March 27, 2013 5:04 pm

OGX loss leads to volume cut warning

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OGX, the oil company controlled by Eike Batista, has warned it will cut its estimate for recoverable volumes at its only producing field after posting a $142m loss in the fourth quarter, delivering another blow to the Brazilian billionaire.

The Rio de Janeiro-based start-up, whose shares have plunged about 85 per cent over the past year, had estimated two weeks ago that its Tubarão Azul offshore field in the Campos basin held about 110m recoverable barrels of oil.

However, OGX’s chief executive Luiz Carneiro said late on Tuesday that the company would have to reduce its estimate but did not specify by how much.

“We remain absolutely focused on optimising the total recoverable volume of the field in accordance with industry best practices, but also acknowledge that our estimated volume of recoverable barrels in the field should be reduced,” Mr Carneiro said.

The warning came after OGX posted a loss in the fourth quarter of R$286m ($142m), albeit lower than the company’s loss of R$332.6m in the same quarter of 2011.

However, the full-year loss of R$1.17bn was more than double that of the previous year.

The company has blamed more complicated geology than expected for a string of disappointing output numbers at Tubarão Azul, which began output in early 2012 and has been unable to fund the company’s ambitious exploration plans.

OGX first shocked the market in June last year when it revised down its production forecasts for Tubarão Azul’s first two wells to 5,000 barrels a day each – Mr Batista had forecast production at 20,000 barrels each and even hinted at 40,000 barrels.

The disappointments have sparked a crisis of confidence across Mr Batista’s empire, which stretches from logistics to wrestling, wiping about $25bn off his net worth over the past year and robbing him of his title as Brazil’s richest man.

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