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OGX Drops to 4-Year Low on Oil Field Stakes Purchase: Rio Mover

Nov. 27 (Bloomberg) -- OGX Petroleo e Gas Participacoes SA, the oil company controlled by billionaire Eike Batista, dropped to the lowest in almost four years after agreeing to buy Petroleo Brasileiro SA’s stake in two oil fields, expanding in deep waters off the coast of Brazil.

Shares declined 3.7 percent to 4.44 reais at the close in Sao Paulo, the lowest since Jan. 7, 2009. The stock, which lost 67 percent this year amid disappointing production rates at its first two wells, was the third-worst performer on Brazil’s benchmark Bovespa index today.

OGX, based in Rio de Janeiro, will pay Petrobras, as the world’s biggest producer in deep waters is known, $270 million for its 40 percent stake in the BS-4 block in the Santos Basin that holds the Atlanta and Oliva heavy oil fields, OGX said in an e-mailed statement late yesterday. The stakes purchase is a “small negative” for OGX as the company should focus on saving cash for its own projects, UBS AG analysts Lilyanna Yang and Luiz Pinho said.

“OGX in our view should preserve cash for the development of its 1.2 billion barrels coming from Campos basin,” the analysts wrote in a note to clients dated yesterday. “While the acquisition can prove to be accretive, we question the timing and acquisition price at the moment.”

Batista granted OGX a $1 billion put option in case the company needs additional funds to finance an expansion, OGX said Oct. 24. OGX also plans to compete for new oil exploration blocks when the government holds the next bidding round as early as May. Petrobras is selling assets in Brazil and abroad to help finance its $236.5 billion five-year investment plan.

The Atlanta and Oliva fields are in 1,500 meters of water 185 kilometers off the coast. OGX’s biggest discoveries to date are closer to shore in the Campos Basin, where it started production in January.

To contact the reporters on this story: Peter Millard in Rio de Janeiro at pmillard1@bloomberg.net; Juan Pablo Spinetto in Rio de Janeiro at jspinetto@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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