RIO DE JANEIRO (Reuters) - Brazilian billionaire Eike Batista's flagship oil company OGX Petroleo e Gas SA (>> OGX Petroleo e Gas Participacoes SA) slashed capital spending on Monday and pulled the plug on three offshore oil prospects, the latest move by his EBX Group to bolster finances and avert collapse.

OGX shares fell as by as much as 39 percent, touching a record low. Once Brazil's second largest oil company by market value and a symbol of Brazil's now-stalling, decade-long commodities boom, OGX shares are trading at less than 3 percent of their all-time high.

"OGX has just sent a statement that alters practically the entire outlook on which market expectations for the company have been based," Luiz Caetano, an oil and gas analyst with Planner Corretora in Sao Paulo, said in a note to investors on Monday.

"We are now at a new level, one of survival rather than growth."

OGX's move comes as the six-year-old company struggles to turn promising offshore discoveries into producing fields. Output from OGX's first offshore field, Tubarão Azul, began in early 2012 at far below expectations. That raised concern OGX would soon be unable to generate revenue to finance ships, drill new wells and pay its debts.

The plunge in the share prices of OGX and other EBX Group companies has sliced more than $20 billion from Batista's fortune. Most of his wealth is tied up in his companies, which has led investors to question the billionaire's ability to meet his own promises.

As shares fell and project delays mounted, Batista has offered to prop up EBX's oil, mining, shipbuilding, transport and electricity companies with billions in new cash that he might no longer have or be able to borrow.

Many now believe Batista's entire EBX empire is on the verge of collapse. OGX is spending about $500 million every three months, giving it about 9 months to burn through its remaining $1.1 billion of cash, HSBC said in June.

"This is very bad news," said Luis Gustavo Pereira, a strategist at Futura Corretora, a Sao Paulo brokerage. "Things were not looking good for OGX in the coming year. Now they look even more critical."

OGX said a promise by Batista, the controlling shareholder, to inject up to $1 billion of new capital by the end of March 2014 "is still valid." The company also denied speculation it plans to file for bankruptcy protection.

THREE DEAD SHARKS

OGX will cut costs by suspending the development of the Tubarão Tigre, Tubarão Gato and Tubarão Areia offshore areas northeast of Rio de Janeiro, the company said in a securities filing on Monday. In English, the names mean "Tiger Shark," "Cat Shark" and "Sand Shark."

The decision is an about-face for OGX, which rushed to declare to Brazil's oil regulator that the areas were commercially viable in an effort to speed up production and generate revenue.

OGX's three producing wells at Tubarão Azul, or "Blue Shark," the company's only active offshore field, could stop oil and natural gas production as soon as next year, OGX said. In addition to lower than expected initial output, Tubarão Azul has suffered equipment and reservoir problems.

A reassessment of the geological surveys of Tubarão Azul, where the oil is in relatively dense carbonate rocks, led OGX to conclude there was no existing technology that could economically extract the oil at the moment, the company said.

OGX also produces natural gas in partnership with electric utility MPX Energia SA (>> MPX Energia SA) from onshore fields in Brazil's northeast. While OGX has lost its position as Brazil's No. 2 oil company to QGEP Participacoes SA (>> Qgep Participacoes SA), OGX and MPX together were Brazil's No. 3 oil and natural gas producer in April after state-run leader Petroleo Brasileiro SA, or Petrobras (>> Petroleo Brasileiro Petrobras SA), and Great Britain's BG Group Plc (>> BG Group plc).

Together OGX and MMX produced 19,921 barrels of oil and natural gas equivalent per day (BOEPD) in April, or 0.8 percent of Brazil's total production of 2.39 million BOEPD. As recently as 2010, OGX expected to produce 1.4 million BOEPD, or more than half of Brazil's current output.

OSX ORDERS CUT

OGX is not alone in scaling back its outlook for Brazilian oil. Brazil's HRT Participações em Petróleo SA (>> HRT Participacoes em Petroleo SA), the No. 3 Brazilian oil company by market value, also said on Monday that it is reducing exploration activity in Brazil's Amazon region after disappointing results.

The Rio de Janeiro-based OGX also asked shipbuilding sister-company OSX Brasil SA (>> OSX BRASIL SA) to stop building several oil platforms meant for the canceled projects. OGX said it no longer considers Tubarão Tigre, Tubarão Gato and Tubarão Areia commercially viable.

OGX will pay OSX $449 million in cash as compensation.

After dropping as much as 11 percent, OSX shares closed down 5 percent at 1.33 reais in Sao Paulo. OGX also trimmed losses and closed down 29 percent at 56 centavos.

DEFAULT CONCERNS

Pressure to cut spending cuts has been mounting on OGX for months on concern about a possible default on its 8.94 billion reais ($4.01 billion) debt.

OGX bonds due in 2018 and 2022 have been losing value since March. The 2018 debt fell to 20.25 bid, or about a fifth of face value, on Monday, according to Thomson Reuters IFR. The 2022 bonds fell even lower, to 18 percent of face value.

Such values are seen as an indication that investors consider a default likely.

In May, Batista sold 70.5 million OGX shares for $57 million, cutting his stake to 59 percent from 61 percent. He sold the stock for less than one-third of what he has promised to pay for new shares.

The promise to buy the new shares, known as a put option, requires that Batista buy up to $1 billion of OGX stock at 6.30 reais a share by April 2014 if the OGX board finds it necessary.

Selling stock below the put price raised speculation that Batista lacks the cash to honor his promise. In response, Fitch Rating Service downgraded OGX debt to "CCC" on June 17, indicating it was at high risk of default.

The following week brought the resignation of three prominent board members with the responsibility of deciding when to request the put.

($1 = 2.23 Brazilian reais)

(Additional reporting by Silvio Cascione, Asher Levine, Danielle Assalve and Guillermo Parra-Bernal in Sao Paulo; Writing by Jeb Blount; Editing by Gerald E. McCormick, Jeffrey Benkoe, Chris Reese and Andre Grenon)

By Jeb Blount