1、APACHE CORPFORM 10-K(Annual Report)Filed 03/02/09 for the Period Ending 12/31/08 Address2000 POST OAK BLVDSTE 100HOUSTON,TX 77056-4400Telephone7132966000CIK0000006769SymbolAPASIC Code1311-Crude Petroleum and Natural GasIndustryOil&Gas OperationsSectorEnergyFiscal Year12/31 http:/www.edgar- Copyright
2、 2009,EDGAR Online,Inc.All Rights Reserved.Distribution and use of this document restricted under EDGAR Online,Inc.Terms of Use.Table of Contents Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington,D.C.20549 FORM 10-K Commission file number 1-4300 APACHE CORPORATION (Exact
3、name of registrant as specified in its charter)One Post Oak Central,2000 Post Oak Boulevard,Suite 100,Houston,Texas 77056-4400 (Address of principal executive offices)Registrants telephone number,including area code(713)296-6000 Securities registered pursuant to Section 12(b)of the Act:Securities re
4、gistered pursuant to Section 12(g)of the Act:Common Stock,$0.625 par value Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes?No?Indicate by check mark if the registrant is not required to file reports pursuant to section 13 or S
5、ection 15(d)of the Act.Yes?No?Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2
6、)has been subject to such filing requirements for the past 90 days.Yes?No?Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,and will not be contained,to the best of registrants knowledge,in definitive proxy or information stateme
7、nts incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.?Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,or a smaller reporting company.See the definitions of“large accelerated filer,”“acce
8、lerated filer”and“smaller reporting company”in Rule 12b-2 of the Exchange Act.(Check one):Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act):Yes?No?DOCUMENTS INCORPORATED BY REFERENCE Portions of registrants proxy statement relating to regi
9、strants 2009 annual meeting of stockholders have been incorporated by reference in parts II and III hereof.(Mark One)?ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31,2008 OR?TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF
10、THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Delaware (State or other jurisdiction of incorporation or organization)41-0747868 (I.R.S.Employer Identification No.)Name of Each Exchange Title of Each Class On Which Registered Common Stock,$0.625 par value New York Stock Exchan
11、ge,Chicago Stock Exchange and NASDAQ National Market Preferred Stock Purchase Rights New York Stock Exchange and Chicago Stock Exchange Apache Finance Canada Corporation New York Stock Exchange 7.75%Notes Due 2029 Irrevocably and Unconditionally Guaranteed by Apache Corporation Large accelerated fil
12、er?Accelerated filer?Non-accelerated filer?(Do not check if a smaller reporting company)Smaller reporting company?Aggregate market value of the voting and non-voting common equity held by non-affiliates of registrant as of June 30,2008$46,488,719,719 Number of shares of registrants common stock outs
13、tanding as of January 31,2009 334,753,638 TABLE OF CONTENTS PART I ITEMS 1 AND 2.BUSINESS AND PROPERTIES ITEM 1A.RISK FACTORS ITEM 1B.UNRESOLVED SEC STAFF COMMENTS ITEM 3.LEGAL PROCEEDINGS ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS PART II ITEM 5.MARKET FOR THE REGISTRANTS COMMON EQU
14、ITY AND RELATED STOCKHOLDER MATTERS ITEM 6.SELECTED FINANCIAL DATA ITEM 7.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ITEM 9.CHANGES IN AND D
15、ISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ITEM 9A.CONTROLS AND PROCEDURES ITEM 9B.OTHER INFORMATION PART III ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ITEM 11.EXECUTIVE COMPENSATION ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ITE
16、M 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,AND DIRECTOR INDEPENDENCE ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES PART IV ITEM 15.EXHIBITS,FINANCIAL STATEMENT SCHEDULES,AND REPORTS ON FORM 8-K SIGNATURES REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING REPORT OF INDEPENDE
17、NT REGISTERED PUBLIC ACCOUNTING FIRM REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM STATEMENT OF CONSOLIDATED OPERATIONS STATEMENT OF CONSOLIDATED CASH FLOWS CONSOLIDATED BALANCE SHEET STATEMENT OF CONSOLIDATED SHAREHOLDERS EQUITY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS EX-10.17 EX-10.19
18、 EX-10.20 EX-10.21 EX-10.22 EX-10.23 EX-10.24 EX-10.25 EX-10.35 EX-10.36 EX-10.37 EX-10.38 EX-10.39 EX-10.44 EX-12.1 EX-21.1 EX-23.1 EX-23.2 EX-31.1 EX-31.2 EX-32.1 Table of Contents PART I General Apache Corporation,a Delaware corporation formed in 1954,is an independent energy company that explore
19、s for,develops and produces natural gas,crude oil and natural gas liquids.In North America,our exploration and production interests are focused in the Gulf of Mexico,the Gulf Coast,East Texas,the Permian basin,the Anadarko basin and the Western Sedimentary basin of Canada.Outside of North America,we
20、 have exploration and production interests onshore Egypt,offshore Western Australia,offshore the United Kingdom(U.K.)in the North Sea(North Sea),and onshore Argentina.We also have exploration interests on the Chilean side of the island of Tierra del Fuego.Our common stock,par value$0.625 per share,h
21、as been listed on the New York Stock Exchange(NYSE)since 1969,on the Chicago Stock Exchange(CHX)since 1960,and on the NASDAQ National Market(NASDAQ)since 2004.On May 23,2008,we filed certifications of our compliance with the listing standards of the NYSE and the NASDAQ,including our principal execut
22、ive officers certification of compliance with the NYSE standards.Through our website,you can access,free of charge,electronic copies of the charters of the committees of our Board of Directors,other documents related to Apaches corporate governance(including our Code of Business Conduct and Governan
23、ce Principles),and documents Apache files with the Securities and Exchange Commission(SEC),including our annual reports on Form 10-K,quarterly reports on Form 10-Q,and current reports on Form 8-K,as well as any amendments to these reports filed or furnished pursuant to Section 13(a)or 15(d)of the Se
24、curities Exchange Act of 1934.Included in our annual and quarterly reports are the certifications of our principal executive officer and our principal financial officer that are required by applicable laws and regulations.Access to these electronic filings is available as soon as reasonably practica
25、ble after we file such material with,or furnish it to,the SEC.You may also request printed copies of our committee charters or other governance documents free of charge by writing to our corporate secretary at the address on the cover of this report.Our reports filed with the SEC are also made avail
26、able to read and copy at the SECs Public Reference Room at 100 F Street,N.E.,Washington,D.C.,20549.You may obtain information about the Public Reference Room by contacting the SEC at 1-800-SEC-0330.Reports filed with the SEC are also made available on its website at www.sec.gov.From time to time,we
27、also post announcements,updates and investor information on our website in addition to copies of all recent press releases.We hold interests in many of our United States(U.S.),Canadian,and other international properties through subsidiaries,including Apache Canada Ltd.,DEK Energy Company(DEKALB),Apa
28、che Energy Limited(AEL),Apache North America,Inc.,and Apache Overseas,Inc.Properties which we refer in this document may be held by those subsidiaries.We treat all operations as one line of business.References to“Apache”or the“Company”include Apache Corporation and its consolidated subsidiaries unle
29、ss otherwise specifically stated.Growth Strategy Apaches mission is to grow a profitable upstream oil and gas company for the long-term benefit of our shareholders.Our strategy includes building a balanced portfolio of assets,maintaining financial flexibility,and maximizing earnings and cash flows b
30、y controlling costs.We have a portfolio of core areas that provide long-term growth opportunities through organic drilling supplemented by strategic acquisitions.Two decades ago,recognizing that the United States was a mature oil and gas province,we launched an international exploration component to
31、 our portfolio approach.Our international locations provide additional diversity of geologic and geographic risk as well as exposure to larger reserve targets,which fuel production and reserve growth.We have exploration and production operations in six countries,comprising seven regions:the Gulf Coa
32、st and Central regions in the United States,Canada,Egypt,the North Sea,Australia and Argentina.We have exploration interests in Chile located adjacent to our Argentine operations in Tierra del Fuego.We have achieved a critical mass in each of our producing regions that support sustainable,lower-risk
33、,repeatable drilling opportunities.This enables us to pursue higher-risk,higher-reward exploration primarily in our international regions,particularly our growth areas of Australia,Canada and Egypt.Our acreage positions,which include 39 million gross acres across the globe,also bring ample growth op
34、portunities.2 ITEMS 1 AND 2.BUSINESS AND PROPERTIES Table of Contents In 2008,we drilled or participated in 1,418 gross wells with an overall 93 percent success rate;90 percent were developmental and 10 percent were exploratory.We carefully spread our risk among our regions.For instance,no single re
35、gion contributed more than 23 percent of our production or reserves in 2008.Our multiple geological locations also provide us a mixture in reserve life,which translates into balance in the timing of returns on our investments.Reserve life(estimated reserves divided by annual production)in our region
36、s ranges from as short as seven years to as long as 27 years.In addition,our goal is to balance our mix of hydrocarbons,which provides some measure of protection against price deterioration in a given product while retaining upside potential through a significant increase in either commodity price.I
37、n 2008,crude oil and liquids provided 50 percent of our production and 68 percent of our revenue.We were well-positioned to realize the benefit of higher oil prices,which significantly outpaced natural gas price increases for much of the year,despite falling 70 percent from their June 2008 peak.Our
38、year-end estimated proved reserves were balanced at 55 percent natural gas and 45 percent crude oil and liquids.Preserving financial flexibility and a strong balance sheet are also key to our overall business philosophy.We ended 2008 with a debt-to-capitalization ratio of 23 percent,after current ye
39、ar capital investments of$6.3 billion,excluding asset retirement costs.We also had over$1.5 billion of cash and short-term investments.In tightening credit markets,we believe Apaches single-A debt ratings provide a competitive advantage in accessing capital.Our 2008 return on capital employed and re
40、turn on equity of four percent and five percent,respectively,was negatively impacted by a non-cash write-down(discussed in Item 7 of this Form 10-K).Another critical component of our overall strategy is maximization of earnings and cash flow.Both are significantly impacted by commodity prices,which
41、fluctuate and are primarily influenced by factors beyond our control,including worldwide supply and demand,political stability and governmental actions and regulations.For example,demand for energy,once thought to be insatiable,waned,driving prices down.Prices began the year strong and soared to unp
42、recedented levels in mid-2008,only to fall rapidly by year-end,as the financial markets and ultimately the worlds economies stalled.We also strive to control costs of both adding and producing reserves.Operating regions are given the autonomy necessary to make drilling and operating decisions and to
43、 act quickly.Management and incentive systems underscore high cash flows and motivate appropriate risk taking to reach or exceed targeted hurdle rates of return.Results are measured monthly,reviewed with management quarterly and utilized to determine annual performance awards.We monitor capital allo
44、cations,at least quarterly,through a disciplined and focused process of analyzing current economic conditions in each of our regions,internally generated drilling prospects,opportunities for tactical acquisitions or,occasionally,new core areas which could enhance our portfolio.We also periodically e
45、valuate our properties to determine whether sales of certain assets could provide opportunities to redeploy our capital resources to rebalance our portfolio and enhance prospective returns.The global economic slowdown and decline in oil and gas prices create a difficult operating environment for 200
46、9.In preparation,we have substantially reduced our capital budget for 2009 in an effort to keep our expenditures in line with our cash flow.In 2009,we plan to invest$3.5 to$4.0 billion on capital expenditures,which is 50 percent less than in 2008.Our plan includes investments for drilling and recomp
47、leting wells,development projects,waterflood projects,equipment upgrades,production enhancement projects and seismic acquisition.Also included is$300 million for gathering,transmission and processing(GTP)assets and$500 million for plugging and abandonment work,of which$250 million is for damage caus
48、ed by Hurricanes Katrina,Rita and Ike.As is our custom,we will review and revise our capital expenditure estimates throughout the year based on changing industry conditions and results-to-date.Additionally,we plan to step up our search for opportunities to acquire oil and gas properties where we bel
49、ieve we can add value and earn adequate rates of return.During our 54 years in business and throughout the cycles of our industry,these strategies have underpinned our ability to deliver long-term production growth,increase proved reserves at a reasonable economic cost and achieve competitive invest
50、ment rates of return for the benefit of our shareholders.We increased reserves 22 out of 23 years and increased production 28 out of the past 30 years,a testament to our longevity.While the business environment in 2009 is likely to be challenging,we believe we are in a strong financial position and
51、are well-positioned to take advantage of what could be some of the most attractive acquisition opportunities in years.3 Table of Contents Region Overviews We currently have exploration and production interests in six countries,divided into seven operating regions:the United States(Gulf Coast and Cen
52、tral regions),Canada,Egypt,Australia,offshore the United Kingdom in the North Sea and Argentina.We also have exploration interests on the Chilean side of the island of Tierra del Fuego,which we acquired in the second quarter of 2008.The following table sets out a brief comparative summary of certain
53、 key 2008 data for each of our operating areas.Additional data and discussion is provided in Item 7 of this Form 10-K.United States In the U.S.,the Gulf Coast region historically generates high returns on invested capital and cash flow significantly in excess of its exploration and development spend
54、ing.Occasional acquisitions have played an important role,as steep decline rates mean offshore reserves are generally shorter-lived and difficult to replace on a cost-effective basis through drilling alone.The Central region brings the balance of long-lived reserves and consistent drilling results t
55、o the portfolio.Apaches future growth in the U.S.is more likely to be achieved through a combination of drilling and acquisitions than through drilling activity alone.Gulf Coast Region The region comprises our interests in and along the Gulf of Mexico,in the areas on and offshore Louisiana and Texas
56、.In waters less than 1,200 feet deep in the Gulf of Mexico,Apache is the largest producer and,since 2004,has been the largest held-by-production acreage holder.In 2008,the region contributed approximately 22 percent of our production and approximately 25 percent of our revenues and,at year-end,held
57、approximately 14 percent of our estimated proved reserves.The region had a productive year even though a considerable amount of effort was expended on evacuations and repair related to Hurricanes Gustav and Ike.We drilled 116 wells,90 of which were completed as producers,and performed 358 workover a
58、nd recompletions.In June 2008,we had a key discovery at the Geauxpher prospect located on Garden Banks Block 462 in deepwater Gulf of Mexico.Apache generated the prospect and has a 40 percent working interest.Mariner Energy,Inc.is the designated operator of the block with a 60 percent working intere
59、st.A delineation well was drilled in December 2008,extending the productive reservoir limits.We project the initial discovery to be online in the second quarter of 2009.Additional potential on the block is expected to be tested by further drilling.At Ewing Banks 826,we completed four wells during th
60、e first half of 2008 and increased 4 Percentage 2008 2008 Gross Percentage 12/31/08 of Total Gross New of Total 2008 Estimated Estimated New Productive 2008 2008 Production Proved Proved Wells Wells Production Production Revenue Reserves Reserves Drilled Drilled (In MMboe)(In millions)(In MMboe)Regi
61、on/Country:Gulf Coast 43.1 22%3,076 334.8 14%116 90 Central 33.4 17 2,007 602.8 25 415 404 Total U.S.76.5 39 5,083 937.6 39 531 494 Canada 28.6 15 1,651 523.0 22 484 471 Total North America 105.1 54 6,734 1,460.6 61 1,015 965 Egypt 40.5 21 2,739 342.9 14 260 236 Australia 10.5 5 372 285.5 12 46 34 N
62、orth Sea 22.0 11 2,103 188.8 8 14 12 Argentina 17.5 9 380 122.8 5 83 72 Total International 90.5 46 5,594 940.0 39 403 354 Total 195.6 100%12,328 2,400.6 100%1,418 1,319 Table of Contents production to 6,315 b/d from 700 b/d at the beginning of the year.We own a 100 percent working interest in the f
63、ield.In addition,significant progress was achieved toward wrapping up remaining abandonments associated with Hurricanes Katrina and Rita in 2005 and repairing damage and restoring shut-in production attributable to Hurricanes Gustav and Ike in 2008.Central Region The Central region includes assets i
64、n East Texas,the Permian basin of West Texas and New Mexico and the Anadarko basin of western Oklahoma and the Texas Panhandle,where the Company got its start over 50 years ago.At year-end 2008,the Central region accounted for approximately 25 percent of our estimated proved reserves,the largest con
65、centration in the Company.During 2008,we participated in drilling 415 wells in the Central region,404 of which were completed as producers.Apache also performed 1,210 workovers and recompletions in the region during the year.Marketing In general,most of our U.S.gas is sold at either monthly or daily
66、 market prices.Our natural gas is sold primarily to Local Distribution Companies(LDCs),utilities,end-users,integrated major oil and gas companies and marketers.Approximately two percent of our 2008 U.S.natural gas production was sold under physical long-term fixed-price contracts,all of which expire
67、d in 2008.See Item 7A,“Quantitative and Qualitative Disclosures about Market Risk Commodity Risk”in this Form 10-K.Apache primarily markets its U.S.crude oil to integrated major oil companies,purchasers,transporters and refiners.The objective is to maximize the value of crude oil sold by identifying
68、 the best markets and most economical transportation routes available to move the product.Sales contracts are generally 30-day evergreen contracts that renew automatically until canceled by either party.These contracts provide for sales that are priced daily at market prevailing prices.We manage our
69、 credit risk by selling our oil and gas to diverse counterparties and monitoring our exposure on a daily basis.Canada In our Canadian region,we have 4.9 million net acres across the provinces of British Columbia,Alberta and Saskatchewan,which provide a significant inventory of both low-risk developm
70、ent drilling opportunities in and around a number of Apache fields and higher-risk,higher-reward exploration opportunities.In 2008,we drilled 484 wells in Canada,with 471 completed as producers.Three percent of the wells drilled during the year were exploration wells,half of which were productive.We
71、 performed 531 workover and recompletion projects.The region comprises approximately 22 percent of our estimated proved reserves,the second largest concentration in the Company.In 2009,we will continue our pursuit of the emerging shale-gas play in northeast British Columbia,where we have over 217,00
72、0 highly prospective net acres.Apache completed seven horizontal wells at the Ootla shale-gas play in the Horn River Basin during 2008.The last completed well utilized a 10-stage fracture stimulation.Apache plans to continue to develop the optimum strategy for Ootla well completions in 2009.In addit
73、ion,we plan to drill exploratory wells to test other emerging plays in both Alberta and northeast British Columbia during 2009.We will also continue to target shallow gas,including coal bed methane(CBM),in the Provost,North Grant Land and Nevis areas.As a result of these efforts,we believe Apache ha
74、s emerged as one of Canadas largest producers of CBM.We are also utilizing horizontal well technology to develop waterflood and enhanced oil recovery projects in the Midale field located in southeast Saskatchewan,and the Zama and House Mountain fields located in Alberta.Intermediate depth gas develo
75、pment drilling continues in the Kaybob,West 5 and South Grant Land areas of central and southern Alberta.Marketing Our Canadian natural gas marketing activities focus on sales to LDCs,utilities,end-users,integrated major oil companies,supply aggregators and marketers.Our composite client portfolio i
76、s diverse with the intent of reducing the concentration of credit risk in our portfolio.Improved North American natural gas pipeline connectivity over the years has led to a closer correlation between Canadian and U.S.natural gas prices.To diversify our market exposure and optimize pricing differenc
77、es in the U.S.and Canada,we transport natural gas via our firm transportation contracts to California,the Chicago area,and eastern Canada.We sell the majority of our Canadian 5 Table of Contents production on a monthly basis,either into the first-of-the-month market or the daily market.In 2008,appro
78、ximately two percent of our gas sales were subject to long-term fixed-price contracts with the latest expiration in 2011.Our Canadian crude oil is primarily sold to refiners,integrated major oil companies and marketers.To increase the market value of our condensate and heavier crudes,our condensate
79、is generally either used or sold for blending purposes.We sell our oil and natural gas liquids(NGLs)on crude oil postings,which are market-reflective prices that depend on worldwide crude oil prices and are adjusted for transportation and quality.In order to reach more purchasers and diversify our m
80、arket,we transport crude oil on 12 pipelines to the major trading hubs within Alberta and Saskatchewan.Egypt Egypt holds our largest acreage position with more than 11 million gross acres,following relinquishments in January 2009,in 23 separate concessions(19 producing concessions)that provide a siz
81、able resource in the Cretaceous Upper Bahariya formations and outstanding exploration potential in deeper intervals from Lower Cretaceous to Jurassic.In addition to being the largest acreage holder in Egypt,we believe that Apache is the largest producer of liquid hydrocarbons and natural gas in the
82、Western Desert and the third largest in all of Egypt.In 2008,our Egypt region contributed 22 percent of Apaches production revenue,21 percent of total production,and 14 percent of total estimated proved reserves.The Company reports all estimated proved reserves held under production sharing agreemen
83、ts utilizing the economic interest method,which excludes the host countrys share of reserves.In 2008,Apache had an active drilling program in Egypt,completing 236 of 260 wells,a 91 percent success rate,and conducted 701 workovers and recompletions.Historically,our growth in Egypt has been driven by
84、drilling;we are the most active driller in Egypt.In the Khalda concession two additional Salam gas processing trains,three and four,and an associated Apache pipeline compression project on the Western Desert Northern Gas Pipeline are forecasted to add additional net production of 100 MMcf/d and 5,00
85、0 b/d when fully operational in the second quarter of 2009.The third processing train commenced operations on December 4,2008.Commissioning with first gas from the fourth processing train is projected to commence during the first quarter of 2009.In Egypt,our operations are conducted pursuant to prod
86、uction sharing contracts under which the contractor partner pays all operating and capital expenditure costs for exploration and development.A percentage of the production,usually up to 40 percent,is available to the contractor partners to recover operating and capital expenditure costs.In general,t
87、he balance of the production is allocated between the contractor partners and Egyptian General Petroleum Corporation(EGPC)on a contractually defined basis.Development leases within concessions generally have a 25-year life with extensions possible for additional commercial discoveries or on a negoti
88、ated basis.Marketing Our gas production is sold to EGPC under an industry-pricing formula,a sliding scale based on Dated-Brent crude oil with a minimum of$1.50 per MMbtu and a maximum of$2.65 per MMbtu,which corresponds to a Dated-Brent price of$21.00 per barrel.Generally,the industry-pricing formul
89、a applies to all new gas discovered and produced.In exchange for extension of the Khalda Concession lease in July 2004,Apache agreed to accept the industry-pricing formula on a majority of gas sold but retained the previous gas-price formula(without a price cap)until 2013 for up to 100 MMcf/d gross.
90、Oil from the Khalda Concession,the Qarun Concession and other nearby Western Desert blocks is sold directly to EGPC or other third parties.Oil sales are made either directly into the Egyptian oil pipeline grid,exported or sold at one of two terminals on the northern coast of Egypt or sold to non-gov
91、ernmental third parties including the Middle East Oil Refinery located in northern Egypt.Oil production that is presently sold to EGPC is sold on a spot basis at the monthly EGPC quoted price(indexed to Brent).In 2008,we sold 34 cargoes(approximately 10.1 million barrels)of Western Desert crude oil
92、from the El Hamra terminal located on the northern coast of Egypt into the export market.These export cargoes were sold to EGPC at market prices above our domestic sales.Additionally,Apache sold Qarun quality oil(approximately 7.6 million barrels)at the Sidi Kerir terminal,also located on the northe
93、rn coast of Egypt.This Qarun oil was sold at prevailing market prices into the domestic market to non-governmental purchasers(three million barrels)or exported to buyers in the Mediterranean markets(11 6 Table of Contents cargoes for approximately 4.6 million barrels).We expect sales to the export m
94、arket from both the Khalda and Qarun areas in the Western Desert to continue in 2009.Australia Overview In Australia,our exploration activity is focused in the offshore Carnarvon,Gippsland and Browse basins,where Apache holds 5.2 million net acres in 34 exploration permits,11 production licenses and
95、 five retention leases.Production operations are concentrated in the Carnarvon and Exmouth basins,the location of Apaches 11 production licenses,all of which are Apache operated.In 2008,the region generated$372 million of production revenues from the sale of 10.5 MMboe,approximately five percent of
96、our total production.Australia held 12 percent of our year-end estimated proved reserves.During the year,the region participated in drilling 46 wells,which generated 25 productive oil wells and nine productive gas wells.Our growth strategy includes development in the Carnarvon basin and in areas adj
97、acent to this core area.As of the end of 2008,our Van Gogh and Pyrenees projects in the Exmouth basin were under active development.We had also initiated a development project related to our 2008 Halyard discovery(discussed below)and began appraising our large Julimar discovery(also discussed below)
98、.We completed planned development drilling at our Reindeer field.Van Gogh is Apache-operated,while Pyrenees is operated by BHP Billiton.Van Gogh development drilling and sub-sea production equipment installation is well underway,with first oil production slated for mid-2009 through a floating produc
99、tion storage and offloading tanker.Additional development drilling is planned in 2009 prior to the start of production.Pyrenees development drilling is expected to commence in 2009 with first oil production expected in the first half of 2010.Production from each field is estimated at 20,000 b/d net
100、to Apache.In April 2008,we drilled the Halyard-1 well,which tested 68 MMcf/d of gas and was completed as a producer.The Halyard field is expected to be tied-in to the nearby East Spar gas facilities once a market for the gas is under contract.Apache holds a 55 percent interest in the field.Additiona
101、l appraisal in 2009 is necessary on the Julimar gas discovery before proceeding with a development plan.Based on current geological mapping,we believe that Julimar could be a multi-Tcf discovery.Apache owns a 65 percent interest in and operates the Julimar-Brunello complex.During the fourth quarter
102、of 2008,Apache completed a three-well development drilling campaign at the Reindeer field.On January 6,2009,we secured a 154 Bcf,7-year gas sales contract that allowed us to reinstate our Reindeer development,which was suspended at the end of 2008 program because of a delay in gas sales contract neg
103、otiations.Negotiations were delayed by the onset of the global economic crisis and the resulting drop in metal prices.The gas will be supplied through a new 65-mile offshore pipeline and a new onshore gas processing facility at Devil Creek.This sales contract is discussed in more detail below under“
104、Subsequent Events.”Construction of pipeline and processing infrastructure is scheduled to commence in 2009 with first production anticipated in 2011.Apache owns a 55-percent interest in the field.We are currently evaluating the results of wells drilled in 2008 and seismic information to assess the f
105、uture potential in the Gippsland basin.All six wells drilled in 2008 were either dry or non-commercial.Varanus Island On June 3,2008,subsidiaries of the Company reported a gas pipeline explosion at the Varanus Island gas processing and transportation hub offshore Western Australia,which shut-in prod
106、uction from the John Brookes field and Harriet Joint Venture.When fully operational,the Islands operations process approximately 195 MMcf/d and 5,400 b/d,net to Apache subsidiaries.On August 5,2008,partial production was reestablished from the John Brookes field and by year-end was at greater than 8
107、0 percent pre-incident levels.The Harriet Joint Venture gas facilities are located adjacent to the pipeline explosion and required more significant repairs to restore operation.A portion of the gas production from the Harriet Joint Venture was restored in December 2008 and is projected to be fully r
108、estored in the first half of 2009.Harriet Joint Venture oil production is projected to be fully restored in the first quarter of 2009.The John Brookes field accounted for approximately 60 percent and 25 percent of the islands pre-incident natural gas and oil production,respectively.Production from t
109、he Harriet Joint Venture accounted for the remaining 40 percent and 75 percent of the islands pre-incident natural gas and oil production,7 Table of Contents respectively.Company subsidiaries operate the facilities and own a 68.5 percent interest in the Harriet Joint Venture and a 55 percent interes
110、t in the John Brookes field.Company subsidiaries maintain replacement cost insurance,subject to a deductible of approximately$7 million,with adequate limits to cover fully their share of the estimated cost of restoring the Varanus Island facilities.During 2009,our Australian region plans to focus on
111、 its major field development projects and,to a lesser extent,its exploration and appraisal activities.Marketing As of December 31,2008,Apache had a total of 18 active gas contracts in Australia with expiration dates ranging from March 2010 to July 2030.Generally,natural gas is sold in Western Austra
112、lia under long-term,fixed-price contracts,many of which contain price escalation clauses based on the Australian consumer price index.We continue to export all of our crude oil production into international markets at prices indexed to Asian benchmark crude oil prices,which typically track at or abo
113、ve New York Mercantile Exchange(NYMEX)oil prices.North Sea Apache entered the North Sea in 2003 upon acquiring an approximate 97 percent working interest in the Forties field(Forties).Our drilling program and continued improvements in plant efficiencies led to an 11 percent increase in 2008 producti
114、on.We expect to increase our North Sea production in 2009 relative to 2008.We also have several targeted facilities projects planned for 2009 to further improve the efficiency of our operations in the North Sea.In 2008,the North Sea region produced 21.9 MMboe,approximately 11 percent of our total pr
115、oduction,generating slightly more than$2.1 billion of revenue and accounting for approximately eight percent of our year-end estimated proved reserves.In 2008,we invested$459 million in the North Sea on drilling and recompleting wells and facility enhancement programs.We drilled 14 wells in the Nort
116、h Sea during 2008,12 of which were producers.We completed and commissioned a number of key projects in the North Sea region during 2008,including replacing the key import header on the Charlie platform that services the field export system,high-pressure gas-lift compression projects on the Alpha and
117、 Delta platforms,a large produced water reinjection system on the Charlie platform and replacement of the infield pipeline between the Bravo and Charlie platforms.Investments in facility upgrades and integrity-related projects over the past five years have continually increased the efficiency of our
118、 operations.Drilling successes and improved platform operating efficiencies led to fourth-quarter 2008 production of 61,740 b/d.During 2008,production averaged 59,494 b/d.The 2008 annual maintenance shut down on the Charlie platform impacted the field by 1,330 b/d,which was an improvement compared t
119、o 2,270 b/d impact in 2007.The new import header on the Charlie platform enabled the platform to be shut in for planned maintenance activities without impacting production export operations from the other field platforms.Marketing In 2008,we entered into two new term contracts for the physical sale
120、of Forties crude at prevailing market prices.These term sales are composed of base-market indices,adjusted for the quality difference between the Forties crude and Brent,with a premium to reflect the higher market value for term arrangements.In addition to the term sales,Apache sold 11 spot cargoes
121、of approximately 600,000 barrels each and received value at or above the prevailing market prices.Argentina Argentina became our latest core area following two significant acquisitions in 2006 that substantially increased our presence in the country.In the second quarter of 2006,we completed our pur
122、chase of Pioneers operations in Argentina for$675 million,with estimated proved reserves of 22 MMbbls of liquid hydrocarbons and 297 Bcf of natural gas.In the third quarter of 2006,we acquired additional interests in(and now operate)seven concessions in Tierra del Fuego(TdF)from Pan American for$429
123、 million.With the addition of Mendoza CCyB Block 17B in 2008,our oil and gas assets are located in the Neuqun,Austral and Cuyo basins of Argentina.While Argentina presents unique challenges with evolving governmental regulations,we are optimistic about our ability to find additional hydrocarbons wit
124、h the drill bit and to grow our reserves and production over the long-term.8 Table of Contents In 2008,our Argentina region continued its broad drilling and recompletion programs.The region drilled 83 wells,72 of which were productive.We produced 17.5 MMboe in 2008,which accounted for nine percent o
125、f Apaches total production.Argentina holds approximately five percent of our total estimated proved reserves.In December 2008,the Mendoza Province granted Apache an exploration permit for CCyB Block 17B in the Cuyo basin,increasing our Argentine acreage by 34 percent.The block is adjacent to and alo
126、ng a trend of existing producing fields.We also completed a nearly 2,500 square kilometer three-dimensional(3-D)seismic mega shoot in Tierra del Fuego.which aided in the identification of prospects and increased Apaches ability to drill productive wells.In the Austral Basin of Tierra del Fuego,Apach
127、e made discoveries on operated blocks in which we own a 70 percent working interest,including the San Sebastian area,where Apache successfully drilled three kilometers from the shore to test a new separate oil structure in the San Sebastian field.Apache also discovered a new field,Seccin Veintinueve
128、,and a field extension to the Sara Norte field.Apache believes that the new 3-D seismic survey will continue to generate an inventory of drilling prospects.On the mainland,we continued our drilling and recompletion campaigns in our established gas areas in the Neuqun basin.We drilled 11 new wells in
129、 our Estacion Fernandez Oro field,10 new wells in our Guanaco field including a new deeper gas pool and 9 new wells in our Ranquil Co field,with a success rate of 100 percent.Apache plans to continue drilling in each of these fields in 2009.We also drilled a successful exploratory well on our Collon
130、 Cura exploration lease,fulfilling our license obligations.Marketing In 2008,52 percent of our natural gas portfolio was regulated based upon certain market segments.We realized an average price of$.92 per Mcf on sales to regulated market segments in 2008.The remaining free market volumes were sold
131、either on a monthly or daily basis or under term contracts,some of which extend through 2009.The average price received for free market volumes during the fourth quarter 2008 was$2.28 per Mcf,versus a fourth-quarter 2007 price of$2.32,a decrease of two percent primarily because of lower spot price s
132、ales in Tierra del Fuego.Taxes on exported oil effectively limits prices buyers are willing to pay for domestic sales.Domestic oil prices are currently based on$42 per barrel,plus quality adjustments,and producers realize a gradual increase or decrease as market prices deviate from the base price.In
133、 Tierra del Fuego,the price cap applies,but Apache retains the value-added tax collected from buyers,effectively increasing realized prices by 21 percent.In 2008,we received an average price of$49.46 per barrel for crude oil.Chile In November 2007,Apache was awarded exploration rights on two blocks
134、comprising one million net acres in Tierra del Fuego,following a bid round.This acreage is adjacent to our 552,000 net acres on the Argentine side of the island of Tierra del Fuego,and the additional acreage represents a natural extension of our expanding exploration and production operations.In 200
135、8,Apache finalized the contracts with the Chilean government in July and shot a 3-D seismic survey.In 2009,we plan to process and interpret this seismic data in order to validate prospects and identify initial drilling locations.Major Customers In 2008,purchases by Shell accounted for 17 percent of
136、the companys oil and gas production revenues.Subsequent Events Australian Gas Sales Contract On January 6,2009,Apache signed a contract to supply natural gas from its Reindeer field to CITIC Pacifics Sino Iron project in Western Australia.Apache and its joint venture partner agreed to supply 154 bil
137、lion cubic feet of gas over seven years,beginning in the second half of 2011.Apache owns a 55-percent interest in the field.9 Table of Contents The gas will be supplied through a new,65-mile offshore pipeline and a new onshore sales gas processing facility at Devil Creek,about 28 miles southwest of
138、Dampier,with capacity to process 210 MMcf/d.Apache plans to sell additional production from the Reindeer field to other domestic customers in Western Australia.The contract price for the first three years is a fixed price adjusted periodically for changes in the Australian consumer price index.Begin
139、ning in the fourth year,the price is indexed to international oil prices.At an oil price of$50 per barrel,Apaches net share of the revenue over the seven years of the contract would be approximately$700 million.The gas sales agreement will not take effect unless Apache and its joint venture partner
140、sign contracts for engineering and procurement of the gas plant and pipeline by mid-March 2009(or a later date if agreed by all parties).Management Changes On January 15,2009,Raymond Plank retired as Chairman of the Board,a director,and an employee of Apache.Mr.Plank founded Apache in 1954 and had s
141、erved as an officer of the Company since 1954(President and/or Chief Executive Officer from 1954 to 2002 and Chairman of the Board since 1979).He had been a director of the Company since 1954.G.Steven Farris,Apaches president,chief executive officer and chief operating officer since 2002,succeeded M
142、r.Plank as chairman.Also on January 15,2009,Apache and Mr.Plank entered into an amendment and restatement of his employment agreement dated December 5,1990,pursuant to which he agreed to provide consulting services to the Company for the remainder of his life.On February 12,2009,Mr.Farris formed an
143、office of the chief executive with three key executives reporting to him.Messrs.Roger B.Plank,John A.Crum and Rodney J.Eichler were appointed to new positions effective as of February 12,2009.Mr.Roger Plank now serves as president,Mr.Crum serves as co-chief operating officer and president North Amer
144、ica,and Mr.Eichler serves as co-chief operating officer and president International.Although Messrs.Roger Plank,Crum and Eichler have separate functional responsibilities,they have joint and equal roles in the daily decision-making and direction of Apache.Mr.Farris continues to serve as chairman and
145、 chief executive officer of Apache and has resigned from his positions of president and chief operating officer of Apache effective February 12,2009.Mr.Farris continues to serve as Apaches principal executive officer and,in his new role as president,Mr.Roger Plank continues to serve as Apaches princ
146、ipal financial officer.Canadian Gas Pipeline Contract On February 10,2009,Apaches wholly-owned subsidiary,Apache Canada Ltd entered into an agreement with TransCanada Pipelines Limited(TCPL)pursuant to which TCPL will construct and install a gas pipeline from northeastern British Columbia to the exi
147、sting NOVA pipeline system located in the Ekwan area of Alberta.Apache Canada intends to ship gas produced from the Ootla basin on the new pipeline.The construction,operation and transportation rates of the new pipeline are subject to regulatory approval.We expect to receive authority to construct t
148、he pipeline,and construction is expected to be complete on or before April 1,2011.Upon completion of the pipeline,Apache Canada will have a ship-or-pay commitment to ship 100 MMBtu/d for either a four-year period or a ten-year period,depending on the rate structure determined and approved by the reg
149、ulatory agency.Apache Canada has the right to terminate the agreement before October 1,2009.If Apache Canada elects to terminate the agreement or TCPL terminates for reasons set forth in the agreement,Apache Canada must reimburse TCPL for certain costs and expenses up to CDN$90 million plus certain
150、taxes.Drilling Statistics Worldwide,in 2008,we participated in drilling 1,418 gross wells,with 1,319(93 percent)completed as producers.We also performed more than 2,800 workovers and recompletions during the year.Historically,our drilling activities in the U.S.have generally concentrated on exploita
151、tion and extension of existing,producing fields rather than exploration.As a general matter,our operations outside of the U.S.focus on a mix of exploration and exploitation wells.In addition to our completed wells,at year-end several wells had not yet reached completion:91 in the U.S.(56.3 net);10 i
152、n Canada(9.7 net);36 in Egypt(33.5 net);2 in Australia(1.6 net);2 in the North Sea(1.9 net);and 9 in Argentina(8.7 net).10 Table of Contents The following table shows the results of the oil and gas wells drilled and completed for each of the last three fiscal years:Productive Oil and Gas Wells The n
153、umber of productive oil and gas wells,operated and non-operated,in which we had an interest as of December 31,2008,is set forth below:11 Net Exploratory Net Development Total Net Wells Productive Dry Total Productive Dry Total Productive Dry Total 2008 United States 4.5 6.6 11.1 334.8 25.3 360.1 339
154、.3 31.9 371.2 Canada 3.9 5.0 8.9 328.0 10.1 338.1 331.9 15.1 347.0 Egypt 18.7 11.5 30.2 193.2 5.8 199.0 211.9 17.3 229.2 Australia 6.4 9.0 15.4 12.5 12.5 18.9 9.0 27.9 North Sea 11.7 11.7 11.7 11.7 Argentina 7.5 2.0 9.5 54.4 6.2 60.6 61.9 8.2 70.1 Total 41.0 34.1 75.1 934.6 47.4 982.0 975.6 81.5 1,0
155、57.1 2007 United States 3.0 3.1 6.1 264.9 16.5 281.4 267.9 19.6 287.5 Canada 9.5 15.5 25.0 206.0 35.4 241.4 215.5 50.9 266.4 Egypt 10.7 13.0 23.7 144.3 14.8 159.1 155.0 27.8 182.8 Australia 3.8 7.2 11.0 2.7 2.7 6.5 7.2 13.7 North Sea 2.5 2.5 4.9 6.8 11.7 4.9 9.3 14.2 Argentina 2.0 2.0 80.8 2.0 82.8
156、82.8 2.0 84.8 Total 29.0 41.3 70.3 703.6 75.5 779.1 732.6 116.8 849.4 2006 United States 2.9 2.7 5.6 266.4 15.3 281.7 269.3 18.0 287.3 Canada 34.3 6.4 40.7 577.3 114.8 692.1 611.6 121.2 732.8 Egypt 11.8 8.9 20.7 122.7 10.4 133.1 134.5 19.4 153.9 Australia 1.2 9.3 10.5 1.0 1.3 2.3 2.2 10.6 12.8 North
157、 Sea 1.0 1.0 3.9 3.9 3.9 1.0 4.9 Argentina 9.3 5.3 14.6 60.8 2.0 62.8 70.1 7.3 77.4 Other International 1.5 1.5 1.5 1.5 Total 59.5 33.6 93.1 1,033.6 143.8 1,177.4 1,093.1 177.5 1,270.6 Gas Oil Total Gross Net Gross Net Gross Net Gulf Coast 835 675 885 640 1,720 1,315 Central 3,415 1,765 7,650 5,215
158、11,065 6,980 Canada 8,200 7,260 2,250 990 10,450 8,250 Egypt 42 42 618 589 660 631 Australia 10 6 37 22 47 28 North Sea 65 63 65 63 Argentina 395 363 580 503 975 866 Total 12,897 10,111 12,085 8,022 24,982 18,133 Table of Contents Production,Pricing and Lease Operating Cost Data The following table
159、describes,for each of the last three fiscal years,oil,NGLs and gas production,average lease operating expenses per boe(including severance and other taxes and transportation costs)and average sales prices for each of the countries where we have operations:12 Average Lease Production Operating Cost p
160、er Average Sales Price Year Ended December 31,Oil NGLs Gas Boe Oil NGLs Gas (Mbbls)(Mbbls)(MMcf)(Per bbl)(Per bbl)(Per Mcf)2008 United States 32,866 2,191 248,835$14.67$83.70$58.62$8.86 Canada 6,278 760 129,099 14.27 93.53 49.33 7.94 Egypt 24,431 96,518 6.47 91.37 5.25 Australia 3,019 45,019 10.87 9
161、1.78 2.10 North Sea 21,775 965 41.70 95.76 18.78 Argentina 4,542 1,056 71,609 6.58 49.46 37.83 1.61 Total 92,911 4,007 592,045$15.02$87.80$51.38$6.70 2007 United States 33,127 2,811 280,903$11.99$66.48$45.24$7.04 Canada 6,846 820 141,697 12.74 68.29 40.55 6.30 Egypt 22,168 87,883 5.16 72.51 4.60 Aus
162、tralia 5,029 71,149 6.15 79.79 1.89 North Sea 19,576 705 28.21 70.93 15.03 Argentina 4,175 1,022 73,330 4.81 45.99 37.78 1.17 Total 90,921 4,653 655,667$11.35$68.84$42.78$5.34 2006 United States 24,394 2,915 243,442$11.13$54.22$38.44$6.54 Canada 7,561 798 147,579 10.58 59.90 35.40 6.09 Egypt 20,648
163、79,424 4.68 63.60 4.42 Australia 4,341 67,933 4.95 68.25 1.65 North Sea 21,368 752 28.23 63.04 10.64 Argentina 2,503 561 40,878 4.47 42.79 36.64 .97 Other International 1,156 4.77 62.73 Total 81,971 4,274 580,008$10.92$59.92$37.70$5.17 Table of Contents Gross and Net Undeveloped and Developed Acreag
164、e The following table sets out our gross and net acreage position in each country where we have operations:As of December 31,2008,we had 4,933,430,3,270,055 and 8,474,094 net acres scheduled to expire by December 31,2009,2010 and 2011,respectively,if production is not established or we take no other
165、 action to extend the terms.Approximately two million net acres(four million gross acres)of the 2009 expiration total expired in Egypt in January 2009.We plan to continue the terms of many of these licenses and concession areas through operational or administrative actions and do not expect a signif
166、icant portion of our net acreage position to expire before such actions occur.Estimated Proved Reserves and Future Net Cash Flows As of December 31,2008,Apache had total estimated proved reserves of 1,081 MMbbls of crude oil,condensate and NGLs and 7.9 Tcf of natural gas.Combined,these total estimat
167、ed proved reserves are equivalent to 2.4 billion barrels of oil equivalent or 14.4 Tcf of natural gas.As a result of prices in effect at the end of 2008,we experienced significant negative revisions to our reserves,causing 2008 to be the first year in the last 23 in which reserves did not grow.Prove
168、d oil and gas reserves are the estimated quantities of natural gas,crude oil,condensate and NGLs that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.The Company reports all
169、 estimated proved reserves held under production sharing arrangements utilizing the“economic interest”method,which excludes the host countrys share of reserves.Reserve estimates are considered proved if economical productivity is supported by either actual production or conclusive formation tests.Es
170、timated reserves that can be produced economically through application of improved recovery techniques are included in the“proved”classification when successful testing by a pilot project or the operation of an active,improved recovery program in the reservoir provides support for the engineering an
171、alysis on which the project or program is based.Estimated proved developed oil and gas reserves can be expected to be recovered through existing wells with existing equipment and operating methods.Apache emphasizes that its reported reserves are estimates which,by their nature,are subject to revisio
172、n.The estimates are made using available geological and reservoir data,as well as production performance data.These estimates are reviewed throughout the year and revised either upward or downward,as warranted by additional performance data.Apaches proved reserves are estimated at the property level
173、 and compiled for reporting purposes by a centralized group of experienced reservoir engineers that is independent of the operating groups.These engineers interact with engineering and geoscience personnel in each of Apaches operating areas and with accounting and marketing employees to obtain the n
174、ecessary data for projecting future production,costs,net revenues and ultimate recoverable reserves.Reserves are reviewed internally with senior management and presented to Apaches Board of Directors in summary form on a quarterly basis.Annually,each property is reviewed in detail by our centralized
175、 and operating region engineers to ensure forecasts of operating expenses,netback prices,production trends and development timing are reasonable.13 Undeveloped Acreage Developed Acreage Gross Acres Net Acres Gross Acres Net Acres United States 2,158,979 1,365,722 2,904,849 1,797,004 Canada 3,138,067
176、 2,225,462 3,325,289 2,652,939 Egypt 13,969,530 8,488,721 1,316,195 1,211,734 Australia 6,877,670 4,857,730 572,170 352,830 North Sea 319,929 241,450 41,019 39,952 Argentina 3,070,000 2,791,000 259,000 194,000 Chile 1,203,137 1,034,436 Total Company 30,737,312 21,004,521 8,418,522 6,248,459 Table of
177、 Contents The estimate of reserves disclosed in this Annual Report on Form 10-K are prepared by the Companys internal staff,and the Company is responsible for the adequacy and accuracy of those estimates.However,we engage Ryder Scott Company,L.P.Petroleum Consultants(Ryder Scott)to review our proces
178、ses and the reasonableness of our estimates of proved hydrocarbon liquid and gas reserves.We selected the properties for review by Ryder Scott.These properties represented all material fields,approximately 90 percent of international properties and over 80 percent of each countrys reserve value for
179、new wells drilled during the year.During 2008,2007 and 2006,Ryder Scotts review covered 82,77 and 75 percent of the Companys worldwide estimated reserves value,respectively.Ryder Scott opined that the overall proved reserves for the reviewed properties as estimated by the Company are,in the aggregat
180、e,reasonable,prepared in accordance with generally accepted petroleum engineering and evaluation principles and conform to the SECs definition of proved reserves as set forth in Rule 210.4-10(a)of Regulation S-X.Ryder Scott has informed the Company that the tests and procedures used during its reser
181、ves audit conform to the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information approved by the Society of Petroleum Engineers.Paragraph 2.2(f)of the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information defines a reserves audit as t
182、he process of reviewing certain of the pertinent facts interpreted and assumptions made that have resulted in an estimate of reserves prepared by others and the rendering of an opinion about(1)the appropriateness of the methodologies employed,(2)the adequacy and quality of the data relied upon,(3)th
183、e depth and thoroughness of the reserves estimation process,(4)the classification of reserves appropriate to the relevant definitions used,and(5)the reasonableness of the estimated reserve quantities.A reserve audit is not the same as a financial audit and is less rigorous in nature than an independ
184、ent reserve report where the independent reserve engineer determines the reserves on his or her own.The Companys estimates of proved reserves and proved developed reserves as of December 31,2008,2007 and 2006,changes in estimated proved reserves during the last three years and estimates of future ne
185、t cash flows and discounted future net cash flows from estimated proved reserves are contained in Note 13 Supplemental Oil and Gas Disclosures of Item 15 in this Form 10-K.These estimated future net cash flows are based on prices on the last day of the year and are calculated in accordance with Stat
186、ement of Financial Accounting Standards(SFAS)No.69,“Disclosures about Oil and Gas Producing Activities.”Disclosure of this value and related reserves has been prepared in accordance with SEC Regulation S-X Rule 4-10.In December 2008,the SEC released the final rule for“Modernization of Oil and Gas Re
187、porting”(Modernization).The Modernization disclosure requirements will permit reporting of oil and gas reserves using an average price based upon the prior 12-month period rather than year-end prices and the use of new technologies to determine proved reserves,if those technologies have been demonst
188、rated to result in reliable conclusions about reserves volumes.Companies will also be allowed to disclose probable and possible reserves in SEC filed documents.In addition,companies will be required to report the independence and qualifications of its reserves preparer or auditor and file reports wh
189、en a third party is relied upon to prepare reserves estimates or conduct a reserves audit.The Modernization disclosure requirements become effective for Apaches Annual Report on for the year ended December 31,2009.Employees On December 31,2008,we had 3,639 employees.Offices Our principal executive o
190、ffices are located at One Post Oak Central,2000 Post Oak Boulevard,Suite 100,Houston,Texas 77056-4400.At year-end 2008,we maintained regional exploration and/or production offices in Tulsa,Oklahoma;Houston,Texas;Calgary,Alberta;Cairo,Egypt;Perth,Western Australia;Aberdeen,Scotland;and Buenos Aires,A
191、rgentina.Apache leases all of its primary office space.The current lease on our principal executive offices runs through December 31,2013.For information regarding the Companys obligations under its office leases,see the table in Item 7 Managements Discussion and Analysis of Financial Condition and
192、Results of Operations Capital Resources and Liquidity and Note 9 Commitments and Contingencies of Item 15 in this Form 10-K.14 Table of Contents Title to Interests As is customary in our industry,a preliminary review of title records,which may include opinions or reports of appropriate professionals
193、 or counsel,is made at the time we acquire properties.We believe that our title to all of the various interests set forth above is satisfactory and consistent with the standards generally accepted in the oil and gas industry,subject only to immaterial exceptions that do not detract substantially fro
194、m the value of the interests or materially interfere with their use in our operations.The interests owned by us may be subject to one or more royalty,overriding royalty,and other outstanding interests(including disputes related to such interests)customary in the industry.The interests may additional
195、ly be subject to obligations or duties under applicable laws,ordinances,rules,regulations,and orders of arbitral or governmental authorities.In addition,the interests may be subject to burdens such as production payments,net profits interests,liens incident to operating agreements and current taxes,
196、development obligations under oil and gas leases,and other encumbrances,easements,and restrictions,none of which detract substantially from the value of the interests or materially interfere with their use in our operations.Our business activities and the value of our securities are subject to signi
197、ficant hazards and risks,including those described below.If any of such events should occur,our business,financial condition,liquidity and/or results of operations could be materially harmed,and holders and purchasers of our securities could lose part or all of their investments.Additional risks rel
198、ating to our securities may be included in the prospectuses for securities we issue in the future.Our profitability and the carrying value of our properties is highly dependent on the prices of crude oil,natural gas and natural gas liquids,which have historically been very volatile Our estimated pro
199、ved reserves,revenues,profitability,operating cash flows and future rate of growth are highly dependent on the prices of crude oil,natural gas and NGLs,which are affected by numerous factors beyond our control.These prices have historically been very volatile and are likely to remain volatile in the
200、 future.A significant and extended downward trend in commodity prices would have a material adverse effect on our revenues,profitability and cash flow and could result in a reduction in the carrying value of our oil and gas properties and the amounts of our estimated proved oil and gas reserves.To t
201、he extent that we have not hedged our production with derivative contracts or fixed-price contracts,any significant and extended decline in oil and natural gas prices adversely affects our financial position.Under the full-cost method of accounting as allowed by the SEC,the Company is required to re
202、view the carrying value of its proved oil and gas properties each quarter on a country-by-country basis.Under these rules,capitalized costs of proved oil and gas properties,net of accumulated DD&A and deferred income taxes,may not exceed the present value of estimated future net cash flows from prov
203、ed oil and gas reserves,discounted 10 percent,net of related tax effects.These rules generally require pricing future oil and gas production at the unescalated oil and gas prices in effect at the end of each fiscal quarter and require a write-down if the“ceiling”is exceeded,even if prices declined f
204、or only a short period of time.The Company recorded a$5.3 billion($3.6 billion net of tax)non-cash write-down of the carrying value of the Companys U.S.,U.K.North Sea,Canadian and Argentine proved oil and gas properties as of December 31,2008,as a result of the ceiling test limitations.If oil and ga
205、s prices deteriorate from the Companys year-end realized prices,it is likely that additional write-downs will occur in 2009.A downgrade in our credit rating could negatively impact our cost of and ability to access capital We receive debt ratings from the major credit rating agencies in the United S
206、tates.Factors that may impact our credit ratings include debt levels,planned asset purchases or sales and near-term and long-term production growth opportunities.Liquidity,asset quality,cost structure,reserve mix and commodity pricing levels could also be considered by the rating agencies.Apaches se
207、nior unsecured long-term debt is currently rated A3 by Moodys,A-by Standard&Poors and A by Fitch.Apaches short-term debt rating for its commercial paper program is currently P-2 by Moodys,A-2 by Standard&Poors and F1 by Fitch.The outlook is stable from Moodys and Standard&Poors and negative from Fit
208、ch.A ratings downgrade could adversely impact our ability to access debt markets in 15 ITEM 1A.RISK FACTORS Table of Contents the future,increase the cost of future debt and potentially require the Company to post letters of credit in certain circumstances.Declining general economic,business or indu
209、stry conditions may have a material adverse effect on our results of operations,liquidity and financial condition Recently,concerns over inflation,energy costs,geopolitical issues,the availability and cost of credit,the United States mortgage market and a declining real estate market in the United S
210、tates have contributed to increased economic uncertainty and diminished expectations for the global economy.These factors,combined with volatile oil,natural gas and NGLs prices,declining business and consumer confidence and increased unemployment,have precipitated an economic slowdown and a recessio
211、n.Concerns about global economic growth have had a significant adverse impact on global financial markets and commodity prices.If the economic climate in the United States or abroad continues to deteriorate,demand for petroleum products could continue to diminish,which could impact the price at whic
212、h we can sell our oil,natural gas and NGLs,affect our vendors,suppliers and customers ability to continue operations,and ultimately,adversely impact our results of operations,liquidity and financial condition.Our commodity price risk management and trading activities may prevent us from benefiting f
213、ully from price increases and may expose us to other risks To the extent that we engage in price risk management activities to protect ourselves from commodity price declines,we may be prevented from realizing the full benefits of price increases above the levels of the derivative instruments used t
214、o manage price risk.In addition,our hedging arrangements may expose us to the risk of financial loss in certain circumstances,including instances in which:The credit risk of financial institutions could adversely affect us We have exposure to different counterparties,and we have entered into transac
215、tions with counterparties in the financial services industry,including commercial banks,investment banks,insurance companies,other investment funds and other institutions.These transactions expose us to credit risk in the event of default of our counterparty.Continued deterioration in the credit mar
216、kets may continue to impact the credit ratings of our current and potential counterparties and affect their ability to fulfill their existing obligations to us and their willingness to enter into future transactions with us.We have exposure to these financial institutions in the form of derivative t
217、ransactions in connection with our hedges.We also maintain insurance policies with insurance companies to protect us against certain risks inherent in our business.In addition,if any lender under our credit facility is unable to fund its commitment,our liquidity will be reduced by an amount up to th
218、e aggregate amount of such lenders commitment under our credit facility.Certain of our undeveloped leasehold acreage is subject to leases that will expire over the next several years unless production is established on units containing the acreage A sizeable portion of our acreage is currently undev
219、eloped.Unless production in paying quantities is established on units containing certain of these leases during their terms,the leases will expire.If our leases expire,we will lose our right to develop the related properties.Our drilling plans for these areas are subject to 16 our production falls s
220、hort of the hedged volumes;there is a widening of price basis differentials between delivery points for our production and the delivery point assumed in the hedge arrangement;the counterparties to our hedging or other price risk management contracts fail to perform under those arrangements;or a sudd
221、en unexpected event materially impacts oil and natural gas prices.Table of Contents change based upon various factors,including drilling results,oil and natural gas prices,the availability and cost of capital,drilling and production costs,availability of drilling services and equipment,gathering sys
222、tem and pipeline transportation constraints and regulatory approvals.Our ability to sell natural gas and/or receive market prices for our gas may be adversely affected by pipeline and gathering system capacity constraints and various transportation interruptions A portion of our natural gas and oil
223、production in any region may be interrupted,or shut in,from time to time for numerous reasons,including as a result of weather conditions,accidents,loss of pipeline or gathering system access,field labor issues or strikes,or capital constraints that limit the ability of third parties to construct ga
224、thering systems,processing facilities or interstate pipelines to transport our production,or we might voluntarily curtail production in response to market conditions.If a substantial amount of our production is interrupted at the same time,it could temporarily adversely affect our cash flow.Acquisit
225、ions or discoveries of additional reserves are needed to avoid a material decline in reserves and production The production rate from oil and gas properties generally declines as reserves are depleted,while related per-unit production costs generally increase as a result of decreasing reservoir pres
226、sures and other factors.Therefore,unless we add reserves through exploration and development activities or,through engineering studies,identify additional behind-pipe zones,secondary recovery reserves or tertiary recovery reserves,or acquire additional properties containing proved reserves,our estim
227、ated proved reserves will decline materially as reserves are produced.Future oil and gas production is,therefore,highly dependent upon our level of success in acquiring or finding additional reserves on an economic basis.Furthermore,if oil or gas prices increase,our cost for additional reserves coul
228、d also increase.We may not realize an adequate return on wells that we drill Drilling for oil and gas involves numerous risks,including the risk that we will not encounter commercially productive oil or gas reservoirs.The wells we drill or participate in may not be productive,and we may not recover
229、all or any portion of our investment in those wells.The seismic data and other technologies we use do not allow us to know conclusively prior to drilling a well that crude or natural gas is present or may be produced economically.The costs of drilling,completing and operating wells are often uncerta
230、in,and drilling operations may be curtailed,delayed or canceled as a result of a variety of factors including,but not limited to:Future drilling activities may not be successful and,if unsuccessful,this failure could have an adverse effect on our future results of operations and financial condition.
231、While all drilling,whether developmental or exploratory,involves these risks,exploratory drilling involves greater risks of dry holes or failure to find commercial quantities of hydrocarbons.We may fail to fully identify potential problems related to acquired reserves or to properly estimate those r
232、eserves Although we perform a review of properties that we acquire that we believe is consistent with industry practices,such reviews are inherently incomplete.It generally is not feasible to review in depth every individual 17 unexpected drilling conditions;pressure or irregularities in formations;
233、equipment failures or accidents;fires,explosions,blowouts and surface cratering;marine risks such as capsizing,collisions and hurricanes;other adverse weather conditions;and increase in the cost of,or shortages or delays in the availability of,drilling rigs and equipment.Table of Contents property i
234、nvolved in each acquisition.Ordinarily,we will focus our review efforts on the higher-value properties and will sample the remainder.However,even a detailed review of records and properties may not necessarily reveal existing or potential problems,nor will it permit us as a buyer to become sufficien
235、tly familiar with the properties to assess fully and accurately their deficiencies and potential.Inspections may not always be performed on every well,and environmental problems,such as ground water contamination,are not necessarily observable even when an inspection is undertaken.Even when problems
236、 are identified,we often assume certain environmental and other risks and liabilities in connection with acquired properties.There are numerous uncertainties inherent in estimating quantities of proved oil and gas reserves and future production rates and associated costs with respect to acquired pro
237、perties,and actual results may vary substantially from those assumed in the estimates.In addition,there can be no assurance that acquisitions will not have an adverse effect upon our operating results,particularly during the periods in which the operations of acquired businesses are being integrated
238、 into our ongoing operations.Our North American operations are subject to governmental risks that may impact our operations Our North American operations have been,and at times in the future may be,affected by political developments and by federal,state,provincial and local laws and regulations such
239、 as restrictions on production,changes in taxes,royalties and other amounts payable to governments or governmental agencies,price or gathering rate controls and environmental protection laws and regulations.New political developments,laws and regulations may adversely impact our results on operation
240、s.International operations have uncertain political,economic and other risks Our operations outside North America are based primarily in Egypt,Australia,the United Kingdom and Argentina.On a barrel equivalent basis,approximately 46 percent of our 2008 production was outside North America and approxi
241、mately 39 percent of our estimated proved oil and gas reserves on December 31,2008 were located outside North America.As a result,a significant portion of our production and resources are subject to increased political and economic risks and other factors including,but not limited to:Foreign countri
242、es have occasionally asserted rights to oil and gas properties through border disputes.If a country claims superior rights to oil and gas leases or concessions granted to us by another country,our interests could decrease in value or be lost.Even our smaller international assets may affect our overa
243、ll business and results of operations by distracting managements attention from our more significant assets.Various regions of the world in which we operate have a history of political and economic instability.This instability could result in new 18 general strikes and civil unrest;the risk of war,a
244、cts of terrorism,expropriation,forced renegotiation or modification of existing contracts;import and export regulations;taxation policies,including royalty and tax increases and retroactive tax claims,and investment restrictions;price control;transportation regulations and tariffs;constrained natura
245、l gas markets dependent on demand in a single or limited geographical area;exchange controls,currency fluctuations,devaluation or other activities that limit or disrupt markets and restrict payments or the movement of funds;laws and policies of the United States affecting foreign trade,including tra
246、de sanctions;the possibility of being subject to exclusive jurisdiction of foreign courts in connection with legal disputes relating to licenses to operate and concession rights in countries where we currently operate;the possible inability to subject foreign persons to the jurisdiction of courts in
247、 the United States;and difficulties in enforcing our rights against a governmental agency because of the doctrine of sovereign immunity and foreign sovereignty over international operations.Table of Contents governments or the adoption of new policies that might result in a substantially more hostil
248、e attitude toward foreign investments such as ours.In an extreme case,such a change could result in termination of contract rights and expropriation of our assets.This could adversely affect our interests and our future profitability.The impact that future terrorist attacks or regional hostilities m
249、ay have on the oil and gas industry in general,and on our operations in particular,is not known at this time.Uncertainty surrounding military strikes or a sustained military campaign may affect operations in unpredictable ways,including disruptions of fuel supplies and markets,particularly oil,and t
250、he possibility that infrastructure facilities,including pipelines,production facilities,processing plants and refineries,could be direct targets of,or indirect casualties of,an act of terror or war.We may be required to incur significant costs in the future to safeguard our assets against terrorist
251、activities.Material differences between the estimated and actual timing of critical events may affect the completion and commencement of production from development projects We are involved in several large development projects whose completion may be delayed beyond our anticipated completion dates.
252、Our projects may be delayed by project approvals from joint venture partners;timely issuances of permits and licenses by governmental agencies;weather conditions;manufacturing and delivery schedules of critical equipment;and other unforeseen events.Delays and differences between estimated and actual
253、 timing of critical events may adversely affect our large development projects and our ability to participate in large scale development projects in the future.Our operations are sensitive to currency rate fluctuations Our operations are sensitive to fluctuations in foreign currency exchange rates,p
254、articularly between the U.S.dollar with the Canadian dollar,the Australian dollar and the British Pound.Our financial statements,presented in U.S.dollars,are affected by foreign currency fluctuations through both translation risk and transaction risk.Volatility in exchange rates may adversely affect
255、 our results of operation,particularly through the weakening of the U.S.dollar relative to other currencies.Weather and climate may have a significant adverse impact on our revenues and productivity Demand for oil and natural gas are,to a significant degree,dependent on weather and climate,which imp
256、act the price we receive for the commodities we produce.In addition,our exploration and development activities and equipment can be adversely affected by severe weather,such as hurricanes in the Gulf of Mexico or cyclones offshore Australia,which may cause a loss of production from temporary cessati
257、on of activity or lost or damaged equipment.Our planning for normal climatic variation,insurance programs,and emergency recovery plans may inadequately mitigate the effects of such weather,and not all such effects can be predicted,eliminated or insured against.We may incur significant costs related
258、to environmental matters As an owner or lessee and operator of oil and gas properties,we are subject to various federal,provincial,state,local and foreign country laws and regulations relating to discharge of materials into,and protection of,the environment.These laws and regulations may,among other
259、 things,impose liability on the lessee under an oil and gas lease for the cost of pollution clean-up resulting from operations,subject the lessee to liability for pollution damages and require suspension or cessation of operations in affected areas.Our efforts to limit our exposure to such liability
260、 and cost may prove inadequate and result in significant adverse affect on our results of operations.In addition,it is possible that the increasingly strict requirements imposed by environmental laws and enforcement policies could require us to make significant capital expenditures.Such capital expe
261、nditures could adversely impact our cash flows and our financial condition.We face strong industry competition that may have a significant negative impact on our result of operations Strong competition exists in all sectors of the oil and gas exploration and production industry.We compete with major
262、 integrated and other independent oil and gas companies for acquisition of oil and gas leases,properties and 19 Table of Contents reserves,equipment and labor required to explore,develop and operate those properties and marketing of oil and natural gas production.Crude oil and natural gas prices imp
263、act the costs of properties available for acquisition and the number of companies with the financial resources to pursue acquisition opportunities.Many of our competitors have financial and other resources substantially larger than we possess and have established strategic long-term positions and ma
264、intain strong governmental relationships in countries in which we may seek new entry.As a consequence,we may be at a competitive disadvantage in bidding for drilling rights.In addition,many of our larger competitors may have a competitive advantage when responding to factors that affect demand for o
265、il and natural gas production,such as fluctuating worldwide commodity prices and levels of production,the cost and availability of alternative fuels and the application of government regulations.We also compete in attracting and retaining personnel,including geologists,geo-physicists,engineers and o
266、ther specialists.These competitive pressures may have a significant negative impact on our results of operations.Our insurance policies do not cover all risks Exploration for and production of oil and natural gas can be hazardous,involving unforeseen occurrences such as blowouts,cratering,fires and
267、loss of well control,which can result in damage to or destruction of wells or production facilities,injury to persons,loss of life,or damage to property or the environment.The insurance coverage that we maintain against certain losses or liabilities arising from our operations may be inadequate to c
268、over any such resulting liability;moreover,insurance is not available to us against all operational risks.As of December 31,2008,we did not have any unresolved comments from the SEC staff that were received 180 or more days prior to year-end.See the information set forth in Note 9 Commitments and Co
269、ntingencies of Item 15 of this Form 10-K which is incorporated herein by reference.No matters were submitted to a vote of our security holders during the most recently ended fiscal quarter.20 ITEM 1B.UNRESOLVED SEC STAFF COMMENTS ITEM 3.LEGAL PROCEEDINGS ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SEC
270、URITY HOLDERS Table of Contents PART II During 2008,Apache common stock,par value$0.625 per share,was traded on the New York and Chicago Stock Exchanges and the NASDAQ National Market under the symbol“APA.”The table below provides certain information regarding our common stock for 2008 and 2007.Pric
271、es were obtained from The New York Stock Exchange,Inc.Composite Transactions Reporting System.Per-share prices and quarterly dividends shown below have been rounded to the indicated decimal place.The closing price of our common stock,as reported on the New York Stock Exchange Composite Transactions
272、Reporting System for January 30,2009(last trading day of the month),was$75.00 per share.As of January 31,2009,there were 334,753,638 shares of our common stock outstanding held by approximately 6,000 stockholders of record and approximately 448,000 beneficial owners.We have paid cash dividends on ou
273、r common stock for 44 consecutive years through December 31,2008.When,and if,declared by our Board of Directors,future dividend payments will depend upon our level of earnings,financial requirements and other relevant factors.In 1995,under our stockholder rights plan,each of our common stockholders
274、received a dividend of one preferred stock purchase right(a“right”)for each 2.310 outstanding shares of common stock(adjusted for subsequent stock dividends and a two-for-one stock split)that the stockholder owned.These rights were originally scheduled to expire on January 31,2006.Effective as of th
275、at date,the rights were reset to one right per share of common stock,and the expiration was extended to January 31,2016.Unless the rights have been previously redeemed,all shares of Apache common stock are issued with rights,which trade automatically with our shares of common stock.For a description
276、 of the rights,please refer to Note 7 Capital Stock of Item 15 in this Form 10-K.Information concerning securities authorized for issuance under equity compensation plans is set forth under the caption“Equity Compensation Plan Information”in the proxy statement relating to the Companys 2009 annual m
277、eeting of stockholders,which is incorporated herein by reference.21 ITEM 5.MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 2008 2007 Price Range Dividends Per Share Price Range Dividends Per Share High Low Declared Paid High Low Declared Paid First Quarter$122.34$84.52$.25$.
278、15$73.44$63.01$.15$.15 Second Quarter 149.23 117.65 .15 .25 87.82 70.53 .15 .15 Third Quarter 145.00 94.82 .15 .15 91.25 73.41 .15 .15 Fourth Quarter 103.17 57.11 .15 .15 109.32 87.44 .15 .15 Table of Contents The following stock price performance graph is intended to allow review of stockholder ret
279、urns,expressed in terms of the appreciation of the Companys common stock relative to two broad-based stock performance indices.The information is included for historical comparative purposes only and should not be considered indicative of future stock performance.The graph compares the yearly percen
280、tage change in the cumulative total stockholder return on the Companys common stock with the cumulative total return of the Standard&Poors Composite 500 Stock Index and of the Dow Jones U.S.Exploration&Production Index(formerly Dow Jones Secondary Oil Stock Index)from December 31,2003 through Decemb
281、er 31,2008.COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*Among Apache Corporation,S&P 500 Index and the Dow Jones US Exploration&Production Index 22 *$100 invested on 12/31/03 in stock including reinvestment of dividends.Fiscal year ending December 31.2003 2004 2005 2006 2007 2008 Apache Corporation$
282、100.00$125.41$170.91$166.97$272.02$189.80 S&Ps Composite 500 Stock Index 100.00 110.88 116.33 134.70 142.10 89.53 DJ US Expl&Prod Index 100.00 141.87 234.54 247.14 355.06 212.61 Table of Contents The following table sets forth selected financial data of the Company and its consolidated subsidiaries
283、over the five-year period ended December 31,2008,which information has been derived from the Companys audited financial statements.This information should be read in connection with,and is qualified in its entirety by,the more detailed information in the Companys financial statements of Item 15 in t
284、his Form 10-K.As discussed in more detail under Item 15,the 2008 numbers in the following table reflect a$5.3 billion($3.6 billion net of tax)non-cash write-down of the carrying value of the Companys U.S.,U.K.North Sea,Canadian and Argentine proved oil and gas properties as of December 31,2008,as a
285、result of ceiling test limitations.For a discussion of significant acquisitions and divestitures,see Note 2 Significant Acquisitions and Divestitures of Item 15 in this Form 10-K.23 ITEM 6.SELECTED FINANCIAL DATA As of or for the Year Ended December 31,2008 2007 2006 2005 2004 (In thousands,except p
286、er share amounts)Income Statement Data Total revenues$12,389,750$9,999,752$8,309,131$7,584,244$5,332,577 Income(loss)attributable to common stock 706,274 2,806,678 2,546,771 2,618,050 1,663,074 Net income(loss)per common share:Basic 2.11 8.45 7.72 7.96 5.10 Diluted 2.09 8.39 7.64 7.84 5.03 Cash divi
287、dends declared per common share .70 .60 .50 .36 .28 Balance Sheet Data Total assets$29,186,485$28,634,651$24,308,175$19,271,796$15,502,480 Long-term debt 4,808,975 4,011,605 2,019,831 2,191,954 2,588,390 Shareholders equity 16,508,721 15,377,979 13,191,053 10,541,215 8,204,421 Common shares outstand
288、ing 334,710 332,927 330,737 330,121 327,458 Table of Contents Apache Corporation,a Delaware corporation formed in 1954,is an independent energy company that explores for,develops and produces natural gas,crude oil and natural gas liquids.In North America,our exploration and production operations are
289、 focused in the Gulf of Mexico,the Gulf Coast,East Texas,the Permian basin,the Anadarko basin and the Western Sedimentary basin of Canada.Outside of North America,we have exploration and production operations onshore Egypt,offshore Western Australia,offshore the United Kingdom(U.K.)in the North Sea(
290、North Sea),and onshore Argentina.We also have exploration interests on the Chilean side of the island of Tierra del Fuego.The following discussion should be read together with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements,which are included in Item 8 of thi
291、s Form 10-K,and the Risk Factors information,which are set forth in Item 1A of this Form 10-K.Overview Apaches 2008 results were significantly impacted by several events:Crude Oil and Natural Gas Prices The oil and gas industry as a whole experienced a year of extremes during 2008.Crude oil and natu
292、ral gas prices climbed precipitously in the first half of the year,only to pull back in the third quarter before collapsing in the fourth quarter.Apache monthly average realized prices during the summer reached$118.38 per barrel and$9.12 per thousand cubic feet(Mcf).Our December average realized pri
293、ces were$36.45 per barrel and$4.75 per Mcf.February 2009 indices indicate that prices are trending below Decembers averages as the global economy and demand continue to weaken.Crude Oil and Natural Gas Production Apaches 2008 consolidated production declined five percent from 2007 on a barrel of oil
294、 equivalent(boe)basis.Our production would have increased over 2007 levels had it not been for the impact of the following:Earnings and Cash Flow From an earnings perspective,we had our historical best and worst quarters ever,just one quarter apart.The fourth-quarter price collapse and associated$3.
295、6 billion non-cash after-tax write-down nearly eliminated 2008 nine-month earnings that totaled$3.7 billion dollars or$10.84 per common diluted share.The write-down reduced earnings for the year to$706 million,or$2.09 per share.24 ITEM 7.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
296、 RESULTS OF OPERATIONS A drop in demand related to the slowing global economy caused fourth-quarter oil and gas prices to drop sharply.Two major uncontrollable events curtailed our production:hurricanes in the Gulf of Mexico,and an explosion on a pipeline that transports all of our gas production in
297、 Australia.A non-cash write-down of the carrying value of our U.S.,U.K.North Sea,Canadian and Argentine proved oil and gas properties,necessitated by low commodity prices in effect at year-end(discussed below).U.S.production was affected by wells shut-in because of,and damage caused by,Hurricanes Gu
298、stav and Ike.While we plan to restore nearly all of the production during the second quarter of 2009,the timing in many instances is pipeline dependent and,therefore,beyond our control.See Operating Highlights in this Item 7.In June 2008,a pipeline explosion at the Varanus Island gas processing and
299、transportation hub offshore Western Australia disrupted gas and oil sales,reducing 2008 production.We plan to have all of the volumes restored in the first half of 2009.See Operating Highlights in this Item 7.Table of Contents Record commodity prices in the first half of 2008 drove record cash provi
300、ded by operating activities of$7.1 billion and record oil and gas revenues of$12.4 billion,both of which were unaffected by the write-down.They were,however,affected by falling commodity prices,most notably in the fourth quarter of 2008.Key financial indicators for each quarter and the year of 2008
301、are noted below:Operating and Drilling Costs Costs were a challenge for Apache and our industry in 2008 and are expected to remain so in 2009.Drilling,service and acquisition costs,which have increased steadily since the industrys last downturn in 2001,reached unprecedented levels in 2008.Also,in th
302、e U.S.,activity to repair damage caused by Gulf of Mexico hurricanes over the last few years has contributed to increased demand and costs.Even though we have seen a sharp drop in commodity prices,costs have fallen less rapidly pressuring operating margins.We believe costs will ultimately adjust to
303、the current oil and gas price environment,but until they do,our operating margins and drilling costs will continue to be pressured.Financial Position and 2009 We believe we are well positioned to take advantage of opportunities that will invariably present themselves in the current business environm
304、ent.We enter 2009 with a debt-to-capitalization ratio of 23 percent,after consideration of the non-cash write-down.We had over$1.5 billion in cash and short-term investments and$2.3 billion availability on our lines of credit at the close of the year.In a tightening credit market,we believe Apaches
305、single-A debt ratings will provide a competitive advantage in accessing capital.Our 2008 return on capital employed and return on equity were four percent and five percent,respectively,after taking into effect the$5.3 million non-cash write-down.In 2009,we are projecting production growth driven by
306、multi-year projects coming on-line during the year(discussed below in Operational Highlights).We plan to hold our capital expenditures,currently planned at 50 percent below 2008 spending levels,in line with our operating cash flows.We will continue to monitor capital spending closely based on actual
307、 and projected cash flow estimates and intend to scale back spending further should commodity prices remain at current levels or fall further.For an in-depth discussion of Apaches long-term growth strategy,please refer to Part 1,Items 1 and 2.Business and Properties of this Form 10-K.Full-Cost Accou
308、nting and 2008 Write-down in Net Oil and Gas Property Assets The Company follows the full-cost method of accounting as allowed by the Securities and Exchange Commission(SEC).Under the full-cost method of accounting,a ceiling test must be performed each quarter,for each country.The test establishes a
309、 limit(ceiling),on the carrying value of proved oil and gas properties.This carrying value(net book value and the related deferred income taxes)may not exceed the ceiling.The ceiling limitation is the estimated after-tax future net cash flows from proved oil and gas reserves,excluding future 25 2008
310、 Key Financial Indicators,by Quarter First Second Third Fourth Quarter Quarter Quarter Quarter Full Year (In thousands,except realized price)Oil and Gas Revenues$3,177,949$3,904,118$3,368,882$1,876,890$12,327,839 Average Realized Oil Price$89.25$110.32$101.04$50.69$87.80 Average Realized Gas Price$6
311、.42$8.09$7.43$4.76$6.70 Income Attributable to Common Stock$1,020,093$1,443,809$1,189,405$*(2,947,033)$*706,274 Cash from operating activities$1,808,404$1,929,509$2,290,655$1,036,776$7,065,344 *Includes a$3.6 billion(after-tax)non-cash write-down in the carrying value of oil and gas properties.Table
312、 of Contents expected cash outflows associated with settling asset retirement obligations accrued on the balance sheet.The estimate of after-tax future net cash flows is discounted at 10 percent per annum and calculated using both commodity prices and costs in effect at the end of the period,held fl
313、at for the life of the properties,except where future oil and gas sales are covered by physical contract terms or by derivative instruments that qualify,and are accounted for,as cash flow hedges.If capitalized costs(carrying value)exceed this limit,the excess is charged to expense and reflected as a
314、dditional Depletion,Depreciation and Amortization(DD&A)during the period.In December 2008,the SEC released the final rule for“Modernization of Oil and Gas Reporting,”which will permit reporting of oil and gas reserves using an average price based upon the prior 12-month period rather than year-end p
315、rices.The new rule becomes effective for the quarter ended December 31,2009.See Note 1 Summary of Significant Accounting Policies in this Form 10-K.Despite record realized prices and record revenues for 2008,the low oil and gas prices in effect at the end of the year resulted in an aggregate$5.3 bil
316、lion($3.6 billion net of tax)non-cash write-down of the carrying value of Companys U.S.,U.K.North Sea,Canadian and Argentine proved oil and gas properties.If oil and gas prices fall below year-end levels,additional write-downs of oil and gas properties may occur.See Note 1 Summary of Significant Acc
317、ounting Policies in this Form 10-K.Operating Highlights We made considerable operational progress during the year,which we believe adds to our platform for long-term profitable growth in spite of hurricanes in the Gulf of Mexico and a gas pipeline explosion at the Varanus Island gas processing and t
318、ransportation hub offshore Western Australia.Key operational highlights include:U.S.Gulf Coast Gulf Coast focused on an active drilling program and restoring production impacted by the 2005 and 2008 hurricanes.In addition to drilling wells,the region also performed 358 workover and recompletion oper
319、ations during 2008.Significant events affecting Gulf Coast operations include:Development Projects Exploration Projects Hurricanes Production Wells shut-in as a result of the hurricanes reduced 2008 production by an estimated 54.6 MMcf/d and 6,941 b/d.A substantial part of Apaches net production shu
320、t-in by the storm was restored by the end of 2008,with only 7,700 b/d and 83 MMcf/d remaining offline.While we plan to restore nearly all of the production by mid-year 2009,the timing in many instances is beyond our control since we 26 At Ewing Banks 826,we completed four wells during the first half
321、 of 2008 and increased production to 6,315 b/d,up from 700 b/d at the beginning of the year.We own a 100 percent working interest in the field.In June 2008,we had a key discovery at the Geauxpher prospect located on Garden Banks Block 462 in deepwater Gulf of Mexico.Apache generated the prospect and
322、 has a 40-percent working interest.Mariner Energy,Inc.is the designated operator of the block with a 60-percent working interest.A delineation well was drilled in December 2008,extending the productive reservoir limits.We forecast the initial discovery to be online in the second quarter of 2009.Addi
323、tional potential on the block is expected to be tested by further drilling.During the third quarter of 2008,Hurricanes Gustav and Ike damaged onshore and offshore production and transportation facilities in our Gulf Coast region.Although most of our offshore operated platforms escaped with minor dam
324、age,we did lose four Apache-operated and two non-operated platforms.Our ability to transport and process our crude oil and natural gas production was also impacted by damages to third-party pipelines and processing facilities.The impact of the hurricanes on 2008 operations and results follows:Table
325、of Contents are awaiting repairs to third-party pipelines and facilities.All but approximately 1,100 boe per day of production will ultimately be restored.Financial Results The impact of the hurricanes on our 2008 financial results was an estimated$410 million of lower crude oil and natural gas reve
326、nues.We also incurred approximately$75 million of expenditures for repair,redevelopment and abandonment of properties damaged by the hurricanes.The Company anticipates an additional$170 to$190 million of costs,most of which are likely to occur in 2009.A majority of these costs will be recovered thro
327、ugh insurance,as discussed below.Insurance Coverage The Company carries property damage insurance through Oil Insurance Limited(OIL)for windstorm damage in the Gulf of Mexico of$250 million after reaching a$100 million deductible per event.The deductible will be scaled down based on the Companys wor
328、king interest in the damaged properties and is anticipated to be$80 million.The$250 million in coverage will be prorated downward if total claims received by OIL for Hurricane Ike exceed their aggregate limit per event of$750 million.In December 2008,OIL indicated that losses for Hurricane Ike will
329、likely exceed the aggregate limit by an amount that would cause insurance payments to be 80 percent of amounts claimed;however,the final percentage will not be known until all claims have been submitted to OIL.In addition,Apache has$150 million of property damage and business interruption insurance
330、through the London market subject to a$350 million deductible that can be met with property damage and qualifying business interruption losses.Egypt In Egypt,we had a steady stream of significant discoveries during the year across basins and plays,completing 236 of 260 wells for a 91-percent success
331、 rate.The region also conducted 701 workovers and recompletions and made significant progress on the completion of several major growth projects that will underpin future production growth.Notable successes during the year include:Development Projects Exploration Discoveries 27 In the Khalda concess
332、ion,two additional Salam gas processing trains,trains three and four,and an associated Apache pipeline compression project on the Western Desert Northern Gas Pipeline are forecasted to add additional net production of 100 MMcf/d and 5,000 b/d when fully operational in the second quarter of 2009.The
333、third processing train commenced operation on December 4,2008.Commissioning with first gas from the fourth processing train is projected to commence during the first quarter of 2009.We drilled 203 waterflood wells across several concessions during 2008,increasing gross oil production from these waterflood projects 55 percent or 27,000 b/d when compared to 2007 production levels.Also,we believe th
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