Brazil OSX: Shipyard Construction Complete by Mid-2014

RIO DE JANEIRO - Brazilian shipbuilder and oilfield services company OSX Brasil S.A., part of Brazilian businessman Eike Batista's industrial empire, said construction of its shipyard remains on schedule for completion by mid-2014.

Speaking during a conference call with analysts, Chief Executive Carlos Bellot said that about 30% of the shipyard had been built as of the end of the third quarter. OSX is investing about 4.8 billion Brazilian reais ($2.36 billion) to build the shipyard at the Acu port complex in northern Rio de Janeiro state.

Construction of the company's first vessel, a pipe-laying vessel for services firm Sapura Seadrill, will kick off in the first quarter of 2013, Mr. Bellot said. The PLSV is expected to be delivered by the fourth quarter of 2014.

Work on OSX's second and third floating production platforms, which will be leased to sister company OGX Petroleo e Gas Participacoes SA, is on schedule, Mr. Bellot said. OSX-2 is 74% complete, while OSX-3 is 71% complete, the executive said. The two so-called FPSOs are expected to be delivered to OGX in the third quarter next year.

OSX is currently working to complete the financing package for OSX-3, including talks with the Brazilian National Development Bank, Chief Financial Officer Joao Borges said during the call. The company needs about $200 million to cover final construction costs of the converted oil tanker.

While OSX is still waiting for final technical specifications from OGX to move forward with the OSX-4 and OSX-5 platforms, the company has been invited to bid for the construction of two floating platforms for state-run energy giant Petroleo Brasileiro, or Petrobras, Mr. Bellot said. The FPSOs will be used to produce oil from areas transferred to Petrobras from the government during the company's 2010 capitalization. Proposals for the ships are due by December, Mr. Bellot said.

In addition, OSX is seeking other orders that could lead to "tens" of new ships added to the company's portfolio, Mr. Bellot said.

"We are continuing to negotiate for various ships that would be built at the shipyard, including some that we would build and then lease," Mr. Bellot added.

Mr. Borges, meanwhile, reiterated the company's plans for Mr. Batista to buy up to $1 billion in new shares as part of a put option. Part of the option should hit the books by the end of November, when $250 million in shares are issued after minority shareholders have a chance to subscribe to the offer, the CFO said. An additional $250 million in shares will be purchased by Mr. Batista by March 2013, with the remaining $500 million put pushed back until 2014.

The put exercise will push OSX's free-float to 22.9%, below the 25% limit for the Bovespa exchange's Novo Mercado listing mechanism. Mr. Borges said that the company is working with local regulators to get the free-float in line with listing rules without dramatically affecting the company's share price.


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