Xcite Xceeds Xpectations

PUBLISHED: 08 Apr 2013 @ 23:32 | Comments (0) | More info about Lou Gutheil

The share price of Xcite Energy (LSE:XEL) jumped as much as 8.25% to 117.25 by 13:00 today on news that its Bentley Oil Field holds much more in reserves than originally thought.

It was just over a year ago (20 February 2012) that Xcite announced that preliminary research indicated that the field contained some 550 million stock tank barrels. Today’s updated estimate, following a new 3D seismic survey, now says that the site contains a whopping 909 million barrels in place. The net present value of petroleum initially in place is now estimated at £4.2 billion

Xcite has now begun the process of finding a “suitable” farm-in partner. The company is not expecting that to be much of a hurdle as CEO Rupert Cole remarked that “We have demonstrated the value of the field, materially de-risked it ahead of development, and we would expect potential partners to recognize these achievements.” Xcite currently holds 100% interest in three license blocks in the Bentley field through its subsidiary Xcite Energy Resources Ltd.

The company has forecasted a peak production rate of 45,000 stb/d during Phase I, followed by 57,000 stb/d during Phase II. Mr. Cole said that “We have now moved Bentley form being a significant assets to one of the major strategic assets in the North Seas.” In addition to seeking a farm-in partner, Xcite will also begin seeking additional funding by borrowing against the increased volume of potential production. Cole added that “We anticipate being in a position to increase the borrowing capacity of the field considerably and we shall be discussing this with our existing and potential new lenders.”

It will be interesting to see what analysts say as they issue their evaluations. So far, one has decided that “investors are yet to properly appreciate the potential of the project.” Another added that it will be increasing its target price for Xcite shares due to the significance of the new discovery. Jamie Maddock, a representative of Morgan Stanley said that “Today’s reserves upgrade and accompanying revised development plan confirm Xcite’s 100% owned Bentley field as one of the largest production potential oil fields in the UK.”

Rupert Cole reiterated the importance of the the Bentley field, saying that it, “Will be an important source of future employment and economic contribution to the UK for many years to come.” With an estimate life of 35 years, this discovery should be a boon to the UK employment and economic environment for at least a generation.

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