Eike Batista, chairman and founder of Oleo e Gas Participacoes SA.
By Juan Pablo Spinetto May 31, 2014 5:06
Photographer: Patrick Fallon/Bloomberg
Oleo e Gas Participacoes SA, the oil startup that triggered Eike Batista’s financial collapse, will emerge as a viable producer once creditors approve a recovery plan at a meeting scheduled for next week, Chief Executive Officer Paulo Narcelio said.
OGpar, as the Rio de Janeiro-based company is know, will eliminate most of its debt and recover financing capacity as it generates about $500 million in sales this year, enough to sustain operations, Narcelio said in an interview at the company’s headquarters yesterday. OGpar expects to produce an average 16,000 barrels a day for 12 months after connecting two extra wells to its Tubarao Martelo deposit by July, he said.
“We have a combination of resources that leave us comfortable in the coming months,” Narcelio, 51, said. “Operationally, the company’s going very well.”
OGpar (OGXP3) is attempting to reinvent itself as a much smaller version of the vision Batista marketed to investors in a 2008 stock listing. The former speed-boat racer planned to create Brazil’s second-biggest oil producer and rise to the top of global wealth rankings by tapping deposits state-run Petroleo Brasileiro SA had overlooked for decades.
Instead, the company abandoned most of its offshore fields and failed to generate enough income to service debt, including $3.6 billion in international bonds, culminating in a bankruptcy protection filing in October. Creditors including Pacific Investment Management Co. will discuss a revised plan to guide the company out of the bankruptcy process at a June 3 meeting in Rio.
Weighing Pre-Sales
OGpar is considering options to generate new income, including selling oil production in advance or finding partners for its blocks, Narcelio said during the interview. It also has the proceeds from the sale of assets including natural gas operations and Colombian exploration blocks.
Creditors probably will approve OGpar’s proposal to exit the bankruptcy protection process after next week’s meeting, Narcelio said.
“The alternative of not approving the plan would be to liquidate the company,” he said. “That’s not a good alternative to anyone. It would be an irrational decision.”
Shares of OGpar closed little changed at 22 centavos in Sao Paulo, reducing its decline in the past year to 87 percent. The company’s market value is 647 million reais ($289 million).
OGpar’s management, Batista and creditors still need to resolve a so-called put option the entrepreneur pledged in 2012 when output at the company’s first oil project was fading.
Unresolved Put
In September the company requested payment of the $1 billion option. Batista refused, arguing it was set up for expansions not debt payments. Brazil’s securities regulator CVM is investigating the original agreement, and minority investors have complained about it at shareholders meetings.
“The put is still to be resolved,” Narcelio said. “The board will review this and eventually send a decision, whatever that is, to a shareholders assembly.”
He declined to comment on the likelihood of Batista paying part or all of the option.
To contact the reporter on this story: Juan Pablo Spinetto in Rio de Janeiro at jspinetto@bloomberg.net
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Mubadala refinancing after Óleo success, sources say
BY GUILLERMO PARRA-BERNAL AND JEB BLOUNT
SAO PAULO/RIO DE JANEIRO, June 18 Wed Jun 18,
(Reuters) - The successful restructuring of bankrupt oil producer Óleo e Gás Participações SA will allow Brazilian tycoon Eike Batista to move forward with plans to cut his own debt, three sources with direct knowledge of the situation said.
Batista and his EBX holding company have been in talks to renegotiate about $2 billion owed to Abu Dhabi sovereign wealth fund Mubadala Development Co PJSC, the sources said. Batista may offer assets, including stakes in firms he either controls or has a stake in, to speed up the process, they said.
"Our discussions are continuing," Brian Lott, a spokesman for Mubadala, told Reuters without elaborating. "We continue to review assets and opportunities that complement our existing portfolio."
If the loan is refinanced, it will be the second time both parties agreed to change the terms of the loan. Soon after Mubadala bought a 5.6 percent stake in EBX in March 2012, it converted that equity into debt. EBX was forced to renegotiate the debt last July as Batista's energy, mining and logistics empire collapsed.
Spokespeople and lawyers for Batista and EBX declined to comment.
Now that a judge has approved Óleo e Gás' restructuring and most other EBX companies have been sold, Batista wants better terms on the Mubadala deal, a first source said. Óleo e Gás used to be known as OGX Petróleo e Gás Participações SA, which filed Latin America's largest-ever bankruptcy petition last year.
The Óleo resolution "is a starting point from which he can improve his own finances and those of his business," said the source, who is not authorized to discuss the matter publicly.
A renegotiation could involve Mubadala getting new stock in or extending loans to EBX companies, a second source said. Without new investment some of those companies may not be able to generate revenue needed to repay their debt.
Batista's problems stem from a Óleo e Gás' 2012 revelation that it could not produce as much oil as promised. Oleo e Gas' share price sank by more than 90 percent, and other EBX companies followed, wiping out most of their market value along with Batista's $30 billion fortune.
The three sources noted that Batista and Mubadala have been in talks for some time about options. The most likely area for Mubadala to provide capital is in port operator Prumo Logística SA and shipbuilding company OSX Brasil SA.
Batista was left with about 20 percent of Prumo after the August takeover of the company by EIG Global Energy Partners LLC. Batista and EBX own 50.2 percent of OSX, which filed for protection from creditors in November.
Because OSX's debts alone could "sink" EBX, a deal with Mubadala would probably require some effort to keep OSX working or unravel it in an orderly fashion, said the third source, adding that Mubadala could also be interested in Batista's stake in electricity utility Eneva SA. (Reporting by Guillermo Parra-Bernal and Jeb Blount; Additional reporting by Stanley Carvalho in Abu Dhabi)