Market Overview

OGX - Third Quarter 2011 Results


OGX Petróleo e Gás Participações S.A. (Bovespa: OGXP3) today announced its results for the third quarter of 2011. The financial and operational data below is presented on a consolidated basis, in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board - IASB and, in reais (R$), except where otherwise indicated.

“Operationally, this was a very intense quarter for us as we made important advancements towards the production of our first oil, began the development of the Parnaíba Basin and generated important results from drill-stem tests in the Santos Basin. Additionally, through our ongoing exploration efforts, we were able to confirm the characteristics and extensions of previously discovered accumulations,” commented Mr. Paulo Mendonça, OGX's General Executive Officer and Exploration Officer. “Finally, towards the beginning of a robust cash generation, we signed a sales contract of our first cargo with Shell, which confirms the oil quality of Waimea,” concluded Mr. Mendonça.

During the third quarter, we remained focused on the exploratory campaign in the Campos Basin, where we drilled nine appraisal wells and one wildcat well. We also performed drill-stem tests in the Santos Basin, obtaining significant results which confirmed the presence of gas and condensate. In the Parnaíba Basin, we began drilling the first production well and completed the drilling of an important wildcat well.

Towards the start of OGX production, we received the installation license for the Extended Well Test (EWT) and production development in Waimea, granted by IBAMA (the Brazilian Institute for Environment and Renewable Natural Resources). We have begun the installation of the FPSO OSX-1 mooring system and the subsea equipment for the connection of the first production well (OGX-26HP). All necessary equipment for the Waimea EWT has already been delivered, including the FPSO OSX-1, which arrived in Brazil at the beginning of October.

“Having obtaining the required licenses, and with all the necessary equipment in hand, we have begun the installation of our production system. The EWT in Waimea demonstrates how OGX's teamwork and ability to make quick decisions, combined with strong execution capacity, will produce OGX's first oil in record time,” said Reinaldo Belotti, OGX Production Officer.

Third Quarter Highlights and Subsequent Events:

  • Continuation of the appraisal campaign in Waimea (OGX-53D and OGX-65D), Fuji (OGX-54 and OGX-56D), Illimani (OGX-61) and Peró-Ingá (OGX-62 and OGX-64) accumulations, located in the Campos Basin;
  • Granted installation license and commenced installation of subsea equipment for the EWT in Waimea;
  • Arrival of FPSO OSX-1 in Brazil in the beginning of October;
  • Sale agreement with Shell for the first oil produced;
  • Initiated drilling of OGX-55HP and OGX-60HP, horizontal wells in the Waimea accumulation;
  • Performed two drill-stem tests in the Santos Basin in Maceió (OGX-47) and Natal (OGX- 11D) accumulations, both of which presented excellent results;
  • Initiated drilling of well GVR-1D, the first production well of the Gavião Real field in the Parnaíba Basin;
  • Celebrated an EPC contract for the construction of a gas processing unit in the Parnaíba Basin with Valerus-Geogas;
  • Acquisition of a 50% stake in block PN-T-102 in the Parnaíba Basin through its subsidiary, OGX Maranhão;
  • Initiated drilling of the first exploration well in the Espírito Santo Basin.

Campos Basin

Among the activities performed in the third quarter of 2011 in Campos Basin, we can highlight the following: (i) the continuation of the appraisal campaign; (ii) the granting of the preliminary license and installation license for the EWT and production development in Waimea by IBAMA; (iii) the beginning of installation activities for the subsea equipment and mooring system of the FPSO OSX-1 in preparation for initial production in the Waimea accumulation and; (iv) the arrival of FPSO OSX-1 to Brazil in early October for the EWT and initial production development of the Waimea.

During the quarter, we continued our appraisal and exploratory campaign in the Basin in the Waimea, Fuji, Peró-Ingá, Illimani and Tambora accumulations. In Waimea, we concluded the drilling of well OGX-53D, where we identified a hydrocarbon zone with 71 meters of net pay in the Albian section. OGX-53D was the pilot well for OGX-60HP, the third horizontal production well in the accumulation, which is still ongoing. We have also concluded well OGX-55HP, where we had drilled a horizontal section for more than 1,000 meters. In addition, we initiated the drilling of one more appraisal well in this accumulation, OGX-65D, which is still ongoing. In the Fuji accumulation, we concluded the drilling of wells OGX-54 and OGX-56D, and identified the presence of hydrocarbons in the Albian section with net pays of approximately 24 and 60 meters, respectively. As for the Illimani accumulation, we initiated the drilling of one more appraisal well, OGX-61, which is still ongoing. In the Peró-Ingá accumulation, we concluded the drilling of well OGX-62, where we identified 26 meters of net pay in the Santonian section and 20 meters of net pay in the Albian-Cenomanian section. We also initiated the drilling of well OGX-64, which is still in progress. Finally, with respect to Tambora accumulation, discovered by well OGX-52, we drilled well OGX-58DP to test deeper structures and which proved the existence of reservoirs with good permo-porosity conditions, but without the presence of hydrocarbon.

We are about to begin the production of our first oil in the Campos Basin which will occur through an EWT in the Waimea accumulation and will be performed in record time, only two years after initial discovery. The beginning of production will mark a milestone in the history of OGX, demonstrating the execution capability of its teams to produce oil just four years after the creation of the Company.

All of the necessary equipment for initial production is already in Brazil and is being mobilized to the site. After obtaining the installation license from IBAMA on September 16, 2011, we started the installation of the subsea equipment using the Aker Wayfarer vessel, which is able to install the FPSO OSX-1 mooring system, as well as connect the well through flexible lines.

This installation process in open sea is subject to setbacks due to bad weather conditions. However, we have already completed the installation of 10 piles, moorings and the MWA (Mid Water Arch - designed to alleviate the force of the flexible lines on the turret). We will then connect the buoy, which is being mobilized to the site, first the well, and then to the FPSO. With all of the equipment installed and tests performed, we expect to start production this year.

In the quarter, we signed a sales contract with the major, Shell, for our first two shipments totaling 1.2 million barrels (600k barrels per shipment), at an average price equivalent to a discount of US$ 5.50 to Brent, confirming not only the Waimea oil but also the Company's execution capability.

Below are the concluded and ongoing wells in the Campos Basin:

  Well   Block   Prospect   Rig   Coast Distance   Water Depth     Net Pay   Drilling Area¹
  OGX-53D   BM-C-41   Waimea – 2D   Pride Venezuela   84 Km   131m     Albian: 71m   1C
  OGX-54   BM-C-41   Fuji - 2   Ocean Lexington   81 Km   136m     Albian: 24m   Delineation
  OGX-56D   BM-C-41   Fuji – 1 D   Ocean Star   83 Km   133m     Albian: 60m   3C
  OGX-58DP   BM-C-41   Tambora   Ocean Ambassador   93 km   128m     -   Prospective
  OGX-62   BM-C-40   Ingá - 1   Ocean Lexington   93 Km   105m    

Santonian: 26m

Albian-Cenomanian: 20m

  OGX-55HP   BM-C-41   Waimea – 3HP   Sea Explorer   84 Km   131m    

Albian: > 1,000m

(horizontal section)

  Well   Block   Prospect   Rig   Coast Distance   Water Depth     Status   Drilling Area¹
  OGX-60HP   BM-C-41   Waimea – 2D   Pride Venezuela   84 Km   132m     In progress since 08/22/11   1C
  OGX-61   BM-C-41   Illimani - 2   Ocean Ambassador   87Km   124m     In progress since 09/06/11   3C
  OGX-64   BM-C-40   Ingá – 1 DP   Ocean Lexington   93 Km   105m     In progress since 10/12/11   3C
  OGX-65D   BM-C-41   Waimea – 4D   Sea Explorrer   83Km   135m     In progress since 10/22/11   1C

¹ As per D&M´s Dec/10 reports


Parnaíba Basin

To strengthen our position in the Parnaíba Basin, we acquired a 50% stake in the PN-T-102 exploration block during the quarter through our subsidiary, OGX Maranhão Petróleo e Gás Ltda. OGX Maranhão, a joint venture between OGX (66.7%) and MPX Energia S.A. (MPX) (33.3%), an EBX Group company, is now the operator of the block, together with the consortium formed by Imetame Energia S.A., DELP Engenharia Mecânica Ltda. and Orteng Equipamentos e Sistemas Ltda., which retain 16.67%, 16.665% and 16.665% stakes, respectively. With this new concession, OGX Maranhão now holds positions in eight onshore exploration blocks in the Parnaíba Basin with the total area exceeding 24,500 km².

This quarter we concluded the drilling of two wells in the basin, one wildcat well and one production well. The exploration well in the Fazenda Torrão accumulation, OGX-59, was concluded and we identified the presence of hydrocarbons in the Devonian section with net pay of 9 meters. The production well, which is still ongoing, was the first production well in the Gavião Real field, GVR-1D, located in PN-T-68 block. In addition, we began the drilling of well OGX-66, a wildcat well in the Angical structure, located in the PN-T-67 block and is still in progress.

We currently have two drilling rigs in operation and three seismic crews in the region, employing more than 1,000 people. A third onshore rig has recently been contracted and it is expected to begin operations in the fourth quarter of 2011.

During the quarter, we celebrated the signing of an EPC contract for the construction and assembly of the gas processing unit and collecting system in Parnaíba with consortium Valerus-Geogas, which will be responsible for the entire surface installation and gas processing plant.

Natural gas produced in the region will be supplied to thermoelectric power plants to be built by MPX Energia SA in association with Petra Energia SA, both partners of OGX in this basin. MPX and Petra have obtained environmental licenses for 3,722 MW of power for this facility. During this quarter, the Bertin Group project, previously acquired by MPX, denominated Thermoelectric Power Plant (“TPP”) Maranhão IV and V (676 MW) were approved by ANEEL. Also, MPX won the A-3 energy auction in August 2011 for the supply of 517 MW. The result of this auction shows the importance of the integration of the natural gas production, supplied by OGX Maranhão, to power generation in the Parnaíba Basin.

MPX signed EPC contracts for the development of the MPX Parnaíba thermoelectric complex, comprising TPP Maranhão III with Initec S.A. and TPP Maranhão IV and V with Duro Felguera, both in the Parnaíba Thermoelectric Complex. Additionally, MPX has signed a partnership agreement with GE Energy, ensuring the supply of turbines to the thermoelec

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