OSX Brasil Brings Updates on Production Units Orders

OSX Brasil Brings Updates on Production Units Orders

OSX Brasil S.A., a Brazilian publicly held corporation with activities in the sector of supplying equipment and services to the offshore oil and natural gas industry, with integrated operations in shipbuilding, chartering of exploration and production units (E&P) and operation and maintenance services (O&M), hereby informs to its shareholders and the market that:

As informed in the Material Fact released yesterday by the client OGX Petróleo e Gás Participações S.A. (OGX), OGX concluded technical analyses concerning the development of its fields and, as a result, decided to update the orders made to OSX pursuant to the existing Strategic Cooperation Agreement between the companies, as stated below:

  • Regarding FPSOs OSX 4 and 5 and WHPs 1, 3 and 4 units, OGX decided to discontinue the orders of such projects. Thus, complementing OSX Material Fact of May 17, 2013, this confirmation from OGX regarding the cancellation of its four orders planned for construction in the OSX Açu Shipyard (FPSOs OSX 4 and 5 and WHPs 3 and 4) ratifies that the phase 1 orderbook of the Açu shipyard consists of the construction of one PLSV and the integration of two FPSOs for other OSX clients. Concerning the cancellation of the WHP 1 order, OSX will commence negotiations with the EPC contractor for the amendment of the scope of work under the relevant contract, in line with the absolute priority given to the construction of WHP 2, which is being carried out by the same EPC contractor.
  • Concerning FPSO OSX-2, OGX decided not to allocate this unit in the development of the fields mentioned below, considering its intention to apply for the suspension of the development of such fields with the ANP. Additionally, OGX has stated in its Material Fact that the day rates for the FPSO OSX 2 charter, a platform that would be used in the development of Tubarão Tigre, Tubarão Gato e Tubarão Areia fields, will be paid to OSX in accordance with the respective contract, such payment to commence on January 2014 and to continue until such time as the unit is either sold or redeployed. FPSO OSX-2 is in its final stage of construction (commissioning), with 95.4% of physical progress on May 31, 2013.
  • Regarding FPSO OSX-1, which is already in operation by OSX in the Tubarão Azul field and chartered to OGX, OGX informed that it has completed technical analyses which concluded that the wells currently in operation in this field may cease production during the year 2014. Additionally, OGX stated in its Material Fact that the day rates for the charter of FPSO OSX 1, a platform connected to said wells and in operation, will continue to be paid to OSX in accordance with the relevant contract.
  • Concerning FPSO OSX 3 and WHP 2 units, both of them are designed to be deployed to the Tubarão Martelo field, which regular development was confirmed by OGX, with first oil planned for the fourth quarter of 2013, as already announced. The terms of these charter contracts are of 20 and 25 years and will include termination rights by OGX without costs as from 13th and 12th years, respectively. Such termination rights shall become effective in relation to FPSO OSX 3 only after full repayment of the relevant outstanding debt financing, which is expected to occur by 2015. FPSO OSX-3 is in its final stage of construction (commissioning) with 92.7% of physical progress, while WHP 2 has 50.1% of physical progress (basis May 31, 2013).

Due to the events informed above, the parties entered into an agreement whereby OSX receives an immediate disbursement from OGX of approximately USD 449 million. According to the agreement, roughly 70% of such amount is to be invested in the completion of the construction of the FPSO OSX 3 and WHP 2.

As a result of the update now released, several dialogues and initiatives were initiated by OSX, and will continue to be pursued with lenders, employees, suppliers and other stakeholders, with the goal of readjusting the Company’s business to such update, in line with the phasing of the Açu shipyard announced in the Material Fact of May 17, 2013.

As informed in the May 17 Material Fact, OSX has been studying potential business combinations and similar business opportunities in order to optimize OSX’s leasing and services portfolio and the Açu shipyard, aiming at evaluating the best strategies to create value for its shareholders.

In furtherance to the implementation of the new OSX Business Plan, the update of the contractual relationship with our client OGX reflects our commitment to adapt OSX to the current situation, with the strong capital discipline required to optimize our excellent assets, available to suit the broad demand for oil production equipment in this country“, said Carlos Bellot, CEO of OSX.

Additionally, the Company informs that projections previously disclosed should no longer be considered valid, including those related to the OGX estimated orders of production units.

[mappress]
Press Release, July 2, 2013