Brazil OGX Plans Investments of $2B in 2011 -CFO

RIO DE JANEIRO (Dow Jones Newswires), March 28, 2011

OGX expects to invest about $2 billion in 2011 as it ramps up exploration efforts and produces its first oil, the company's chief financial officer said Monday.

"This will be for drilling exploratory wells and production at the extended-well test," CFO Marcelo Torres said during a conference call with analysts. The independent driller, which is still in the pre-operational phase, expects to produce its first oil from an extended-well test at the Waimea prospect in the third quarter.

Part of the 2011 capital expenditure budget will be directed at pioneer wells in the Para-Maranhao Basin, said Chief Executive Officer Paulo Mendonca. The company expects regulators to issue a license to start drilling OGX's first wells in the basin in "two weeks," Mendonca said. The drilling platform hired to spud the wells is on site and ready to start work once the license is approved, the executive added.

In the Espirito Santo Basin, meanwhile, OGX is focused on post-salt prospects, Mendonca said. While Brazil's much-ballyhooed pre-salt region extends into the basin, the depth of the pre-salt targets puts them out of OGX's reach at the moment.

"We have to do 3D seismic, but the locations we are looking at are in the post-salt. Maybe in the future it will be possible to think about pre-salt," Mendonca said. The executive noted that pre-salt targets in the region were at about 10,000 meters deep, a depth at which OGX is not yet authorized to drill.

"In the future, perhaps, we can find something not so deep," he said.

Late Friday, OGX reported a fourth-quarter 2010 loss of 123.4 million Brazilian reais ($74.3 million), compared with a loss of BRL100.6 million a year earlier. OGX is still in a pre-operational phase and reported only financial earnings from cash on hand. OGX said it holds BRL4.8 billion in cash.

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