Reuters: Global Markets: Brazil's OGX falls 35 pct as it scraps offshore projects

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Brazil's OGX falls 35 pct as it scraps offshore projects Jul 1st 2013, 14:23 RIO DE JANEIRO | Mon Jul 1, 2013 10:23am EDT RIO DE JANEIRO (Reuters) - Brazil's OGX Petroleo e Gas SA (OGXP3.SA) said on Monday it will stop development of three offshore oil prospects, slashing capital spending as it tries to stave off financial collapse, sending shares sliding 35 percent. The company, controlled by Brazilian billionaire Eike Batista, suspended the development of the Tubarão Tigre, Tubarão Gato and Tubarão Areia offshore areas northeast of Rio de Janeiro, the company said in a securities filing on Monday. OGX stock fell 35 percent to 51 centavos. OGX's three producing wells at Tubarão Azul, the company's only active offshore field, could stop oil and natural gas production as soon as next year, according to the filing. The company has suffered equipment and reservoir problems and produced far less than expected since output started in early 2012. The Rio de Janeiro-based company, part of Batista's EBX Group, also asked shipbuilding sister firm OSX Brasil SA (OSXB3.SA) to stop building several oil platforms slated for the canceled projects. OGX said it no longer considers Tubarão Tigre, Tubarão Gato and Tubarão Areia commercially viable. OGX will pay OSX $449 million in cash as compensation. OSX stock fell 11 percent in early trading. OGX bonds due in 2018 and 2022 have been losing value since March, tumbling to less than one-third of their face value in a sign of higher default risk. In May, Batista sold 70.5 million shares in OGX for $57 million, cutting his stake to 59 percent from 61 percent, selling them for less than one-third of what he has promised to pay for new shares. The promise to buy the new shares, known as a put option, requires Batista to buy up to $1 billion of OGX stock at 6.30 reais a share by April 2014 if the OGX board finds it necessary. Fitch Rating Service downgraded OGX debt to "CCC," indicating it was at high risk of default. Selling stock below the put price raised speculation that Batista lacks the cash to honor his promise. (Reporting by Silvio Cascione and Asher Levine; Writing by Jeb Blount; Editing by Gerald E. McCormick and Jeffrey Benkoe) Link this Share this Digg this Email Reprints

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