UPDATE: BMO Capital Markets Downgrades Advantage Oil & Gas to Underperform

BMO Capital Markets lowers its rating on Advantage Oil & Gas AAV and cuts its target price from $5 to $3.25 as it believes natural gas oversupply will cause the company to lag the rest of the E&P market. BMO Capital Markets says, "As we exit the winter heating season with record-high natural gas storage inventory and strong supply, we believe balance-of-year Henry Hub gas prices could fall below $2/Mcf to force production cuts and to restore balance to the oversupplied market. In this macro environment, we expect Advantage Oil & Gas, a dry-gas producer without yield support, will continue to lag the broader E&P market. The recent unsuccessful Birchcliff Energy (BIR-TSX) offer process also makes the prospect of an Advantage takeout less likely, in our view." AAV closed at $2.95 yesterday.