UPDATE 1-Shares of Brazil OGX plummet as regulator starts probe

Wed Jul 3, 2013 10:22am EDT

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* Shares drop as CVM sees flaws in disclosure standards

* Analysts say deal with OSX could hamper OGX finances

* OGX says has enough cash to meet mid-term obligations (Adds regulator statement, details of filing)

By Caroline Stauffer and Natalia Gómez

SAO PAULO, July 3 (Reuters) - Shares of Brazil's OGX Petroleo e Gas SA slid for a fifth straight day on Wednesday after securities regulator CVM began a probe into the embattled company's market disclosure standards.

Shares of the Rio de Janeiro-based company plunged as much as 18 percent, touching a fresh record-low of 0.38 real, even after the company said it would be able to cover medium-term obligations with proceeds from the recent sale of a 40 percent stake in two oil blocks.

The stock is down 91 percent this year.

CVM asked OGX to explain why it pledged to pay $449 million in cash as compensation to shipbuilder OSX Brasil SA to stop building several oil platforms meant for a number of canceled prospects, according to a securities filing. OSX is controlled by billionaire Eike Batista, who also owns most of OGX.

Some analysts have said the deal between OGX and OSX could jeopardize the survival of the former, which is running out of cash to repay debt, finance capital spending and honor other contracts.

Speaking at an event in São Paulo, CVM President Leonardo Pereira said that the agency is investigating OGX for potential flaws in the way the company discloses financial and operational information to minority shareholders.

"When investors are left unprotected, it is a serious flaw," Pereira said when asked about the case on Wednesday.

CVM's Pereira said the role of the regulator is to make sure companies disclose truthful information, and that would be no different with OGX. (Reporting by Caroline Stauffer and Natalia Gomez; Editing by Gerald E. McCormick, Guillermo Parra-Bernal)

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