OGX Petroleo e Gas Participacoes SA stocks and bonds slumped to records after Brazilian billionaire Eike Batista’s oil company shut two of the three wells at its only producing field.
OGX’s 8.5 percent bonds due in 2018 dropped 12.77 cents to 57.19 cents on the dollar in Sao Paulo, sending yields to a record 23 percent. Shares sank 11 percent to 1.25 reais.
Unstable power supply damaged production pumps last month at the Tubarao Azul field, where output was already a fraction of original estimates, OGX said in a filing yesterday. The Rio de Janeiro-based company said it’s producing from a third well that was only shut for two days as a precaution. Crude output fell 26 percent in March to 8,300 barrels a day on the mechanical malfunctions.
“These technical problems further increase our concerns on the company’s ability to effectively produce from the Campos carbonates,” Itau analysts Paula Kovarsky and Diego Mendes wrote in a research report.
OGX shares have lost 90 percent over the past year after disappointing production at Tubarao Azul. The company encountered more compartmentalized geology than it was expecting at the reservoir, inhibiting the flow of oil. OGX’s lower-than-expected revenue has weighed on other companies in Batista’s natural resources and logistics group that supply the producer with goods and services.
OSX Brasil SA, Batista’s shipbuilder that supplies production vessels to OGX, fell 16 percent to 3.21 reais.
The company will restart well 68HP in mid-May after completing repairs and then fix the pump at well 1HP before resuming output, it said yesterday. The 1HP well will resume output in mid-June, the company said in an e-mailed reply to questions today. OGX didn’t provide production estimates for April or May.
In February, before the stoppages, Tubarao Azul pumped 11,300 barrels a day, compared with an installed capacity of about 60,000 barrels a day at the production vessel it contracted for the project. OGX plans to start producing from an additional two fields in the Campos Basin by year-end.
Natural gas output rose to 6,800 barrels of oil equivalent per day in March at the Gaviao Real field on land, it said.
Poor March production and news that two wells will remain out of commission for another one to two months and will weigh on shares, Santander analysts Felipe Reis and Alex Sciacio wrote in a note to clients today.