Xcite Energy Limited Half Yearly Report (7295W)

TIDMXEL

RNS Number : 7295W

Xcite Energy Limited

24 August 2015

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART DIRECTLY OR INDIRECTLY IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

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   6 months ended   3 months ended 
                                               30 June          30 June          30 June          30 June 
-------------------------------------  ---------------  ---------------  ---------------  --------------- 
 Income Statement Information                     2015             2015             2014             2014 
-------------------------------------  ---------------  ---------------  ---------------  --------------- 
                                                  US$m             US$m             US$m             US$m 
-------------------------------------  ---------------  ---------------  ---------------  --------------- 
 Net (loss)/profit                              (0.83)           (0.38)             0.81             0.88 
-------------------------------------  ---------------  ---------------  ---------------  --------------- 
 Basic earnings per share in cents               (0.3)            (0.1)              0.3              0.3 
-------------------------------------  ---------------  ---------------  ---------------  --------------- 
 Diluted earnings per share in cents             (0.3)            (0.1)              0.2              0.3 
-------------------------------------  ---------------  ---------------  ---------------  --------------- 
 
 
                                            6 months ended   3 months ended   6 months ended   3 months ended 
                                                   30 June          30 June          30 June          30 June 
-----------------------------------------  ---------------  ---------------  ---------------  --------------- 
 Cash Flow Information                                2015             2015             2014             2014 
-----------------------------------------  ---------------  ---------------  ---------------  --------------- 
                                                      US$m             US$m             US$m             US$m 
-----------------------------------------  ---------------  ---------------  ---------------  --------------- 
 Net cash flow from operations                         3.3              2.7             10.5             11.8 
-----------------------------------------  ---------------  ---------------  ---------------  --------------- 
 Net cash flow from investing activities            (19.4)            (9.6)           (34.4)           (28.5) 
-----------------------------------------  ---------------  ---------------  ---------------  --------------- 
 Net cash flow from financing activities                 -                -             46.4             46.4 
-----------------------------------------  ---------------  ---------------  ---------------  --------------- 
 
 
                                                   As at          As at      As at 
                                                 30 June    31 December    30 June 
---------------------------------------------  ---------  -------------  --------- 
 Statement of Financial Position Information        2015           2014       2014 
---------------------------------------------  ---------  -------------  --------- 
                                                    US$m           US$m       US$m 
---------------------------------------------  ---------  -------------  --------- 
 Total assets                                      485.4          482.2      514.7 
---------------------------------------------  ---------  -------------  --------- 
 Cash and cash equivalents                          34.4           50.4       70.8 
---------------------------------------------  ---------  -------------  --------- 
 Current liabilities                               132.7            5.5        5.9 
---------------------------------------------  ---------  -------------  --------- 

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August 24, 2015 02:00 ET (06:00 GMT)