Xcite energy confirms that Bentley field is flowing

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Xcite energy announced this morning that the Bentley field extended well test (EWT) well is flowing at a stabilised rate of 2900 barrels a day, exactly in line with the December 2010 well test (at which point the shares rose to over £4 albeit with almost half the number of shares in circulation!). They also confirmed that 10,000 barrels had been collected in the Scott Spirit (worth over $1 million without the impact of dilutive purchases to help mobility of the heavy oil) and that the well was operating well within operational specifications. This implies that they will be cranking up the flow rate over coming days to measure the maximum output.

Xcite’s intention was to collect at least 45,000 barrels of oil over a 3 month period and, given the performance to date, this figure will be easily breached. Either the company will make a lot more money out of the well test or give up the Rowan Norway rig early.

If a predator is really looking at Xcite then today’s news give significant reassurance. Not only has auditors TRACS confirmed that the field has a minimum 116 million barrels but it is clearly able to be commercially produced.

With several heavy oil fields near to Bentley, buying Xcite’s technical expertise to develop their assets and get 116 million barrels of oil in the safe geo-political environment of the North Sea looks compelling. At less than $2.5 per barrel valuation at the moment, there is plenty of upside despite the constant share placings. Previous RNS’s have given a strong hint that reserves upgrades will be on the way after the EWT. Then it’s either DECC approval for phase 1b and 2 of full production or the takeover happens. Certainly not an expensive bet at 78p with plenty of upside and limited down side risk after this flow update.

Contrarianinvestor UK

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