Fifteen months ago, OGX Petrsleo chief executive Paulo Mendonga was confident that the company he led was on track to become a major independent oil producer, an anchor for Eike Batista’s vast Brazilian resource empire.
In an interview with Reuters at a Rio de Janeiro office block, Mendonga showed off bowls of pungent crude oil from OGX’s first field, Tubarco Azul, or “Blue Shark,” and brushed aside concerns about its operations in the waters northeast of Rio.
Sure, there had been some hiccups, but they were being fixed. Shares of OGX Petrsleo e Gas Participagues - the flagship of Batista’s EBX Group - had dropped by a third from recent highs but Brazil’s main stock index and other oil companies were also falling. Everything was fine, Mendonga suggested.
Then, almost in passing at the end of the one-hour interview, he dropped a bombshell: Tubarco Azul was producing only 17,000 barrels of oil and natural gas equivalent a day (boepd), and a year-end goal of 40,000 to 50,000 boepd was going to take “longer than expected.”
The admission that OGX had fallen well behind its forecasts was a crucial moment in the demise of the much-hyped energy company - the first domino to fall in the rapid collapse of Batista’s EBX oil, energy, shipbuilding, mining and port group.
OGX shares slumped 8.4 per cent the following day as investor confidence evaporated. They had dropped another 50 per cent - erasing US$10.4 billion of shareholder value - by the time Mendonga resigned a month later.
Since then, things have gotten worse for Batista. Hit by mounting debt, a series of project delays and a crisis of confidence, his six publicly listed companies have suffered one of the most spectacular corporate meltdowns in recent history.