Brazil's OGX Petroleo e Gas Participaçoes SA said its Tubarao Martelo offshore oil field has 87.9 million barrels of "probable" oil and equivalent natural gas, less than a third of the total it called recoverable when it declared the area commercially viable last year.
Tubarao Martelo may be the last chance for OGX to generate enough cash to sustain long-term operations after disappointing output from its first field, Tubarao Azul.
The failure of Tubarao Azul caused a selloff in OGX shares last year and led to the collapse in share price of other companies controlled by Eike Batista, the tycoon whose energy, mining, shipbuilding and port ventures are all in the process of restructuring.
The selloff also hurt Batista's ability to borrow more money, diminishing his ability to sustain expensive offshore oil activities and other investments.
"The good news is that they now have a more solid estimate of reserves," said John Foreman, a geologist and former board member of Brazil's oil regulator, the ANP. "The other side of that though is that the potential amount of oil they are working with is now a lot smaller."
OGX told Brazil's oil regulator, known as the ANP, that Tubarao Martelo had 285 million barrels of "recoverable" resources in April 2012. At the time, it said oil could be commercially produced in the area and asked the ANP for permission to start output.
Reserves are more certain than resources, Foreman said.
So-called proven reserves are those with at least a 90 percent certainty of being produced. Probable reserves have at least a 50 percent chance of being produced. Possible reserves have at least a 10 percent chance. Resources are more speculative.
"If they have reserves, even if you're not producing, you can sell them for $5 a barrel, resources you can only sell for 50 cents, this news isn't all negative, especially for a company trying to put a value on its assets," Foreman said.
Malaysian state oil company Petroliam Nasional Bhd , also known as Petronas, agreed to take a 40 percent stake in Tubarao Martelo for $850 million in May. It has delayed payment on the project on concerns OGX may be unable to pay debts or finance development.
If all 87.9 million barrels of probable reserves in the Tubarao Martelo estimate by Dallas-based oil certification company DeGolyer & MacNaughton were to be produced, it would be enough to supply all U.S. oil needs for about five days. The old OGX estimate of recoverable resources suggested enough oil for nearly 16 days of U.S. demand.
OGX previously told investors and regulators that Tubarao Azul, its first offshore field, had 110 million barrels of recoverable oil. The company now expects to shut the area in 2014 after producing only a small fraction of that amount.
Tubarao Martelo is located in concession blocks BM-C-39 and BM-C-40 northeast of Rio de Janeiro. The estimates released on Tuesday also said the area has 108.5 million barrels of "proven and possible reserves." D&G did not declare any of the field's resources as "proven."
OGX, whose shares have shed more than 90 percent of their value this year, were unchanged from Wednesday at 0.22 reais at Thursday's close in Sao Paulo.