Eike Batista’s Year from Hell Continues as OGX Files for Bankruptcy Protection

Just hours before becoming the first Brazilian oil producer to ever file for bankruptcy protection, OGX Petroleo e Gas Participacoes SA was able to sell its only producing assets; a move that helped to reduce the amount of money that the company’s creditors would be able to recover in the event of liquidation.

OGX was the second largest oil company in Brazil, by market value, after Petrobras, and is part of the EBX Group, controlled by Eike Batista, the former billionaire who has in recent years lost nearly his entire fortune.

Bloomberg reported that Cambuhy Investmentos Ltda, a private equity fund from Brazil, along with EON Se, of Germany, agreed to buy OGX’s stake in the OGX Maranhao Petroleo e Gas SA natural gas company. In a two stage deal the two companies will hand over 594 million reais ($270 million) for OGX’S entire holding in the gas producing assets that operate eight blocks in the Parnaiba basin, supplying gas to local thermoelectric plants run by Eneva SA, a Brazilian utility.

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Eneva is another of Batista’s companies, one that he controls jointly with EON, and a major shareholder in OGX Maranhao. On the 28th of October it offered to buy the remaining stock of the gas company in the case that OGX defaulted on its loan payments and entered bankruptcy, offering to pay 200 million reais for the 66.7 percent stake, but on Thursday it agreed to forfeit its rights to the stock to Cambuhy and EON, who will buy at a far higher price.

Cambuhy’s involvement in the natural gas company will stabilise it, offering more security, and ensuring a safe supply of natural gas to support Eneva’s power plants in the Parnaiba region.

OGX Petroleo’s bankruptcy protection is the latest episode in a long list that has seen Batista’s personal fortune lose about $30 billion over the past 16 months. After being founded in 2007, OGX made some good oil discoveries in shallow waters off the coast of Rio de Janeiro, growing quickly and becoming the foundation of Batista’s empire. When moving from exploration to production OGX found that the geology of terrain around the reserves was much more complicated than expected and several projects had to be abandoned. The beginning of the end.

Shares in OGX Petroleo e Gas Participacoes SA fell by as much as 35.3 percent on Thursday, the day after filing for bankruptcy protection.

By. James Burgess of Oilprice.com