OGX Petroleo & Gas Participacoes SA, the Brazilian oil company that plunged to a three-year low in June, is set for a rebound as its weighting in the Bovespa index may more than double because of increased trading.
The energy producer’s stake in Brazil’s benchmark equity gauge will likely rise to about 5.3 percent from 2.3 percent, the biggest gain among the index’s 67 members, according to data compiled by Bloomberg. The preliminary weightings, which are based on trading volume, will be announced tomorrow and the final change will take effect on Sept. 3.
OGX’s average daily trading volume surged to 168 million shares after the company’s June 26 announcement that it cut output targets by up to 75 percent at its first oil project, from about 24 million shares in May. The weighting change will fuel a rebound as funds increase holdings of the company controlled by billionaire Eike Batista, said Luiz Otavio Broad, an analyst at Agora CTVM SA brokerage.
“Many funds mirror the Bovespa index’s portfolio, so if the stock’s weighting increases, demand for it also increases,” Broad said in a telephone interview from Sao Paulo. “It can help boost shares in the short term.”
Rio de Janeiro-based OGX declined 55 percent this year before today, making it the worst performer on the Bovespa, which is up 2.3 percent. The drop dragged down Batista’s mining, logistics and energy companies on concern the enterprises, some of which rely on OGX for revenue, will also scale back production targets. Shipbuilder OSX Brasil SA, which has contracts with OGX, has declined 28 percent from this year’s high on March 15.
Shares of OGX fell 3.9 percent to 5.95 reais in Sao Paulo trading today. OSX declined 4.4 percent to 11.95 reais, while the Bovespa was up 0.2 percent.
OGX last night said its loss before interest, taxes, depreciation and amortization widened to 110 million reais ($54.3 million) from 107.5 million reais a year earlier. The company was expected to report an Ebitda loss of 137.9 million reais, the median estimate of four analysts in a Bloomberg survey.
OGX’s press office didn’t respond to an e-mail for comment.
The oil company’s weighting will likely rise further when the Bovespa rebalances the index again as OGX consolidates its position as Brazil’s biggest oil company behind state-controlled Petroleo Brasileiro SA, said Rogerio Freitas, a partner at Rio de Janeiro-based hedge fund Teorica Investimentos.
“There were a lot of people rushing to sell shares after the target cut, which explains the volume increases,” Freitas said in a telephone interview. “There’s also more visibility on the company as it starts actual production after years in a pre-operational stage. There’s more interest in the company now, which also means more trading.”