broker report

My broker's report downgraded HDR from HOLD to SELL because of the Chinguetti downgrade by upto 50% in recoverable reserves. HDR price target is $1.10/share.

The brokers report states:

Quote:
HDR has advised that Chinguetti 2P recoverable oil reserves should be revised down by up to 50% when the Independent Audit is complete, probably in the Dec Q’06. Given the previous 2P gross reserve volume was 123 mmbbls – we estimate around 70 mmbbls will be the outcome, or ~14 mmbbls net to HDR.
This outcome would value HDR on an EV/reserve metric at ~A$63/boe (v’s the mid cap oil sector average of ~A$29/boe). HDR would need to trade at $0.75/sh to trade in line with the mid cap oil sector. We think some middle ground may be achieved (say $1.10/sh) given other resources in Mauritania and Uganda may be converted in the future.
Unquote.