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Analyst cuts Apache rating on Egypt concerns

NEW YORK (AP) -- Apache's stock dropped Monday as an analyst cut his rating on the oil and natural gas producer because of its exposure to Egypt.

THE SPARK: Amir Arif of Stifel Nicolaus lowered Apache Corp. to "Hold" from "Buy."

THE ANALYSIS: Arif said in a client note that even though Apache's production in Egypt has not been disrupted, the risk of a disruption in the future can't be ignored.

Egypt comprises 19 percent of the Houston company's production and nearly a quarter of cash flow, the analyst explained.

In its second-quarter earnings report earlier this month, Apache announced seven oil and gas discoveries across its 9.7 million gross acres in Egypt's Western Desert.

THE BACKGROUND: Egypt is in turmoil, with suspected Islamic militants killing 25 off-duty policemen on Monday. In all, nearly 1,000 people have been killed in violence between security forces and supporters of ousted President Mohammed Morsi since last Wednesday.

Tensions in Egypt have soared since the army ousted Morsi, Hosni Mubarak's successor, in a July 3 coup following days of protests by millions of Egyptians demanding the Islamist president leave and accusing him of abusing his powers.

But Morsi's supporters have fought back, staging demonstrations demanding that he be reinstated and denouncing the military coup.

Apache does not comment on analyst reports.

SHARE ACTION: Down $2.95, or 3.7 percent, to $76.04 in midday trading. The stock has traded in a 52-week range of $67.91 to $94.87.