The tumble in shares of the Rio de Janeiro-based company, controlled by Brazil's richest man Eike Batista, led to a $6.7 billion loss in market value.
"Investors need more time and more information in order to take the company's estimates at face value," said Deutsche Bank analysts Marcus Sequeira and Luiz Fonseca in a research note, downgrading the company to "hold" from "buy."
The report by oil-field auditors DeGolyer and MacNaughton released on Friday showed a nearly 60 percent jump in the company's potential oil resources, but the Deutsche researchers noted that the crude found in recent exploration activity carried a higher degree of risk.
Potential resources refer to estimates, often based on seismic and geological data, of the amount of oil in a given reservoir that could be recovered. The estimates are less certain than proven reserves.
OGX plummeted as much as 17 percent at market opening, recouping part of the losses in midday trading. The shares, which were first sold to the public in June 2008, were trading 14 percent down at 16.94 reais at noon in Sao Paulo.
Batista on Monday described the DeGolyer and MacNaughton report as overly conservative and insisted the company would demonstrate the reserves situation was in fact optimistic.
"We have never advanced any number that we did not feel comfortable with," he said during a conference call with analysts. "It's time for people to start trusting the OGX stamp."
BATISTA OPTIMISTIC
OGX is the largest company by market value in Batista's energy, mining and logistics conglomerate EBX. Batista is a former speedboat racer whose mercurial personality and capacity to sell his ideas to capital markets helped launch OGX's wildly successful IPO in 2008.
EBX firms have shed more than $8 billion since late November, as investors shunned recent moves to spin off units and unlock value from asset sales.
The company throughout 2009 reported repeated discoveries in the shallow water Campos Basin that helped push its stock up more than four-fold between the start of that year and the end of 2010.
Its valuation has at times rivaled that of mid-sized oil companies with significant production profiles such as Spain's Repsol and US independent Devon.
Apart from Deutsche Bank, analysts for local securities firm BTG Pactual also lowered their price target for the company. Gustavo Gattass, BTG's senior energy analyst, described the report as "more anticlimactic than bullish."
Frank McGann, an oil analyst with Bank of America Merrill Lynch, said in a report that "though the 10.8 billion boe (barrels of oil equivalent) headline figure did not disappoint, a closer look at the underlying data suggests that this number is significantly overstated."
However BTG, along with analysts from other banks, said investors will likely remain interested in OGX's portfolio of shallow water offshore fields that are cheaper to produce than those in the deep-water region known as the subsalt that is dominated by state-oil company Petrobras.