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Xcite Energy - North Sea Heavy Oil (XEL)     

Proselenes - 22 Oct 2009 11:14


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.

Proselenes - 06 Apr 2010 05:48 - 145 of 3002

New Broker Note Out.

Strong Buy rec.


Proselenes - 06 Apr 2010 08:37 - 146 of 3002

Nice, thats me 300% bagged, not selling any, not taking any profits and waiting for even more :)

I am just really upset I got in around 20p and not at 5p with the house on it.

cynic - 06 Apr 2010 08:49 - 147 of 3002

i actually bought a small slice a few weeks ago .... very happy to stay put for a while, and don't much care whether or not i make several-fold so long as what i bank is a decent profit

Proselenes - 22 Apr 2010 16:18 - 148 of 3002

Thursday, April 22, 2010

Xcite Energy: exciting times ahead

London and Toronto listed Xcite Energy is sitting on a likely 160 million-barrel recoverable oilfield in the North Sea and, although it has the drilling and offtake agreements in place to begin extracting oil by the middle of next year, has a share price that values the company at under a dollar per barrel for its resource.

Among the possible reasons why the market is viewing the shares with an unsympathetic eye, is the fact that the oil in its reservoir is viscous referred to as heavy oil in the industry - which has historically made the extraction process more problematic and means it is sold at a 8-12% discount to more free-flowing Brent Crude. Furthermore the company is small and is unwilling to farm out the extraction process to a larger player, an unusual approach from a small cap resources player but an innovative one that should reap significantly larger rewards in the long run. The key here is the securing of the business partners earlier this year; BP, AMEC and Transocean/ADTI, who will provide the credibility and services to enable the field to be developed. Small cap doesnt look so small cap after all.

The oilfield named Bentley and situated 160 kilometres east of the Shetland islands - was previously owned by Conoco, the worlds fifth largest refiner, who drilled three times in the 1980s but failed to bring oil to surface. They had a bad day, confirms Xcites chief financial officer Rupert Cole. They had the wrong pump set-up, the wrong sand screens and the oil price and the level of technology was much lower then. Indeed, heavy oil is now much less of a technological problem and is being extracted commercially in several continents around the globe, with Statoils Grane heavy oil field producing 200,000 bopd (barrels of oil per day) only a few miles away from Bentley and a number of others in the region targeted for 40-60% recovery rates.

BVI-domiciled Xcite acquired 100% of Bentley in 2003 and, with a team that includes a number of former Conoco men, proved oil does flow with an appraisal well in early 2008. This, along with two subsequent Competent Persons Reports and recent reprocessing of 3D seismic data has shown the oil field could be one of the largest in the North Sea, with an upside of 886 million barrels (mmbbls) of petroleum initially in place (PIIP). However, the company is understandably being cautious and says the most likely level of PIIP for the Bentley field is 689 million barrels (this excludes upside from some lower, Jurassic oil that has been encountered and logged).

The likely amount of viscous oil that can be extracted, according to Competent Person RPS Energy, is between 72 and 166 mmbbls, with a most likely case of 122.5 mmbbls. The recent seismic reprocessing by the company lifts the recoverability estimates to between 109 and 220 mmbbls, with a base case of 160 mmbls. With the projects current chance of commercial success calculated at 70%, the base risked case is 112 mmbbls. Successful completion of a planned drilling project this July and August will take the chance of commercial success up to 90%, will upgrade a portion of the contingent resources to a proven and probable reserve level, and will cement Xcites place as the third biggest independent producer company active in the UK North Sea in terms of reserves. Cole adds that recent 3D analysis means that applying upside reservoir parameters we now think that the 160 mmbbls base case could be 235 mmbbls.

The oil is contained in large, homogeneous body of high porosity, highly permeable sand and, heavy as it is, the oil has been found to be saturated with methane gas, which makes it behave like lighter oil in situ, according to the company. So this is a very good reservoir.

Now, can Xcite extract it and then sell it for a reasonable price?

An oilfield of this size is generally only found in the hands of an Exxon, a BP, a Shell or a Statoil. These giants of the industry would simply employ the very best drilling and engineering contractors and most likely succeed without much of a hitch. So we have secured exactly the same team as a major oil company would, explains Cole. Xcite has created the Bentley Alliance, a group of industry partners that will provide the services as well as potentially contributing to the equity/cash flow to take the oil field into an early production system next year and to the full production that is expected in 2014.

Top engineers AMEC will take care of the top side engineering and consultancy, backed up by Schlumberger behind them, and with Transocean doing the drilling (and taking a 4% quasi-equity stake in the field in return for its $4m contribution to well costs). Another major coup has been to get BP to sign up as the offtake partner, incentivised to maximise the sales value of the oil and with the offtake fee directly related to the realised price achieved by BP in relation to the prevailing Brent crude price. Bentley oil has a very high diesel cut (ie it is good to refine for diesel fuel), among several other uses, and Cole is confident that BP will be able to minimize the discount to Brent.

Its quite an agreement that Xcite has rigged for itself and a testament to the experience of the management team, says Cole, himself a former Halliburton man. The board has a wide range of industry experience both upstream and down, and is led by CEO Richard Smith, who worked with Cole at Halliburton, and chairman Roger Ramshaw, former chairman and managing director of ConocoPhillips in the UK and in Venezuela (heavy oil), with local expertise bolstered by exploration and development director Stephen Kews 25 years with Conoco and specific experience in respect of the Bentley field.

Cole explains that the result of this brains trust is an excellent deal for all concerned: The Alliance is unusual for a small company like this, but we have done it before. As Xcite is unlikely to fund a conventional full field development, we are going to do it in bite-sized chunks and engage the Alliance partners to provide an extraction service. For our partners this is potentially a very important contract, due to the way we are able to structure it. They would have the potential to earn significant bonus revenues as they are incentivized to deliver much more than the minimum amount extracted.

With a 24.9 million placing (at 40p a share) completed on 18 March, Xcite has the financing to complete the drilling and flow testing of a pre-development well this summer. By around the end of June, Transocean should have one of its jack-up rigs standing on the sea bed to drill a horizontal well of around 500m with the aim of achieving a representative flow rate and moving the contingent resources to reserve status.

The next stage will be the early production system (EPS), which is an extension of this summers drilling, with 5 wells planned to be drilled. If we had the money wed probably do it now, says Cole, who says that this is planned for the middle of next year and should be in production for around two years and produce around 10 mmbbls; our first oil and cash flow. He says the EPS funding should be around $100m and will probably be made up of half debt and half equity.

At 80 million market cap, the 60p shares mean the market is only ascribing 75cents per barrel to Xcites base case oil reserves, compared to a Brent crude price of around $80. This assumes a huge amount of uncertainty in the project much more than seems justifiable based on the big industry names which have signed up to the Alliance after full due diligence on the field. Broker Arbuthnot, based on the Competent Persons Report, calculates a low net present value of 79p, a base of 340p and a high of 669p.

cynic - 22 Apr 2010 17:06 - 149 of 3002

i'ld guess it'll still be a month or two before there is any significant interest in XEL, and then of course it's fingers crossed until late august, though bad news would probably come before then.

the problem with XEL is that trading is thin and it's solely MMs who only offer blocks of 5000, though almost for sure you could buy more

Andy - 23 Apr 2010 22:07 - 150 of 3002

New article, click HERE

cynic - 27 Apr 2010 12:13 - 151 of 3002

XEL getting pretty xel'ed today, though volume is still pretty modest.
i confess i top-sliced 50% at 57 the other day to bank a respectable profit (considering outlay), and though with hindsight, that looks to have been decidedly premature, i am happy to live by my customary dictum

Balerboy - 28 Apr 2010 16:17 - 152 of 3002

a wide belt should do the trick cynic....problem with your dicktum.....

Proselenes - 28 Apr 2010 20:58 - 153 of 3002

Happily holding through, with my just above 20p average price ;)

Not a seller.

required field - 30 Apr 2010 11:08 - 154 of 3002

Stellar performance..sp wise : !...

Proselenes - 30 Apr 2010 14:24 - 155 of 3002

And lots more to come.

Mid case price 350p a share

Top level case about 650p a share

Plenty more stellar upside potential

kate bates - 30 Apr 2010 14:54 - 156 of 3002

I'm in for 50000 right at the top (75p). Confidently informed I will make upwards of 75% in the time it takes for them to announce spudding. We shall see...

Proselenes - 30 Apr 2010 18:19 - 157 of 3002

Up 11% in Canada so far today so nearing 80p a share......looks good for a strong run next week too.
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