UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the Quarterly Period Ended March 31, 2008

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

For the Transition Period from                      to                    

APACHE CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Delaware		41-0747868
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification Number)
Suite 100, One Post Oak Central		77056-4400
2000 Post Oak Boulevard, Houston, TX		(Zip Code)
(Address of Principal Executive Offices)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES þ     NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES þ     NO o

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o     NO þ

Number of shares of Registrant’s common stock, outstanding as of March 31, 2008

333,588,922

 

 

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED OPERATIONS
(Unaudited)

		For the Quarter Ended March 31,
		2008				2007
		(In thousands, except per common share data)
REVENUES AND OTHER:
Oil and gas production revenues		$	3,177,949			$	2,023,067
Other			9,792				(20,192	)
			3,187,741				2,002,875
OPERATING EXPENSES:
Depreciation, depletion and amortization			620,489				530,913
Asset retirement obligation accretion			26,497				24,064
Lease operating expenses			454,638				382,107
Gathering and transportation			40,976				31,263
Taxes other than income			242,578				109,970
General and administrative			82,423				67,862
Financing costs, net			44,253				42,063
			1,511,854				1,188,242
INCOME BEFORE INCOME TAXES			1,675,887				814,633
Current income tax provision			487,800				186,522
Deferred income tax provision			166,574				135,162
NET INCOME			1,021,513				492,949
Preferred stock dividends			1,420				1,420
INCOME ATTRIBUTABLE TO COMMON STOCK		$	1,020,093			$	491,529
NET INCOME PER COMMON SHARE:
Basic		$	3.06			$	1.48
Diluted		$	3.03			$	1.47

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

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

		For the Quarter Ended
		March 31,
		2008				2007
		(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	1,021,513			$	492,949
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization			620,489				530,913
Provision for deferred income taxes			166,574				135,162
Asset retirement obligation accretion			26,497				24,064
Other			9,611				9,372
Changes in operating assets and liabilities:
(Increase) decrease in receivables			(38,356	)			45,365
(Increase) decrease in inventories			76,311				(8,250	)
(Increase) decrease in drilling advances and other			(911	)			(4,502	)
(Increase) decrease in deferred charges and other			(8,914	)			3,304
Increase (decrease) in accounts payable			55,869				(3,296	)
Increase (decrease) in accrued expenses			(111,511	)			(156,217	)
Increase (decrease) in advances from gas purchasers			—				(9,449	)
Increase (decrease) in deferred credits and noncurrent liabilities			(8,768	)			4,144
NET CASH PROVIDED BY OPERATING ACTIVITIES			1,808,404				1,063,559
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas property			(1,165,729	)			(1,109,095	)
Acquisition of U.S. Permian Basin properties			—				(1,000,000	)
Additions to gas gathering, transmission and processing facilities			(80,704	)			(96,427	)
Restricted cash			(228,134	)			—
Proceeds from sale of oil and gas properties			192,932				6,477
Other, net			(123,264	)			(30,149	)
NET CASH USED IN INVESTING ACTIVITIES			(1,404,899	)			(2,229,194	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Commercial paper and money market borrowings, net			(87,043	)			(298,128	)
Fixed-rate debt borrowings			—				1,494,045
Payments on fixed-rate debt			(353	)			(3,000	)
Dividends paid			(84,672	)			(51,032	)
Common stock activity			8,653				5,821
Treasury stock activity, net			(616	)			1,949
Cost of debt and equity transactions			(288	)			(13,389	)
Other			18,031				5,313
NET CASH PROVIDED BY FINANCING ACTIVITIES			(146,288	)			1,141,579
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS			257,217				(24,056	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR			125,823				140,524
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	383,040			$	116,468
SUPPLEMENTARY CASH FLOW DATA:
Interest paid, net of capitalized interest		$	52,237			$	13,263
Income taxes paid, net of refunds			368,614				136,757

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

APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)

		March 31,				December 31,
		2008				2007
		(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	383,040			$	125,823
Receivables, net of allowance			1,972,318				1,936,977
Inventories			490,423				461,211
Drilling advances			112,873				112,840
Derivative instruments			448				20,889
Prepaid assets and other			94,001				94,511
			3,053,103				2,752,251
PROPERTY AND EQUIPMENT:
Oil and gas, on the basis of full cost accounting:
Proved properties			35,778,792				34,645,710
Unproved properties and properties under development, not being amortized			1,473,476				1,439,726
Gas gathering, transmission and processing facilities			2,287,157				2,206,453
Other			421,685				416,149
			39,961,110				38,708,038
Less: Accumulated depreciation, depletion and amortization			(14,095,724	)			(13,476,445	)
			25,865,386				25,231,593
OTHER ASSETS:
Restricted cash			228,134				—
Goodwill, net			189,252				189,252
Deferred charges and other			480,200				461,555
		$	29,816,075			$	28,634,651

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

APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)

		March 31,				December 31,
		2008				2007
		(In thousands)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	683,581			$	617,937
Accrued operating expense			112,917				112,453
Accrued exploration and development			708,596				600,165
Accrued compensation and benefits			135,072				172,542
Accrued interest			73,153				78,187
Accrued income taxes			154,854				73,184
Current debt			227,588				215,074
Asset retirement obligation			271,476				309,777
Derivative instruments			435,561				286,226
Other			197,684				199,471
			3,000,482				2,665,016
LONG-TERM DEBT			3,911,924				4,011,605
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes			3,953,792				3,924,983
Asset retirement obligation			1,553,814				1,556,909
Derivative instruments			563,287				381,791
Other			752,769				716,368
			6,823,662				6,580,051
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS’ EQUITY:
Preferred stock, no par value, 5,000,000 shares authorized – Series B, 5.68% Cumulative, $100 million aggregate liquidation value, 100,000 shares issued and outstanding			98,387				98,387
Common stock, $0.625 par, 430,000,000 shares authorized, 341,906,506 and 341,322,088 shares issued, respectively			213,691				213,326
Paid-in capital			4,369,172				4,367,149
Retained earnings			12,394,428				11,457,592
Treasury stock, at cost, 8,317,584 and 8,394,945 shares, respectively			(236,066	)			(238,264	)
Accumulated other comprehensive loss			(759,605	)			(520,211	)
			16,080,007				15,377,979
		$	29,816,075			$	28,634,651

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

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

																											Accumulated
							Series B																				Other				Total
		Comprehensive					Preferred				Common				Paid-In				Retained				Treasury				Comprehensive				Shareholders’
		Income					Stock				Stock				Capital				Earnings				Stock				Income (Loss)				Equity
		(In thousands)
BALANCE AT DECEMBER 31, 2006							$	98,387			$	212,365			$	4,269,795			$	8,898,577			$	(256,739	)		$	(31,332	)		$	13,191,053
Comprehensive income (loss):
Net income		$	492,949					—				—				—				492,949				—				—				492,949
Commodity hedges, net of income tax benefit of $87,020			(161,815	)				—				—				—				—				—				(161,815	)			(161,815	)
Comprehensive income		$	331,134
Dividends:
Preferred								—				—				—				(1,420	)			—				—				(1,420	)
Common ($.15 per share)								—				—				—				(49,654	)			—				—				(49,654	)
Common shares issued								—				199				10,288				—				—				—				10,487
Treasury shares issued, net								—				—				1,170				—				2,928				—				4,098
Compensation expense								—				—				10,359				—				—				—				10,359
FIN 48 adoption								—				—				—				(48,502	)			—				—				(48,502	)
Other								—				—				48				252				—				—				300
BALANCE AT MARCH 31, 2007							$	98,387			$	212,564			$	4,291,660			$	9,292,202			$	(253,811	)		$	(193,147	)		$	13,447,855
BALANCE AT DECEMBER 31, 2007							$	98,387			$	213,326			$	4,367,149			$	11,457,592			$	(238,264	)		$	(520,211	)		$	15,377,979
Comprehensive income (loss):
Net income		$	1,021,513					—				—				—				1,021,513				—				—				1,021,513
Commodity hedges, net of income tax benefit of $123,133			(239,394	)				—				—				—				—				—				(239,394	)			(239,394	)
Comprehensive income		$	782,119
Dividends:
Preferred								—				—				—				(1,420	)			—				—				(1,420	)
Common ($.25 per share)								—				—				—				(83,271	)			—				—				(83,271	)
Common shares issued								—				365				5,957				—				—				—				6,322
Treasury shares issued, net								—				—				(545	)			—				2,198				—				1,653
Compensation expense								—				—				13,592				—				—				—				13,592
Other								—				—				(16,981	)			14				—				—				(16,967	)
BALANCE AT MARCH 31, 2008							$	98,387			$	213,691			$	4,369,172			$	12,394,428			$	(236,066	)		$	(759,605	)		$	16,080,007

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

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

     These financial statements have been prepared by Apache Corporation (Apache or the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC), and reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods, on a basis consistent with the annual audited financial statements. All such adjustments are of a normal recurring nature. Certain information, accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the financial statements and the summary of significant accounting policies and notes included in the Company’s most recent annual report on Form 10-K.

Reclassifications

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

1. ACQUISITIONS AND DIVESTITURES

2008 Activity

     Divestitures On January 29, 2008, the Company completed the sale of its interest in Ship Shoal blocks 349 and 359 on the outer continental shelf of the Gulf of Mexico to W&T Offshore, Inc. for $116 million, subject to normal post-closing adjustments.

     On January 31, 2008, the Company completed the sale of non-strategic oil and gas properties in the Permian Basin of West Texas to Vanguard Permian, LLC for $78 million, subject to normal post-closing adjustments.

     Subsequent Event On April 2, 2008, the Company completed the sale of non-strategic Canadian properties to Central Global Resources for $112 million, subject to normal post-closing adjustments.

2. HEDGING AND DERIVATIVE INSTRUMENTS

     Apache uses a variety of strategies to manage its exposure to fluctuations in crude oil and natural gas commodity prices. As of March 31, 2008, the total outstanding positions of Apache’s natural gas and crude oil cash flow hedges were as follows:

Collars

														Weighted
Production														Average				Fair Value
Period		Instrument Type				Total Volumes								Floor/Ceiling				Asset/(Liability)
																		(In thousands)
2008		US Gas Collars					70,125,000			MMBtu					$7.27 / 10.31			$	(50,872	)
		Canadian Gas Collars					24,750,000			GJ					6.41 / 10.04				(9,134	)
		Oil Collars					9,762,500			Bbl					64.12 / 78.96				(220,352	)
2009		US Gas Collars					18,250,000			MMBtu					7.35 / 10.19				(16,980	)
		Canadian Gas Collars					29,200,000			GJ					6.32 / 9.83				(12,878	)
		Oil Collars					8,591,000			Bbl					61.13 / 77.07				(190,399	)
2010		US Gas Collars					1,350,000			MMBtu					7.17 / 10.58				(1,402	)
		Oil Collars					6,016,000			Bbl					62.11 / 77.44				(118,165	)
2011		Oil Collars					4,377,000			Bbl					65.83 / 84.41				(63,679	)
2012		Oil Collars					1,456,000			Bbl					66.88 / 85.52				(19,397	)

Options

Production																		Fair Value
Period		Instrument Type				Total Volumes								Strike Price				Asset/(Liability)
																		(In thousands)
2008		Gas Put Option					5,500,000			MMBtu				$	8.75			$	1,419
2010		Oil Call Option					368,000			Bbl					129.50				1,656
2011		Oil Call Option					1,095,000			Bbl					134.17				5,144
2012		Oil Call Option					364,000			Bbl					138.00				1,973

Fixed-Price Swaps

														Weighted
Production														Average				Fair Value
Period		Instrument Type				Total Volumes								Fixed-Price				Asset/(Liability)
																		(In thousands)
2008		Fixed-Price Oil Swap					3,300,000			Bbl				$	69.21			$	(99,090	)
2009		Fixed-Price Oil Swap					368,000			Bbl					67.95				(9,681	)
2010		Fixed-Price Oil Swap					2,018,000			Bbl					70.87				(45,304	)
2011		Fixed-Price Oil Swap					3,285,000			Bbl					71.16				(70,025	)
2012		Fixed-Price Oil Swap					2,926,000			Bbl					71.34				(59,140	)
2013		Fixed-Price Oil Swap					1,086,000			Bbl					71.34				(21,518	)

     U.S. natural gas prices in the table above represent a weighted average of several contracts entered into on a per million British thermal units (MMBtu) basis and are settled against a combination of indices, including NYMEX Henry Hub, Panhandle Eastern Pipe Line and Houston Ship Channel. The Canadian natural gas prices in the table above represent a weighted average of AECO Index prices. These gas collars are entered into on a per gigajoule (GJ) basis, are converted to U.S. dollars utilizing a March 31, 2008 exchange rate, and are settled against the AECO Index. Crude oil prices in the table above primarily represent a weighted average of NYMEX WTI Cushing Index prices on contracts entered into on a per barrel (Bbl) basis.

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

		Before tax				After tax
		(In thousands)
Unrealized loss on derivatives at December 31, 2007		$	(638,752	)		$	(411,678	)
Net losses realized into earnings			92,653				59,634
Net change in derivative fair value			(455,180	)			(299,028	)
Unrealized loss on derivatives at March 31, 2008		$	(1,001,279	)		$	(651,072	)

     Based on market prices as of March 31, 2008, the Company’s unrealized loss in other comprehensive income totaled $1 billion ($651 million after tax). Gains and losses on the commodity hedges will be realized in future earnings contemporaneously with the related sales of natural gas and crude oil production applicable to specific hedges. Of the $1 billion estimated unrealized loss on derivatives as of March 31, 2008, approximately $437 million ($284 million after tax) applies to the next 12 months; however, estimated and actual amounts are likely to vary materially as a result of changes in market conditions. These contracts, designated as hedges, qualified and continue to qualify for hedge accounting in accordance with Statement of Financial Accounting Standards (SFAS) No. 133, as amended.

3. DEBT

     The Company’s March 31, 2008 debt-to-capitalization ratio was 20 percent, down from 22 percent at December 31, 2007.

     In February 2008 the Company requested amendments to its existing $1.5 billion U.S. five-year revolving credit facility to (a) extend the maturity date one year to May 28, 2013 and (b) remove certain restrictions on our Australian entities including their ability to incur liens and issue guarantees. The Company also requested amendments to its $450 million U.S. credit facility, $150 million Australian credit facility and $150 million Canadian credit facility to (a) extend the maturity date one year to May 12, 2013, (b) remove certain restrictions on our Australian entities including their ability to incur liens and issue guarantees, and (c) specific to the Australian credit facility, giving the Company the option of increasing the size of the facility up to a maximum amount of $400 million from the current limit of $300 million by adding commitments from new or existing lenders.

     Lenders approved the amendments removing certain restrictions on our Australian entities, including their ability to incur liens and issue guarantees as well as the amendment allowing the Company to increase the size of Australian credit facility to a maximum of $400 million. At March 31, 2008, lenders had extended the maturity date on all of the credit facilities except for $50 million of the $1.5 billion U.S. credit facility and $40 million of the $450 million U.S. credit facility. In April 2008, both U.S. amounts were extended and the Company increased the Australian credit facility by $50 million to $200 million, leaving $200 million, half the maximum amount.

Financing Costs, Net

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

		For the Quarter Ended March 31,
		2008				2007
		(In thousands)
Interest expense		$	69,307			$	65,732
Amortization of deferred loan costs			851				694
Capitalized interest			(21,577	)			(21,776	)
Interest income			(4,328	)			(2,587	)
Financing costs, net		$	44,253			$	42,063

4. INCOME TAXES

     The Company estimates its annual effective income tax rate in recording its quarterly provision for income taxes in the various jurisdictions in which the Company operates. Statutory tax rate changes and other significant or unusual items are recognized as discrete items in the quarter in which they occur.

     Apache and its subsidiaries are subject to U.S. federal income tax as well as income tax in various state and foreign jurisdictions. The Company’s tax reserves are related to tax years that may be subject to examination by the relevant taxing authority.

     The Company is in Administrative Appeals with the United States Internal Revenue Service (IRS) regarding the 2002 and 2003 tax years and under IRS audit for the 2004 and 2005 tax years. The Company is also under audit in various states and in most of the Company’s foreign jurisdictions as part of its normal course of business.

5. CAPITAL STOCK

Net Income per Common Share

     A reconciliation of the components of basic and diluted net income per common share is presented in the table below:

		For the Quarter Ended March 31,
		2008												2007
		Income				Shares				Per Share				Income				Shares				Per Share
		(In thousands, except per share amounts)
Basic:
Income attributable to common stock		$	1,020,093				333,393			$	3.06			$	491,529				331,213			$	1.48
Effect of Dilutive Securities:
Stock options and other			—				3,156								—				2,089
Diluted:
Income attributable to common stock, including assumed conversions		$	1,020,093				336,549			$	3.03			$	491,529				333,302			$	1.47

     The diluted earnings per share calculation excluded 30,500 and 1.6 million average shares of common stock that were anti-dilutive for the quarters ending March 31, 2008 and 2007, respectively.

Common and Preferred Stock Dividends

     During the first quarter of 2008 and 2007, Apache paid $83 million and $50 million, respectively, in dividends on its common stock. The increase in the first-quarter 2008 common stock dividends compared to the amount paid in the same period last year, including a special cash dividend of 10 cents per common share paid March 18, 2008. In addition, in each period, Apache paid a total of $1.4 million in dividends on its Series B Preferred Stock issued in August 1998.

Stock-Based Compensation

     2005 Share Appreciation Plan On May 5, 2005, the Company’s stockholders approved the 2005 Share Appreciation Plan that provided incentives for employees to double Apache’s share price to $108 by the end of 2008, with an interim goal of $81 to be achieved by the end of 2007. To achieve the trigger price, the Company’s stock price had to close at or above the stated threshold for 10 days out of any 30 consecutive trading days by the end of the stated period.

     On June 14, 2007, Apache’s share price exceeded the interim threshold for the required 10-days. As such, Apache will issue approximately one million shares of its common stock, after minimum tax withholding requirements, in four equal installments. The first installment was issued in July 2007. Subsequent installments will be issued in 2008, 2009 and 2010 to employees remaining with the Company during that period.

     On February 29, 2008, Apache’s share price exceeded the second threshold for the required 10-days. As such, Apache will issue approximately two million shares of its common stock, after minimum tax withholding requirements, in four equal installments. The first installment was issued in March 2008. Subsequent installments will be issued in 2009, 2010 and 2011 to employees remaining with the Company during that period.

     2008 Share Appreciation Program On May 7, 2008, the Stock Option Plan Committee of the Company’s board of directors, pursuant to the Apache Corporation 2007 Omnibus Equity Compensation Plan, approved the 2008 Share Appreciation Program (the “Program”) that provides incentives for employees to increase Apache’s share price to $216 by the end of 2012, with an initial goal of $162 to be achieved by the end of 2010. To achieve the trigger price, the Company’s stock price must close at or above the stated threshold for 10 trading days out of any 30 consecutive trading days by the end of the stated period. Under the Program, if the first threshold is achieved, approximately 1.1 million shares would be awarded for an intrinsic cost of $180 million. Achieving the second threshold would result in awards of approximately 1.7 million shares for an intrinsic cost of $359 million. Shares ultimately issued to employees would be reduced by the required minimum tax withholding. Awards under the Program are payable in five equal installments, beginning on a date not more than 30 days after a threshold is attained for the required measurement period and on the four succeeding anniversaries of the attainment date.

     Current accounting practices dictate that, regardless of whether these thresholds are ultimately achieved, the Company will recognize, over time, the fair value cost determined at the grant date based on numerous assumptions, including an estimate of the likelihood that Apache’s stock price will achieve these thresholds and the expected forfeiture rate. As a result, the Company will recognize expense and capitalized costs of approximately $191 million over the expected service life of the plan.

     The weighted average fair value, based on a Monte Carlo Simulation Model, was $82.14 per share, determined by using expected volatility of 26.97 percent, an expected dividend yield of 0.50 percent, and a risk free interest rate of 2.46 percent.

     On May 7, 2008, the Stock Option Plan Committee of Apache's board of directors awarded its chief executive officer up to 250,000 restricted stock units, 50,000 of which will vest on July 1, 2009. The remaining 200,000 shares will vest ratably on the first business day of each of 2010, 2011, 2012 and 2013. Upon vesting, the Company will issue one share of the Company's common stock as settlement for each restricted stock unit. Thirty thousand of the shares vesting each year will not be eligible for sale by the executive until such time as he retires or otherwise terminates employment with the Company. The restricted stock unit agreement, dated May 8, 2008, is included as Exhibit 10.4 to this quarterly report on Form 10-Q and incorporated herein by reference.

6. BUSINESS SEGMENT INFORMATION

     Apache has production in six countries: the United States (Gulf Coast and Central regions), Canada, Egypt, Australia, offshore the United Kingdom (U.K.) in the North Sea, and Argentina. Early in the second quarter of 2008, we finalized contracts for two exploration blocks in Chile. Financial information by country is presented below:

		United																U.K.								Other
		States				Canada				Egypt				Australia				North Sea				Argentina				International				Total
		(In thousands)
For the Quarter Ended March 31, 2008
Oil and Gas Production Revenues		$	1,369,468			$	406,262			$	671,898			$	124,099			$	516,376			$	89,846			$	—			$	3,177,949
Operating Income (1)		$	783,119			$	180,724			$	532,628			$	44,919			$	231,829			$	19,552			$	—			$	1,792,771
Other Income (Expense):
Other																															9,792
General and administrative																															(82,423	)
Financing costs, net																															(44,253	)
Income Before Income Taxes																														$	1,675,887
Total Assets		$	12,515,032			$	7,459,446			$	3,708,017			$	2,076,730			$	2,330,861			$	1,715,456			$	10,532			$	29,816,075
For the Quarter Ended March 31, 2007
Oil and Gas Production Revenues		$	861,317			$	320,170			$	396,607			$	104,184			$	273,608			$	67,181			$	—			$	2,023,067
Operating Income (1)		$	373,556			$	128,306			$	273,909			$	42,724			$	115,748			$	10,507			$	—			$	944,750
Other Income (Expense):
Other																															(20,192	)
General and administrative																															(67,862	)
Financing costs, net																															(42,063	)
Income Before Income Taxes																														$	814,633
Total Assets		$	12,663,370			$	5,978,178			$	2,603,969			$	1,442,133			$	1,894,525			$	1,459,814			$	11,818			$	26,053,807

7. ASSET RETIREMENT OBLIGATION

     The following table describes changes to the Company’s asset retirement obligation (ARO) liability for the quarter ended March 31, 2008:

		2008
		(In thousands)
Asset retirement obligation at December 31, 2007		$	1,866,686
Liabilities incurred			85,072
Liabilities settled			(152,965	)
Accretion expense			26,497
Asset retirement obligation at March 31, 2008			1,825,290
Less current portion			271,476
Asset retirement obligation, long-term		$	1,553,814

     The asset retirement obligation reflects the estimated present value of the amount of dismantlement, removal, site reclamation and similar activities associated with our oil and gas properties. The Company utilizes current retirement costs to estimate the expected cash outflows for retirement obligations. To determine the current present value of this obligation, some key assumptions the Company must estimate include the ultimate productive life of the properties, a risk adjusted discount rate, and an inflation factor. To the extent future revisions to these assumptions impact the present value of the existing ARO liability, a corresponding adjustment is made to the oil and gas property balance.

     Liabilities settled primarily relate to individual properties plugged and abandoned during the period. Most of the activity was in the Gulf of Mexico, a portion of which relates to the continued abandonment activity on platforms lost in 2005 during Hurricanes Katrina and Rita.

8. COMMITMENTS AND CONTINGENCIES

Legal Matters

     Grynberg As more fully described in Note 9 of the financial statements in our annual report on Form 10-K for our 2007 fiscal year, in 1997, Jack J. Grynberg began filing lawsuits against other natural gas producers, gatherers, and pipelines claiming that the defendants have under paid royalty to the federal government and Indian tribes by mis-measurement of the volume and heating content of natural gas and are responsible for acts of others who mis-measured natural gas. The claims against Apache were dismissed, though Mr. Grynberg has appealed the dismissal. No material changes in this matter have occurred since the filing of our most recent annual report on Form 10-K.

     Argentine Environmental Claims In connection with the Pioneer acquisition in 2006, the Company acquired a subsidiary of Pioneer in Argentina (PNRA) that is involved in various administrative proceedings with environmental authorities in the Neuquén Province relating to permits for and discharges from operations in that province. In addition, PNRA was named in a suit initiated against oil companies operating in the Neuquén basin entitled Asociación de Superficiarios de la Patagonia v. YPF S.A., et. al., originally filed on August 21, 2003, in the Argentine National Supreme Court of Justice relating to various environmental and remediation claims. All of these matters are more fully described in Note 9 of the financial statements in our annual report on Form 10-K for our 2007 fiscal year. No material change in the status of these matters has occurred since the filing of our most recent annual report on Form 10-K.

     Louisiana Restoration As more fully described in Note 9 of the financial statements in our annual report on Form 10-K for our 2007 fiscal year, numerous surface owners have filed claims or sent demand letters to various oil and gas companies, including Apache, claiming that, under either expressed or implied lease terms or Louisiana law, they are liable for damage measured by the cost of restoration of leased premises to their original condition as well as damages for contamination and cleanup. No material change in the status of these matters has occurred since the filing of our most recent annual report on Form 10-K.

     Hurricane Related Litigation As more fully described in Note 9 of the financial statements in our annual report on Form 10-K for our 2007 fiscal year, in a case styled Ned Comer, et al vs. Murphy Oil USA, Inc., et al, Case No: 1:05-cv-00436; U.S.D.C., United States District Court, Southern District of Mississippi., Mississippi property

owners allege that hurricanes’ meteorological effects increased in frequency and intensity due to global warming, and there will be continued future damage from increasing intensity of storms and sea level rises. They claim this was caused by the various defendants (oil and gas companies, electric and coal companies, and chemical manufacturers). No material change in the status of this matter has occurred since the filing of our most recent annual report on Form 10-K.

     Other Matters The Company is involved in other litigation and is subject to government and regulatory controls in the normal course of business. The Company has an accrued liability of approximately $11 million for other legal contingencies that are probable of occurring and can be reasonably estimated. It is management’s opinion that the loss for any such other litigation matters and claims that are reasonably possible to occur will not have a material adverse affect on the Company’s financial position or results of operations.

Environmental Matters

     As of March 31, 2008, the Company had an undiscounted reserve for environmental remediation of approximately $26 million. The Company is not aware of any environmental claims existing as of March 31, 2008, which have not been provided for or would otherwise have a material impact on its financial position or results of operations. There can be no assurance, however, that current regulatory requirements will not change, or past non-compliance with environmental laws will not be discovered on the Company’s properties.

Decommission of Downed Platforms

     In January 2008, Apache, BP plc and Chevron Corporation entered into a contract with Well Control, Inc, to decommission certain downed platforms and related well facilities located offshore Louisiana in the Gulf of Mexico for a fixed fee of $750 million. Apache’s portion is 37.5 percent, or $281 million, which is included as part of the Company’s accrued asset retirement obligation.

9. FAIR VALUE MEASUREMENTS

     The Company adopted SFAS No. 157, “Fair Value Measurements,” as of the beginning of 2008. SFAS No. 157 defines fair value, and establishes disclosure requirements for assets and liabilities presented at fair value on the consolidated balance sheet. The statement also provides a hierarchy that prioritizes and defines the types of inputs used to measure fair value. Level 1 inputs consist of unadjusted quoted prices for identical instruments in active markets, and have the highest priority. Level 2 inputs consist of quoted prices for similar instruments. Level 3 valuations are derived from inputs which are significant and unobservable, and have the lowest priority.

     The following table presents the Company’s material assets and liabilities measured at fair value for each hierarchy level as of March 31, 2008.

		Fair Value Measurements Using
		Level 1				Level 2				Level 3				Total Fair
		Inputs				Inputs				Inputs				Value
						(In thousands)
Assets:
Derivative instruments		$	—				448				—			$	448
Liabilities:
Derivative instruments		$	—				998,848				—			$	998,848

     Derivative instruments are valued using forward commodity price curves provided by reputable third-party brokers. Some of our derivative instruments are not actively quoted in the market, and are valued using Level 2 inputs.

10. RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED

     In March 2008, the Financial Accounting Standards Board (FASB) issued SFAS No. 161 “Disclosures about Derivative Instruments and Hedging Activities.” The statement amends SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133 and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years beginning after November 15, 2008. We are currently evaluating the provisions of SFAS No. 161 and assessing the impact, if any, it may have on the Company.

     In December 2007, the FASB issued a revision to SFAS No. 141 “Business Combinations” (SFAS No. 141(R)). The revision broadens the definition of a business combination to include all transactions or other events in which control of one or more businesses is obtained. Further, the statement establishes principles and requirements for how an acquirer recognizes assets acquired, liabilities assumed and any non-controlling interests acquired. SFAS No. 141(R) is effective for business combination transactions for which the acquisition date is on or after the beginning of the first reporting period beginning on or after December 15, 2008. Early adoption is prohibited. Apache is currently evaluating the provisions of SFAS No. 141(R) and assessing the impact, if any, it may have on the Company.  

     Also in December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements.” This statement amends Accounting Research Bulletin No. 51, “Consolidated Financial Statements.” SFAS No. 160 establishes accounting and reporting standards for the noncontrolling interests in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary, sometimes called a minority interest, is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. Additionally, the amounts of consolidated net income attributable to both the parent and the noncontrolling interest must be reported separately on the face of the income statement. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Early adoption is prohibited. We are currently evaluating the provisions of SFAS No. 160 and assessing the impact, if any, it may have on the Company.

11. SUPPLEMENTAL GUARANTOR INFORMATION

     Apache Finance Pty Ltd. (Apache Finance Australia) and Apache Finance Canada Corporation (Apache Finance Canada) are subsidiaries of Apache that have issued publicly traded securities, and the following condensed consolidating financial statements are provided as an alternative to filing separate financial statements.

     Each of the Companies presented in the condensed consolidating financial statements has been fully consolidated in Apache’s consolidated financial statements. As such, these condensed consolidating financial statements should be read in conjunction with the financial statements of Apache Corporation and Subsidiaries and notes.

APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended March 31, 2008

																		All Other
										Apache				Apache				Subsidiaries
		Apache				Apache				Finance				Finance				of Apache				Reclassifications
		Corporation				North America				Australia				Canada				Corporation				& Eliminations				Consolidated
		(In thousands)
REVENUES AND OTHER:
Oil and gas production revenues		$	1,353,405			$	—			$	—			$	—			$	1,842,319			$	(17,775	)		$	3,177,949
Equity in net income (loss) of affiliates			643,089				8,050				10,926				89,593				(2,491	)			(749,167	)			—
Other			(34	)			—				—				14,657				(3,909	)			(922	)			9,792
			1,996,460				8,050				10,926				104,250				1,835,919				(767,864	)			3,187,741
OPERATING EXPENSES:
Depreciation, depletion and amortization.			288,516				—				—				—				331,973				—				620,489
Asset retirement obligation accretion			17,777				—				—				—				8,720				—				26,497
Lease operating expenses			213,325				—				—				—				241,313				—				454,638
Gathering and transportation			10,127				—				—				—				48,624				(17,775	)			40,976
Taxes other than income			54,209				—				—				—				188,369				—				242,578
General and administrative			66,883				—				—				—				16,462				(922	)			82,423
Financing costs, net			37,473				—				4,497				14,113				(11,830	)			—				44,253
			688,310				—				4,497				14,113				823,631				(18,697	)			1,511,854
INCOME (LOSS) BEFORE INCOME TAXES			1,308,150				8,050				6,429				90,137				1,012,288				(749,167	)			1,675,887
Provision (benefit) for income taxes			286,637				—				(1,621	)			159				369,199				—				654,374
NET INCOME			1,021,513				8,050				8,050				89,978				643,089				(749,167	)			1,021,513
Preferred stock dividends			1,420				—				—				—				—				—				1,420
INCOME ATTRIBUTABLE TO COMMON STOCK		$	1,020,093			$	8,050			$	8,050			$	89,978			$	643,089			$	(749,167	)		$	1,020,093

APACHE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended March 31, 2007

																		All Other
										Apache				Apache				Subsidiaries
		Apache				Apache				Finance				Finance				of Apache				Reclassifications
		Corporation				North America				Australia				Canada				Corporation				& Eliminations				Consolidated
		(In thousands)
REVENUES AND OTHER:
Oil and gas production revenues		$	837,548			$	—			$	—			$	—			$	1,231,734			$	(46,215	)		$	2,023,067
Equity in net income (loss) of affiliates			296,573				4,480				7,830				38,010				(12,911	)			(333,982	)			—
Other			306				—				—				—				(20,498	)			—				(20,192	)
			1,134,427				4,480				7,830				38,010				1,198,325				(380,197	)			2,002,875
OPERATING EXPENSES:
Depreciation, depletion and amortization.			226,892				—				—				—				304,021				—				530,913
Asset retirement obligation accretion			17,638				—				—				—				6,426				—				24,064
Lease operating expenses			196,313				—				—				—				232,009				(46,215	)			382,107
Gathering and transportation			8,989				—				—				—				22,274				—				31,263
Taxes other than income			32,135				—				—				—				77,835				—				109,970
General and administrative			52,329				—				—				—				15,533				—				67,862
Financing costs, net			34,372				—				4,513				14,112				(10,934	)			—				42,063
			568,668				—				4,513				14,112				647,164				(46,215	)			1,188,242
INCOME (LOSS) BEFORE INCOME TAXES			565,759				4,480				3,317				23,898				551,161				(333,982	)			814,633
Provision (benefit) for income taxes			72,810				—				(1,163	)			(4,551	)			254,588				—				321,684
NET INCOME			492,949				4,480				4,480				28,449				296,573				(333,982	)			492,949
Preferred stock dividends			1,420				—				—				—				—				—				1,420
INCOME ATTRIBUTABLE TO COMMON STOCK		$	491,529			$	4,480			$	4,480			$	28,449			$	296,573			$	(333,982	)		$	491,529