June 12 (Bloomberg) -- OGX Petroleo e Gas SA, the Brazilian oil company controlled by billionaire Eike Batista, raised 5.87 billion reais ($3.58 billion) from what could be the country's biggest initial public offering.

OGX has sold 5.19 million shares, or 16 percent of outstanding stock, for 1,131 reais apiece, the maximum allowed, according to filings yesterday on the Web sites of Brazil's securities regulator and CBLC clearing house. If banks exercise options to buy 741,800 more shares, the sale will be worth 6.71 billion reais, making it the largest Brazilian IPO ever.

The Rio de Janeiro-based company is capitalizing on soaring interest in Brazilian offshore oil after state-controlled Petroleo Brasileiro SA's Nov. 8 announcement of the 5 billion-to 8 billion-barrel Tupi field, the largest discovery in the Americas since 1976. The sale values OGX at $21.8 billion, or 8.4 percent of Petrobras, as its Brazilian rival is known.

``Outside the OPEC oil cartel, Brazil is one of the few places building oil reserves,'' said David Pursell, managing partner at Tudor Pickering & Holt Co., a Houston-based investment bank. ``OGX is also one of the few pure, non-state, oil plays you can buy. In this environment there is a lot of room for it in people's portfolios.''

OGX, which has never drilled a well or pumped oil, will begin trading as Brazil's second-largest oil company behind Petrobras. OGX may have as much as 4.8 billion barrels of oil, said OGX board member Francisco Gros April 4, citing Dallas research company DeGolyer and MacNaughton. If proven, OGX's will have more than a third of Petrobras' proven reserves of about 13 billion barrels.

The company starts trading tomorrow in Sao Paulo, according to the prospectus.

Brazilian Oil

Excitement about Brazilian oil and record-high oil prices have helped the preferred shares of Petrobras rise 89 percent in the last 12 months, boosting its market value to $272 billion and making it the world's sixth-largest company. Crude oil futures for July delivery in New York climbed $10.75 a barrel on June 6, the most ever in a day, to a record $139.12.

The interest has also allowed OGX and Batista, 51, Brazil's richest man, to buck a slowdown in Brazilian IPOs.

OGX is the fourth such offering this year compared with 19 in the same period of 2007, according to Bloomberg data. The three previous offerings this year raised $469 million. The 19 in the same period last year were worth $5.64 billion.

The largest previous Brazilian IPO was the 6.63 billion-real Oct. 25 sale of Bovespa Holding SA.

`Exploration Risk'

``This is a way to round out your portfolio and take some exploration risk,'' Pursell said.

Banco UBS Pactual SA, Credit Suisse and Itau BBA managed the OGX sale. Credit Suisse has 30 days to buy additional shares to meet investor demand, according to the prospectus.

In January, Batista said OGX expects to begin drilling wells by the end of this year. The company hopes to announce its first discoveries in 2009, according to Gros.

Batista, who said before the sale that he is worth $17 billion, paid $800 million in November to buy his first oil exploration licenses off Brazil's coast.

The creation of OGX marks Batista's first major move away from mining. The billionaire, who began his business life in the gold industry, also controls MMX Mineracao e Metalicos SA, an iron-ore producer and MPX Energia SA, a coal mining and electricity generation company, and LLX Logistica SA.

Petrobras Executives

While OGX has no track record in drilling or production, Batista is counting on executives hired from Petrobras, which until a decade ago had a monopoly on Brazilian oil exploration, to turn their prospects into successes.

For instance, Gros, OGX's vice chairman, was Petrobras' chief executive from 2001 to 2003.

``OGX has hired some of the best people from Petrobras, including those in exploration,'' said Fernando Barbosa, president of Brasil Supply SA, a Brazilian offshore oil service company and a former Petrobras executive.

Most of OGX's leases are also near Petrobras's most productive fields.

``It's an old but true rule that the best place to find oil is near where you found oil before,'' Pursell said.

To contact the reporter on this story: Jeb Blount in Rio de Janeiro at jblount@bloomberg.net

Last Updated: June 12, 2008 09:43 EDT