Xcite Energy Limited (XEL) 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 (XER).

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.

Business Strategy

Bring the Bentley field into commercial production

Grow its reserves base from the existing 116 million barrels of oil equivalent
(“MMboe”) of 2P reserves through the conversion of its prospective resources base

Grow its resources base further through drilling activity on Blocks 9/3c and 9/3d

Employ enhanced oil recovery processes (“EOR”) to further increase its resource base

Increase its asset portfolio through license rounds and asset transactions whilst utilising its heavy-oil expertise to leverage opportunities


http://www.xcite-energy.com/

2012 in Review and the way ahead Robert Cole Video

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Would be nice to see what you have typed as been away all weekend and just logged on.

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http://oilbarrel.com/news/xcite-energy-tantalises-shareholders-as-it-sells-bentley-well-data-for-us-15-million

May 28, 2013

Xcite Energy Tantalises Shareholders As It Sells Bentley Well Data For US$15 Million



Xcite Energy surprised – in a good way – its followers last week when the AIM-quoted company announced the sale of a package of technical well data for US$15 million. This is an unusual move but then £300 million market cap Xcite has prided itself on thinking outside the box when it comes to its 100 per cent owned Bentley heavy oilfield in the North Sea.


The confidential deal covers technical data for the Bentley 9/03b-6, 6Z well and the 9/03b-7 and 7Z extended pre-production well test plus associated interpretation work. Xcite will receive an additional payment of US$1 million when the buyer passes certain regulatory milestones.

This is good news for Xcite, adding up to US$16 million to the coffers. The company ended Q1 with cash of £20.4 million, of which £12.3 million was held in escrow for the Bentley Phase 1A work programme; £11.6 million of this has now been released.

The data sale also underscores the technical credibility of Xcite's work on the Bentley field, signalling that the work has value to other operators. And while there is no information as to the identity of the mystery buyer, investors are obviously speculating that the deal signals some very real interest in the project or possibly the company itself.Xcite CEO Rupert Cole said the deal was “complementary” to the farm-out process that recently got underway, a statement that had industry watchers scratching their heads as companies engaged in the farm-out would surely have had access to this data in the data room as part of the due diligence.

“This has been done without compromising the company's intellectual property and is a good commercial outcome that provides additional working capital," said Cole.

Bentley is a major asset. It was discovered in 1977 by Amoco and is one of the largest undeveloped oilfields in the North Sea. The Bentley field may be heavy oil – between 10 and 12 degree API – but it's a quality reservoir, with oil saturations of more than 90 per cent and high porosity and permeability. Xcite has now drilled three wells into the field – that makes seven altogether when adding in wells already sunk by former operators Amoco and Conoco – and its work has successfully derisked this heavy oilfield, demonstrating it is capable of flowing at commercial rates and firming up 1P reserves of 198 million barrels, 2P reserves of 250 million barrels and 3P reserves of 312 million barrels.

It hasn't all been good news, however. The stock was the darling of the small cap markets, surging more than 700 per cent in 2010, but was dented following a conservative reserves report of 2011 and an FDP knock back by DECC. To restore confidence – and secure a US$155 million reserves-based lending facility - Xcite ran a pre-production test, known was known as Phase 1A, with the well exceeding management expectations. Water breakthrough was better than expected – a key indicator in heavy oil economics – and around 149,000 barrels of oil plus diluent were successfully sold to BP, raising £13.3 million. Importantly, the company now has a better understanding of how oil, gas and water move through the reservoir to help optimise the field development plan.

This, however, is still a long way short of being what most investors consider a developed oilfield. Phase 1B, involving a 15-well template, is the next key milestone and a farm-down is necessary to shoulder the development costs. This will be a key benchmark of how the industry values this project. Bulletin boards are alive with chatter, however, that the company will be acquired before then, with Norwegian oil giant Statoil tipped as the most likely candidate given that it is already signed up for the US$7 billion development of the 250 million barrel Mariner heavy oilfield.

Indeed, industry watchers suspect Statoil could be the mystery buyer of the Bentley well data – after all, £15 million is relatively small change to the Norwegian giant – signalling its potential interest either in a farm-in or corporate transaction. For its part, Xcite is playing its cards close to its chest but once again the AIM company has won plaudits for extracting cash from industry before a deal has even been inked.

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Cancellation of Rowan Rig Option



Xcite Energy announces that its 100% subsidiary, Xcite Energy Resources Limited ("XER"), has cancelled its option for a jack-up drilling unit from British American Offshore Limited, a subsidiary of Rowan Companies, Inc. The rig contract was initially entered into in February 2011 and subsequently amended in February 2012 ahead of the pre-production extended well test on the Bentley field, which was completed in September 2012.



Following the extended well test, which has led to the significant increase in reserves and updated field development plan, the Company no longer believes the terms and structure of the rig option to be appropriate for its commercial objectives.



XER has been in constructive dialogue with other drilling rig providers to develop alternative commercial solutions, which potentially would deliver better strategic alignment and fit for purpose structures to reflect the amended Bentley field development programme. Consequently, Expressions of Interest have now been issued to a number of drilling rig providers to formally develop an optimised drilling solution for the Bentley field.



Rupert Cole, CEO of Xcite Energy, commented:



"We are grateful for the provision of the Rowan Norway and the associated drilling support during the successful extended well test last year. The amendments to the Bentley field development plan have given us the opportunity to construct a more commercially attractive and longer term approach to drilling up the field, and we are encouraged by the alternative structures that the industry has to offer. We look forward to updating the market in due course on the outcome of this initiative, which could further enhance the economics of the Bentley field development."

Completing; forming a complement.
(of two or more different things) Combining in such a way as to enhance or emphasize each other's qualities.

Xcite Energy is pleased to announce that its 100% subsidiary, Xcite Energy Resources Limited ("XER"), has entered into a non-exclusive, confidential, binding sale and purchase agreement ("Agreement") for certain technical data in respect of the Bentley 9/03b-6, 6Z well, and the recently concluded 9/03b-7 and 7Z extended pre-production well test.

Under the terms of the Agreement, XER will receive $15 million in respect of the well data and associated interpretation work. An additional payment of $1 million will be made to XER following certain regulatory milestones being achieved by the purchaser.

Rupert Cole, CEO of Xcite Energy, commented:

"We are very pleased to have completed this agreement, which is complementary to the recently commenced farm-out process....."

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looks like she is starting to blow at long last

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Or to put it another way?

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Taken from iii

Statoil are progressing with two major North Sea heavy oil projects involving a spending commitment of at least £12.5 billion with Bressay costing about £5.5 billion and Mariner £7 billion. In fact the UK government reported last summer that over the next 45 years Statoil would be spending around £18 billion on these two heavy oil projects alone.

However, in my opinion, this massive spending commitment could be revised quite dramatically in the downward direction if they succeed in incorporating a technology/IP methodology which is currently in the closely guarded possession of one of their neighbours – no prizes for correctly guessing who that would be. I will try and expand on this toward the end of this post.

Please allow me first of all to elaborate on Statoil’s Mariner plan and accept my apologies if it becomes a bit technical – bear with it if you can.

Mariner is approximately twice the size of Xcite’s Bentley field in terms of oil in place with nearly 2 billion barrels from two relatively shallow reservoirs (Maureen formation & Heimdal sandstones of the Lista formation) of which approximately something like 300 to 500 million is expected to be recovered while the Bressay field has a further 200 to 300 million barrels of recoverable oil. Bentley competes well with these two fields having recently reported 250 million barrels of 2P reserves. Take note that all of the reserves figures I’ve quoted here are before taking in to account of EOR techniques. The Bentley figure also doesn’t take account of the oil in its outlying fields.

Last December, Statoil announced awards of the EPC contracts to Daewoo and Dragados for the PDQ (Production & Drilling with Quarters) platform topsides and steel jacket respectively for the Mariner field and similarly for the Bressay field in February this year. The Mariner PDQ is scheduled for delivery to the field by January 2016 with production for 2017 while Bressay is a year behind with delivery of the PDQ by early 2017 and production in 2018.

The method which Statoil intend to use to extract the viscous ultra heavy oil from the Mariner field will involve drilling lots of horizontals in relative proximity to each other and re-injecting copious quantities of the produced water (something like 250,000 bbls/day) in order to maintain a targeted 55,000 to 75,000 bbls/day of oil production. The PDQ platform will feature 50 well slots and tie in to a circular shaped floating storage unit (FSU) which will be used to store up to 1 million barrels (75% crude, 25% diluents) of oil. The FSU will have the ability to export 20,000 barrels of diluents to the PDQ platform to mix with the heavy crude and will also have the ability to receive 80,000 barrels of the mixed crude from the PDQ for eventual forwarding on to a shuttle tanker.

The produced well fluids will be separated into oil and water on the PDQ with the water being re-injected back into the reservoir in order to maintain the required pressure to lift the oil. In a 2011 Statoil presentation it was indicated that the Maureen formation they plan to utilise 16 producers and 6 water injection wells while the much more viscous Heimdal formation will require 44 dual multi laterals, 3 producers and 32 water injection wells. The Bressay PDQ will have something like 30 well slots and utilise 25 producer wells.

So, Statoil are going to be drilling a massive number of wells from the Mariner and Bressay fields in order to get them to produce. They’re also going to be re-injecting an awful lot of water to help maintain the production over time which requires a lot of energy. Both the capital investments required and operational costs are significantly high. Hold this thought about the high costs involved while I now elaborate on what Xcite are doing.

Since Xcite announced their recent major upward revision of reserves of the Bentley field they have revised the field development concept from a 3 phase development (requiring 3 platforms) and costing an initial $320million investment to a 2 phase development (requiring 2 platforms) costing initial $699million investment. The earlier concept would have produced 15,000 barrels/day in phase 1B while the first phase of the revised concept will produce up to 45,000 bbls/day.

Xcite have cancelled the Rowan jack-up rig contract and are now proceeding in developing an optimised drilling rig solution utilising a Production, Utilities & Quarters (PUQ) platform. The first phase PUQ will have 20 well slots. There will be 18 producers each with up to 4 or 5 laterals each, two subsea gas production wells and one subsea water injection well for the South East Bentley area. The first phase will also include an extension phase which will include 2 more producers and 2 water injection wells. For the second phase, a further 20 well slot PUQ platform is planned with 8 producers and 3 water injection wells with the remaining well slots reserved for later EOR wells.

Bearing in mind that Bentley oil is more viscous than Mariner and slightly more viscous than Bressay, to my mind, the number of wells required and especially the number of water injection wells required on Bentley seems considerably less than what is required on Mariner & Bressay. How is this so? That must be a question running through the minds of other majors. This would be one very good reason why a company like Statoil might be very interested in seeing Xcite’s EWT data and to even want to pay a significant sum ahead of a dataroom process suggests a sense of urgency to see this data. It may not give away the secret of how it’s done but it will at least show the proof it can be done. Xcite have demonstrated with Bentley that it is possible to lift heavy oil of just 10 degrees API and for what seems to be a significant fraction of the costs of their competitors. I appreciate that Bentley may have some superior oil qualities including possibly a better aquifer over the Mariner or Bressay fields however I would suspect these advantages alone are not sufficient to explain the reduced number of wells and minimal water re-injection proposed on Bentley in comparison to Mariner or Bressay.

The Rowan rig cancellation raises an interesting question. Xcite are now forecasting first oil in late 2015 on the assumption funding and FDP is all in place by 3Q of this year. Either they are confident they can independently source a suitable PUQ platform and have it ready for installation in 2015 or they’re relying on a deal with an industry partner where the partner already has a suitable rig to put in place for then.

This latter possibility brings me back to Statoil. As I already mentioned earlier they already have two PDQ rigs planned for construction, the Mariner rig for 2016 delivery and the Bressay rig for 2017 delivery. Is it conceivable that they could do a quick adaptation of the Bressay/Mariner rig designs, to produce a suitable modification and place an order with the existing EPC contractors for an additional rig and put the modified design ahead of the queue for use on the Bentley field? This could be a feasible scenario if Statoil have everything to gain by partnering with Xcite and acquiring some significant stake in or outright purchase of Bentley and assumes that there is significant benefit in utilising Xcite’s IP methodology on Mariner & Bressay. Statoil’s partners for Mariner & Bressay (Shell, ENI, OMV & Nautical) would also stand to benefit from the potentially massive cost savings and therefore would quite possibly willingly approve such radical changes to the development plans on Mariner & Bressay.

At the last quarterly results Statoil (current market capital approx £37 billion) reported £7 billion cash/cash equivalents, nearly £13 billion debt, and net debt to capital employed ratio of 13%, with adjusted net earnings of £4.6 billion against revenues of 17.7 billion. To my amateurish eyes this looks like a good state of financial health. I believe the involvement of Statoil in a farm in of Bentley is a likely prospect while a full takeover Xcite or 100% acquisition of the Bentley field by Statoil is also not out of the question.

My main point is that access to Xcite’s IP methodology for lifting heavy oil may be key in providing an opportunity to save not just £millions but hundreds of £millions if not even £billions on their existing heavy oil projects not to mention the savings on future heavy oil projects. A Society of Petroleum Engineers paper reported that there’s an estimated 9 billion barrels of heavy oil in place still to be unlocked in the North Sea alone. To think that Statoil would pass off on an opportunity like this would be madness.

There is of course plenty of other potential competition for involvement in the Bentley farm in and ultimately I feel Xcite are likely to end up with several industry partners supporting the project. What proportion of Bentley Xcite will be give away is impossible to predict but I believe any of Statoil’s partners in Mariner & Bressay are likely to express an interest to farming in to Bentley (with or without Statoil) not to mention other industry players with nearby interests such as Enquest or BP and Total etc.

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http://www.investegate.co.uk/xcite-energy-limited--xel-/rns/memorandum-of-understanding-with-amec/201306120700048127G/



Memorandum of Understanding with AMEC



Xcite Energy announces that its 100% subsidiary, Xcite Energy Resources Limited ("XER"), has entered into a Memorandum of Understanding ("MOU") with AMEC Group Limited ("AMEC") setting out commercial principles for future cooperation to support the development of the Bentley Field.



XER and AMEC will shortly commence a front-end engineering and design (FEED) programme, during which the terms for a wider services agreement are expected to be formulated to include project and programme management and controls, further detailed engineering and design, fabrication management, sub-contractor management, hook-up and commissioning, operations and maintenance planning and system build, and Duty Holder services.



XER and AMEC intend to build on the already agreed MOU principles to optimise the commercial benefits for all stakeholders and provide a strong foundation for the life-of-field technical and operational solutions.



Rupert Cole, CEO of Xcite Energy, commented:



"We are very pleased to have developed our existing relationship with AMEC to create the basis for these commercial arrangements. I believe that AMEC's expertise and track record in delivering major UKCS offshore and heavy oil projects will complement the Company's own skillset to deliver a best in class development programme. This is another industry confirmation of Bentley as one of the largest development-ready North Sea fields and provides further, complementary support to the current farm-out process as we progress towards development."

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mnamreh it needs more than Bollinger bands tightening it need a rocket up its arse.

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