OGX 2013 First Quarter Results

OGX 2013 First Quarter Results

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 first quarter results for the three months ended March 31, 2013.

Key Financial Metrics       1Q 2013       4Q 2012    
Net Revenue (R$ mm)       289       175    
EBITDA (R$ mm)       74       (38)    
Net Profit (Loss) (R$ mm)       (805)       (286)    
Realized oil price per barrel (US$)       103       104    
CAPEX (US$ mm)       289       550    
Cash Position (US$ mm)       1,148       1,655    
Production volume (kboepd)       10.9       10.2  
 

Luiz Carneiro, Chief Executive Officer of OGX, commented:


"OGX delivered a sequential improvement in its performance in the first quarter of 2013, posting higher revenues and positive EBITDA for the first time, while also achieving higher total production volume at the Tubarão Azul Field in the Campos Basin, which totaled 954 thousand barrels of oil. OGX also achieved total production of 4 million cubic meters of gas per day at the Gavião Real Field, in the Parnaíba Basin, after the fourth turbine at the Parnaíba I Thermo Power Plant has been synchronized with the National System.

"Despite this progress, the first quarter of 2013 was a challenging one for OGX as operational issues led to production stoppages at the OGX-68HP and TBAZ-1HP wells, along with intermittent production at the OGX-26HP well. We continue to analyze the reservoir behavior, as well as the impact on total estimated recoverable volume.

"As announced on May 7, 2013, the company has entered into an important strategic partnership with Petronas, the Malaysian oil major, to jointly exploit two blocks in the Campos Basin that encompass the Tubarão Martelo Field besides Peró and Ingá accumulations. Under the transaction, Petronas will acquire a 40% non-operating work interest in the two blocks, BM-C-39 and BM-C-40, for a total value of US$850 million, and has an option to acquire a 5% stake of our company from our controlling shareholder, Mr. Eike Batista. The partnership with Petronas, which has more than 32 billion barrels of recoverable resources and produces about 2 million barrels of oil equivalent per day, underscores the quality of our assets and our management team, strengthens our cash position and secures additional funding to continue developing our portfolio and pursuing new growth opportunities."

SHORT TERM OUTLOOK

UPCOMING EVENTS

OGX has several important events planned for the coming months:

  • Continue the execution of the Discovery Evaluation Plans (PADs) by drilling appraisal wells and performing tests in the Campos and Santos basins
  • Continue the exploration and wildcat campaigns in the Parnaíba and Espírito Santo basins
  • Update our resource evaluation report
  • Continue to develop the Tubarão Martelo Field by preparing for OSX-3's arrival and conclude studies for OSX-2's development area
  • Commence drilling of the first development well in the Atlanta Field (BS-4 Block) in 2H13
  • FPSOs OSX-2 and OSX-3 expected to arrive in the 3Q13 and first production wells expected to come on-stream by the end of the year

STRATEGIC PARTNERSHIP WITH PETRONAS

  • OGX has entered into an agreement with Petronas to sell a 40% non-operating work interest in the BM-C-39 and BM-C-40 blocks, located in the Campos Basin, for a total value of US$850 million. The blocks encompass the Tubarão Martelo Field (2C resources of 212 million barrels estimated by DeGolyer and MacNaughton in February 2012) and the Peró and Ingá accumulations. The transaction is subject to approval from Brazil's National Petroleum, Natural Gas and Biofuels Agency (ANP) and the Brazilian Council for Economic Defense (CADE)
  • Upon financial closing of the transaction, US$250 million and an additional amount equivalent to 40% of the development costs of TBMT field incurred since May 1st 2013 (capex and opex) will be paid directly to OGX (and will become immediately available for any purpose). The remaining US$600 million will be deposited on behalf of OGX into an escrow account and released as described below:

    • US$500 million upon first oil
    • US$50 million upon achievement of an aggregate production of 40 kboepd
    • US$25 million upon achievement of an aggregate production of 50 kboepd
    • US$25 million upon achievement of an aggregate production of 60 kboepd
  • In addition to the stake in the BM-C-39 and BM-C-40 blocks, Petronas has an option to purchase 5% of OGX's capital at a price of R$6.30 per share at any time until April 2015. Exercise of this option will not involve any issuance of new shares or imply dilution for minority shareholders since the shares will come from the current holdings of OGX´s controlling shareholder, Mr. Eike Batista

OPERATIONS REVIEW

HIGHLIGHTS

  • Attained total production volume of 954 thousand barrels of oil in the Tubarão Azul Field (Campos Basin) in 1Q13, up 5.1% on the previous quarter
  • 1.2 million barrels of oil sold in 1Q13, delivered in two different cargos
  • Third production well in the Tubarão Azul Field (Campos Basin), TBAZ-1HP, was connected to FPSO OSX-1 and commenced production on January 4, 2013
  • OGX-68HP well: operational issues in the electrical submersible pump (ESP) resulted in a 15 day stoppage of production in March. Repairs commenced in mid-April and its conclusion is expected for mid-May
  • TBAZ-1HP well: unstable electrical generation at OSX-1 along with lower than expected flow rate at the well led to intermittent operations and damage to the ESP resulting in an 11 day stoppage during March. Repairs to begin once OGX-68HP is back in operation
  • OGX-26HP well: 2 day stoppage at the well in March caused by unstable electrical generation at OSX-1. Well production has been periodically stopped since the beginning of April to prevent damages at the ESP, and its production is being monitored
  • Drilled and made the lower completion of six production wells in the Tubarão Martelo Field (Campos Basin). The first well is projected to come on-stream late 2013 after the arrival of FPSO OSX-3
  • Final stage of reservoir engineering for FPSO OSX-2 installation, with delivery scheduled for 2H13
  • Average net gas production of 3.2 kboepd, 5.5 kboepd, 6.8 kboepd and 12.1 kboepd in January, February, March and April 2013, respectively, in the Gavião Real Field (Parnaíba Basin)
  • Achieved total production of 4.0 M m3/d (~25 kboepd) in the Gavião Real Field after the fourth turbine at the Parnaíba I Thermo Power Plant has been synchronized with the National System on April 5, 2013

PRODUCTION - CAMPOS BASIN

  • Total production volume of 954 thousand barrels of oil in the Tubarão Azul Field in 1Q13
  • Sale of 1.2 million barrels of oil in 1Q13, distributed in two cargos

    • 779 thousand barrels of oil to ENAP, in January 2013
    • 425 thousand barrels of oil to BP, in February 2013
  • Sale of 394 thousand barrels of oil to Shell, in April 2013
  • Connection start-up of the third production well in the Tubarão Azul Field, TBAZ-1HP on January 4, 2013
  • Drilling and lower completion of six production wells concluded in the Tubarão Martelo Field
  • Final stage of reservoir engineering for FPSO OSX-2 installation, with delivery scheduled for 3Q13

Tubarão Azul Field Development

In March, production in the Tubarão Azul Field was mainly affected by operational issues that caused damage to the ESP at wells OGX-68HP and TBAZ-1HP, resulting in a 15 day stoppage and an 11 day stoppage, respectively. Works to repair OGX-68HP have already commenced and are expected to complete in mid-May. Work on the TBAZ-1HP well should commence once repairs on the OGX-68HP have been completed. Production at both wells will remain interrupted until the ESP overhauls are completed. Additionally, production at the OGX-26HP well also stopped for 2 days in March as a result of unstable electrical generation at FPSO OSX-1.

In the first two months of the year, before the operational issues occurred, average daily production was 12.3 kboepd, while in March it decreased to 8.3 kboepd as a result of these issues.

In April after the OGX-26HP well returned to production, we noticed that the gas oil ratio (GOR) increased, resulting in the ESP overheating. In order to prevent any damage to the equipment, we decided to periodically stop the well production, which led to intermittent operations, producing only during 16 days with an average daily flow rate of 3.4 kboepd, considering the effective production days.

OGX's technical team is currently analyzing the reservoir behavior to define the next steps on the development of this field.

During 2013, we delivered the fifth, sixth and seventh shipments of approximately 779 thousand barrels, 425 thousand barrels and 394 thousand barrels, respectively. The first shipment was delivered to ENAP (Chile) on January 5, the second to BP on February 7 and the third to Shell on April 6.

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

Delivered cargos     2012     2013  
1st ¹   2nd ¹   3rd   4th Total 2012 5th   6th

Overall

Total

Delivery Date 03/28/2012 4/21/2012 07/26/2012 10/15/2012 5/1/2013 7/2/2013
Operation Period 51 days 27 days 98 days 80 days 73 days 39 days
 
Production related to the shipments - in barrels (bbls)     547,376     246,809     789,774     809,495     2,393,454     779,110     425,313     3,597,877  
 
R$ ('000)
Sales Revenues 118,003 55,996 150,686 174,707 499,392 165,000 89,634 754,026
 
Sales Taxes     -     -     -     -     -     -     -     -  
Royalties     (10,687 )   (4,938 )   (14,842 )   (15,772 )   (46,239 )   (15,351 )   (8,685 )   (70,275 )
Leasing     (24,078 )   (13,222 )   (52,708 )   (41,998 )   (132,006 )   (39,116 )   (20,868 )   (191,990 )
OSX Services     (13,944 )   (7,236 )   (28,071 )   (22,499 )   (71,750 )   (25,194 )   (12,471 )   (109,415 )
Logistics     (12,005 )   (7,410 )   (27,795 )   (18,405 )   (65,615 )   (8,355 )   (4,310 )   (78,280 )
Freight cost on sales     -     -     -     (5,831 )   (5,831 )   (3,877 )   (1,631 )   (11,339 )
Others     (871 )   36     (1,183 )   (1,529 )   (3,547 )   (2,394 )   (1,200 )   (7,141 )
 
EBITDA 56,418 23,226 26,087 68,673 174,404 70,713 40,469 285,586
 
% EBITDA / Revenues 47.81 % 41.48 % 17.31 % 39.31 % 34.92 % 42.86 % 45.15 % 37.87 %
EBITDA / barrel - (R$/barrel)     103.07     94.11     33.03     84.83     72.87     90.76     95.15     79.38  
    Note:
¹Sales occurred during the Extended Well Test and before the declaration of commerciality - not accounted in Results and recorded as a reduction of "Fixed Assets"
 

The following table demonstrates the effective daily rates (in USD) of each of the costs associated with the FPSO OSX-1 operation, related to the operation period in each of the first six delivered cargos:

Daily Cost (USD '000)     2012   2013  
1st cargo   2nd cargo   3rd cargo   4th cargo Avg. 2012   5th cargo   6th cargo

Overall

Average

                                   
Leasing     (268)   (262)   (268)   (259)   (264)   (263)   (263)   (264)
OSX Services     (155)   (143)   (143)   (139)   (145)   (169)   (157)   (151)
Logistics     (134)   (147)   (141)   (113)   (134)   (56)   (54)   (108)
Others     (10)   1   (6)   (9)   (6)   (16)   (15)   (9)
                                   
Total     (567)   (551)   (557)   (520)   (549)   (504)   (489)   (531)
 

Tubarão Martelo Field Development

OGX has drilled and made the lower completion of six horizontal production wells (TBMT-2HP, TBMT-4HP, TBMT-6HP, OGX-44HP, TBMT-8H and TBMT-10H). FPSO OSX-3 is scheduled to arrive by 3Q13 and its first production well is expected to come on-stream by 4Q13.

We have performed drill-stem tests on five production wells and the results were in line with our expectations.

PRODUCTION - PARNAÍBA BASIN

  • Revenue generation commenced in January 2013, starting with gas dispatch for the synchronization of the first Parnaíba I Thermo Power Plant (TPP) turbine
  • Average net gas production of 3.2 kboepd, 5.5 kboepd, 6.8 kboepd and 12.1 kboepd in January, February, March and April, respectively
  • Achieved total production of 4.0 M m3/d (~25 kboepd) in the Gavião Real Field after synchronizing the fourth turbine at the Parnaíba I Thermo Power Plant with Brazil's National Interconnected System (SIN) on April 5, 2013

Gavião Real and Gavião Azul Field Development

In January 2013, OGX started gas dispatch for the synchronization of the first Parnaíba I TPP turbine, initiating the project's revenue generation only 16 months after the drilling of the first development well in the Parnaíba Basin.

In a 12-day production period in January with only one turbine synchronized, we registered an average net gas production of 3.2 kboepd (0.5 M m³/d). In February, operating with 2 turbines from February 9, we registered an average net gas production of 5.5 kboepd (0.9 M m³/d). In March, the third turbine was synchronized with the system on March 16 and we reached an average net gas production of 6.8 kboepd (1.1 M m³/d). In April, operating with 4 turbines synchronized from April 5, we registered an average net gas production of 12.1 kboepd (1.9 M m³/d) and the Thermal Power Plant Parnaíba I reached its total installed capacity of 676 MW.

We have also started the drilling of two additional development wells: GVR-17 and GVR-18, which will be completed and connected to the production clusters soon.

The table below shows the pro-forma GTU EBITDA after the three months of operations. The pro-forma EBITDA margin of approximately 73% reflects the asset's profitability, still leaving room for margin increase with the full ramp-up of our production, in particular in April and May, with the synchronization of the fourth and fifth turbines.

           


GTU Parnaíba

Jan-13 Feb-13 Mar-13 Total
Operation Period¹ From   20-Jan   26-Jan   26-Feb
To 25-Jan 25-Feb 25-Mar
 
OGX Maranhão gas production - in Mm3         3.62    

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