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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, 2007
 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 
General Partnership
    
    IRS Employer
No. 41-1464066
 
  
 o þ
 o þ
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer
þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
 Aggregate market value of the voting and non-voting common
equity held by non-affiliates of registrant as of June 30,
2007
    
    $
    13,173,278




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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
    
    
    339A.
    
    CONTROLS AND PROCEDURES
    
    
    339B.
    
    OTHER INFORMATION
    
    
    33PART III10.
    
    DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
    
    
    3411.
    
    EXECUTIVE COMPENSATION
    
    
    3412.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
    
    
    3413.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    
    3414.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    34PART IV15.
    
    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
    
    
    35Consent of Ryder Scott Company, L.P., Petroleum ConsultantsCertification of CEOCertification of CFOCertification of CEO & CFO




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PART I
 
 ITEM 1. BUSINESS
 General
        1




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2007 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
  Inherent Risk in Drilling Activities
  
    
    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
    
    increase in cost of, or 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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Limited
Control Over the Activities on Properties We Do Not Operate
  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
    
    
    
    68146,061
    
    
    
    3,096
  4




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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
    
    
    
    25
    
    
    
    1.77North Padre Island 969, 976
    
    TX
    
    
    4
    
    
    
    .28
    
    
    
    
    
    
    
    Matagorda Island 681, 682
    
    TX
    
    
    1
    
    
    
    .06
    
    
    
    
    
    
    
    15
    
    
    
    .98
    
    
    
    25
    
    
    
    1.77
 Net Wells Drilled
  Net Exploratory
    
    Net DevelopmentYear
    
    Productive
    
    Dry
    
    Total
    
    Productive
    
    Dry
    
    Total2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    .13
    
    
    
    .06
    
    
    
    .19
 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)2007
    
    
    45
    
    
    
    555
    
    
    
    10
    
    
    $
    1.69
    
    
    $
    74.07
    
    
    $
    7.10
    
    
    $
    45.052006
    
    
    55
    
    
    
    795
    
    
    
    16
    
    
    
    1.08
    
    
    
    65.39
    
    
    
    7.58
    
    
    
    38.592005
    
    
    74
    
    
    
    1,158
    
    
    
    18
    
    
    
    .78
    
    
    
    53.91
    
    
    
    8.78
    
    
    
    33.98
  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 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(In thousands, except per Unit amounts)Total assets
    
    $
    8,308
    
    
    $
    8,629
    
    
    $
    11,624
    
    
    $
    12,215
    
    
    $
    11,674Partners capital
    
    $
    6,960
    
    
    $
    7,625
    
    
    $
    10,311
    
    
    $
    11,293
    
    
    $
    10,475Oil and gas sales
    
    $
    7,679
    
    
    $
    10,255
    
    
    $
    14,779
    
    
    $
    13,874
    
    
    $
    11,951Net income
    
    $
    4,834
    
    
    $
    7,149
    
    
    $
    11,048
    
    
    $
    9,591
    
    
    $
    8,037Net income allocated to:Managing Partner
    
    $
    1,146
    
    
    $
    1,702
    
    
    $
    2,555
    
    
    $
    2,407
    
    
    $
    2,037Investing Partners
    
    
    3,688
    
    
    
    5,447
    
    
    
    8,493
    
    
    
    7,184
    
    
    
    6,000$
    4,834
    
    
    $
    7,149
    
    
    $
    11,048
    
    
    $
    9,591
    
    
    $
    8,037Net income per Investing
Partner Unit
    
    $
    3,531
    
    
    $
    5,178
    
    
    $
    8,048
    
    
    $
    6,786
    
    
    $
    5,598Cash distributions per
Investing Partner Unit
    
    $
    4,000
    
    
    $
    7,500
    
    
    $
    9,000
    
    
    $
    6,000
    
    
    $
    4,500
 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 31,2007
    
    2006
    
    2005Gas volumes  Mcf per day
    
    
    1,520
    
    
    
    2,178
    
    
    
    3,172Average gas price  per Mcf
    
    $
    7.10
    
    
    $
    7.58
    
    
    $
    8.78Oil volumes  barrels per day
    
    
    122
    
    
    
    152
    
    
    
    203Average oil price  per barrel
    
    $
    74.07
    
    
    $
    65.39
    
    
    $
    53.91NGL volumes  barrels per day
    
    
    26
    
    
    
    43
    
    
    
    51Average NGL price  per barrel
    
    $
    45.05
    
    
    $
    38.59
    
    
    $
    33.98
 Year 2007 Compared to Year 2006
 Natural Gas and Crude Oil Sales
   Operating Expenses
  Year 2006 Compared to Year 2005
 Natural Gas and 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
   12




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Reserve Estimates
    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 Management on Internal Control over Financial Reporting
    
    16Report of Independent Registered Public Accounting Firm
    
    17Statement of Consolidated Income for each of the three years in the period ended December 31,
2007
    
    18Statement of Consolidated Cash Flows for each of the three years in the period ended
December 31, 2007
    
    19Consolidated Balance Sheet as of December 31, 2007 and 2006
    
    20Statement of Consolidated Changes in Partners Capital for each of the three years in the period
ended December 31, 2007
    
    21Notes to Consolidated Financial Statements
    
    22Supplemental Oil and Gas Disclosures
    
    30Supplemental Quarterly Financial Data
    
    32
   15




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REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
    Internal
Control  Integrated Framework
 President, Chief Executive Officer
and Chief Operating Officer of Apache Corporation,
Managing Partner
 Executive Vice President and Chief Financial Officer of
Apache Corporation, Managing Partner
 Vice President and Controller
(Chief Accounting Officer) of Apache Corporation,
Managing Partner
 
 16




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      
 17




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APACHE OFFSHORE INVESTMENT PARTNERSHIP
 
 STATEMENT OF CONSOLIDATED INCOME
 For the Year Ended December 31,2007
    
    
    2006
    
    
    2005REVENUES:Oil and gas sales
    
    $
    7,679,104
    
    
    $
    10,254,559
    
    
    $
    14,778,653Interest income
    
    
    104,274
    
    
    
    158,140
    
    
    
    99,9707,783,378
    
    
    
    10,412,699
    
    
    
    14,878,623OPERATING EXPENSES:Depreciation, depletion and amortization
    
    
    998,826
    
    
    
    1,482,299
    
    
    
    2,039,571Asset retirement obligation accretion
    
    
    44,522
    
    
    
    42,002
    
    
    
    45,672Lease operating expenses
    
    
    1,393,734
    
    
    
    1,183,159
    
    
    
    1,159,366Gathering and transportation costs
    
    
    96,082
    
    
    
    137,448
    
    
    
    169,114Administrative
    
    
    416,000
    
    
    
    419,000
    
    
    
    417,0002,949,164
    
    
    
    3,263,908
    
    
    
    3,830,723NET INCOME
    
    $
    4,834,214
    
    
    $
    7,148,791
    
    
    $
    11,047,900NET INCOME ALLOCATED TO:Managing Partner
    
    $
    1,145,720
    
    
    $
    1,702,177
    
    
    $
    2,554,528Investing Partners
    
    
    3,688,494
    
    
    
    5,446,614
    
    
    
    8,493,372$
    4,834,214
    
    
    $
    7,148,791
    
    
    $
    11,047,900NET INCOME PER INVESTING PARTNER UNIT
    
    $
    3,531
    
    
    $
    5,178
    
    
    $
    8,048WEIGHTED AVERAGE INVESTING PARTNER
UNITS OUTSTANDING
    
    
    1,044.5
    
    
    
    1,051.9
    
    
    
    1,055.4
 
 18




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##### Table of Contents



APACHE OFFSHORE INVESTMENT PARTNERSHIP
 
 STATEMENT OF CONSOLIDATED CASH FLOWS
 For the Year Ended December 31,2007
    
    
    2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    4,834,214
    
    
    $
    7,148,791
    
    
    $
    11,047,900Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation, depletion and amortization
    
    
    998,826
    
    
    
    1,482,299
    
    
    
    2,039,571Asset retirement obligation accretion
    
    
    44,522
    
    
    
    42,002
    
    
    
    45,672Dismantlement and abandonment cost
    
    
    
    
    
    
    
    
    
    
    (167,767
    )Changes in operating assets and liabilities:(Increase) decrease in accrued revenues receivable
    
    
    170,918
    
    
    
    902,563
    
    
    
    (470,419
    )Increase (decrease) in accrued operating expense
    
    
    150,712
    
    
    
    27,041
    
    
    
    (3,204
    )Increase (decrease) in receivable/payable from
Apache Corporation
    
    
    (123,581
    )
    
    
    531,823
    
    
    
    (191,796
    )Net cash provided by operating activities
    
    
    6,075,611
    
    
    
    10,134,519
    
    
    
    12,299,957CASH FLOWS FROM INVESTING ACTIVITIES:Additions to oil and gas properties
    
    
    (153,814
    )
    
    
    (369
    )
    
    
    (1,678,072
    )Increase (decrease) in accrued development cost
    
    
    
    
    
    
    (551,324
    )
    
    
    551,324Proceeds from sales of oil and gas properties
    
    
    
    
    
    
    
    
    
    
    134,060Net cash used in investing activities
    
    
    (153,814
    )
    
    
    (551,693
    )
    
    
    (992,688
    )CASH FLOWS FROM FINANCING ACTIVITIES:Repurchase of Partnership Units
    
    
    (124,512
    )
    
    
    (57,312
    )
    
    
    (22,775
    )Distributions to Investing Partners
    
    
    (4,184,610
    )
    
    
    (7,895,978
    )
    
    
    (9,499,617
    )Distributions to Managing Partner
    
    
    (1,189,789
    )
    
    
    (1,882,190
    )
    
    
    (2,506,864
    )Net cash used in financing activities
    
    
    (5,498,911
    )
    
    
    (9,835,480
    )
    
    
    (12,029,256
    )NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    422,886
    
    
    
    (252,654
    )
    
    
    (721,987
    )CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
    
    
    2,358,999
    
    
    
    2,611,653
    
    
    
    3,333,640CASH AND CASH EQUIVALENTS, END OF YEAR
    
    $
    2,781,885
    
    
    $
    2,358,999
    
    
    $
    2,611,653
 
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APACHE OFFSHORE INVESTMENT PARTNERSHIP
 
 CONSOLIDATED BALANCE SHEET
 December 31,2007
    
    
    2006ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    2,781,885
    
    
    $
    2,358,999Accrued revenues receivable
    
    
    362,259
    
    
    
    533,1773,144,144
    
    
    
    2,892,176OIL AND GAS PROPERTIES, on the basis of full cost accounting:Proved properties
    
    
    185,999,480
    
    
    
    185,574,025Less  Accumulated depreciation, depletion and amortization
    
    
    (180,835,913
    )
    
    
    (179,837,087
    )5,163,567
    
    
    
    5,736,938$
    8,307,711
    
    
    $
    8,629,114LIABILITIES AND PARTNERS CAPITALCURRENT LIABILITIES:Accrued operating expense
    
    $
    238,318
    
    
    $
    87,606Payable to Apache Corporation
    
    
    50,972
    
    
    
    174,553289,290
    
    
    
    262,159ASSET RETIREMENT OBLIGATION
    
    
    1,058,319
    
    
    
    742,156COMMITMENTS AND CONTINGENCIES (Note 7)PARTNERS CAPITAL:Managing Partner
    
    
    31,203
    
    
    
    75,272Investing Partners (1,038.2 and 1,048.3 Units outstanding,
respectively)
    
    
    6,928,899
    
    
    
    7,549,5276,960,102
    
    
    
    7,624,799$
    8,307,711
    
    
    $
    8,629,114
 
 20




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##### Table of Contents



APACHE OFFSHORE INVESTMENT PARTNERSHIP
 
 STATEMENT OF CONSOLIDATED CHANGES IN PARTNERS CAPITAL
 Managing
    
    
    InvestingPartner
    
    
    Partners
    
    
    TotalBALANCE, 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
    
    
    $
    7,624,799Distributions
    
    
    (1,189,789
    )
    
    
    (4,184,610
    )
    
    
    (5,374,399
    )Repurchase of Partnership Units
    
    
    
    
    
    
    (124,512
    )
    
    
    (124,512
    )Net income
    
    
    1,145,720
    
    
    
    3,688,494
    
    
    
    4,834,214BALANCE, DECEMBER 31, 2007
    
    $
    31,203
    
    
    $
    6,928,899
    
    
    $
    6,960,102
 
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APACHE OFFSHORE INVESTMENT PARTNERSHIP
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (1)
    
    ORGANIZATIONNature of Operations 
      22




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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, 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
    
    
    
    10,016December 31, 2006
    
    
    15,207,303
    
    
    
    12,507June 30, 2007
    
    
    13,866,608
    
    
    
    11,282
 Investing Partner Units Outstanding:
    
    2007
    
    2006
    
    2005Balance, beginning of year
    
    
    1,048.3
    
    
    
    1,053.4
    
    
    
    1,055.7Repurchase of Partnership Units
    
    
    (10.1
    )
    
    
    (5.1
    )
    
    
    (2.3
    )Balance, end of year
    
    
    1,038.2
    
    
    
    1,048.3
    
    
    
    1,053.4
 Capital Contributions 
  23




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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 
     24




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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 
  Payable to Apache Corporation 
  Maintenance and Repairs 
  Shipping and Handling Costs 
  25




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APACHE OFFSHORE INVESTMENT PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (3)
    
    COMPENSATION TO APACHE
  Total Reimbursed by the Investing Partners forthe Year Ended December 31,2007
    
    
    2006
    
    
    2005(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
    
    $
    333
    
    
    $
    335
    
    
    $
    334b.
    
    
    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
    
    $
    7
    
    
    $
    
    
    
    $
    71
  (4)
    
    OIL AND GAS PROPERTIES
  2007
    
    
    2006
    
    
    2005(In thousands)Oil and Gas PropertiesBalance, beginning of year
    
    $
    185,574
    
    
    $
    185,574
    
    
    $
    184,066Costs incurred during the year:Development Investing Partners
    
    
    319
    
    
    
    
    
    
    
    1,766Managing Partner
    
    
    106
    
    
    
    
    
    
    
    44Property sales Investing Partners
    
    
    
    
    
    
    
    
    
    
    (274
    )Managing Partners
    
    
    
    
    
    
    
    
    
    
    (28
    )Balance, end of year
    
    $
    185,999
    
    
    $
    185,574
    
    
    $
    185,574
 Managing
    
    
    InvestingPartner
    
    
    Partners
    
    
    Total(In thousands)Accumulated Depreciation, Depletion and AmortizationBalance, 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
    
    
    $
    179,837Provision
    
    
    4
    
    
    
    995
    
    
    
    999Balance, December 31, 2007
    
    $
    20,897
    
    
    $
    159,939
    
    
    $
    180,836
  26




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##### Table of Contents



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 
 27




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APACHE OFFSHORE INVESTMENT PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (8)
    
    ASSET RETIREMENT OBLIGATION
    2007
    
    
    2006Asset retirement obligation at beginning of period
    
    $
    742,156
    
    
    $
    700,154Accretion expense
    
    
    44,522
    
    
    
    42,002Revisions in estimated liabilities
    
    
    271,641
    
    
    
    Asset retirement obligation at December 31
    
    $
    1,058,319
    
    
    $
    742,156
 (9)
    
    TAX-BASIS FINANCIAL INFORMATION
  2007
    
    
    2006
    
    
    2005Net partnership ordinary income for
federal income tax reporting purposes
    
    $
    5,475,029
    
    
    $
    8,176,253
    
    
    $
    11,103,205Plus: Items of current (income) expense
for tax reporting purposes only Intangible drilling cost
    
    
    35,699
    
    
    
    43,739
    
    
    
    1,318,588Dismantlement and abandonment cost
    
    
    
    
    
    
    
    
    
    
    167,767Gain on sale of properties
    
    
    
    
    
    
    
    
    
    
    (134,060
    )Tax depreciation
    
    
    366,834
    
    
    
    453,100
    
    
    
    677,643402,533
    
    
    
    496,839
    
    
    
    2,029,938Less: full cost DD&A expense
    
    
    (998,826
    )
    
    
    (1,482,299
    )
    
    
    (2,039,571
    )Less: asset retirement obligation accretion
    
    
    (44,522
    )
    
    
    (42,002
    )
    
    
    (45,672
    )Net income
    
    $
    4,834,214
    
    
    $
    7,148,791
    
    
    $
    11,047,900
 28




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##### Table of Contents



APACHE OFFSHORE INVESTMENT PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   December 31,2007
    
    
    2006Liabilities for federal income tax purposes
    
    $
    289,920
    
    
    $
    262,159Asset retirement liability
    
    
    1,058,319
    
    
    
    742,156Liabilities under accounting principles generally
accepted in the United States
    
    $
    1,348,239
    
    
    $
    1,004,315
  29




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##### Table of Contents



APACHE OFFSHORE INVESTMENT PARTNERSHIP
 
 SUPPLEMENTAL OIL AND GAS DISCLOSURES
(UNAUDITED)
 Oil and Gas Reserve Information 
    2007
    
    
    2006
    
    
    2005Oil
    
    
    Gas
    
    
    Oil
    
    
    Gas
    
    
    Oil
    
    
    GasProved ReservesBeginning of year
    
    
    605
    
    
    
    3,433
    
    
    
    643
    
    
    
    4,538
    
    
    
    648
    
    
    
    5,244Extensions, discoveries and other additions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    147Revisions of previous estimates
    
    
    20
    
    
    
    126
    
    
    
    33
    
    
    
    (310
    )
    
    
    83
    
    
    
    305Production
    
    
    (54
    )
    
    
    (555
    )
    
    
    (71
    )
    
    
    (795
    )
    
    
    (92
    )
    
    
    (1,158
    )End of year
    
    
    571
    
    
    
    3,004
    
    
    
    605
    
    
    
    3,433
    
    
    
    643
    
    
    
    4,538Proved DevelopedBeginning of year
    
    
    605
    
    
    
    3,328
    
    
    
    643
    
    
    
    4,433
    
    
    
    648
    
    
    
    5,140End of year
    
    
    571
    
    
    
    2,899
    
    
    
    605
    
    
    
    3,328
    
    
    
    643
    
    
    
    4,433
   30




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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 31,2007
    
    
    2006
    
    
    2005(In thousands)Future cash inflows
    
    $
    70,569
    
    
    $
    54,599
    
    
    $
    79,709Future production costs
    
    
    (8,710
    )
    
    
    (6,193
    )
    
    
    (7,962
    )Future development costs
    
    
    (4,421
    )
    
    
    (3,485
    )
    
    
    (3,485
    )Net cash flows
    
    
    57,438
    
    
    
    44,921
    
    
    
    68,26210 percent annual discount rate
    
    
    (25,539
    )
    
    
    (17,156
    )
    
    
    (26,666
    )Discounted future net cash flows
    
    $
    31,899
    
    
    $
    27,765
    
    
    $
    41,596
  For the Year Ended December 31,2007
    
    
    2006
    
    
    2005(In thousands)Sales, net of production costs
    
    $
    (6,189
    )
    
    $
    (8,935
    )
    
    $
    (13,451
    )Net change in prices and production costs
    
    
    10,719
    
    
    
    (8,315
    )
    
    
    15,482Extensions, discoveries and other additions
    
    
    
    
    
    
    
    
    
    
    1,616Development costs incurred
    
    
    
    
    
    
    
    
    
    
    65Revisions of quantities
    
    
    1,469
    
    
    
    (459
    )
    
    
    4,391Accretion of discount
    
    
    2,777
    
    
    
    4,160
    
    
    
    3,175Changes in future development costs
    
    
    (453
    )
    
    
    
    
    
    
    (126
    )Changes in production rates and other
    
    
    (4,189
    )
    
    
    (282
    )
    
    
    (1,306
    )$
    4,134
    
    
    $
    (13,831
    )
    
    $
    9,846
 Impact of Pricing
  31




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##### Table of Contents



APACHE OFFSHORE INVESTMENT PARTNERSHIP
 
 SUPPLEMENTAL QUARTERLY FINANCIAL DATA
 (UNAUDITED)
 First
    
    
    Second
    
    
    Third
    
    
    Fourth
    
    
    Total(In thousands, except per Unit amounts)2007Revenues
    
    $
    1,918
    
    
    $
    1,828
    
    
    $
    1,903
    
    
    $
    2,134
    
    
    $
    7,783Expenses
    
    
    640
    
    
    
    858
    
    
    
    646
    
    
    
    805
    
    
    
    2,949Net income
    
    $
    1,278
    
    
    $
    970
    
    
    $
    1,257
    
    
    $
    1,329
    
    
    $
    4,834Net income allocated to:Managing Partner
    
    $
    306
    
    
    $
    239
    
    
    $
    297
    
    
    $
    304
    
    
    $
    1,146Investing Partners
    
    
    972
    
    
    
    731
    
    
    
    960
    
    
    
    1,025
    
    
    
    3,688$
    1,278
    
    
    $
    970
    
    
    $
    1,257
    
    
    $
    1,329
    
    
    $
    4,834Net income per InvestingPartner Unit (1)
    
    $
    928
    
    
    $
    698
    
    
    $
    920
    
    
    $
    986
    
    
    $
    3,5312006Revenues
    
    $
    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 InvestingPartner Unit (1)
    
    $
    1,827
    
    
    $
    1,497
    
    
    $
    1,057
    
    
    $
    794
    
    
    $
    5,178
 
 (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. 32




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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
  Changes in Internal Control Over Financial Reporting
  
 ITEM 9B. OTHER INFORMATION
  33




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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
  34




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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, 2008, relating to the
2008 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.
 35




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##### Table of Contents



SIGNATURES
  APACHE OFFSHORE INVESTMENT PARTNERSHIPBy:
    
    Apache Corporation, General PartnerDate: February 28, 2008
    
    By:
    
    /s/ G. Steven Farris

G. Steven Farris
President, Chief Executive Officer and
Chief 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, 2008/s/ Roger B. Plank

Roger B. Plank
    
    Executive Vice President and
Chief  Financial Officer
(Principal Financial
Officer)
    
    
    February 28, 2008/s/ Rebecca A. Hoyt

Rebecca A. Hoyt
    
    Vice President and Controller
(Principal Accounting Officer)
    
    
    February 28, 2008




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##### Table of Contents



Name
    
    Title
    
    Date/s/ Raymond Plank

Raymond Plank
    
    Chairman of the Board
    
    February 28, 2008/s/ Frederick M. Bohen

Frederick M. Bohen
    
    Director
    
    February 28, 2008/s/ Randolph M. Ferlic

Randolph M. Ferlic
    
    Director
    
    February 28, 2008/s/ Eugene C. Fiedorek

Eugene C. Fiedorek
    
    Director
    
    February 28, 2008/s/ A. D. Frazier, Jr.

A. D. Frazier, Jr.
    
    Director
    
    February 28, 2008/s/ Patricia Albjerg Graham

Patricia Albjerg Graham
    
    Director
    
    February 28, 2008/s/ John A. Kocur

John A. Kocur
    
    Director
    
    February 28, 2008/s/ George D. Lawrence

George D. Lawrence
    
    Director
    
    February 28, 2008/s/ F. H. Merelli

F. H. Merelli
    
    Director
    
    February 28, 2008/s/ Rodman D. Patton

Rodman D. Patton
    
    Director
    
    February 28, 2008/s/ Charles J. Pitman

Charles J. Pitman
    
    Director
    
    February 28, 2008




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##### Table of Contents



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, 2008, relating to the
2008 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.