The failure of Xcite Energy Limited (LON:XEL) doesn’t have much to do with oil prices or geology, not according to WH Ireland analyst Brendan Long.
Xcite this week flagged that a debt for equity swap, currently under negotiation, will leave existing shareholder with very little, if anything at all.
WH Ireland analyst Brendan Long, in an interview with Proactive Investors, says Xcite has a “very high quality” asset, but, he explains how ‘above ground’ issues have undermined what was a strong proposition.
“It [Xcite] has circa US$174mln of bond debt and no revenues,” he said. “That does not work in any business, oil and gas or otherwise, so in some respects you might say that the downturn in oil and gas allows for a more graceful exit.”
He added: “it [Xcite’s problem] is not really reflective at all of the possibilities and potential of the geology of the North Sea, it is just that [funding strategy] just doesn’t work.”
Long says Xcite could be seen as a cautionary tale for a number of other growing North Sea oil juniors that are currently enjoying “an exciting period” – specifically in his interview he discusses Hurricane Energy Plc (LON:HUR), The Parkmead Group Plc (LON:PMG), and Jersey Oil & Gas Plc (LON:JOG)