OGX Concludes Drill-Stem Test in Santos Basin

- OGX Concludes Drill-Stem Test in Santos Basin

Monday, August 29, 2011
OGX S.A.

OGX has concluded the drill-stem test performed in the Santonian section of well 1-OGX-47-RJS, in the BM-S-59 block, in the shallow waters of the Santos Basin. OGX has a 100% interest in this block.

"With a successful exploration campaign underway in the Santos Basin, we initiated the drill-stem test phase. This is the first of a series of tests which has obtained significant productivity data from our sandstone reservoirs and represents an important step in broadening our understanding of this basin and in beginning the development of this area," commented Paulo Mendonça, OGX's General Executive Officer and Exploration Officer.

Following the discovery announced on July 1, 2011, a drill-stem test was performed in a vertical well in the Maceió accumulation. Besides the presence of gas, the test confirmed the existence of condensate of about 50° API that should account for around 20% of the hydrocarbon volume of this structure. The results of this test, with three production intervals, indicate a production potential of 1 million cubic meters per day in a vertical well, which could reach 2.5 million cubic meters per day in a horizontal well, both at Absolute Open Flow.

The test information is extremely important to the Company, because when combined with the accumulations of Natal (OGX-11), which will be the next well to be tested, and Aracaju (OGX-19), which will be tested in a Discovery Appraisal Plan, indicate the existence of one more important gas and condensate region in Brazil.

The well OGX-47, named 'Maceió', is located in the BM-S-59 block and is situated approximately 110 kilometers off the coast of the state of Rio de Janeiro at a water depth of approximately 185 meters. The Ocean Quest rig initiated drilling activities on May 24, 2011.

Oil & Gas Post

Promote Your Page Too
LINK

OGX Intensifies Appraisal Campaign; Posts 2Q Loss

- OGX Intensifies Appraisal Campaign; Posts 2Q Loss

Thursday, August 11, 2011
OGX S.A.

OGX announced its results for the second quarter of 2011. The financial and operating data 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, except where otherwise indicated.

"We remain focused on executing our business plan, which has advanced significantly as we have intensified our appraisal campaign and performed additional drill-stem tests, all of which are essential in converting our resources into reserves. With the recent bond issuance as well as the significant progress made in the past three months, we are not only technically but financially prepared to proceed towards production," commented Mr. Paulo Mendonça, General Executive Officer and Exploration Officer for OGX.

From the perspective of our drilling campaign, highlights of the second quarter include the drilling of 11 appraisal wells in the Campos Basin and 2 in the Parnaíba Basin, two successful drill-stem tests performed in horizontal wells in the Campos Basin and the declaration of commerciality for two fields in the Parnaíba basin, confirming our projections and attesting to the excellent execution of our business plan. In addition, we drilled wildcat wells that continue to demonstrate the great potential of our portfolio.

With respect to the commencement of production, important steps have been achieved in the past three months including the arrival of the newly built vessel Aker Wayfarer which will be used throughout the system installation, as well as the final stage of commissioning for the FPSO OSX -1. In addition, the construction of the turret, a disconnectable buoy which is part of the OSX-1 mooring system, has been completed and is already in the mobilization process to Brazil.

Second Quarter Highlights and Subsequent Events:

• Intensification of the appraisal campaign in Waimea (OGX-50D, OGX-53D and OGX-55HP), Waikiki (OGX-41D, OGX-44HP and OGX-45D), Pipeline (OGX-39HP, OGX-40D, OGX-42D and OGX-48D), Illimani (OGX-43D) and Fuji (OGX-54D and OGX-56D) accumulations located in the Campos Basin;
• Declaration of commerciality for the California and Fazenda São José accumulations in the Parnaíba Basin, for which the newly designations are Gavião Azul and Gavião Real Fields;
• Performance of drill-stem test for the first horizontal well (OGX-44HP) in the Waikiki accumulation, with excellent results;
• Important discoveries in the Parnaíba basin through the drilling of wells OGX-38 and OGX-46D;
• Significant discoveries in the Santos basin through the drilling of wells OGX-30 and OGX-47;
• Performance of a drill-stem test for the first horizontal well (OGX-39HP) in the Pipeline accumulation with very good results;
• Initiated drilling of well OGX-55HP, the second horizontal well in the Waimea accumulation;
• Raised US $2.563 billion through a bond issuance; and
• Announcement of the Company's business plan for discoveries in the Campos and Parnaíba Basins.

Campos Basin

Among the activities performed in the second quarter of 2011 in Campos Basin we can highlight the intensification of the successful appraisal campaign, the results of drill-stem tests in Waikiki and Pipeline accumulations, the drilling of wildcat wells, and the arrival and preparation of equipment for the start-up of production. On June 6, we formally announced our business plan relating to discoveries made in the basin.

During the quarter we intensified our appraisal campaign in the Waimea, Waikiki, Pipeline, Illimani and Fuji accumulations. In Waimea, we concluded the drilling of well OGX-50D encountering a hydrocarbon zone with 52 meters of net pay in the Albian section. In addition, we initiated the drilling of wells OGX-53D and OGX-55HP, which are still ongoing. In the Waikiki accumulation, we have concluded the OGX-41D, OGX-44HP and OGX-45D wells. The directional well OGX-41D found a net pay of 92 meters in the Albian section and was the pilot well for OGX-44HP, which was horizontally drilled for more than 1,000 meters in Albian-Cenomanian reservoirs. The well OGX-45D, which was intended to test the limits of the Waikiki accumulation, discovered hydrocarbons only in the Maastrichtian section, indicating an additional potential in sandstone reservoirs which extend towards the Ingá-Peró Complex. In the Pipeline accumulation, wells OGX-39HP, OGX-40D, OGX-42D and OGX-48 were drilled, identifying the presence of hydrocarbons in the Albian section with net pays of more than 1,000 (horizontal column), 107, 82 and 12 meters, respectively. In the Illimani accumulation, we have concluded well OGX-43D which confirmed the extent of the reservoirs in the Albian section and identified a net pay of 50 meters. Finally, we began the drilling of wells OGX-54D and OGX-56D in the Fuji accumulation, both of which are still in progress.

Additionally, we obtained the results of the drill-stem tests in horizontal wells OGX-39HP and OGX-44HP in the Pipeline and Waikiki accumulations, respectively. The test in well OGX-39HP, which is the first horizontal well in the Pipeline accumulation, indicated good reservoir conditions, implying a production capacity of around 10,000 barrels per day and oil of approximately 19° API. The test in well OGX-44HP identified oil of approximately 23° API and a production potential of 40,000 barrels per day, which will be limited to a flow rate of 15,000 to 20,000 barrels per day per well to optimize oil recovery from the reservoir.

Continuing with our wildcat drilling campaign, well OGX-33 was drilled in the Chimborazo accumulation and identified a net pay of 42 meters in the Albian section. We have also drilled well OGX-52 in the Tambora accumulation, which has identified a net pay of 96 meters in the Albian section and we have initiated OGX-58DP well also in this accumulation that is still ongoing.

The commencement of OGX's production is scheduled for October/November this year in the Campos Basin. The first project in the Waimea Complex will take place through an Extended Well Test (EWT) and will have an anticipated production of up to 20,000 barrels per day from well OGX-26HP.

All of the critical equipment for the start-up of production has been secured. The wet christmas tree and the electric submersible pumping system are already installed and other equipment such as flexible lines, moorings and piles (which are part of the FPSO mooring system) and the installation vessel have already been delivered. The FPSO OSX-1 is ready in the shipyard in Singapore and the turret (a buoy, part of the mooring system) is in the mobilization process to Brazil.

Parnaíba Basin

During this quarter, we made important discoveries in this basin and presented to the ANP declarations of commerciality for the Gavião Azul and Gavião Real fields. The development plans for these fields have already been submitted by OGX, who are still in the process of analyzing them.

We concluded the drilling of four wells, including two wildcat wells, OGX-34 and OGX-46D, and two appraisal wells, OGX-38 and OGX-51DP, which identified net pays of 23, 15, 43 and 8 meters, respectively, in the Devonian section. We also started the drilling of wildcat well, OGX-49, and appraisal well, OGX-57, which are still in progress.

Following the seismic campaign in this basin, we engaged a second seismic team during the quarter to focus on the southern blocks, while the first team remains focused on seismic in the northern blocks.

The Gavião Azul and Gavião Real fields will be the first natural gas fields developed by OGX. We expect that gas production in this basin will start in the second half of 2012, as announced in our business plan for the discoveries made in this basin. We estimate that these fields will reach a production level of 5.7 million m3/day in 2013, which corresponds to total production of 1.1 Tcf of gas. Natural gas produced in the region is expected to be the supply source for thermoelectric power plants to be built by MPX Energia SA, an EBX Group company, in association with Petra Energia SA, both of which are partners with OGX in this basin.

MPX has entered into a term sheet with Bertin Energia e Participações to acquire two projects, which are still awaiting ANEEL's approval, that have the authorization for the construction of thermoelectric power plants with a total capacity of 660 MW. MPX intends to transfer these licenses acquired in the A-5 auction in 2008 to the Parnaíba Thermoelectric Complex, where it already has a prior installation license to implement 3,722 MW. This acquisition represents an important step in the integration of natural gas production provided by OGX Maranhão, to power generation in the Parnaíba Basin.

We have recently approved the leasing agreement of two additional onshore drilling rigs for the production development plan in Parnaíba Basin.

Santos Basin

In the second quarter of 2011, we continued our exploratory campaign and achieved important results testing classic targets and new geological models. We have concluded the drilling of well OGX-30, which confirmed a new play in fractured carbonates in the Albian age, showing a significant gas column and a large structured area. This discovery enabled us to confirm this new geological model for the region so that we can begin the appraisal campaign.

The recent discovery in sandstones in the Santonian age in well OGX-47, in the Maceió accumulation, contributed significantly to the development of our assets in this region and, when combined with the discoveries already made in the basin, will generate greater economies of scale and cost-effectiveness. We intend to focus on the appraisal campaign and proceed with the development of the production model for the region.

OGX currently has nine rigs at its disposal, including six semi-submersible rigs, two onshore rigs and one jack-up for drilling in the Campos, Santos, Parnaíba and Pará-Maranhão basins. Eight rigs are in operation and one is currently being mobilized.

Oil & Gas Post

Promote Your Page Too
LINK

Keppel Lands OGX Deals

- Keppel Lands OGX Deals

Friday, August 05, 2011
Keppel Corp. Ltd.

Keppel Shipyard has secured two contracts worth a total of S$146 million to convert a Floating Production Storage and Offloading (FPSO) unit as well as to fabricate and integrate an external turret mooring system for an existing FPSO unit.

The first contract is from Single Buoy Moorings Inc (SBM) for the conversion of the Very Large Crude Carrier (VLCC) M/T Concorde Spirit into a FPSO facility, to be named FPSO OSX-2. SBM had been engaged by OSX Brasil to supply the FPSO, which is expected to be completed in the second quarter of 2013 and will be deployed in the OGX Petroleo e Gas Participacoes S.A. (OGX) field in Campos Basin, offshore Brazil.

Keppel Shipyard's work scope on FPSO OSX-2 comprises refurbishment and life extension works, accommodation block extensions for 80 personnel, a new flare tower, a new internal turret mooring system and topside module supports, as well as the installation and integration of topside modules. Work on the vessel is expected to commence in September 2011.

Mr. Tony Mace, Chief Executive Officer of SBM Offshore said "Since 2001, Keppel has been our preferred partner and we are pleased to award another FPSO conversion to them. I look forward to continue with this partnership as we build up our FPSO fleet."

Mr. Nelson Yeo, Managing Director of Keppel Shipyard, said, "We are glad for another opportunity to collaborate with our long-time customer SBM and to support OSX. Committed to safe and value-added services, we will work closely with all stakeholders of FPSO OSX-2 towards a successful conversion project."

Other ongoing projects between Keppel Shipyard and SBM include the fast-track modification and upgrading of the FPSO Cidade de Anchieta and the conversion of the FPSO Cidade de Paraty, which will subsequently proceed to Keppel FELS Brasil's BrasFELS for installation and integration of topsides. Keppel Shipyard is also undertaking modification and upgrading work on OSX's first vessel, FPSO OSX-1.

Keppel Shipyard's second contract is for the fast-track fabrication and integration of an external turret mooring system for Rubicon Offshore International Pte Ltd (Rubicon Offshore).

FPSO Rubicon Intrepid is currently engaged in the production of Galoc Field, west of Palawan Island, the Philippines. Fabrication of the turret is expected to be completed and integrated to the FPSO in the fourth quarter of this year.

The above contracts are not expected to have any material impact on the net tangible assets and earnings per share of Keppel Corporation Limited for the current financial year.

Oil & Gas Post

Promote Your Page Too
LINK

Tambora Wildcat Sings for OGX Offshore Brazil

- Tambora Wildcat Sings for OGX Offshore Brazil

Monday, July 25, 2011
OGX S.A.

OGX has identified the presence of hydrocarbons in the Santonian and Albian sections of well 1-OGX-52-RJS in the BM-C-41 block, in the shallow waters of the Campos Basin. OGX holds a 100% working interest in this block.

''This new discovery nearby the Waimea accumulation successfully tested Albian calcarenites in a deeper position, completely independent of the prior discovery. Also, it is important to note the discovery of oil in sandstone reservoirs of the Santonian age. These discoveries confirm, as we have mentioned, significant potential remaining resources in this important oil province in the southern portion of the Campos Basin,'' said Paulo Mendonça, General Executive Officer and Exploration Officer of OGX.

A hydrocarbon column of approximately 12 meters was encountered in the sandstone reservoirs of the Santonian section with about 5 meters of net pay. In addition, a hydrocarbon column of approximately 174 meters was encountered in carbonates of the Albian section with around 96 meters of net pay.

The OGX-52 well, known as Tambora, is located in the BM-C-41 block and is situated approximately 93 kilometers off the coast of the state of Rio de Janeiro at a water depth of approximately 130 meters. The Ocean Ambassador rig initiated drilling activities on July 04, 2011.

Oil & Gas Post

Promote Your Page Too
LINK

OGX Finishes Drilling First Campos HZ Well

- OGX Finishes Drilling First Campos HZ Well

Friday, July 15, 2011
OGX S.A.

OGX announced the conclusion of drilling at the horizontal well 9-OGX-39HP-RJS (Pipeline Horizontal) and as expected identified very good reservoir conditions through a drill-stem test (DST). The well is located in block BM-C-41 in the Campos Basin.

"This was the third horizontal well test that yielded important results, confirming the quality of the accumulations discovered thus far and that are being appraised. We are continuing to move rapidly towards production," said Paulo Mendonça, General Executive Officer and Exploration Officer for OGX.

The OGX-39 well was horizontally drilled for more than 1,000 meters into the carbonate reservoirs of the Albian section of the Pipeline accumulation, which was originally discovered by the 1-OGX-2A-RJS well in November 2009, and uncovered new material information regarding the development of this area. The results from the drilling of the OGX-39 well demonstrated a high correlation with other wells in the Albian section, including calcarenites with excellent porosity with dolomitized and naturally fractured sections, and confirmed the extension of the Pipeline accumulation.

Following the conclusion of the drilling process, a DST was performed which indicated a production capacity of around 10,000 barrels of oil per day with an API gravity of approximately 19°. The process of selective acidification was used in six well intervals, which enabled better stimulation of the 1,000 meter horizontal well extension, thereby maximizing the oil flow.

Oil & Gas Post

Promote Your Page Too
LINK

OGX Hits Hydrocarbon Pay in Santos Basin

- OGX Hits Hydrocarbon Pay in Santos Basin

Friday, July 01, 2011
OGX S.A.

OGX has identified the presence of hydrocarbons in the Santonian section of 1-OGX-47-RJS well, in the BM-S-59 block, in the shallow waters of the Santos Basin. OGX holds a 100% working interest in this block.

"This discovery in conventional reservoirs of the Santos Basin contributes significantly to the development of our assets in this region. When combined with the discoveries that we have already made, we will be able to optimize the operational structure of this area by taking advantage of the economies of scale," commented Mr. Paulo Mendonça, General Executive Officer and Exploration Officer of OGX. "Following the drilling campaign, we will intensify both the appraisal process of the several discoveries for this basin, as well as the development of the production model for the region," added Mr. Mendonça.

A hydrocarbon column of approximately 131 meters was encountered in the sandstone reservoirs of the Santonian section with about 51 meters of net pay. This discovery is located 2.9 kilometers from the Natal accumulation which was discovered through the drilling of well OGX-11.

The OGX-47 well, named as Maceió, is located in the BM-S-59 block and is situated approximately 110 kilometers off the coast of the state of Rio de Janeiro at a water depth of approximately 185 meters. The Ocean Quest rig initiated drilling activities on May 24, 2011.

Oil & Gas Post

Promote Your Page Too
LINK

OGX Concludes Drilling at Waikiki HZ Well

- OGX Concludes Drilling at Waikiki HZ Well

Monday, June 20, 2011
OGX S.A.

OGX announced the conclusion of drilling at the horizontal well OGX-9-44HP-RJS (Waikiki Horizontal) and through a drill-stem test (DST), the identification of excellent production conditions. This result confirms the Company's initial expectations regarding the Waikiki accumulation and offers further concrete evidence of the development potential for this area. The well is located in block BM-C-39 in the Campos Basin, and should be part of OGX's second production project in the basin.

"The information obtained through this well strengthens our understanding of this part of the Campos Basin and will allow us to accelerate the process for the declaration of commerciality for this area, ensuring the full implementation of our business plan," commented Paulo Mendonça, General Executive Officer and Exploration Officer for OGX.

The drilling of horizontal well OGX-9-44HP-RJS followed the same concept previously utilized by the Company and involved the drilling of a directional well (OGX-41D) to a depth of 2,340 meters in order to enable a horizontal entrance into the targeted reservoir. This approach resulted in a well with a 1,063 meter long horizontal extension into the carbonate reservoirs of the Albo-Cenomanian section of the Waikiki accumulation, which was originally discovered through the drilling of the 1-OGX-25-RJS well on December 8, 2010.

Following the conclusion of the drilling process, a drill-stem test was performed, which confirmed a production potential of 40,000 barrels of oil per day with an oil gravity of approximately 23° API. The tests performed in the Peró and Ingá accumulations, in block BM-C-40, adjacent to block BM-C-39, have shown oil of approximately 26° to 28° API, revealing a province of oil lighter than the one seen in the southern blocks. A complex process of selective acidification – a technology similar to the one used with great success in the Waimea accumulation at OGX-26HP – was used in eight well intervals, permitting better stimulation of the 1,063 meter horizontal well extension, thereby maximizing the oil flow.

The quality and homogeneity of the limestone reservoir seen in this region will enable very efficient drainage of producer wells limited to a flow rate of 15,000 to 20,000 barrels per day of oil, as announced in our business plan, optimizing oil recovery.

Oil & Gas Post

Promote Your Page Too

OGX Anticipates 730,000 boepd by 2015

- OGX Anticipates 730,000 boepd by 2015

Tuesday, June 07, 2011
OGX S.A.

OGX announced the Company's business plan for the Campos and Parnaíba discoveries.

"Following OGX's discoveries and successful appraisal campaign in the Campos and Parnaíba basins, we are pleased to announce our business plan for the development and production of OGX's resources portfolio. The pro-forma liquidity of approximately US $5.1 billion of cash and cash equivalents that we have on hand will enable us to reach stable positive cash flows in 2014 and secure an estimated production of 730,000 boepd by the end of 2015," commented Paulo Mendonça, OGX's General Executive Officer and Exploration Officer. "We remain confident in our ability to continue executing our exploration and production plan in the coming years, while efficiently managing our cost base," added Mr. Mendonça.

In order to fund its exploration and production activities, OGX raised approximately US $8 billion, including US $1.3 billion through an equity private placement in 2007, an additional US $4.1 billion in the 2008 initial public offering (IPO), and a further US $2.563 billion through the senior unsecured notes offering announced on May 26, 2011.

Since its IPO, OGX has made the following important achievements in executing its business plan:

• A significant increase in its portfolio's potential resources from 4.8 to 10.8 billion boe;
• The drilling of 52 wells in the past 20 months with an overall success rate exceeding 90%;
• An increase in the number of concessions from 21 to 34, of which 29 are located in Brazil and five in Colombia;
• The expansion of the Company's concession acreage from approximately 7,000 km2 to 41,000 km2; and
• A growth in the current number of employees to more than 250, while leveraging a total workforce of over 6,100 professionals.

As a result of the Company's financial discipline, OGX has maintained strong liquidity throughout all of its exploratory activities, with cash and cash equivalents of US $2.5 billion as of March 31, 2011. OGX expects that this level of liquidity, plus the US $2.563 billion of proceeds from the debt offering and its operating cash flows from production, will enable the Company to fully fund its production development of the discoveries already made and to reach stable positive free cash flows in 2014.

OGX's successful exploratory campaign has been followed by an intensive appraisal campaign in order to gather more information on the accumulations discovered and optimize the execution of the development plans, which were based on 4.2 billion boe already discovered in the Campos and Parnaíba Basins. Since the beginning of 2011, OGX has focused increasingly on the drilling of wells primarily in the contingent resource and delineation areas with the intent of converting 3C contingent resources into 2C and 1C, and ultimately into reserves.

In the Campos Basin, production will begin in the first project (Waimea complex) in October 2011, with anticipated production of up to 20,000 barrels per day (bpd) from the OGX-26 well. The second project (Waikiki complex) production is expected to begin in the fourth quarter of 2013. In 2013, the Company expects to have three Floating Production Storage Offloading "FPSOs" (OSX-1, OSX-2 and OSX-3) and two Wellhead Platforms "WHPs" (WHP-1 and WHP-2) in place with a total of ten horizontal production wells on-stream in these two projects.

The Company will adopt the best practices in the oil and gas industry in its production in order to avoid reservoir damage. OGX expects to achieve 150,000 bpd of production from the Campos Basin in 2013 in these two production complexes from 10 horizontal wells producing an average of 15,000 bpd each.

In addition to these three FPSOs, OSX has acquired two very large crude oil carriers (VLCCs), which will be converted into two FPSOs (OSX-4 and OSX-5). These equipment will be leased to OGX, with delivery expected in 2014. It is anticipated that both of these FPSOs will have approximately 1.3 million barrels of storage capacity and approximately 100,000 bpd of installed oil processing capacity.

The gas production ramp-up in the Parnaíba Basin is expected to begin in the second half of 2012. OGX has one project covering two accumulations in the PN-T-68 block, which is 46.7% owned by OGX, and is expected to achieve gross production of 5.7 million m3 of natural gas per day (approximately 200 million ft3 of natural gas per day), or approximately 36,000 barrels of oil equivalent per day (boepd) in 2013 (approximately 15,000 boepd net to OGX).

The Company anticipates that the Campos and Parnaíba current discoveries will be sufficient to support a production level of over 730,000 boepd. Considering OGX's estimated total potential resources portfolio of 10.8 billion boe, the Company forecasts that additional potential projects will enable it to reach a production level plateau of approximately 1.4 million boepd from 19 onwards. By 2019, when it is expected that OGX will utilize a total of 19 FPSOs, 24 WHPs and 5 TLWPs of offshore production equipment to reach the production levels depicted in the graph attached.

"We are excited to begin our production this year in the Campos Basin, having already secured the necessary equipment, staff and funding to produce the already discovered accumulations. In addition to our efforts in the Campos Basin, in April we submitted to the ANP our declaration of commerciality for two accumulations in the Parnaíba Basin, where we currently expect production to begin in the second half of 2012," commented Reinaldo Belotti, OGX's Production Officer. "At the same time, we continue to plan proactively for the long-term development of our diversified portfolio," added Mr. Belotti.

Campos Basin Development and Production

The general development concept for the Campos Basin shallow waters envisions that each development well will be dry-completed in a WHP producing to an FPSO. Given the significant number of OGX's discoveries and their similarities, the Company benefits from an accelerated procurement process through the use of FPSO flex production units which enable the processing of different oil qualities. In order to expedite the drilling process and accelerate production ramp-up, OGX has a strategy of pre-drilling an average of five horizontal wells per accumulation prior to the arrival of the WHPs using semi-submersible rigs. The remaining development wells in each accumulation will be drilled through the WHPs upon their arrival. The connection from the WHP to the FPSO will be made through a subsea flow line package, including production, electrical, gas lift, service, water injection and test lines.

OGX has thus far discovered several oil accumulations in the Campos Basin. From these accumulations, the Company expects to produce 4.1 billion barrels. To develop these accumulations, OGX expects to use 12 FPSOs and 11 WHPs.

For these accumulations, the Company anticipates a projected average field life capital expenditure of approximately US $2 per barrel and projected operating expenditure lower than US $16 per barrel.

Project 1 – Waimea Production Complex

This project is located at the BM-C-41 block, which is 100% owned by OGX, at a water depth of 140 meters and approximately 80 kilometers from shore. OGX expects to have three FPSOs and two WHPs operating at the Waimea complex, and production is expected to be achieved through a total of 42 development wells, including 28 production and 14 injection wells. In 2013, OGX expects to have the FPSOs OSX-1 and OSX-2, as well as the WHP-1 (all of which have already been secured), already under operation. The Company has acquired all of the necessary production equipment to be used in the initial production at the Waimea complex, including wet christmas trees and flexible lines. OGX anticipates the production for OSX-1 in the Waimea complex to come from three subsea production wells. Additionally, two subsea injection wells will be directly connected to this FPSO. The Company forecasts the average productivity from the horizontal wells in the Waimea complex to be in the range of 10,000 - 20,000 bpd.

Production is expected to begin in October 2011 through an extended well test (EWT) at the OGX-26 horizontal well. Until the expected arrivals of the WHP-1 in the first quarter of 2013 and the OSX-2 in the second quarter of 2013, the Company intends to produce from three horizontal subsea wells and from four pre-drilled horizontal production wells during 2012 and 2013. OGX expects OSX-2 to begin operations in the third quarter of 2013. In 2013, the Company expects to have 180,000 bpd of installed capacity and seven horizontal production wells on-stream, with three wells producing for OSX-1 and four wells producing for OSX-2.

Project 2 – Waikiki Production Complex

This project is located in BM-C-39 and BM-C-40 blocks, both of which are 100% owned by OGX, and is located at a water depth of 110 meters and approximately 90 kilometers from shore. OGX expects to have one FPSO and one WHP operating at this project, and production is expected to take place through a total of 22 development wells, including 14 production wells and eight injection wells. The Company expects to allocate to this project the OSX-3 and the WHP-2, which have already been secured, and anticipates an average productivity from the horizontal wells in the Waikiki complex in the range of 15,000-20,000 bpd.

Production in the Waikiki complex is expected to begin in the fourth quarter of 2013. In order to ensure a strong production ramp-up, OGX intends to pre-drill five horizontal production wells during 2012 and 2013, prior to the anticipated arrivals of the WHP-2 in the second quarter of 2013 and OSX-3 in the third quarter of 2013. The Company expects the OSX-3 to arrive and commence operations in the fourth quarter of 2013 and, as a result, by 2013 expects to have 100,000 bpd of installed capacity and three horizontal production wells on-stream producing to OSX-3.

Campos Basin Typical Development Project

Given the similarities between OGX's discoveries in the Campos Basin, the Company has established a replicable conceptual development project that should be considered as a reference for our future projects in the basin.

For OGX's replicable project in the Campos Basin, the Company has considered the following assumptions:

• A location that is approximately 80 kilometers from shore in shallow waters ranging from 100-150 meters in depth;
• A recoverable volume of 500 million bbl;
• Due to the low gas-to-oil ratio, all of the produced gas will be used to generate energy on the platform;
• Development through one FPSO of 100,000 bbl per day and one WHP with a drilling package on top and a drilling capacity for 30 wells (with the utilization of 25 wells);
• Production through 16 horizontal production wells and nine injection wells, all to be completed from the WHP; and
• Pre-drilling of five horizontal production wells from a semi-submersible rig prior to the drilling of the remaining 20 wells from the WHP.

The estimated capital expenditures unit cost for OGX's replicable project is approximately US $2 per barrel based on: (i) average drilling cost of a semisubmersible pre-drilled well will be approximately US $50 million; (ii) average cost of a WHP drilled well will be of approximately US $20 million; (ii) drilling time of 75 days for all wells; (iv) average of US $15 million per completion on the WHP; (v) completion time of approximately 30 days after the drilling of the wells; (vi) average of US $65 million for a package of subsea flow lines, including production, electrical, gas lift, service, water injection and test lines.

The estimated operating expenditures unit cost for OGX's replicable project is lower than US $16 per barrel based on: (i) one leased FPSO, constructed with high local content, at an estimated average day rate of approximately US $350,000; (ii) one leased WHP at an estimated average day rate of US $160,000; (iii) operating and maintenance of these equipment, mostly relating to the operation of the FPSO, at an estimated average day rate of approximately US $85,000; (iv) variable unit costs that are estimated at US $3.50 per barrel; and (v) expected abandonment cost that is estimated at US $100 million.

Once the development concept is in place, OGX expects each project to achieve a production plateau in three quarters, to maintain this plateau for an additional four years, and to have a 20 to 22 year production decline period following the plateau years.

Parnaíba Basin Development and Production

For OGX's onshore natural gas discoveries, the development concept includes vertical wells connected to a gathering system that will transport the gas to a gas processing unit through connection lines. Since the gas from the Company's initial discoveries has demonstrated characteristics of dry gas, the gas processing unit will be designed accordingly, making it simpler and less costly than a typical facility.

Project 1 – Gavião Azul and Gavião Real Fields

Project 1 is expected to begin producing gas in the second half of 2012, and OGX intends to ramp up production to achieve a gross flat production rate of 5.7 million m³ per day by 2013, which will correspond to a total production of 1.1 Tcf of gas. The Company plans to develop production with vertical wells connected to a gathering system that will take the gas to a dry gas treatment facility. This treatment facility is expected to be directly connected to the gas thermal power plants that are expected to be constructed by OGX's affiliate, MPX, which holds a 23.3% stake in these concessions.

Twenty months after the Parnaíba Basin concessions were granted, OGX declared to the National Petroleum Agency ("ANP") the commerciality of two accumulations (Califórnia and São José) in the PN-T-68 block, each of which are 46.7% owned by OGX. The Company expects Project 1 to include 23 production wells, some with re-completion during the production period, with a total estimated cost of US $340 million (including re-completion costs) and an estimated drilling and completion time of 55 days. The facilities involved in the development are estimated to cost approximately US $110 million, including a gathering system (lines and manifolds), a production facility for dry gas, and a very short pipeline.

The Company estimates the average operating cost for the field life to be less than US $0.30/1,000 ft3 (including operation and maintenance of production facilities, lines, gas pipelines, wells and gas variable costs). OGX anticipates that there will be 18 production wells on-stream in 2013.

Oil & Gas Post

Promote Your Page Too

OGX Briefs on Issuance of $2.563B Senior Unsecured Notes

- OGX Briefs on Issuance of $2.563B Senior Unsecured Notes

Friday, May 27, 2011
OGX S.A.

OGX in compliance with the Instruction of Comissão de Valores Mobiliários (CVM) announced the issuance of Senior Unsecured Notes totaling US $2.563 billion. The Notes issued on May 26, 2011 are due and payable by the Company on June 1, 2018 and will accrue interest at rate of 8.5% per annum, payable semi-annually, in June and December.

The Notes will be offered to qualified institutional buyers (QIBs), resident and domiciled in the United States, in accordance with the provisions of "Rule 144A" of the Securities Act of 1933, as amended, and in other countries except the United States and Brazil, based on "Regulation S".

When added to OGX’s current cash position of approximately US $2.5 billion (as of March 31, 2011), the net proceeds from the issuance Notes provide a liquidity of approximately US $5.063 billion, at a level which is sufficient for OGX to support the exploratory campaign and the production development of the discoveries made until the Company becomes self-funded by its own cash flow generation.

"This funding provides the necessary capital for the development of OGX's sizable discoveries that were made in an unprecedented time frame for the oil and gas sector. OGX now has the natural, financial, human and physical resources to implement its business plan," declared Paulo Mendonça, General Executive Officer and Exploration Officer for OGX.

Oil & Gas Post

Promote Your Page Too

Parnaiba Basin Wells Deliver for OGX

- Parnaiba Basin Wells Deliver for OGX

Tuesday, May 17, 2011
OGX S.A.

OGX has presented to the National Petroleum Agency (ANP), through its subsidiary OGX Maranhão Petróleo e Gás Ltda., declarations of commerciality for the Califórnia and Fazenda São José accumulations discovered in the PN-T-68 block within the Parnaíba Basin.

"These declarations of commerciality in the Parnaíba Basin represent a milestone in the Company's development in a new exploratory frontier only 20 months after the acquisition of the concessions. With this declaration, we have taken an important step towards production," stated Paulo Mendonça, General Executive Officer and Exploration Officer for OGX.

OGX has presented to the ANP the declarations of commerciality for the California accumulation, which the new proposed designation is Gavião Azul Field and for the Fazenda São José accumulation that is expected to be designated as the Gavião Real Field, following the Agency's approval. The development plans for the fields were properly submitted to ANP's approval by OGX and are still under analysis.

Additionally, the Company has identified the presence of hydrocarbons in wells 1-OGX-34-MA and 3-OGX-38-MA, both in the PN-T-68 block within the Parnaíba Basin.

The OGX-34 well, a wildcat well in the Bom Jesus prospect, discovered a net pay of 23 meters of gas in two intervals, within the Poti and Cabeças formation, which is the third accumulation the Company has discovered in the region. The OGX-38 well, the first appraisal well in the Fazenda São José accumulation which was discovered by the OGX-22 wildcat well, encountered a net pay of 43 meters of gas in the Poti formation, surpassing initial volume expectations for this accumulation. The exploration of this well is ongoing.

The California and Fazenda São José accumulations will be OGX's first natural gas fields. The Company estimates that these fields will reach a production of 5.7 million m³ per day by 2013, which will correspond to a total production of 1.1 Tcf of gas. The natural gas to be produced in this region will be preferentially provided to the power plants to be constructed by MPX Energia S.A., an EBX group company, in association with Petra Energia S.A., both of whom are partners of OGX in the PN-T-68 block.

MPX has already acquired the site to construct a power plant in the PN-T-68 block and has also obtained an installation license for 1,863 MW, which was granted by the Secretaria Estadual do Meio Ambiente do Estado do Maranhão. In addition, MPX has initiated the environmental licensing process for the development of an additional 1,859 MW in the region.

OGX Maranhão Petróleo e Gás Ltda., an entity controlled by OGX S.A. (66.6%) and MPX Energia S.A. (33.3%), is the operator and holds a 70% stake in this block, with Petra Energia S.A. owning the remaining 30%.

Oil & Gas Post

Promote Your Page Too

OGX Strikes Oil in Campos Appraisals

OGX Strikes Oil in Campos Appraisals

Wednesday, April 20, 2011
OGX S.A.
by SubseaIQ

OGX has identified the presence of hydrocarbons in the Albian section of 3-OGX-40D-RJS well and in the Albian-Cenomanian section of the well 3-OGX-41D-RJS, both appraisal wells from the Pipeline and Waikiki accumulations, respectively.

"The wells OGX-40 and OGX-41 confirmed the successful OGX delimitative campaign in the Campos Basin and reinforced the Company's base case to develop the 4.1 billion barrels already discovered in the Campos Basin," stated Paulo Mendonça, Executive General Officer and Exploration Officer of OGX.

"The accumulations of Pipeline and Waikiki are among the priorities to be developed for production, due to the advanced stage of the discoveries' delimitation and the quality of the reservoirs," commented Reinaldo Belotti, Production Officer of OGX.

The well OGX-40 found an oil column of approximately 204 meters with a net pay of about 107 meters in carbonate reservoirs in the Albian section. The well OGX-41 discovered an oil column of approximately 148 meters with a net pay of about 92 meters, also in carbonate reservoirs in the Albian-Cenomanian section.

The well OGX-40D is the second appraisal well in the Pipeline accumulation discovered by the well OGX-2A. The first appraisal well of the accumulation was the OGX-36, which also confirmed the presence of oil and contributed to its delimitation. The well OGX-41D is the second appraisal well of the Waikiki accumulation, discovered by the well OGX-25, with OGX-35 being the first appraisal well. The discoveries' evaluation plans for the Pipeline and Waikiki will soon be proposed to ANP.

It is worth noting that wells OGX-40 (Pipeline) and OGX (Waikiki), as well as the wells OGX-35 (Waikiki), OGX-36 and OGX-39HP (both in the Pipeline accumulation), would increased OGX's contingent resources area, in case the certification happened at this moment.

Both wells are deviated and pilots for horizontal wells, in which drill-stem tests could be performed to verify the productivity of these areas, as was done recently for the Waimea accumulation, where exceptional results were obtained.

The OGX‐40D well is located in the BM‐C‐41 block and is situated about 79 kilometers off the coast of the state of Rio de Janeiro at a water depth of approximately 130 meters. The Sea Explorer rig initiated drilling activities there on March 28, 2011.

The OGX‐41D well is located in the BM‐C‐39 block and is situated about 89 kilometers off the coast of the state of Rio de Janeiro at a water depth of approximately 104 meters. The Ocean Lexington rig initiated drilling activities there on April 3, 2011.

OGX Notes 4 Bboe Increase in Potential Resources Offshore Brazil

OGX Notes 4 Bboe Increase in Potential Resources Offshore Brazil

Monday, April 18, 2011
OGX S.A.

OGX disclosed the results of the reports prepared by petroleum consultants DeGolyer & MacNaughton ("D&M"), which estimate new volume of resources held by the Company in Brazil's Campos and Parnaiba basins and three basins in Colombia. These reports indicate net potential resources for OGX of 5.7 billion barrels of oil equivalent ("boe") in the Campos Basin, 1.0 billion boe in the Parnaíba Basin and 1.1 billion boe in Colombia. When combined with the estimates from the previous report for the Santos, Espírito Santo and Pará-Maranhão Basins (Sep/09), these new results present a total volume of net potential resources of 10.8 billion boe.

These results validate the successful and accelerated evolution of the Company's asset portfolio and its ability to grow organically, through massive discoveries as well as via the acquisition of new areas, demonstrating a unique capacity of to create value and deliver results.

"These results, presented by an independent, internationally-renowned consulting group, confirm the extraordinary success of our business strategy and execution, which has been to focus on world-class assets located mostly in shallow waters. We have discovered accumulations of scale and levels of productivity comparable to those found in the pre-salt areas, and will be able to develop them at a much lower cost, utilizing fully tried-and-tested technologies," commented Eike Batista, Chairman and CEO of OGX.

"OGX has demonstrated that it has the technical and managerial expertise to discover billions of barrels in accumulations in basins which vary greatly in their geological formations, and to transform their prospective resources into contingent resources. At the same time, we have expanded our exploration portfolio with high-potential assets. We have also made huge strides in the delineation of new discoveries and production, while continuing to grow and create value for all stakeholders," emphasized Paulo Mendonça, General Executive Officer and Head of Exploration for OGX.

The five reports submitted by D&M were prepared with the information available as of December 31, 2010, for the Campos and Parnaíba Basins, and as of March 31, 2011 for Colombia. The documents cover a period of approximately 15 months of exploration and 22 wells, and do not include the wells drilled subsequently. For the Campos Basin, only the post salt sections were considered. The new reports update the figures that were previously available for these two basins and present the first estimates for the five blocks held by OGX in Colombia. D&M's potential resource report dated September 2009 continues to apply for the Santos, Espírito Santo and Pará Maranhão basins.

The results of these studies reflect the success of OGX's strategy to prioritize, in the initial phase of its campaign, the accomplishment of ANP work program and the exploratory drilling of wildcat wells to maximize the discovery of accumulations. In response to the large number of discoveries made, the Company is intensifying its appraisal campaign in preparation for Declarations of Commerciality and the start-up of production.

"The identification of our discoveries and the recent chartering of five FPSOs and two WHPs with OSX, which will be followed by new orders, represent an important step towards production. We have rapidly executed on our business plan and achieved important milestones, enabling us to the begin production and commercialization within a timeframe that is unprecedented for the oil and gas industry," stated the Production Officer, Reinaldo Belotti.

OGX Hits Oil Pay in Campos Basin

OGX Hits Oil Pay in Campos Basin

Thursday, April 14, 2011
OGX S.A.

OGX has identified the presence of hydrocarbons in the Albian section of well 1-OGX-33-RJS, which is located in the BM-C-41 block, in the shallow waters of the Campos Basin. OGX holds a 100% working interest in this block.

An oil column of approximately 95 meters with approximately 42 meters of net pay has been identified in the carbonate reservoirs of the Albian section. The drilling of well OGX-33, also known as the Chimborazo prospect, was concluded at a final depth of 3,755 meters.

The OGX-33 well is situated 84 kilometers off the coast of Rio de Janeiro at a water depth of about 127 meters. The rig, Pride Venezuela, left the well on April 9, 2011. Drilling of the third extension well (OGX-42) of the Pipeline accumulation has been initiated.

Brazil OGX Plans Investments of $2B in 2011 -CFO

Brazil OGX Plans Investments of $2B in 2011 -CFO

Monday, March 28, 2011
Dow Jones Newswires

by  Jeff Fick

 

OGX expects to invest about $2 billion in 2011 as it ramps up exploration efforts and produces its first oil, the company's chief financial officer said Monday.

"This will be for drilling exploratory wells and production at the extended-well test," CFO Marcelo Torres said during a conference call with analysts. The independent driller, which is still in the pre-operational phase, expects to produce its first oil from an extended-well test at the Waimea prospect in the third quarter.

Part of the 2011 capital expenditure budget will be directed at pioneer wells in the Para-Maranhao Basin, said Chief Executive Officer Paulo Mendonca. The company expects regulators to issue a license to start drilling OGX's first wells in the basin in "two weeks," Mendonca said. The drilling platform hired to spud the wells is on site and ready to start work once the license is approved, the executive added.

In the Espirito Santo Basin, meanwhile, OGX is focused on post-salt prospects, Mendonca said. While Brazil's much-ballyhooed pre-salt region extends into the basin, the depth of the pre-salt targets puts them out of OGX's reach at the moment.

"We have to do 3D seismic, but the locations we are looking at are in the post-salt. Maybe in the future it will be possible to think about pre-salt," Mendonca said. The executive noted that pre-salt targets in the region were at about 10,000 meters deep, a depth at which OGX is not yet authorized to drill.

"In the future, perhaps, we can find something not so deep," he said.

Late Friday, OGX reported a fourth-quarter 2010 loss of 123.4 million Brazilian reais ($74.3 million), compared with a loss of BRL100.6 million a year earlier. OGX is still in a pre-operational phase and reported only financial earnings from cash on hand. OGX said it holds BRL4.8 billion in cash.

OGX Reports Operational Reports for 2010

OGX Reports Operational Reports for 2010 

Monday, March 28, 2011
OGX S.A.

OGX announced its 2010 results. The following financial and operating information is presented on a consolidated basis, in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board - IASB, in reais (R$), unless stated otherwise.

"2010 was a year of tremendous achievements for OGX. Our drilling success and identification of extraordinary accumulations in the Campos, Santos and Parnaiba basins validated the geological models developed by our team, revealed the significant potential of our portfolio located mostly in shallow waters, and encouraged the mapping of additional prospects. With 9 drilling rigs now at our disposal, we are also prepared to enter another exploratory cycle in under-explored basins, such as the Espirito Santo and Para-Maranhão, as well as commence seismic studies in five recently-acquired blocks in Colombia," commented Mr. Paulo Mendonça, OGX's General Executive Officer.

"In particular, I would like to highlight our accomplishments in the Campos Basin, where we achieved a success rate of 100% and registered excellent discoveries, most of them located in an extensive carbonate platform, which had its production potential proved through one of the best horizontal well drill-stem tests ever performed in Brazil," added Mr. Mendonça.
"With all necessary equipment already procured from renowned suppliers, the drilling of the first production well and related drill-stem test both completed, we are on track and poised to reach a very important milestone for OGX with the initiation of production in the third quarter of 2011. The successful horizontal well drill-stem test recently performed in Waimea, where we will begin our production, surpassed our expectations. We look forward to conducting the upcoming extended well test, which signals the beginning of production and, ultimately, commercialization of our resources," noted Reinaldo Belotti, Production Officer of OGX. 

2010 Highlights and Subsequent Events

• Drilling of 26 wells during the year of 2010 and 11 in the subsequent months in the Campos, Santos and Parnaíba Basins;
• Confirmed the existence of important oil-bearing regions in the Campos basin: an extensive carbonate platform in the Albian section, as well as important sandstone reservoirs in the Tertiary of the BM-C-41, BM-C-42 and BM-C-43 blocks in the south of the Campos Basin, and another one in BM-C-39 and BM-C-40 blocks, more to the north, with large discoveries in the Santonian, Albian and Albian-Cenomanian sections;
• Performed several drill-stem tests, proving high levels of productivity in several discovered accumulations;
• Concluded the drilling of the first horizontal well (OGX-26HP) of the Waimea accumulation, which tested and confirmed the productive potential of 40,000 barrels per day and productivity index of 100m³/day/kgf/cm² in carbonate reservoirs in the Campos Basin. OGX's production phase will commence at this well through an extended well test (EWT);
• Three discoveries in the Santos Basin, with the identification of liquid hydrocarbons and associated gas;
• Revealed the great hydrocarbon-bearing potential in the Parnaíba Basin with the results obtained in the drilling of the wells OGX-16 and OGX-22, allowing for a volume estimate of potential resources of approximately 15 trillion cubic feet (Tcf) of natural gas in the region;
• Acquired five high-potential exploratory blocks in three onshore basins in Colombia: Cesar-Ranchería, Lower Magdalena Valley and Middle Magdalena Valley Basins;
• Procured all of the essential equipment for beginning production in the Waimea accumulation in the Campos Basin. 

Exploratory Campaign

2010 was a year of extraordinary accomplishments and major achievements for OGX, notable for significant discoveries and the confirmation of the high productivity potential of our main hydrocarbon accumulations. We intensified our exploratory campaign and conducted important drill-stem tests that confirmed the Company's geological model and the potential of the discoveries we have made. These tests yielded fundamental information that provided for a better understanding of the reservoirs that had been discovered in the Campos Basin, allowing us to further enhance the calibration of the production model to be put into place.

At the moment we are drilling the 39th well of OGX, which added to the four other wells drilled by Maersk Oil, bring the total number of wells drilled in the Campos, Santos and Parnaíba Basins to 43 in approximately 18 months since the beginning of our exploratory campaign. Of the 43 total wells, 26 were drilled in 2010, demonstrating the intensification of our activities, and resulting in important discoveries, some of them in areas that until now had been under-explored, including the Parnaíba onshore basin in the interior of the state of Maranhão. These results were made possible due to both a more robust operating structure and the superior geological knowledge that has been acquired about the region. We expanded the number of available drilling rigs from four to nine and now have nearly 5,000 people working on our behalf including outsourced personnel. 

Campos Basin

We ended 2010 with 18 wells drilled in the Campos Basin, all of which identified hydrocarbons, confirming a success rate of 100% in this basin. Of this total, 11 were drilled in the BM-C-41, BM-C-42 and BM-C-43 blocks and allowed for the identification of several accumulations in different geological ages, confirming the presence of a vast oil-bearing province in these blocks. Through the wells OGX-2A, OGX-3, OGX-5, OGX-6, OGX-7A, OGX-8, OGX-10, OGX-15, OGX-20, OGX-21D, OGX-26HP, OGX-28, as well as the MRK-3/4 wells, we have also confirmed the existence of an extensive carbonate platform in the Albian section with great permo-porosity conditions and good quality oil. Moreover, we recorded important discoveries in the Tertiary age and in the Aptian section, reaffirming the enormous potential of the region.

We also began our drilling activities in the blocks BM-C-39 and BM-C-40, located between the Peregrino and Polvo fields, and have obtained excellent results, especially with the OGX-14 (Peró), OGX-18 (Ingá) and OGX-25 (Waikiki) wells. For OGX-14 and OGX-18, drill-stem tests were performed which identified production potential of 3,000 barrels/day using a vertical well for the Peró accumulation that could reach 15,000 barrels/day using a horizontal well, and 8,000 to 12,000 barrels/day through a vertical well at the Ingá accumulation that could reach 25,000-35,000 barrels/day through a horizontal well. The tests also enabled us to measure the quality of the oil at approximately 27° API in each accumulation. Well OGX-25, also known as Waikiki, was an exceptional discovery with the largest detected net pay of approximately 145 meters in the Albian-Cenomanian section.

In addition to the exploratory wells, the first appraisal well for the Waimea accumulation, OGX‐21D (BM-C-41 block) was drilled. It was converted into a horizontal well, OGX-26HP, which extended 1,000 meters within the carbonate reservoirs of the Albian section of the Waimea accumulation, originally discovered by well OGX‐3. The well OGX-26HP, which will be OGX's first production well, was tested and registered a productivity index (PI) of 100m³/day/kgf/cm², one of the highest seen to date in Brazil, as well as a production potential of 40,000 barrels/day and oil gravity of approximately 20° API. This well is currently equipped for an extended well test (EWT) that could record flows of up to 20,000 barrels/day and reach even higher flow levels in a definitive project scenario. The results to date have exceeded initial expectations regarding the Waimea accumulation and offer an even more solid foundation for the initiation of OGX's production phase.

Besides this, two other appraisal wells in the Pipeline (OGX-36D) and Waikiki (OGX-35D) accumulations confirmed their extensions, advancing significantly the delineation of these accumulations, which are respectively located in the southern and northern blocks of the Campos Basin. These directional wells, which were drilled at respective distances of 2.6km and 2.0 km from the wildcat wells, were the pilots for the horizontal wells in these accumulations. Therefore, OGX initiated the drilling of the first horizontal well in the Pipeline accumulation (OGX-39HP) which will be used in the future for production in this area. 

Santos Basin

With respect to the Santos Basin, of particular note was the drilling in the Natal prospect (OGX-11D) in the BM-S-59 block adjacent to the Mexilhão field, which identified liquid hydrocarbons and associated gas in the Santonian section with net pay of around 75 meters. The liquid hydrocarbons proved to be of excellent quality, rated at about 41° API, indicating a higher level of attractiveness of the project. Two other wells registered important discoveries: Belém (OGX-17, with net pay of 43 meters in the Albian section), located in the BM-S-56 block; and Aracajú (OGX-19, with net pay of 40 meters in the Santonian section), located in the BM-S-58 block.

Drilling of the OGX-12 (Niterói), OGX-23 (Ilhéus) and OGX-24 (Itagi) wells has been concluded and resulted in shows of non-commercial hydrocarbons. However, the information acquired through these wells has been of great importance in the calibration of a new geological model for the region. In addition, with the transfer of exploratory rights of the BM-S-29 block from Maersk to OGX, the Company now owns 100% of this block, which is in the evaluation phase. To date, the company's success rate in the Santos Basin has been approximately 60%. 

Parnaíba Basin

In the Parnaíba Basin, the Company's subsidiary OGX Maranhão, drilled two wells in the PN-T-68 block, reaffirming the great oil-bearing potential of this new frontier which had not been explored since the 1980s. In the first well, OGX-16 (Califórnia), an important gas discovery was made in the Devonian section with a drill-stem test that encountered 1,900-psi pressure and generated a flame 15 meters long. In addition, evidence of gas was also encountered in the Pimenteiras and Itaim formations, also in the Devonian section. The data obtained through this drilling campaign, coupled with the seismic information recently acquired in the area as well as technical analysis, have made it possible to identify approximately 20 prospects similar to the one drilled by OGX-16 and to estimate a volume of resources of approximately 15 trillion cubic feet (Tcf) of natural gas for our portfolio in this region. In the second well, OGX-22 (Fazenda São José), two accumulations were found with net pay of 49 and 47 meters in the Poti and Cabeças formations, respectively. The top of the Poti formation was tested with exceptional results which indicated a production potential of up to 3.4 million m³ per day in Absolute Open Flow (AOF).

These estimates point to a production potential for the region of approximately 15 million cubic meters per day of natural gas. Based on this relevant new data, OGX decided to review the scope of its exploratory campaign for the region and boosted the forecast for the number of wells to be drilled from 7 to 15. 

Drilling Activity in Progress operated by OGX

• 1-OGX-30-RJS, also known as Salvador prospect, is being drilled by the rig Ocean Quest in the BM-S-58 block in the Santos basin. Drilling was initiated on January 11th;
• 1-OGX-33-RJS, also known as Chimborazo prospect, is being drilled by the rig Pride Venezuela in the BM-C-41 block in the Campos basin. Drilling was initiated on February 3rd;
• 1-OGX-34-MA, also known as Bom Jesus prospect, is being drilled by the rig QG-1 in the PN-T-68 block in the Parnaíba basin. Drilling was initiated on February 13th;
• 1-OGX-37-RJS, also known as Potosi prospect, is being drilled by the rig Ocean Ambassador in the BM-C-43 block in the Campos basin. Drilling was initiated on March 6th;
• 3-OGX-38-MA, the first appraisal well of the Fazenda São José accumulation, is being drilled by the rig BCH-05 in the PN-T-68 block in the Parnaíba basin. Drilling was initiated on March 25th;
• 9-OGX-39HP-RJS, first horizontal well of the Pipeline accumulation, is being drilled by the rig Ocean Star in the BM-C-41 block in the Campos basin. Drilling was initiated on March 25th. This well will be used in the future for production in the area.

The drilling rig Sea Explorer, which drilled well 9-OGX-26HP, an appraisal well of the Waimea accumulation in which the extended well test (EWT) will be performed, will drill the third appraisal well of the Pipeline accumulation.
The drilling rig Ocean Lexington has just drilled well 3-OGX-35D, the first appraisal well of the Waikiki accumulation, which will be used as a pilot for a horizontal well.
The jack up rig, Ocean Scepter, will start operating soon and will be dedicated to the Pará-Maranhão Basin. 

Beginning of Production

The beginning of OGX's production is expected for the third quarter of 2011. This will be an important milestone in the Company's history and will contribute to its ongoing growth trajectory in the coming years. The production will be in the Waimea accumulation, in block BM-C-41 in the Campos Basin, through an extended well test (EWT), which could record flows of up to 20,000 barrels/day.

The technology that will be employed for this first project has been widely applied within the oil industry and calls for using wet christmas trees and flexible lines that will be directly connected to the FPSO OSX-1. The well was prepared for production using the subsea centrifugal pumping method.

All of the key equipment for this phase of production has already been contracted from globally renowned suppliers and some pieces have already been delivered. Suppliers of equipment and services include: Schlumberger (Integrated Project Management and equipment and services for well completion), GE Oil & Gas (subsea X-trees), Wellstream (flexible lines and a vessel for launching the lines), Oceaneering (control umbilical), Baker Hughes (electrical subsea pumping) and OSX, which will supply the FPSO OSX-1. This FPSO (Floating Production Storage & Offloading system) is currently in Singapore, undergoing modifications to its processing plant in order to conform to the characteristics of the Waimea oil and is expected to arrive in Brazil by mid 2011.