
proved reserves in Argentina in 2006. “Our main focus is to grow production and control operat-
ing costs in our two operating districts, Neuquen and Tierra del Fuego, where we have significant
potential for growth,” he says. “At the region level, we have good management systems
which set transparent goals for each department, and these goals are easily translated
through the chain to the field operators.”
deepwater concession alleviated the need to undertake a costly development program and
enabled the Apache team in Egypt to concentrate on doubling production from Apache’s
Western Desert concessions by 2010.
In summary, Apache acquired nearly 200 MMboe of proved reserves for $2.3 billion and
divested about 12 MMboe for $673 million. (The totals include some smaller purchases
and sales.)
U.S. Central Region
Production in Apache’s Central Region, which comprises producing assets in the Anadarko,
Permian and East Texas basins, averaged 259 MMcf and 31,700 barrels per day – a 16 per-
cent increase in barrel-equivalent terms. Reserves increased 10 percent during the region’s
most active year, with 374 wells drilled and a 97 percent success rate. With approximately 2
million acres across the three basins – including fields acquired from Hess in 2006 – the
region has an inventory of drilling locations that exceeds 2006 levels; the actual activity level
will depend on service costs and commodity prices. The recently announced acquisition of
Anadarko’s Permian Basin fields is expected to add production of 9,000 barrels of liquid
hydrocarbons and 19 MMcf of gas per day during 2007.
16 16
WORLDWIDE OPERATIONS Canada
2006 Natural gas production 404 MMcf/day
2006 Liquid hydrocarbon production 22,902 Bbls/day
Proved reserves 575 MMboe
2006 Wells drilled/productive 874/740
Gross acreage 6.8 million
U.S. Central Region
2006 Natural gas production 259 MMcf/day
2006 Liquid hydrocarbon production 31,692 bbls/day
Proved reserves 551 MMboe
2006 Wells drilled/productive 374/363
Gross acreage 1.8 million
U.S. Gulf Coast Region
2006 Natural gas production 408 MMcf/day
2006 Liquid hydrocarbon production 43,125 Bbls/day
Proved reserves 393 MMboe
2006 Wells drilled/productive 83/65
Gross acreage 2.7 million
Argentina
2006 Natural gas production 112 MMcf/day
2006 Liquid hydrocarbon production 8394 Bbls/day
Proved reserves 111 MMboe
2006 Wells drilled/productive 83/74
Gross acreage 2.7 million
Committed to our t
producing essential energy supplies that
throughout
Dedicated to preserving and strengthening
urgency, integrity and
Single-minded in our pursuit of Apache’s l
wealth for our
task of finding and
contribute to improved living standards
the world;
g our unique culture with its foundation of
mutual respect; and
long-term profitable growth and building
shareholders
North Sea
2006 Natural gas production 2 MMcf/day
With the acquisition and planned drilling activity, the region should achieve double-digit
2006 Liquid hydrocarbon production 58,545 Bbls/day production growth in 2007. The Hess and Anadarko acquisitions provide additional opportu-
Proved reserves 197 MMboe
2006 Wells drilled/productive 5/4 nities to tap one of Apache’s core strengths – exploitation of mature fields through workovers,
Gross acreage 1.5 million
recompletions and drilling that will increase production and reserves, reduce costs per unit
produced, and enhance profitability.
U.S. Gulf Coast Region
Apache’s Gulf Coast region consistently delivers high returns on capital employed as well as
cash flow that significantly exceeds exploration and development spending in the region. Al-
though some analysts have questioned the Gulf’s continued viability, it remains a key ele-
ment of Apache’s diversified portfolio and generates more cash than any other region. The
acquisition of BP’s assets brought operational control of the Grand Isle/West Delta Complex,
which will enable Apache to step up development in the field, one of the largest ever discov-
ered on the Shelf.
In 2006, the region focused on rebuilding facilities damaged in the unprecedented 2005
Australia hurricane season. Substantially all production has been restored on damaged facilities, al-
2006 Natural gas production 186 MMcf/day
2006 Liquid hydrocarbon production 11893 Bbls/day though some platforms must be replaced before all production is back online. During 2007,
Proved reserves 204 MMboe
2006 Wells drilled/productive 21/5 Apache expects to restore additional production totaling 5,000 barrels and 10 MMcf per day.
Gross acreage 11.8 million
The unusually calm 2006 hurricane season helped speed the repair process. Total produc-
tion, measured on a barrel-equivalent basis, increased 2 percent over 2005 levels, and Apache
entered 2007 with momentum from restored production, including output from fields ac-
quired from BP, and additional drilling. In 2007, Apache plans to drill 90 wells offshore and
onshore along the Texas and Louisiana Gulf Coast.
Canada
Apache’s total production in Canada increased 4 percent, fueled by natural gas production
that grew 9 percent to 404 MMcf per day. The region drilled 874 wells with a success rate of
85 percent. Softer commodity prices and higher service costs will result in a lower activity
level in 2007. In 2006, exploration and development spending of $1.1 billion was focused on
Egypt shallow conventional and unconventional drilling locations across Apache’s acreage. The
2006 Natural gas production 218 MMcf/day
2006 Liquid hydrocarbon production 56,570 Bbls/day 2007 program will target some deeper, higher-potential exploration projects on the Exxon-
Proved reserves 281 MMboe
2006 Wells drilled/productive 163/140 Mobil farm-in acreage and in other areas. (The farm-in was a creative way to earn
Gross acreage 10.2 million
24
acreage without upfront costs in a basin where acreage has been difficult – and costly – to
acquire.) Apache has acquired 477 square miles of 3-D seismic over the South Grant
Lands area, which is part of the ExxonMobil farm-in. Using the new data, Apache’s geosci-
entists have generated several structural prospects reaching depths of 13,000 feet in
Mississippian-age formations. The Canada Region also has identified deeper targets in
British Columbia.
North Sea
The North Sea was the only region in Apache’s portfolio that did not increase production in
2006; output declined 11 percent to 58,544 barrels per day while reserves increased slightly.
The region made steady progress on facilities upgrades during 2006, but the number and
frequency of unplanned shut-ins, including an extensive curtailment for repairs of the BP
Forties pipeline, were disappointing. These interruptions affected production and drilling
and pushed completion of Phase One refurbishments into 2007. Other projects scheduled
in 2007 aim to: Upgrade the produced-water and re-injection systems to double injection
volumes to 300,000 barrels per day; upgrade the primary gas lift compression; and finish
replacement of instrumentation control systems on several platforms.
Australia
Apache’s Australia production increased 19 percent in 2006 as the company started deliver-
ing gas through several new contracts. Significant exploration activity is planned in 2007,
including four high-potential wildcats in the Exmouth Basin. These wells follow up on five
Exmouth discoveries in the Pyrenees development area, which will begin production in
2009 with expected net volumes of 20,000 barrels per day, and Apache’s 2006 Theo discov-
ery, also expected to commence production in 2009 with net volumes of approximately
20,000 barrels per day. In the Carnarvon Basin, Apache will drill a large gas prospect north
of the 1-Tcf John Brookes discovery, as well as three exploration wells in the Reindeer area
where Apache expects to commence production in early 2009 at 100 MMcf of gas per day.
Recent contracts in the range of $4 per Mcf have signaled a change in the Western Australia
gas market. In the Gippsland Basin offshore Southeast Australia, Apache is planning a 10-
well, high-potential exploration program beginning in 2008 on its 1.8 million acre position.
Apache’s drilling program in Australia totals 33 wells in 2007, up 45 percent from 2006.
25
Egypt
Apache drilled 163 wells in Egypt during 2006 with a success rate of 86 percent. Production
PHILANTHROPY
and reserves increased 12 percent and 4 percent, respectively. Industry data provider IHS
reported that one in five of Egypt’s 42 recorded discoveries in 2006 was drilled by Apache. In
early 2007, Apache announced five successful wells – including two new-field discoveries
and the recently tested Syrah-5 appraisal well, which logged more than 200 feet of net pay in
the Jurassic Lower Safa formation and tested at more than 47 MMcf of gas per day. Much
of Apache’s exploration success in Egypt is attributable to 3-D seismic acquisition; in 2006,
the company acquired over 2,400 square miles of new data in nine different concessions.
In 2005, Apache and the Egyptian General Petroleum Corp. agreed to undertake the “2X
Program” to double gross operated production from Apache’s concessions to approximately
700 MMcf of gas and 200,000 barrels a day by the end of 2010. Apache’s Qasr discovery and
other Jurassic formation gas discoveries should provide adequate deliverability to achieve
the gas production goal when additional processing capacity is brought online in 2008 and
2009. Higher oil production is expected from 1,500 identified oil drilling locations that will
be pursued over the next several years. Most of that activity will focus on Cretaceous-age oil
plays from 6,000 feet to 12,000 feet in the greater Khalda and East Bahariya concession
areas. In 2007, Apache plans to drill 274 wells in Egypt, including 42 exploration wells, a 68
percent increase over the 2006 activity level.
Argentina
After completing two acquisitions in Argentina in 2006, year-end reserves totaled 111
MMboe – roughly 5 percent of Apache’s worldwide total. A 700-square-mile 3-D seismic
program will cover much of Apache’s 733,000 acres in Tierra del Fuego, where the compa-
ny owns a 70 percent interest. By midyear, the company expects to have two drilling rigs
active in the area. Apache plans to drill more than 20 wells in Tierra del Fuego in 2007 --
more wells than were drilled by the prior operator in the previous decade. All told, Apache
plans to drill more than 100 wells in Tierra del Fuego and Neuquen this year.
Leaving the World a Better Place
In rural villages in the Fayoum, Giza and Minya governorates of Egypt, 7,000 girls are getting their
first opportunity to learn reading, writing and basic arithmetic as a result of a partnership that
brings together Apache; U.S. non-profit Springboard – Educating the Future; the Egyptian
26 26
government’s National Council for Childhood and Motherhood and Ministry of Education; and
Egypt’s non-profit Sawiris Foundation. Two hundred schools are now complete, the result of
Apache’s sense of urgency coupled with an outpouring of $3 million from Apache’s employees,
officers, directors, friends and other U.S. firms.
The one-room schools program is just the latest example of high-impact projects to spring
from Apache’s parallel commitments to profitable growth and leaving the world a better place.
Through the public foundation, Fund for Teachers, Apache supports sabbaticals and
growth experiences for teachers from pre-kindergarten through high school across the United
States. 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. The Fund for Teachers has created opportunities for more
than 2,070 teachers from more than 950 different schools to study and travel in 93 different
countries on all seven continents with awards of up to $5,000 each. In 2006, 497 teachers
received awards.
The Ucross Foundation, launched in Wyoming by Apache and friends in 1981, is known for
its artists-in-residence program that has awarded more than 1,300 fellowships for artists to
paint, write, compose music and create in the unique and striking landscape of the Ucross
Ranch in the Powder River Basin. In 2005, the Ucross Foundation decided to focus its ener-
gies on the artists-in-residence program, while Apache Foundation agreed to operate the
Ucross conservation and holistic ranching programs. Apache Foundation also assumed
responsibility for a long-term program to plant 1 million trees for conservation, beautification
and mitigation of greenhouse gas emissions.
Safety
Apache believes that work-related injuries and illnesses are preventable. From 2005, Apache
experienced an 11 percent improvement in its lost-time incident rate and a 16 percent
improvement in incidents per vehicle. These results reflect an even greater focus by the
Apache Regions on “back-to-basics” in injury prevention, field-driven empowerment of
workers to accept personal responsibility for safety, and other technical training areas such as
driving and accident investigation. Apache continues to implement such broad-based ini-
tiatives as behavior-based safety leadership training, safety management system regional
audits, major contractor safety audits, and scheduled facility site inspections
28 28
Statement of Consolidated Operations
(In thousands, except per-common-share data) For the Year Ended December 31,
2006 2005 2004
REVENUES AND OTHER:
Oil and gas production revenues $ 8,074,253 $ 7,457,291 $ 5,308,017
Gain on China devestiture 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
29
Statement of Consolidated Cash Flows
(In thousands) For the Year Ended December 31,
2006 2005 2004
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 properties (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
30
Consolidated Balance Sheet
(In thousands) December 31,
ASSETS 2006 2005
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
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
31
Statement of Consolidated Shareholders’ Equity
(In thousands)
Series B
Comprehensive Preferred Common Paid-In
Income Stock Stock Capital
BALANCE AT DECEMBER 31, 2003 $ 98,387 $ 207,818 $ 4,038,007
Comprehensive income (loss):
Net income $ 1,668,754 – – –
Commodity hedges, net of income tax
expense of $13,742 22,461 – – –
Comprehensive income $ 1,691,215
Cash dividends:
Preferred – – –
Common ($.28 per share) – – –
Five percent common stock dividend – – –
Common shares issued – 1,502 25,030
Treasury shares issued, net – – 8,312
Compensation expense – – 34,462
Other – – 371
BALANCE AT DECEMBER 31, 2004 98,387 209,320 4,106,182
Comprehensive income (loss):
Net income $ 2,623,730 – – –
Commodity hedges, net of income tax
benefit of $128,990 (236,126) – – –
Comprehensive income $ 2,387,604
Cash dividends:
Preferred – – –
Common ($.36 per share) – – –
Common shares issued – 1,303 21,125
Treasury shares issued, net – – 2,736
Compensation expense – – 40,528
Other – – 143
BALANCE AT DECEMBER 31, 2005 98,387 210,623 4,170,714
Comprehensive income (loss):
Net income $ 2,552,451 – – –
Post retirement, net of income tax
benefit of $2,816 (6,116) – – –
Commodity hedges, net of income tax
expense of $187,162 340,392 – – –
Comprehensive income $ 2,886,727
Cash dividends:
Preferred – – –
Common ($.50 per share) – – –
Common shares issued – 1,742 54,917
Treasury shares purchased, net – – 1,968
Compensation expense – – 42,085
Other – – 111
BALANCE AT DECEMBER 31, 2006 $ 98,387 $ 212,365 $ 4,269,795
32
Accumulated
Other Total
Retained Treasury Comprehensive Shareholders’
Earnings Stock Income (Loss) Equity
$ 2,445,698 $ (105,169) $ (151,943) $ 6,532,798
1,668,754 – – 1,668,754
– – 22,461 22,461
(5,680) – – (5,680)
(91,433) – – (91,433)
– – – –
– – – 26,532
– 7,844 – 16,156
– – – 34,462
– – – 371
4,017,339 (97,325) (129,482) 8,204,421
2,623,730 – – 2,623,730
– – (236,126) (236,126)
(5,680) – – (5,680)
(118,526) – – (118,526)
– – – 22,428
– 7,561 – 10,297
– – – 40,528
– – – 143
6,516,863 (89,764) (365,608) 10,541,215
2,552,451 – – 2,552,451
– – (6,116) (6,116)
– – 340,392 340,392
(5,680) – – (5,680)
(165,059) – – (165,059)
– – – 56,659
– (166,967) – (164,999)
– – – 42,085
2 (8) – 105
$ 8,898,577 $ (256,739) $ (31,332) $ 13,191,053
33
Eleven-Year Statistical Summary
(In millions of dollars, except as otherwise indicated)
2006 2005 2004 2003
Financial Data
Oil and gas production revenues 8,074.3 7,457.3 5,308.0 4,198.9
Gain on China divestiture 173,545 – – –
Other 41.0 126.9 24.6 (8.6)
Consolidated revenues 8,288.8 7,584.2 5,332.6 4,190.3
Income (loss) attributable to common stock 2,546.8 2,618.1 1,663.1 1,116.2
Net cash provided by operating activities 4,312.9 4,332.3 3,231.5 2,705.9
Oil and gas capital expenditures (including acquisitions) 6,053.9 3,464.0 3,455.7 3,073.8
Total assets 24,308.2 19,271.8 15,502.5 12,416.1
Long-term debt 2,019.8 2,192.0 2,588.4 2,327.0
Shareholders’ equity 13,191.1 10,541.2 8,204.4 6,532.8
Common shares outstanding at year end 330.7 330.1 327.5 324.5
Amortization of oil and gas properties-recurring 1,698.6 1,325.3 1,149.2 1,003.3
Effective tax rate (benefit) 36.3% 37.6% 37.3% 43.0%
Future cash inflows 93,906.1 100,673.3 66,103.4 46,959.0
Shareholder Data
Basic net income (loss) per common share 7.72 7.96 5.10 3.46
Cash dividends per common share .45 .34 .26 .21
Shareholders’ equity per common share 39.60 31.63 24.75 19.83
Operations Data
Natural gas production (Bcf) 580.0 461.3 452.0 444.3
Oil, condensate and natural gas liquids production (MMbbls) 86.2 89.0 88.7 78.3
Total production (MMboe) 182.9 165.9 164.1 152.3
Average price of natural gas (per Mcf) 5.17 6.35 4.91 4.61
Average price of oil (per barrel) 59.92 51.66 35.24 27.76
Oil, condensate and NGL reserves (MMbbls):
Proved developed 728.5 676.7 662.7 593.7
Proved undeveloped 332.6 299.2 269.4 250.2
Natural gas reserves (Bcf):
Proved developed 5,125.5 4,775.9 3,844.1 3,541.0
Proved undeveloped 2,387.4 2,072.1 2,183.9 1,335.0
Total proved reserves (MMboe) 2,313.2 2,117.2 1,936.7 1,656.5
Reserve life (in years) 12.6 12.8 11.8 10.9
34
2002 2001 2000 1999 1998 1997 1996
2,559.8 2,823.0 2,308.9 1,159.0 773.5 985.4 835.8
– – – – – – –
.1 (13.6) (6.9) 2.7 (0.7) (4.4) 1.2
2,559.9 2,809.4 2,302.0 1,161.7 772.8 981.0 837.0
543.5 703.8 693.1 186.4 (131.4) 154.9 121.4
1,380.7 1,905.0 1,517.4 638.2 471.5 723.8 490.5
1,252.6 2,280.2 2,194.7 1,842.3 649.1 911.4 939.9
9,459.9 8,933.7 7,482.0 5,502.5 3,996.1 4,138.6 3,432.4
2,158.8 2,244.4 2,193.3 1,879.7 1,343.3 1,501.4 1,235.7
4,924.3 4,418.5 3,754.6 2,669.4 1,801.8 1,729.2 1,518.5
302.5 287.9 285.6 263.3 225.8 215.5 208.0
783.6 760.2 547.5 415.6 359.7 358.9 296.0
38.3% 39.7% 40.1% 41.7% (31.0)% 40.1% 39.3%
33,806.4 20,584.9 39,081.9 14,951.6 6,502.7 8,559.9 11,427.4
1.83 2.44 2.54 .75 (.58) .74 .61
.19 .12 .12 .12 .12 .12 .12
15.95 14.28 12.07 8.96 7.54 8.02 7.30
394.3 411.5 304.0 239.5 215.4 222.2 205.3
58.9 57.0 44.6 34.7 27.7 25.2 20.2
124.6 125.6 95.2 74.6 63.6 62.2 54.4
2.87 3.70 3.64 2.16 1.93 2.28 2.03
24.78 23.18 27.41 18.45 12.70 19.24 20.94
414.4 411.8 354.0 302.0 178.0 203.1 183.2
222.4 187.6 168.5 113.2 73.0 70.7 52.1
3,206.5 3,203.8 2,664.8 1,873.7 1,450.1 1,554.3 1,435.3
848.1 801.5 718.9 477.9 722.1 317.5 190.0
1,312.5 1,266.9 1,086.4 807.2 613.0 585.7 506.2
10.5 10.1 11.4 10.8 9.6 9.4 9.3
35
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.
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.
(Thousands of barrels)
Crude Oil, Condensate and Natural Gas Liquids
United North
States Canada Egypt Australia Sea Argentina China Total
Proved developed reserves:
December 31, 2003 265,135 91,501 54,881 26,999 147,880 845 6,448 593,689
December 31, 2004 320,752 87,914 57,084 18,919 172,260 910 4,811 662,650
December 31, 2005 313,580 87,012 59,197 22,550 189,385 1,573 3,393 676,690
December 31, 2006 343,743 102,417 58,366 20,197 178,364 25,378 – 728,464
Total proved reserves:
Balance December 31, 2003 389,365 168,406 73,173 53,102 147,880 1,140 10,822 843,888
Extensions, discoveries and other additions 26,600 1,106 26,865 10,422 45,261 229 (43) 110,440
Purchases of minerals in-place 84,375 165 – – 389 – – 84,929
Revisions of previous estimates (13,588) (1,207) (2,955) 2 (4) (2) (346) (18,100)
Production (27,867) (10,209) (19,099) (9,214) (19,338) (207) (2,775) (88,709)
Sales of properties (408) – – – – – – (408)
Balance December 31, 2004 458,477 158,261 77,984 54,312 174,188 1,160 7,658 932,040
Extensions, discoveries and other additions 27,055 16,531 37,431 2,623 44,977 880 427 129,924
Purchases of minerals in-place 2,020 1,874 – – – – – 3,894
Revisions of previous estimates 4,039 2,591 (4,396) – 1 45 (110) 2,170
Production (26,945) (9,028) (20,126) (5,613) (23,904) (424) (2,968) (89,008)
Sales of properties (3,078) (32) – – – – – (3,110)
Balance December 31, 2005 461,568 170,197 90,893 51,322 195,262 1,661 5,007 975,910
Extensions, discoveries and other additions 12,354 18,430 18,535 23,517 21,777 3,422 3,386 101,421
Purchases of minerals in-place 53,853 643 – – – 28,351 – 82,847
Revisions of previous estimates (2,009) 63 31 24 – 147 (19) (1,763)
Production (27,308) (8,359) (20,648) (4,341) (21,369) (3,064) (1,156) (86,245)
Sales of properties (3,187) – – – – (724) (7,218) (11,129)
Balance December 31, 2006 495,271 180,974 88,811 70,522 195,670 29,793 – 1,061,041
As of December 31, 2006, 2005 and 2004, on a barrel-of-equivalent basis 32, 30 and 33 percent of our estimated worldwide reserves, respec-
tively, 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 due to 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.”
36
(Millions of cubic feet)
Natural Gas
United North Mboe
States Canada Egypt Australia Sea Argentina China Total Total
1,565,855 1,411,877 337,844 218,745 3,902 2,750 – 3,540,973 1,183,851
1,722,803 1,479,271 474,028 158,789 6,804 2,364 – 3,844,059 1,303,327
1,711,060 1,799,102 605,687 649,972 7,475 2,594 – 4,775,890 1,472,672
1,840,105 1,591,157 664,818 584,236 6,840 438,391 – 5,125,547 1,582,722
2,029,392 1,605,683 550,967 683,273 3,902 2,751 – 4,875,968 1,656,549
291,303 542,779 452,509 54,272 3,575 1,007 – 1,345,445 334,681
268,386 17,273 – – 12 – – 285,671 132,541
53,816 (61,695) (18,572) 1 – 1 – (26,449) (22,508)
(236,660) (119,669) (50,412) (43,228) (685) (1,395) – (452,049) (164,050)
(657) – – – – – – (657) (518)
2,405,580 1,984,371 934,492 694,318 6,804 2,364 – 6,027,929 1,936,695
388,844 526,876 241,420 175,502 1,441 1,350 – 1,335,433 352,496
17,792 5,749 – – – – – 23,541 7,818
23,470 (13,717) (35,071) – 72 17 – (25,229) (2,035)
(218,080) (135,749) (60,484) (45,003) (842) (1,137) – (461,295) (165,890)
(51,419) (938) – – – – – (52,357) (11,836)
2,566,187 2,366,592 1,080,357 824,817 7,475 2,594 – 6,848,022 2,117,248
253,707 248,549 151,086 46,860 118 36,986 – 737,306 224,305
195,552 1,500 – – – 484,707 – 681,759 196,473
(74,225) (102,922) 3,965 4 – 1,858 – (171,320) (30,317)
(243,441) (147,579) (79,424) (67,934) (753) (40,878) – (580,009) (182,913)
(2,418) (421) – – – – – (2,839) (11,602)
2,695,362 2,365,719 1,155,984 803,747 6,840 485,267 – 7,512,919 2,313,194
37
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.
(In thousands)
United
States Canada (1) Egypt Australia North Sea Argentina China Total
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.
38
BOARD OF DIRECTORS
Frederick M. Bohen (3)(5) Patricia Albjerg Graham(4) Charles J. Pitman (4)
Former Executive Vice President and Charles Warren Research Professor Emerita Former Regional President - Middle
Chief Operating Officer, of the History of American Education, East/Caspian/Egypt/India, BP Amoco plc;
The Rockefeller University Harvard University Sole Member, Shaker Mountain Energy
Associates, LLC
G. Steven Farris (1) John A. Kocur (1)(3)
President, Chief Executive Officer and Attorney at Law; Raymond Plank (1)
Chief Operating Officer, Former Vice Chairman of the Board, Founder and Chairman of the Board,
Apache Corporation Apache Corporation Apache Corporation
Randolph M. Ferlic, M.D. (1)(2) George D. Lawrence (1)(3) Jay A. Precourt (4)
Founder and Former President, Private Investor; Chairman of the Board, Hermes
Surgical Services of the Great Plains, P.C. Former Chief Executive Officer, Consolidated, Inc.
The Phoenix Resource Companies, Inc.
Eugene C. Fiedorek (2)
Private Investor, Former Managing Director, F. H. Merelli (1)(2) (1) Executive Committee
EnCap Investments L.C. Chairman of the Board, Chief Executive (2) Audit Committee
Officer and President, Cimarex Energy Co. (3) Management Development and
A. D. Frazier, Jr. (3)(5) Compensation Committee
Chairman and Chief Executive Officer, Rodman D. Patton (2) (4) Corporate Governance and
Danka Business Systems PLC Former Managing Director, Nominating Committee
Merrill Lynch Energy Group (5) Stock Option Plan Committee
CORPORATE OFFICERS
Raymond Plank Floyd R. Price Thomas P. Chambers W. Kregg Olson
Founder and Chairman of the Executive Vice President Vice President Vice President
Board Eurasia, Latin America Corporate Planning Corporate Reservoir Engineering
and New Ventures
G. Steven Farris John J. Christmann Jon W. Sauer
President, Jon A. Jeppesen Vice President Vice President
Chief Executive Officer and Senior Vice President Business Development Tax
Chief Operating Officer
P. Anthony Lannie Matthew W. Dundrea Cheri L. Peper
Michael S. Bahorich Senior Vice President and Vice President and Treasurer Corporate Secretary
Executive Vice President General Counsel
Exploration and Production Robert J. Dye
Technology Sarah B. Teslik Vice President
Senior Vice President Investor Relations
John A. Crum Policy and Governance
Executive Vice President Rebecca A. Hoyt
Jeffrey M. Bender Vice President and Controller
Rodney J. Eichler Vice President
Executive Vice President and Human Resources Anthony R. Lentini, Jr.
General Manager, Vice President
Apache Egypt Companies Michael J. Benson Public and International Affairs
Vice President
Roger B. Plank Security Janine J. McArdle
Executive Vice President and Vice President
Chief Financial Officer Oil and Gas Marketing
39
SHAREHOLDER INFORMATION
Stock Data
Dividends Dividend Reinvestment Plan
Price Range per Share Shareholders of record may invest their dividends automatically in additional
shares of Apache common stock at the market price. Participants may also invest
High Low Declared Paid up to an additional $25,000 in Apache shares each quarter through this service. All
2006 bank service fees and brokerage commissions on purchases are paid by Apache. A
First Quarter $76.25 $63.17 $.10 $.10 prospectus describing the terms of the Plan and an authorization form may be
Second Quarter 75.66 56.50 .10 .10 obtained from the Company’s stock transfer agent, Wells Fargo Bank, N.A.
Third Quarter 72.40 59.18 .15 .10
Fourth Quarter 70.50 59.99 .15 .15 Direct Registration
Shareholders of record may hold their shares of Apache common stock in book-
2005 entry form. This eliminates costs related to safekeeping or replacing paper stock
First Quarter $65.90 $47.45 $.08 $.08 certificates. In addition, shareholders of record may request electronic movement
Second Quarter 67.99 51.52 .08 .08 of book-entry shares between your account with the Company’s stock transfer
Third Quarter 78.60 64.85 .10 .08 agent and your broker. Stock certificates may be converted to book-entry shares
Fourth Quarter 75.95 59.36 .10 .10 at any time. Questions regarding this service may be directed to the Company’s
stock transfer agent, Wells Fargo Bank, N.A.
The Company has paid cash dividends on its common stock for 42 con-
secutive years through December 31, 2006. Future dividend payments Annual Meeting
will depend upon the Company’s level of earnings, financial require- Apache will hold its annual meeting of shareholders at 10 a.m. on Wednesday,
ments and other relevant factors. May 2, 2007, in the Ballroom, Hilton Houston Post Oak, 2001 Post Oak
Boulevard, Houston, Texas. Apache plans to webcast the annual meeting live;
Apache common stock (symbol APA) is listed on the New York and connect through the Apache Web site: http://www.apachecorp.com.
Chicago stock exchanges and the NASDAQ National Market. At
December 31, 2006, the Company’s shares of common stock outstanding Stock Held in “Street Name”
were held by approximately 7,000 shareholders of record and 319,000 The Company maintains a direct mailing list to ensure that shareholders with
beneficial owners. Also listed on the New York Stock Exchange are: stock held in brokerage accounts receive information on a timely basis.
Shareholders wishing to be added to this list should direct their requests to
• Apache Finance Canada’s 7.75% notes, due 2029 (symbol APA 29) 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
Corporate Offices on Apache’s Web site: http://www.apachecorp.com.
One Post Oak Central
2000 Post Oak Boulevard Form 10-K Request
Suite 100 Shareholders and other persons interested in obtaining, without cost, a copy of
Houston, Texas 77056-4400 the Company’s Form 10-K filed with the Securities and Exchange Commission
(713) 296-6000 may do so by writing to Cheri L. Peper, Corporate Secretary, 2000 Post Oak
Boulevard, Suite 100, Houston, Texas, 77056-4400.
Independent Public Accountants
Ernst & Young LLP Investor Relations
Five Houston Center Shareholders, brokers, securities analysts or portfolio managers seeking information
1401 McKinney Street, Suite 1200 about the Company are welcome to contact Robert J. Dye, Vice President of
Houston, Texas 77010-2007 Investor Relations, at (713) 296-6662.
Stock Transfer Agent and Registrar Members of the news media and others seeking information about the
Wells Fargo Bank, N.A. Company should contact Apache's Public and International Affairs Department
Attn: Shareowner Services at (713) 296-6107.
P.O. Box 64854
South St. Paul, Minnesota 55164-0854 Web site: http://www.apachecorp.com
(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 may access account information on the Web site:
http://www.shareowneronline.com.
40
APACHE CORPORATION
2000 Post Oak Boulevard, Suite 100
Houston, Texas 77056-4400
www.apachecorp.com
