Petronas abandons Batista’s OGX as Martelo project backer
BY PETER MILLARD & JUAN PABLO SPINETTO
RIO DE JANEIRO -- OGX Petroleo & Gas Participacoes, the oil explorer that filed for bankruptcy protection last month, lost Petroliam Nasional as a financial backer for its most promising field.
Petronas, canceled a contract to buy a 40 % stake in two offshore exploration blocks that include the Tubarao Martelo field, OGX said in a statement. The company, controlled by former billionaire Eike Batista, said it’s studying its legal options.
OGX was counting on $850 million from the Petronas sale to develop the Martelo field where it plans to start output this year. The company, which expects to run out of cash in the last week of December, needs about $250 million to sustain operations through April, it said in an October 23 presentation to Rothschild, the adviser hired by its bondholders.
OGX became the first Brazilian oil producer to seek protection from creditors last month when it filed in a Rio state court for a so-called judicial recovery, declaring total debts of $5 billion. Petronas had set as a pre-condition to the Martelo deal that OGX restructure its debt, Shamsul Azhar Abbas, CEO of Malaysia’s state energy company, said in August.
A press official for OGX, who asked not to be named according to corporate policy, said the company still plans to start producing at Martelo this year. Petronas spokesman Azman Ibrahim wasn’t able to immediately comment when contacted by e-mail in Kuala Lumpur.
OGX’s initial success finding oil in shallow waters off the coast of Rio sparked a stock market rally that made it more valuable than other established producers, including Repsol. The company’s cash fell to about $82 million at the end of September, it said in a separate document dated October 7 and released after talks with bondholders collapsed.
Batista founded OGX in 2007 and it became the pillar of his group of commodities and logistics companies, transforming him into Brazil’s richest man. When OGX moved from exploration to production it encountered more complicated and compartmentalized geology than expected and started abandoning projects it had previously declared commercial.
Martelo may hold as much as 108.5 MMbbls of oil, including proven, probable and possible reserves, DeGolyer & MacNaughton, an oil-reserves auditing company, said in a report posted on OGX’s website October 3.