Bloomberg News

Batista’s OGX Receiving Offers for Campos, Parnaiba Fields

June 17, 2011

(Updates with closing share price in fifth paragraph.)

June 17 (Bloomberg) -- OGX Petroleo e Gas Participacoes SA, the oil company controlled by Brazilian billionaire Eike Batista, said it’s receiving offers for stakes in its Brazilian crude and natural-gas projects and expects a sale this year. The stock rose the most in a month.

OGX is negotiating with oil companies and investment funds to sell a minority stake in the Campos Basin where the company has had a 100 percent success rate drilling for oil and plans to start production in October, Chief Executive Officer Paulo Mendonca said late yesterday in an interview in Rio de Janeiro.

Buyers are also approaching the company to invest in its gas fields in Parnaiba, where the company declared two deposits commercially viable in May, he said. Talks to sell a minority stake in Campos are “more advanced” than at Parnaiba, he said.

“Everyone wants it, the large companies and the large funds,” Mendonca said. “It’s a stamp of approval.”

OGX climbed 52 centavos, or 3.8 percent, to 14.29 reais. The stock has fallen 29 percent so far this year.

OGX is in a stronger position with potential buyers after selling $2.56 billion in bonds last month, removing the need for a partner to finance investments, Mendonca said. OGX plans to produce 1.38 million barrels a day in 2019 as it develops 10.8 billion barrels of potential resources in Brazil and Colombia.

‘Market Will Like’

“It will be someone the market is going to like,” Mendonca said, referring to potential buyers. “In the oil business, the more money you have, the better.”

Brazil’s oil and gas industry generated a record volume of mergers and acquisitions in 2010 after companies including BP Plc, Sinochem Group and China Petrochemical Corp. bought oil assets. The country, home to the largest discovery in the Western Hemisphere in the past three decades, plans to more than double production by 2020.

Sovereign wealth funds are also buying Brazilian oil industry assets. Temasek Holdings Pte, Singapore’s state investment company, paid $400 million for a 14.3 percent stake in the oil services unit of Brazil’s Odebrecht SA last October. Capital Group International bought a 5.1 percent stake in Queiroz Galvao Exploracao e Producao in March.

International Companies

International oil companies including Chevron Corp., Total SA, BP and Statoil ASA are also looking to expand in Brazil.

Sinochem paid the equivalent of about $15 dollars for each barrel of reserves last year when it bought a 40 percent stake in Statoil’s Peregrino project near OGX’s Campos discoveries.

That’s setting a benchmark for Batista, said Anisa Redman, an oil analyst at HSBC Holdings Plc in New York, who said OGX’s current market value is equivalent to $4.50 for each barrel.

Batista “has indicated a strong preference for at least $15-a-barrel valuation,” Redman said in a telephone interview from New York. “It’s only logical he will not sell at anywhere below $4.50 a barrel, because that is where the shares are trading.”

Top Latin America Stories: TOPL <GO>

--Editors: Dale Crofts, Robin Saponar

To contact the reporter on this story: Peter Millard in Rio de Janeiro at Pmillard1@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net


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