OGX Petroleo & Gas Participacoes SA soared the most in three months after Brazilian Billionaire Eike Batista granted a put option that could require him to buy as much as $1 billion of new stock in the oil company he controls at a 36 percent premium.
OGX, based in Rio de Janeiro, rose 2.6 percent to 4.75 reais in Sao Paulo after climbing as much as 8.2 percent, the most intraday since July 27. The benchmark Bovespa index rose 1.2 percent.
Batista will only exercise the option at a premium relative to the market price to avoid harming minority shareholders, Chief Financial Officer Roberto Monteiro said in an interview today. Batista would buy the shares at 6.30 reais each, OGX said yesterday after markets closed.
“It’s not like the main shareholder is going to dilute the smaller shareholders,” Monteiro said by telephone from Rio. “This is not the case.”
The oil company will exercise the option should it need additional capital and in the absence of more favorable financing options, according to its Oct. 24 statement distributed by Business Wire.
“The move aims to reduce investor concerns regarding the sustainability of OGX’s cash position and its ability to raise more money if needed,” Itau BBA SA analysts Paula Kovarsky and Diego Mendes said in a note to clients yesterday.
The put option is designed as an “insurance policy” to guarantee OGX has enough money to participate in the government’s upcoming auction for exploration areas next year or other oil assets for sale in Brazil, Monteiro said.
OGX would consider a “non-negotiable” rights offering extended to all shareholders if the stock’s price exceeds the value set for Batista’s put option, he said. OGX is also considering selling stakes in some of its more developed oil projects or selling future oil production to raise cash if needed, he said.
The company began reducing its drilling fleet in Brazil to cut exploration costs and focus on developing the oil fields it has discovered. The company has also expressed interest in competing for new exploration blocks when Brazil holds an auction as early as May.
OGX has declined 65 percent this year, compared with a 1.9 percent gain in the Bovespa Index.
“This option underpins my confidence in OGX’s technical expertise and quality assets, as well as the new opportunities that the oil and gas sector offer to OGX,” Batista said in yesterday’s statement.
Batista is also buying shares in his shipbuilding and oil services unit OSX Brasil SA to raise capital. Batista will pay 39.38 reais a share, more than triple the current price, to buy as much as $1 billion of new stock in the unit as part of a plan to raise capital as it invests in a shipyard, OSX said yesterday.