www.xcite-energy.com
Xcite Energy Limited is a heavy oil appraisal and development company, with current interests in three licence blocks in the UK North Sea, all of which are held with 100% working interests through its wholly-owned UK subsidiary, Xcite Energy Resources Limited.
Its primary focus is in bringing the Bentley oil field on Block 9/3b into production and in doing so becoming a significant independent oil producer in the North Sea by 2014.
Watch Xcite Energy's May 2012 Corporate Video here.
Xcite Energy still a buy, according to broker Oriel Securities
Xcite Energy (LON:XEL, CVE:XEL) shares are still a buy but trading is likely to remain volatile while investors await further news, according to house broker Oriel Securities.
Yesterday the shares fell around 20 per cent after Xcite made changes to a development plan for the Bentley oilfield.
The revised plan means that Xcite can still achieve first oil next year, as it originally planned, but Phase 1B is planned for 2013 and Phase 2 pencilled in to start in 2016. Xcite says the new schedule means it will be able to complete the project in a more cost effective manner.
“We retain our BUY recommendation but note that the shares are likely to remain volatile until DECC approval is granted and visible financing is in place,” analyst Nick Copeman said.
The analyst reduced his risked valuation for the stock after yesterday’s news but at 216p a share his assessment is some 130 per cent higher than the current price of 93p.
Xcite already has the financial resources to complete the initial Phase 1A development. In this initial period Xcite will drill one well and the produced oil will be transferred via a pipeline to a shuttle tanker.
The rig has already been paid for along with other equipment required for the initial development programme.
This first stage will allow Xcite to complete the final design and optimisation of the Phase 1B programme. It also provides an opportunity to establish an industry valuation for the producing oilfield.
“Assuming the (Phase 1A) well performs in-line with pre-drill prognosis we think Xcite should be able to obtain debt funding for Phase 1B or approach industry participants for a partial/full sale of the Bentley field,” Copeman said.
The analyst added: “We estimate Phase 1A will cost US$190 million to complete vs the company’s latest estimated cash balance of US$80 million. Management noted yesterday that funding for this phase is available if DECC approval is granted, although it is unclear if this is through debt, a strategic investment, an industry partner or the SEDA.
“We estimate Phase 1B would cost c.US$250 million to first oil which we expect to be partially debt funded assuming Phase 1A performs in-line with prognosis.”
On AIM today Xcite shares were up around 5 per cent, this follows a 20 per cent drop yesterday.
Speaking with Proactive Investors on Thursday, Xcite finance director Rupert Cole said he understands that in isolation yesterday’s statement has caused some investors to ask questions.
But in the overall context of the Bentley development and the broader economic environment it represents a positive step forward, he added.
He explained that the unexpected update came after a document relating to an amendment to the project’s environmental statement was circulated on the internet.
“We needed to clarify the information relating to that amended environmental statement but unfortunately we are restricted at present in explaining the context of what we are doing ,” he explained.
“There is a lot more [about the development plan] that we will be saying, but at the moment there’s only so much that can be disclosed.”
Cole says there is a very carefully put together programme that is due to fall into place in the coming weeks, in which the company plans to inform investors in full and in an orderly manner.
