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Xcite Energy Limited (XEL)

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Tuesday 10 May, 2011

Xcite Energy Limited

Bentley Upgrade to Reserves Status

RNS Number : 2510G
Xcite Energy Limited
10 May 2011







10 May 2011


Xcite Energy Limited

("Xcite Energy" or the "Company")


Bentley Upgrade to Reserves Status



Xcite Energy, a developer of heavy oil assets in the UK North Sea, is pleased to announce the results of an evaluation of the Company's oil and gas properties in which it holds an interest, pursuant to which "reserves" have been assigned.  The Company, through its wholly owned subsidiary Xcite Energy Resources Limited ("XER"), holds a 100% working interest in Block 9/3b, which contains the Bentley field (the "Field") and a 100% working interest in Blocks 9/3c and 9/3d (both adjacent to the Field). These Blocks are located in the North Sea in the United Kingdom (collectively, the "Company's Assets").

The Company has recently drilled and tested the 9/3b-6 and 6Z wells in the northern part of the Field, which demonstrated commercial flow rates and, on this basis, XER commissioned TRACS International Consultancy Ltd ("TRACS"), an independent qualified reserves auditor, to prepare an independent audit of reserves and resources for the Company's Assets.  That audit by TRACS is set out in the Reserves Assessment Report ("RAR") dated 9 May 2011 and effective 30 April 2011, prepared using guidelines outlined in the Canadian Oil and Gas Evaluation Handbook and in accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities.

This assignment of reserves to the Field is a key milestone to enable the Field to be developed, commencing with the First Stage Production ("FSP") currently being planned by the Company in the Core Area (as defined below).  The Company intends to submit the Field Development Plan for the FSP to DECC (as defined below) shortly. 



Highlights of the RAR


Ø Oil reserves of the type 1P, 2P and 3P in the FSP of approximately 22 MMstb, 28 MMstb and 35 MMstb, respectively.


Ø NPV10 (after tax) for the FSP oil reserves types 1P, 2P and 3P of approximately $229 MM, $396 MM and $558 MM, respectively.

Ø Contingent resources for the remaining Core Area of the Field  in the Second Stage Production ("SSP") (i.e. in addition to the reserves stated above) of approximately 73 MMstb of oil, 87 MMstb of oil and 101 MMstb of oil on a "low estimate", "best estimate" and "high estimate" basis, respectively. 


Ø Conversion of contingent resources to reserves anticipated on project sanction and deliverability of the SSP.  No technical contingencies remain.


Ø NPV10 (after tax) for the contingent resources for the remaining Core Area of the Field in the SSP (ie in addition to the reserves stated above) of approximately $661 MM, $961 MM and $1315 MM, on a "low estimate", "best estimate" and "high estimate" basis, respectively.


Ø RAR assigned prospective resources for seven (7) prospects on the Company's Assets of, in the aggregate, approximately 17.7 MMboe on a risked "best estimate" basis.

Ø Management has confirmed that it will continue to incorporate updated modelling and latest technologies through the life of Field, including the potential application of enhanced oil recovery techniques. As a result of further, successful drilling, management expects prospective resources to be upgraded to contingent resources and contingent resources to be upgraded to reserves as the Field development matures. The combination of these factors is expected to materially improve the ultimate recovery of oil from the Field.


Summary of the RAR


The RAR focused on the reserves accessed from a single drill centre for the northern Core Area of the Field relating to the FSP.  In addition, the RAR assessed the Core Area development scenario, incorporating the FSP and the SSP, together with the additional prospective resources within the Company's Assets, all of which have yet to be drilled, predominantly the Bentley East structure.


All reserves and resources being reported in the RAR assume only the use of conventional, cold-flow recovery techniques.  The Company believes that enhanced oil recovery techniques to be assessed in due course have the potential to increase recovery from the Field.


Analysis of the long-term well performance during the FSP will help determine the design of the wells for the SSP.  It is the intention during the FSP to conduct pilot tests for the potential enhanced oil recovery techniques to be used in due course.



Richard Smith, Xcite Energy Chief Executive Officer, commented:


"This is an excellent outcome following the successful 9/3b-6 and 6Z wells.  The Reserve Assessment Report confirms management's belief in the commercial value of Bentley and its potential as one of the largest undeveloped fields in the UK sector of the North Sea.  This reserves upgrade allows us to proceed with the First Stage Production and is a key milestone in our program to determine full field reserves and deliver significant value for shareholders."


A summary of the Company's updated reserves and net present value of future net revenue dated effective 30 April 2011 will be set out in a Material Change Report to be filed by the Company at in connection herewith.




Xcite Energy Limited




+44 (0) 1483 549063

Richard Smith

Chief Executive Officer


Rupert Cole

Chief Financial Officer





Arbuthnot Securities Limited

(Nomad and Broker)



+44 (0)20 7012 2000 

Antonio Bossi






Pelham Bell Pottinger


+44 (0) 20 7861 3232

Mark Antelme

Henry Lerwill





Paradox Public Relations


+1 514 341 0408

Jean-Francois Meilleur







Contingent resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political, and regulatory matters, or a lack of markets. There is no certainty that it will be commercially viable to produce any portion of the contingent resources.


The risks and uncertainties associated with recovery of the contingent resources for the Company's Assets which prevent them from being classified as reserves are, as set forth in the RAR, project sanction and deliverability of the SSP.


Prospective resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development.  Prospective resources are further subdivided in accordance with the level of certainty associated with recoverable estimates assuming their discovery and development and may be sub-classified based on project maturity.


There is no certainty that any portion of the prospective resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the prospective resources.


The principal risks and uncertainties associated with the recovery of the prospective resources (over and above the contingent resources) which prevent them from being classified as contingent resources are that they have not yet been confirmed by appraisal drilling.




"1P" means proved reserves.


"2P" means proved plus probable reserves.


"3P" means proved plus probable plus possible reserves.  Possible reserves are those additional reserves that are less certain to be recovered than probable reserves and there is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.


"best estimate" is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.


"boe" means barrels of oil equivalent.  Boe's, derived by converting gas to oil in the ratio of five thousand eight hundred cubic feet of gas to one barrel of oil, may be misleading, particularly if used in isolation. A boe conversion is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.


"Core Area" means FSP and SSP.


"DECC" means UK Department of Energy and Climate Change.


"FSP" means First Stage Production in the core area of the Field.


"high estimate" is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. If probabilistic methods are used, there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate.


"low estimate" is considered to be a conservative estimate of the quantity that will actually be recovered.  It is likely that the actual remaining quantities recovered will exceed the low estimate.  If probabilistic methods are used, there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate.


"MM" means millions.


"MMboe" means millions of barrels of oil equivalent.


"MMstb" means millions stock tank barrels.


"NPV10" means net present value in money of the day using a 10% forward discount rate, which values do not represent fair market value.


"SSP" means Second Stage Production in the core area of the Field.


"$" means US dollars.


Forward-Looking Statements           


Certain statements contained in this announcement constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to the Company's future outlook and anticipated events or results and, in some cases, can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "target", "potential", "continue" or other similar expressions concerning matters that are not historical facts. These statements are based on certain factors and assumptions including expected growth, results of operations, performance and business prospects and opportunities. While the Company considers these assumptions to be reasonable based on information currently available to us, they may prove to be incorrect. Forward-looking information is also subject to certain factors, including risks and uncertainties that could cause actual results to differ materially from what we currently expect. These factors include risks associated with the oil and gas industry (including operational risks in exploration and development and uncertainties of estimates oil and gas potential properties), the risk of commodity price and foreign exchange rate fluctuations and the ability of Xcite Energy to secure financing. Additional information identifying risks and uncertainties are contained in the Company's annual information form dated October 26, 2010 and in the annual Management's Discussion and Analysis for Xcite Energy dated March 24, 2011 filed with the Canadian securities regulatory authorities and available at The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required under applicable securities regulations.


Statements relating to "reserves" or "resources" are deemed to be forward-looking statements or information, as they involve the implied assessment, based on certain estimates and assumptions, that the resources and reserves described can be profitable in the future.   There are numerous uncertainties inherent in estimating quantities of proved reserves, including many factors beyond the control of the Company.  The reserve data included herein represents estimates only.  In general, estimates of economically recoverable oil reserves and the future net cash flows therefrom are based upon a number of variable factors and assumptions, such as historical production from the properties, the assumed effects of regulation by governmental agencies and future operating costs, all of which may vary considerably from actual results.  All such estimates are to some degree speculative and classifications of reserves are only attempts to define the degree of speculation involved.  For those reasons, estimates of the economically recoverable oil reserves attributable to any particular group of properties and classification of such reserves based on risk of recovery and estimates of future net revenues expected therefrom, prepared by different engineers or by the same engineers at different times, may vary substantially.  The actual production, revenues, taxes and development and operating expenditures of the Company with respect to these reserves will vary from such estimates, and such variances could be material.

Consistent with the securities disclosure legislation and policies of Canada, the Company has used forecast prices and costs in calculating reserve quantities included herein.  Actual future net cash flows also will be affected by other factors such as actual production levels, supply and demand for oil and natural gas, curtailments or increases in consumption by oil and natural gas purchasers, changes in governmental regulation or taxation and the impact of inflation on costs

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.


This information is provided by RNS
The company news service from the London Stock Exchange

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