Apache Positioned for Drill-Bit Driven Growth in Egypt

• The Company: Apache Corp., a U.S. oil and natural gas producer.
• The Finding: FORM 10-Q filed with the SEC on November 10, 2008.
• The Finding: Apache, the largest acreage holder in Egypt, continues to benefit from its active drilling program in the Western Desert, a gas-rich area of about 450,000-square kilometers. During the third-quarter ended September 30, an interruption in oil and natural gas production in the Gulf of Mexico from Hurricane Ike was more than offset by a seven percent year-on-year increase in Egyptian operations.

Oil and natural gas production in Egypt climbed 7.3% and 18.7% on a comparable basis to 64,803 barrels per day and 287,231 MMcf per day, resulting from new wells, re-completion and workover activities.

At September 30, current operated production was about 242,410 barrels of oil per day and 1.55 Bcf of gas per day. Apache also holds productive assets in Argentina, Australia, Canada (#1 position in Ootla shale play), and the North Sea (operator of largest field).

Management is projecting 2009 production growth of six-percent to 14 percent, or between 572,000 to 620,000 barrels of oil equivalents per day.

Unbooked resource potential reserves in Egypt are estimated at 1,373 MM barrels of oil equivalents. Concession agreements with the government of Egypt are currently favorable, with most exploration and development leases not expiring until 2023.

The Question: Some key exploration acreage in Egypt will start turning over in 2010. What impact would the Egyptian's government failure to renew have on future production gains?