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OGX Reports 2009 Results

Posted by Dana in March 13th 2010

*Successful Execution of Largest Private Exploratory Campaign in Brazil
*Five Wells Yielded Discoveries Estimated Between 2.1 and 4.7 Billion BOE
*R$ 7.3 Billion in Cash at Year-end to Fund Exploration Commitments through 2013

OGX S.A. (Bovespa: OGXP3; OTC: OGXPY) announced its 2009 results . The following financial and operating information is presented on a consolidated basis, pursuant to Brazilian corporate law, in thousands of reais (R$), unless stated otherwise.

2009 and Subsequent Events:

* Six exploratory wells drilled in the Campos and Santos basins including five which have previously announced volume estimates of 2.1 to 4.7 billion barrels of oil equivalent;
* Initial production expected to begin ahead of schedule in early 2011 and long-term production target aimed at achieving 730 thousand barrels per day by 2015 and 1.380 million by 2019;
* Updated appraisal report issued by Degolyer & MacNaughton (D&M) certifying in 6.7 billion barrels of net risked prospective resources, considering an average probability of success of 34.5%, and 212 million boe of net contingent resources;
* Strategic Cooperation Agreement signed with OSX Brasil S.A. to support the demand for Exploration and Production Units. The equipment will be provided by OSX at competitive prices and will contribute to OGX’s compliance with local content requirement obligations under the concession contracts with ANP;
* First production unit FPSO (Floating Production Storage & Offloading), OSX 1, chartered from OSX Brasil S.A. for the period of 20 years;
* 70% participation in seven exploratory onshore blocks acquired in the Parnaíba Basin. In parallel, OGX signed a Memorandum of Understanding with MPX Energia S.A. (“MPX”) to formalize the transfer, subject to ANP approval, of OGX’s participation to a new special purpose vehicle in which OGX and MPX would hold respectively 66.7% and 33.3% interests, as well as the intention of executing an agreement related to the sale of gas to be produced;
* Company’s offshore drilling fleet increased by securing a fifth drilling rig, Ocean Star, from Diamond Offshore Netherlands B.V.;
* Additional 15% of concession rights and obligations obtained for Block BM-S-29, in the Santos Basin. This transaction brought OGX’s participation interest in the Block to 65%; Maersk Oil remains the operator;
* OGXP3 included in the Ibovespa index, with a weighting of 0.87%, corresponding to the 34th position in the selected portfolio of 63 stocks;
* OGX’s Level I Global Depositary Receipts (GDR) started trading on the over-the-counter market under the symbol “OGXPY”. Banco Itaú S.A. was hired as the custodian and Bank of New York Mellon as the depositary institution.

Financial Results

The net financial income of R $ 264.4 million was mainly driven by the interest income of R$ 838.8 million, losses on hedging of future commitments in foreign currency (U.S. dollars) of R$ 220 million and the negative impact of marking-to-market the fair value of financial instruments of R$ 355.6 million.

Net Profit

Net profit for the year was R$ 10.8 million resulting from net financial income of R$ 264.4 million offset by exploratory costs of R$ 97.9 million, General and Administrative Expenses of R$ 118.0 million and Income Tax and Social Contribution of R$ 37.6 million. The primary reason for the reduction in net profit for 2009 was the increase in financial expenses as compared to 2008.

Cash

The Consolidated Cash of the Company and its subsidiary totaled R$ 7.3 billion at year-end, equivalent to US$ 4.2 billion. The cash position at the end of 2009 is sufficient to fund the entire exploratory campaign and the initial production development. These resources are invested in fixed-income fund that have yielded at an accumulated gross average return of 116.37% of Interbank Deposit Rate (CDI), equivalent to R$ 838.8 million.