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Brazil' s OGX expects Tubarao Azul repairs completed in June

RIO DE JANEIRO -- Brazilian independent oil producer OGX expects to complete well repairs at its offshore Tubarao Azul field in June, although the company' s chief financial officer on Friday declined to estimate how much the disappointing field would produce.

"We will have to see how the reservoir will behave after all these interventions," said OGX' s Roberto Monteiro during a conference call with analysts. In March, OGX was forced to shut down all three of its production wells at the field after electrical troubles damaged two submersible pumps. In April, Tubarao Azul produced an average 1,800 barrels of oil equivalent per day from a single well.

Tubarao Azul' s performance has rebounded a bit from earlier troubles as the single production well is being fed with more crude oil from the reservoir, a prospect that OGX' s engineers are studying to determine why the field is behaving this way, Mr. Monteiro said. "As of today, the well is producing a volume slightly higher than what was produced on average last month," Mr. Monteiro said.

OGX expects to complete repairs to one of the two offline wells in "weeks," Mr. Monteiro said. Repairs to the remaining well will take between 30 days and 45 days, he added.

The technical issues at Tubarao Azul have forced the company to put on hold plans for a fourth production well and water injection, Mr. Monteiro said. Water injection involves pumping water back into the oil reservoir in an attempt to increase pressure and boost production.

OGX expects crude-oil output to get a lift from the arrival of two floating production platforms in the third quarter of 2013. The OSX-2 and OSX-3 platforms will be installed by the end of 2013, Mr. Monteiro said. While the OSX-3 platform is earmarked for the Tubarao Martelo field, OGX engineers are still planning the development project for the OSX-2 platform, the executive said.

"If we get the engineering project [done] by June, we still have time to drill one well to connect to the [platform]," Mr. Monteiro said.

The OSX-3 platform will go to the Tubarao Martelo field, where six wells have already been drilled, Mr. Monteiro said. Malaysian state oil company Petronas purchased a 40% stake of the field and two other prospects for $850 million in a deal disclosed earlier this week.

"The size and quality of our assets and people were underscored by this transaction," Mr. Monteiro said. Cash from the deal gives OGX some financial breathing room, although Mr. Monteiro recalled that the company still holds a $1 billion put option with controlling shareholder Eike Batista, a billionaire Brazilian entrepreneur with interests as diverse as real estate, mining and shipbuilding.

Disappointing production at Tubarao Azul have undercut OGX' s shares since mid-2012 and created doubts about Mr. Batista' s ability to deliver on his development plans. OGX shares were down 2.4% at $0.80 early afternoon trade in Sao Paulo.

OGX also expects to hire a company to certify its crude-oil reserves in the first half of 2013, with the final certification report complete by the end of the year, Mr. Monteiro said.




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