Oil
Bankruptcy Nears for Batista
LONDON – Brazilian commodities tycoon Eike Batista’s troubled oil company OGX is set to file for bankruptcy protection in Brazil in the coming days, people familiar with the matter said.
The company is expected to be reorganized but the next steps are unclear. A bankruptcy would be the biggest ever in Latin America, and an ignominious milestone in the former powerboat racer’s rise-and-fall.
The decision is a jarring reversal from just last year, when the entrepreneur was listed among the world’s richest on the Forbes list with estimated wealth over $30 billion. But his wealth has plunged since OGX admitted it could find little oil. That sent shares falling across his commodities companies. Mr. Batista later fell of the Forbes list.
The company and creditors convened this week in Rio de Janeiro to strike a restructuring deal, but those talks fell through, people familiar with the talks said. OGX is also running out of cash. One difficulty in the discussions has been Mr. Batista’s snap decision-making, say people involved. He has recently switched bankers and lawyers, and fired management with little notice.
Mr. Batista listed six start-up commodity and infrastructure companies since 2006, as a global frenzy for emerging markets and commodities investing took hold. He told investors he planned to become the world’s richest man, and gave his firms three letter names ending in ‘X’ to signify multiplication of wealth.
“The crisis in Eike Batista’s group is a symptom of the fragility of Brazilian economic model, which is largely based on the prices of commodities in the international markets,” said Marco Aurelio Guerra de Sa, director and head of the trading desk at Credit Agricole Securities in Miami.
OGX Petroleo e Gas Participacoes SA was the centerpiece of Mr. Batista’s start-up empire. In the prospectus for its $4.1 billion public share sale in 2008—Brazil’s biggest ever at the time—the company said it had rights to fields that contained up to 10.8 billion barrels of oil.
But OGX burned through much of its cash in a failed effort to develop those fields. In July, OGX disclosed it was incapable of extracting oil from most of them, unleashing a rout on its shares.
The OGX collapse spread across Mr. Batista’s X companies because many have interlinking operations. For example, the OSX shipbuilding firm he took public had OGX as its main customer. OSX was supposed to build ships at a port under construction by Mr. Batista’s logistics company LLX, which also would serve his mining company MMX.
Company officials have held out hope that one of OGX’s fields, Tubarao Martelo, is an economically viable field. The restructuring negotiations had centered around whether bond holders would inject more cash into the company in order to develop the field as part of the deal.
Other indebted firms, such as the ship builder OSX, own assets such as drilling platforms that can be sold. But it could be hit by the OGX bankruptcy filing, too. OGX may halt leases for offshore oil equipment OSX owns, resulting in hundreds of millions of dollars of OSX claims that would compete with OGX bondholder claims.
“It’s tragic for holders of the security and him as a person,” said Greg Lesko, who manages around $800 million at Deltec Asset Management and formerly held OGX securities. “There’s nothing Eike can do at this point to make the company what he wanted it to be. The oil just wasn’t there.”
Mr. Batista’s undoing is also a blemish to the Brazilian strategy of backing key businessmen who could project Brazil’s economic power. Brazil’s giant development bank lent Batista companies as much as $4.5 billion—although it did not lend to OGX. A BNDES spokesman said a possible bankruptcy filing by OGX would have no bearing on the bank.
An OGX bankruptcy process would be closely watched as a precedent for how Brazil’s relatively new bankruptcy law will be carried out in big cases. Broadly, Brazilian bankruptcy proceedings are similar to those in the U.S. OGX will present a reorganization plan to a judge, who will either accept it, or reject it and order OGX liquidated.
However, Brazil’s bankruptcy law is less than a decade old, which means there is still room for legal debates on how it is carried out, experts said. What’s more, liquidations in Brazil can last a decade or more.
For OGX, the advantages of a bankruptcy proceeding include that “it provides some space and time to reorganize,” said Sergio Bermudes, one of Mr. Batista’s lawyers, in an interview Thursday. At the time of the interview he said he hadn’t been contracted to file for bankruptcy protection.
The possible downside is that a judge may throw out the plan and order liquidation. But Brazilian legal experts say that outcome is unlikely since Brazil’s laws require the judge to make a priority of keeping the business open. The side effect is that some inadequate plans get approved.
“Nobody has the courage to ask for a liquidation of the company so debtors take advantage of that and present a bad plan,” said Glaucia Mara Coelho, partner at law firm Machado Meyer Sendacz Opice Advogados.
– WALL STREET JOURNAL
In a strategic move to revitalize Nigeria’s oil and gas sector, the Federal Government has unveiled two key fiscal incentives aimed at attracting investment and enhancing energy security.
The announcement was made by Mr. Wale Edun, the Minister of Finance and Coordinating Minister of the Economy on Wednesday.
The first initiative, the Value Added Tax (VAT) Modification Order 2024, introduces critical exemptions for essential energy products and infrastructure, including Diesel, Feed Gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Electric Vehicles, Liquefied Natural Gas (LNG) infrastructure, and Clean Cooking Equipment.
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These exemptions are designed to reduce living costs for Nigerians, promote energy security, and accelerate the transition to cleaner energy alternatives.
The second initiative, the Notice of Tax Incentives for Deep Offshore Oil & Gas Production, offers new tax relief options for deep offshore exploration projects.
This measure aims to position Nigeria’s deep offshore basin as a premier destination for international oil and gas investments, boosting the country’s appeal to foreign investors.
These reforms are part of a broader set of policy initiatives, known as Policy Directives 40-42, endorsed by President Bola Ahmed Tinubu.
The directives reflect the administration’s commitment to fostering sustainable development in the energy sector and enhancing Nigeria’s competitive edge in the global oil and gas market.
By Yemie Adeoye
NIGERIA’s President Bola Tinubu has announced that the protracted ExxonMobil-Seplat upstream oil divestment will be formally approved by the Minister of petroleum within a matter of days, just as he announced his government’s intention to expand the Compress natural Gas, CNG buses initiative.
The President who stated this during his Independence day nationwide broadcast stated that the move is in line with his administration’s commitment to free enterprise, free entry and free exit in investments which is the hallmark of his administration investment policy.
“Fellow compatriots, our administration is committed to free enterprise, free entry, and free exit in investments while maintaining the sanctity and efficacy of our regulatory processes. This principle guides the divestment transactions in our upstream petroleum sector, where we are committed to changing the fortune positively. As such, the ExxonMobil Seplat divestment will receive ministerial approval in a matter of days, having been concluded by the regulator, NUPRC, in line with the Petroleum Industry Act, PIA. This was done in the same manner as other qualified divestments approved in the sector.”
The President also seized the opportunity to plead with Nigerians to be patient with his administration’s reform policies. “As your President, I assure you that we are committed to finding sustainable solutions to alleviate the suffering of our citizens. Once again, I plead for your patience as the reforms we are implementing show positive signs, and we are beginning to see light at the end of the tunnel”.
“Our energy transition programme is on course. We are expanding the adoption of the Presidential Initiative on Compressed Natural Gas for mass transit with private sector players. The Federal Government is ready to assist the thirty-six States and FCT in acquiring CNG buses for cheaper public transportation.
Fellow Nigerians, while we are working to stabilise the economy and secure the country, we also seek to foster national unity and build social harmony and cohesion. Our economy can only thrive when there is peace”. he enthused.
As part of the administration’s push to improve Ease of Doing Business (EoDB), Nigeria’s Vice President Kashim Shettima has expressed support for ExxonMobil’s plan to invest $10 billion in the country’s deep-water oil sector.
Speaking on Wednesday, September 25, 2024, during a meeting with ExxonMobil executives at the 79th United Nations General Assembly (UNGA) in New York, Shettima called the investment “a clear testament to the administration’s economic reforms and investor-friendly policies.”
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This announcement follows news that international maritime company DP World intends to develop a multibillion-dollar port project in Nigeria.
Stanley Nkwocha, Senior Special Assistant to the President on Media and Communications, shared the development in a statement on Wednesday. He quoted Shettima as saying: “ExxonMobil’s potential investment aligns with the vision of President Bola Ahmed Tinubu’s administration for a more investment-friendly Nigeria.
We are committed to fostering an environment that supports such transformative projects.”Shettima also discussed the administration’s broader efforts to improve the ease of doing business, highlighting the “Renewed Hope Agenda,” which aims to simplify bureaucratic processes, enhance transparency, and offer fiscal incentives to attract global investors.
“Our administration has taken bold steps to unify the exchange rate, remove fuel subsidies, and implement tax reforms. These measures, though challenging in the short term, are intended to create a stable and predictable business environment in the long term,” he added.
On the oil and gas sector, Shettima mentioned that the government is revising the fiscal framework for deep-water operations to attract investment while ensuring fair returns for the Nigerian people.
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