APACHE CORPORATION Analysis of Recent Financial Performance

1. APACHE CORPORATIONAnalysis of Recent Financial Performance University of Houston Energy Risk Management Bill Ramsey, Teressa Barner, Scott Randall October 22, 2003

2. AGENDA • APACHE and Peers • Global Economy • Superindependent E&P Industry • APACHE/Peer Ratio Comparisons • Going Forward

3. APACHE and Peers • APACHE • Super Independent as defined by Herold’s • Financially successful over past several years • Houston based • Peers - Anadarko and Kerr-McGee • Chosen based on similarity of 5 operating metrics • Picked one larger company and one smaller • Apache and Anadarko are Full Cost whereas Kerr-McGee is Successful Efforts • Kerr-McGee has a chemicals segment that contributes ~1% of earnings

4. Global Economy • Forecast turnaround in 2004 - led by U.S. • Energy consumption highly correlated to growth - industrial feedstocks and fuel • Oil prices expected to decrease due to production from non-OPEC countries • NG prices expected to fluctuate between $4.50 and $5.00 per MMBTU

5. Superindependent E&P • Does very little “green field” development • Lower cost structures • Develop fields that are no longer economical for the majors • Replaces reserves primarily through acquisition • Requires strong balance sheet

6. Reserve Replacement Ability • Condition of balance sheet very significant in ability to acquire reserves • Apache demonstrates ability to take quick advantage of opportunities • Apache has no issues servicing debt and is in prime condition for taking on more

7. Reserve Ratios • Apache has had very consistent reserve replacement • In 2002 Kerr-McGee sold reserves • Apache’s low reserves/well should indicate that they are not very efficient at lifting

8. Cost Analysis • Apache has advantage in Finding Costs- Peer Group benchmark for 5 year median is $5.99/BOE • Apaches advantage in Lifting Costs seems to eroding

9. Apache’s Strategic Advantage • Apache’s stated strategy is value added growth as opposed to growth at all cost • Flatter management structure yields lower SG&A costs

10. Strategy Results • Yields higher ROCE and PM since they obtain greater value from each BOE • PM and ROCE more constant due also to stable overhead cost control • 2002 and 2003 metrics have dropped slightly due to lower gas prices

11. Our Past Has Been Impressive • Growth based on the following advantages: • Ability to execute on our strategy: • Exploit our Asset base • Efficient Operations (low finding and development costs using proven technologies) • Disciplined Acquisitions yielding high reserve value added ratios • Geographic focus leading to cost control and purchasing power • Strong Balance Sheet-evidenced by low debt/equity ratios

12. Future Oil and Gas Scenario* Medium Term World Oil Prices ($/bbl) Medium Term Natural Gas Price ($/mcf) Low 23.4 3.2 Base 24 3.3 High 24.5 3.6 Lower Oil and Gas Price Outlook Plays to Our Strategy • Short Term: Crude and Natural Gas Futures Strip through Cal ’04 is backwardated1 • Medium Term: 3 different scenarios illustrate price declines 2 This will increase Acquisition Opportunities as Competitors Shed their Assets to Survive! 1 10/21/03 : Nymex- WTI Kushing and NG Henry Hub 2 US Energy Information Administration, Annual Energy Outlook 2003

13. Our Future is Bright • Our balance sheet and operational strengths allow us to execute by: • Increasingly Efficient Acquisitions • Continuous exploitation of New Assets through extensions, discoveries and improved recovery • Relentless Focus, Cost Control and Purchasing Power

14. “Building to Last” Apache Corporation