March 27 (Bloomberg) -- OGX Petroleo & Gas Participacoes SA, the Rio de Janeiro-based oil company run by billionaire Eike Batista, will reduce the volume estimate for its only producing field after missing output targets.
OGX, which has plunged 84 percent over the past year, is “stabilizing” output at its third well at the Tubarao Azul field in the Campos Basin after encountering more complicated geology than it was expecting, Chief Executive Officer Luiz Carneiro said in an earnings report. OGX estimated Tubarao Azul’s recoverable volumes at 110 million barrels in a March 11 presentation. It didn’t offer a new estimate in the report.
“We continue completely concentrated on optimizing the total recoverable volumes at the field in line with the best industry practices, but we also recognize that the estimate of total recoverable volumes should be reduced,” Carneiro said.
Batista’s personal wealth has fallen almost $26 billion in the past year as the market value of OGX and his other commodities and logistics companies sank. OSX Brasil SA, Batista’s shipbuilder that depends on OGX to rent its production vessels, is down 74 percent in the past year.
OGX rose 4 percent to 2.39 reais at the close in Sao Paulo.
The first two wells at Tubarao Azul off the coast of Brazil’s Rio state are producing a little less than 10,000 barrels a day, Carneiro said. The company originally planned to pump as much as 20,000 barrels a day at each well at Tubarao Azul and began scaling back estimates after production missed targets.
“A reduction in Tubarao Azul’s recoverable volume raises concerns about the real potential of the surrounding areas,” Banco Itau SA analysts Paula Kovarsky and Diego Mendes, based in Sao Paulo, said in a note to clients. “We currently assume a 25 percent recovery factor for these accumulations, but there could be downside to our estimates.”
The potential decline at the Tubarao Azul field doesn’t apply to the surrounding fields, Carneiro said in a conference call. The expected recovery rates are “not far away from the 25 percent” the company previously announced, Chief Financial Officer Roberto Monteiro said on the call.
OGX increased its planned 2013 investments 8.3 percent to $1.3 billion after it bought a stake in the Atlanta and Oliva oil fields in November. It had $1.66 billion in cash at the end of 2012, down from $2.86 billion a year earlier, it said.
The company reported a 286 million reais ($142 million) loss in the fourth quarter, less than the 303 million reais estimate in a Bloomberg survey of two analysts.
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