APACHE CORPORATION
 
                             2005 STOCK OPTION PLAN
 
                                   SECTION 1
 
                                  INTRODUCTION
 
1.1   Establishment.   Apache Corporation, a Delaware corporation (hereinafter
referred to, together with its Affiliated Corporations (as defined in Section
2.1 hereof) as the "Company" except where the context otherwise requires),
hereby establishes the Apache Corporation 2005 Stock Option Plan (the "Plan")
for Eligible Employees (as defined in Section 2.1 hereof). The Plan permits the
grant of stock options to Eligible Employees selected by the Committee (as
defined in Section 2.1 hereof).
 
1.2   Purposes.   The purposes of the Plan are to provide the Eligible Employees
designated by the Committee for participation in the Plan with added incentives
to continue in the long-term service of the Company and to create in such
employees a more direct interest in the future success of the operations of the
Company by relating incentive compensation to increases in stockholder value, so
that the income of those employees is more closely aligned with the interests of
the Company's stockholders. The Plan is also designed to attract outstanding
individuals and to retain and motivate Eligible Employees by providing an
opportunity for investment in the Company.
 
1.3   Effective Date.   The Effective Date of the Plan (the "Effective Date") is
February 3, 2005. This Plan and each Option (as defined in Section 2.1 hereof)
granted hereunder is conditioned on and shall be of no force or effect until the
Plan is approved by the stockholders of the Company. The Committee may grant
Options, the exercise of which shall be expressly subject to the condition that
the Plan shall have been approved by the stockholders of the Company.
 
                                   SECTION 2
 
                                  DEFINITIONS
 
2.1   Definitions.   The following terms shall have the meanings set forth
below:
 
        (a) "Administrative Agent" means any designee or agent that may be
     appointed by the Committee pursuant to Section 3.1(b) hereof.
 
        (b) "Affiliated Corporation" means any corporation or other entity
     (including but not limited to a partnership) which is affiliated with
     Apache Corporation through stock ownership or otherwise and is treated as a
     common employer under the provisions of Sections 414(b) and (c) or any
     successor section(s) of the Internal Revenue Code.
 
        (c) "Board" means the Board of Directors of the Company.
 
        (d) "Committee" means the Stock Option Plan Committee of the Board,
     which is empowered hereunder to take actions in the administration of the
     Plan. The Committee shall be constituted at all times as to permit the Plan
     to comply with Rule 16b-3 or any successor rule(s) promulgated under the
     Securities Exchange Act of 1934, as amended (the "1934 Act").
 
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        (e) "Eligible Employees" means full-time employees (including, without
     limitation, officers and directors who are also employees), and certain
     part-time employees, of the Company or any division thereof.
 
        (f) "Expiration Date" means the date on which the Option Period (as
     defined in subsection 7.2(c) hereof) ends.
 
        (g) "Fair Market Value" means the per share closing price of the Stock
     as reported on The New York Stock Exchange, Inc. Composite Transactions
     Reporting System for a particular date or, if the Stock is not so listed at
     any time, as reported on NASDAQ or on such other exchange or electronic
     trading system as, on the date in question, reports the largest number of
     traded shares of Stock. If on such date there are no transactions in the
     Stock, the Fair Market Value shall be determined as of the immediately
     preceding date on which there were transactions in the Stock.
 
        (h) "Internal Revenue Code" means the Internal Revenue Code of 1986, as
     it may be amended from time to time, and any successor thereto.
 
        (i) "Option" means a right to purchase shares of Stock at a stated price
     for a specified period of time. All Options granted under the Plan shall be
     Options which are not "incentive stock options" as described in Section 422
     or any successor section(s) of the Internal Revenue Code.
 
        (j)"Option Price" means the price at which shares of Stock subject to an
     Option may be purchased, determined in accordance with subsection 7.2(b)
     hereof.
 
        (k) "Participant" means an Eligible Employee designated by the Committee
     from time to time during the term of the Plan to receive one or more
     Options under the Plan.
 
        (l) "Stock" means the U.S. $0.625 par value Common Stock of the Company
     or any security into which such Common Stock is converted or exchanged upon
     merger, consolidation, or any capital restructuring (within the meaning of
     Section 4.3) of the Company.
 
2.2   Headings; Gender and Number.   The headings contained in the Plan are for
reference purposes only and shall not affect in any way the meaning or
interpretation of the Plan. Except when otherwise indicated by the context, the
masculine gender shall also include the feminine gender, and the definition of
any term herein in the singular shall also include the plural.
 
                                   SECTION 3
 
                              PLAN ADMINISTRATION
 
3.1   Administration by the Committee.
 
        (a) The Plan shall be administered by the Committee. In accordance with
     the provisions of the Plan, the Committee shall, in its sole discretion,
     select the Participants from among the Eligible Employees, determine the
     Options to be granted pursuant to the Plan, the number of shares of Stock
     to be issued thereunder, the time at which such Options are to be granted,
     fix the Option Price, and establish such other terms and requirements as
     the Committee may deem necessary or desirable and consistent with the terms
     of the Plan. The Committee shall determine the form or forms of the
     agreements with Participants which shall evidence the particular
     provisions, terms, conditions, rights and duties of the Company and
 
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     the Participants with respect to Options granted pursuant to the Plan,
     which provisions need not be identical except as may be provided herein.
 
        (b) The Committee may from time to time adopt such rules and regulations
     for carrying out the purposes of the Plan as it may deem proper and in the
     best interests of the Company. The Committee may appoint an Administrative
     Agent, who need not be a member of the Committee or an employee of the
     Company, to assist the Committee in administration of the Plan and to whom
     it may delegate such powers as the Committee deems appropriate, except that
     the Committee shall determine any dispute. The Committee may correct any
     defect, supply any omission or reconcile any inconsistency in the Plan, or
     in any agreement entered into hereunder, in the manner and to the extent it
     shall deem expedient and it shall be the sole and final judge of such
     expediency. No member of the Committee shall be liable for any action or
     determination made in good faith. The determination, interpretations and
     other actions of the Committee pursuant to the provisions of the Plan shall
     be binding and conclusive for all purposes and on all persons.
 
3.2   Compliance with Section 162(m).   The Plan is intended to comply with the
requirements of Section 162(m) or any successor section(s) of the Internal
Revenue Code ("Section 162(m)") as to any "covered employee" as defined in
Section 162(m), and shall be administered, interpreted and construed
consistently therewith. In accordance with this intent, the amount of income a
Participant may receive from Options granted under the Plan shall be based
solely on an increase in the value of the Stock after the date of the grant of
the Option, or such other bases as may be permitted by applicable law. The
Committee is authorized to take such additional action, if any, that may be
required to ensure that the Plan and any Option granted under the Plan satisfy
the requirements of Section 162(m), taking into account any regulations or other
guidance issued by the Internal Revenue Service.
 
                                   SECTION 4
 
                           STOCK SUBJECT TO THE PLAN
 
4.1   Number of Shares.   Subject to Section 7.1 hereof and to adjustment
pursuant to Section 4.3 hereof, five million (5,000,000) shares of Stock are
authorized for issuance under the Plan in accordance with the provisions of the
Plan and subject to such restrictions or other provisions as the Committee may
from time to time deem necessary. This authorization may be increased from time
to time by approval of the Board and the stockholders of the Company if, on the
advice of counsel for the Company, such stockholder approval is required. Shares
of Stock which may be issued upon exercise of Options shall be applied to reduce
the maximum number of shares of Stock remaining available for use under the
Plan. The Company shall at all times during the term of the Plan and while any
Options are outstanding retain as authorized and unissued Stock, or as Stock in
the Company's treasury, at least the number of shares from time to time required
under the provisions of the Plan, or otherwise assure itself of its ability to
perform its obligations hereunder.
 
4.2   Other Shares of Stock.   Any shares of Stock that are subject to an Option
which expires, is forfeited, is cancelled, or for any reason is terminated
unexercised, and any shares of Stock that for any other reason are not issued to
a Participant or are forfeited shall automatically become available for use
under the Plan.
 
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4.3   Adjustments for Stock Split, Stock Dividend, Etc.   If the Company shall
at any time increase or decrease the number of its outstanding shares of Stock
or change in any way the rights and privileges of such shares by means of the
payment of a Stock dividend or any other distribution upon such shares payable
in Stock, or through a Stock split, subdivision, consolidation, combination,
reclassification or recapitalization involving the Stock (any of the foregoing
being herein called a "capital restructuring"), then in relation to the Stock
that is affected by one or more of the above events, the numbers, rights and
privileges of the following shall be, in each case, equitably and proportionally
adjusted to take into account the occurrence of any of the above events, (i) the
shares of Stock as to which Options may be granted under the Plan; (ii) the
shares of Stock then included in each outstanding Option granted hereunder; and
(iii) the Option Price for each outstanding Option granted hereunder.
 
4.4   Dividend Payable in Stock of Another Corporation, Etc.   If the Company
shall at any time pay or make any dividend or other distribution upon the Stock
payable in securities or other property (except money or Stock), a proportionate
part of such securities or other property shall be set aside and delivered to
any Participant then holding an Option for the particular type of Stock for
which the dividend or other distribution was made, upon exercise thereof. Prior
to the time that any such securities or other property are delivered to a
Participant in accordance with the foregoing, the Company shall be the owner of
such securities or other property and shall have the right to vote the
securities, receive any dividends payable on such securities, and in all other
respects shall be treated as the owner. If securities or other property which
have been set aside by the Company in accordance with this Section are not
delivered to a Participant because an Option is not exercised, then such
securities or other property shall remain the property of the Company and shall
be dealt with by the Company as it shall determine in its sole discretion.
 
4.5   Other Changes in Stock.   In the event there shall be any change, other
than as specified in Sections 4.3 and 4.4 hereof, in the number or kind of
outstanding shares of Stock or of any stock or other securities into which the
Stock shall be changed or for which it shall have been exchanged, and if the
Committee shall in its discretion determine that such change equitably requires
an adjustment in the number or kind of shares subject to outstanding Options or
which have been reserved for issuance pursuant to the Plan but are not then
subject to an Option, then such adjustments shall be made by the Committee and
shall be effective for all purposes of the Plan and on each outstanding Option
that involves the particular type of stock for which a change was effected.
 
4.6   Rights to Subscribe.   If the Company shall at any time grant to the
holders of its Stock rights to subscribe pro rata for additional shares thereof
or for any other securities of the Company or of any other corporation, there
shall be reserved with respect to the shares then under Option to any
Participant of the particular class of Stock involved the Stock or other
securities which the Participant would have been entitled to subscribe for if
immediately prior to such grant the Participant had exercised his entire Option.
If, upon exercise of any such Option, the Participant subscribes for the
additional shares or other securities, the aggregate Option Price shall be
increased by the amount of the price that is payable by the Participant for such
additional shares or other securities.
 
4.7   General Adjustment Rules.   No adjustment or substitution provided for in
this Section 4 shall require the Company to sell a fractional share of Stock
under any Option, or otherwise issue a fractional share of Stock, and the total
substitution or adjustment with respect to each Option shall be limited by
deleting any fractional share. In the case of any such substitution or
adjustment, the aggregate Option Price for the shares of Stock then subject to
the Option shall
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remain unchanged but the Option Price per share under each such Option shall be
equitably adjusted by the Committee to reflect the greater or lesser number of
shares of Stock or other securities into which the Stock subject to the Option
may have been changed.
 
4.8   Determination by the Committee, Etc.   Adjustments under this Section 4
shall be made by the Committee, whose determinations with regard thereto shall
be final and binding upon all parties.
 
                                   SECTION 5
 
                         REORGANIZATION OR LIQUIDATION
 
In the event that the Company is merged or consolidated with another corporation
and the Company is not the surviving corporation, or if all or substantially all
of the assets or more than 20 percent of the outstanding voting stock of the
Company is acquired by any other corporation, business entity or person, or in
case of a reorganization (other than a reorganization under the United States
Bankruptcy Code) or liquidation of the Company, and if the provisions of Section
8 hereof do not apply, the Committee, or the board of directors of any
corporation assuming the obligations of the Company, shall, as to the Plan and
outstanding Options make appropriate provision for the adoption and continuation
of the Plan by the acquiring or successor corporation and for the protection of
any such outstanding Options by the substitution on an equitable basis of
appropriate stock of the Company or of the merged, consolidated or otherwise
reorganized corporation which will be issuable with respect to the Stock,
provided that no additional benefits shall be conferred upon the Participants
holding such Options as a result of such substitution, and the excess of the
aggregate Fair Market Value of the shares subject to the Options immediately
after such substitution over the aggregate Option Price thereof is not more than
the excess of the aggregate Fair Market Value of the shares subject to such
Options immediately before such substitution over the aggregate Option Price
thereof. Additionally, upon the occurrence of such an event and upon written
notice to the Participants, the Committee may provide that all unexercised
Options shall be exercised within a specified number of days of the date of such
notice or such Options will be terminated. In the latter event, the Committee
shall accelerate the vesting dates of outstanding Options so that all Options
become fully vested and exercisable prior to any such event.
 
                                   SECTION 6
 
                                 PARTICIPATION
 
Participants in the Plan shall be those Eligible Employees who, in the judgment
of the Committee, are performing, or during the term of their incentive
arrangement will perform, vital services in the management, operation and
development of the Company or an Affiliated Corporation, and significantly
contribute, or are expected to significantly contribute, to the achievement of
the Company's long-term corporate economic objectives. Participants may be
granted from time to time one or more Options; provided, however, that the grant
of each such Option shall be separately approved by the Committee, and receipt
of one such Option shall not result in automatic receipt of any other Option.
Upon determination by the Committee that an Option is to be granted to a
Participant, written notice shall be given to such person, specifying the terms,
conditions, rights and duties related thereto. Each Participant shall, if
required by the Committee, enter into an agreement with the Company, in such
form as the Committee shall determine and which is consistent with the
provisions of the Plan, specifying such terms,
                                       B-5
<PAGE>
 
conditions, rights and duties. Options shall be deemed to be granted as of the
date specified in the grant resolution of the Committee, which date shall be the
date of any related agreement with the Participant. In the event of any
inconsistency between the provisions of the Plan and any such agreement entered
into hereunder, the provisions of the Plan shall govern.
 
                                   SECTION 7
 
                                 STOCK OPTIONS
 
7.1   Grant of Stock Options.   Coincident with or following designation for
participation in the Plan, an Eligible Employee may be granted one or more
Options. Grants of Options under the Plan shall be made by the Committee. In no
event shall the exercise of one Option affect the right to exercise any other
Option or affect the number of shares of Stock for which any other Option may be
exercised, except as provided in subsection 7.2(j) hereof. During the duration
of the Plan, no Eligible Employee may be granted Options which in the aggregate
cover in excess of 25 percent of the total shares of Stock authorized under the
Plan.
 
7.2   Stock Option Agreements.   Each Option granted under the Plan shall be
evidenced by a written stock option agreement which shall be entered into by the
Company and the Participant to whom the Option is granted (the "Stock Option
Agreement"), and which shall contain the following terms and conditions set out
in this Section 7.2, as well as such other terms and conditions, not
inconsistent therewith, as the Committee may consider appropriate. This
requirement for delivery of a written Stock Option Agreement is satisfied by
electronic delivery of such agreement provided that evidence of the
Participant's receipt of such electronic delivery is available to the Company
and all applicable laws and regulations permit such delivery.
 
        (a) Number of Shares.   Each Stock Option Agreement shall state that it
     covers a specified number of shares of Stock, as determined by the
     Committee.
 
        (b) Price.   The price at which each share of Stock covered by an Option
     may be purchased shall be determined in each case by the Committee and set
     forth in the Stock Option Agreement, but in no event shall the price be
     less than the Fair Market Value of the Stock on the date the Option is
     granted.
 
        (c) Duration of Options; Employment Required For Exercise.   Each Stock
     Option Agreement shall state the period of time, determined by the
     Committee, within which the Option may be exercised by the Participant (the
     "Option Period"). The Option Period must end, in all cases, not more than
     ten years from the date an Option is granted. Except as otherwise provided
     in Sections 5 and 8 and subsection 7.2(d)(iv) hereof, each Option granted
     under the Plan shall become exercisable in increments such that 25 percent
     of the Option becomes exercisable on each of the four subsequent one-year
     anniversaries of the date the Option is granted, provided that each such
     additional 25-percent increment shall become exercisable only if the
     Participant has been continuously employed by the Company from the date the
     Option is granted through the date on which each such additional 25-percent
     increment becomes exercisable.
 
        (d) Termination of Employment, Death, Disability, Etc.   Each Stock
     Option Agreement shall provide as follows with respect to the exercise of
     the Option upon termination of the employment or the death or disability of
     the Participant:
 
              (i) If the employment of the Participant by the Company is
        terminated within the Option Period for cause, as determined by the
        Company, the Option shall thereafter be
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        void for all purposes. As used in this subsection 7.2(d), "cause" shall
        mean a gross violation, as determined by the Company, of the Company's
        established policies and procedures, provided that the effect of this
        subsection 7.2(d) shall be limited to determining the consequences of a
        termination and that nothing in this subsection 7.2(d) shall restrict or
        otherwise interfere with the Company's discretion with respect to the
        termination of any employee.
 
              (ii) If the Participant retires from employment by the Company on
        or after attaining age 60, the Option may be exercised by the
        Participant within 36 months following his or her retirement (provided
        that such exercise must occur within the Option Period), but not
        thereafter. In the event of the Participant's death during such 36-month
        period, each Option may be exercised by those entitled to do so in the
        manner referred to in (iv) below. In any such case, the Option may be
        exercised only as to the shares as to which the Option had become
        exercisable on or before the date of the Participant's retirement.
 
              (iii) If the Participant becomes disabled (as determined pursuant
        to the Company's Long-Term Disability Plan or any successor plan),
        during the Option Period while still employed, or within the three-month
        period referred to in subsection 7.2(d)(v) below, or within the 36-month
        period referred to in subsection 7.2(d)(ii) above, the Option may be
        exercised by the Participant or by his or her guardian or legal
        representative, within twelve months following the Participant's
        disability, or within the 36-month period referred to in subsection
        7.2(d)(ii) above if applicable and if longer (provided that such
        exercise must occur within the Option Period), but not thereafter. In
        the event of the Participant's death during such twelve-month period,
        each Option may be exercised by those entitled to do so in the manner
        referred to in subsection 7.2(d)(iv) below. In any such case, the Option
        may be exercised only as to the shares of Stock as to which the Option
        had become exercisable on or before the date of the Participant's
        disability.
 
              (iv) In the event of the Participant's death while still employed
        by the Company, each Option of the deceased Participant may be exercised
        by those entitled to do so under the Participant's will or under the
        laws of descent and distribution within twelve months following the
        Participant's death (provided that in any event such exercise must occur
        within the Option Period), but not thereafter, as to all shares of Stock
        which are subject to such Option, including each 25-percent increment of
        the Option, if any, which has not yet become exercisable at the time of
        the Participant's death. In the event of the Participant's death within
        the 36-month period referred to in subsection 7.2(d)(ii) above or within
        the twelve-month period referred to in subsection 7.2(d)(iii) above,
        each Option of the deceased Participant that is exercisable at the time
        of death may be exercised by those entitled to do so under the
        Participant's will or under the laws of descent and distribution within
        twelve months following the Participant's death or within the 36-month
        period referred to in subsection 7.2(d)(ii) above, if applicable and if
        longer (provided that in any event such exercise must occur within the
        Option Period). The provisions of this paragraph (iv) of subsection
        7.2(d) shall be applicable to each Stock Option Agreement as if set
        forth therein word for word. Each Stock Option Agreement executed by the
        Company prior to the adoption of this provision shall be deemed amended
        to include the provisions of this paragraph and all Options granted
        pursuant to such Stock Option Agreements shall be exercisable as
        provided herein.
 
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              (v) If the employment of the Participant by the Company is
        terminated (which for this purpose means that the Participant is no
        longer employed by the Company or by an Affiliated Corporation) within
        the Option Period for any reason other than cause, the Participant's
        retirement on or after attaining age 60, or the Participant's disability
        or death, the Option may be exercised by the Participant within three
        months following the date of such termination (provided that such
        exercise must occur within the Option Period), but not thereafter. In
        any such case, the Option may be exercised only as to the shares as to
        which the Option had become exercisable on or before the date of
        termination of the Participant's employment.
 
        (e) Transferability.   Each Stock Option Agreement shall provide that
     the Option granted therein is not transferable by the Participant except by
     will or pursuant to the laws of descent and distribution, and that such
     Option is exercisable during the Participant's lifetime only by him or her,
     or in the event of the Participant's disability or incapacity, by his or
     her guardian or legal representative.
 
        (f) Agreement to Continue in Employment.   Each Stock Option Agreement
     shall contain the Participant's agreement to remain in the employment of
     the Company, at the pleasure of the Company, for a continuous period of at
     least one year after the date of such Stock Option Agreement, at the salary
     rate in effect on the date of such agreement or at such changed rate as may
     be fixed, from time to time, by the Company. Termination of the Stock
     Option Agreement and all unvested Options granted under such Stock Option
     Agreement shall be the Company's sole and exclusive remedy for an
     employee's breach of this Section 7.2(f).
 
        (g) Exercise, Payments, Etc.
 
              (i) Each Stock Option Agreement shall provide that the method for
        exercising the Option granted therein shall be by delivery to the Office
        of the Secretary of the Company or to the Administrative Agent of
        written notice specifying the number of shares of Stock with respect to
        which such Option is exercised and payment to the Company of the
        aggregate Option Price. Such notice shall be in a form satisfactory to
        the Committee and shall specify the particular Options (or portions
        thereof) which are being exercised and the number of shares of Stock
        with respect to which the Options are being exercised. The Participant's
        obligation to deliver written notice of exercise is satisfied by
        electronic delivery of such notice through means satisfactory to the
        Committee and prescribed by the Company. The exercise of the Option
        shall be deemed effective on the date such notice is received by the
        Office of the Secretary or by the Administrative Agent and payment is
        made to the Company of the aggregate Option Price (the "Exercise Date");
        however, if payment of the aggregate Option Price is made pursuant to a
        sale of shares of Stock as contemplated by subsection 7.2(g)(iii)(E)
        below, the Exercise Date shall be deemed to be the date of such sale. If
        requested by the Company, such notice shall contain the Participant's
        representation that he or she is purchasing the Stock for investment
        purposes only and his or her agreement not to sell any Stock so
        purchased in any manner that is in violation of the Securities Act of
        1933, as amended, or any applicable state law, and such restriction, or
        notice thereof, shall be placed on the certificates representing the
        Stock so purchased. The purchase of such Stock shall take place upon
        delivery of such notice to the Office of the Secretary of the Company or
        to the Administrative Agent, at which time the aggregate Option Price
        shall
 
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        be paid in full to the Company by any of the methods or any combination
        of the methods set forth in subsection 7.2(g)(iii) below.
 
              (ii) The shares of Stock to which the Participant is entitled as a
        result of the exercise of the Option shall be issued by the Company and
        (A) delivered by electronic means to an account designated by the
        Participant, or (B) delivered to the Participant in the form of a
        properly executed certificate or certificates representing such shares
        of Stock. If shares of Stock are used to pay all or part of the
        aggregate Option Price, the Company shall issue and deliver to the
        Participant the additional shares of Stock, in excess of the aggregate
        Option Price or portion thereof paid using shares of Stock, to which the
        Participant is entitled as a result of the Option exercise. The
        Company's obligation to deliver the shares of Stock to which the
        Participant is entitled as a result of the exercise of the Option shall
        be subject to the payment in full to the Company of the aggregate Option
        Price and the required tax withholding.
 
              (iii) The aggregate Option Price shall be paid by any of the
        following methods or any combination of the following methods:
 
                  (A) in cash, including the wire transfer of funds in U.S.
            dollars to one of the Company's bank accounts located in the United
            States, with such bank account to be designated from time to time by
            the Company;
 
                  (B) by personal, certified or cashier's check payable in U.S.
            dollars to the order of the Company;
 
                  (C) by delivery to the Company or the Administrative Agent of
            certificates representing a number of shares of Stock then owned by
            the Participant, the aggregate Fair Market Value of which (as of the
            Exercise Date) is not greater than the aggregate Option Price of the
            Option being exercised, properly endorsed for transfer to the
            Company, provided that the shares of Stock used for this purpose
            must have been owned by the Participant for a period of at least six
            months;
 
                  (D) by certification or attestation to the Company or the
            Administrative Agent of the Participant's ownership (as of the
            Exercise Date) of a number of shares of Stock, the aggregate Fair
            Market Value of which (as of the Exercise Date) is not greater than
            the aggregate Option Price of the Option being exercised, provided
            that the shares of Stock used for this purpose have been owned by
            the Participant for a period of at least six months; or
 
                  (E) by delivery to the Company or the Administrative Agent of
            a properly executed notice of exercise together with irrevocable
            instructions to a broker to promptly deliver to the Company, by wire
            transfer or check as noted in subsection 7.2(g)(iii)(A) and (B)
            above, the amount of the proceeds of the sale of all or a portion of
            the Stock or of a loan from the broker to the Participant necessary
            to pay the aggregate Option Price.
 
              (iv) For purposes of the Plan, the income resulting from an Option
        exercise shall be based on the Fair Market Value of the Stock for the
        Exercise Date; however, if payment of the aggregate Option Price is made
        pursuant to a sale of shares of Stock as contemplated by subsection
        7.2(g)(iii)(E) hereof, the Fair Market Value shall be deemed to be the
        per share sale price and the Exercise Date shall be deemed to be the
        date of such sale.
 
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        (h) Date of Grant.   An Option shall be considered as having been
     granted on the date specified in the grant resolution of the Committee.
 
        (i) Tax Withholding. Each Stock Option Agreement shall provide that,
     upon exercise of the Option, the Participant shall make appropriate
     arrangements with the Company to provide for the minimum amount of tax
     withholding required by law, including without limitation Sections 3102 and
     3402 or any successor section(s) of the Internal Revenue Code and
     applicable state and local income and other tax laws, by payment of such
     taxes in cash (including wire transfer), by check, or as provided in
     Section 13.2 hereof.
 
        (j) Adjustment of Options. Subject to the provisions of Sections 4, 5,
     7, 8 and 12 hereof, the Committee may make any adjustment in the number of
     shares of Stock covered by, or the terms of an outstanding Option and a
     subsequent granting of an Option, by amendment or by substitution for an
     outstanding Option; however, except as provided in Sections 4, 5, 8 and 12
     hereof, the Committee may not adjust the Option Price of any outstanding
     Option. Such amendment or substitution may result in terms and conditions
     (including the number of shares of Stock covered, vesting schedule or
     Option Period) that differ from the terms and conditions of the original
     Option. The Committee may not, however, adversely affect the rights of any
     Participant to previously granted Options without the consent of such
     Participant. If such action is effected by amendment, the effective date of
     such amendment will be the date of grant of the original Option.
 
7.3   Stockholder Privileges.   No Participant shall have any rights as a
stockholder with respect to any shares of Stock covered by an Option until the
Participant becomes the holder of record of such Stock. Except as provided in
Section 4 hereof, no adjustments shall be made for dividends or other
distributions or other rights as to which there is a record date preceding the
date on which such Participant becomes the holder of record of such Stock.
 
                                   SECTION 8
 
                               CHANGE OF CONTROL
 
8.1   In General.   In the event of the occurrence of a change of control of the
Company, as defined in Section 8.3 hereof, all outstanding Options shall become
automatically vested, without further action by the Committee or the Board, so
as to make all such Options fully vested and exercisable as of the date of such
change of control.
 
8.2   Limitation on Payments.   If the provisions of this Section 8 would result
in the receipt by any Participant of a payment within the meaning of Section
280G or any successor section(s) of the Internal Revenue Code, and the
regulations promulgated thereunder, and if the receipt of such accelerated
vesting or payment by any Participant would, in the opinion of independent tax
counsel of recognized standing selected by the Company, result in the payment by
such Participant of any excise tax provided for in Sections 280G and 4999 or any
successor section(s) of the Internal Revenue Code, then the amount of such
accelerated vesting or payment shall be reduced to the extent required, in the
opinion of independent tax counsel, to prevent the imposition of such excise
tax; provided, however, that any payment or vesting of any Options shall occur
as otherwise provided herein to the fullest extent possible without triggering
such excise tax.
 
8.3   Definition.   For purposes of the Plan, a "change of control" shall mean
any of the events specified in the Company's Income Continuance Plan or any
successor plan which constitute a change of control within the meaning of such
plan.
 
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                                   SECTION 9
 
                       RIGHTS OF EMPLOYEES, PARTICIPANTS
 
9.1   Employment.   Nothing contained in the Plan or in any Option granted under
the Plan shall confer upon any Participant any right with respect to the
continuation of his or her employment by the Company or any Affiliated
Corporation, or interfere in any way with the right of the Company or any
Affiliated Corporation, subject to the terms of any separate employment
agreement to the contrary, at any time, to terminate such employment or to
increase or decrease the level of the Participant's compensation from the level
in existence at the time of the grant of an Option. Whether an authorized leave
of absence, or absence in military or government service, shall constitute a
termination of employment shall be determined by the Committee at the time.
 
9.2   Nontransferability.   No right or interest of any Participant in an Option
granted pursuant to the Plan shall be assignable or transferable during the
lifetime of the Participant, either voluntarily or involuntarily, or subjected
to any lien, directly or indirectly, by operation of law, or otherwise,
including execution, levy, garnishment, attachment, pledge or bankruptcy. In the
event of a Participant's death, a Participant's rights and interests in Options
shall, to the extent provided in Section 7 hereof, be transferable by
testamentary will or the laws of descent and distribution, and payment of any
amounts due under the Plan shall be made to, and exercise of any Options may be
made by, the Participant's legal representatives, heirs or legatees. If, in the
opinion of the Committee, a person entitled to payments or to exercise rights
with respect to the Plan is disabled from caring for his or her affairs because
of mental condition, physical condition or age, payment due such person may be
made to, and such rights shall be exercised by, such person's guardian,
conservator or other legal personal representative upon furnishing the Committee
with evidence of such status satisfactory to the Committee.
 
                                   SECTION 10
 
                              GENERAL RESTRICTIONS
 
10.1   Investment Representations.   The Company may require a Participant, as a
condition of exercising an Option, to give written assurances in substance and
form satisfactory to the Company and its counsel to the effect that such person
is acquiring the Stock subject to the Option for his own account for investment
and not with any present intention of selling or otherwise distributing the
same, and to such other effects as the Company deems necessary or appropriate in
order to comply with federal and applicable state securities laws.
 
10.2   Compliance with Securities Laws.   Each Option shall be subject to the
requirement that, if at any time counsel to the Company shall determine that the
listing, registration or qualification of the shares of Stock subject to such
Option upon any securities exchange or under any state or federal law, or the
consent or approval of any governmental or regulatory body, is necessary as a
condition of, or in connection with, the issuance or purchase of shares of Stock
thereunder, such Option may not be accepted or exercised in whole or in part
unless such listing, registration, qualification, consent or approval shall have
been effected or obtained on conditions acceptable to the Committee. Nothing
herein shall be deemed to require the Company to apply for or to obtain such
listing, registration, qualification, consent or approval.
 
                                       B-11
<PAGE>
 
                                   SECTION 11
 
                            OTHER EMPLOYEE BENEFITS
 
The amount of any income deemed to be received by a Participant as a result of
an Option exercise shall not constitute "earnings" or "compensation" with
respect to which any other employee benefits of such Participant are determined
including, without limitation, benefits under any pension, profit sharing, life
insurance or salary continuation plan.
 
                                   SECTION 12
 
                  PLAN AMENDMENT, MODIFICATION AND TERMINATION
 
The Board may at any time terminate, and from time to time may amend or modify
the Plan provided, however, that no amendment or modification may become
effective without approval of the amendment or modification by the Company's
stockholders if stockholder approval is required to enable the Plan to satisfy
any applicable statutory or regulatory requirements unless the Company, on the
advice of counsel, determines that stockholder approval is otherwise necessary
or desirable.
 
No amendment, modification or termination of the Plan shall in any manner
adversely affect any Option theretofore granted under the Plan, without the
consent of the Participant holding such Option.
 
The Committee shall have the authority to adopt such modifications, procedures
and subplans as may be necessary or desirable to comply with the provisions of
the laws (including, but not limited to, tax laws and regulations) of countries
other than the United States in which the Company may operate, so as to assure
the viability of the benefits of the Plan to Participants employed in such
countries.
 
                                   SECTION 13
 
                                  WITHHOLDING
 
13.1   Withholding Requirement.   The Company's obligations to deliver shares of
Stock upon the exercise of an Option shall be subject to the Participant's
satisfaction of all applicable federal, state and local income and other tax
withholding requirements.
 
13.2   Satisfaction of Required Withholding.   At the time the Committee grants
an Option, it may, in its sole discretion, grant the Participant an election to
pay all such amounts of required tax withholding, or any part thereof:
 
        (a) by the delivery to the Company or the Administrative Agent of a
     number of shares of Stock then owned by the Participant, the aggregate Fair
     Market Value of which (as of the Exercise Date) is not greater than the
     amount required to be withheld, provided that such shares have been held by
     the Participant for a period of at least six months;
 
        (b) by certification or attestation to the Company or the Administrative
     Agent of the Participant's ownership (as of the Exercise Date) of a number
     of shares of Stock, the aggregate Fair Market Value of which (as of the
     Exercise Date) is not greater than the amount required to be withheld,
     provided that such shares of Stock have been owned by the Participant for a
     period of at least six months; or
 
                                       B-12
<PAGE>
 
        (c) by the Company or the Administrative Agent withholding from the
     shares of Stock otherwise issuable to the Participant upon exercise of the
     Option, a number of shares of Stock, the aggregate Fair Market Value of
     which (as of the Exercise Date) is not greater than the amount required to
     be withheld. Any such elections by Participants to have shares of Stock
     withheld for this purpose will be subject to the following restrictions:
 
              (i) all elections shall be made on or prior to the Exercise Date;
        and
 
              (ii) all elections shall be irrevocable.
 
13.3   Section 16 Requirements.   If the Participant is an officer or director
of the Company within the meaning of Section 16 or any successor section(s) of
the 1934 Act ("Section 16"), the Participant must satisfy the requirements of
such Section 16 and any applicable rules and regulations thereunder with respect
to the use of shares of Stock to satisfy such tax withholding obligation.
 
                                   SECTION 14
 
                              REQUIREMENTS OF LAW
 
14.1   Requirements of Law.   The issuance of Stock and the payment of cash
pursuant to the Plan shall be subject to all applicable laws, rules and
regulations.
 
14.2   Federal Securities Laws Requirements.   If a Participant is an officer or
director of the Company within the meaning of Section 16, Options granted
hereunder shall be subject to all conditions required under Rule 16b-3, or any
successor rule(s) promulgated under the 1934 Act, to qualify the Option for any
exception from the provisions of Section 16 available under such Rule. Such
conditions are hereby incorporated herein by reference and shall be set forth in
the Stock Option Agreement with the Participant which describes the Option.
 
14.3   Governing Law.   The Plan and all Stock Option Agreements hereunder shall
be construed in accordance with and governed by the laws of the State of Texas.
 
                                   SECTION 15
 
                              DURATION OF THE PLAN
 
The Plan shall terminate at such time as may be determined by the Board, and no
Option shall be granted after such termination. If not sooner terminated under
the preceding sentence, the Plan shall fully cease and expire at midnight on the
first date that no further shares remain available for Option grants hereunder.
Any Options outstanding at the time of the Plan termination shall continue to be
exercisable in accordance with the Stock Option Agreement pertaining to each
such Option.
 
Dated: February 3, 2005
 
ATTEST:
 
/s/ CHERI L. PEPER
------------------------------------------------------------
Cheri L. Peper
Corporate Secretary
APACHE CORPORATION
 
By: /s/ JEFFREY M. BENDER
    -----------------------------------------------------------
    Jeffrey M. Bender
    Vice President, Human Resources
 
                                       B-13