Batista’s OGX Falls Most in Almost a Month After S&P Cut
OGX, based in Rio de Janeiro, dropped 14 percent to 1.71 reais at the close of trading in Sao Paulo, the biggest decline since March 11. The shares tumbled 26 percent this week, the most in the MSCI Emerging Markets Index. Bonds due in 2018 fell 6.3 percent to 75.20 cents on the dollar, the lowest since March 27.
The explorer is producing a fraction of expected volumes at its first oil project after it encountered more difficult geology than it was expecting at the Tubarao Azul field off the coast of Rio. The company will probably need to raise cash for its 2014 investment program because production revenues don’t cover costs, S&P said in an April 3 report. It lowered its rating on OGX to B- from B and may cut it again this year.
The B- rating is six levels below investment grade and indicates the company is vulnerable to adverse business, financial and economic conditions.
OGX had $1.7 billion in cash at the end of 2013 and plans to spend $1.3 billion this year, the company said in a March 26 earnings release. OGX may need to raise $1 billion from Batista through a put option or sell assets to cover spending next year, S&P said.
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