- By Region
One of the most important moments in the career of Brazil’s richest man, Eike Batista, came earlier this year.
The corporate headquarters of this Rio de Janeiro-based oil, mining and infrastructure magnate was at action stations in late January as the offshore field run by his start-up exploration and production company OGX prepared to produce its first droplets of crude.
“It`s like the Kennedy Space Centre around here, we are on countdown mode,” he excitedly enthused at the time.
The oil started flowing a week later, sending OGX’s stock soaring and reassuring Mr Batista’s increasing number of investors and partners, such as German power utility Eon, about the aggressive vision of this former speedboat racing champion for his group and for Brazil.
Johannes Teyssen, chief executive of Eon, told the Financial Times last week: “The opportunities offered by the Brazilian market and by the combination of the two companies are very broad.
“We’re having a look at what more we could do.”
Still mostly at the start-up phase, Mr Batista`s empire consists of the holding company, EBX, with oil producer OGX expected to become the flagship and cash cow when it starts pumping commercial quantities of oil towards the end of this year. All companies in the group carry the letter “X” – a reference to Mr Batista`s desire to produce multiple returns.
Other parts of the group include OSX, an oil services company that is planning to provide billions of dollars of equipment to Brazil’s rapidly expanding offshore oil industry in partnership with South Korea’s Hyundai Heavy. These will be manufactured at Mr Batista’s giant Acu port, operated by LLX, which he is aiming to make the largest in the Americas.
Then there is MPX, the electricity company that has joined up with Eon with plans to operate 20,000 megawatts of power plants by 2020, and MMX, the group’s mining company and one of its more established businesses.
Mr Batista also has his fingers in innumerable smaller pies, such as a joint venture with sports company IMG to stage events such as UFC fights, the mixed martial arts franchise that has become hugely popular in Brazil.
Ranked as Brazil’s richest and the world’s seventh wealthiest man with a fortune of $30bn by Forbes magazine, Mr Batista is an indefatigable salesman and is fearless in public whether on professional or personal matters. When his son, Thor, recently ran over a cyclist in his Mercedes in Rio de Janeiro, Mr Batista launched a vocal Twitter campaign espousing the youth’s innocence of any wrongdoing.
But Mr Batista knows that key to his long-term success will be oil company OGX. From first crude in February, the company is now producing between 10,000 and 13,000 barrels per day. Mr Batista wants the group’s total oil production to rise to 1.4m bpd by 2020, which would account for nearly one quarter of expected national production and make it the country’s largest private producer of crude.
“About 65 per cent of EBX’s profits will come from oil and gas. It’s big business and will continue to dominate,” he told the last week.
But oil can be a volatile industry. After hitting a 52-week high of R$18.41 per share on first oil, OGX`s stock has been dragged down by concern over global economic growth and is now trading at R$13.11, yielding a one-year negative return of 27.17 per cent, according to Bloomberg data.
Fitch said in a report: “OGX has a very aggressive growth strategy.” The ratings agency said OGX needed to invest up to $4.2bn over the next two years and would have negative cashflow for the next three years. “This growth plan will require large capital investments to bring production on line.”
These large capital needs, not just at OGX but also at miner MMX, oil services group OSX, port operator LLX and electricity producer MPX, are behind a swathe of new partnerships announced by Mr Batista in recent weeks that have raised billions in new funding.
Aside from deals with Eon, he recently sold a $2bn indirect stake in his holding company EBX to Abu Dhabi sovereign wealth fund Mubadala and hinted he might bring in other similar investors.
If everything goes to plan, Mr Batista could realise his longheld desire to top the global richlist, usurping Mexican tycoon Carlos Slim. “I’ve still not decided whether I’m going to overtake Carlos Slim on the left or on the right,” he said.
But Mr Slim has a fortune of $69bn, more than twice that of Mr Batista. The Brazilian tycoon still has his work cut out for him.