June 29, 2012 / 2:06 AM / in 7 years

OGX CEO Mendonca steps down after shares plummet

RIO DE JANEIRO (Reuters) - OGX Petroleo de Gas OGXP3.SA, Brazil’s second-largest oil company by market value, said on Thursday that chief executive Paulo Mendonca has resigned but will remain an advisor to the company’s controlling shareholder.

Mendonca’s departure comes after the company’s shares have fallen 51 percent so far in June and 45 percent in the last two days on concern that the company’s output targets will not be met.

This month’s declines have wiped 17 billion reais ($8.2) billion) off the company’s market value and hit Brazilian billionaire Eike Batista, the company’s controlling shareholder and Brazil’s richest man, with a more than 10 billion-real loss on his shares.

Mendonca will be replaced by Luiz Eduardo Carneiro, chief executive of shipbuilder and leaser OSX Brasil (OSXB3.SA), OGX said in a Brazilian securities filing.

Analysts downgraded the company in recent weeks after the company cut its daily production estimates for its Tubarao Azul field, an offshore area northeast of Rio de Janeiro.

Mendonca and OGX said that the flow levels were being improperly interpreted and that they stood by their estimate that Tubarao Azul, or “Blue Shark,” will produce the expected 110 million barrels of oil over the next three decades.

That amount is enough to supply the needs of the United States, the world’s largest oil consumer, for about six days, according to BP Plc (BP.L) and Reuters data.

Despite the explanations and a conference call with investors on Wednesday, OGX shares fell 25.3 percent Wednesday and 19.2 percent Thursday in Sao Paulo trading. At 5.05 reais a share, the stock now trades at its lowest level in more than three years.

OGX, founded in 2007, produced its first oil at Tubarao Azul in January after an exploration and development campaign that was one of the fastest on record. OGX says it plans to produce about 1.4 million barrels of oil and natural gas by the end of 2019.

If OGX succeeds, it will likely help Brazil overtake the United States as the world’s No.3 oil producer after Russia and Saudi Arabia.

Reporting by Jeb Blount, Fabio Couto and Juliana Schincariol; Editing by Matt Driskill

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