Egypt exposure sparks downgrade of Apache

Shares of Apache (APA) slumped more than 4% on Monday after Stifel Nicholas downgraded the oil-exploration company due to concerns that deepening chaos in Egypt could cause a disruption.

The negative research note comes as investors continue to pay attention to the situation in Egypt, which plays a pivotal role in the global energy market as a key transit center.

“While Egyptian production operations have not been disrupted to date, the potential risk of disruption going forward cannot be ignored,” Stifel Nicholas analyst Amir Arif wrote in the research note.
Stifel downgraded Apache to “hold” from “buy” and removed its $90 price target.

The firm notes that Apache relies on Egypt for 19% of its production, about 24% of the company’s cash flow and a portion of its free-cash flow.

“We believe that the risk/reward profile has decreased, near-term catalysts have mostly played out, and while the name remains a value stock, we do not see any key drivers to move the name higher,” Amir wrote.