OGX files for insolvency
October 31, 2013
OGX filed for insolvency with a court in Rio de Janeiro and was given legal protection from its creditors for a period of 180 days, the Brazilian oil major announced Wednesday.
Under Brazil's bankruptcy proceedings, the heavily indebted oil firm needs to present a restructuring plan within 60 days.
The application came after talks between the firm and its main creditors ended in failure. In early October, OGX failed to pay $45 million (32 million euros) in interest on bonds. The firm owes creditors an estimated $4 billion.
According to the Brazilian business daily Valor Economico, the collapse of OGX would be one of the largest bankruptcies ever in Latin America.
OGX was founded in 2007 by Brazilian billionaire Eike Batista, who is named by Forbes Magazine as the world's seventh richest man with a net worth of $30 billion. OGX is the backbone of Batista's empire that also includes steel, mining, infrastructure and real estate companies.
OGX has failed to produce significant amounts of offshore oil despite repeatedly reporting finds since 2010. In the first half of 2013, the company reached an average output of just 8,500 barrels per day, posting losses of more than $2.5 billion. A few weeks ago, investors have started to retreat from the firm after OGX lowered projection for a promising oil field from 1 billion barrels to just 285 million.
On its website, OGX said that it would need $250 million to satisfy near-term liquidity through the first quarter of 2014, adding that it would run out of cash before the year's end if its restructuring plan wasn't accepted by creditors.
uhe/rc (AP, dpa, AFP)