Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

Batista’s Oil Company Viable After Creditor Approval: CEO

Eike Batista, chairman and founder of Oleo e Gas Participacoes SA. Photographer: Patrick Fallon/Bloomberg
Eike Batista, chairman and founder of Oleo e Gas Participacoes SA. Photographer: Patrick Fallon/Bloomberg

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.

Weighing Pre-Sales

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.

Unresolved Put

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.

To contact the reporter on this story: Juan Pablo Spinetto in Rio de Janeiro at jspinetto@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net Robin Saponar

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.