Bloomberg News

OGX Leads Bovespa Decline as Oil-Field Acquisition Burns Cash

November 27, 2012

The Bovespa fell, led by OGX Petroleo e Gas Participacoes SA’s slump to the lowest in almost four years on concern its $270 million purchase of an oil field stake will cut into cash holdings and imperil investment in existing projects.

OGX, the oil arm of billionaire Eike Batista’s EBX Group, contributed the most to the gauge’s decline after agreeing to buy a 40 percent stake in a block in the Santos Basin from state-controlled Petroleo Brasileiro SA (PETR4), which also declined. Online retailer B2W Cia. Global do Varejo was the best performer on the index as Bank of America Corp. raised the stock to buy.

Brazil’s main equity measure fell 0.9 percent to 56,248.09 at the close of trading in Sao Paulo, with 50 stocks down and 17 higher. The real sank 0.1 percent to 2.0838 per U.S. dollar.

“The market is in a bad mood concerning the governance of the EBX companies,” Nataniel Cezimbra, an analyst at Banco do Brasil SA, said by phone from Sao Paulo. “There’s still a lot of pressure on OGX’s stock.”

OGX slid 3.7 percent to 4.44 reais, the lowest since January 2009. Petrobras, as Petroleo Brasileiro is known, fell 1.6 percent to 18.51 reais, the lowest in four months.

“When an acquisition like this is announced, the first thing investors think about is how much the company will have to spend, that’s why shares fell,” Sandro Fernandes, a trader at brokerage Corval Corretora de Valores SA, said by phone from Belo Horizonte, Brazil.

OGX should focus on saving cash for its own projects, UBS AG (UBSN) analysts Lilyanna Yang and Luiz Pinho wrote in a note.

B2W Jumps

The Bovespa earlier advanced as much as 1.2 percent as B2w rallied and electric utility Centrais Eletricas Brasileiras SA, known as Eletrobras, climbed. Brazil may boost the $9 billion offered to utilities to compensate for lower electricity rates, said a government official with knowledge of the plan, who asked not to be identified because the information isn’t public. Eletrobras rose 3.4 percent to 8.29 reais, a one-week high.

B2W jumped 18 percent to 14 reais, its biggest rally since October 2008. Parent company Lojas Americanas SA advanced 4.2 percent to 19.22 reais, a record.

The Bovespa has climbed 7.2 percent from this year’s low on June 5 as stimulus from central banks around the world eased economic concern and borrowing costs at a record low in Brazil boosted demand for equities. The index trades at 10.4 times analysts’ earnings estimates for the next four quarters, compared with 10.6 times for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume was 6.36 billion reais in stocks in Sao Paulo today, according to data compiled by Bloomberg. That compares with a daily average of 7.18 billion reais this year through Nov. 23, according to data compiled by the exchange.

To contact the reporters on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net; Denyse Godoy in Sao Paulo at dgodoy2@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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