On the Brink

Mar 1, 2012

Troubled Brazilian oil services company Lupatech may have the support of the BNDES and a backlog of orders, but can it survive in an increasingly

by Raúl Gallegos

Brazil is the toast of the global oil industry. A string of massive oil discoveries over the past five years and generous capital spending by Petrobras is attracting top oil service companies in droves.

But not all is well in the new oil frontier. Petrobras is missing its production targets and its project execution is falling behind schedule. The delays are hurting suppliers and have left Brazil’s leading oil services company, Lupatech, on the brink of bankruptcy.

Lupatech, an energy valve manufacturer, is the poster child for the dangers of growing too fast and too soon in the Brazilian oil business. Encouraged by Brazil’s large, offshore finds in 2007, the company borrowed heavily and embarked on a string of 17 acquisitions that left it too weak to sustain the 2008 oil price drop and the resulting slowdown.

The company is now undergoing the equivalent of...

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