Brazilian equities: The OGX effect

Rob Dwyer
Published on:

If Petrobras is considering an equity transaction in 2014, the implosion of Eike Batista’s OGX group this year won’t be helpful for investors’ perceptions of the risk of Brazil’s oil exploration and production industry.

The oil and gas company, launched in 2007 by Brazilian entrepreneur Eike Batista, which raised $1.3 billion in November 2007, has had a dramatic and very public collapse, entering bankruptcy in October this year and delisting from the Bovespa in November. Since October 2010 the company’s market capitalization has fallen by more than $45 billion, with a negative impact on the equity portfolios of many international investors that had bought into the Brazil pre-salt-layer oil discovery growth story. However,...