To: Archie Meeties who wrote (156752 ) 9/9/2011 3:54:59 PM From: profile_14 Respond to Among the exploration company reports that I have read, APC has some of the highest quality assets. Here is a snippent from one dated 6-22-11 from BofAML (note the section in bold) that sticks in my mind for the magnitude of the number (and I saved the email). This would be the one to buy IMO as it seems it has developed the highest quality assets recently and has the most upside potential away from the speculative bunch in my opinion... APC… Adding to the US1 Focus List (Best Ideas) Public benchmarks validate APC’s valuation… As a partner with APC across Ghana, KOS provides a benchmark for the fair value of Ghana (Kosmos EV is currently ~45% above our assessed value of APC’s Ghana stake that we value ~$5B). Moreover, if we add in Cobalt International Energy (implied EV of $470mm, grossed up equivalent value for APC’s 36.5% interest would be ~$2B), we believe these two represent an emerging slate of exploration plays that will spark a rethink on recognition of Anadarko’s prospect backlog.APC trading on the lowest relative multiple amongst peers… APC is trading on the lowest relative EV/DACF multiples amongst large cap US oils. Excluding the value of existing exploration success, APC is trading on ~6.5x 2012 EV/DACF vs. large cap US peers at 4-9x. But if we exclude the value of the four public benchmarks and the five major discoveries already declared in the GoM, we contend APC is trading on a multiple of just 2x. Macondo overhang causing underperformance… APC is trading back at $72 (same as the day before Macondo), vs. the EPX up ~21% since the oil spill. Together, the value from exploration secured in the past year and relative underperformance implies a pre-tax cost net to APC of ~$17B – and a gross cost for Macondo of $67B, even though BP has only provisioned $42B. The magnitude of Anadarko’s underperformance is made all the more significant by the scale of exploration success in the past year - delivering eight major discoveries.Specialist Sales Conclusions: We have argued that Anadarko’s value proposition is compelling, but this has been made all the more significant by the recent IPO of KOS, providing the latest in a growing list of benchmarks that reinforce our conviction that APC is one of the most attractive value plays of the US oils – and at $72, our $120 PO represents 67% upside… APC is also the most significant of a new breed of exploration plays. Anadarko needs to be valued accordingly with due respect afforded a world class prospect backlog that we view as a free option embedded in the share price at current levels… Kosmos is the catalyst we believe can drive recognition of Anadarko’s risked exploration potential. With a current value from exploration that we believe is easily ~60% of the current share price we believe any focus on the relative multiple vs. domestic US E&P peers distorts perceptions of relative value, and if undeveloped exploration value is removed we contend Anadarko’s multiple stands as the lowest of its peers at ~3.8x.
