OGX Petroleo e Gas Participacoes SA, the oil company of billionaire Eike Batista, slumped after an unexpected drop in offshore oil production, erasing last week’s rally.
OGX, based in Rio de Janeiro, fell 15 percent to 2.65 reais at the close in Sao Paulo after declining as much as 20 percent to its lowest intraday level since the company was taken public. The stock, which was the most traded by volume on Brazil’s Bovespa at 2.8 times its three-month daily average volume, led losses on the index, which rose 0.2 percent.
Yields on OGX’s $2.56 billion of bonds due in 2018 surged 1.39 percentage points to 11.69 percent.
Production at the company’s three offshore wells in the Campos Basin fell 14 percent to a combined 11,300 barrels a day in February, the company said in a presentation. Investors were expecting production to increase this year after the company connected a third well to the Tubarao Azul project in January, Oswaldo Telles, an equity analyst at Banco Espirito Santo SA, said by phone from Sao Paulo.
Batista, 56, signed an agreement last week with billionaire Andre Esteves’ Grupo BTG Pactual to co-run a strategic and financial management committee for his six publicly-traded companies after OGX fell 68 percent in 2012. BTG is the most profitable Brazilian bank and Esteves is the only Brazilian national on Bloomberg Markets Magazine’s 50 Most Influential list last year. OGX rallied 16 percent on March 7 after the deal was announced.
“There was a short-term relief when Eike announced a pact with BTG, and now people realize this pact is not a miracle,” Telles said. “Only one thing can bring expectations up: delivering on production.”
OGX in June cut targets at two wells by as much as 75 percent, triggering a stock selloff that wiped out 7.3 billion reais ($3.73 billion) in market value in a week. Five years after the oil startup raised 6.7 billion reais in an initial public offering by vowing to produce 730,000 barrels a day in 2015, OGX is still struggling to boost output at its offshore fields where the geology is more challenging than the company anticipated.
Banco Safra SA was expecting output at Tubarao Azul to rise to about 15,000 barrels a day after the company added the third well, analyst Leonardo Alves said today in a note to clients.