Xcite Struggles As Credit Woes Persist For Small Oil Cos
19 August 2009 - 12:46AM
Dow Jones News
Independent U.K. oil explorer Xcite Energy Ltd. (XEL.LN) gave an
indication Tuesday of the woes still afflicting small oil and gas
companies despite recovering oil prices, and said it is still
struggling to raise cash to fund the development of a sizable North
Sea oil field.
"The current status of the global equity and credit
markets...will make it difficult for the company to raise
additional finance and to make significant commitments to move
forward with the next phase of the work program on the Bentley
field," the company said in a statement.
Small U.K. oil explorers were hit hard by the sharp fall in the
oil price last year, as well as the near collapse and partial
nationalization of many of the biggest lenders to the sector -
Royal Bank of Scotland Group PLC (RBS.LN) and HBOS, now part of
Lloyds Banking Group PLC (LLOY.LN).
The most active of the small North Sea oil companies, Oilexco
North Sea, declared bankruptcy earlier this year and its assets
were purchased by Premier Oil PLC (PMO.LN). A number of other small
companies have been forced to find buyers over the previous year as
they ran short of cash.
Industry lobby Oil and Gas U.K. said investment and exploration
in the U.K. North Sea has slumped this year and warned that without
tax incentives to support the sector, total production could fall
40% in the next five years and 50,000 U.K. jobs could be lost.
Xcite's cash balance more than halved over the last six months
to just GBP670,000 as of June 30. The company spent GBP280,000 in
the first half of this year.
"The group has sufficient existing resources to meet its
financial obligations to March 2010, but is reliant on securing
additional funding in order to finance working capital beyond that
time," is said. "The group is currently pursuing a number of
commercial initiatives involving potential farm-in partners and
production sharing contractors to facilitate further work on the
Bentley field," it added.
Xcite estimates the Bentley field could contain between 109
million and 220 million recoverable barrels of heavy oil, which is
more expensive to produce than conventional oil.
Company Web site: http://www.xcite-energy.com
-By James Herron, Dow Jones Newswires; +44 (0)20 7842 9317; james.herron@dowjones.com
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