UPDATE 2-Shares of Brazil oil start-up OGX soar after IPO

Fri Jun 13, 2008 4:46pm BST

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By Todd Benson

SAO PAULO, June 13 (Reuters) - Shares of new Brazilian oil and gas company OGX (OGXP3.SA) soared on Friday on their first day of trading, underscoring investors' voracious appetite to profit from the nation's newfound energy wealth.

OGX Petroleo e Gas Participacoes SA, as the company is formally known, was created from scratch less than a year ago and has yet to drill an oil well. But the start-up has created huge expectations that it will strike oil off Brazil's coast, luring billions of dollars from energy-hungry investors.

The stock opened 18.9 percent higher at 1,345 reais after the initial public offering priced at 1,131 reais -- the top of the anticipated range -- on Wednesday. It later gave up some gains and was trading 12.7 percent higher at 1,275 reais, outpacing a 0.3 percent advance by the Bovespa index .BVSP.

"Investors that couldn't get a piece of the IPO are now piling in," said Nelson de Matos, a stock analyst at Banco do Brasil Investimentos.

OGX raised 6.71 billion reais ($4.1 billion) in the offering, making it the largest IPO in Brazilian history. Eike Batista, the Brazilian billionaire who founded the company, said demand for the offering reached $30 billion.

"I thought demand would reach about $20 billion, but it was way above what we expected," he said on Friday at the Sao Paulo stock exchange. "Investors feel reassured that they are associating themselves with a company that is committed to the principles of transparency."

OGX became the 100th company to list on the exchange's Novo Mercado trading platform, which requires stricter corporate governance standards. It placed shares with qualified investors who had to shell out a minimum of 300,000 reais ($184,050) to take part in the IPO.

Bovespa Holding BOVH3.SA, which controls the stock exchange, set the previous record for IPOs when it raised 6.6 billion reais last September. Two months later, the BM&F commodities and futures exchange BMEF3.SA raised 5.98 billion reais by going public. The exchanges are now merging.

BILLIONAIRE RISK TAKER

Batista, a flashy entrepreneur who made his fortune in the mining business, is one of Brazil's richest men. His conglomerate also includes a water company, power plants and mining company MMX Mineracao (MMXM3.SA)(XMM.TO), which he took public in 2006.

Batista, who has a reputation as a risk taker, is betting that recent oil discoveries off Brazil's coast are a sign of more to come. On Thursday, state-run energy company Petrobras (PETR4.SA)(PBR.N) announced another find in the Santos basin, bolstering the view that Brazil may be poised to join the ranks of the world's major oil exporters.

To get his new oil venture off the ground, Batista has hired several former executives from Petrobras, a world leader in offshore drilling technology. Among them are Francisco Gros, a former chief executive there, and Paulo Mendonca, who had been production and exploration manager.

The high-profile hires have helped reassure investors that Batista did his homework before paying more than $1 billion for drilling rights on 21 offshore blocks at an auction last November while some oil majors watched from the sidelines.

OGX estimates the areas, all shallow-water tracts, hold 4.8 billion barrels of oil equivalent and expects production to start in late 2011. ($1=1.63 reais) (Additional reporting by Alberto Alerigi Jr. and Marcelo Teixeira; editing by Lisa Von Ahn)

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