Xcite Energy LTD (XEL)


Xcite Energy deems 2013 "important"

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Xcite Energy (XEL) on Friday said that 2013 would be an "important" year for the company as it released its nine-months results to 30 September.

The oil and gas company narrowed its losses to £0.8 million from £1 million in the corresponding period the previous year. Cash at the end of the period stood at £54.6 million, following net new equity capital and debt financing of £21.2 million in the third quarter.

The cash balance includes an escrow of £44 million relating to the Bentley Phase 1A work programme, a significant amount of which is expected to be returned to the company in due course.

The third quarter also saw an issue of an additional $10 million of unsecured 14% loan notes to West Face Capital, while the company signed a $155 million reserves based lending facility in June to provide a substantial part of the Phase 1B work programme funding requirement.

Operationally, the Bentley pre-production well test successfully and safely concluded in September, with initial well test results exceeding management expectations - the company produced approximately 149,000 barrels of Bentley crude, which was combined with approximately 58,000 barrels of diluents.

The 9/3b-7 and 7Z wells have been suspended for future use as production wells during Phase 1B and the Rowan Norway demobilised from the field, with all associated equipment off hire.

Post the period end, the UK Department of Energy and Climate Change (DECC) has offered the company licenses over Blocks 9/4 (part), 9/8b and 9/9f (split) as applied for in the UK 27th Offshore Licensing Round. "These licences could add significant additional value to a Bentley hub development concept," Xcite said.

Looking ahead, 2013 is promising to be a year of activity, with an updated competent persons report, discussions with potential farm-in partners, the re-submission of the updated field development plan to DECC and the initiation of the Phase 1B work programme, the planning for which is well underway.

Investor reaction

Users of Interactive Investor were divided on the news, with there being slightly more seller than buyers.

User 'swingy' said: "There's never been such a safe play on AIM. If you can ride out the fluctuations and put up with the twaddle on the bulletin boards, there's enormous potential. Farm in talks will lead to eventual takeover. Whatever happens, ... this company is sitting on a very commercial proven prospect. Strong buy for all timescales."

'MARKET CHASER' was more sceptical: "Another missed opportunity by the [Board of Directors] to put a floor under the share price - NO detail on anything and an entirely predictable statutory announcement that is not what was hoped for by many.

"As a long term and substantial holder here I am starting to consider whether or not to de-risk and halve my holding and reinvest elsewhere for the time being as I am sick of seeing the paper loss here on my portfolio every day. Sell order placed."

The user added: "[If] this was such a sure bet ... why haven't Statoil just taken Xcite out? At 200p a share, I know plenty of shareholders would be delighted to see the back of this. Clearly, there is more to this than meets the eye. For now, and possibly the next 6 months, I can't see us breaking above 110p and staying there if progress continues to be so sluggish with the data analysis and engagement of potential interested parties (assuming that there genuinely are any).

"Clearly we still haven't satisfied the consortium banks yet to confirm that the $155 million RBL is a certainty. The company continue to fail to manage expectations and that is why there is NO institutional support for the stock."

User 'BigBear2' echoed this view: "Every man and his dog is aware that the short term value driver is farm-in talks - To casually announce the data room is not ready ... is a joke. [It] pains me to say it, but I have lost confidence and if the chance presents itself, [I] will be looking for the exit door at a painful loss."

'blackeyes' stressed that he would continue to hold the stock, but acknowledged: "I'm also a little frustrated [that] the Xcite team seems a little slow in delivering.

"But as [has been] pointed out, technically we have a first class team, and [in the] long term, Xcite is a great investment."