Bob Dye - VP of IR Steve Farris - CEO Roger Plank - CFO

Tom Gardner - Simmons & Company Ellen Hannan - Bear Sterns Ben Dell - Bernstein Gil Yang - Citi David Heikkinen - Tudor Pickering Joe Allman - JP Morgan Leo Mariani - RBC Capital Markets

Good day, everyone, and welcome to the Apache Corporation fourth quarter earnings 2007 conference call. Today's presentation will be hosted by Mr. Bob Dye, Vice President of Investor Relations. Mr. Dye, please go ahead.

Thanks for joining us today. This morning Apache Corporation released fourth quarter and annual 2007 results which on a reported basis totaled $3.19 and $8.39 respectively. But consistent with prior quarters, we have provided adjustments to those numbers which reflect one-time items which are non-GAAP that totaled $2.92 and $8.65 per share respectively. Our adjustments primarily relate to foreign currency fluctuations and changes in the Canadian federal tax rate on the deferred tax balances that are on our balance sheet. Today's discussion may contain forward-looking estimates and assumptions and no assurance can be given that those expectations will be realized. A full disclaimer is located on our website. In addition any non-GAAP numbers that we discuss, such as adjusted earnings, cash flow from operations or adjusted cost incurred will be identified as such with the reconciliation, again located on our website at www.apachecorp.com. Steve Farris, our CEO and Roger Plank, our CFO will now make prepared remarks prior to taking questions. And with that, I'll turn the call over to Steve.

Thank you, Bob. Good morning everyone and thank you for joining us for our year end 2007 earnings call. For Apache, 2007 was a year of high impact exploration success, on track development of major projects and very strong and balanced production growth. Apache achieved record results in virtually every measurable financial and operating category. Production grew at 12% to a new record average level of 561,000 barrels oil equivalent a day in 2007 which marks to the 28th year out of the last 29 that Apache has grown its production. We have grown through good and bad times in the balanced deep portfolio we have built during all those years, meaning that we now have a growth engine that is capable of continuing that stream into the foreseeable future. In 2007, we replaced a 167% of production in terms of SEC proved reserves. Proved reserves additions from the drill-bit alone replaced a 140% of production and outstanding reserve addition performance and it should support Apache's continued growth path and has led to record proved reserves at 2.450 billion barrels oil equivalent at year end. 2007 marked the 22nd year of consecutive reserve growth for Apache. Adjusted earnings of $2.9 billion increased 26% over 2006 and eclipse the previous record set in 2005 by 11%. Our balanced portfolio profile delivered outstanding results in 2007 and clearly showed the upside potential we have across commodities, plays and countries in the current environment. Adjusted earnings per share of $8.65 increased 25% over 2006 and broke the previous record set in 2005. Our cash flow from operations is $6.2 billion increased 22% over our previous record set in 2006. 2007 was a year of high impact and broad-based exploration success, most notably in Australia. We discovered the Julimar complex in April of '07. We estimated gross recoverable resource potential is between 2 and 4 Tcf currently. Apache has a 65% working interest in this block. During the course of 2007 we completed four wells in the area which have given us increased confidence of this 2 to 4 Tcf gross recoverable estimate. The latest well which is the Brulimar-1x was completed in January and had a 113 feet of net pay which we chose not to test because of an excellent result. In Canada, our utilized Ootla shale gas play in Northern British Columbia took an important step forward. We drilled and tested one horizontal well and tested two wells that we had previously drilled vertically. The preliminary test results encouraged us to acquire additional acreage during the year which now stands at over 400,000 gross acres. In Egypt, we made several deep Jurassic oil and gas discoveries which include the Jade, Alexandrite, Imhotep discoveries in the Matruh Concession which is in Northern part of the Greater Khalda area and they all had tremendous flow rates. We also made discoveries in the Northeast Abu Gharadig concession, operated by Shell and an interesting discovery in East Ras Badran that tested over 1,900 barrels a day. It's on an onshore concession area near the Gulf of Suez and we will drill appraisal wells to all these discoveries in 2008. Each of these highlighted discoveries and the other ones across our international portfolio added recoverable resources to Apache, representing a multiple of what we are recognizing at this point in our proved reserves. And this underlines the resource depth of our portfolio. 2007 was also a very successful year for Apache in progressing six large development projects that will add over a 100,000 barrels of oil equivalent a day of production over the 2009-2011 timeframe. These six projects include Australia's Van Gogh, Pyrenees, Reindeer and Julimar and Egypt's Salam gas plant expansion and water flood activities. On total in 2007, we spent on E&P activities $5.25 billion with $4.2 billion on exploration and development. If you relate this level of investment to our proved reserve additions for the year, you will derive at 2007 finding and development cost of $15.31 per BOE for all sources and $14.76 per BOE from exploration and development activities alone. On the acquisitions side in 2007, we purchased 70 million barrels of oil equivalent which is primarily oil reserves from Anadarko for a price of $1 billion. It is hard to believe that oil prices were $55 a barrel when we completed that transaction last February. The acquisition has been a success both from a financial and operating perspective. Today we are producing over 12,000 barrels of oil equivalent from these properties and have a significant drilling program planned in 2008. All in all 2007 was an outstanding year and we achieved record financial and operating results while executing a very successful worldwide exploration program that really enhanced our deep development and growth pipeline for the future. I would like now to address 2008 which is shaping up to be another year of numerous high impact growth catalysts for Apache. We have previously provided guidance for 2008 in a 6% to 10% reduction growth and we remained comfortable with that range. I want you to bear in mind at the end of last year we took the opportunity to sell or have contracted to sell $360 million of marginal properties. So at this point, we anticipate being at the lower end of that range. Currently our overall 2008 capital budget is coming in at about 5% higher than last year and will be directed at continued delivery of our portfolio of opportunities. As many of you are aware, Apache allocates capital quarterly to our regions so that our going-in budget is preliminary at best. The most obvious catalyst in 2008 is our exploration program which is nearly our most ambitious program ever and potentially exposes the company to over 2 billion barrels of oil equivalent of recoverable hydrocarbon resources. In Australia we plan an active drilling program in the Carnarvon Basin. We will drill five additional wells at Julimar which will go a long way in defining the ultimate resource potential to block. Also on the Carnarvon, we will drill two key appraisal wells at Hilliard and Maitland and both of these areas have multi-hundred Bcf potentials. In the aggregate, the recoverable resource potential of the 2008 Carnarvon Basin exploration program is in excess at 900 million barrels of oil equivalent. Our interest across the Carnarvon Basin program that I just outlined is between 50% and 100%. Elsewhere in Australia in 2008, we will drill seven wells in the Gippsland Basin on a acreage that is adjacent to several giant producing fields. This exploration program has more upside potential than any other exploration program in the company. The first three wells will be drilled with a jack up beginning next month followed by four wells later in the year to be drilled with a semi-submersible. Recoverable resource potential in this program is over 500 million barrels of oil equivalent. In Canada, we have nine well program planned in Ootla shale in British Columbia this winter with our 50% partner in Canada. Our goal is to determine whether the supply is commercial and will be experimenting with different multistage fracturing programs to enhance the flow rate. If the play is commercial, it would expose the company to three to six Tcf of reserve additions net to Apache's interest. In Egypt, we plan to drill 40 exploration wells in 2008, many targeting the deep Jurassic which has yielded several large discoveries to Apache in the past. We have started this year out with a major exploration success of Hydra-1X discovery in Egypt which was announced two weeks ago and tested 42 million a day and 1300 barrels of condensate from the lower Jurassic. The 2008 exploration program in Egypt, the 40 wells, includes a diverse range of plays and prospects which highlight the richness and depth and extent of our portfolio in the country. We'll be drilling 18 shallow Upper Bahariya, Abu Roash prospects, six cretaceous AEB wildcats and 12 deep Jurassic wildcat. We will also drill four wildcats in our Tharwa acreage, which we acquired last year. The recoverable resource potential of the Egyptian exploration program is excess of a 130 million barrels of oil equivalent. All-in-all, 2008 exploration program exposes the company to over 2 billion barrels of oil equivalent of resource potential, net rate to Apache's working interest. On the development side in 2008, we will continue progressing the six major projects that alone will add over 100,000 barrels of oil equivalent to our production in 2009, 2011 timeframe. Continued delivery of these major industry projects on time and within budget, as we approach our on-stream day, will be an important catalyst for Apache in 2008. At Van Gogh, the development in Australia, all development wells will be down by mid-year and the facilities constructions is on schedule to achieve post production by the middle of 2009 at a net rate to Apache of 20,000 barrels of oil a day. At the Pyrenees development which is operated by BHP, facilities construction will begin this year with development drilling schedule to start in the first quarter of 2009. This project will come online in late 2009 or early 2009 again at a net rate to Apache at 20,000 barrels of oil a day. At Reindeer, which is a gas discovery, we will grow two development wells and began pipeline and onshore natural gas processing plant construction. The field is slated to begin producing in the middle of 2010 at a net rate of 60 million a day to Apache. At Julimar, we will complete the appraisal program this summer and look to sanctioning the project in the second half of the year. The field will come online in 2011, and we estimate that the net plough rate to Apache is about, 200 million a day. In Egypt, we expect to finish the construction on the Salam gas plant expansion by yearend, which will add 90 million to 100 million a day net and 4500 barrels of condensate net to Apache's at the end of the year. We are also continuing our expansion of several Egyptian water flood projects with continued drilling and increase water rejection capacity to build toward net production 20,000 barrels oil a day. Aside from these major exploration and development projects, we have an active program planned in the US, Canada and the North Sea and I might just run through them real quickly. In the Central Region, we continue an active drilling program with 307 totaled wells planned. We will focus on our primary Anadarko basis drilling play for the Red Fork spring on Atoka, as well as further exploiting the properties acquired in 2007 in the Permian Basin. In the Gulf region, we will continue to develop the grant of 40 complex and focus on other opportunities really around our production base. We will run a similar program to the past couple years with 60 to 65 wells planned and 8 to 10 operated rigs running. In Canada, recent changes in the royalty rates in Alberta have caused us to redirect our 2008 capital spending. Our drilling activity plans have been refocused by what we consider to be shortsighted decision by the Alberta government with their announcement of significant royalty increases starting in 2009. We have cut our 2008 capital program in Alberta by 40% predominantly associated with deeper gas drilling. Ironically those are the places that can provide Alberta with larger discoveries providing production growth with a smaller footprint. We would hope that the government will reconsider their decision but in the mean time we have increased our activity in British Columbia and Saskatchewan. The reduction in Apache's Alberta activities will be made up in large part by increasing our activity in the Ootla shale play. As we are constantly reminded, the richness and growth opportunity of our balanced portfolio is demonstrated in this case. In the North Sea, our program will be dissimilar to 2007, which includes drilling 16 wells at Forties. We will also continue refurbishing the tops sides with plans to finish installing gas-lift compression capacity and additional water injection capacity. Consistent with previous calls, we want to inform you that we have a scheduled maintenance turnaround at our Alpha platform in April that will reduce our production by 4000 barrels a day in the second quarter of '08. And finally I'd like to talk a little bit about the fundamentals of international gas, which may also provide catalyst to Apache in 2008. In 2007, we saw strong price conversion of low domestic gas prices to levels required to meet supply growth requirements and compete with other international markets. Apache generates top tier returns in countries like Australia, Egypt and Argentina at low prices we have seen historically. Today, international supplies certainly are not available at $1 to $2 gas. As gas prices move up to the $7 level, our real upside will be apparent. We also hope, you noticed our fourth quarter 2007 realized natural gas price in Argentina increased to a $1.60, which is over $0.50 higher than any quarter we've reported since entering the country. This number is 45% realization upside versus our previous record in the country and is based on fundamentals of supply and demand and not speculative activity on the NYMEX. Australia in particular provides a good example of how international gas fundamentals will provide important catalyst for Apache in 2008. I know many of you are aware that natural gas prices in the Carnarvon Basin increased from under $2 to over $7 in the past year due to increased gas demand from the mining industry and large takeaway capacity from LNG, which is priced in the spot market against highest price offered internationally be it Henry Hub or other. We tendered 80 million cubic feet of gas a day of our Reindeer production to the mining industry, with first delivery beginning in 2010 and received over 20 expressions of interest. We are currently negotiating with one buyer for most of that gas and a contract will represent a good barometer, as to how much the Western Australian gas market has strengthened. We hope to announce something soon as early as this quarter. In the second half of 2008 we will explore markets for Julimar gas by again tendering volumes to the Western Australian markets, as well as investigating the viability of LNG. The marketing results of Reindeer and Julimar could both provide meaning catalyst to our shares. I would like to close with a few comments and then I would like to turn it over to Roger Plank, our Chief Financial Officer. We had record financial and operating results in 2007, but more importantly had built tremendous growth momentum that extends our visibility well in to the next decade. Our development pipeline is absolutely world class with six development projects coming online in 2009 to 2011 that will add over a 100, 000 barrels a day of production We intend to add to that development pipeline in 2008 with the strongest inventory of exploration opportunities we have ever had, with major programs in the Carnarvon and Gippsland basins of Australia, the Western Desert of Egypt and our shale play in Northern BC, 2008 we will expose the company to greater resource addition potential than in any previous year in our history. So we look forward to continued success in 2008. Roger?

Thank you, Steve, and good morning, everyone. We've talked over the years about Apache's portfolio approach to the business, and our balanced commodity mix and geographic diversity have enabled a portfolio effect in the form of yet another year of consistent profitable results. We spent decades building a company capable of delivering such a performance and frankly while our approach may not always be in favor, it's certainly difficult to argue with the results. Just about anyway you slice it, 2007 was a standout with unparalleled results in our 53 years. Records were reached in all key categories of revenues, cash from operations, earnings, reserves and production. The benefits of unprecedented oil prices and our second highest gas realizations were multiplied by a 12% rise in production to 561,000 barrels of oil equivalent a day, driving Apache's oil and gas revenue up 23% to a notable $10 billion. It is also notable that $3 billion of the $10 billion was generated in the final quarter which we hope might provide sort of a sneak preview of things to come in 2008. Cash from operations crossed $6 billion for the first time and at $6.2 billion, was up 22%, almost just as we added a fifth quarter to the year's results. Cash flow per share totaled $18.52, that's more than triple of what it was just five years ago. Over one-quarter of our $10 billion in revenue made it to the bottom line, at $2.8 billion Apache's record 2007 earnings were up over a quarter of a billion dollars. Earnings per share of $8.39 increased 10% from $7.64 per share the prior year. Adjusting for the impact that foreign currency fluctuations and a reduction in Canadian taxes had on deferred tax balances, Apache earned $8.65 a share, up 25% from 2006 adjusted earnings. Apache continues to deliver competitive results with return on capital employed and return on equity reaching 16% and 20% respectively. Our record financial results are an outcrop of exceptional operating performance at EBITDA line. In addition to driving production higher for the 28 over the last 29 years, reserves grew for the 22nd consecutive year, up 6% to 2.4 billion barrels equivalent, that's 7.2 barrels equivalent behind each share. Of our 2.4 billion barrels equivalent, 343 million barrels equivalent were added in the last year alone at a cost of $15.31 per BOE, replacing a 167% of the year's production. Interestingly 84% of our additions before revisions resulted from exploration and development. The 286 million barrels added through the drill-bit at $14.76 per BOE, replaced a 140% of Apache's production which speaks volumes as to the effectiveness of Apache's drilling program. In a day and age where competition for both opportunities and services is intense, it would be easy for a company to hit the wall by running short no drilling opportunities and long on costs. Hopefully our results demonstrate the business hardly the case here at Apache. Nowhere were Apache's results more noteworthy than in the fourth quarter of '07 exceeding both our own expectations and those of the Street's. Fourth quarter revenues crossed the $3 billion mark for the first time, that's up $1 billion from fourth quarter '06 and a $0.5 billion from the third quarter of '07. Record oil prices of $83 a barrel, enabled oil to contribute some two-thirds of our revenue despite representing less than half of our production. Compared to fourth quarter '06, cash from operations increased $636 million to $1.9 billion, while cash flow per share of $5.71 rose 48% from a year earlier. Compared to the prior quarter cash flow increased by $300 million or $0.88 a share and earnings for the quarter crossed $1 billion for the first time, up more than a 100% from fourth quarter a year ago and 75% higher than the prior quarter. To be fair, fourth quarter of '07 included $89 million of positive adjustments or uppers items that went our way for a change and they are not likely to be repeated. The reduction in Canadian federal tax rate reduced deferred taxes as a result of adjusting our deferred cash balances. This added a $135 million to the quarter's earnings and more than offset a $46 million increase in deferred taxes internationally, reflecting continued weakness in the US dollar. Combining these two items benefited the quarter by $89 million or $0.27 a share, so on an adjusted basis fourth quarter '07 earnings of $982 million were up a 107% from adjusted fourth quarter '06 earnings. On a per share basis fourth quarter adjusted earnings totaled a record $2.92 per share twice the dollar $1.40 of a year ago and handily beating a consensus estimates of $2.52 by 16%. Cost remained an issue for both Apache and the industry as a whole as I will go into shortly. However, I would note that despite rising cost, Apache's fourth quarter cash margins topped $40 a barrel for the first time. To put this in perspective, it was only two years ago that our entire realized price for the year broke $40 a barrel for the first time. Zeroing in on cost and margin, let me confuse you with numerous comparisons, I am just going to compare fourth quarter to third quarter to focus on the most recent sequential changes. As mentioned earlier, cash margins reached record levels rising 19% over third quarter of '07 to $41.51 per BOE, while cost rose, higher prices more than offset the increase, even if you include DD&A our total pre-tax margins rose to $29.24 of BOE, up from $22.73 sequentially. Lifting cost per BOE rose to a reported $8.90 per BOE from $8.21 last quarter, obviously high prices are a double-edged sword when it comes to cost. To fully grasp where costs are going, you should be aware of a number of items outside of our base running rate, such as foreign exchange impact, some lingering hurricane repair and incentive-based compensation expense, if you normalize for these items, lifting cost rose 3% to $8.30 per BOE from $8.05 per BOE on an adjusted basis in the third quarter of '07. Workover expense, which continues to provide positive production impacts, accounted for $0.09 of the increase, but generally higher costs accounting for the balance. For 2008, we had estimated a range of 8.25, just say 8.75 per BOE for sort of our base running rate, depending on what your expectations for prices are. Full-cost DD&A increased 2% sequentially to $11.13 per BOE, although drilling cost had moderated somewhat in certain areas, they continue above historic levels. G&A cost increased to $1.42 per BOE from $1.19 driven by increased stock-based compensation expense on a higher stock price. Removing this variable again to look at sort of a base running rate drops G&A per BOE to $1.12 up from an adjusted $1.01 in the third quarter. For 2008 adjusted G&A per BOE should fall in the range of say $1.5 to $1.15 per BOE. Severance and other taxes of $3.57 per BOE increased to $1.15 quarter-over-quarter primarily driven by 16% higher North Sea volumes combined with 18% higher oil price realizations, which resulted in more PRT. Finance expense decreased $0.15 to $1.2 per BOE of significantly lower debt balances. And turning to income taxes. Our fourth quarter effective tax rate dropped 31% from 48% in the third quarter due primarily to two issues. First the third quarter rate was higher because the Australian and Canadian currency strengthened during that particular quarter adding to our deferred tax. And the second issue has to do with a fourth quarter catch up adjustment for the Canadian tax reduction mentioned earlier. For the year, our effective tax rate was 39.8% and the portion of taxes that was differed averaged 48%. Looking back on my prior notes, I realized my predictive skills in this area fall far short. But absent the unforeseen our effective tax rate should approximate 40% of which 40% to 45% should be deferred. Before closing, I'd like to amplify on Steve's comments about why we have higher hopes for 2008 and beyond. In a nutshell, I believe Apache is in the best shape for the best outlook that we have ever had. 2008 production growth is virtually assured. Our backlog of large scale development prospects has never been greater providing visible sources of growth into the next decade. Our worldwide acreage position of over a million acres -- of over 40 million acres is second to none in the upstream sector and a very important key to our continued growth. We have another active year plan for 2008, as Steve indicated, it's again a portfolio effect, a number of lower risks singles and doubles combined with our highest potential exploration program to-date and again as Steve indicated, we are off to a fast start with meaningful discoveries in both Egypt and Australia. From a financial standpoint, we have also never been stronger. Solid production should underpin cash flow that more than covers our preliminary E&D budget of somewhere around $4.5 billion dollars. And finally Apache's strong balance sheet with 22% debt as a percentage of capitalization is a real asset during a highly uncertain period for the economy. In the tightening credit markets there are fall out of the subprime debacle, Apache's A rated balance sheet gives us a tremendous competitive advantage in accessing capital at reasonable cost with which to continue to carryout our business strategy. So, with that, we'd be happy to address any questions you might have.

(Operator Instructions). And we'll take our first question comes from Tom Gardner with Simmons & Company. Please go ahead. Tom Gardner - Simmons & Company: Yeah, good morning, guys.

Good Morning Tom Gardner - Simmons & Company: Just with respect to Argentina and the gas market, do you anticipate the recent price trend to continue and is the market now at a point where you might be able to increase your gas directed capital spending in the country?

Well with respect to the gas price frankly, we do expect it to continue. If you look at some of the later contracts that we've signed over the last quarter to quarter and half, one was with major fertilizer that we contracted for three years at $3.50 that's going to $3.90 over a three year period. I don't think the current supply is certainly keeping up with demand. So, one of the reasons we got in Argentina at the time that we did we really anticipated that the current shortage and supply would have a real impact on prices. So, with respect to our capital budget what we've done is basically limited our capital budget in Argentina to our cash flow and although we're very high on Argentina, I think that's a prudent thing to do in the current environment. Tom Gardner - Simmons & Company: Got you. And then jumping over to Canada, I'd like to talk specifically about the tapering of your activity and how damaging the royalty changes have been. And then on the other side of the coin the increasing of activity in the Ootla shale play because Ootla qualify as shallow gas or it's does not impacted by that?

Well, the current structure of the Alberta royalty is both a rate and price curve. And so at lower rates you actually pay a lower rate than you would under the old regime and as you go higher you pay a disproportionate higher price, which is why we curtailed our deeper drilling activities because they generally come on at higher rates. If you get a 5 million a day well for instance, the royalty today in Canada under the new regime is 50%, which seems to absorbent to us, which is why we -- in the lower rates for Alberta to start out at 5% and cross that path at about 220 Mcf a day. In terms of the Ootla shale, I mentioned that we are going to drill nine wells up there with our partner EnCana. We currently are into our winter drilling program. We are drilling three wells right now as we speak and we will put multiple stage fracs on those wells. EnCana should start their drilling momentarily; actually they took one of our rigs and started their drilling program. So, the winter is going to be real important to the Ootla play. Tom Gardner - Simmons & Company: Following on that path, the Ootla play could you speak to perhaps the anticipated economics as a play or what you are seeing in your first horizontal that has you encouraged anything that you can add there?

Yeah, the horizontal well that we drilled this last year and we put three fracs on it and if tested came on at $3 million a day and it's been on 10 months and still making over $1 million a day, very good results with very good pressure. The ones that we are drilling today will put at least six individual fracs on and expect a higher initial rate than what we got out of the first horizontal well. Tom Gardner - Simmons & Company: Where do you hope to get the cost to?

Well, let's finish drilling our experiment. We have to drill those wells for about $5 million. Tom Gardner - Simmons & Company: Thank you, Steve.

And we'll take our next question from Ellen Hannan with Bear Sterns. Please go ahead. Ellen Hannan - Bear Sterns: Good morning. Just a coupe of questions, could you remind us what it is you have targeted for sale in the US? And the second question I had was, for Steve or Roger. In looking at the development program that you've got to bring on the 100,000 barrels of oil equivalent per day in the 2009 - 2011 timeframe. Has your idea or your thoughts on what the capital spending will be required with that, has that changed at all in the current environment?

The first part of the question was?

Sales, what was the sales?

Oh yeah, we have actually closed some at the end of the year and then following it along at the end of it, we've already closed about $250 million worth of sales and have a few pending for another, about a $120 million. Basically it's, either a non-operated or marginal production that we've sold. We sold a little bit of production at Permian basin; we sold a non-focused area for us in North Louisiana. We sold a non-operated field in the Gulf of Mexico and we also sold some non-focus area production, non-operated production in Canada. It's really the tail end of our property. We just that thought it was a good time with prices where they were to turn that into cash.

And the total was just over 5000 BOE per day I think. It's hard to say.

Of production. Ellen Hannan - Bear Sterns.: Okay and then future development cost; has your projection for that changed at all in the current cost environment?

No, it really hasn't. In fact we put - the numbers that we have down there we feel very comfortable with. Ellen Hannan - Bear Sterns.: Okay, that's it from me. Thank you.

Part of the reason is we have contracted for some of those costs. So we kind of lost…

Certainly on the Pyrenees and the Van Gogh Development we have and a great extent on Reindeer. Obviously Julimar right now is a estimate. But we also maybe estimating higher than what we hopefully anticipated it actually being. Ellen Hannan - Bear Sterns.: Thank you.

Thank you. And we will take our next question with Ben Dell with Bernstein. Please go ahead. Ben Dell - Bernstein : Hi, guys.

Hi.

Good morning. Ben Dell - Bernstein : I had a couple of questions. First you obviously mentioned the tightening LNG market. In terms of the majors, have you seen them approach you around the world obviously particularly in Egypt and Australia for increments of gas supply for any of the LNG expansions? And if so, are there particular expansion that you can highlight?

Both in Australia and Egypt we have, we have had discussions with LNG players in that part of the world. And those are ongoing discussions. So and it really is a very good parameter to what you are going to see happening in domestic gas markets around the world because the competition, once you put an LNG facility out there, the competition it's and now it is going offshore, it's going in country. We are seeing that certainly seeing that pressure in Australia and we are also beginning to see that pressure in Egypt. Ben Dell - Bernstein : Okay, does that make you want to look at areas like other areas of Asia such as Malaysia and Indonesia where there is already LNG schemes in terms of developing incremental gas or accessing licenses or is that not on the radar screen?

Well it's not on the radar -- Our goal is to develop core areas that have long-term potential. And I am not suggesting that those too don’t but in the areas that were in if you look at our acreage position or you look at our infrastructure position, all of them are sizable and all of them have the potential to continue to grow. Ben Dell - Bernstein : Okay and just lastly, obviously you’ve been very active in Australia also signing rigs. Are you seeing any sort of weakness in the jack-up market, as these new rigs are added in the Asian region or have you changed your rig signing strategy to just hold off a little bit while they come through?

Well you're definitely -- internationally you're definitely seeing a small reduction in prices, nothing compared to what you are seeing in North America today but they are definitely starting -- at least currently, they have hit their peak and we’re starting to see lower prices, especially on the jack-up side and especially in the Gulf of Mexico. Ben Dell - Bernstein : Okay, great, thank you

And we'll take our next question with Gil Yang with Citi. Please go ahead. Gil Yang - Citi: Hi, Steve, could you comment on what you expect to happen to Canadian production with the 40% drop in capital spending?

Yeah and I tried to make sure but I've said that correctly, our overall capital spending in Canada is going to be about flat. What we have done is, redirected our capital spending to other areas. And to speak a little bit to our share play, we have gas plant capacity up there right now, but takeaway capacity is about 25 million a day, which we could increase with some compression. So, all those wells are in a remote area because of some other drilling we've done many years ago. We have some capacity takeaway there. Our budget is basically flat…. Gil Yang - Citi: Production budget?

Capital budget. Gil Yang - Citi: But would there be any impact to production because you are maybe spending more money on exploratory longer-term projects?

Well, I think what you saw in 2007 is probably what you will see in 2008 and that is a little drip down but not dramatic if you understand what I am saying. Gil Yang - Citi: Yeah, okay. And second question is, you spent $320 million or so in Argentina and you booked 19 million barrels with so pretty high F&D cost. Can you comment on what was going on there, what kind of projects you are investing in, maybe the over the long-term that we didn't see?

I mean you have got to be careful because you got an awful lot of seismic in that. Gil Yang - Citi: Okay.

And I would say the same thing of Canada. We spent almost a $100 million in acreage in Canada last year. So, when you look at the total E&D spend, either in Australia, I mean Argentina or Canada, we had a significant seismic program. We are shooting 680 square kilometers of 3-D seismic right now in (inaudible). And I think we announced our first well, we've made 1600 barrels a day after that 3-D seismic. So, it's paying dividends, but you get a one time hit early on and then you get the benefit of it over the several years. Gil Yang - Citi: Okay. And so, if you excluded that offer and investment, can you quantify what the F&D would look like?

I can't, in front of me.

Well, it's about $15 if you again remove the ARO and the capitalized interest Gill that calculation which I don't think you do. Gil Yang - Citi: Right. But if you think it…

What the seismic is, I don't know. But I can get that for you off-line. Gil Yang - Citi: Okay. Thank you very much.

Good luck.

And we'll take our next question with David Heikkinen with Tudor Pickering. Please go ahead. David Heikkinen - Tudor Pickering: Good morning. Just I wanted to get your CapEx per region?

For '07 or? David Heikkinen - Tudor Pickering: '08, what's your target?

The one thing I would tell you is that when we talk about budgets as I pointed out, we allocate capital quarterly. So, I think Roger has our regional budgets but that is very subject to change. David Heikkinen - Tudor Pickering: Okay.

Very much. Well, I mean we look at it every month really and it will depend on what happens to prices, cash flow, economy, all sorts of things. But this is a very tentative budget. But in Argentina we are looking at somewhere around $250 million for the year 2008. The biggest increase is going to be on Australia, it's going to be -- we are looking to something like $900 million versus $400 million for exploration and development. In Chile we got a seismic program so we are slating something like $15 million there. Egypt is also likely to see a meaningful increase in its E&D budget to about three quarter of a $1 billion which is up maybe a 135 from the prior year. North Sea is about flat at five in a quarter. Central is about flat at 650, that's our onshore region basically split between the mid-continent and the Permian. The Gulf is perhaps flat that maybe down a $100 million to $900 million. And Canada as Steve indicated is about flat at about six in a quarter or so. David Heikkinen - Tudor Pickering: Okay.

So that should add up to about $4.5 billion or so that we referenced. David Heikkinen - Tudor Pickering: And then in the Gulf, you did sign up an abandonment plan for the next several years. Is that an internal Apache goal to kind of clean everything up? Or was that MMS mandated? Or how did you push that forward?

Well, it was really both. I think we are taking an opportunity, a big chunk of that is part of that Grand Isle 40s Complex that BP retained when we bought the Grand Isle 40s Complex; BP retained their obligation for the 37.5% we bought. And we own 37.5%, so if you are speaking to the contract that was out there, the biggest chuck of that is scheduled toward to that Grand Isle 40s Complex. David Heikkinen - Tudor Pickering: And do you think there will be an uptick kind of industrywide? Are you getting ahead of that before costs start increasing or?

Well, we really tried to get ahead of it in 2007 as well as working on it in 2008, I doubt if you will see a large increase in 2008 over our activity in 2007. David Heikkinen - Tudor Pickering: Okay. And then just trying to, the Alpha platform going off-line in the second quarter in the North Sea, how long do you have that in your budget for it to be off-line and how much production would you expect to be off-line?

Well, we project it's going to about 4,000 barrels a day for the quarter. But the platform will be down. I think we're scheduled it to be down for 13 days. David Heikkinen - Tudor Pickering: 13 days. Thanks a lot guys. That's all I had.

Thank you.

And we will take our next question with Joe Allman with JP Morgan. Please go ahead. Joe Allman - JP Morgan: Hi, everybody.

Good morning. Joe Allman - JP Morgan: What are the plans in terms of your excess cash flow? Any specific targets for US dollars?

Well, as Raymond Plank always likes to point out is, if we really ever end up with excess cash flow, it would surprise us. We generally find things to do with it. The other thing I would say about that is that we've got in front of us and I think Ellen pointed that future development capital that we have in some of our major projects, those numbers add up to be over $2 billion net to Apache. So, we have uses, may not be short-term uses but we have long-term usage for our cash. Joe Allman - JP Morgan: In terms of opportunity to make acquisitions, are you looking at significant acquisitions at this point or do you plan to look at significant acquisitions in 2008?

I think hopefully you've got to feel that we've evolved in such position with the asset base that we built. We intend to grow organically and that does not mean we would make an acquisition. Certainly we are an acquisitive company. We look at things that fit us, that are in areas that we want to be. The acquisition market is pretty floppy right now and so we're certainly not looking at anything in a major acquisition way. We always look for things that tag on to what we're doing. Joe Allman - JP Morgan: Got it, that’s helpful. And then, I heard you talk about the rig rates softening a little bit internationally. Could you talk about other drilling complete cost? Do you see them still softening and can you give us specifics on that?

I think probably everybody is aware of Schlumberger's comment since I'm not commenting just on Slumber Jay but there is absolutely no doubt that with all the new equipment and what's happened in Alberta, North American cost, service cost are coming down. And we see that in rig rates and we also see that in primary services. Internationally, there are still very active programs going on in the world. We've seen [CMIs] coming down somewhat but certainly not the levels that percentage drops, if you are seeing for jack-ups and Gulf of Mexico or land rigs in the U.S. Joe Allman - JP Morgan: Okay, it's helpful. And then Roger just real quick; I missed some of your comments on the LOE. Could you again just give us the specifics why the LOE was up in the fourth quarter and why it's not going to be up to that degree on a unit basis in 2008?

Well, one reason was we had work over activity that was $0.09 of the increase and then -- I mean, I don't know whether it will go up or not but things that we need to adjust for the foreign exchange impact that was $0.18 of the increase, lingering hurricane repairs, which hopefully will die down here with $0.12, and then incentive based or stock-based compensation expense was $0.30, which happens when our stock goes up. And I think we closed the quarter at $107 of change though that was a big number at that point. But depending on what happens in those particular areas that will drive the direction of the rate to some extent in the future.

We'd expect the stock to be huge this year. Joe Allman - JP Morgan: Yes. We'll model that. And then just lastly in terms of your budget for cost are you budgeting lower costs or you being conservative in budgeting kind of flat or slightly up cost?

Well, we budget for spots on the map. And all of the capital that we've allocated right now are for projects that either have an AFE on them or a real estimate of cost. So, the thing I think you're going to see is we're going to be able to drill more wells with the same amount of money. Joe Allman - JP Morgan: Got you. Okay, very helpful. Thank you.

(Operator Instructions) We'll take our next question with Leo Mariani with RBC Capital Markets. Please go ahead sir. Leo Mariani - RBC Capital Markets: Hey, good afternoon here guys. A couple of quick questions here for you. On the Australian gas prices, obviously, you guys are having uplift here in the fourth quarter. Curious if you could, maybe quantify for us one some of your existing contracts roll off, I don't know, if there is a way to break this up into kind of percentages in the next couple of years because clearly there could be upside from re-contracting I guess?

I think we've about three quarters of our gas that will roll off in the 2010 to 2015 period. And so we'll have to see what kind of price we can get when that happens. Frankly, we might just contract with the same users that we've now. But just have a change in prices, as the market directs. But we'll have one contract that you may be familiar with (inaudible) that would extend beyond that period. So, roughly the $200 million that we've contracted today about three quarters of it, a little loss in beginning in 2010 through '015. Leo Mariani - RBC Capital Markets: Okay. Also in Australia you guys reported a very robust oil price in the fourth quarter. I was curious, if there was anything sort of going on there that was unique to one of us?

We've seen the price of Tapas become very robust because it's in the Asian markets and it kind of premium crude. So, we've been benefiting from that. As I recall, we said that last quarter as well. So it's just selling at a premium to WTI. Leo Mariani - RBC Capital Markets: Okay. Switching over to Argentina real quick here, it looks like your gas productions kind of been down for the past couple of quarters. If that not at all, whether there are going to be an area of focus, you're spending more time drilling for well down there and your programs. Just trying to get a sense of what we should expect to the next couple of quarters there?

Yeah. The biggest impact is not the capability of the wells. The biggest impacts has pipeline takeaway capacity up north, and also the limit of selling gas across to Chile. And so, what will happen to do is re-inject that gas and skip the liquid that's not a performance issue that's more of a market issue. Leo Mariani - RBC Capital Markets: Okay, thanks a lot guys.

Thank you.

I might just say one thing about that, we did, as Steve indicated we saw our price improved to $60 I guess for the quarter which was very nice increase. The way the market works over there we must deliver a certain volume of gas roughly 145 million cubic feet a day at a fixed price. So, when we bring on incremental gas then we can go after the kind of market that Steve was talking about $3 contract type price. So, as far you can make economics at these prices really it will be a blend of the old price from the new but to the extent we bring on incremental production, we'll get a free market price that has been $2.5 and $3.5 in Mcf. So, I think our guys are still planning to drill a number of gas wells because of that net aspect of it.

Yeah. The primary drilling for gas right now at least will be in the neck and the primary drilling for oil will be in TDS.

(Operator Instructions) And we have no further questions. I'd like to turn it back over to Mr. Dye for any additional or closing remarks.

Thanks for tuning in. Roger and I are going to head up fairly soon to the First Boston Conference in Colorado. So, you should probably direct your questions this afternoon to Dave Higgins and his number is 713-296-6690. Again, thanks for joining us.

Once again, ladies and gentlemen, this will conclude today's conference. We thank you for your participation. You may now disconnect.