UPDATE 1-Batista's OGX lost $912 mln in Q3; debt talks resume
* Loss comes as OGX moves to start offshore oil output
* OGX losses boosted by write-offs, new field investments
RIO DE JANEIRO, Nov 27 (Reuters) - Brazilian tycoon Eike Batista's oil company, OGX, lost 2.12 billion reais ($912 million) in the third quarter as it scrambled to start output from an offshore oil field that represents one of its last chances to remain afloat.
The results were announced by the company, formally known as OGX Petróleo e Gas Participações SA, on Wednesday, when it also resumed talks with holders of more than half its $3.6 billion of bonds. OGX is seeking to cut that obligation as part of a court-supervised restructuring plan.
OGX, based in Rio de Janeiro, filed for bankruptcy protection with a Brazilian court on Oct. 30, the largest ever bankruptcy case in Latin America.
"Management understands that, given the current economic and financial situation, the request for judicial recovery is the most appropriate measure to preserve the continuity of its business and protect the interests of the stakeholders," OGX said in its earnings statement.
OGX also reported net sales, or total sales minus sales taxes, of 172 million reais in the quarter. Earnings before interest, taxes, depreciation and amortization, or EBITDA, a measure of the ability to generate cash profit from operations, was 4 million reais.
OGX had $85 million of available free cash at the end of the quarter. Losses were also driven by the need to write off the value of money-losing and underperforming assets, the statement said.
FIELD'S 1ST OIL IN DECEMBER
OGX missed a $45 million bond payment in October and faces another $100 million installment next month. Its failure to pay caused the largest high-yield corporate bond default in the world this year, according to Eric Rosenthal, senior director of Fitch Ratings in New York
Instead of paying debt, the company spent $815 million on capital expenses, much of it to start hooking up the OSX-3 oil production ship owned by sister shipbuilder OSX Brasil SA to wells in the Tubarao Martelo offshore field northeast of Rio de Janeiro.
The first of six wells in Tubarao Martelo is already connected to the ship and output is expected to start in early December, several weeks behind the latest forecast date. Production still awaits an environmental license.
OGX expects to produce an average of about 17,000 barrels a day of oil from the field in 2014, generating about $645 million in gross oil sales revenue, based on an oil certification report by Dallas-based hydrocarbon-resource certification company Degolyer & MacNaughton.
Attempts to get bondholders to agree to a swap of their debt for Batista's shares in the company have so far been unsuccessful, with some investors complaining that the company's investments were throwing money that could be used to pay debt into projects with little chance of return.
Others questioned payments to OSX Brasil SA, part of Batista's EBX group, which owns the oil-production vessels leased by OGX.
OGX, though, now has nearly six months to deliver a restructuring plan to a Rio de Janeiro judge.
TALKS TO CONTINUE
Negotiations "will continue until a definitive agreement is reached," after which creditors will have the opportunity to approve or reject the accord, the filing added.
The company, which tycoon Batista founded in 2007 and at its peak was valued at around $30 billion, has spent more than 10 billion reais on exploration and production activities since 2007.
OSX, the Batista-controlled company, also sought court protection from creditors in the wake of OGX's bankruptcy filing. OSX depends on OGX for nearly all its current and future income.
Pacific Investment Management Co, or Pimco, the world's largest bond fund, and half a dozen money management companies are among bondholders that stand to lose millions if OGX fails to emerge from bankruptcy proceedings.
Investors also worry that a lengthy legal battle is on the horizon in Brazil, where recent debt restructuring and bankruptcy proceedings have turned out badly for them.
A committee formed by Pimco and the other investment funds picked investment banking firm Rothschild in August as its adviser on the matter, two sources told Reuters at the time. Law firms Cleary Gottlieb Steen & Hamilton LLP and Pinheiro Neto Advogados were also hired, both sources added.
The selection process followed a decision by OGX in late July to hire Blackstone Group LP and Lazard Ltd to help the company review its capital structure. OGX's main financial adviser is Rio de Janeiro-based Angra Partners.
OGX faces the December interest coupon payment on about $2.5 billion bonds due in 2018. The price of the 8.5 percent bond was at about 9 cents on the dollar on Wednesday, according to Thomson Reuters data.
Shares in OGX, which have fallen 97 percent over the past year, rose 7.1 percent to 0.15 reais on Wednesday in São Paulo.