MISSION COMMAND

ALTERNATIVE PROJECT MANAGEMENT (IT’S NOT ABOUT THE BOK)

MARK RICHARDSON

APACHE NORTH SEA

PROJECTS GROUP MANAGER

14 MAY 2014

Certain statements in this presentation may contain "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 including, without limitation, expectations, beliefs, plans and objectives regarding production and exploration activities. Any matters that are not historical facts are forward-looking and, accordingly, involve estimates, assumptions, risks and uncertainties, including, without limitation, risks, uncertainties and other factors discussed in our most recently filed Annual Report on Form 10-K, recent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K available on our website, http://www.apachecorp.com/, and in our other public filings and press releases. These forward-looking statements are based on Apache Corporation’s (Apache) current expectations, estimates and projections about the company, its industry, its management’s beliefs and certain assumptions made by management. No assurance can be given that such expectations, estimates or projections will prove to have been correct. Whenever possible, these “forward-looking statements” are identified by words such as “expects,” “believes,” “anticipates” and similar phrases. Because such statements involve risks and uncertainties, Apache’s actual results and performance may differ materially from the results expressed or implied by such forward-looking statements. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. Unless legally required, we assume no duty to update these statements as of any future date. However, you should review carefully reports and documents that Apache files periodically with the Securities and Exchange Commission. Cautionary Note to Investors: The United States Securities and Exchange Commission ("SEC") permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable, and possible reserves that meet the SEC's definitions for such terms. Apache uses certain terms in this presentation, such as “BO resource,” “BO Potential” and other similar terms that the SEC guidelines strictly prohibit Apache from including in filings with the SEC. “BO Resource,” “BO Potential” and other such terms do not take into account the certainty of resource recovery, which is contingent on exploration success, technical improvements in drilling access, commerciality and other factors, and are therefore not indicative of expected future resource recovery and should not be relied upon. Investors are urged to consider carefully the disclosure in Apache’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, and amendments thereto, available from Apache at www.apachecorp.com or by writing Apache at: 2000 Post Oak Blvd., Suite 100, Houston, Texas 77056 (Attn: Corporate Secretary). You can also obtain this report from the SEC by calling 1-800-SEC-0330 or from the SEC's website at www.sec.gov

FORWARD LOOKING STATEMENTS

Apache North Sea Limited

Apache Projects

Traditional Project Management Approach

Traditional Project Management Performance

Mission Command History

Principles

Implementation

Discussion & Questions

4

AGENDA

5

APACHE NORTH SEA

SAFETY PERFORMANCE

Company Improvement

Notices

Prohibition

Notices

Maersk (all sections) 13 3

Talisman 10 1

Shell U.K. Limited 8 6

CNR 8 1

Marathon 7 0

Petrofac Facilities Management 5 0

Total E&P 4 0

Chevron 4 0

Taqa 3 0

Nexen 3 0

BP 2 0

Premier Oil 2 0

Apache 2 0 Sources: OGUK Benchmarking 2013 Data and HSE http://www.hse.gov.uk/notices/notices

7

2013 PRODUCTION

Forties

Beryl Area

Nelson Scott

Nevis S Telford Buckland Ness Maclure Bacchus

0

500

1,000

1,500

2,000

2,500

3,000

MBOE/D

0

20

40

60

80

100

120

140

Gas

Oil

8

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

APACHE

MARATHON

TULLOW

PERENCO

BHP

CENTRICA

ENQUEST

BRIDGE

NEXEN

DANA

COP

TAQA

RWE

BG

CHEVRON

ITHACA

PREMIER

SHELL

TOTAL

BP

TALISMAN

MAERSK

CNR

E.ON

2013 PRODUCTION EFFICIENCY

1

3

5

7

9

11

13

15

17

19

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Op

erat

or

Ran

kin

g

Source: OGUK Production Efficiency Task Force Data Pack

FortiesAcquisition

2003 2004 2005 2006 2007 2008 2009 2010 2011MNSLAcquisition

2012 2013

Running Costs 130 180 186 226 226 236 198 208 253 365 428

Other Capital 683 9 19 35 22 26 23 24 48 33 1250 64 84

ITS Capital 28 158 214 176 253 226 156 202 263 271 323

Drilling Capital 23 185 240 133 260 210 198 367 527 553 476

Cum. Spend ($ million) 683 873 1415 2091 2647 3412 4106 4681 5507 6583 7833 9086 10397

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

0

200

400

600

800

1,000

1,200

1,400

Cu

mu

lati

ve S

pen

d $

mill

ion

An

nu

al S

pen

d $

mill

ion

9

EXPENDITURE

2003 2004 2005 2006 2007 2008 2009 2010 2011MNSLAcquisition

2012 2013

Oil & Gas Revenue 273 472 1275 1355 1399 2103 1369 1605 2185 2771 2728

Total Spend -873 -542 -675 -557 -765 -694 -576 -826 -1076 -1250 -1254 -1311

Current Tax Liability -41 35 -310 -504 -439 -1091 -360 -599 -1235 -1097 -880

Cumulative Rev less Spend less Tax Liability -641 -677 -388 -94 102 419 853 1034 908 -342 78 616

-2,000

-1,500

-1,000

-500

-

500

1,000

1,500

2,000

2,500

3,000

$

mill

ion

10

REVENUE STREAM

Apache North Sea Limited

Apache Projects

Traditional Project Management Approach

Traditional Project Management Performance

Mission Command History

Principles

Implementation

Discussion & Questions

11

AGENDA

12

Projects Group Manager

Mark Richardson

Topsides

Kevin Duncan

Subsea

Paul Williams

Project Services

Richard Stark

Construction

Willie Ferguson

Systems

Kieran Marr

Develops & FASP

Neil Rogerson

THE PROJECTS TEAM

13

THE DELIVERY PROCESS identity

process and control

quick reference

stage summaries

How to...

CP1 CP2 CP3 CP4 CP5 CP6

PROJECTS DELIVERY MANUAL

100 - General philosophy and approach 200 - Broader Project Management Topics 300 - Specific methods and tools

FASP topsides installed - Hook up and commissioning now 99% complete.

Forties Charlie Deep Gas Lift - Commissioned and two wells brought on line.

Beryl's Subsea Campaign - Reinstating shut-in subsea production from S66/S64 plus N10 and S59, correcting integrity faults, laying a new pipeline and installing a new Skene umbilical.

FASP

FC Deep Gas Lift Compressor

Skene Subsea Umbilical Replacement

2013 PROJECTS

Aviat Fuel Gas Tie-back - FEED completed.

Nevis Ness - Concept select phase completed.

Bacchus - Third well hooked up and commissioned.

Tonto Field – New field brought on through Forties.

Forties Delta Controls System ‘Delta V’ upgrade - Complete with wells now being cut over.

Beryl Alpha Rig 2 Reinstatement Project - Completed and now drilling.

Bacchus Third Well Tie-in Delta V Equipment Room Reactivated Drilling Rig

Ness Nevis Tie-back

Aviat Schematic

2013 PROJECTS

Apache North Sea Limited

Apache Projects

Traditional Project Management Approach

Traditional Project Management Performance

Mission Command History

Principles

Implementation

Discussion & Questions

16

AGENDA

17

Definition Project management is the application of processes, methods, knowledge, skills and experience to achieve the project objectives.

General A project is a unique, transient endeavour, undertaken to achieve planned objectives, which could be defined in terms of outputs, outcomes or benefits. A project is usually deemed to be a success if it achieves the objectives according to their acceptance criteria, within an agreed timescale and budget.

17 17 17 Source 1 : http://www.apm.org.uk/WhatIsPM Source 2: http://projectjedi.wordpress.com/2012/04/30/a-brief-history-of-project-management/

TRADITIONAL PROJECT MANAGEMENT

STAGE GATE PROCESS

Defer, Delay or Do Nothing

19

RISK MANAGEMENT

Pro

bab

ility

Cost/Time P50

Flyvbjerg – Optimism Bias

Esti

mat

e V

aria

nce

Time

4.0 X

0.25 X

1.0 X

McConnell - Uncertainty

People, not Process Deliver Projects

Apache North Sea Limited

Apache Projects

Traditional Project Management Approach

Traditional Project Management Performance

Mission Command History

Principles

Implementation

Discussion & Questions

20

AGENDA

21 Source: KPMG 2013 PROJECT MANAGEMENT SURVEY REPORT

There has been a significant increase in project activity in the past two years across all sectors of the economy.

However failure rates are increasing – with survey results showing that only one-third of projects are delivering the desired outcome.

2010 2012

Consistently on Budget 48% 33%

Consistently on Time 36% 29%

Consistently Delivering Stated Deliverables

59% 35%

KPMG 2012 SURVEY OF PM PRACTICES IN NEW ZEALAND

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

> $5bn < $5bn

2011 E&P Projects with >50% Budget Overruns

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

1997 2005 2011

% of E&P Projects with >50% Budget Overruns

◤ Capital spend has tripled in the past 10 years to reach $500-600 bn.

◤ Oil and gas projects failed to meet their original objectives in 78% of cases.

◤ 60% of the failures suffered severe operability problems 2 years after they entered production.

22 22 Source: SBC Capital Projects Survey 2012

SBC 2012 GLOBAL OIL AND GAS PROJECT PERFOMANCE

23

US $BN

End

eavo

ur*

TAA

S-YU

RYA

KH

*

Med

co*

NLN

G**

*

Cen

tric

a*

GD

F Su

ez*

Mae

rsk*

Eco

pet

rol*

OM

V

PT

TEP

*

Sun

cor*

Luko

il**

Wo

od

sid

e*

Petr

on

as*

Talis

man

An

adar

ko

Hes

s

Dev

on

BG

Gro

up

Ap

ach

e

Co

no

coP

hill

ips

BP

Stat

oil

Shel

l

Ch

evr

on

Legend

Major NOC Independent

Mega developers

(average > $4bn)

Large developers

(average < $4bn)

23 23 Source : Company 10-K & 20-F, Rystad, SBC Capital Projects Survey 2013 Note: * from Rystad **Global development cost expenditure was used for Lukoil *** 2012 value only

SBC 2013 SURVEY PARTICIPANTS

24 Source: IHS Upstream database; US PPI Index – Only projects exceeding $1bn (in 2011 US$) were considered, representing an average of 14 projects per year

PROJECT DELAYS AND SEVERITY OF DELAY

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2003 2002 2001 2000

Years o

f de

lay %

of

tota

l pro

ject

s d

ela

yed

2012 2011 2010 2009 2008 2007 2006 2005 2004

Average delay

2 to 5 years

More than 5 years

1 to 2 years

25

Disappointing performance

COST ESCALATION SCHEDULE SLIPPAGE LIFECYCLE VALUE

13%

38% 50%

>40% 18%

20 - 40% 14%

10 - 20% 14%

5 - 10% 9%

0 - 5% 46%

>40% 17%

20 - 40% 26%

10 - 20% 17%

5 - 10% 7%

0 - 5% 33%

Projects capture largest proportion of life cycle value

Significant value left in various forms

A non-negligible part of long-term value not captured

Source: SBC Capital Projects Survey 2013

2013 OIL AND GAS GLOBAL PROJECT PERFORMANCE

26

Central project management function

Formal stage-gate review process 92%

80%

5-10 years ago >10 years ago <5 years ago

Source: SBC Capital Projects Survey 2013

STAGE GATE PROCESS AND CENTRALISED PROJECTS

27

8%

8% 6%

Governance Supply chain 20%

28%

30%

People & organisation

. Safety & environment

Technical & economic challenges

External stakeholders

Talent availability

Training/development

Skill pool management

Availability & quality of critical equipment and engineering services

Contracting & procurement approach

Decision-making

Expectations and targets

Risk management / assurance

Framing and FEL

Source: SBC Capital Projects Survey 2013

2013 PROJECT CHALLENGES

Complexity

Apache North Sea Limited

Apache Projects

Traditional Project Management Approach

Traditional Project Management Performance

Mission Command

History

Principles

Implementation

Discussion & Questions

28

AGENDA

5/15/2014 29 APA BLUE WHITE TEMPLATE.pptx

MISSION COMMAND

WHAT IS MISSION COMMAND?

Mission command is a command approach that is based upon the exercise of local initiative within the framework of command intent. This is enabled by an appropriate delegation of authority that allows subordinate commanders the latitude to plan and conduct operations based upon their understanding of the local situation

MISSION COMMAND HISTORY

Carl von Clausewitz - ‘On War’ (published posthumously 1832)

Field Marshal Von Moltke - Father of ‘Auftragstaktik.’ “Obedience is a principle, but the man stands above the principle.”

Auftragstaktik - Senior commanders should not order more than was absolutely necessary but should ensure the goal was clear. In case of doubt, subordinate commanders should seize the initiative

1986 - Field Marshal Bagnall KCB GCB CVO MC* - Introduces principles of Auftragstaktik to UK Military doctrine and influences NATO doctrine. Doctrine becomes known as ‘Mission Command.’ and is adopted by US Military

Successfully deployed in all operations since 1986

British Army’s Field Publication, Volume 2, Mission Command:

‘The Army's philosophy of command is described in British Military Doctrine and has three enduring tenets: timely decision making, the importance of understanding a superior commander's intention, and, by applying this to one's own actions, a clear responsibility to fulfil that intention. The underlying requirement is the fundamental responsibility to act (or, in certain circumstances, to decide not to act) within the framework of the commander's intentions. Together, this requires a style of command, which promotes decentralised command, freedom and speed of action, and initiative.’

BRITISH MILITARY MISSION COMMAND

33

US Forces Mission Command Principles:

Build cohesive teams through mutual trust

Create shared understanding

Provide a clear commander’s intent

Exercise disciplined initiative

Use mission orders

Accept prudent risk

MISSION COMMAND PHILOSOPOHY

British Military Tenets:

Timely decision making

Understanding the senior leader’s intent

Responsibility to fulfil that intent Leadership Requirements:

Decentralised decision making (formal delegation/empowerment)

Freedom (and speed) of action

Initiative

HOW DOES MISSION COMMAND DIFFER? Mission Command Detailed Command

Probabilistic Assumes War/Project is Deterministic

Unpredictable Predicable Disorder Accepts Order

Uncertainty Certainty Decentralisation Leads to Centralisation

Spontaneity Coercion

Informality Formality

Loose Rein Tight Rein

Self-Discipline Imposed Discipline

Initiative Obedience

Cooperation Compliance

Acceptable Decisions Faster Optimal Decisions but Later

Ability at all Levels Ability Focused at the Top Implicit Communication used Explicit

Vertical and Horizontal Vertical

Interactive Linear Organic Organisation type Hierarchic

Ad Hoc Bureaucratic Delegating Leadership Styles Directing

Transformational Transactional Art of Delivery Appropriate for Science of Delivery

Conduct of Operations Technical and Procedural Tasks

The Commander retains ultimate responsibility

Genuinely empowers their people

Trust is essential

Leadership at all Levels

Action in accordance with commander’s intent

MISSION COMMAND IMPLEMENTATION

The Commander: Briefs his intent to 2 levels down Explains the limitations, e.g. time, boundaries, mission, tasks,

resources Allocates resources States WHAT is to be achieved, not HOW it is to be achieved Gives decision-making criteria The Subordinate Commander: Understands role in commander’s plan 2 levels up Devises his own plan in achieving the commander’s intent Asks for more resources if needed, but offers back resources

not needed Briefs his subordinates 2 levels down

MISSION COMMAND PROCESS

37

COMMAND, CONTROL AND COMMUNICATION

Source: http://www.fas.org/irp/doddir/army/adrp6_0.pdf

Leadership

Command

Control Communication

38

“… Never tell people how to do things, tell them what to do and they will surprise you with their ingenuity”

Sense of urgency

Devolved decision making

Best answers win

Respect, integrity and trust

BEHAVIOURAL REQUIREMENTS

Leadership

Responsibility, accountability and authority

y = 102,948,194x-0.4120

R² = 0.5327

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

0 5 10 15 20 25

Cost p

er M

axim

um

Nu

mber o

f W

ell C

on

nectio

ns (

US

D)

Maximum Number of Well Connections

Non-Deepwater Subsea TiebacksCost per Well (subsea only projects)

Eng, Mat, Inst

North Sea Asia/Australia Africa ss_only Precision Range +/- ss_only Trend

Some points on this chart may be obscured

by others with near-identical values.Outlier with y > 120,000,000 is not shown.

Bacchus Project 4 Wells

BACCHUS BENCHMARKING

40

FASP $54,865/Tonne

FASP 4.8%

FASP AWARD WINNING EFFICIENCY

‘It Works in Practice, but does it Work

Theory’

41

Apache North Sea Limited

Apache Projects

Traditional Project Management Approach

Traditional Project Management Performance

Mission Command

History

Principles

Implementation

Discussion & Questions

42

AGENDA

43

PROJECTS d e l i v e r y a t p a c e

Recommended Reading: ADRP 6.0 Mission Command (www.fas.org/irp/doddir/army/adrp6_0.pdf) British Army Doctrine

(https://www.gov.uk/government/uploads/.../ADPOperationsDec10.pdf) Transforming Command: The Pursuit of Mission Command in the U.S., British

and Israeli Armies (http://www.amazon.co.uk/Transforming-Command-Pursuit-Mission-British/dp/0804772037)