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OGX Starts Pumping Oil at Most Promising Field in Brazil

OGX Petroleo & Gas Participacoes SA, the world’s worst performing oil producer this year, started production at its most promising Brazilian field after failures at four other offshore areas depleted cash reserves.

“Production started yesterday at the Tubarao Martelo field,” Rio de Janeiro-based OGX said in a regulatory filing today. The company began pumping crude from a single well in the Campos basin field after receiving an environmental license Nov. 29, according to the filing. No further details were given.

Tubarao Martelo, which may hold as much as 108.5 million barrels including proven, probable and possible reserves, is OGX’s latest attempt to produce crude after abandoning projects it had declared commercial. OGX, which is controlled by founder Eike Batista, became the first Brazilian oil producer to seek creditor protection when it filed for a so-called judicial recovery in a Rio court in October.

OGX expects to run out of cash in the last week of December and needs about $250 million to sustain operations through April, it said in an Oct. 23 presentation to Rothschild, the adviser hired by its bondholders. Last month, Malaysia’s Petroliam Nasional Bhd. canceled a contract to buy a 40 percent stake in two offshore exploration blocks that include Tubarao Martelo, after estimates were slashed.

Funding Options

Petronas walked away from the deal “unilaterally” and OGX is now looking at alternatives to obtain funding, Chief Executive Officer Paulo Narcelio said at a shareholder meeting in Rio today. A second well at Martelo will be connected in “some days,” he said.

The oil is being produced with a platform called OSX-3, owned by Batista’s OSX Brasil SA, which also filed for bankruptcy protection.

Separately, OGX’s shareholders approved at today’s meeting to change the company’s name to Oleo & Gas Participacoes SA.

OGX stock dropped 95 percent this year, more than any other of the world’s 415 oil companies worth at least $250 million. The shares gained 16 percent to close at 22 centavos in Sao Paulo today, the biggest rise since Oct. 16.

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