October 10, 2013
Kenneth Rapoza – Forbes Magazine, 10/09/2013
By some estimates, Brazil is not getting better.
The undersea Saudi Arabia off the coast of Rio and Sao Paulo states, while still impressive, has not lived up to its hype. Brazilian oil giant Petrobras still has to import gasoline.
Brazil’s biggest oilman cheerleader, Eike Batista, lost his FORBES billionaire status last month because his oil firm, OGX Petroleo, is tapping water from a stone. And now the company that was once the hottest initial public offering in Latin America back in the summer of 2008 is about to be become the largest private default in Latin American corporate history.
September 16, 2013
Brazil’s government may allow state-run oil company Petroleo Brasileiro SA to raise fuel prices by Oct. 21, the date of the first auction of exploration rights for the Libra subsalt oil field, newspaper O Estado de S. Paulo said on Monday.
Estado, citing unnamed sources, said a “relevant part of the government’s economic team” wanted gasoline prices to rise about 8 percent by that date.
By authorizing the increase in fuel prices by Oct. 21, the government wants to bolster investor confidence in the country’s oil and fuel model, Estado reported. Petrobras imports gasoline to meet domestic demand, but sells it at a loss due to the government’s insistence to head off inflation, which is currently running close to the official target’s ceiling.
August 15, 2013
Dan Horch – The New York Times, 08/13/2013
The troubled Brazilian businessman Eike Batista has taken further steps toward dismantling his once high-flying empire of energy, logistics and mining companies.
Mr. Batista announced Wednesday night in a filing with the Brazilian securities and exchange commission that he would sell a controlling stake in one of his companies, the LLX logistics firm, for 1.3 billion reais ($560 million). The buyer is EIG Global Energy Partners, an energy investment firm based in Washington that has invested in projects all over the world. Mr. Batista will also give up his management role in the company.
People briefed on the matter confirmed on Wednesday that another of his companies, the petroleum firm OGX, has hired the Blackstone Group as a financial adviser.
July 22, 2013
Kenneth Foo & Kyunghee Park – Bloomberg, 07/22/2013
Keppel Corp. (KEP), the world’s largest oil-rig maker, will focus on building more offshore production and support vessels in Brazil as competition from China cuts prices for its main product.
Brazil’s offshore development boom means Keppel’s yard is now mainly utilized for building rigs for state-owned Petroleo Brasileiro SA. The Singapore-based company is setting up a second yard to meet demand for other vessels and to offer repair and conversion work, Chief Executive Officer Choo Chiau Beng said in an interview on July 19.
“We’re not interested to take a lot more work than the six semis from Petrobras because we do not want to overload our shipyard,” Choo said, referring to an order to build semi-submersible rigs for state-owned Petroleo Brasileiro SA. “We want to leave some capacity for our other customers” who need floating production, storage and offloading platforms, or FPSOs, and for oil-rig repairs, he said.
July 15, 2013
The consortium that is awarded the right to develop the Libra prospect will likely need to drill for about four years after signing its production-sharing agreement, with commercial production likely to begin in the fifth year, ANP Director-General Magda Chambriard told a press conference in Rio de Janeiro.
ANP studies indicate that between 12 and 18 production platforms will be needed to develop Libra, whose recoverable oil is estimated at between 8 billion and 12 billion barrels, nearly equivalent to Brazil’s current proven-reserve base of 14 billion barrels.
Libra, located some 183 km off the coast of Rio de Janeiro state in an area of the Atlantic Ocean where water depths range from between 1,700 meters and 2,400 meters, will be the first pre-salt field to be auctioned off by Brazil.
July 11, 2013
Samantha Pearson – Financial Times, 07/11/2013
Eike Batista’s empire showed further signs of unravelling after four board members left the Brazilian billionaire’s shipbuilder OSX, including his own father and a former mining and energy minister.
Their departure took place as Brazil’s once-richest man faces intensifying scrutiny by the country’s securities watchdog, which is pursuing almost 20 inquiries about his companies – many in response to investors’ complaints.
OSX said in a filing on Thursday that Eliezer Batista da Silva, Mr Batista’s father, Rodolpho Tourinho Neto, a former mining and energy minister, Luiz do Amaral de França Pereira and Samir Zraick are no longer members of its board.
July 1, 2013
Brazil’s OGX Petroleo e Gas SA said on Monday it will stop development of three offshore oil prospects, slashing capital spending as it tries to stave off financial collapse, sending shares sliding 35 percent.
The company, controlled by Brazilian billionaire Eike Batista, suspended the development of the Tubarão Tigre, Tubarão Gato and Tubarão Areia offshore areas northeast of Rio de Janeiro, the company said in a securities filing on Monday.
OGX stock fell 35 percent to 51 centavos.
June 26, 2013
Juan Pablo Spinetto – Bloomberg, 06/25/2013
Eike Batista became the most popular Latin American billionaire on Twitter by sharing his formula for success. Now the Brazilian entrepreneur is being assailed online by investors blaming him for wealth destruction.
People with shares in Batista’s OGX Petroleo & Gas Participacoes SA (OGXP3) are using the social media to criticize him after missed oil targets spurred an 82 percent share-price plunge this year. The billionaire has posted about 21,700 Twitter messages since 2010 and has more than 1.3 million followers, almost six times more than Mexican magnate Carlos Slim, the world’s second-richest person. Bill Gates, the richest person on the planet, has 11.8 million followers.
William Magalhaes, a 32-year business owner who started buying OGX shares last year, has been using his @MinoritariosOGX Twitter account since March to push Batista to keep minority investors better informed and represented, including on the company’s board. His efforts paid off this month when he was granted a meeting with OGX Chief Executive Officer Luiz Carneiro and Chief Financial Officer Roberto Monteiro at the company’s downtown Rio de Janeiro headquarters.
June 18, 2013
Kenneth Rapoza – Forbes, 06/17/2013
The cool, publicity loving Brazilian billionaire can’t convince investors to stick around. His companies lead the list of stocks investors have dumped most on the BM&F Bovespa exchange in São Paulo this year.
In fact, his oil company OGX and his shipyard and ship leasing company OSX are the worst performing large cap stocks in all of Latin America. OGX, the company that investors clamored for when it went public around six years ago on the grounds that Batista would soon be pulling barrels upon barrels of oil out of the Atlantic Ocean, is down 78%. Investors neglected to realize that at the time they ran up OGX shares, Batista barely had an oil rig to his name, and not an ounce of black gold on his hands. Yes, there were millions of barrels of recoverable oil deep in the salt basins off Rio and São Paulo states, but it would cost bazillions to pull it out of there.
Batista’s shipbuilding and ship leasing company trails OGX in the Latin America ugly contest.
June 14, 2013
Boris Korby & Veronica Navarro Espinosa – Bloomberg, 06/14/2013
OGX Petroleo & Gas Participacoes SA’s bonds are falling like never before, a sign that investors are bracing for what would be the biggest company default in Latin America as controlling shareholder Eike Batista struggles to raise cash.
The oil producer’s $2.56 billion of 8.5 percent notes due 2018 have plummeted 16.9 cents this week, the most since the debt was issued in May 2011, to a record-low 40 cents on the dollar. The securities are trading below the average of 45 cents for defaulted Latin American corporate debt tracked by Bloomberg and less than the maximum 50 cents on the dollar Fitch Ratings estimates bondholders would recover in a restructuring. Pacific Investment Management Co., the world’s largest active bond-fund manager, was the biggest holder of the notes as of March 31.
While OGX said it isn’t analyzing a debt restructuring, investors are losing confidence Batista can honor his obligations as an 83 percent plunge in personal wealth pushed him to sell OGX shares and other stakes in his faltering commodity and energy empire, SW Asset Management and Brookshire Advisory & Research said. The company is set to run out of money in about a year at its burn rate as slumping production puts output goals out of reach, even after Batista pumped at least 2 billion reais ($943 million) of his own cash into OGX.