jp morgan valuation, page-12

hdr Up-date on Chinguetti

Hardman have announced that the JV intends to drill three wells on the southern part of the Chinguetti oilfield in order to boost production. Output has fallen towards 40,000 b/d due to the problems in the northern part of the field. The aim is to produce an additional 10,000 b/d form each of the wells and restore total production back to around the target of 70,000 b/d.
Woodside (the operator) has stated that they are still confident that all the reserves booked for Chinguetti can be produced.
This remedial work will take place in 4Q 2006 (plans will be finalised in July). It will add to costs and will take priority over exploration.
The problem with gas compressors is close to resolution and Hardman anticipates that the two undamaged processors will be recommissioned this week.
Our asset valuations are based mainly on the value of recoverable reserves. We have already downgraded the cash flow, profit and valuation of HDR to take account of these problems. Our view is that the value of Chinguetti as a developed field and Tiof/Tevet as Contingent Resources only is A$1.85/share. Declaring Tiof/Tevet as a commercial development boosts this to A$2.40/share. This does not include any value for Uganda. A successful development in Uganda could boost the value further to around A$3.00/share.