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TSX-V, LSE-AIM: XEL
24 August 2015
Xcite Energy Limited
("Xcite Energy" or the "Company")
Second Quarter Results for the 3 and 6 Month Periods Ended 30 June 2015
Xcite Energy announces its second quarter results for the 3 and 6 month periods ended 30 June 2015.
Highlights for the year to date
· Increase in 1P, 2P and 3P heavy oil reserves for the Bentley field to 234 MMstb, 265 MMstb and 296 MMstb, respectively, effective 31 December 2014 and based on an expected initial 35 year production period.
· NPV10 (after tax) value of reserves for the Bentley field of approximately US$1.9 billion, US$2.3 billion and US$2.6 billion on a 1P, 2P and 3P basis, respectively, effective 31 December 2014.
· Net loss in the second quarter of US$0.4 million.
· Cash balance of US$34.4 million as at 30 June 2015.
· Technical due diligence continuing with a number of potential field development partners.
Overview of Results
Management believes it is making progress despite the industry environment remaining challenging with the oil price recently falling below US$50 per barrel, development budgets remaining under pressure, projects deferred and an increasing number of North Sea assets being put up for sale as oil companies seek to realign their portfolios. The Company's strategy remains flexible and innovative as we pursue a range of potential funding solutions to secure the development capital required for the Bentley first phase development.
Technical due diligence continues with a number of potential field development partners. Whilst management recognises that this appears to be a slow process, as a key element of any such diligence review, the Bentley reservoir requires extensive and iterative subsurface modelling and detailed analysis in order to fully understand the production mechanism and recovery from the field. Xcite Energy's own experience and knowledge has been developed through the course of its appraisal programme and an extended well test, and it should be appreciated that a detailed analysis by any third party is necessary, partly to compensate for a lack of analogous oil fields and databases against which to benchmark outcomes, and partly due to the unique characteristics of the field which drive the application of innovative engineering solutions incorporated into the development plan. Whilst this type of analysis is a highly technical process, it is important to note that the work completed by the Company, its reserves evaluator, AGR TRACS, and recently Baker Hughes, has consistently shown the potential recoverability from the field.
The Baker Hughes technical evaluation of the reservoir has produced first phase development production profiles which closely match the Company's base case modelling and those reported in the Company's Reserves and Resources Assessment Report effective 31 December 2014 and dated 29 April 2015 (the "RAR"). Following on from the RAR, the Company will continue to optimise the production profile and will review potential uplifts from specific Baker Hughes technology.
The Company is also continuing to work with a number of parties in order to develop an asset funding package for the construction and delivery of the mobile offshore production unit ("MOPU") and the floating storage and offloading vessel ("FSO"). The current industry environment has freed up capacity in shipyards and we are actively pursuing and evaluating potential opportunities as a result of increasing competitiveness for major projects in order to deliver the best value and most secure project execution strategy. Management believes this process is complementary with the potential field development partner discussions and will create greater clarity for the overall Bentley First Phase Development funding requirements. Construction of the N Plus class drilling rig continues to make good progress in Singapore.
The project execution strategy and the provision of yard quotes and third party estimates incorporated into the RAR have been supported by the assurance engineering and subsurface work programmes completed to date, all of which underpin the current full field development life-cycle cost estimate of US$35 per barrel, representing a relatively low cost per barrel for a UK North Sea development. The Company has worked closely with third parties to validate the economic and commercial viability of the Bentley project. The collaborative work with the development group has also resulted in material operational efficiencies, such as the utilisation of a bridge-linked FSO into the development plan, which offers significant operational cost savings potential throughout the life of the field. The Company believes this is a good example of how contractor group collaboration can contribute towards maximising economic recovery in the UK North Sea.
The Company has an active dialogue with the Oil and Gas Authority ("OGA") and has recently begun detailed discussions to review the technical approach to the Bentley field development in order to ensure that it will be compliant with government policy. Xcite Energy is fully committed to maximising economic recovery from the Bentley field, maintaining a collaborative approach with its development group and remaining consistent with the aims of the OGA.
The Company will continue to update shareholders with material news as required, in addition to its regular reporting schedule.
The following tables summarise the financial performance of the Company and its wholly owned subsidiary, Xcite Energy Resources plc, in the 3 and 6 month periods ended 30 June 2015 and, following a change in presentation currency from 1 January 2015, the restated US Dollar comparatives for the 3 and 6 month periods ended 30 June 2014 and the restated Statement of Financial Position as at 31 December 2014.
6 months ended
3 months ended
Income Statement Information
Basic earnings per share in cents
Diluted earnings per share in cents
Cash Flow Information
Net cash flow from operations
Net cash flow from investing activities
Net cash flow from financing activities
Statement of Financial Position Information
Cash and cash equivalents
Long term liabilities
Total net assets
The Company's unaudited Consolidated Financial Results for the 3 and 6 month periods ended 30 June 2015 can be found at the following link:
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 annual Management's Discussion and Analysis for Xcite Energy dated 24 March 2015 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.
Statements relating to "resources" and "reserves" are deemed to be forward-looking statements or information, as they involve the implied assessment, based on certain estimates and assumptions, that the resources and reserves described can be profitable in the future. There are numerous uncertainties inherent in estimating quantities of proved reserves, including many factors beyond the control of the Company. The reserve data included herein represents estimates only. In general, estimates of economically recoverable oil reserves and the future net cash flows therefrom are based upon a number of variable factors and assumptions, such as historical production from the properties, the assumed effects of regulation by governmental agencies and future operating costs, all of which may vary considerably from actual results. For those reasons, estimates of the economically recoverable oil reserves attributable to any particular group of properties and classification of such reserves based on risk of recovery and estimates of future net revenues expected therefrom, prepared by different engineers or by the same engineers at different times, may vary substantially. The actual production, revenues, taxes and development and operating expenditures of the Company with respect to these reserves will vary from such estimates, and such variances could be material.
The Company has used forecast prices and costs in calculating reserve quantities included herein. Actual future net cash flows also will be affected by other factors such as actual production levels, supply and demand for oil and natural gas, curtailments or increases in consumption by oil and natural gas purchasers, changes in governmental regulation or taxation and the impact of inflation on costs. The estimated future net revenue set out herein does not necessarily represent the fair market value of the Company's reserves.
The calculation of the NPV10 (after tax) for the Field disclosed above takes into account the following: (a) UK Ring-Fence Corporation Tax is charged at the rate of 30% on net taxable income; (b) UK Supplementary Charge ("SC") is charged at the rate of 20% on net taxable income with no deduction for finance charges and interest; and (c) investment allowances have been applied to offset the SC to the extent possible.
"1P" means proved reserves, which are those quantities that are estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.
"2P" means proved plus probable reserves. Probable reserves are those quantities of additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.
"3P" means proved plus probable plus possible reserves. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated proved plus probable plus possible reserves.
"MMstb" means millions stock tank barrels.
"NPV10" means net present value in money of the day using a 10% forward discount rate, which values do not represent fair market value.
Neither the 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.
Rupert Cole / Andrew Fairclough
Liberum (Joint Broker and Nomad)
Morgan Stanley (Joint Broker)