OGX Petroleo & Gas Participacoes SA, billionaire Eike Batista’s oil company, fell after it abandoned offshore exploration acreage and said it won’t receive the bulk of an $850 million oil-field sale until it starts producing.
OGX, the most shorted stock in Brazil, declined 1.2 percent to 1.63 reais at the close in Sao Paulo, the lowest since April 24. It is down 63 percent this year, compared with a 9.6 percent drop in the benchmark Bovespa index.
The explorer, based in Rio de Janeiro, will receive $250 million from the sale of a 40 percent stake in the Tubarao Martelo oil field when the deal closes, the company said in a statement yesterday. It will get the remaining $500 million after it starts production and $100 million after it meets three separate output targets. OGX agreed to sell a stake in the field, which spans two exploration licenses, to Petroliam Nasional Bhd. on May 8.
“The additional $100 million of payments associated with daily production rates may take some time to realize and may not be achieved at all,” Daniel Sensel and Gregg Brody, analysts at JP Morgan Chase & Co., said in a note to clients today.
OGX reported 856 million reais ($423 million) in write offs from non-commercial areas it returned to the country’s oil regulator and costs from dry holes, according to yesterday’s statement. The charges contributed to higher-than-expected losses of 805 million reais in the first quarter.
The returned areas include the Tambora, Tupangato, Cozumel and Cancun accumulations, Marcus Sequeira, an analyst at Deutsche Bank AG, said in a note to clients today.
“We expect the stock to continue to give back recent gains due to vulnerable cash flow position and the relinquishment of additional areas which has negative valuation repercussions,” Sequeira said.