OGX 2012 Third Quarter Results

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OGX 2012 Third Quarter Results

  • Production advancing on schedule
  • First revenues booked: R$150.7 million

RIO DE JANEIRO--(BUSINESS WIRE)-- OGX Petróleo e Gás Participações S.A. (Bovespa: OGXP3), Brazil's largest private oil and natural gas exploration company, announces its third quarter results for 2012.

GTU Process Plant View

GTU Process Plant View

 
Key Financial Metrics    3Q 2012     YTD 2012
Revenues (R$ mm)    150.7     150.7
EBITDA - Pro forma¹ (R$ mm)    (51.6)     (305.1)
Net Profit (Loss) (R$ mm)    (343.6)     (887.1)
Realized oil price per barrel (US$)²    95     95
CAPEX (R$ mm)    (1,115)     (3,186)
Production volume (kboepd)    9.3     9.7 ³
Notes:
¹ Considers OGX Campos
² Refers to the cargo booked as revenues (delivered on July 26, 2012)
³ Production volume from January 31, 2012 to September 30, 2012
 

Luiz Carneiro, Chief Executive Officer of OGX, said: "OGX reached a new and important milestone in the third quarter, posting revenues from the sale of approximately 800,000 barrels for the first time since the company began commercial production. We are pleased to note that we have achieved this milestone, and, besides that we obtained an 80% success rate in our exploratory and appraisal campaign since the beginning of the year."

"Production is progressing well and is on schedule in the Campos Basin, and a third production well in the Tubarão Azul Field will be connected in the coming weeks. In exploration, we began drilling new prospects in the Campos Basin where we continue to have strong expectations for our activities. In addition, we are continuing to develop the Tubarão Martelo Field, in the Campos Basin, and the Gavião Real Field project in the Parnaíba Basin where we expect to begin commercial gas production in early 2013. We expect to invest about US$1.2 billion towards capital expenditures in 2013 to continue delivering on our potential in both exploration and production," Carneiro continued.

KEY HIGHLIGHTS

Production:

OGX's production activities are progressing according to schedule.

  • Attained total production volume of 856,800 boe in 3Q12 in the Tubarão Azul Field (Campos Basin)
  • Drilled three production wells in the Tubarão Martelo Field (Campos Basin), projected to come on-stream late 2013 after the arrival of FPSO OSX-3
  • Third production well in the Tubarão Azul Field, TBAZ-1HP, under completion and to be connected to the FPSO OSX-1 in the coming weeks
  • Final stage of reservoir engineering for FPSO OSX-2 installation, with delivery scheduled for 2H13
  • All the production wells in the Gavião Real Field, in the Parnaíba Basin, have been drilled and are in the process of completion and connection to the Gas Treatment Unit (GTU). Commercial production is scheduled to begin in early 2013
  • Sale of approximately 800,000 barrels of oil, in October, to Reliance Industries Ltd.

Exploration:

OGX continued its successful exploratory campaign in the third quarter.

  • Receipt of environmental authorization from the Brazilian Environmental and Natural Renewable Resources Institute (IBAMA) to drill in the BM-C-37 and BM-C-38 blocks in the Campos Basin
  • New important discoveries of hydrocarbons in the Bom Jesus accumulation in the Parnaíba Basin
  • Submitted the winning bid for a block in the Lower Magdalena Valley Basin upon participating in Colombia's 2012 National Agency of Hydrocarbonates (ANH)
  • Obtained Operator A qualification from Brazil's National Petroleum Agency (ANP), allowing OGX to operate blocks in deep waters and ultra-deep waters, in addition to shallow waters and onshore

Other:

  • In October, Eike Batista, controlling shareholder of OGX, granted the Company an option to require him to purchase up to US$1.0 billion of new common shares of OGX at a price of R$6.30 per share, conditional upon the Company's additional capital requirement and the absence of more favorable alternatives

2013 OUTLOOK

Besides the increased focus on its production campaign, OGX has interesting prospects to be drilled in the coming months.

Drilling of exploratory wells

  • Campos Basin: 5-6 wells in the BM-C-37 and BM-C-38 blocks (1-2 wells to be initiated in 2012)
 
Prospect   Block   

Total Estimated

Recoverable Volume

(PMean)

   Working Interest   

OGX Estimated

Recoverable Volume

(PMean)

   Spud date
Cozumel   BM-C-37   209-270 mmboe   70%   146-189 mmboe   4Q12
TulumBM-C-37194-280 mmboe70%136-196 mmboe4Q12
CancunBM-C-37184-294 mmboe70%129-206 mmboe1Q13
ViedmaBM-C-38245-313 mmboe70%172-219 mmboe1Q13
Cotopaxi   BM-C-38   30-40 mmboe   70%   21-28 mmboe   1Q13
Total   -   861-1,196 mm boe   70%   603-837 mm boe   -
 
  • Santos Basin: 1 well until the concession for exploration ends in March 2013
  • Parnaíba Basin: 10 wells
  • Espírito Santo Basin: 3 wells, together with Perenco, the operator of the blocks
  • Updated certification of estimated reserves and resources

Capex

  • 2013 Annual estimate: US$1.2 billion

With the end of the exploratory concession periods for the Campos and Santos Basins approaching, the Company is gradually downsizing its rig fleet to accommodate a transition from the exploration campaign to the production phase in these basins, resulting in a reduction of its capex for 2013.

FINANCIAL HIGHLIGHTS

Expenses

OGX spent US$588 million in the third quarter. Compared to the previous quarter, the Company had a slight increase given expenditures in its onshore operations (GTU final assembly and two additional rigs) and in the development of Tubarão Martelo and Tubarão Azul fields. The Company has begun to optimize and rationalize its expenses, mainly in exploration, while it moves towards the development phase. At the end of September, the Company returned one of its offshore rigs, which should impact the exploration capex in the first quarter of 2013.

Cash position

OGX maintains a solid cash position of approximately US$2.5 billion. Considering the fourth quarter operations, OGX expects to end 2012 with a cash position of approximately US$1.8-1.9 billion.

CAMPOS BASIN

  • Extended Well Test concluded in the Tubarão Azul Field (OGX-26HP)
  • Total production of 856,800 boe in the quarter
  • Delivery of one shipment of approximately 800,000 barrels to Shell in July
  • Delivery of one shipment of approximately 800,000 barrels to Reliance Industries in October
  • Receipt of environmental authorization from IBAMA to start drilling in the BM-C-37 and BM-C-38 blocks of the Campos Basin
  • Commencement of drilling in Cozumel prospect, BM-C-37 block

Tubarão Azul Field Development

Since commencing production on January 31, the Tubarão Azul Field has produced more than 2.5 million barrels of oil and delivered four shipments. Average daily production in the nine months of production from January 31 to October 31 was 9.7 kboepd, and, this quarter alone, average daily production was 9.3 kboepd. FPSO OSX-1 continues to perform very well, with an average operating efficiency of 98.5% since first oil.

The OGX-26HP well was reconnected to FPSO OSX-1 during the first week of August, after having been closed for slightly over a month to allow for the replacement of the centrifugal submersible pump. Since then, the two production wells, OGX-26HP and OGX-68HP, have again been producing in line with expectations with stable flows rates of above 5.0 kboepd on average per well.

The third production well in the field, TBAZ-1HP, is under completion and will begin connection to FPSO OSX-1 in the coming weeks. It is expected to come on-stream at the beginning of December.

The average daily production in October amongst all wells in the Tubarao Azul Field was 10.3 kboepd, which is in line with previous months.

In July, OGX made the final shipment delivery of approximately 800,000 barrels under the Company's first sales contract with Shell, marking the commencement of the Company's revenues generation after the declaration of commerciality in the Tubarão Azul Field, resulting in sales revenues of R$150.7 million.

On October 15, following the declaration of commerciality and the conclusion of the Extended Well Test (EWT), the fourth shipment of approximately 800,000 barrels was delivered to Reliance Industries Ltd., one of the world's largest refineries and India's largest private company.

The table below shows the pro-forma OSX-1 EBITDA after the delivery of the first shipments:

 
Delivered cargos    

1st1

  

2nd1

  

3rd2

  

4th3

  Total
Delivery Date03/28/20124/21/201207/26/201210/15/2012
Operation Period51 days27 days98 days80 days
 

Production related to the shipments -

in barrels (bbls)

    547,376  246,809  789,774  809,495  2,393,454
 
R$ ('000)
Net Revenue118,00355,996150,686169,145493,830
 
Sales Taxes    -  -  -  -  -
Royalties    (10,687)  (4,938)  (14,842)  (15,772)  (46,239)
Leasing    (24,078)  (13,222)  (52,708)  (41,998)  (132,006)
OSX Services    (13,944)  (7,236)  (28,071)  (22,499)  (71,750)
Logistics    (12,005)  (7,410)  (27,795)  (18,405)  (65,615)
Others    (871)  36  (1,183)  (1,529)  (3,547)
 
EBITDA56,41823,22626,08768,942174,673
 
% EBITDA / Net Revenue47.81%41.48%17.31%40.76%35.37%
EBITDA / barrel - (R$/barrel)    103.07  94.11  33.03  85.17  72.98
Notes:

1 Sales occurred during the Extended Well Test and before the declaration of commerciality - not accounted in Results and recorded as a reduction of "Fixed Assets"

2 Sale occurred after the Extended Well Test and declaration of commerciality - recorded as net revenues

3 Sale occurred after the Extended Well Test and declaration of commerciality - recorded as net revenues. Net figure of expenses associated with the sale of freight costs

 

As shown in the table above, the delivery of the third cargo presented an EBITDA / barrel relatively lower than the first and second cargos due to: i) lower production during the 98-day production period resulting from the need to close the OGX-26HP well for just over a month to allow for the replacement of the centrifugal submersible pump; ii) lower revenue (discount already applied) resulting from a decrease in oil prices (Brent) from USD 122 per barrel at the time of the first cargo to USD 95 per barrel at the time of the third cargo; iii) an increase in costs resulting from currency fluctuations upon the devaluation of the exchange rate by 14% rate from March 28 to July 26; and iv) an increase in logistics costs (boats and fuel) resulting from the IBAMA requirement to use support boats, which did not exist at the time of the first and second cargos.

In the fourth cargo, with production of the two wells stabilized and a better realized oil price, profitability of the operation improved.

The following table demonstrates the effective daily rates (in USD) of each of the costs associated with the FPSO OSX-1 operation:

 

Daily Cost (USD '000)

    

1st cargo

    

2nd cargo

    

3rd cargo

    

4th cargo

    

Average

                          
Leasing    (268)    (262)    (268)    (259)    (264)
OSX Services    (155)    (143)    (143)    (139)    (144)
Logistics    (134)    (147)    (141)    (113)    (131)
Others    (10)    1    (6)    (9)    (7)
                          
Total    (567)    (551)    (557)    (520)    (546)
 

Tubarão Martelo Field Development

Following the declaration of commerciality of the field and OGX's submission of a Development Plan, ANP granted the Company authorization to begin drilling the production wells in this field. OGX is now concluding the drilling and completing the 3 horizontal production wells (TBMT-2HP, TBMT-4HP and TBMT-6HP). We expect these wells to be connected to FPSO OSX-3, which is scheduled to arrive by 3Q13. The Tubarão Martelo Field is scheduled to come on-stream by 4Q13.

It is important to note that during last week we are performing a production test of the TBMT-2HP well and so far the results within expectations.

Campos Basin Exploration Campaign

On October 5, OGX obtained environmental authorization from IBAMA to begin drilling in the BM-C-37 and BM-C-38 blocks. This authorization will allow the Company to advance its exploratory campaign in this very promising region, where it plans to apply the expertise of its technical team and two of its rigs to continue drilling wildcat and appraisal wells.

Below we highlight results obtained in the third quarter:

Villarrica: We have concluded drilling the wildcat well in the accumulation, OGX-87, and identified 8 meters of net pay in the Maastrichtian section and 2 meters in the Paleocene section.

Fuji: We have finished drilling the fourth appraisal well of the accumulation, OGX-90D, where we discovered 2 meters of net pay in the Albian section.

Cozumel: We have commenced drilling the wildcat well of the accumulation, OGX-99, which is still in progress.

PARNAÍBA BASIN

  • Receipt of Operating License to begin production of natural gas
  • 2 important discoveries of hydrocarbons in the Bom Jesus accumulation
  • Commenced drilling 5 exploratory wildcat wells

Development of the Gavião Real and Gavião Azul fields

Development of Gavião Real Field project is on schedule and has progressed substantially in recent months, with two rigs focused on production development. The drilling of all 16 production wells planned for this phase of the project has already been concluded, of which 11 have already been completed and the remaining 5 are in the process of completion and connection to the GTU. We also concluded the drilling of the first water disposal well, GVR-15D, which will work in conjunction with the second disposal well (GVR-16D), in drilling progress.

The 11 wells already completed have been tested with open choke (3/4") and showed average flow rates of 400,000 - 500,000 m3/day each.

In addition, at the end of September, we obtained the Operating License from the Environmental and Natural Resources Secretary of the State of Maranhão (SEMA/MA) authorizing production of natural gas in the Gavião Real and Gavião Azul fields.

The project is in its final stages as described by the current activities at the site: i) mechanical and instrument assembly, electrical wiring and instrumentation; ii) test of control networks in the clusters and the GTU; iii) pipelines in place; iv) construction of the administrative buildings with offices, workshop and laboratories, all in pre-fabricated metallic structures; and v) leakage tests in the tanks in final phase.

Natural gas production at the Gavião Real Field will begin in the fourth quarter of this year, with the commissioning of the GTU and the MPX Parnaíba Thermoelectric Complex turbines. Commercial generation of power will begin in 2013.

Parnaíba Basin Exploratory Campaign

After the discovery of the Bom Jesus accumulation last year, identified through the OGX-34 well, the Company drilled appraisal wells to test the extent of this accumulation. In addition to the drilling and well test of the OGX-88 well in July, we also concluded the drilling of another two appraisal wells in the region in 3Q12, OGX-91D and OGX-95, both of which contained discoveries of hydrocarbons in the Carboniferous section of 23 and 4 meters of net pay, respectively. After the evaluation of the results from the wells, OGX submitted the Discovery Evaluation Plan (PAD) for the region to the ANP, which has already been approved.

We have initiated the drilling of five new prospects in this basin - Santa Maria (OGX-92), Rio Corda (OGX-93), Peritoró (OGX-96), Basílios (OGX-97) and Norte California (OGX-98). The OGX-92 and OGX-93 wells were concluded in the Fazenda Santa Maria and Rio Corda prospects; however, neither well showed indications of hydrocarbons. Currently, 3 exploratory wells are still in progress - the first exploratory well in the PN-T-50 block in the Peritoró prospect, OGX-96, OGX-97 in the Basílios prospect and OGX-98 in the Norte California prospect.

SANTOS BASIN

In the quarter, we finished drilling the OGX-89D appraisal well of the Natal accumulation, where we discovered 7 meters of net pay in the Santonian section, proving the extension of the accumulation.

We also concluded the drilling of the OGX-85 well, where we have confirmed microbiolite limestone with presence of gas and light oil, identified in sandstone and volcanic rocks, as reported to the ANP. The Company is still analyzing the economic viability of this discovery.

Finally, we are currently drilling the OGX-94DA well, in the Curitiba accumulation, where we have already discovered 32 meters of net pay in the Santonian/Campanian section. The drilling is still in progress aiming for the Albian secti

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