OGX has announced its full year 2008 results today. The following financial and operating information is presented on a consolidated basis, pursuant to Brazilian corporate law, in reais (R$), unless stated otherwise.
"2008 was a year of significant accomplishments and momentum for OGX. We have assembled a talented and experienced team that was able to fulfill, and in some cases exceed, the objectives outlined at the time of our initial public offering. Leveraging technical expertise and a strong balance sheet, the Company reached key milestones in its exploratory campaign. We hired four drilling rigs, procured critical drilling equipment, secured our onshore hub, and arranged for necessary support services. Accomplishment of these goals significantly reduces execution risk and positions OGX to start proving the value of its unique exploratory portfolio in 2009. We look forward to building on this strong record of execution in the coming year as we begin our drilling campaign," commented Rodolfo Landim, OGX's Chief Executive Officer.
Main Financial Highlights:
2008 Operational Overview
On March 12th, OGX signed concession contracts for 21 exploration blocks acquired during the Ninth Bidding Round in November 2007. Subsequently, on December 3rd, the Company obtained approval by the ANP for its 50% participation interest in the farm-in of block BMS-29, located in the Santos basin. As a result, OGX finished 2008 with a diversified exploratory portfolio comprised of 22 highly qualified blocks. The Company is now the largest Brazilian private sector oil and natural gas company in terms of offshore exploratory acreage, with an area of 6,800 km2 (2,700 square miles).
In March, OGX engaged DeGolyer & MacNaughton ("D&M"), a leading global consultant in reserve certification to the oil and natural gas industry, to prepare an independent, third party evaluation of the exploratory portfolio. The appraisal report issued by D&M indicated that the blocks located in the Campos, Santos, Espírito Santo and Para-Maranhao basins contained 4.8 billion boe of net risked prospective resources, assuming an exploratory success probability of 27%.
To finance the exploration and development of these significant resources, OGX completed an Initial Public Offering on the Bovespa’s Novo Mercado in June of 2008, with a fully subscribed offering of 5.93 million common shares. The capital raised from the IPO was invested in fixed income instruments in accordance with OGX's conservative financial investment policy, and had grown to R$7.6 billion as of December 31st.
Through a selective recruitment and hiring process, OGX has assembled experienced teams for key areas related to the exploratory campaign and production development. Executive managers responsible for the drilling, logistics, procurement and production development areas were hired. Therefore, all key personnel necessary for the exploratory campaign are in place.
OGX invested R$128.1 million during 2008 in the acquisition, processing and reprocessing phases of its seismic campaign in the Campos, Santos, Espirito Santo and Para-Maranhao basins, and hired world class seismic service providers. By the end of 2008, 3D data shooting in the Campos and Para-Maranhao basins had been completed. In the Espírito Santo blocks, shooting was well underway and seven months ahead of the original timetable. In addition, existing 3D seismic data for the Santos basin was refined using special modern reprocessing techniques, and is now being studied by OGX's data interpretation team.
Seismic data will be analyzed in the newly constructed, 3D visualization room at the Company's offices in Rio de Janeiro that features state-of-the-art technology owing to a total investment of R$1.8 million. It is expected that the integration of various expert teams with the latest technology will improve decision-making, increase productivity, and allow the Company to choose drilling locations with greater precision.
In parallel to the conducting of seismic studies during the quarter, OGX secured all drilling equipment and services essential to its exploratory campaign. Between August and September, the Company chartered four semi-submersible drilling rigs from world class contractors -- rigs sufficient to carry out the entire exploratory drilling campaign in the Campos and Santos basins and, by year end, had procured wellheads, casings, drilling fluid, as well as engineering and casing running services, dramatically reducing execution risk with regard to the exploratory campaign.
During the final quarter of 2008, OGX chartered six vessels, five of which are being built in Brazil, and two helicopters to transport personnel and goods to offshore drilling rigs operating in the Campos and Santos basins. The Company also secured its onshore hub in the city of Rio de Janeiro, where supplies will be stored and transferred to and from supply vessels.
OGX concluded 2008 having successfully executed its business plan and in some cases was ahead of both budget and schedule due to the broad experience within the organization. The Company expects 2009 to be a pivotal year, one in which it must implement an ambitious business plan in a short time frame, and start transforming prospective resources into proven reserves. The Company is now poised to initiate its exploratory campaign, which involves the drilling of wells in four basins in the next four years.
Key events expected in 2009 include the interpretation of 3D seismic data for the Campos, Santos and Para-Maranhao basins, which will be completed during the first half of 2009, and data interpretation for the Espirito Santo basin, which is expected to be completed by December 2009. In addition, the Company plans to request that D&M update its original appraisal report for the Campos basin now that 3D seismic data is available, and expects to have this information available during the third quarter.
In addition to the 3D seismic results and D&M appraisal update, OGX will be drilling six wells in the Campos and Santos basins during 2009. Drilling of the first well is scheduled for the middle of 2009 in block BMS-29 with our partner and operator, Maersk Oil. In September, the Company is expected to drill two wells in the Campos Basin and, in November, two additional wells in the Campos Basin and one in the Santos basin.
During the next four years, OGX expects to make a total investment of US$3 billion, of which approximately US $2 billion will be allocated to the exploratory campaign and US $1 billion to the initial development of production capacity in the Campos basin.
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