Last Analyst Update: 10/02/2005 Recommendation Reduce Last Price 1.96 Market Cap 1,287 Sector Energy
Rating Outlook HDR is the most leveraged of the three Australian listed players in Mauritania. It has five times the leverage of WPL and 1.5 times the leverage of ROC. The market is presumably paying a price for this leverage with the shares trading at a 20% premium to our valuation. HDR currently has no production although it does have plenty of cash. Further its asset base from a value point of view is primarily Mauritanian. Sovereign risk needs to be seriously considered. That said if its high risk exploration leverage you are chasing, then HDR is the way to go. An indicative 7-9 well exploration program in the Woodside JV Mauritania areas will start in mid 2005. On balance we will retain our 'Reduce' rating.
