ECM Awaits Jumbo Oil IPO

All equity market eyes are on OGX, the oil and gas startup led by Brazilian billionaire Eike Batista. The IPO will grow from an originally targeted $2.0bn to $3.0bn-$3.5bn, say people familiar with the deal, and oil markets remain supportive. As the company awaits the green light from the CVM, investors are getting ready to pounce. “With oil at $129.00 this is an extremely interesting deal,” says a New York hedge fund investor, speaking before crude spiked above $130. “At that price [per barrel] they should be able to easily execute their projects,” he adds, referring to OGX’s plan to explore seven offshore blocks it won in a December government auction. The company may serve as a diversification play away from Petrobras, the only other way to buy Brazil and oil in the same stock, adds another investor who runs an $8bn LatAm equity portfolio. The mood on the investor side generally in LatAm equity remains distrustful and highly selective, says a sell-side ECM head away from the deal. “The overall sense is that it relaxed a bit,” he adds. “The follow-on market is definitely open and while investors will be selective, sizable quality deals will get done,” says the banker, referring to the OGX IPO. UBS, Credit Suisse, Itau BBA and Merrill Lynch are leading OGX.