Fox-Davies get more optimistic on Xcite Energy

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Some interesting new commentary from the latest fact sheet from broker Fox-Davies on Xcite Energy. It looks like they now have a signficantly more optimistic stance than some of their previous coverage. In October they raised fears that the Bentley North Sea field may be non-commerical due to operational costs, now they say that “Based on peer group comparisons, we believe that 251p a share is a better reflection of Bentley’s value.” “Post a Company update (16th of Jan), our initial fears over the commerciality of the Bentley field have been partially offset by the disclosure of an active aquifer as drive mechanism”, following the succesful completion of the extended well test in late 2012.

The shares are holding steady today at 103p, with investors waiting with eager anticipation for the new Bentley field reserves report, and with it the potential for a good upgrade (all being well!!) from the current 116 million barrels 2P (proven and probable) reserves and which should be due any time soon from auditors TRACS. This morning, it was announced that 931,000 share options were being exercised…someone seems confident of a near term rise.


XEL’s market value is being hampered by the fact that investors are aware that funding will be required for it to meet the equity portion of its development costs, providing that it does not farm-out the asset or sell the Company first. Even allowing for the funding expectation, the discount to current valuation is excessive, unless you also start to adjust for development risks. Based on peer group comparisons, we believe that 251p a share is a better reflection of Bentley’s value. ”

In October 2012, Fox-Davies wrote, “Bentley Phase 1A successful, But Questions Remain – Successful completion of Bentley field pre-production well test programme materially de-risks the Bentley development project. Pre-production wells successfully tested full field development drilling, completion, production and export techniques. The 9/3b-7 and 7Z wells have been suspended for future use as producer wells during Phase 1B. Betley’s 2P reserves are estimated at 116mm bbl. Phase 1B development expected to commence in 2013. While news that any North Sea operation has been completed successfully and safely is good news, in the longer-term it still leaves the question of operating costs unanswered. We have always maintained that this field will produce commercially in the first phase, we remain concerned the opex costs, both in absolute terms as a well as measured on a per barrel of oil produced basis, will rise to levels that make the operations non-commercial.

Contrarian Investor UK

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