OGX, the Brazilian oil and gas company responsible for the
largest private-sector exploratory campaign in Brazil, today disclosed the
results of the reports prepared by petroleum consultants DeGolyer &
MacNaughton ("D&M"), which estimate new volume of resources held
by the Company in Brazil's Campos and Parnaiba basins and three basins in
Colombia. These reports indicate net potential resources for OGX of 5.7 billion
barrels of oil equivalent ("boe") in the Campos Basin, 1.0 billion
boe in the Parnaíba Basin and 1.1 billion boe in Colombia. When combined with
the estimates from the previous report for the Santos, Espírito Santo and
Pará-Maranhão Basins (Sep/09), these new results present a total volume of net
potential resources of 10.8 billion boe.
The report by oil-field auditors DeGolyer and MacNaughton
released on Friday showed a nearly 60 percent jump in the company's potential
oil resources, but the Deutsche researchers noted that the crude found in
recent exploration activity carried a higher degree of risk.
Potential resources refer to estimates, often based on
seismic and geological data, of the amount of oil in a given reservoir that
could be recovered. The estimates are less certain than proven reserves.
Batista on Monday described the DeGolyer and MacNaughton
report as overly conservative and insisted the company would demonstrate the
reserves situation was in fact optimistic.
OGX is seeking $2 billion in financing to finance
investments, Batista said, adding it could be through a bond issue or by
receiving money upfront for future oil production.
Repeated discoveries
in Campos basin pushed OGX stock up
The company throughout 2009 reported repeated discoveries in
the shallow water Campos Basin that helped push its stock up more than
four-fold between the start of that year and the end of 2010. Its valuation has
at times rivaled that of mid-sized oil companies with significant production
profiles such as Spain's Repsol and Devon.
Though reserves are significantly overstated, investors likely to remain interested in OGX's shallow water offshore field
Local securities firm BTG Pactual also lowered their price
target for the company. Gustavo Gattass, BTG's senior energy analyst, described
the report as "more anticlimactic than bullish."
Frank McGann, an oil analyst with Bank of America Merrill
Lynch, said in a report that "though the 10.8 billion boe (barrels of oil
equivalent) headline figure did not disappoint, a closer look at the underlying
data suggests that this number is significantly overstated."
However BTG, along with analysts from other banks, said
investors will likely remain interested in OGX's portfolio of shallow water
offshore fields that are cheaper to produce than those in the deep-water region
known as the subsalt that is dominated by state-oil company Petrobras.
