US Edition Xcite Energy
82p+18¼
Questor says HOLD
INDEPENDENT North Sea developer Xcite Energy announced an agreement with oil majors Shell and Statoil that sent shares in the Aim-listed oil business up almost 29pc. If the data shows commercial production is possible then it could start a bidding war for the UK-listed oil minnow.
The successful development of the Bentley heavy oil field is critical to Xcite. The company doubled its estimates of the potential reserves there last year. However, the gap between large estimates of reserves and actually getting the black stuff out of the ground is very wide.
Xcite moved a step closer yesterday but getting the Bentley field into production is forecast to cost at least $700m (£416m) before the project turns profitable, which is expected towards the end of 2015. Xcite has some flexibility as regards its ability to finance itself, although it is seeking a partner to help it exploit the field.
An Xcite division and the two oil majors will share field-specific information for the evaluation of the field. The trio will work towards using common infrastructure, assets and operational solutions in the field’s development.
The Bentley field is 100pc owned by Xcite’s Energy Resources unit.
“We are pleased to continue to work with Statoil and Shell in this important initiative and, following their purchase of the Bentley data in 2013, believe that it demonstrates the value that independent oil companies can bring to the North Sea to unlock major energy assets,” said Rupert Cole, Xcite chief executive.
Xcite shares are certainly not for the faint-hearted, having traded in a wild range from lows of about 4p in late 2008 up to nearly 400p in early 2011. Questor thinks yesterday’s announcement removes some of the risk and those with a healthy appetite for the risk still remaining, and who can stomach some wild moves, could benefit if the data is positive.
Hold.