* Oil company’s cash position fell 31 pct in Q1
* Petronas buy, $1 bln Batista pledge back up cash
RIO DE JANEIRO, May 10 (Reuters) - Brazilian oil company OGX Petroleo e Gas SA plans to burn cash at current levels, but sees room to slow the pace in future, a company executive said on Friday during a conference call to discuss first-quarter earnings.
OGX’s cash position fell by $507 million or 31 percent to $1.148 billion in the first quarter from $1.655 billion in the fourth quarter, the company, controlled by Brazilian billionaire Eike Batista, said in a statement late Thursday.
The company’s net loss in the first quarter nearly tripled from a year earlier to 804.6 million reais ($400 million). The loss deepened despite rising revenue after the company took a charge of 1.19 billion reais to write off dry and non-commercial areas.
The Rio de Janeiro-based oil company’s stock has slipped by about 90 percent since early 2012 when the six-year-old company produced its first oil from the Tubarão Azul, or “Blue Shark”, field in Brazil’s Campos Basin northeast of Rio de Janeiro.
Output from the field has been far below expected levels, raising concern the company will have difficulty paying its debts and could run out of cash and investment capital before it can find and develop new fields.
OGX, however, said its cash position and investment capital are strong, especially after the $850 million purchase of a 40 percent stake in the company’s offshore Tubarão Martelo, or “Hammerhead Shark”, field by Petroliam Nasional Bhd, the Malaysian state-owned oil company better known as Petronas.
Of the Petronas investment $250 million is being paid up front and the rest has been put in escrow, to be released as Tubarão Martelo meets production targets, OGX said late on Thursday.
Executives said on Friday that $100 million was the lower limit for the company’s cash position, adding that Batista has committed to add $1 billion of new capital if needed.
To increase cash flow, the company is rapidly developing the Tubarão Martelo field and expects to start output by the end of the year, said Paulo de Tarso, OGX’s head of exploration.
Technical problems with the three producing wells in Tubarão Azul are being fixed, he added, with the wells likely to be working normally again by the end of June.
Problems with the carbonate rock reservoir in Tubarão Azul have prompted the company to consider scrapping two additional planned wells in the area, a fourth producing well and a water injection well that would add pressure to increase oil flow.
“Something has changed in Tubarão Azul,” De Tarso said adding that it probably wasn’t drastic. One of the changes has been an increase in gas output as compared to oil, which has caused temperature problems in underwater pumps.
Tubarão Martello, where Petronas bought a stake, has oil in sandstone type rocks which are generally less difficult to produce oil from because they are more porous and have higher permeability.