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Xcite Energy - North Sea Heavy Oil (XEL)     

Proselenes - 22 Oct 2009 11:14


Proselenes - 18 Mar 2010 08:54 - 125 of 3002

...............Word has it that Xcite Energy (down 0.5p at 40p) has completed its share placing to raise 25m, which will be used to bankroll its ambitions for the Bentley field in the North Sea. The group specialises in heavy oil, which is slightly more difficult to get out of the ground than some of the lighter crudes. But if the firm's reserve projections prove correct then Xcite could be become the third largest independent in the North Sea.

Proselenes - 18 Mar 2010 14:17 - 126 of 3002

18 March 2010

Xcite Energy Limited Closes C$38.4 million (24.9 million) Placing

Xcite Energy, a developer of heavy oil assets in the UK North Sea, is pleased to announce that it has successfully raised gross proceeds of C$38.4 million (approximately 24.9 million) through its previously reported placing of new ordinary shares, principally to institutional investors.

As a result of the placing 61,972,394 new Ordinary Shares have been issued at a price of C$0.62 (0.40) per Ordinary Share.

The net proceeds of the offering, together with US$4 million in funds committed to the Company by Challenger Minerals (North Sea) Limited, are anticipated to be used primarily to fund the drilling and flow testing of the 9/3b-R pre-development well on the Company's Bentley oil field. The balance of the net proceeds of the offering will be used for general working capital purposes.

Richard Smith, Chief Executive of Xcite Energy, commented:

"This fund raising represents a significant step forward for the Company in the overall achievement of the development plan for the Bentley field. We have successfully obtained commitment from our Bentley partners, BP, Transocean/ADTI/ChallengerMinerals, AMEC and Fugro in the last few months and, now that we have the finance in place, we have the resources to drill the 9/3b-R well expected to commence during the summer of 2010."

Proselenes - 19 Mar 2010 08:08 - 127 of 3002

From another BB :

Jimarilo - 19 Mar'10 - 07:46

Using the Arbuthnot note and adjusting the price targets set by them adding the new placing shares and the 25m the new price targets must be around

Low end 90p, base case 346p and high end 663p

In addition to that there is the ADTI $4m and the $20m credit facility that BP have agreed to guarantee

cynic - 19 Mar 2010 08:13 - 128 of 3002

there is a somewhat facetious argument that if the likes of CHAR and MATD can go intergalactic without any obvious reason, especially in the case of the former, then XEL should at least manage to go into orbit ..... but the Daily Mail does rather gloss over the fact that heavy oil sells at a pretty hefty discount to light crude, and extraction is a LOT more difficult

required field - 19 Mar 2010 08:35 - 129 of 3002

Yes, but this a confirmed discovery and on our doorstep, plus everything is set up to drill, and produce...big, quality firms are in on looks great to me...

cynic - 19 Mar 2010 08:42 - 130 of 3002

but as always, the question is WHEN?

required field - 19 Mar 2010 09:01 - 131 of 3002

They will be spudding very a month....

cynic - 19 Mar 2010 09:04 - 132 of 3002

announced as much?
i also note that this is an MM stock only, offered in max blocks (effectively) of only 5,000 and with tiny average volume

Proselenes - 20 Mar 2010 01:43 - 133 of 3002

Recent OB Presentation :


cynic - 20 Mar 2010 08:34 - 134 of 3002

perhaps i missed something, but that indicated drilling Q2/3, which implies to me no earlier than May or even a bit later

Proselenes - 20 Mar 2010 09:52 - 135 of 3002

Yes, rig is booked for June so spud should be June or July pending the inevitable delays.

cynic - 20 Mar 2010 10:50 - 136 of 3002

aha .... so "in a month" showed considerable artistic licence then!

required field - 20 Mar 2010 13:24 - 137 of 3002

At the moment does it really matter if it is 1 or 2 months....they are going to drill and this is undervalued by two thirds in my opinion....don't forget : this is proven...the oil is there....

cynic - 20 Mar 2010 14:05 - 138 of 3002

sort of and more likely 3/4 and possibly so and yes though rather low value sticky stuff

Proselenes - 20 Mar 2010 14:07 - 139 of 3002

cynic, low value sticky stuff but lots and lots and lots of it.

So much so that best case would have XEL up over 600p a share.

Not bad for low value sticky stuff :)

cynic - 20 Mar 2010 14:43 - 140 of 3002

and not the easiest stock to trade either! ..... but yes, i have some

halifax - 25 Mar 2010 12:12 - 141 of 3002

RNS drilling to start shortly.

cynic - 31 Mar 2010 15:36 - 142 of 3002

sp quite lively here today, though the volumes (as always) are pretty low

Proselenes - 01 Apr 2010 01:37 - 143 of 3002

Yep, looks like the interest is coming in now and should build into the spudding of the drill.

Proselenes - 03 Apr 2010 12:26 - 144 of 3002

INVESTMENT EXTRA: Xcite has strength to make oil field a success

Last updated at 7:58 PM on 02nd April 2010

The exponential rise in the share price of Xcite Energy in the past year would, at first inspection, suggest a stock that is well and truly up with events.

But nothing could be further from the truth. In fact, there is still a huge disconnect between the perception and reality so far as it relates to this North Sea driller.
But before I get to this, it is perhaps worth understanding what the company does, how it differs from the other speculative oil plays and just what it owns.

Not what it seems: There is a huge disconnect between the perception and the reality when it comes to Xcite

That last part is quite easy. Back in 2003 Xcite acquired full ownership of the Bentley oil field, a prospect approximately 100 miles to the east of Shetland.
What lies beneath the seabed is a little more complicated. Currently the experts think there is as much as 200million barrels of crude that may be commercially extractable.

But there's a wrinkle with the prospective reserves - specifically their viscosity. For the oil in Bentley is a lot thicker, or should I say heavier, than the stuff that normally comes out of the ground in the North Sea.

Heavy oil of this kind used to be incredibly tricky to pump, which might explain why a field that was first discovered in 1977 hasn't yet made it into commercial production.

But in the past three decades the technology has moved on apace. Chief executive Richard Smith says: 'Historically people had mixed results flowing (heavy) oil to the surface when they were being tested.

'Heavy oils like this have been produced in countries like Venezuela. And companies such as Conoco are currently developing wells in China with very, very similar oil and reservoir properties as ours. So its not something that hasn't been done.'
As well as being a little trickier to get out of the ground, the oil, because of its thickness, will also sell at a discount to the prevailing price for North Sea crude.
Analysts suggest this discount ought to be around 8-12 per cent, but Xcite management has conservatively accounted for a shortfall of around 15 per cent.
That gap could and should narrow considerably thanks to an off-take agreement Xcite signed with BP, which should make the product far more marketable.
The BP deal also illustrates Xcite's ability to put together a top notch team to commercialise the venture.

Also recruited into the 'Bentley alliance' are Amec, which will be the engineering and facilities partner, Transocean/ADTI, which is carrying out the drilling (more of this later), Challenger Minerals (farm-in partner) and Fugro, which will deal with the geotechnical data. We hear Xcite is down to a short list of Schlumberger and Senergy for the last remaining role, that of well test engineer.

As it stands, there is a greater than 70 per cent chance that Bentley will be a commercial success based on an independent audit called a 'competent persons' report and field data. The time line for development is fluid, but the aim is to be
pumping oil from the field by the middle of next year.

The plan is to be extracting 15-20,000 barrels a day using a floating jack-up rig through to 2014, when it is hoped Xcite's commercial partners will have a more permanent solution ready to take over. Plateau production is expected to hit 60-80,000 barrels a day.

So there's a rough timeline for activity, but just what is beneath the surface?
Well initially, the recovery estimates were for a base case of 37million barrels of crude. Today, and several appraisals later, it is predicted that Bentley will yield between 109million and 220million barrels in total, giving a most likely scenario of around 160million barrels of crude.

Based on the current share price, the reserves are being valued at just 65c a barrel, which is shocking really given the chances of failure receding by the day. This is the sort of valuation you would give a very speculative exploration programme.

Bentley, however, is a predevelopment opportunity which is ready to go into production therefore far less risky.

The company has run through a number of scenarios. One takes 122.5million barrels as the best case and uses what analysts call an NPV 10 calculation based around a prevailing price of $80 a barrel to work out the value of the shares.
On that basis they are worth 390p each. At the 160million barrels - the median estimate based on the latest drill and 3D survey - the value of the company comes out at 866million, or 653p a share.

Of course these are not independent valuations and so really the projections should be seen as a series of 'what ifs'.

Xcite's own broker, Arbuthnot, is far more cautious. But its 133p a share price target gives plenty of upside from current levels.

OUR VERDICT: While the company is confident it can pump commercial quantities of heavy oil out of the Bentley field there is no guarantee that it will flow at the rate and in the quantities predicted.

Even so, the current share price suggests Bentley currently factors in risks that don't exist. A speculative buy; set a stop loss of 40p.
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