# Dear Fellow
Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-e-p/NASDAQ_APA_2019/NASDAQ_APA_2019.mmd` · pages 3-9_

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Dear Fellow
Shareholders,

As we write this, healthcare workers and first responders are on the front lines of the battle against COVID-19, we are all adjusting to changes in the way we live and work, and our industry is facing a crisis driven by simultaneous demand and supply shocks. We are not the first to call these times unprecedented.

While this report is primarily a look back at 2019, we will briefly address the present situation as of May 2020.

Apache has taken numerous precautions to protect employee and public health and ensure business continuity in response to the COVID-19 pandemic. As we continue to explore for energy and operate our assets through this difficult time, our team also remains committed to environmental stewardship and responsible energy development. We are very thankful for – and proud of – our entire workforce; they have shown true resiliency and demonstrated ingenuity, determination and commitment to our core values while finding new, more efficient ways to safely get the job done.

Apache has also taken swift and decisive action to protect its financial position in response to the current market conditions. In March, we further reduced our planned 2020 upstream capital investment to approximately \(1.1 billion, which is nearly 55% below the 2019 level; we reduced our annual dividend payment by \)340 million; and to protect 2020 cash flows from further price deterioration, we added significant near-term oil price hedges. In addition, our organizational redesign, which has been underway for several months, is yielding critical cost reductions that will enable us to remain competitive for the long term. In 2018 and 2019, we completed approximately $1.6 billion of debt refinancings that significantly reduced near-term bond maturities and enabled us to retire $150 million of higher coupon bonds. Together, these steps have prepared us to weather this storm and ultimately thrive for many years to come.

In 2019, we made continued progress on several important strategic initiatives. We maintained strict capital discipline, improved operational performance, advanced sustainability reporting, and initiated a successful and potentially high-impact exploration program in the Guyana-Suriname Basin.

## KEY 2019 HIGHLIGHTS

• Reduced capital investment in 2019 by 23% over 2018, while increasing total company adjusted production by nearly 5%, U.S. production by more than 7%, and Permian oil production by 6% year-over-year;

• Signed a 50-50 joint venture agreement with Total S.A. for Block 58 offshore Suriname that significantly reduces Apache's potential large-scale appraisal and development capital requirements;

• Drilled the Maka Central-1 well in Block 58 Suriname and followed with the announcement of a significant oil discovery in January 2020;

• Launched a comprehensive corporate redesign to further align the organization, work processes and cost structure with long-term planned activity levels, and now targeting a minimum annual savings of $300 million;

• Generated full-year cash return on invested capital on-target with the corporate incentive compensation goal of 19%;

## 2019 ADJUSTED PRODUCTION

Our diverse portfolio gives us a unique set of dials to turn in response to changes in the market.

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$6.32 Billion

Oil and Gas Revenue

$2.37 Billion

Upstream Capital Investment \( ^{1} \) 

474 Mboe/d

Reported Production

413 Mboe/d

Adjusted Production \( ^{2} \) 

$4.05 Billion

Adjusted EBITDAX \( ^{1} \) 

(1) For a reconciliation to the most directly comparable GAAP financial measure, please refer to our earnings press release.

(2) Excludes production attributable to Egypt tax barrels and noncontrolling interest.

• Achieved the highest quarterly Permian oil production rate in Apache history, averaging 103,000 barrels per day during the fourth quarter; and

• Advanced sustainability efforts by initiating alignment with Sustainability Accounting Standards Board (SASB) and Task Force on Climate-related Financial Disclosures (TCFD) reporting standards and beginning to link ESG performance to short-term incentive compensation.

## LOOKING AHEAD

Looking ahead, our strategy for creating long-term shareholder value is straightforward. We will design and fund a capital program capable of delivering a sustainable combination of long-term returns with a moderate pace of growth; adjust our capital investment within our portfolio to match the prevailing commodity price environment; live within cash flow and generate free cash return to investors; and carry out a comprehensive exploratory and appraisal program offshore Suriname, where we have opened up a leading position in arguably the most watched new basin on the globe. With our partner, Total, we have announced two significant oil discoveries on Block 58 in 2020, and – consistent with our strategy of investing for long-term returns with growth as an outcome – we are choosing to allocate capital to Suriname over the next several years in lieu of short-term growth opportunities in a low-price environment elsewhere in the portfolio.

Our new centralized organization has made us more nimble, and our diverse portfolio gives us a unique set of dials to turn in response to change in the market. We are planning and allocating our investments more efficiently and have flexibility to adjust our activity levels – across conventional and unconventional exploration and development; onshore and offshore; short-cycle and longer cycle investments and U.S. and international assets. This is our differentiated approach – one that will enable us not only to ride out the current market situation, but to emerge with the capability to take advantage of better opportunities ahead.

Our long-term vision is clear. Oil and gas will continue to power the world's economies well into the future and create countless new opportunities for people wanting reliable, abundant energy to help lift their families to higher standards of living. Businesses and economies will prosper again on the other side of this pandemic, and Apache will be well-positioned when they do.

To our shareholders, we thank you for your continued investment and support. We would also like to extend our thanks to all those working tirelessly and taking personal risk to see us through this public health crisis. You have our deepest appreciation.

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Jill Evans

John E. Lowe
Chairman of the Board

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John J. Christman IV
Chief Executive Officer
and President

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