May 30 (Bloomberg) -- Oleo e Gas Participacoes SA, the oil startup that triggered Eike Batista’s financial collapse, will emerge as a viable producer once creditors approve a recovery plan at a meeting scheduled for next week, Chief Executive Officer Paulo Narcelio said.
OGpar, as the Rio de Janeiro-based company is know, will eliminate most of its debt and recover financing capacity as it generates about $500 million in sales this year, enough to sustain operations, Narcelio said in an interview at the company’s headquarters yesterday. OGpar expects to produce an average 16,000 barrels a day for 12 months after connecting two extra wells to its Tubarao Martelo deposit by July, he said.
“We have a combination of resources that leave us comfortable in the coming months,” Narcelio, 51, said. “Operationally, the company’s going very well.”
OGpar is attempting to reinvent itself as a much smaller version of the vision Batista marketed to investors in a 2008 stock listing. The former speed-boat racer planned to create Brazil’s second-biggest oil producer and rise to the top of global wealth rankings by tapping deposits state-run Petroleo Brasileiro SA had overlooked for decades.
Instead, the company abandoned most of its offshore fields and failed to generate enough income to service debt, including $3.6 billion in international bonds, culminating in a bankruptcy protection filing in October. Creditors including Pacific Investment Management Co. will discuss a revised plan to guide the company out of the bankruptcy process at a June 3 meeting in Rio.
OGpar is considering options to generate new income, including selling oil production in advance or finding partners for its blocks, Narcelio said during the interview. It also has the proceeds from the sale of assets including natural gas operations and Colombian exploration blocks.
Creditors probably will approve OGpar’s proposal to exit the bankruptcy protection process after next week’s meeting, Narcelio said.
“The alternative of not approving the plan would be to liquidate the company,” he said. “That’s not a good alternative to anyone. It would be an irrational decision.”
Shares of OGpar closed little changed at 22 centavos in Sao Paulo, reducing its decline in the past year to 87 percent. The company’s market value is 647 million reais ($289 million).
OGpar’s management, Batista and creditors still need to resolve a so-called put option the entrepreneur pledged in 2012 when output at the company’s first oil project was fading.
In September the company requested payment of the $1 billion option. Batista refused, arguing it was set up for expansions not debt payments. Brazil’s securities regulator CVM is investigating the original agreement, and minority investors have complained about it at shareholders meetings.
“The put is still to be resolved,” Narcelio said. “The board will review this and eventually send a decision, whatever that is, to a shareholders assembly.”
He declined to comment on the likelihood of Batista paying part or all of the option.
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