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Posted on April 18, 2011
OGX Petroleo & Gas Participacoes SA plunged the most in more than two years, wiping out as much as $6.7 billion in market value, after it reported crude resources that missed analysts’ estimates.
OGX, the oil-exploration company controlled by billionaire Eike Batista, fell 2.70 reais, or 14 percent, to 16.95 reais in Sao Paulo trading at 11 a.m. New York time. Earlier, it dropped as much as 17 percent, the most since September 2008, as Deutsche Bank AG, Banco BTG Pactual SA and Banco Santander SA downgraded OGX to “hold” from “buy” today.
OGX reported April 15 it had contingent resources of 3 billion barrels of oil equivalent and prospective resources of 6.5 billion barrels. BTG analysts led by Gustavo Gattass said in a report they expected OGX to boost contingent resources to about 4 billion barrels, while Merrill Lynch analysts said the estimate came in “at the low end” of expectations.
“OGX is a company that depends on expectations; it has no production right now, so anything that raises doubts about the future of the company hurts the stock,” said Mirela Rappaport, who helps manage about 160 million reais ($100 million) at Investport in Sao Paulo. “This may be an excuse to leave the Brazilian market. The market is weak for oil and gas and weak for Brazil.”
Rio de Janeiro-based OGX, which has no output or proved oil reserves, plans to start output in the third quarter from Brazil’s offshore Campos Basin. Petroleo Brasileiro SA, Brazil’s state-run oil producer, has about 15 billion barrels of proved reserves, the nation’s largest.
The resource report was issued by auditing firm DeGolyer & MacNaughton. Contingent resources are defined as potentially recoverable and less certain than proved reserves, and prospective resources are estimated volumes associated with undiscovered accumulations, according to the Petroleum Resources Management System.
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