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updated 10/23/2013 5:13:14 PM ET 2013-10-23T21:13:14

RIO DE JANEIRO (Reuters) - Brazil's OGX Petroleo e Gas Participações SA , the cash-strapped oil company controlled by Brazilian tycoon Eike Batista, expects to start output from its Tubarão Martelo offshore oil field by the end of November, two sources with direct knowledge of OGX operations told Reuters.

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The company has begun the process of linking up the field's completed production wells to the OSX-3 floating production, storage and offloading platform (FPSO), the sources said. The vessel, a converted oil tanker, is owned by Batista's OSX Brasil SA shipyard and ship-leasing company.

Batista is counting on output at Tubãrao Martelo to ease talks with creditors over the restructuring of about $5 billion of OGX debt to keep the company operating. Without a deal, OGX risks losing its exploration and production licenses to Tubarão Martelo and other areas. Those areas represent the company's only major source of new revenue from oil production or asset sales.

In May, Malaysia's state oil company Petroliam Nasional Bhd agreed to buy 40 percent of Tubarão Martelo and an adjacent area for $850 million but has yet to pay for the areas due to the unresolved debt issues.

OGX shares fell 9.3 percent in Sao Paulo to 0.39 real on Wednesday, trimming earlier losses of as much as 14 percent in late trading. OSX rose 2.53 percent to 0.81 real.

The OSX-3 production ship assigned to Tubarão Martelo's output is complete and anchored in the field, according to a transcript of conversations between OSX management and bondholders made by the Norwegian trustee of OSX bonds.

OSX has $19 million left to pay on its installation contract with Japanese construction and engineering group Modec Inc. <6269.T> under an engineering, procurement, construction and installation contract. It owes $11 million of that by the end of January and $8 million by August, the transcript said.

OSX-3, which should be ready to enter service in the field by the end of October, according to the Norwegian transcripts, could be sold for $1.15 to $1.17 billion if the buyer were to use it in the Atlantic Ocean without much conversion work.

Because OSX gets all of its current revenue from OGX, which also leases its OSX-1 ship in the Tubarão Azul field, its fate is directly tied to OGX. Tubarão Azul and Tubarão Martelo are both in the Campos offshore basin northeast of Rio de Janeiro.

Lower-than-expected output at OGX's first field, Tubarão Azul, in 2012 led to a collapse in the share prices of all the traded companies in Batista's mining, oil, shipbulding, port operation and electricity group, EBX. With losses in excess of 90 percent, Batista shed the title of Brazil's richest man.

By wiping out most of Batista's fortune, estimated by Forbes Magazine at about $30 billion in 2012, the share plunge also made it impossible for him to raise new capital for his stable of start-ups facing project delays and cost overruns.

OGX officials were not available for comment. OSX's press office did not immediately answer requests for comment.

(Reporting by Jeb Blount and Sabrina Lorenzi)

(c) Copyright Thomson Reuters 2013. Check for restrictions at: http://about.reuters.com/fulllegal.asp

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