SOURCE: Xcite Energy Ltd

December 21, 2007 16:30 ET

Xcite Energy Limited ("Xcite Energy" or the "Company") Interim Financial Results - 3 Months Ended 31 October 2007

ABERDEENSHIRE, UK--(Marketwire - December 21, 2007) -


THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED STATES

Xcite Energy (LSE: XEL) (AIM: XEL) (TSX-V: XEL) today announces the interim financial results for the three months ended October 31, 2007.

The three month period does not cover the Company's listing on the AIM market of the London Stock Exchange plc and the TSX Venture Exchange as a result of which:

--  The Company raised in excess of GBP 13 million net of expenses and
    commenced trading on November 16, 2007.
--  Proceeds will be used to fund the testing of the Block 9/3b appraisal
    well on the Bentley field (which is due to spud imminently), drilling
    contingencies and working capital and general corporate purposes.
    

The three month period under review saw the Company move forward in its plans to drill the appraisal well on Block 9/3b. Material activities included:

--  Site survey completion in preparation for appraisal well.
--  Completion of drilling plans for submission to the Department for
    Business, Enterprise and Regulatory Reform ("DBERR") for approval.
--  Initial re-interpretation of 3D seismic confirmed increased reservoir
    volumes.
    

All DBERR approvals have now been obtained and the Company is preparing imminently to spud the appraisal well on Block 9/3b.

Richard Smith, Chief Executive Officer of Xcite Energy, commented:

"The support of the investment community at the time of our listing in London and Toronto means that we are fully funded for our near term drilling programme, which is due to commence shortly. We look forward to progressing the development of the Bentley field, targeting first production in early 2009."

Xcite Energy is an exploration and development company currently focused on the appraisal and development of heavy oil resources in the North Sea on the UK Continental Shelf.

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 changes in market and competition, governmental or regulatory developments and general economic conditions. Additional information identifying risks and uncertainties are contained in Xcite Energy' prospectus filed with the Canadian securities regulatory authorities, available at www.sedar.com.

                        INTERIM FINANCIAL STATEMENTS
                      3 MONTHS ENDED OCTOBER 31, 2007

                            Xcite Energy Limited

                                Geneva Place
                              Waterfront Drive
                                P.O. Box 3469
                                  Road Town
                                   Tortola
                           British Virgin Islands

                                     and

                          Banchory Business Centre
                       Hill of Banchory Business Park
                             Burn O'Bennie Road
                                  Banchory
                                  AB31 5ZU

                          Phone: +44 1330 826740
                            Fax: +44 1330 820670

                           www.xcite-energy.com
                           info@xcite-energy.com

                                TSX-V: XEL
                               LSE-AIM: XEL

XCITE ENERGY LIMITED - INTERIM FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
For the 3 month period ended 31 October 2007


                        NOTES    3 Months ended         12 Months ended
                        ---- ---------------------  ----------------------
                              October     October     October     October
                               2007        2006        2007        2006
                             ---------  ----------  ----------  ----------
                                GBP         GBP         GBP         GBP
                             Unaudited  Unaudited   Unaudited     Audited

Administrative expenses        193,481          73   1,021,151         188
                             ---------  ----------  ----------  ----------

Operating Loss                (193,481)        (73) (1,021,151)       (188)

Finance Income - bank
 interest                      111,752          80     145,453         257
                             ---------  ----------  ----------  ----------

(Loss)/Profit before
 tax                           (81,729)          7    (875,698)         69

Tax Expense                3         -           2           -          21
                             ---------  ----------  ----------  ----------

(Loss)/Profit for the
 period attributable to
 equity holders                (81,729)          5    (875,698)         48
                             =========  ==========  ==========  ==========

Earnings per share
 attributable to equity
 holders of the parent
 entity

Basic and diluted          4   (0.00p)       0.00p     (0.03p)       0.00p

All results are derived from continuing operations.

STATEMENT OF RECOGNISED INCOME AND EXPENSE

There is no difference between the (loss)/profit for the periods shown and the total recognised income and expense for the respective periods. Reconciliations of movements in total equity are given in note 10 to the financial statements.

CONSOLIDATED BALANCE SHEET
At 31 October 2007


                                             Notes     2007        2006
                                                       GBP          GBP
Assets                                              Unaudited     Audited
Non-current assets

Intangible assets                               5    1,670,373   2,103,110

Current assets

Trade and other receivables                     6       39,913       3,132

Cash and cash equivalents                            8,288,764     142,378
                                                    ----------  ----------

Total current assets                                 8,328,677     145,510
                                                    ----------  ----------

Total assets                                         9,999,050   2,248,620

Liabilities

Current liabilities

Trade and other payables                        7      874,663   2,248,535
                                                    ----------  ----------

Total liabilities                                      874,663   2,248,535
                                                    ----------  ----------

Net assets                                           9,124,387          85
                                                    ==========  ==========

Capital and reserves attributable to equity
 holders of the company

Share Capital                                   9   10,000,000           -

Merger Reserve                                 10          218         218

Retained earnings                              10     (875,831)       (133)
                                                    ----------  ----------

Total equity                                   10    9,124,387          85
                                                    ==========  ==========



CONSOLIDATED CASH FLOW STATEMENT
For the 3 month period ended 31 October 2007

                         Notes     3 Months ended       12 Months ended
                                October     October     October   October
                                 2007        2006        2007       2006
                                  GBP         GBP         GBP       GBP
                               Unaudited  Unaudited   Unaudited   Audited
Net cash flow from
 operating activities
(Loss)/Profit for the
 period after tax                (81,729)          5    (875,698)       48
Adjustment for Interest
 received                       (111,752)        (80)   (145,453)     (257)
Movement in working
 capital:
- trade and other
   receivables                   (21,728)          -     (36,781)   32,507
- trade and other
   payables                      (21,378)    (35,343) (1,373,872)  455,516
                               ---------  ----------  ----------  --------
Cash flow from
 operations                     (236,587)    (35,418) (2,431,804)  487,814
Cash flow from investing
 activities
Exploration and
 Evaluation Assets              (465,982)    143,543     432,737  (348,457)
Interest received                111,752          80     145,453       257
                               ---------  ----------  ----------  --------
Net cash flow from
 investing activities           (354,230)    143,623     578,190  (348,200)
                               ---------  ----------  ----------  --------
Cash flow from financing
 activities
Issue of shares                        -           4  10,000,000         4
                               ---------  ----------  ----------  --------
Net cash flow used in
 financing activities                  -           4                     4
                               ---------  ----------  ----------  --------

Net (decrease)/increase
 in cash and cash
 equivalents                    (590,817)    108,209   8,146,386   139,618
Cash and cash equivalents
 at 1 August /
 1 November                    8,879,581      34,169     142,378     2,760
                               ---------  ----------  ----------  --------
Cash and cash
 equivalents at 31
 October                       8,288,764     142,378   8,288,764   142,378
                               =========  ==========  ==========  ========

Cash and cash
 equivalents comprise:
Cash available on demand       8,288,764     142,378   8,288,764   142,378
                               =========  ==========  ==========  ========

NOTES TO THE FINANCIAL STATEMENTS

For the 3 month period ended 31 October 2007

1 ACCOUNTING POLICIES

Basis of presentation

These financial statements should be read in conjunction with the financial statements included in the Prospectus as filed on November 8th, 2007 and available on www.sedar.com.

The interim financial information for the three months ended October 31st, 2007 has been prepared in accordance with the accounting policies that will apply for the year ending December 31st, 2007 which will follow the International Financial Reporting Standards (IFRS) and interpretations as endorsed by the European Union.

Xcite Energy Limited is registered in the British Virgin Islands under the BVI Business Companies Act 2004. The interim financial information for the three months ended October 31st, 2007 is unaudited and does not constitute statutory accounts within the meaning of section 240 of the United Kingdom Companies Act 1985.

Basis of preparation

The principal accounting policies adopted in the preparation of the consolidated financial statements are set out below.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board (IASB). The consolidated financial statements have also been prepared in accordance with IFRSs adopted by The European Union and therefore they comply with Article 4 of the EU IAS Regulation.

Basis of consolidation

The company was incorporated with the sole purpose of acquiring its controlling interest in its directly held, wholly owned, subsidiary Xcite Energy Resources Limited ("XER"). XER was acquired through a transaction under common control, as defined in IFRS 3 Business Combinations. As a result of the transaction, the equity shareholders of Xcite Energy Limited ("XEL") and Xcite Energy Resources Limited became the equity shareholders of the combined entities. The Directors note that transactions under common control and those that involve a new shell company (XEL) with no business of its own acquiring a controlling interest in an existing entity (XER), are outside the scope of IFRS 3 and that there is no guidance elsewhere in IFRS covering such transactions.

IFRS contains specific guidance to be followed where a transaction falls outside the scope of IFRS. This guidance is included at paragraphs 10 to 12 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. This requires, inter alia, that where IFRS does not include guidance for a particular issue, the Directors may also consider the most recent pronouncements of other standard setting bodies that use a similar conceptual framework to develop accounting standards. In this regard it is noted that the UK Accounting Standards Board (ASB) has issued an accounting standard covering acquisitions and mergers (FRS 6). FRS 6 allows for merger accounting to be applied where two or more companies are combined to form one group on terms such that the equity shareholders in each company become the equity shareholders in the combined entity.

NOTES TO THE FINANCIAL STATEMENTS

For the 3 month period ended 31 October 2007 (continued)

1 ACCOUNTING POLICIES (CONTINUED)

Having considered the requirements of IAS 8, and the guidance included within FRS 6, it is considered appropriate to apply merger accounting when dealing with the transaction in which the Company acquired its controlling interest in Xcite Energy Resources Limited. The effect of the above is:

--  New shares issued by XEL as consideration for the merger are recorded
    at their nominal amount in books of XEL;
--  The net assets of XER and XEL are combined using existing book values;
--  No amount is recognised as consideration for goodwill or negative
    goodwill; and
--  The consolidated profit and loss includes profits of each company for
    the entire period, regardless of the date of the merger, and the
    comparative amounts in the consolidated accounts are restated to the
    aggregate of the amounts recorded by the two companies.
    

Revenue

Revenue arises from the sale of oil produced from Block 9/3b on the UK Continental Shelf and reflects the actual sales value, net of VAT and overriding royalties. Revenues are recognised when the risks and rewards of ownership together with effective control are transferred to the customer and the amount of revenue and associated costs incurred in respect of the relevant transaction can be reliably measured. Revenue is not recognised unless it is probable that the economic benefits associated with the sales transaction will flow to the group.

Interest income is recognised on an accruals basis and is disclosed separately on the face of the income statement.

Intangible fixed assets -- Exploration and Evaluation Assets

Capitalisation

Certain costs (other than payments to acquire the legal right to explore) incurred prior to acquiring the rights to explore are charged directly to the income statement. All costs incurred after the rights to explore an area have been obtained, such as geological and geophysical costs and other direct costs of exploration (drilling, trenching, sampling and technical feasibility and commercial viability activities) and appraisal are accumulated and capitalised as intangible Exploration and Evaluation ("E&E") assets.

E&E costs are not amortised prior to the conclusion of appraisal activities. At completion of appraisal activities if technical feasibility is demonstrated and commercial reserves are discovered, then, following development sanction, the carrying value of the relevant E&E asset will be reclassified as a development and production asset, but only after the carrying value of the relevant E&E asset has been assessed for impairment, and where appropriate, its carrying value adjusted. If after completion of appraisal in an area, it is not possible to determine technical feasibility and commercial viability or if the legal right to explore expires or if the Company decides not to continue exploration and evaluation is written off to the income statement in the period the relevant events occur.

NOTES TO THE FINANCIAL STATEMENTS

For the 3 month period ended 31 October 2007 (continued)

1 ACCOUNTING POLICIES (CONTINUED)

Impairment

If and when facts and circumstances indicate that the carrying value of an E&E asset may exceed its recoverable amount an impairment review is performed.

This is carried out by identifying groups of assets, within the E&E asset, which together form the Cash Generating Unit ("CGU") and comparing the carrying value of the CGU with its recoverable amount. And any resulting impairment loss is written off directly to the income statement. The recoverable amount of the CGU is determined as the higher of its fair value less costs to sell and its value in use.

Foreign currency

The functional currency of the group is Pounds Sterling. Transactions entered into by the group entities in a currency other than the functional currency are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the balance sheet date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are similarly recognised immediately in the income statement.

For the purposes of presenting consolidated financial statements, the assets and liabilities of the parent are translated from US Dollars into Pounds Sterling at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period where it approximates to the actual rate. Exchange differences arising, if any, are classified as equity and transferred to the Group's translation reserve.

Financial assets

The Group's financial assets comprise the following:

Other receivables -- these are measured on initial recognition at fair value and are subsequently measured at amortised cost. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired.

Cash and cash equivalents -- comprise cash on hand and are subject to an insignificant risk of changes in value.

Financial liabilities

The group's financial liabilities comprise trade and other payables and are recognised on initial recognition at fair value and are subsequently measured at amortised cost.

Deferred taxation

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs to its tax base.

NOTES TO THE FINANCIAL STATEMENTS

For the 3 month period ended 31 October 2007 (continued)

1 ACCOUNTING POLICIES (CONTINUED)

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).

Deferred tax assets and liabilities are offset when the group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

--  the same taxable group company; or
--  different group entities which intend either to settle current tax
    assets and liabilities on a net basis, or to realise the assets and settle
    the liabilities simultaneously, in each future period in which significant
    amounts of deferred tax assets or liabilities are expected to be settled or
    recovered.
    

New accounting standards adopted during the period

During the period the Group adopted IFRIC 10 'Interim Financial Reporting and Impairment.' IFRIC 10 prohibits impairment losses recognised in Interim Reports from being reversed in the next annual financial statements. There has been no affect on the Groups reported results on financial position arising from the adoption of IFRIC 10.

New standards and interpretations not yet applied

The following new standards and interpretations, which have been issued by the IASB and the IFRIC, are effective for future periods and have not been adopted early in these interim financial statements. A description of these standards and interpretations, together with (where applicable) an indication of the effect of adopting them, is set out below.

None are expected to have a material effect on the reported results or financial position of the Group.

Amendment to IAS 23 'Borrowing Costs' was issued in May 2007 and is effective for accounting periods beginning on or after 1 January 2009. The amendment requires borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset to be added to the cost of that asset.

IFRIC 11 'IFRS 2 -- Group and Treasury Share Transactions' was issued in November 2006 and is effective for annual periods beginning on or after 1 March 2007. IFRIC 11 clarifies the accounting for share based transactions which fall within the scope of IFRS 2.

IFRIC 12 'Service Concession Arrangements' was issued in November 2006 and is effective for annual periods beginning on or after 1 January 2008. IFRIC 12 prohibits private sector operators from recognising as their own those infrastructure assets which are owned by the grantor.

NOTES TO THE FINANCIAL STATEMENTS

For the 3 month period ended 31 October 2007 (continued)

1 ACCOUNTING POLICIES (CONTINUED)

IFRIC 13 'Customer Loyalty Programmes' was issued in June 2007 and is effective for annual periods beginning on or after 1 July 2008. IFRIC 13 requires the fair value of revenue relating to customer loyalty rewards to be deferred until all related obligations to the customer have been fulfilled.

IFRIC 14 'IAS 19 the limit on a defined benefit asset, minimum funding requirements and their interaction', was issued in June 2007 and is effective for annual periods beginning on or after 1 January 2008. IFRIC 14 clarifies how any asset to be recognised should be determined, in particular where a minimum funding requirement exists.

IFRS 7 'Financial Instruments: Disclosures and Amendment to IAS 1: Capital Disclosures' were issued in August 2005 and are effective for annual periods beginning on or after 1 January 2007. They revise and enhance previous disclosures required by IAS 32 'Financial Instruments: Disclosures and Presentation' and IAS 30 'Disclosures in the Financial Statements of Banks and similar Financial Institutions.'

IFRS 8 'Operating Segments' was issued in November 2006 and is effective for annual periods beginning on or after 1 January 2009. It requires portable operating segments to be based on the entity's own internal reporting structure. It also extends the scope and disclosure requirements of IAS 14 Segmental Reporting.

Status of EU endorsement

Entities in EU Member States which report in accordance with EU-endorsed IFRS can only apply IFRSs and IFRICs where the endorsement process has been completed at the date of approval of their financial statements. Of the standards and interpretations listed above, the following had not yet been endorsed by the European Union at the date these interim financial statements were authorised for issue:

--  IFRS 8 'Operating Segments';
--  IFRIC 12 'Service Concession Arrangements';
--  IFRIC 13 'Customer Loyalty Programmes';
--  IFRIC 14 'IAS 19 the limit on a defined benefit asset'; and
--  Amendment to IAS 23 'Borrowing Costs.'
    

2 Segment Information

The Company only operates in a single business and geographical segment. The company's single line of business is the exploration and evaluation of oil and gas reserves, whilst the geographical segment in which it operates is currently restricted to Block 9/3b situated in the North Sea.

NOTES TO THE FINANCIAL STATEMENTS

For the 3 month period ended 31 October 2007 (continued)

3 Taxation

a) Reconciliation of the total tax charge

Differences between the UK standard rate of corporation tax and tax assessed are reconciled below.

                                                   2007         2006
                                                    GBP          GBP

Accounting (loss)/profit before tax             (81,729)           7
                                                 ------        -----
Taxation at UK Statutory income tax rate of 30% (81,729)           2
Expenses not deductible                          81,729            -
                                                 ------        -----
Tax charge                                            -            2
                                                 ======        =====

4 Earnings per share

The calculation of basic earnings per ordinary share is based on a loss of £81,729 (2006: £5 profit) and on 53,363,500 (2006: 21,800,000), being the weighted average number of ordinary shares in issue during the period.

No share options or other instruments with a potentially dilutive effect were granted during the 3 month period to 31 October 2007 or as at 31 October 2006.

5 Intangible Assets

Exploration and Evaluation Assets

                                                     Licence costs
                                                   2007         2006
                                                    GBP          GBP
Cost and Carrying Value
At 1 August                                      66,297       36,162
Additions                                             -       30,135
                                                 ------       ------
At 31 October                                    66,297       66,297
                                                 ======       ======

NOTES TO THE FINANCIAL STATEMENTS

For the 3 month period ended 31 October 2007 (continued)

5 Intangible Assets (continued)

                                              Appraisal and exploration
                                                         costs
                                                   2007         2006
                                                    GBP          GBP
Cost and Carrying Value
At 1 August                                   1,138,094    2,210,491
Additions
  -  Costs capitalised                          465,982      138,816
  -  Contributions to costs received                  -     (312,494)
                                              ---------    ---------
At 31 October                                 1,604,076    2,036,813
                                              =========    =========

                                                        TOTAL
                                                   2007         2006
                                                    GBP          GBP
Cost and Carrying Value
At 1 August                                   1,204,391    2,246,653
Additions
  -  Costs capitalised                          465,982      168,951
  -  Contributions to costs received                  -     (312,494)
                                              ---------    ---------
At 31 October                                 1,670,373    2,103,110
                                              =========    =========

Based on the Company's success in achieving the extension of its Licence over Block 9/3b on the UK Continental Shelf, the costs associated with the appraisal of this Block have been capitalised in accordance with the Company's accounting policy in Note 1.

In view of the forecast revenue streams and cashflows of these projects, management is confident that the carrying amount of the related intangible assets as disclosed above will be recovered in full and that there is no need for any impairment provision. The situation will be monitored by management and adjustments made in future periods if future events indicate that such adjustments are appropriate.

NOTES TO THE FINANCIAL STATEMENTS

For the 3 month period ended 31 October 2007 (continued)

6 Trade and other receivables

                                                   2007         2006
                                                    GBP          GBP
Indirect taxes receivable                        36,238            -
Other receivables                                 3,675        3,132
                                              ---------    ---------
                                                 39,913        3,132

                                              =========    =========

7 Trade and other payables

                                                   2007         2006
                                                    GBP          GBP
Trade payables                                  199,974      170,148
Directors' loan accounts                              -    1,954,125
Corporation and other taxes payable              40,709       28,262
Accruals and other creditors                    633,980       96,000
                                              ---------    ---------
                                                874,663    2,248,535

                                              =========    =========

8 Financial instruments

The Company's principal financial instruments are other receivables, trade and other payables and cash all of which are denominated in pounds sterling. The main purpose of these financial instruments is to finance the Company's ongoing operational requirements.

The major financial risks faced by the Company are credit risk and liquidity risk. The Company does not consider that it has any significant credit risk due to the nature of its receivables.

The Company does not trade in financial instruments. Policies for the management of these risks are shown below

a) Credit risk

Receivables relate to VAT recoverable and an office rent deposit. As such, they are regarded as low risk.

NOTES TO THE FINANCIAL STATEMENTS

For the 3 month period ended 31 October 2007 (continued)

8 Financial instruments (continued)

b) Liquidity risk

Company management has responsibility for reducing exposure to liquidity risk and for ensuring that adequate funds are available to meet anticipated requirements. It operates according to the policies and guidelines established by the Board. Cash management is carried out centrally.

                                             Carrying Amount October
                                                   2007         2006
                                                    GBP          GBP
Financial assets
     - Cash                                   8,288,764      142,378
     - Receivables (Current)                     39,913        3,132
Financial Liabilities
    - Payables (Current)                        874,663    2,248,535

The management believes that as they are short term, the fair values for all items equate to their carrying amount.

The accounting policies for financial assets and financial liabilities are disclosed in note 1.

c) Interest rate risks

Numeric information presented below

The currency and interest profile of the Group's financial assets and liabilities are as follows:

                    Floating rate   Fixed rate  Interest free
                     liabilities   liabilities   liabilities
                        2007           2007         2007        Total
                         GBP            GBP          GBP         GBP

Sterling                        -            -        874,663   874,663
$US                             -            -              -         -
                    -------------  -----------  -------------   -------
                                -            -        874,663   874,663
                    =============  ===========  =============   =======

NOTES TO THE FINANCIAL STATEMENTS

For the 3 month period ended 31 October 2007 (continued)

8 Financial instruments (continued)

                    Floating rate   Fixed rate  Interest free
                     liabilities   liabilities   liabilities
                        2006           2006         2006        Total
                         GBP            GBP          GBP         GBP

Sterling                        -            -     2,248,535  2,248,535
$US                             -            -             -          -
                    -------------  -----------  ------------  ---------
                                -            -     2,248,535  2,248,535
                    =============  ===========  ============  =========

                    Floating rate   Fixed rate  Interest free
                      assets          assets       assets
                        2007           2007         2007        Total
                         GBP            GBP          GBP         GBP

Sterling                        -      745,375        39,913    785,288
$US                             -    7,543,389             -  7,543,389
                    -------------  -----------  ------------  ---------
                                -    8,288,764        39,913  8,328,677
                    =============  ===========  ============  =========

                    Floating rate   Fixed rate  Interest free
                       assets         assets        assets
                        2006           2006          2006       Total
                         GBP            GBP          GBP         GBP

Sterling                        -      142,378         3,132    145,510
$US                             -            -             -          -
                    -------------  -----------  ------------  ---------
                                -      142,378         3,132    145,510
                    =============  ===========  ============  =========

Sterling fixed rate assets earn interest at circa 5.5% per annum. $US fixed rate assets earn interest at circa 4.8% per annum. Cash deposits are only kept with banks with "AA" rating.

NOTES TO THE FINANCIAL STATEMENTS

For the 3 month period ended 31 October 2007 (continued)

9 Share capital

                                                         Number of shares
                                                         2007        2006
Authorised
- Ordinary shares of no par value each              Unlimited   Unlimited
Issued and fully paid up
- Ordinary shares of no par value each             41,800,000           -


                                                      GBP value of shares
                                                         2007        2006
Authorised
- Ordinary shares of no par value                   Unlimited   Unlimited
Issued and fully paid up
- Ordinary shares of no par value                  10,000,000           -
                                                   ==========   =========

Xcite Energy Limited is registered in the British Virgin Islands under the BVI Business Companies Act 2004. Under BVI laws and regulations there is no concept of "Share Premium," and all proceeds from the sale of no par value equity shares is deemed to be Share Capital of the company.

Shares issued
                                                      GBP value of shares
                                                         2007        2006
41,800,000 ordinary shares issued during
 the period                                        10,000,000           -
                                                   ==========   =========

NOTES TO THE FINANCIAL STATEMENTS

For the 3 month period ended 31 October 2007 (continued)

10 Retained earnings, merger reserve and total equity

                                                       Retained Earnings
                                                         2007        2006
                                                          GBP         GBP
At 1 August                                          (794,102)       (138)
(Loss)/profit for the period                          (81,729)          5
                                                      -------     -------
At 31 October                                        (875,831)       (133)

                                                     ========     =======

                                                          Merger Reserve
                                                         2007        2006
                                                          GBP         GBP
At 1 August                                               218         214
Change for the period                                       -           4
                                                      -------     -------
At 31 October                                             218         218

                                                     ========     =======


                                                           Total Equity
                                                         2007        2006
                                                          GBP         GBP
At 1 August                                         9,206,116          76
(Loss)/profit for the period                          (81,729)          5
Shares issued                                               -           4
                                                    ---------     -------
At 31 October                                       9,124,387          85

                                                    =========     =======


The following explains the nature and purpose of each reserve within owners
equity:
    Share Capital           Amount of the contributions made by
                            shareholders in return for the issue of
                            shares.

    Retained Earnings       Cumulative net gains and losses recognised
                            in the company balance sheet.

    Merger Reserve          The difference between the nominal value of the
                            shares issued to acquire a subsidiary and the
                            nominal value of the shares acquired.

Contact Information

  • Enquiries:
    Xcite Energy
    Richard Smith
    Chief Executive Officer
    Rupert Cole
    Chief Financial Officer
    +44 1330 826 740

    Westwind Partners
    Paul Colucci
    Managing Director
    + 44 20 7290 9716

    Strand Partners Ltd.
    James Harris
    Director
    Warren Pearce
    Associate Director
    +44 20 7409 3494

    Pelham Public Relations
    Alisdair Haythornthwaite
    Katherine Stewart
    Lucy Frankland
    +44 20 7743 6676