Xcite Energy board reshuffle sees CEO Richard Smith retiring

Another solid update this morning from Xcite Energy’s North Sea Bentley field extended well test with the 9/03b-7 well producing at a stabilised rate of approximately 3,200 barrels per day with no associated basic sediments or water, better than the initial 2,900 barrel per day flow rate announced a couple of weeks ago.  This is viewed as being well within the operational performance of the reservoir.

Xcite also confirmed that oil collected so far in the Scott Spirit tanker is over 47,000 barrels of dry oil, exceeding the 45,000 barrel target for the entire well test.

Early data gathered from down hole pressure and temperature responses demonstrates that the underlying aquifer support is strong and consistent, which is a good indicator for longer term productivity of the reservoir. The test will be continued in order to determine the reservoir fluid behaviour and to gather data to assist in the optimisation of ultimate life-of-field performance.

Also some welcome board changes with the CEO Richard Smith retiring and being replaced by CFO Rupert Cole. Stephen Kew, exploration and development director becomes COO. Jon Dale, Financial Controller and company secretary, becomes CFO. Andrew Fairclough has been appointed as Corporate Affairs Director, Matt Bower has been appointed as Operations Director.

Those with a longer term interest in XEL will have very mixed feelings about Richard Smith. Undoubtedly the board dropped the ball in December 2010 by not plugging the funding gap at that point when the shares were over £4. A Rockhopper style rights issue to fund a large chunk of the field development plan would have been smart, even if it was deeply discounted (better £3 than 80p!!) . Instead countless smaller placings over 2011 and 2012 have doubled the number of shares in issue since the initial flow test at the end of 2010. Then, the fact that the initial Field Development plan (FDP) was turned down by DECC, partly because of the BP Macondo well disaster increased safety requirements forcing Xcite to deliver a phased approach instead due to funding considerations. This left a rather nasty taste in the mouth of many!

The Bentley field would have been in full production using the Rowan Norway right now was it not for the need to reengineer the FDP. Then there was the reserves report fiasco in 2011, when the auditors TRACS originally declared 2P (proven and probable) reserves of 28 million barrels of oil compared with expectations of 150 million barrels plus. Fortunately TRACS, later upgraded to 116 million barrels 2P. Finally, Smith and fellow Directors pocketed £4 million in share sales after the December 2010 flow test, good call with the shares now at 76p!

The extended well test (pre production flow test) seems to be proving without doubt that the Bentley field is a large and commercially exciting North Sea field. There have been no operational hiccups or causes for concern, in fact, it couldn’t be going better, with the Scott Spirit tanker filling up nicely (47,000 barrels so far). So far so good. Now for the final funding gap on phase 1b to be filled with a farm in.

As usual the share price spikes first thing over 80p and then the buy orders get swamped by sells. No doubt Socius, Esousa and Global Financial are selling when they can and also keeping the price in check to maximise warrants. Frustrating for private investors!

Contrarian Investor UK

Some recent operations pictures from the Xcite Energy Website (Bentley field):