SOURCE: Xcite Energy Ltd

Xcite Energy Ltd

February 24, 2009 14:38 ET

Xcite Energy Limited ("Xcite Energy" or the "Company"): Announcement of New Competent Person's Report

ABERDEENSHIRE, UK--(Marketwire - February 24, 2009) -


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

Xcite Energy (TSX-V: XEL) (LSE: XEL) (AIM: XEL) is a heavy oil company focused on the development of discovered resources in the United Kingdom North Sea. The Company holds a 100% working interest in Block 9/3b, which contains the Bentley field in its entirety, one of the largest undeveloped heavy oil fields in the United Kingdom North Sea.

Xcite Energy is listed on the AIM Market of the London Stock Exchange ("AIM") and the TSX Venture Exchange ("TSX-V").

The Company today announces the results of the new Competent Person's Report ("CPR"), dated and effective on February 20, 2009, as undertaken by RPS Energy following the successful drilling and testing of the 9/3b-5 well by Xcite Energy on the Bentley field in February 2008.

KEY HIGHLIGHTS

--  The CPR supports the Company's view that the Bentley field should be
    commercial based on proving the modelled flow rates and completion
    techniques through an Early Production System ("EPS"); the probability of
    commercial success for the Bentley field has been increased from 50% to
    70%.
    
--  The Bentley field has been classified as having Contingent Resources
    (Development Pending), the highest category of Contingent Resources before
    the "Reserves" category under PRMS (as subsequently defined) terminology,
    which represents a significant reduction of risk compared with the resource
    category assigned to the field prior to the drilling and testing of the
    9/3b-5 well. The risks and the uncertainty associated with recovery of the
    resources have been set out in the CPR.
    
--  The volume of recoverable resources on the Bentley field has been
    increased significantly in the Low and Base cases; 72 MMbbls (previously 37
    MMbbls) for the Low case and 122 MMbbls (previously 68 MMbbls) for the Base
    case. With the increased confidence in the commercial potential of the
    Bentley field, the Base case risked resources have increased from 34 MMbbls
    to 86 MMbbls, an increase of over 250%.
    
--  Further potential upside has been identified in the recoverable
    volumes reported from a range of reservoir parameters and data, including
    the re-processed 3D seismic survey.
    
--  The success case Net Present Value of the Bentley field in the Base
    case, using a 10% forward discount rate ("NPV10"), a flat real price of $80
    for Brent crude (the RPS Energy current price forecast) and a 15% discount
    for heavy oil, is approximately US$780 million.
    
--  Principal issues remaining to be addressed following the drilling and
    testing of the 9/3b-5 well include the requirement to confirm commercial
    flow rates within Bentley, which are currently predicted from modelling and
    are supported by the well flow rates in the analogue Bressay field. This
    will require a horizontal well and flow test during the next reservoir
    intervention, i.e. the planned EPS.
    
--  The EPS work programme has been designed to resolve these remaining
    issues and should enable the Company to book "Reserves" (as defined under
    PRMS) on the Bentley field.
    

2009 OUTLOOK

--  Preparation for the EPS on the Bentley field (as outlined in the CPR)
    will continue together with the application to the Department for Energy
    and Climate Change to become a North Sea production operator.
    
--  Financing and commercial options for undertaking the EPS are currently
    being discussed and appraised with a number of potential business partners,
    with a view to concluding such discussions during 2009.
    

In a development that the Company believes shows the potential for heavy oil production in the North Sea, StatoilHydro, as operator of the Bressay field, completed the fifth well on the field in November 2008 and has publicly announced its intention for the development of the field with a target first oil date in 2014. The Bressay field is 6km from the Bentley field and has been shown to be a close reservoir analogue field for the Bentley field, with similar crude oil and geological properties.

Richard Smith, Xcite Energy Chief Executive Officer commented:

"We are very pleased to be able to announce the results of this new Competent Person's Report from RPS Energy, which has substantially improved all material aspects of the Bentley field from recoverable volumes through to the commercial chance of success, and thus the potential economic value of this significant asset. This new CPR has been made possible by the enormous efforts of the XER team during the latter half of 2008, which the Company believes has also brought a new level of understanding to the behaviour of this type of heavy oil. We have now set our sights clearly on planning for the next reservoir intervention, an early production system which, on success, should enable Xcite Energy to book "Reserves" to the Bentley field, one of the largest undeveloped heavy oil fields in the United Kingdom North Sea.

The complete CPR is available for viewing at http://www.rns-pdf.londonstockexchange.com/rns/6619N_-2009-2-20.pdf and on the System for Electronic Document and Analysis Retrieval at www.sedar.com and on the Company's website at www.xcite-energy.com.

The CPR has been prepared by RPS Energy using the definitions and guidelines set out in the 2007 SPE/WPC/AAPG/SPEE Petroleum Resource Management System ("PRMS") as incorporated into the Canadian Oil and Gas Evaluation Handbook ("COGEH") by the Society of Petroleum Evaluation Engineers & Canadian Institute of Mining, Metallurgy & Petroleum.

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 resources.

Stephen Kew has reviewed and approved the technical information contained within this press release in his capacity as a competent person, as required under the AIM rules. Stephen Kew is Head of Exploration and Development at Xcite Energy and is an associate of the Institution of Chemical Engineers and a member of the Society of Petroleum Engineers.

The TSX-V has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

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 the Company's annual information form dated June 30, 2008 filed with the Canadian securities regulatory authorities, available at www.sedar.com. 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.

Contact Information

  • ENQUIRIES:

    Xcite Energy
    +44 (0) 1330 826 740
    Richard Smith, Chief Executive Officer
    Rupert Cole, Chief Financial Officer

    Thomas Weisel Partners (UK) Limited
    +44 (0) 20 7877 4300
    Paul Colucci, Managing Director
    Paul Newman, Managing Director

    Strand Partners Limited
    +44 (0) 20 7409 3494
    James Harris, Director
    Rory Murphy, Director

    Pelham Public Relations
    +44 (0) 20 7743 6676
    Mark Antelme, Director