.

From the motley

The share price of Xcite has certainly been interesting to watch over the last couple of months or so.

Indeed from a peak of 420p -upon release of the flow test results- it has mysteriously gone walkabout down to 300p where the shorters have found a support level hard to breach.

Having gone back through all my postings on this stock over the last few months I am quite satisfied that I have made the right investment calls since July of last year. The exception to this was when a few days after announcement of the flow test results I somewhat over exuberantly opined/predicted that the stock would head up to 600p in anticipation of a release of an updated CPR. How wrong I was !!

So the question really is - what has happened to dampen the share price and why do we still have when I think is a disconnect between subjective fundamental value and the market's current price for this stock ?

I would offer the following as explanatory factors for this stock's subdued performance so far this year.

1)Shorters have been out on force as the usual deramp crews have tried to sow fear and misinformation. This strategy has been markedly successful over the last 6 weeks. Doubts have been successfully cast as to the nature and validity of the flow test conducted by the bucket and spade brigade as well as the reasons for the apparent change of independent reserves auditor drafting up the reserves report.

2) The Bentley alliance terms are still not known to the market and that lack of transparency will continue to hold the share price back as it makes it difficult for analysts to assess the stock's true leverage to the oil price as well as the economic netback to Xcite.

I am afraid that the Board will need to come clean on this at some time although I do acknowledge that at the oil barrel conference they did indicate that the economic returns to the partners would be risk adjusted and be within market parameters. Still, this disclosure is insufficient but I guess that the Board have their communication strategy planned in advanced for this year prior to FSP.

3) The market is still waiting for the Reserves update and 200 Mio bbls seems to be the consensus priced in. Obviously this reserves update will be the key driver of share price value over the coming months. The delay in the release of this from end Feb/early March to late end March/early April has somewhat shaken some people's confidence given the previously immaculate communication track record of the Board. This said the Board is correct in my opinion to be patient and take the time necessary to maximize the value of the report.

Not long to go now but I expect a reserves estimate circa 250 mmbbls.

4) The uncertainties around funding and the rumours of a discounted placing for institutional investors have also contributed to the shareprice's lack lustre performance. Viewed in this context, this morning 's announcement of an increase in the SEDA line to GBP 100 Mio is a very significant and positive development as it effectively puts the finance in place for FSP. I think that this speaks volumes for Yorkville's confidence and I am sure that they would not have increased their exposure without having a pretty firm preliminary indication of the reservoir numbers and technical characteristics.

Lastly the situation in the Middle East and Japan has also to be taken into account although I don't think that they are fundamentally negative in the long run for Xcite as

a) The trouble in the Middle Easst only highlights the growing attractiveness of oil reserves in the North Sea

b) The problems inherent in producing nuclear power will make oil and gas more attractive assets (particularly gas)

So really not long to go now before the reserves assessment report comes out ( within 30 days my guess if not before) and only 9 months to go before FSP.

Will the share price be 315 p in December ? If the oil price does not collapse I don't think so !!

for an easy eaner i left it late

iam in target 400p and out

and gla

http://www.youtube.com/watch?v=L5YUCygMBiE

http://www.bbc.co.uk/news/

http://www.bbc.co.uk/news/

creeping up towards 4 in readyness for news SOON!!

Ouch

Numis: Oil & Gas; North Sea Supplementary charge hike impacts


The government has just announced that the supplementary charge on North Sea production will rise from 20% to 32%. If oil prices drop below 75$/bbl for a sustained period then supplementary charge will fall back towards 20% (no detail on the exact mechanism).

We estimate the NAV impact on the UK producers we cover below.




EnQuest: EnQuest remains exposed to the rate hike once existing tax losses have been utilised. It is one of the most exposed companies in our coverage given its 100% UK North Sea asset base. As a result of the tax change we estimate that our NAV will drop from 178p/share to 160p/share (-10%).
Premier Oil: Approximately 31% of 2011 forecast production and 40% of NAV is supported by North Sea assets. As a result of the tax change we estimate that our NAV will drop from 2339p/share to 2280p/share (-2.5%). A material remaining UK North Sea tax loss position acquired with Oilexco helps minimise the impact.
Nautical Petroleum. Our first take on the impact of the tax increase is a reduction in our Nautical NAV from 707p to 610p (a 14% downgrade). The key impact is on our valuation of the Kraken field (270p down to 212p), which is eligible for the UK's 800m heavy oil tax allowance. In our view, Kraken will now exhaust this allowance much faster, and incur the higher tax charge sooner than expected. The estimated impact on the Catcher development is more muted (down from 175p to 147p).
Xcite Energy. Xcite's 100% exposure to the Bentley asset amplifies the impact of the tax increase - at first glance our Xcite NAV reduces from 630p to 370p (a c.40% downgrade). The scale of the Bentley development means the field's production (and earnings) are expected to increase gradually over 5-6 years as additional production wells are drilled. While the UK's heavy oil tax allowance had previously insulated Xcite against the supplementary charge while the field was at its most productive, under the new 32% rate Xcite will exhaust this allowance quickly and hence face a significantly higher tax burden sooner in our NAV.
Numis Comment: Today's tax hike was unexpected and has a significant negative impact on company valuations. Today's announcement suggests that the government may put in place a more comprehensive sliding scale mechanism that limits returns for UK North Sea producers when oil prices rise. Recent fiscal changes (introduced in 2009) to incentivise the development of stranded assets and unconventional resource have been partially negated by today's announcement. We believe this may have a negative impact on the life of the North Sea and the associated service market.

that's very dull .... no wonder sp took a bashing, but can't see the logic for why this big increase ..... i would have thought the gov't would have wanted to encourage the maximum extraction from what remains of our north sea assets rather than truncate them

All to pay for the petrol in your tank for visits to brad on Avon cyners.,.

thank goodness i walk to the office!

i wonder how the market will treat XEL this morning ..... further, i wonder if this now makes XEL more or less of a t/o target .... my guess is the former

Morning all,i dont think we need to worry


North sea oil companies hit by increase in tax

WEDNESDAY, MARCH 23, 2011 AT 4:58PM

After hitting close to 370p in early trades, Xcite energy fell over 5% or 19p to 342p on news from the Budget that the supplemental corporation tax for North Sea oil and gas companies would rise from 20 percent to 32 percent on top of normal corporation tax meaning a 62 percent tax on profits in total.

The increase in taxation applies when the price of oil (Brent) is over $75 a barrel. Not great news!

But fortunately Xcite's Bentley oil field is a heavy oil field which attracts 160 million a year of tax relief on profits for up to 5 years.

So 800 million of tax relief is available to Xcite which means it will not pay tax until 2017. (see First Energy report 11 February 2011:

fmlinfo.co.uk/uploads/xel/pdf/Focus-C-XEL_LN-2011-02-15.pdf page 8 "The UK governments recent scal changes in favour of heavy oil assets will allow Xcite to claim up to 800 mm in tax credit spread out over ve years. We expect the Company will not pay any tax until 2017.

The UK governments recent scal changes in favour of heavy oil assets will allow Xcite to claim up to 800 mm in tax credit spread out over ve years. We expect the Company will not pay any tax until 2017."

However for the likes of Encore (down 5.2% to 108p), Nautical (down 10% to 399p) and Ithaca (down 6% to 158p) no such luck.

Given the fact that Xcite's Bentley field is subject to this heavy oil tax relief and the other companies listed above aren't, Xcite's drop today seems overdone, unless of course there's something lurking in the small print of the budget document which removes the heavy oil relief.

http://contrarianinvestoruk.squarespace.com/
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interesting post marky, for which thanks .... market remains unconvinced at present

Good find marky, encouraging. NPE have taken a knock but EO. hasn't changed much at the mo.

I would think the company will be taken over by 2017.

http://www.proactiveinvestors.co.uk/companies/stocktube/686/rupert-cole-of-xcite-energy-believes-theres-still-significant-upside-on-asset-value-.html

During the Proactive Investor interview, R. Cole can be quoted as saying we're currenty valued at $4 to $5 per barrel"

...if we should be valued somewhere in between $10 and $15, what is the adjusted share price?

....and what is the baseline recoverable figure XEL are using for their calculations?

If we're valued at $4 or $5 a barrel, we can work the numbers forward using $4.5 as an average to determine the projected value / share price.

$10 a barrel = 7.55
$11 a barrel = 8.31
$12 a barrel = 9.04
$13 a barrel = 9.82
$14 a barrel = 10.58
$15 a barrel = 11.34

These figures are based on a figure for the recoverable reserves. @ 3.40p the market cap is 549.5m / $894m. Divide that by $4.5 and you get 200m.

So 200m is the baseline figure they're using to calculate the current value of $4 to $5 per barrel.

Given that the BoD have a track record for providing conservative figures I'm personally treating 200m recoverable as a baseline figure to work up from. If you adjust to 250m or 300m to determine the projected value / share prices you get the following set of figures.

p/barrel 200m 250m 300m
@ $10 7.55 9.44 11.33
@ $11 8.31 10.39 12.47
@ $12 9.04 11.30 13.56
@ $13 9.82 12.28 14.73
@ $14 10.58 13.23 15.87
@ $15 11.34 14.18 17.01

No company pays tax until it makes a profit, NI apart, long time away.

holding up nicely today.,.

She will be happy baleboy,Cynic was telling me you had a problem in that department.

I've had a viagra injection.........last's for a month :0))

XEL needs a double dose

Highlights



v Successful completion and flow testing of the 9/3b-6z 1,800ft horizontal well on the Bentley field, with a stabilised flow rate of 2,900 barrels of oil equivalent per day, significantly exceeding the pre-drill upside reservoir model expectations;



v Successful 9/3b-6 pilot well showing the eastern flank reservoir height to be greater than prognosis, together with 100% net to gross reservoir pay;



v 9/3b-6 and 9/3b-6z wells have provided all the information required to move forward with the reserves assessment currently being undertaken;



v Recent Budget changes in North Sea tax will not affect the Company's plans to move forward with its First Stage Development. The increased benefit of the heavy oil tax allowances will have a material offsetting effect on the increased supplemental corporation tax charge;



v Successful equity capital financings, raising more than 50 million net of expenses to drill the wells on the Bentley field and for working capital purposes;



v Increase in the Standby Equity Distribution Agreement facility to 100 million, of which 32.75 million has been drawn down;



v Contract signed for the Rowan Norway deep water, harsh environment jack-up drilling and production rig to commence the First Stage Production programme on the Bentley field scheduled for late 2011;



v Significant uplift in the market capitalisation of the Company.