OGX Lowered, OSX Gets Cash

Fitch has downgraded Brazil’s OGX to B minus from B, it says, while sister EBX company OSX has added $120m cash from controlling shareholders though the partial exercise of a put option. In its rating action, Fitch points to concerns about OGX’s liquidity due to its aggressive acquisition last week of 13 exploratory blocks during a time in which the company is implementing an aggressive investment program and struggling to bring oil and gas production on line. “The exploratory blocks acquisition is valued at approximately $190m and has to be paid upfront within the next few months. Committed minimum investments for these blocks amount to $350m in the five-year exploratory period, which will further pressure OGX’s cash needs,” Fitch says. As of March 31, OGX had $4bn of total debt and $1.1bn of cash and marketable securities. OGX’s ambitious capex program of approximately $1.3bn in 2013 and low-to-negative Ebitda is expected to result in a large cash flow deficit during 2013. The agency believes there is a high likelihood that OGX will need to exercise a $1bn put option from its controlling shareholder in 2013 to fund a portion of its negative cash flow. The outlook is negative.