OSX Brasil Positioning Itself to Compete for Big Petrobras Contracts

sete brasil petrobras fpso
Petrobras FPSO, image courtesy Sete Brasil

RIO DE JANEIRO–Brazilian shipbuilder and oil-field-services company OSX Brasil SA (OSXB3.BR), part of billionaire businessman Eike Batista’s industrial empire, is targeting state-run oil company Petroleo Brasileiro SA (PBR, PETR4.BR), or Petrobras, to broaden the company’s order book.

Early next week, OSX will take the first step toward expanding its relationship with Petrobras by signing a contract to integrate processing modules on the top decks of two floating production platforms, known as FPSOs, OSX Chief Executive Carlos Bellot said during a conference call. Petrobras disclosed OSX was part of one of the winning consortia earlier in July.

Calling Petrobras the “driver” for Brazil’s oil and natural-gas industries, Mr. Bellot said the nascent shipyard will also bid for new vessel tenders from Petrobras. “Petrobras has said it will conduct bidding rounds for new platforms, and we want to participate,” Mr. Bellot said. OSX is also in negotiations to build drilling rigs destined for Petrobras, with talks about one of the rigs at a “very advanced” stage, the executive added.

OSX’s plans to expand outside the umbrella of Mr. Batista’s EBX Group holding company, which controls stakes in a diverse range of companies that include oil, mining, power generation and real estate, will likely be welcomed by investors and Mr. Batista. Shares in Mr. Batista’s companies have been battered in recent months amid questions about the flamboyant Brazilian entrepreneur’s ability to deliver results to investors.

Lower-than-expected production from sister company OGX Petroleo e Gas Participacoes SA (OGXP3.BR, OGXPY), which remains OSX’s primary client, was behind the latest selloff in shares of Mr. Batista’s companies. But OSX has proven resilient, joining power generator MPX Energia SA (MPXE3.BR) as one of the best performers in the billionaire’s portfolio of firms. OSX shares are up 21% in July and down 5% so far in 2012, similar to MPX’s 15% gain this month and 3.7% decline year-to-date. OGX, meanwhile, is down 1.1% this month and a staggering 60% so far in 2012.

Given OSX’s performance, perhaps it was telling that Mr. Batista turned to company executives when he decided to switch top management at OGX earlier this year. Mr. Batista tapped former OSX Chief Executive Luiz Carneiro and former OSX Chief Financial Officer Roberto Monteiro to fill the same spots at his oil company.

Investors, meanwhile, are betting OSX can capitalize on Brazil’s demand for locally produced offshore oil-production platforms and drilling rigs needed to develop recently discovered fields deep underwater off the country’s Atlantic Ocean coast. OSX is one of several new shipyards under construction in Brazil. But unlike other “virtual” yards that have yet to break ground, work on OSX’s Acu port operation is under way and on time for completion in 2014.

While OSX’s first three FPSOs were built or under construction at overseas shipyards, the company expects OSX-4 and OSX-5 to be built in Brazil without a hitch. “At this moment, we don’t have any concerns about the timeline,” Mr. Bellot said.

– Jeff Fick, (c) 2012 Dow Jones Newswires