SOURCE: Xcite Energy Ltd

June 22, 2009 11:33 ET

Xcite Energy Limited ("Xcite Energy" or the "Company") Results of Interpretation of 3D Seismic Data

ABERDEENSHIRE, UK--(Marketwire - June 22, 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), a developer of heavy oil assets in the UK North Sea, is pleased to report the results, effective June 22, 2009, of its interpretation of re-processed 3D seismic data ("2009 Evaluation") over the Bentley field (the "Field") in Block 9/3b. The 2009 Evaluation represents the advancement of the Company's view on potential recoverable resources reported in the Competent Person's Report of RPS Energy, dated February 20, 2009 (the "CPR").

The 2009 Evaluation is based on 1998 3D seismic data re-processed in 2008 using latest techniques. Xcite Energy considers the re-processed 3D seismic data used in the 2009 Evaluation to be better than the data available to RPS at the time of the CPR and, therefore, also considers the updated interpretation of the Field structure to be a marked improvement over that described in the CPR.

All potential recoverable resources now being reported for the Field assume the use of conventional, cold-flow recovery techniques.

Highlights of the 2009 Evaluation

--  STOIIP for the Most-Likely structure of 689 MMbbls, with a range of
    521 to 886 MMbbls for Down-Side and Up-Side structures, respectively.
    
--  Most-Likely structure confirms potential recoverable resources, from a
    single platform in the core area of the Field, of between 80 and 166
    MMbbls, materially unchanged from the Contingent Resources range of 72 to
    166 MMbbls reported in the CPR.
    
--  Addition of southern drill centre gives potential recoverable
    resources range of 29 to 54 MMbbls, with 40 MMbbls Base Case.
    
--  Full Field evaluation gives potential recoverable resources range of
    109 to 235 MMbbls, with 160 MMbbls Base Case.
    

Background to the 2009 Evaluation

The CPR focused on the resources accessed from a single drill centre in the core area of the Field, based on a single depth structure and a range of reservoir and fluid parameters representing Low, Base and High cases, which are broadly equivalent to the P90, P50 and P10 from a probabilistic analysis. These resources were assigned a reserves category of Contingent Resources (Development Pending), with a range of 72 to 166 MMbbls and a Base Case of 122 MMbbls.

The 2009 Evaluation also analysed resources accessible from a single drill centre in the core area of the Field and computed a range materially unchanged from the CPR (Table 1).

Table 1: Resources Comparison for Core Area of the Field - CPR vs 2009
Evaluation

              Case                     Conventional Recovery
                                    ------------------------------
                                              (MMbbls)
                                    ------------------------------
                                    Low Case  Base Case  High Case
                                    --------  ---------  ---------
                     CPR
                 (Contingent
                  Resources -
  Core Area       Development
     and          Pending)             72        122        166
  Most Likely                       --------  ---------  ---------
   Structure    2009 Evaluation
                 (Prospective
                  Resources)           80        120        166
                                    --------  ---------  ---------

Note: On the basis that the 2009 Evaluation has not been audited by an independent third party, it is referenced herein as Prospective Resources. However, Xcite Energy is confident that the comparison with the CPR in Table 1 is valid and demonstrates that the 2009 Evaluation is supported by the CPR for both resource category of Contingent Resources (Development Pending) and range. Xcite Energy intends to update the CPR for the results of the 2009 Evaluation as part of its future work programme on the Field.

Results of 2009 Evaluation

In addition to confirming the resources in the core area Most-Likely structure as set out in the CPR, the 2009 Evaluation demonstrates that the Field extends to the south and east beyond the area evaluated in the CPR. This extension now encompasses Bentley East (originally considered a separate prospect and referred to as "Prospect A" in the CPR) and permits a southern drill centre to access resources from this area of the Field, thereby enhancing the full Field economics.

The aggregation of the south and east extension together with the core Field area provided the basis for the full Field evaluation. This evaluation included a review of the Down-Side and Up-Side structures for a range of Low, Base and High reservoir and fluid parameters, in addition to the Most-Likely structure reported in Table 1. The results of this evaluation are set out in Table 2 below.

Table 2: Bentley Full Field Potential Recoverable Resources

          Structure                    Conventional Recovery
                                    ------------------------------
                                              (MMbbls)
                                    ------------------------------
                                    Low Case  Base Case  High Case
                                    --------  ---------  ---------
      Down-Side Structure              73        123        168
                                    --------  ---------  ---------
     Most-Likely Structure            109        160        220
                                    --------  ---------  ---------
       Up-Side Structure              165        235        324
                                    --------  ---------  ---------

The above results represent nine deterministic cases. From these, Xcite Energy considers the total potential recoverable resources from the Field, on a (broadly equivalent) P90 to P10 basis from conventional cold-flow recovery techniques, to be between 109 and 235 MMbbls, with 160 MMbbls as the Base Case. The Down-Side and Up-Side extremes of 73 MMbbls and 324 MMbbls respectively are considered outside the normally quoted P90 and P10 cases.

Note: As noted above, the CPR confirms that, included in the Most-Likely structure potential recoverable resources, a range of 72 to 166 MMbbls (with 122 MMbbls Base Case) can be designated as Contingent Resources (Development Pending).

The risks and uncertainties associated with recovery of the Contingent Resources (Development Pending) which prevent them from being classified as reserves have been set out in the CPR, with the probability of commercial success for the Field being reported as 70%.

The principal risks and uncertainties associated with the recovery of the Prospective Resources (over and above the CPR Contingent Resources) which prevent them from being classified as Contingent Resources are that appraisal wells have not yet confirmed their existence.

The principal issues remaining to be addressed following the drilling and testing of the 9/3b-5 well, as reported in the CPR, include the requirement to confirm commercial flow rates from the Field, which are currently predicted from modelling supported by the well flow rates in the analogue Bressay field, 6 km to the northwest and recently announced by StatoilHydro as moving forward to development. The next reservoir intervention will be designed to resolve these remaining issues and, if successful, will enable the Field to be designated as 1P and 2P reserves (as defined under PRMS) within its core area.

In addition, the next reservoir intervention is expected to be designed to confirm the existence of the Up-Side structure in the core area and its recoverable resources.

Richard Smith, Xcite Energy Chief Executive Officer, commented:

"We are very pleased with the outcome of this new 3D interpretation, which confirms our belief in the potential of the Bentley field as a world class asset and is expected to provide confidence to potential partners that Bentley is indeed one of the largest undeveloped fields in the UK sector of the North Sea, with substantial capacity to deliver value."

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

While the above prospective resources estimates have been prepared in accordance with the COGE Handbook by a qualified reserves evaluator with the Company, they have not been verified by an independent third party.

Third party confirmation of these changes to potential recoverable resources will be undertaken in due course as part of the work programme for the pre-development well on Bentley.

The technical terms herein are used in accordance with 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 Contingent Resources.

Prospective Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. There is no certainty that any portion of the Prospective Resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the Prospective Resources.

Stephen A. 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 A. 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.

Glossary

"MMbbls" means millions of barrels

"P10" means a ten percent probability of the outcome being this or better

"P50" means a fifty percent probability of the outcome being this or better

"P90" means ninety percent probability of the outcome being this or better

"STOIIP" means stock tank oil initially in place

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 risks associated with the oil and gas industry (including operational risks in exploration and development and uncertainties of estimates oil and gas potential properties), the risk of commodity price and foreign exchange rate fluctuations and the ability of Xcite Energy to secure financing. Additional information identifying risks and uncertainties are contained in the Company's annual information form dated June 30, 2008 and in the annual Management's Discussion and Analysis for Xcite Energy dated March 26, 2009 filed with the Canadian securities regulatory authorities and 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 Limited
    Richard Smith
    Chief Executive Officer
    Rupert Cole
    Chief Financial Officer
    +44 (0) 1330 826 740

    Thomas Weisel Partners International Limited
    Paul Colucci
    Managing Director
    Jesse Meidl
    Vice President
    +44 (0) 20 7877 4300

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

    Pelham Public Relations
    Mark Antelme
    Director
    +44 (0) 20 7337 1500