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A Talisman offshore oil platform in the South China Sea.

Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day.

Lower oil prices will persist for a considerable time to come, Canaccord Genuity said today as it slashed its outlook on crude prices and downgraded two Canadian producers amid worries they may have to eventually cut their dividend payouts.

With OPEC's decision to hold output at 30 million barrels per day, the global oil market should be more than 1 million barrels per day oversupplied in 2015, said the research firm. As such, Canaccord lowered its 2015 oil price estimates by 21 per cent to $83 (U.S.) per barrel for Brent and to $76 for West Texas Intermediate. It cut its long-term price forecasts as well by around 10 per cent, to $88 for Brent and $84 for WTI.

"OPEC has sent a clear message that it wants this supply surplus to come out of the U.S.; and therefore, with its heels dug deeply into the sand, the market must wait to for U.S. supply growth to more closely align with global demand growth," Canaccord analysts said in a note.

The revised outlook on oil prices resulted in Canaccord cutting price targets for energy stocks it covers by an average of 12 per cent.

And there were two notable downgrades: Talisman Energy Inc. and Baytex Energy Corp. Ratings on both were lowered to "hold" from "buy."

Talisman took the biggest hit in Canaccord's fresh look at the energy sector, with its price target slashed to $5 (U.S.) from $13, partly because the company may now be forced into selling more assets to take the pressure of its balance sheet.

"While we believe a sale of Marcellus midstream assets is likely to be sold by year-end, with possibly a surprising price tag, current oil prices are putting further pressure on the company to possibly look to sell more assets: To that end, if oil prices average $70/barrel WTI in 2015, we believe the company needs to sell about $4.0-4.5 billion of assets vs. the $2-billion that it currently plans. At this commodity price forecast, before asset sales, we estimate the company would see its debt/cash flow end up at over 4x. Therefore, in order to get it back down to a respectable 1.5x, the company would need to sell our aforementioned amount," said Canaccord analyst Phil Skolnick.

But the current market will make selling assets for a good price a challenge, he added. And the current geopolitical environment will make offloading its Kurdistan assets especially difficult.

As such, Mr. Skolnick says "a dividend cut is very likely in order."

"Once the dust settles post this market meltdown, we believe investors will gravitate towards the fundamentally strong companies that once again look cheap; and we believe TLM is not one of those," he said.

Canaccord's price target cut on Baytex was almost as harsh, going to $25 (Canadian) from $42. He also thinks the company's dividend is at risk as lower oil prices makes for a more stretched balance sheet.

"While the company has stated it is not forced to cut its dividend at this time, the messaging may be different post last week's OPEC meeting. On our $76/barrel 2015 WTI deck, if BTE keeps the dividend intact and it spends $830-million in capex, the company could see its available credit capacity fall to $240-million or 20 per cent, down from $575-million at September 30. If oil prices stay at current levels of around US$65/Bbl, then we expect the availability would fall to zero per cent by Q4/15," he said.

Meanwhile, he said the company has little room to cut capital expenditures. "We also forecast BTE exits 2015 with a net debt to trailing cash flow ratio of 2.7x, which is above the company's preferred level of about 2.0x. However, to preserve its balance sheet, and maintain current production levels BTE has just about $155-million of room to cut capital spending, as we forecast maintenance capital spending of $675-million in 2015. Omitting this $155-million would actually increase the debt metric to 2.9x due to lower production and cash flow growth.

Mr. Skolnick did make one upgrade in the energy sector: Imperial Oil Ltd.'s rating was moved to "hold" from "sell" - even as its price target was lowered to $51 (Canadian) from $55.

He notes the company has two stages of large production growth slated to come on line within the next 12 months, at its Nabiye and Kearl projects. Both would raise Imperial's production by 48 per cent from third-quarter levels.

Plus, Mr. Skolnick says that investors who want to own ExxonMobil - which has a nearly 70 per cent stake in Imperial - tend to favour the Canadian producer because of its visible production growth. As such, the stock can be seen as a more "defensive" play.


Good news from a California mine has been overshadowed by a potential lowering of reserves for Golden Queen Mining Co., says Canaccord Genuity analyst Joe Mazumdar.

The company's Soledad Mountain gold-silver project in California is "well-advanced," but Golden Queen has said that a geological model review suggests a potential reduction in the resource and reserves.

Mr. Mazumdar downgraded the company to "sell" from "hold" and cut his target price to 90 cents (Canadian) from $1. The analyst consensus price target is $1.29.


Bank of Montreal helped ease the impact of an earnings miss with a dividend increase and a plan to buy back up to 15 million of its own shares, RBC Dominion Securities analyst Darko Mihelic said.

On Tuesday, BMO was the first of the big Canadian banks to report its fourth-quarter earnings, which fell short of analyst expectations by a narrow margin.

A slowdown in the bank's capital markets segment was largely to blame for the shortfall. Mr. Mihelic lowered his capital markets earnings expectations for fiscal 2015 as a result, but that is more than offset by the earnings contribution from share repurchases.

He raised his target price on the stock to $86 (Canadian) from $85 and maintained a "sector perform" rating.

"We do not believe tempered capital markets expectations for next year will be a BMO exclusive phenomenon and preliminarily suggest BMO's exposure to lower oil prices is likely mid-pack with respect to capital markets related earnings," Mr. Mihelic said.


In other analyst actions:

AltaCorp Capital Research upgraded Pembina Pipeline to "outperform" from "sector perform" and maintained a $50 (Canadian) price target.

Goldman Sachs upgraded The TJX Companies to "conviction buy" from "neutral" with a price target of $77 (U.S.).

Canaccord Genuity upgraded Vale to "buy" on share price weakness and a more manageable balance sheet risk. It raised its price target to $12 (Canadian) from $11.50.