First, the bank analyst Paula Kovarsky gives the good news:

“Successful exploration is a job for only a few companies, but turning discoveries into production is also part of the success. OGX’s shift into production is positive by all means; the company is taking oil out of the ground only two years after discovering it, becoming operational and differentiating itself from pure-exploration peers.”

Then, some reality check:

“We updated our production curve based on OGX’s scheduled production systems, and this reality check led us to forecast further delays in the production ramp-up. Our production curve already fell some two years behind company guidance – OGX expects to reach 730 kbpd of production by the end of 2015. We now forecast production to reach 345 kbpd by that date, versus 550 kbpd previously… 

… We maintain our outperform recommendation, but we are reducing our YE12 fair value to BRL 21.2/OGXP3 (from BRL 25.9/OGXP3), mostly based on the delay in the production curve, slightly higher production costs on lower flow rates, lower volumes for the Espirito Santo Basin and write-off of the Pará-Maranhão Basin. Our outperform recommendation is grounded on the long-term upside potential and our risk adjusted preference for OGX against its Brazilian peers.”

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