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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the Fiscal Year Ended December 31, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period from  to
 Commission File Number 0-13546
 APACHE OFFSHORE INVESTMENT PARTNERSHIP
 A Delaware
    
    IRS EmployerGeneral Partnership
    
    No. 41-1464066
 
  
 o þ
 o þ
 þ o
 o
  o o þ
 o þ
 Aggregate market value of the voting and non-voting common
equity held by non-affiliates of registrant as of June 30,
2006
    
    $
    14,011,307




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##### 



TABLE OF CONTENTS
 DESCRIPTION
 Item
    
    
    

PagePART I1.
    
    BUSINESS
    
    
    11A.
    
    RISK FACTORS
    
    
    21B.
    
    UNRESOLVED STAFF COMMENTS
    
    
    42.
    
    PROPERTIES
    
    
    43.
    
    LEGAL PROCEEDINGS
    
    
    64.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    6PART II5.
    
    MARKET FOR THE PARTNERSHIP'S SECURITIES AND RELATED SECURITY HOLDER MATTERS
    
    
    76.
    
    SELECTED FINANCIAL DATA
    
    
    77.
    
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    87A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    138.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    159.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    329A.
    
    CONTROLS AND PROCEDURES
    
    
    329B.
    
    OTHER INFORMATION
    
    
    32PART III10.
    
    DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
    
    
    3311.
    
    EXECUTIVE COMPENSATION
    
    
    3312.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
    
    
    3313.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    
    3314.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    33PART IV15.
    
    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
    
    
    34Consent of Ryder Scott Company, L.P.Certification of Chief Executive OfficerCertification of Chief Financial OfficerCertification of Chief Executive Officer and Chief Financial Officer




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PART I
 
 ITEM 1. BUSINESS
 General
        1




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2006 Results and Business Development
    Marketing
    
 ITEM 1A. RISK FACTORS
  2




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Partnerships Profitability is Highly Dependent on the Prices of Crude Oil, Natural Gas and Natural
Gas Liquids, which have Historically been very Volatile
  Drilling Activities may not be Productive
  
    
    unexpected drilling conditions;
    
    pressure or irregularities in formations;
    
    equipment failures or accidents;
    
    fires, explosions, blow-outs and surface cratering;
    
    marine risks such as capsizing, collisions and hurricanes;
    
    other adverse weather conditions; and
    
    shortages or delays in the delivery of equipment.
  Uncertainty in Calculating Reserves; Rates of Production; Development Expenditures; Cash Flows
  Costs Incurred Related to Environmental Matters
    3




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Insurance Does Not Cover All Risks
  Industry Competition
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
 Acreage
  Developed AcreageLease Block
    
    State
    
    Gross Acres
    
    Net AcresShip Shoal 258, 259
    
    LA
    
    
    10,141
    
    
    
    638South Timbalier 276, 295, 296
    
    LA
    
    
    15,000
    
    
    
    1,063North Padre Island 969, 976
    
    TX
    
    
    10,080
    
    
    
    714Matagorda Island 681, 682
    
    TX
    
    
    10,840
    
    
    
    681Ship Shoal 202
    
    LA
    
    
    5,000
    
    
    
    51,061
    
    
    
    3,096
  Productive Oil and Gas Wells
  Gas
    
    OilLease Block
    
    State
    
    Gross
    
    Net
    
    Gross
    
    NetShip Shoal 258, 259
    
    LA
    
    
    9
    
    
    
    .57
    
    
    
    
    
    
    
    South Timbalier 276, 295, 296
    
    LA
    
    
    1
    
    
    
    .07
    
    
    
    32
    
    
    
    2.27North Padre Island 969, 976
    
    TX
    
    
    4
    
    
    
    .28
    
    
    
    
    
    
    
    Matagorda Island 681, 682
    
    TX
    
    
    3
    
    
    
    .19
    
    
    
    
    
    
    
    Ship Shoal 202
    
    LA
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    1.11
    
    
    
    32
    
    
    
    2.27
 4




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Net Wells Drilled
  Net Exploratory
    
    Net DevelopmentYear
    
    Productive
    
    Dry
    
    Total
    
    Productive
    
    Dry
    
    Total2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    .13
    
    
    
    .06
    
    
    
    .192004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    .30
    
    
    
    
    
    
    
    .30
 Production and Pricing Data
  Production
    
    Average
    
    Average Sales PricesYear Ended
    
    Oil
    
    Gas
    
    NGLs
    
    Production
    
    Oil
    
    Gas
    
    NGLsDecember 31,
    
    (Mbbls)
    
    (MMcf)
    
   (Mbbls)
    
    Cost per Mcfe
    
    (per Bbl)
    
    (per Mcf)
    
    (per Bbl)2006
    
    
    55
    
    
    
    795
    
    
    
    16
    
    
    $
    1.08
    
    
    $
    65.39
    
    
    $
    7.58
    
    
    $
    38.592005
    
    
    74
    
    
    
    1,158
    
    
    
    18
    
    
    
    .78
    
    
    
    53.91
    
    
    
    8.78
    
    
    
    33.982004
    
    
    110
    
    
    
    1,398
    
    
    
    26
    
    
    
    .48
    
    
    
    40.62
    
    
    
    6.23
    
    
    
    26.84
  Estimated Proved Reserves and Future Net Cash Flows
      5




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ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  6




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PART II
 
 ITEM 5. MARKET FOR THE PARTNERSHIPS SECURITIES AND RELATED SECURITY HOLDER MATTERS
   
 ITEM 6. SELECTED FINANCIAL DATA
  As of or For the Year Ended December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(In thousands, except per Unit amounts)Total assets
    
    $
    8,629
    
    
    $
    11,624
    
    
    $
    12,215
    
    
    $
    11,674
    
    
    $
    9,834Partners capital
    
    $
    7,625
    
    
    $
    10,311
    
    
    $
    11,293
    
    
    $
    10,475
    
    
    $
    9,610Oil and gas sales
    
    $
    10,255
    
    
    $
    14,779
    
    
    $
    13,874
    
    
    $
    11,951
    
    
    $
    6,868Net income
    
    $
    7,149
    
    
    $
    11,048
    
    
    $
    9,591
    
    
    $
    8,037
    
    
    $
    3,524Net income allocated to:Managing Partner
    
    $
    1,702
    
    
    $
    2,555
    
    
    $
    2,407
    
    
    $
    2,037
    
    
    $
    1,036Investing Partners
    
    
    5,447
    
    
    
    8,493
    
    
    
    7,184
    
    
    
    6,000
    
    
    
    2,488$
    7,149
    
    
    $
    11,048
    
    
    $
    9,591
    
    
    $
    8,037
    
    
    $
    3,524Net income per Investing
Partner Unit
    
    $
    5,178
    
    
    $
    8,048
    
    
    $
    6,786
    
    
    $
    5,598
    
    
    $
    2,259Cash distributions per
Investing Partner Unit
    
    $
    7,500
    
    
    $
    9,000
    
    
    $
    6,000
    
    
    $
    4,500
    
    
    $
    1,000
 7




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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
      Results of Operations
  Net Income and Revenue
   8




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For the Year Ended December 31,2006
    
    2005
    
    2004Gas volumes  Mcf per day
    
    
    2,178
    
    
    
    3,172
    
    
    
    3,820Average gas price  per Mcf
    
    $
    7.58
    
    
    $
    8.78
    
    
    $
    6.23Oil volumes  barrels per day
    
    
    152
    
    
    
    203
    
    
    
    301Average oil price  per barrel
    
    $
    65.39
    
    
    $
    53.91
    
    
    $
    40.62NGL volumes  barrels per day
    
    
    43
    
    
    
    51
    
    
    
    71Average NGL price  per barrel
    
    $
    38.59
    
    
    $
    33.98
    
    
    $
    26.84
   Natural Gas Sales
   Crude Oil Sales
   9




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Operating Expenses
     Capital Resources and Liquidity
     10




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Capital Commitments
      11




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Off-Balance Sheet Arrangements
  Critical Accounting Policies and Estimates
  Full Cost Method of Accounting for Oil and Gas Operations
   Reserve Estimates
  12




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Asset Retirement Obligation
   
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Commodity Risk
   13




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Governmental Risk
  Weather and Climate Risk
  Forward-Looking Statements and Risk
   14




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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 APACHE OFFSHORE INVESTMENT PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
 PageNumberReport of Independent Registered Public Accounting Firm
    
    
    16Statement of Consolidated Income for each of the three years in the period ended December 31,
2006
    
    
    17Statement of Consolidated Cash Flows for each of the three years in the period ended
December 31, 2006
    
    
    18Consolidated Balance Sheet as of December 31, 2006 and 2005
    
    
    19Statement of Consolidated Changes in Partners Capital for each of the three years in the period
ended December 31, 2006
    
    
    20Notes to Consolidated Financial Statements
    
    
    21Supplemental Oil and Gas Disclosures
    
    
    29Supplemental Quarterly Financial Data
    
    
    31Schedules 
  15




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      
 16




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APACHE OFFSHORE INVESTMENT PARTNERSHIP
 
 STATEMENT OF CONSOLIDATED INCOME
 For the Year Ended December 31,2006
    
    
    2005
    
    
    2004REVENUES:Oil and gas sales
    
    $
    10,254,559
    
    
    $
    14,778,653
    
    
    $
    13,873,998Interest income
    
    
    158,140
    
    
    
    99,970
    
    
    
    39,08710,412,699
    
    
    
    14,878,623
    
    
    
    13,913,085OPERATING EXPENSES:Depreciation, depletion and amortization
    
    
    1,482,299
    
    
    
    2,039,571
    
    
    
    2,816,528Asset retirement obligation accretion
    
    
    42,002
    
    
    
    45,672
    
    
    
    48,744Lease operating costs
    
    
    1,183,159
    
    
    
    1,159,366
    
    
    
    918,337Gathering and transportation expense
    
    
    137,448
    
    
    
    169,114
    
    
    
    135,263Administrative
    
    
    419,000
    
    
    
    417,000
    
    
    
    403,0003,263,908
    
    
    
    3,830,723
    
    
    
    4,321,872NET INCOME
    
    $
    7,148,791
    
    
    $
    11,047,900
    
    
    $
    9,591,213NET INCOME ALLOCATED TO:Managing Partner
    
    $
    1,702,177
    
    
    $
    2,554,528
    
    
    $
    2,407,360Investing Partners
    
    
    5,446,614
    
    
    
    8,493,372
    
    
    
    7,183,853$
    7,148,791
    
    
    $
    11,047,900
    
    
    $
    9,591,213NET INCOME PER INVESTING PARTNER UNIT
    
    $
    5,178
    
    
    $
    8,048
    
    
    $
    6,786WEIGHTED AVERAGE INVESTING PARTNER
UNITS OUTSTANDING
    
    
    1,051.9
    
    
    
    1,055.4
    
    
    
    1,058.6
 
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##### Table of Contents



APACHE OFFSHORE INVESTMENT PARTNERSHIP
 
 STATEMENT OF CONSOLIDATED CASH FLOWS
 For the Year Ended December 31,2006
    
    
    2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    7,148,791
    
    
    $
    11,047,900
    
    
    $
    9,591,213Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation, depletion and amortization
    
    
    1,482,299
    
    
    
    2,039,571
    
    
    
    2,816,528Asset retirement obligation accretion
    
    
    42,002
    
    
    
    45,672
    
    
    
    48,744Dismantlement and abandonment cost
    
    
    
    
    
    
    (167,767
    )
    
    
    (323,966
    )Changes in operating assets and liabilities:(Increase) decrease in accrued revenues receivable
    
    
    902,563
    
    
    
    (470,419
    )
    
    
    (324,111
    )Increase (decrease) in accrued operating
expenses
    
    
    27,041
    
    
    
    (3,204
    )
    
    
    11,693Increase (decrease) in receivable/payable from
Apache Corporation
    
    
    531,823
    
    
    
    (191,796
    )
    
    
    (79,257
    )Net cash provided by operating activities
    
    
    10,134,519
    
    
    
    12,299,957
    
    
    
    11,740,844CASH FLOWS FROM INVESTING ACTIVITIES:Additions to oil and gas properties
    
    
    (369
    )
    
    
    (1,678,072
    )
    
    
    (1,570,794
    )Increase (decrease) in accrued development costs
    
    
    (551,324
    )
    
    
    551,324
    
    
    
    (334,740
    )Proceeds from sales of oil and gas properties
    
    
    
    
    
    
    134,060
    
    
    
    Net cash used in investing activities
    
    
    (551,693
    )
    
    
    (992,688
    )
    
    
    (1,905,534
    )CASH FLOWS FROM FINANCING ACTIVITIES:Repurchase of Partnership Units
    
    
    (57,312
    )
    
    
    (22,775
    )
    
    
    (55,881
    )Distributions to Investing Partners
    
    
    (7,895,978
    )
    
    
    (9,499,617
    )
    
    
    (6,350,335
    )Distributions to Managing Partner
    
    
    (1,882,190
    )
    
    
    (2,506,864
    )
    
    
    (2,366,949
    )Net cash used in financing activities
    
    
    (9,835,480
    )
    
    
    (12,029,256
    )
    
    
    (8,773,165
    )NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
    
    
    (252,654
    )
    
    
    (721,987
    )
    
    
    1,062,145CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR
    
    
    2,611,653
    
    
    
    3,333,640
    
    
    
    2,271,495CASH AND CASH EQUIVALENTS, END OF YEAR
    
    $
    2,358,999
    
    
    $
    2,611,653
    
    
    $
    3,333,640
 
 18




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APACHE OFFSHORE INVESTMENT PARTNERSHIP
 
 CONSOLIDATED BALANCE SHEET
 December 31,2006
    
    
    2005ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    2,358,999
    
    
    $
    2,611,653Accrued revenues receivable
    
    
    533,177
    
    
    
    1,435,740Receivable from Apache Corporation
    
    
    
    
    
    
    357,2702,892,176
    
    
    
    4,404,663OIL AND GAS PROPERTIES, on the basis of full cost accounting:Proved properties
    
    
    185,574,025
    
    
    
    185,573,656Less  Accumulated depreciation, depletion and amortization
    
    
    (179,837,087
    )
    
    
    (178,354,788
    )5,736,938
    
    
    
    7,218,868$
    8,629,114
    
    
    $
    11,623,531LIABILITIES AND PARTNERS CAPITALCURRENT LIABILITIES:Accrued development costs
    
    $
    
    
    
    $
    551,324Accrued operating expenses
    
    
    87,606
    
    
    
    60,565Payable to Apache Corporation
    
    
    174,553
    
    
    
    262,159
    
    
    
    611,889ASSET RETIREMENT OBLIGATION
    
    
    742,156
    
    
    
    700,154COMMITMENTS AND CONTINGENCIES (Note 7)PARTNERS CAPITAL:Managing Partner
    
    
    75,272
    
    
    
    255,285Investing Partners (1,048.3 and 1,053.4 Units
outstanding, respectively)
    
    
    7,549,527
    
    
    
    10,056,2037,624,799
    
    
    
    10,311,488$
    8,629,114
    
    
    $
    11,623,531
 
 19




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##### Table of Contents



APACHE OFFSHORE INVESTMENT PARTNERSHIP
 
 STATEMENT OF CONSOLIDATED CHANGES IN PARTNERS CAPITAL
 Managing
    
    
    InvestingPartner
    
    
    Partner
    
    
    TotalBALANCE, DECEMBER 31, 2003
    
    $
    167,210
    
    
    $
    10,307,586
    
    
    $
    10,474,796Distributions
    
    
    (2,366,949
    )
    
    
    (6,350,335
    )
    
    
    (8,717,284
    )Repurchase of Partnership Units
    
    
    
    
    
    
    (55,881
    )
    
    
    (55,881
    )Net income
    
    
    2,407,360
    
    
    
    7,183,853
    
    
    
    9,591,213BALANCE, DECEMBER 31, 2004
    
    
    207,621
    
    
    
    11,085,223
    
    
    
    11,292,844Distributions
    
    
    (2,506,864
    )
    
    
    (9,499,617
    )
    
    
    (12,006,481
    )Repurchase of Partnership Units
    
    
    
    
    
    
    (22,775
    )
    
    
    (22,775
    )Net income
    
    
    2,554,528
    
    
    
    8,493,372
    
    
    
    11,047,900BALANCE, DECEMBER 31, 2005
    
    
    255,285
    
    
    
    10,056,203
    
    
    
    10,311,488Distributions
    
    
    (1,882,190
    )
    
    
    (7,895,978
    )
    
    
    (9,778,168
    )Repurchase of Partnership Units
    
    
    
    
    
    
    (57,312
    )
    
    
    (57,312
    )Net income
    
    
    1,702,177
    
    
    
    5,446,614
    
    
    
    7,148,791BALANCE, DECEMBER 31, 2006
    
    $
    75,272
    
    
    $
    7,549,527
    
    
    $
    7,624,799
 
 20




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APACHE OFFSHORE INVESTMENT PARTNERSHIP
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (1)
    
    ORGANIZATIONNature of Operations 
      21




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APACHE OFFSHORE INVESTMENT PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Right of Presentment 
    Right of Presentment
    
    Total Repurchase
    
    Repurchase PriceValuation Date
    
    Price
    
    Per UnitDecember 31, 2003
    
    $
    14,338,941
    
    
    $
    11,518June 30, 2004
    
    
    13,730,918
    
    
    
    8,988December 31, 2004
    
    
    17,331,746
    
    
    
    12,418June 30, 2005
    
    
    15,131,715
    
    
    
    9,337December 31, 2005
    
    
    17,123,974
    
    
    
    12,756June 30, 2006
    
    
    14,748,744
    
    
    
    10,016
 2006
    
    2005
    
    2004Investing Partner Units Outstanding:Balance, beginning of year
    
    
    1,053.4
    
    
    
    1,055.7
    
    
    
    1,060.7Repurchase of Partnership Units
    
    
    (5.1
    )
    
    
    (2.3
    )
    
    
    (5.0
    )Balance, end of year
    
    
    1,048.3
    
    
    
    1,053.4
    
    
    
    1,055.7
 Capital Contributions 
  22




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APACHE OFFSHORE INVESTMENT PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (2)
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESStatement Presentation 
  Cash Equivalents 
  Oil and Gas Properties 
     23




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APACHE OFFSHORE INVESTMENT PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Revenue Recognition 
  Net Income Per Investing Unit 
  Income Taxes 
  Use of Estimates 
  Receivable from /Payable to Apache Corporation 
  Maintenance and Repairs 
  Shipping and Handling Costs 
  24




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APACHE OFFSHORE INVESTMENT PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (3)
    
    COMPENSATION TO APACHE
  Total Reimbursed by the Investing Partnersfor the Year Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)a.
    
    Apache is reimbursed for general, administrative and
overhead expenses incurred in connection with the
management and operation of the Partnerships business
    
    $
    335
    
    
    $
    334
    
    
    $
    322b.
    
    Apache is reimbursed for development overhead costs
incurred in the Partnerships operations. These costs are
based on development activities and are capitalized to
oil and gas properties
    
    $
    
    
    
    $
    71
    
    
    $
    71
  (4)
    
    OIL AND GAS PROPERTIES
  2006
    
    
    2005
    
    
    2004(In thousands)Oil and Gas PropertiesBalance, beginning of year
    
    $
    185,574
    
    
    $
    184,066
    
    
    $
    182,174Costs incurred during the year:Development Investing Partners
    
    
    
    
    
    
    1,766
    
    
    
    1,841Managing Partner
    
    
    
    
    
    
    44
    
    
    
    51Property sales Investing Partners
    
    
    
    
    
    
    (274
    )
    
    
    Managing Partners
    
    
    
    
    
    
    (28
    )
    
    
    Balance, end of year
    
    $
    185,574
    
    
    $
    185,574
    
    
    $
    184,066
 Managing
    
    
    InvestingPartner
    
    
    Partners
    
    
    Total(In thousands)Accumulated Depreciation, Depletion and AmortizationBalance, December 31, 2003
    
    $
    20,765
    
    
    $
    152,734
    
    
    $
    173,499Provision
    
    
    75
    
    
    
    2,741
    
    
    
    2,816Balance, December 31, 2004
    
    
    20,840
    
    
    
    155,475
    
    
    
    176,315Provision
    
    
    52
    
    
    
    1,988
    
    
    
    2,040Balance, December 31, 2005
    
    
    20,892
    
    
    
    157,463
    
    
    
    178,355Provision
    
    
    1
    
    
    
    1,481
    
    
    
    1,482Balance, December 31, 2006
    
    $
    20,893
    
    
    $
    158,944
    
    
    $
    179,837
  25




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APACHE OFFSHORE INVESTMENT PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (5)
    
    MAJOR CUSTOMER AND RELATED PARTIES INFORMATION
      (6)
    
    FINANCIAL INSTRUMENTS
  (7)
    
    COMMITMENTS AND CONTINGENCIES
 Litigation 
 Environmental 
 26




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APACHE OFFSHORE INVESTMENT PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (8)
    
    ASSET RETIREMENT OBLIGATION
    2006
    
    
    2005Asset retirement obligation at beginning of period
    
    $
    700,154
    
    
    $
    858,207Liabilities incurred
    
    
    
    
    
    
    167,767Liabilities settled
    
    
    
    
    
    
    (336,100
    )Accretion expense
    
    
    42,002
    
    
    
    45,672Revisions in estimated liabilities
    
    
    
    
    
    
    (35,392
    )Asset retirement obligation at December 31
    
    $
    742,156
    
    
    $
    700,154
  (9)
    
    TAX-BASIS FINANCIAL INFORMATION
  2006
    
    
    2005
    
    
    2004Net partnership ordinary income for federal income
tax reporting purposes
    
    $
    8,176,253
    
    
    $
    11,103,205
    
    
    $
    9,993,343Plus: Items of current (income) expense for tax reporting
purposes only Intangible drilling cost
    
    
    43,739
    
    
    
    1,318,588
    
    
    
    1,457,967Dismantlement and abandonment cost
    
    
    
    
    
    
    167,767
    
    
    
    6,101Gain on sale of properties
    
    
    
    
    
    
    (134,060
    )
    
    
    Tax depreciation
    
    
    453,100
    
    
    
    677,643
    
    
    
    999,074496,839
    
    
    
    2,029,938
    
    
    
    2,463,142Less: full cost DD&A expense
    
    
    (1,482,299
    )
    
    
    (2,039,571
    )
    
    
    (2,816,528
    )Less: asset retirement obligation accretion
    
    
    (42,002
    )
    
    
    (45,672
    )
    
    
    (48,744
    )Net income
    
    $
    7,148,791
    
    
    $
    11,047,900
    
    
    $
    9,591,213
 27




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APACHE OFFSHORE INVESTMENT PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   December 31,2006
    
    
    2005Liabilities for federal income tax purposes
    
    $
    262,159
    
    
    $
    611,889Asset retirement liability
    
    
    742,156
    
    
    
    700,154Liabilities under accounting principles generally
accepted in the United States
    
    $
    1,004,315
    
    
    $
    1,312,043
  28




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##### Table of Contents



APACHE OFFSHORE INVESTMENT PARTNERSHIP
 
 SUPPLEMENTAL OIL AND GAS DISCLOSURES
(UNAUDITED)
 Oil and Gas Reserve Information 
    2006
    
    2005
    
    2004Oil
    
    Gas
    
    Oil
    
    Gas
    
    Oil
    
    GasProved ReservesBeginning of year
    
    
    643
    
    
    
    4,538
    
    
    
    648
    
    
    
    5,244
    
    
    
    618
    
    
    
    5,992Extensions, discoveries and other additions
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    147
    
    
    
    32
    
    
    
    1,027Revisions of previous estimates
    
    
    33
    
    
    
    (310
    )
    
    
    83
    
    
    
    305
    
    
    
    134
    
    
    
    (377
    )Production
    
    
    (71
    )
    
    
    (795
    )
    
    
    (92
    )
    
    
    (1,158
    )
    
    
    (136
    )
    
    
    (1,398
    )End of year
    
    
    605
    
    
    
    3,433
    
    
    
    643
    
    
    
    4,538
    
    
    
    648
    
    
    
    5,244Proved DevelopedBeginning of year
    
    
    643
    
    
    
    4,433
    
    
    
    648
    
    
    
    5,140
    
    
    
    618
    
    
    
    5,883End of year
    
    
    605
    
    
    
    3,328
    
    
    
    643
    
    
    
    4,433
    
    
    
    648
    
    
    
    5,140
   29




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##### Table of Contents



APACHE OFFSHORE INVESTMENT PARTNERSHIP
SUPPLEMENTAL OIL AND GAS DISCLOSURES  (Continued)
(UNAUDITED)
 Future Net Cash Flows 
  Discounted Future Net Cash Flows Relating to Proved Reserves
 December 31,2006
    
    
    2005
    
    
    2004(In thousands)Future cash inflows
    
    $
    54,599
    
    
    $
    79,709
    
    
    $
    58,854Future production costs
    
    
    (6,193
    )
    
    
    (7,962
    )
    
    
    (5,943
    )Future development costs
    
    
    (3,485
    )
    
    
    (3,485
    )
    
    
    (3,571
    )Net cash flows
    
    
    44,921
    
    
    
    68,262
    
    
    
    49,34010 percent annual discount rate
    
    
    (17,156
    )
    
    
    (26,666
    )
    
    
    (17,590
    )Discounted future net cash flows
    
    $
    27,765
    
    
    $
    41,596
    
    
    $
    31,750
  For the Year Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)Sales, net of production costs
    
    $
    (8,935
    )
    
    $
    (13,451
    )
    
    $
    (12,820
    )Net change in prices and production costs
    
    
    (8,315
    )
    
    
    15,482
    
    
    
    4,435Extensions, discoveries and other additions
    
    
    
    
    
    
    1,616
    
    
    
    6,331Development costs incurred
    
    
    
    
    
    
    65
    
    
    
    233Revisions of quantities
    
    
    (459
    )
    
    
    4,391
    
    
    
    1,644Accretion of discount
    
    
    4,160
    
    
    
    3,175
    
    
    
    3,059Changes in future development costs
    
    
    
    
    
    
    (126
    )
    
    
    Changes in production rates and other
    
    
    (282
    )
    
    
    (1,306
    )
    
    
    (1,717
    )$
    (13,831
    )
    
    $
    9,846
    
    
    $
    1,165
 Impact of Pricing
  30




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APACHE OFFSHORE INVESTMENT PARTNERSHIP
 
 SUPPLEMENTAL QUARTELY FINANCIAL DATA
(UNAUDITED)
 First
    
    
    Second
    
    
    Third
    
    
    Fourth
    
    
    Total(In thousands, except per Unit amounts)2006Revenues
    
    $
    3,414
    
    
    $
    2,865
    
    
    $
    2,229
    
    
    $
    1,905
    
    
    $
    10,413Expenses
    
    
    915
    
    
    
    814
    
    
    
    738
    
    
    
    797
    
    
    
    3,264Net income
    
    $
    2,499
    
    
    $
    2,051
    
    
    $
    1,491
    
    
    $
    1,108
    
    
    $
    7,149Net income allocated to:Managing Partner
    
    $
    574
    
    
    $
    475
    
    
    $
    378
    
    
    $
    275
    
    
    $
    1,702Investing Partners
    
    
    1,925
    
    
    
    1,576
    
    
    
    1,113
    
    
    
    833
    
    
    
    5,447$
    2,499
    
    
    $
    2,051
    
    
    $
    1,491
    
    
    $
    1,108
    
    
    $
    7,149Net income per Investing
Partner Unit (1)
    
    $
    1,827
    
    
    $
    1,497
    
    
    $
    1,057
    
    
    $
    794
    
    
    $
    5,1782005Revenues
    
    $
    3,398
    
    
    $
    3,366
    
    
    $
    3,154
    
    
    $
    4,961
    
    
    $
    14,879Expenses
    
    
    1,037
    
    
    
    899
    
    
    
    944
    
    
    
    951
    
    
    
    3,831Net income
    
    $
    2,361
    
    
    $
    2,467
    
    
    $
    2,210
    
    
    $
    4,010
    
    
    $
    11,048Net income allocated to:Managing Partner
    
    $
    568
    
    
    $
    571
    
    
    $
    515
    
    
    $
    901
    
    
    $
    2,555Investing Partners
    
    
    1,793
    
    
    
    1,896
    
    
    
    1,695
    
    
    
    3,109
    
    
    
    8,493$
    2,361
    
    
    $
    2,467
    
    
    $
    2,210
    
    
    $
    4,010
    
    
    $
    11,048Net income per Investing
Partner Unit (1)
    
    $
    1,698
    
    
    $
    1,797
    
    
    $
    1,606
    
    
    $
    2,947
    
    
    $
    8,048
 
 (1)
    
    The sum of the individual net income per Investing Partner Unit may not agree with
the year-to-date net income per Investing Partner Unit as each quarterly computation is
based on the weighted average number of Investing Partner Units during that period. 31




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##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Disclosure Control and Procedures
  Report on Internal Control Over Financial Reporting
  
 ITEM 9B. OTHER INFORMATION
 None.
 32




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##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
  Code of Business Conduct
  
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  33




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 a.
    (1
    )
    
    Financial Statements  See accompanying index to financial statements in Item 8 above.(2
    )
    
    Financial Statement Schedules  See accompanying index to financial statements in Item 8 above.(3
    )
    
    Exhibits
 3.1
    
    Partnership Agreement of Apache Offshore Investment Partnership
(incorporated by reference to Exhibit (3)(i) to Form 10 filed by Partnership with
the Commission on April 30, 1985, Commission File No. 0-13546).3.2
    
    Amendment No. 1, dated February 11, 1994, to the Partnership Agreement
of Apache Offshore Investment Partnership (incorporated by reference to Exhibit 3.3
to Partnerships Annual Report on Form 10-K for the year ended December 31, 1993,
Commission File No. 0-13546).3.3
    
    Limited Partnership Agreement of Apache Offshore Petroleum Limited
Partnership (incorporated by reference to Exhibit (3)(ii) to Form 10 filed by
Partnership with the Commission on April 30, 1985, Commission File No. 0-13546).10.1
    
    Form of Assignment and Assumption Agreement between Apache Corporation
and Apache Offshore Petroleum Limited Partnership (incorporated by reference to
Exhibit 10.2 to Partnerships Quarterly Report on Form 10-Q for the quarter ended
June 30, 1992, Commission File No. 0-13546).10.2
    
    Joint Venture Agreement, dated as of November 23, 1992, between Apache
Corporation and Apache Offshore Petroleum Limited Partnership (incorporated by
reference to Exhibit 10.6 to Partnerships Annual Report on Form 10-K for the year
ended December 31, 1992, Commission File No. 0-13546).10.3
    
    Matagorda Island 681 Field Purchase and Sale Agreement with Option to
Exchange, dated November 24, 1992, between Apache Corporation, Shell Offshore, Inc.
and SOI Royalties, Inc. (incorporated by reference to Exhibit 10.7 to Partnerships
Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No.
0-13546).*23.1
    
    Consent of Ryder Scott Company, L.P., Petroleum Consultants.*31.1
    
    Certification of Chief Executive Officer.*31.2
    
    Certification of Chief Financial Officer.*32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer.99.1
    
    Consent statement of the Partnership, dated January 7, 1994 (incorporated
by reference to Exhibit 99.1 to Partnerships Annual Report on Form 10-K for the
year ended December 31, 1993, Commission File No. 0-13546).99.2
    
    Proxy statement to be dated on or about March 30, 2007, relating to the
2007 annual meeting of stockholders of Apache Corporation (incorporated by reference
to the document filed by Apache pursuant to Rule 14A, Commission File No. 1-4300).
 
 *
    
    Filed herewith. b.
    
    See a (3) above.c.
    
    See a (2) above.
 34




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##### Table of Contents



SIGNATURES
  APACHE OFFSHORE INVESTMENT PARTNERSHIPBy:
    
    Apache Corporation, General PartnerDate: February 28, 2007
    
    By:
    
    /s/ G. Steven FarrisG. Steven FarrisPresident, Chief Executive Officer andChief Operating Officer
 POWER OF ATTORNEY
   Name
    
    Title
    
    Date/s/ G. Steven Farris

G. Steven Farris
    
    Director, President, Chief
Executive Officer and Chief
Operating Officer (Principal
Executive Officer)
    
    February 28, 2007/s/ Roger B. Plank

Roger B. Plank
    
    Executive Vice President and
Chief Financial Officer
(Principal Financial
Officer)
    
    February 28, 2007/s/ Rebecca A. Hoyt

Rebecca A. Hoyt
    
    Vice President and Controller
(Principal Accounting Officer)
    
    February 28, 2007




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##### Table of Contents



Name
    
    Title
    
    Date/s/ Raymond Plank

Raymond Plank
    
    Chairman of the Board
    
    February 28, 2007/s/ Frederick M. Bohen

Frederick M. Bohen
    
    Director
    
    February 28, 2007/s/ Randolph M. Ferlic
    
    Director
    
    February 28, 2007Randolph M. Ferlic/s/ Eugene C. Fiedorek

Eugene C. Fiedorek
    
    Director
    
    February 28, 2007/s/ A. D. Frazier, Jr.

A. D. Frazier, Jr.
    
    Director
    
    February 28, 2007/s/ Patricia Albjerg Graham

Patricia Albjerg Graham
    
    Director
    
    February 28, 2007/s/ John A. Kocur

John A. Kocur
    
    Director
    
    February 28, 2007/s/ George D. Lawrence

George D. Lawrence
    
    Director
    
    February 28, 2007/s/ F. H. Merelli

F. H. Merelli
    
    Director
    
    February 28, 2007/s/ Rodman D. Patton

Rodman D. Patton
    
    Director
    
    February 28, 2007/s/ Charles J. Pitman

Charles J. Pitman
    
    Director
    
    February 28, 2007/s/ Jay A. Precourt

Jay A. Precourt
    
    Director
    
    February 28, 2007




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##### Table of Contents



Index to Exhibits
 3.1
    
    Partnership Agreement of Apache Offshore Investment Partnership (incorporated by reference to
Exhibit (3)(i) to Form 10 filed by Partnership with the Commission on April 30, 1985,
Commission File No. 0-13546).3.2
    
    Amendment No. 1, dated February 11, 1994, to the Partnership Agreement of Apache Offshore
Investment Partnership (incorporated by reference to Exhibit 3.3 to Partnerships Annual
Report on Form 10-K for the year ended December 31, 1993, Commission File No. 0-13546).3.3
    
    Limited Partnership Agreement of Apache Offshore Petroleum Limited Partnership (incorporated
by reference to Exhibit (3)(ii) to Form 10 filed by Partnership with the Commission on April
30, 1985, Commission File No. 0-13546).10.1
    
    Form of Assignment and Assumption Agreement between Apache Corporation and Apache Offshore
Petroleum Limited Partnership (incorporated by reference to Exhibit 10.2 to Partnerships
Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, Commission File No. 0-13546).10.2
    
    Joint Venture Agreement, dated as of November 23, 1992, between Apache Corporation and Apache
Offshore Petroleum Limited Partnership (incorporated by reference to Exhibit 10.6 to
Partnerships Annual Report on Form 10-K for the year ended December 31, 1992, Commission File
No. 0-13546).10.3
    
    Matagorda Island 681 Field Purchase and Sale Agreement with Option to Exchange, dated
November 24, 1992, between Apache Corporation, Shell Offshore, Inc. and SOI Royalties, Inc.
(incorporated by reference to Exhibit 10.7 to Partnerships Annual Report on Form 10-K for the
year ended December 31, 1992, Commission File No. 0-13546).*23.1
    
    Consent of Ryder Scott Company, L.P., Petroleum Consultants.*31.1
    
    Certification of Chief Executive Officer.*31.2
    
    Certification of Chief Financial Officer.*32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer.99.1
    
    Consent statement of the Partnership, dated January 7, 1994 (incorporated by reference to
Exhibit 99.1 to Partnerships Annual Report on Form 10-K for the year ended December 31, 1993,
Commission File No. 0-13546).99.2
    
    Proxy statement to be dated on or about March 30, 2007, relating to the 2007 annual meeting
of stockholders of Apache Corporation (incorporated by reference to the document filed by
Apache pursuant to Rule 14A, Commission File No. 1-4300).
 
 *
    
    Filed herewith.