UPDATE 2-OGX, Maersk Brazil areas hold about 1 bln bbls oil-OGX

Fri Nov 9, 2012 3:29pm EST

Related Topics

* OGX estimates Cozumel prospect has 270 mln bbls oil, gas

* Four other prospects may yield 927 mln boe - OGX

* OGX does not yet need $1 bln Batista share-buy offer

By Jeb Blount

RIO DE JANEIRO, Nov. 9 (Reuters) - OGX Petroleo e Gas SA , Brazil's second-largest oil company by market value, said on Friday that it and its partner, Norway's Maersk Oil, expect to recover about a billion barrels of oil and natural gas from two offshore oil blocks in Brazil.

The Cozumel, Tulum and Cancun prospects in the BM-C-37 block and Viedma and Cotopaxi prospects in the neighboring BM-C-38 block hold 861 million to 1.19 billion barrels of recoverable oil and natural gas equivalent, the company said in a presentation accompanying a conference call with investors.

If proven, it would be enough oil to supply all crude needs in the United States, the world's largest oil consumer, for nearly two months, according to the BP Statistical Review of World Energy and Reuters.

OGX owns 70 percent of the blocks and Maersk Oil, a unit of Denmark's Maersk Group. OGX's share of the oil would be 603 million to 837 million boe, the statement said.

"The most important well in our opinion should be the Viedma prospect," Pedro Medeiros, a Citibank oil and gas company analyst in Rio de Janeiro, said in a report sent to investors Friday. "A positive result from the wells is key to unlock new production systems."

Medeiros rates OGX stock "Neutral/High Risk." The OGX estimate of potential reserves in BM-C-37 and BM-C-38 is the company's first since a 2009 report by U.S. reservoir appraisal firm DeGolyer and MacNaughton, Medeiros said.

WATCHING FLOW RATE

OGX has already started drilling a well on the Cozumel prospect, Chief Financial Officer Roberto Monteiro said on a conference call with investors and analysts Friday.

Tulum is expected to start drilling by year end and the three other prospects will be drilled in the first quarter of 2013, OGX said.

OGX may sublet more offshore oil drilling rigs in the first quarter of 2013, Monteiro said. He said the company has sufficient financial resources and does not need to exercise either a put option or an offer from founder Eike Batista to buy $1 billion worth of OGX stock, at the moment.

The company plans to start production from the third well of the Tubarão Azul field in December, Monteiro said. Tubarão is OGX's only producing oil field.

The company declined to say how much the well would produce. Lower-than-expected production from the first two wells has helped see OGX's share price fall by more than half since mid-June.

"A flow rate below 5,500 barrels a day would be viewed as a negative and above 7,000 barrels a day as a positive," Christopher Buck and oil company bond analysts with Barclays in New York wrote in a report sent to investors on Friday.

Tubarão Azul's first two wells produced 10,300 barrels a day in October.

OGX expects to recover 18 million to 20 million barrels of oil per well over the life of the field, Monteiro said. Tubarão Azul is OGX's first producing field and began output in January.

Tubarão Azul is believed to have about 100 million barrels of recoverable oil, Monteiro said on the call.

The Rio de Janeiro-based company said it believes the Tubarão Martelo field, also in the Campos basin, has better prospects than the Tubarão Azul field, with tests showing good results, Monteiro said. OGX expects to start producing oil from three wells in Tubarão Martelo in late 2013.

In Tubarão Martelo "everything is going good and according to our expectations," OGX production director Reinaldo Belotti said on the conference call Friday.

OGX reported on Thursday a net loss of 343.6 million reais ($168 million), after logging its first fully accountable revenues from crude oil sales.

The results were considered "benign", Buck wrote.

The yield on OGX 8.375 percent bonds due April 1, 2022 fell to 11.03 percent bid on Friday while the yield on OGX bonds due June 18, 2018 rose to 11.62 percent bid.

The company's stock rose 1.68 percent to 4.85 reais in Sao Paulo on Friday as the BM&FBovespa exchanges benchmark Bovespa index fell 0.29 percent.

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