OGX to return nine Brazilian exploration blocks
BY JEFF FICK
RIO DE JANEIRO -- OGX Petroleo e Gas Participacoes SA, the flagship of businessman Eike Batista's troubled industrial empire, said Tuesday that it would return nine oil and natural gas exploration blocks it won at an auction earlier this year.
OGX will pay a fine of 3.42 million Brazilian reais ($1.42 million) for returning the blocks, which the company held 100% stakes in after submitting the winning bids at Brazil's 11th-round auction of oil and natural-gas concessions in May. OGX, however, said it would pay signing bonuses related to four blocks the company won in partnerships with Exxon Mobil, France's Total and Queiroz Galvao Exploracao e Producao.
OGX's board determined that it was "not advisable, at this moment, to assume exploration risk in new areas," the company said in a regulatory filing. Risks in the four blocks OGX will retain stakes in are mitigated by the partnerships with the other oil companies, the company added.
Returning the exploration blocks relieves the company of paying the signing bonuses and expenses related to carrying out initial exploration programs on the acreage. OGX has struggled after its first producing oil field, known as Tubarao Azul, failed to meet the company's ambitious output targets. The company has said it won't invest further to boost output at the field, and may actually halt output altogether early next year.
The troubles at OGX sparked a crisis of confidence in Mr. Batista's companies.
OGX is banking on the start of oil output at the Tubarao Martelo field to boost revenues after the issues at Tubarao Azul. Malaysian state-run oil-and-gas firm Petroliam Nasional Bhd., or Petronas, purchased a 40% stake in the field earlier this year, although OGX's ongoing issues have cast a cloud over the deal.
OGX shares fell nearly 5% to BRL0.77 in early trading on the Sao Paulo Stock Exchange.
Dow Jones Newswires