) -- The political sea changes in Northern Africa and the Middle East didn't help

Apache Corp

(APA) - Get Report

in the early days, but now the energy stock has received an upgrade based on the thesis that higher Brent crude prices will help its business. The upgrade to hold wasn't as big an endorsement of Apache as it was a recognition of the impact of crude oil prices on financial models in the energy sector.

A rising tide has lifted all boats in the energy sector with the surge of crude, to begin with, but energy analysts expect that energy stock models will begin to look more closely at issues like exposure to Brent crude versus WTI, as one way to gauge where trading gains have been based on fundamental advantages versus general oil price sentiment.

The premium at which Brent crude trades over WTI has dipped to below $10, though energy sector analysts have indicated that the premium and its link to a specific company's production mix will be a greater factor in energy stock models as the events in the Middle East continue to be digested by the Street. Crude oil prices were down in early market action on Tuesday. WTI was trading at $105.44, while Brent crude had slipped to $113.45, down by more than $1.

Ironically, Apache was one of the first energy stocks to experience a negative trade on events in Northern Africa, when the importance of its business in Egypt was linked to headlines about the political crisis for former Egyptian president Hosni Mubarak.

>>Apache: Egypt Rocks the Energy Stock

Apache shares fell below the $115 mark -- down from a year-to-date high above $127 -- as the Egyptian crisis unfolded. The stock tanked even as several analysts noted that Apache's production operations in Egypt were far removed from the cities where political protests were underway, and that there was no actual impact on Apache oil and gas operations. Fears of a Suez Canal shutdown never materialized and even during the crisis in Egypt political and energy analysts were downplaying this risk.

Apache had the most exposure to any energy company in Egypt, though the list is long of energy companies with exposure to Northern Africa.

In retrospect, it's the Libyan political crisis that has been the first true political event to impact energy markets, as the physical disruption to Libya's oil production is real -- as opposed to what only ever amounted to perceived risks in Egypt. European oil majors like


(E) - Get Report




have among the largest exposures to Libyan oil production.

Among U.S. integrated majors,


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generates 3% of its output from Libyan operations.

U.S. independent oil and gas company

Marathon Oil

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has roughly 12% of its output from Libyan production. Marathon has been among the biggest energy sector gainers in 2011.


(HES) - Get Report

has an exploration and production presence in Libya amounting to 6% of its annual output. Hess said on Tuesday morning that it was in compliance with U.S. sanctions on Libya, though the company could not quantify its production impacted by events in the country.

Occidental Petroleum

(OXY) - Get Report

has Libya among its strategic production markets for the next three years and generates roughly 2% of output from Libya.

All the major oil service companies have operations in Libya, including


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(SLB) - Get Report


Baker Hughes



Weatherford International

(WFT) - Get Report

. Weatherford recently noted that its total Northern African exposure may represent 3% of revenue, though it did not include Algeria, which analysts say is an important market for the company.

Apache shares have made back about half of their Egypt-linked losses over the past few weeks as oil prices have continued to surge, and Apache shares were trading near the $121 mark on Tuesday morning.

Argus Research, which had been at a sell on Apache, has now upgraded the energy stock to a hold due to the extent to which Apache is exposed to Brent crude. The international oil dynamic may have hurt Apache as investors turned skittish in the first days of the Middle East crisis, but stepping back from the political events, Argus Research notes that well over half of Apache's production is priced base on Brent crude, which continues to trade at a premium relative to WTI.

Argus Research remains below Street consensus on Apache, but has raised numbers based on the belief that as long as the Middle East issues don't impact demand, producers with exposure to Brent crude stand to benefit.

-- Written by Eric Rosenbaum from New York.


>>Apache: Egypt Rocks the Energy Stock

>>Weatherford Not Cheap Enough Yet: Analysts

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