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Is OGX blowing smoke in Brazil?

OGX Petroleo e Gas Participacoes SA, the oil company controlled by billionaire Eike Batista, said it may have discovered as much as 1.5 billion bbl of oil in an offshore block after drilling off Brazil’s southeastern coast, Bloomberg reports.

The BM-C-43 block, located in the shallow waters of the Campos Basin, may hold between 500 million and 1.5 billion barrels, based on well information and seismic data, Rio de Janeiro-based OGX said today in a regulatory filing. The company owns all of the block, according to its Web site.

OGX raised 5.87 billion reais ($3.43 billion) in its June 2008 initial public offering as investors bet Batista could match Brazil’s state-controlled Petroleo Brasileiro SA’s success at finding oil.

Bloomberg says that Batista, who owns about 62% of OGX, is plowing about $4 billion into crude exploration and production, with first oil output expected by late 2011.

The company earlier this month also said it found signs of crude in the BM-S-29 block, in the Santos Basin off the coast of Sao Paulo state.

The company estimates BM-S-29 holds 4.8 billion bbl of oil and gas, and it plans to spend $2 billion during the next three years drilling about 50 wells, Chief Financial Officer Marcelo Faber Torres said Oct. 2.

OGX holds 22 exploratory blocks in Brazil’s Campos, Santos, Espirito Santo and Para-Maranhao basins with an offshore exploration area of 7,000 sq km.

How credible does this report sound to you? Or does it sound like an estimate aimed at boosting the firm’s share price on the stock market?

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posted by: noreply@blogger.com

091014 :Is OGX blowing smoke in Brazil?

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2 Comments:

Lucas Velozo de Melo Bento said...
OGX has not yet produced a single barrel of oil. This could indeed be ungrounded speculation - but if so, the company will lose credibility in the market in future announcements. This could be detrimental if in the future the company needs to raise more capital via equity finance.

Thu Oct 15, 07:25:06 AM CDT

Eric Watkins said...
Not a single barrel of oil? Hmmm... are you suggesting that OGX is blowing smoke in Brazil? You are surely right in saying they will lose credibility if their forecasts are not correct. But what about investor monies in the meantime?

Thu Oct 15, 11:31:05 AM CDT

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Eric Watkins
OGJ Oil Diplomacy Blog
by Eric Watkins

Eric Watkins joined Oil & Gas Journal in 2001 as Middle East Correspondent and now serves as its Oil Diplomacy Editor, drawing out the industry’s political implications. His column Watching the World appears weekly in Oil & Gas Journal, while his news articles appear daily on Oil & Gas Journal Online. Eric’s work is based on his experience as a correspondent in the Middle East, Europe, and Central Asia. He lived in Saudi Arabia, 1981-88; Yemen, 1989-94; the UK, 1988-89 and 1994-2000; and Cyprus, 2000-04. Additional assignments have taken him to Africa, the Arabian Gulf, the Caucasus, and Central Asia.

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