Company announces changes in the production development and production units orders
OGX Petróleo e Gás, the Brazilian oil and gas company responsible for the largest private-sector exploratory campaign in Brazil, announces that:
1. OGX concluded a detailed analysis of the behavior of each one of the Tubarão Azul Field’s three production wells since the beginning of production to the present day, which resulted on the following conclusions: (i) there is no technology currently available that would economically allow any additional investment aiming to increase the field production curve and (ii) the wells currently under production could cease to produce in 2014. The day rate for the leasing contract of FPSO OSX-1, platform connected into the Tubarão Azul Field, will continue to be paid to OSX as per the terms of the contract. Based on these conclusions, the Company will submit to the Brazil’s National Petroleum, Natural Gas and Biofuels Agency (ANP) a revised version of the field development plan.
2. The behavior of the production wells in the Tubarão Azul Field led the Company to reprocess and reinterpret existing geological and geophysical data, resulting in the development of a new reservoir model that revealed the intense compartmentalization and discontinuity of these reservoirs, compromising their productivity. Consequently, the Company concluded that there is no technology currently available that would economically allow the development of the Tubarão Tigre, Tubarão Gato and Tubarão Areia fields. As a result and as specified in article 7.5 of the Concession Contract, the Company will submit to ANP a motion to suspend the development of these fields. Additionally, the day rate for the leasing contract of FPSO OSX-2, which would have been used for the fields’ development, will be paid to OSX, as per the terms of the contract, commencing in January 2014 up until the unit is sold or dispatched to another location.
3. For the same reasons described above, the Company decided to interrupt the construction by OSX of the following production units: FPSO OSX-4 and FPSO OSX-5, as well as WHP-1, WHP-3 and WHP-4.
4. Tubarão Martelo Field will continue to be developed as planned, with first oil expected for 4Q13, as previously disclosed. In addition, the FPSO OSX-3 and WHP-2 units to be installed in this field will have their leasing contract terms adjusted to give OGX the right to end the contracts without onus from the 13th and 12th years respectively. The adjustment in the FPSO OSX-3 leasing contract will only be enforced after the complete amortization of the loans contracted by OSX for the unit construction, expected by 2015.
5. Due to the above events, OSX and OGX have signed an agreement under which OGX will make an immediate cash disbursement to OSX of approximately US$449 million. As per the agreement, approximately 70% of this amount will be used for the payment of the construction costs of FPSO OSX-3 and WHP-2.
6. Finally, the projections previously disclosed, including the ones referring to OGX’s production goals, should no longer be considered valid and should be disregarded.