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OGX production from Waimea falls short of expectations


RIO DE JANEIRO -- Brazilian independent oil producer OGX Petroleoe Gas Participacoes said that crude oil output at its Waimea complex averaged about 10,400 bopd in October, remaining far short of what the company originally expected.

OGX has struggled to boost output at its first producing oil field in Brazil' s offshore Campos Basin, including shutting down one of the two wells operating at the Tubarao Azul field earlier this year to swap out equipment. OGX had expected to produce at least 40,000 bopd of crude by the end of 2012.

The disappointing output levels at Waimea have undercut OGX' s shares since midyear and created doubt about billionaire Brazilian businessman Eike Batista' s ability to deliver on his development plans. Mr. Batista took a series of companies public in the late 2000s, with many of the companies still in the pre-operational stage.

Investors took report in stride; however, sending OGX' s locally traded shares up 1.5% to $2.35 in late afternoon trade. The shares are down 65% so far in 2012.

"OGX lost the confidence of investors," said Ruaraidh Montgomery, an analyst at oil industry consultants group Wood Mackenzie. "They' re trying to re-establish some credibility with the market."

OGX has indicated that it will rein in its exploration program to focus on production at the Waimea complex, an area that contains several independent discoveries, and the Waikiki complex that is also in the Campos Basin, Mr. Montgomery said. OGX is now "focused on short-term and medium term targets, as well as delivering production and projects on time," he added, noting that the company has backed off earlier plans to reach about 1.4 MMbopd of crude output by 2019.

The October production results were in line with output the previous two months, OGX data showed. Two more production wells in the Waimea complex will come on stream by early 2013, with each expected to produce about 7,000 bopd. "By 2013, I think they' re hoping to hit between 20,000 and 25,000 bopd of production," Mr. Montgomery said.

OGX noted that it hasn' t yet started injecting water into the Waimea field, a technique that can boost pressure in the oil reservoir and increase output. The company also said that in addition to water injection, it was planning to use hydraulic fracturing to raise production.

Dow Jones Newswires



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