# Fellow Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-e-p/NASDAQ_APA_2017/NASDAQ_APA_2017.mmd` · pages 3-9_

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Fellow Shareholders

2017 was another year of significant progress at Apache, marked by several important milestones across the company's portfolio. Key strategic actions and operational achievements have placed us on a firm path to deliver long-term, returns-focused growth and differential shareholder value. Apache's accomplishments over the last three years have generated significant momentum that we will continue to build upon in 2018 and beyond.

## Key 2017 highlights

• Returned the Permian Basin to a growth trajectory, exclusive of Alpine High, on an increasingly productive capital program. Our total Permian Basin production reached a record high in the fourth quarter of 2017, exceeding the previous record set two years prior.

• Conducted important multiwell pad tests in the Midland Basin, which led to reduced drilling and completion time, more effective well bore placement within landing zones, and more efficient stimulation of oil-bearing rock. Apache is now delivering some of the best well results in the Midland Basin per capital dollar invested.

• Initiated production at Alpine High ahead of schedule and grew volumes steadily throughout the year. We increased our inventory of risked locations to more than 5,000 and initiated our first multiwell pads and pattern tests, which will drive significant capital efficiency gains in the 2018 program and for many years to come.

• Completed our strategic exit from Canada; the latest significant step in a large-scale, multiyear portfolio rotation into Alpine High. This will enhance capital efficiency, increase recycle ratios and most importantly, improve long-term returns.

• Continued our long track record of successful international exploration and development in Egypt and the North Sea, sustaining the capacity to generate strong free cash flow.
• Maintained our balance sheet strength and liquidity, which supports our dividend and capital program.

## Building for the future

As we look to the future, our investment programs are directed to maximize the long-term value potential of our portfolio.

At Alpine High, we are developing a world-class, large-scale resource play capable of significantly enhancing Apache's returns, growth and value-adding capacity for decades. After two years of delineating this massive hydrocarbon system, we began the transition to development in 2017. We have taken a very deliberate and methodical approach to appraising the Alpine High potential, and we are very well-positioned for this next phase of activity. The midstream infrastructure buildout at Alpine High will bring forth the capacity to deliver very high volumes of oil, gas and NGLs to rapidly growing markets on the Texas Gulf Coast. In 2018, we are evaluating strategic alternatives to fund Alpine High midstream. This includes partnering, which would free up capital planned for midstream infrastructure, or a partial monetization; either of which would allow us to invest in higher return opportunities within the portfolio or return capital to shareholders.

In other areas of the Permian Basin, we have made great progress over the last three years. We have lowered well costs, improved targeting capability, and enhanced our landing zone understanding. This has enabled a transition to full-section development in

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John E. Lowe
Chairman of the Board

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John J. Christmann IV
Chief Executive Officer and President

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Production by Product
■ Oil
■ Natural Gas
■ NGLs

457 Mboe/d
TOTAL PRODUCTION

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Revenue by Product
■ Oil
■ Natural Gas
■ NGLs

$5.9 Billion
TOTAL REVENUE

our key assets. Full-section development is the only way to maximize long-term value. We also continue to test and prove up new opportunities across our extensive acreage position. We operate at an appropriate pace in the Permian Basin that allows us to grow our development activity for the long term while incorporating learnings along the way.

Internationally, we are well-positioned to continue generating strong returns and significant free cash flow. In Egypt, we've increased our acreage footprint by 40 percent with two new concessions and are conducting a large-scale, high-density, high-resolution 3D seismic survey. We are confident the significantly improved imaging will open new growth opportunities across both our new and legacy acreage footprint in the Western Desert. In the North Sea, we have a well-balanced inventory of current development locations, short-cycle tie-backs of recent discoveries, and further exploration prospects. Near-infrastructure opportunities like these are highly economic and help maintain efficient operating volumes at our installed facilities. In Suriname, we have two large and highly prospective offshore blocks that are on trend with recent discoveries in an emerging world-class oil basin.

As a leader in technological innovation, we know that the continued application of technology is vital to our industry and our company. Apache will accelerate the adoption and implementation of cutting-edge technology initiatives and data analytics, with an objective of reducing costs, driving efficiency gains, expanding inventory and generating higher returns.

We have a well-established practice of leading the industry on environmental stewardship, and we are using that experience at Alpine High, which is designed to be a showcase for best-in-class environmental and community practices.

2018 promises to be a year of opportunity. With a continued focus on financial discipline, rigorous portfolio management and relentless optimization of returns, we are confident that it will be a year of great progress and great success.

We thank you for your continued support and investment.

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John E. Lowe
Chairman of the Board

![](images/4_3.jpg)

John J. Christmann IV
Chief Executive Officer and President