Is Xcite set for a bidding war?

A collaboration agreement between a subsidiary of Xcite Energy, Royal Dutch Shell and Statoil has prompted rumours of a takeover.

The market reacted positively to the news and Xcite's share price rose by over 16% in morning trading to 74.25p with a spread of 0.75p. The group has a market capitalisation of £185 million and was the best performer in the AIM 100 index, which was down in morning trading.

Xcite Energy Resources (XER) and the two leading oil and gas companies will share field-specific information for the evaluation of collaborations between the Bentley and Bressay fields. The trio will work towards using common infrastructure, assets and operational solutions in the fields' development.

The Bentley field is 100% owned by XER. Statoil has a 81.625% working interest in the Bressay field and Shell holds the remaining stake.

Chief executive Rupert Cole said: "We are pleased to continue to work with Statoil and Shell in this important initiative and, following their purchase of the Bentley EWT data in 2013, believe that it demonstrates the value that independent oil companies can bring to the North Sea to unlock major energy assets.

"We also believe that the principles contained in this Collaboration Agreement complement the recent UK Government commissioned report, 'UKCS Maximising Recovery Review' by Sir Ian Wood, and will provide an important early framework through which additional value can be captured in area development scenarios."

Investor view

The majority of users on the Interactive Investor discussion board were pleased with Tuesday's update, with some saying it indicated interest in a potential takeover.

'Bigbootsss' said: "Not only did Statoil buy the data, so did Shell. So two biggies toying for the asset. Will they work together or will this eventually end up in a bidding war for XEL? Either way this is a massive announcement and a win-win for XEL and their shareholders."

'RedDragon3' thought the update signalled a cheap acquisition of assets. The user said: "So the move to acquire Xcite's assets as cheaply as possible continues apace. Shell and Statoil will not be doing this for nothing. Ask yourself who is in the strongest bargaining position, the people who own the safe, or the people who have the combination and the means to open it."

However, 'wahlburg' said: "Rubbish. If they wanted to acquire XEL as quickly as possible the time would be now. XEL have 'the combination and the means to open it' as demonstrated by the data sale."

Rating Xcite 'buy', 'ArtemisSA' commented: "Another good news story again this morning. Could Xcite be about to live up to its name? Someone said on here recently that the supermajors wouldn't have any interest in Xcite. I don't believe that for a minute. Statoil have always been in the wings. As the large oils increasingly struggle with their CAPEX, maybe little ol' Xcite has something useful to teach them. As for the 'worked-out' North Sea, the LSE:BP.:BP chief for North America at the OTC in Houston yesterday named the North Sea as one of the company's four most important areas globally."

Also dismissing cheap asset buying, 'BigBootsss' added: "It is clear that Rupert is playing hard ball here. Will not sell the asset on the cheap, he knows what it is worth, more importantly is that Statoil AND Shell know how important and how good this asset is, so what Rupert is doing is getting into bed with two majors but will only get out when the right number is put in front of him. Ask yourself why would Statoil and Shell link up with such a minnow if there was not an end game here? Take out by both or either, either way this is massive for XEL shareholders."

Bentley field

Drawing attention to the timeline of the Bentley field, 'rollthediceagain' said: "XEL quantified the asset years ago so when are they actually going to monetise it by actually producing anything? It's fine getting in bed with all these big names but why's it taken so long and what's the timeline to production."

'Palspurs' replied: "Wait for developments. This confirmation is the first concrete step to production. Hopefully this process will move apace - note the reference to the Wood report. We are going to production - it's now a matter of time as the process and stages to production are ticked off - yipee indeed and at last."

Now the collaboration had been agreed, 'Tomthebomb' thought the timeline would now speed up. "If anyone was ever worried about holding XEL it should have changed now. We are now operators with a 100% interest in a 256 metre 2P field including memorandum of understandings with TEEKAY, AMEC and ARUP. We have sold 150,000 barrels to BP for $100 per barrel (p/b). We now also have an agreement in place with Statoil and Shell.

"Development of Bentley will be fast tracked now in my opinion. We should also get information with regards to reserve-based lending soon. A takeover is looking even more likely now. I want the board of directors to make sure they have drilled at least one in Blackbeard before selling up though. We have potentially another Bentley there. $15-20 p/b x 2..."

Of the market's reaction to the update, 'Ranger gb' said: "This should fly, we should easily be at 120p in short term based on this great news not 70p.

However, some users were not convinced by the news. 'Middler2' said: "I wish I could be as confident. The RNS said virtually nothing. What does collaboration mean? And why Shell? If BP or Statoil thought it was that good, why not say they will provide the finance and infrastructure and let XEL lead with their understanding of the field? I am afraid I don't even see it as a holding RNS and I really want to. XEL is my biggest holding."

'Wahlburg' reminded the user: "Why Shell? Because they have an 18.375% interest in Bressay."