OGX Inks Production Equipment, Services Deal
OGX signed a Preliminary Strategic Cooperation Agreement with OSX to support the demand for Exploration and Production Units; the charter of the production unit, FPSO type OSX 1, and related operation and maintenance services under the previously mentioned agreement; and expected production targets for the short, medium and long term.
"Our drilling results have revealed a new oil province in the southern part of the Campos basin and broken paradigms regarding the quality and potential of the reservoirs in this area. At this moment, OGX is entering into a new phase in its history, with a focus on reaching our production target of 1.4 million barrels per day by 2019," said Eike Batista, CEO and Chairman of OGX. "We have an unparalleled 10 year growth story, based on world-class assets of extraordinary quality," added Batista.
OGX and OSX agreed to the terms and conditions for a Cooperation Agreement to support OGX's long-term demand for equipment and production services. The agreement establishes a mutual right of first negotiation which applies to the construction of production units in Brazil, as well as the charter and operation of the production units by OSX, at market terms and according to the technical specifications and timeframe required by OGX. The Agreement terms and conditions establish an open book procedure and a target predetermined remuneration margin of 15% in the shipbuilding industry, 5% in O&M services and leveraged return on equity of 15% for the leasing activity.
The equipment will be provided by OSX at competitive prices and will contribute to OGX's compliance with local content requirement obligations assumed under the concession contracts with ANP. The equipment will be leased, thereby minimizing capital needs for OGX in the short and medium term and optimizing OGX's use of cash during this period.
Charter of FPSO OSX 1
OGX and OSX agreed to the terms and conditions for the charter of the FPSO OSX 1 for a period of 20 years, at an average daily rate of US $263,000/day. The charter also covers related operational and maintenance services. The OSX 1, built by Samsung Heavy Industries Co. Ltd’s shipyard, is expected to allow OGX to initiate production in early 2011, thus sooner than previously anticipated. The FPSO OSX 1 has a storage capacity of 950,000 barrels and processing capacity of 80,000 barrels per day, expandable to approximately 100,000 bpd.
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