OGX Slumps on Oil Output, Drags Down Batista's Brazil Stocks
06/27/2012| 01:16pm US/Eastern
SAO PAULO--Shares of OGX Petroleo & Gas Participacoes SA (OGXP3.BR), the start-up oil company controlled by Brazilian billionaire Eike Batista, plunged in Sao Paulo trading Wednesday after the company reported weaker-than-expected output at its wells.
OGX plunged 27% to 6.09 Brazilian reais ($2.92) at 12:30 p.m. ET, leading declines on the Ibovespa index, which was 0.6% lower.
OGX, which started commercial production of oil earlier this year, said in a regulatory filing after markets closed Tuesday that it had determined the ideal flows of two wells in its Tubarao Azul oil field to be 5,000 barrels per day. OGX said it was confident it could extract 110 million barrels of oil equivalent from the well, but disappointed investors who expected daily output of at least double the amount disclosed.
"The flow was very small, close to the minimum of the possible range," said a Sao Paulo-based trader. "Usually with these test wells, the flow improves over time, but we don't know yet if that will be the case."
The Tubarao Azul field will likely receive two more wells in the next 12 months to help increase output, OGX said in the note.
The disappointing news from OGX knocked down the shares of other companies controlled by Mr. Batista, many of which are in pre-operational stages.
LLX Logistica SA (LLXL3.BR), his transportation company, fell 7.5% to BRL2.23, while mining company MMX Mineracao & Metalicos SA (MMXM3.BR) slid 5.7% to BRL6.11, rounding out the top three decliners on the Ibovespa.
Power company MPX Energia SA (MPXE3.BR) fell 6.3% to BRL30.96, while shipbuilder OSX Brasil SA (OSXB3.BR) dropped 12% to BRL10.54. CCX Carvao da Colombia SA (CCXC3.BR), the Colombian coal assets recently spun off from MPX, dropped 7% to BRL4.51.
Write to Paulo Winterstein at email@example.com.