Xcite Energy still seeking funding solution for Bentley

By Amy McLellan

Xcite Energy has released its full year results, and it’s another year without its Bentley oilfield in the North Sea moving into development. The AIM-quoted company has 2P oil reserves of 257 million barrels plus 48 million barrels of contingent resources at Bentley but last year’s slump in the oil price meant the company missed its target of filing a Field Development Plan for the heavy oilfield.

The BVI-registered company has spent several years tee-ing up A-list contractors to work on the project. It has signed Memoranda of Understanding with AMEC, Aibel, Arup, Baker Hughes, COSL and Teekay as well as collaboration agreements with Statoil, Shell and EnQuest to evaluate potential development and operational synergies with neighbouring fields.

This is all solid work but the stock remains under pressure as investors have grown weary of the wait to monetise this large oil deposit, with funding the key concern. Chief executive Rupert Cole said the company was focused on delivering the financing required to bring the field into production, and is in ongoing funding discussions with potential co-venturer partners.

While the company had been unable to submit an FDP, Cole said much had been achieved in 2014 despite the increasingly challenging environment. This included the MoUs with development contractors, the drafting of commercial contracts, the completion of key pre-FEED/assurance engineering programmes, continuing discussions with potential co-venturers and ongoing work on developing asset financing solutions as well as re-financing the balance sheet through the issue of a US$135 million two year bond and a US$5 million private placement of ordinary shares. The company ended 2014 with cash of £32.5 million.

“During the year we spent valuable time creating an asset financing model to fund the construction of the MOPU,” said Cole in the results statement. “In recent months, it is clear that the declining oil price is affecting the overall project financing environment and, as a result, we have extended these discussions into new geographic regions where there appears to be a longer term strategic view. We have also actively continued our discussions and diligence process with a number of potential co-venturers during the year.”

One benefit of the low oil price is that the company can benefit from lower contracting costs: Cole said the company is continuing to work on the early definition of project costs and seeking to capitalise on the cost benefit opportunities that are slowly working through into the sector.

Certainly there is much to be said for contracting when oil prices are low and then pumping the oil five years out when prices have recovered. This is a development-ready project: the focus for 2015, said Cole, is developing the commercial and funding discussions. Investors will hope this paves the way for that long-awaited FDP.