Lukoil in Talks to Buy 40% of Brazil's OGX

RIO DE JANEIRO - Billionaire Brazilian businessman Eike Batista is in talks to sell a 40% stake in oil producer OGX Petroleo e Gas Participacoes SA to Russia's Lukoil, the Folha de S. Paulo newspaper reported Sunday. 

The deal would beef up finances at the entrepreneur's troubled flagship company ahead of an important auction of oil and natural-gas concessions next month. The Russian firm is conducting due diligence of the company, and the deal could be announced in early May, the newspaper reported. 

OGX is also in talks to sell a 40% stake in the company's Tubarao Martelo field to Malaysian state-run oil and gas firm Petroliam Nasional Bhd., or Petronas, the newspaper said. Tubarao Martelo is expected to start producing crude oil by the end of 2013. OGX could also operate fields for Brazilian state-run energy giant Petroleo Brasileiro, or Petrobras, the newspaper reported. 

OGX denied the report. "The information is not true," an OGX spokeswoman said Monday. 

Despite the denial, investors reacted positively to the report. OGX shares led broad gains for companies in Mr. Batista's EBX Group of companies, climbing 19% to 1.62 Brazilian reais ($0.80) in early Sao Paulo trading on Monday. Port operator LLX Logistica rose 3.6% to BRL2.02, shipbuilder OSX Brasil added 3.8% to BRL3.58 and miner MMX advanced 3.5% to BRL2.08. 

Shares in the companies have tumbled so far in 2013 amid questions about the ability of the firms to generate concrete results for investors. Many of Mr. Batista's interests are in the startup or pre-operational phase. 

OGX has fallen far short of its crude-oil production goals since the Tubarao Azul field first started output in early 2012. The field was expected to reach output of 40,000 barrels per day by end-2012, but those expectations were slashed by nearly half last year. 

In March, technical issues at Tubarao Azul caused production to plummet. The company is carrying out repairs on two of the field's three production wells, with full output not expected to return before June. The field produced 8,300 barrels of oil equivalent per day in March.


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