I’ll keep this short as most of the detail is in Xcite’s RNS below. The RNS is welcome as is the clarity which is serves to achieve. The question is… why wasn’t this issued 5 months ago?
Phase 1A is beginning to look and sound very much like the drill/operations achieved in late 2010 and could be interpreted as a repeat. There are some subtle differences and much has been learned since 2010 not to mention a bit of red tape cut through too.
This second drill could indeed achieve much of what Xcite promised with the drill from 2010. It has the potential to boost the reserve numbers due to enhanced oil recovery techniques which i’m sure TRACS will be keen to see in practice.
In 2010, Xcite were hinting at 160mmboe reserve potential. In 2012 they might just prove it. This would result in a near 50% increase to current 2p booked reserves and certainly help a great deal with their funding options for Phase 1b and the future development of the field.
One thing is sure, XEL BoD’s clearly understand the importance of shareholder communication after their poor show in 2011. Updates are likely to be dished out at every key operational event. So whilst the ops are likely to last through to Q4 2012, progress will be known much much sooner than that. The canadian TSX exchange has more stringent regulations than AIM and XEL will be reporting a “Statement of Reserves Data and other Oil and Gas Information” at the end of April.
At 112p+ ranges – XEL looks very good value based on current North Sea Oil prices being near year highs.
The discount of 70%+ to the Independent TRACS valuation report seems a tad overdone. In 2011 that might have been warranted – but in 2012? It does seem harsh.
19 April 2012, Xcite Energy Limited
Operations Update and Bentley Phase 1A Work Programme
The Company is pleased to provide an update to the market in respect of the current drilling operations and the Bentley Phase 1A work programme.
Current Operations Update
As previously announced, the well was spudded on 18 March 2012, with 20 inch casing now having been set down to approximately 2000ft below the rotary table. Preparations are being made to set the blow out preventer and to continue the drilling of the 17.5 inch hole.
Summary of Bentley Phase 1A Work Programme
Following the successful completion of the 9/03b-6 and 6Z wells (as announced in December 2010), the Company has invested significant resources designing and engineering the next phases in the development of the Bentley field, the Phase 1A and Phase 1B work programmes.
The Bentley Phase 1A Work Programme has two principal objectives:
1. The 9/03b-7 and 7Z wells are planned to demonstrate the mechanical and operational aspects of the drilling, completion and flowing of the proposed well design for Phase 1B. The 9/03b-7Z well is planned to be used in Phase 1B as the first full production wellbore.
2. To collect additional reservoir and production data to improve the calibration of the reservoir model, including data with respect to enhanced oil recovery techniques. This data with be used to further increase the certainty with respect to the longer term oil, gas and water production profiles and recoverable reserves from the Bentley field.
The Phase 1A work programme on the Bentley field has been planned to achieve the two principal objectives set out above and comprises the following key operations:
v Drilling of a horizontal motherbore well in the geological formation immediately overlying the reservoir. This motherbore is planned to be approximately 2,000ft in length.
v Drilling of the toe extension well (9/03b-7 well), being a horizontal wellbore from the toe of the motherbore, with a reservoir section of up to 2,400ft in length. This well is planned to be positioned approximately at mid-height in the reservoir at an elevation above the oil-water contact such that, when produced at an oil rate of at least 1,500 barrels of oil per day (“bopd”), it should initiate water breakthrough at the well and subsequently develop sufficient water cut (to approximately 50%) within the flow test period. This well will be plugged and abandoned at the end of the production test.
v The 9/03b-7 wellbore is planned to recover a minimum cumulative volume of 45,000 barrels of oil during the flow test period to help ensure that the data gathering will be as effective as possible. This flow test is planned to be up to 90 days in length and to be conducted at a range of different flow rates (specifically not 500 barrels per day for 90 days), again to assist in the data gathering programme. This flow test is expected to commence in the second quarter of 2012 and, for the sake of clarity, it is not a headline flow rate test, it is a data gathering exercise.
v Drilling of a lateral well (9/03b-7Z well) from the side of the motherbore, being a horizontal wellbore with a reservoir section of approximately 2,450ft in length. This well is planned to be positioned as high in the reservoir as possible, being similar in design and completion to the successful 9/03b-6Z well. This wellbore will be drilled after the toe extension well, but not flowed until after the toe extension well has been flowed to achieve sufficient water cut. This lateral wellbore will be cleaned up and then flowed at a rate of at least 1,500 bopd for a minimum period of one day, prior to being suspended as the first full production well on the field in Phase 1B. This flow test is expected to be completed in the fourth quarter of 2012.
v Crude oil produced from the 9/03b-7 and 7Z wells will be marketed by BP Oil International Limited, the Company’s marketing and offtake partner.
v The results and data gathered from the 9/03b-7 well will be used to calibrate the existing reservoir model and update the Reserves Assessment Report. This update is likely to take a number of weeks to finalise after the Phase 1A work programme has been completed.
v In parallel to the update of the Reserves Assessment Report, the Field Development Plan for the Bentley field is expected to be updated for re-submission to the Department of Energy & Climate Change as soon as practicable.
The Company will continue to keep shareholders fully informed during the coming months, which will include the filing of its NI51-101 “Statement of Reserves Data and other Oil and Gas Information” as required in Canada by the end of April 2012.