Brazilian billionaire Eike Batista’s flagship oil company OGX Petroleo e Gas has slashed capital spending and pulled the plug on three offshore oil prospects, the latest move by his EBX Group to bolster finances and avert collapse.
OGX shares fell as by as much as 39 per cent, touching a record low. Once Brazil’s second largest oil company by market value and a symbol of Brazil’s now-stalling, decade-long commodities boom, OGX shares are trading at less than 3 per cent of their all-time high.
“OGX has just sent a statement that alters practically the entire outlook on which market expectations for the company have been based,” Luiz Caetano, an oil and gas analyst with Planner Corretora in Sao Paulo, said in a note to investors on Monday.
“We are now at a new level, one of survival rather than growth.”
OGX’s move comes as the six-year-old company struggles to turn promising offshore discoveries into producing fields. Output from OGX’s first offshore field, Tubarco Azul, began in early last year at far below expectations. That raised concern OGX would soon be unable to generate revenue to finance ships, drill new wells and pay its debts.
The plunge in the share prices of OGX and other EBX Group companies has sliced more than US$20 billion (HK$155.1 billion) from Batista’s fortune. Most of his wealth is tied up in his companies, which has led investors to question the billionaire’s ability to meet his own promises.