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Third Avenue Management Comments on Apache

December 19, 2013 | About:

In August, Apache (NYSE:APA) announced that it agreed to sell a 33% stake in its Egyptian oil and gas business to Sinopec (NYSE:SHI) for $3.1 billion. This price equated to $34 per barrel of proved reserves, or a significant premium to the valuation of Apache common of about $15 per barrel prior to the announcement of the transaction. Given the recent political turmoil in Egypt, we were pleasantly surprised at the higher

than expected price received. Apache expects to use the proceeds to reduce leverage, buy back shares and fund other capital spending—in effect using the proceeds from one value enhancing resource conversion to fund other types of desirable conversion events. With this sale, the company will have sold around $7 billion of assets this year, well above its previous plans to sell $4 billion of assets, enabling it to diversify more into North America on-shore.From Third Avenue Management's fourth quarter 2013 commentary. 


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