LON:XEL^J17 | Xcite Energy - General Discussion

18th Mar '10 by Cuthbert C

147 comments 57689 reads

this thread does what it says on the title line

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Cuthbert C

Premium Member

147 comments

tiktok14

18th Feb '11

Good evening all,
Im new to the site and whilst browsing this discussion board can instantly see a huge difference in the standard compared to others out there. Very informative wth reasoning behind all the posts! A rarity to say the least.

I am invested here and was wondering if anyone had views on this price being a good one to buy at? I feel it is as the updated cpr is due and after watching the oilbarrel presentation surely we are in for a nice boost ? Or do we feel more information is needed regarding funding before further investment?

Im struggling to understand how we can be £4+ on a successful flow test then almost 2 months on, after the oilbarrel presentation and rig signing, be 350ish?

Any thoughts appreciated
Tiktok

Jimarilo

20th Feb '11

Good post from Dalesman on iii and why he recently invested £55k in XEL

http://www.iii.co.uk/investment/detail/?display=discussion&code=cotn:XEL.L&it=le&action=detail&id=7833879&prevpost=7833860&nextpost

Biggles

20th Feb '11

You need to dig it out but there's some commentary on the qualtiy of what's been found in Bentley, Kraken and Mariner in here:
http://www.oilvoice.com/n/OilEdge_Crossing_the_line/ce5d18afb.aspx

In essence, the argument is, if the larger, much better known, Mariner accumulations haven't been developed, what makes anybody think the other two will be any time soon?

marben100

20th Feb '11

I note these paragraphs from the article you refer to:

It is then vital to add an assessment of the ‘dynamic’ behaviour of the reservoir. In circumstances where reservoir performance is already well known – for example in a ‘mature’ area such as the North Sea – or can be reliably predicted – for example dealing with light oils in deep water clastic reservoirs, this can be achieved by collecting an adequate number of drill stem tests (DSTs) in which wells are flowed for a relatively short time (24 hours or a day or two).

However, DST data is too short term for unconventional oils where questions arise as to the longer term flow of oil - out of the reservoir, and then through the well bore, the sub-sea installations and any pipeline. Observations need to be made over a much longer period.

I remain deeply suspicious of the very short well test Xcite undertook and last week disposed of the rump of the holding that I purchased originally at 45p. I fear that investors in Xcite could be in for a nasty shock, at some stage.

Regards,

Mark

repobear

20th Feb '11

Hi marben,

Well if that's the case after watching the oilbarrel presentation on youtube they are in the running for the oil industry equivalent of a BAFTA.

I sold my last little bit of XEL for 390+ not so long ago. The text highlighted by marben looks like it is softening people up for some disappointment. Whether it is the nasty shock that anticipated remains to be seen.

Nvertheless, I think marben's decision is very sensible, FWIW.

repo

Cuthbert C

20th Feb '11

I exited a while back because I was sceptical about the quality/rigour of the flow test. And because I'd already made a v good return on my original investment which was non-trivial in size. I was at the oil barrel presentation and I did not like it. I never did like the "don't worry your pretty little head about the detail" kind of approach. I am watching closely and am quite ready to wade back in when/if the risk/reward balance reverts to the level of appeal it exhibited when I first bought in. I just don't see the need to hold it whilst the fog clears.

Jimarilo

20th Feb '11

The well test seems to be a sticking point for those sat on the fence and rightly so. This maybe why the Ocean Nomad looks to be contracted again this time via SPD (as per my post on TMF)

A new well test, new umbilical, hopefully a better weather window and a longer term test result as positive as the short test, will be enough to persuade those on the fence and funding at a price above the current sp

However we will have to wait for an announcement confirming the Ocean Nomad and any such plans

The Rowan Norway has been contracted and seems additional works on the Rowan Norway have already been discussed with Global Energy (Aberdeen/Invergordon) to be carried out at Nigg before the Norway is deployed (as per the Press & Journal)

Biggles said, "In essence, the argument is, if the larger, much better known, Mariner accumulations haven't been developed, what makes anybody think the other two will be any time soon?"

Statoil now have 65% interest in Mariner and 81% interest in Bressay with production planned for 2012

http://www.intsok.com/index.php?id=4556&download=1

Cheers

Paul

Jimarilo

20th Feb '11

Links below for the ON, contract until June

Ocean Nomad Diamond Offshore SPD/Valiant/Xcite SEMI Jun. 2011

http://www.offshore247.com/projects/rigloc.aspx

Ocean Princess shown here to complet the current ON contract with BG group

http://www.diamondoffshore.com/ourFleet/documents/February2web2011.xls

Biggles

21st Feb '11

Jimarilo, thanks for the intsok link: I hadn't seen this presentation before.
The way I read it from this pdf, it's Mariner project sanction that is planned for 2012 - slide headed Master Plan: Pre-Sanction phase - and as one of the later figures makes clear, getting to production will take a long time and have a slow build-up (next to last slide, showing slow build up and mentioning 40 year life!).

Mariner first; Bressay next; then Kraken and Bentley................?

Jimarilo

21st Feb '11

Hi Biggles,

Full field development on Bentley is expected by 2014 and first oil expected late 2011/early 2012

The Rowan Norway will have the ability to drill and produce in tandem

JPGH

21st Feb '11

Mariner, although it has been appraised and EWTed ad nausium, will still undergo a FEED that will lead into a FID and a subsequent detailed design engineering phase before any oil flows. This FEED (with a view to follow on EPIC work) is currently being bid out to various London based Engineering Contractors.

Bressay is also at Conceptual Engineering/FEED phase (not sure which). No FID there yet so first oil a long way off here also.

It would be wildly optimistic by Xcite and investors to expect to produce anything other than small scale oil (<3000 bopd) from an extende well test (EWT) on Bentley until such time as much more flesh (via engineeirng studies leading to a FID and then subsequent EPIC phase) is added to the story (2-3 years away from now, minimum).

I was not at all impressed by well test methodology used (Tote Tanks and speculation/rumours of stop-start testing) but bought in after test flow results and expect to make some money here on the back of "exuberance" that may happen upon release of CPR and usual bid rumours. Expectation has been tempered somewhat but will hang in here for a while longer.

JPGH

luckyjonah

21st Feb '11

Hi JPGH, I'm always happy to listen to the bear case but I do not understand your pessimism with regards to the potential "flow test rates" by which I assume you mean the First Stage Production due in Q4 - they flowed 2,900 at a reduced horizontal length with lesser equipment compared to the horizontals planned for Rowan Norway in the FSP. And the RN can have up to 6 wells operating simultaneously. I believe they also stated at OB that these flow rates should translate to around 4,000 bopd which is slightly higher than the Schlumberger re-modelled estimates after the first test phase. Given XEL stated that the 6z well flowed "better than we could ever have expected", and the low porosity to boot, I don't see such cause for pessimism on that front - but XEL seems surrounded by pessimism, has done since day 1 when the standard resposnse was "tssssk, I hear there are problems with the geology, it will never flow"... people couldn't even read the CPR properly explaining the restricted test flow being caused by the high skin [not you, just general comment at the time!]. So I'm wary of only seeing the positives, but struggling to find much cause to agree with the negatives!

As for Mariner, well it's a 2 layer field - the Maureen flowed at 10,000 bopd but that was only 23 mmbo net to NPE. The much larger Heimdal (4x size) flowed at "up to 1,133 bopd". I'm not sure fast-tracking 86mmbo of Mariner's Maureen is quite as compelling a financial story as 200-400 mmbo at Bentley with an Alliance of blue chip firms signed up for an FSP, conceptual design complete, and with off-take agreement already in place. Maureen is quoted as being viable at POO over $50 compared to Bentley at $37 - personally I'm assuming the lower cost associated with developing Bentley will make it easier to move the contingent to reserves, although no doubt the FSP will be required to get the majority moved across. Noteworthy again that XEL have stated they will "definitely" have reserves booked post-CPR.

JPGH

21st Feb '11

Luckyjonah

I haven't used the term "flow test rates" in my post so I dont really get what you are asking of me. Were you querying a previous other poster perhaps?
The duration of the XEL well test and the apparent stop-start nature of the test was not long enough nor continuous enough to yield the test data that could be used to infer sustainable and reproducible well flow and that is why some investors are sceptical that the announced well test flow rates are representative of the operational potential of a Bentley well. Hence why for heavy viscous oil (and waxy oils like Tullow Oils Lake Albert crudes and RKHs Sealion crude oil all need EWTs in order to demonstrate to the Oil Co before they commit to expensive development (and also to provide data for reservoir models and for engineering development and to worried investors). This is a normal concern for any unconventional oil development and not in any way unusual. I work daily with waxy and heavy crude oils so am fully au fait with the technical concerns.
Also another facet of Bentley to be aware of is because XEL have involved quite a few different personnel from a good few UK service companies as part of the consortium then it followed that there is quite a lot of "gossip" on Bentley development is out there, some good and some not so good, some rubbish and some close to the knuckle, none of which is repeatable here. Best XEL can do is an EWT to ease investors worries. Meanwhile I will wait for the CPR and takeover rumour mongering to bump up the SP.
JPGH

Jimarilo

22nd Feb '11

An EWT would explain why the Ocean Nomad is assigned to Xcite

luckyjonah

22nd Feb '11

JPGH - sorry, I meant the EWT not the "flow test", too much rushing! The Ocean Nomad assignment is interesting especially as it's not been announced as far as I'm aware, maybe this is indeed to do an EWT. But to suggest 2-3 years until production seems massively out of kilter with XEL's opinion and expenditure on the RN - surely having delayed the RN deal for so long the board must be confident they have the necessary data in place to progress to the EPS in 4Q2011 which in turn requires reserves to have been booked?

luckyjonah

22nd Feb '11

FYI Rupert Cole has confirmed that XEL don't have the Ocean Nomad under contract.

JPGH

22nd Feb '11

Luckyjonah

An EWT can morph into/become an EPS (early production systems) if Oil Co specifies this from the onset of the EWT and is happy to pay the "got you by the balls" rates that they will get charged i.e. high rates for this kit until such time as the "proper" equipment/facilities are ready for longer term production. The EWT, that will now be an EPS, though will need some bespoking if it is to be used long term and this "bespoking" is how the Oil Co gets rightly rogered.

As regards EWTs and EPSs, Tullow Oil, who I am familiar with, do this / are planning to do this type of test for their very waxy crude oils in Uganda, AFAIAA Rockhopper will do same in FIs this year, BG are doing a large scale EWT for one of its Brazilian subsalt plays.

The 2-3 yrs time taken to attain production is to be intepreted as meaningful production and represents the time taken to engineer and install the proper permanent kit.

Retruning to XEL's upcoming FPS/EWT/EPS (whatever you wish to call it) I would doubt that XEL can produce fluids except from one well on the specially hired in rig, and seeing as they struggled (for whole raft of reasons including weather, having to use Tote tanks to store oil, injecting downhole chemicals) to get 2900 bopd from a short stop start test then I stand by my comment that it is wildly optimistic to expect much more than this from an EWT/EPS or whatever is next planned. The main objective for EWT should be to demonstarte flow stability/sustainability and not to cone in water. Then they have a project.

JPGH

JPGH

Biggles

27th Apr '11

Here's a question.
Based on the experience of heavy oil accumulations in the North Sea, how many wells would it take to produce the mooted (contingent) resources in Bentley?
Let's try a bit of arithmetic:
Production per well will most probably be in the range 1 to 1.5 million barrels in total....a very low number due to the viscous crude.
Hmm, isn't 150 million barrels divided by 1.5 million roughly 100!

As the commerciality of any development is dominated by the well costs then IMHO this is going to struggle without a tax break (the lack of which perhaps persuaded ChevronTexaco to walk away from Mariner). And Ooops - texes have just gone up.

Jimarilo

28th Apr '11

Biggles, they will qualify for around £800m in heavy oil tax breaks and not pay tax until 2017

mangotree

15th Jun '11

New interview with Richard Smith.

http://www.xcite-energy.com/

“The RAR has indicated that the assets have now reached a valuation of $1.35 billion for the core area alone. This is prior to further appraisal work in the field or additional enhanced oil recovery techniques that we can have on the field, so there is a lot of potential upside on the 1.35 which will come throughout the development of the field and I think the key issue for the investment community now is to look at the market cap based on the current share price and you’ll see that there is something like a 70% discount to the net asset value today.

That is a substantial discount and it would be more relevant for a company in exploration and very early appraisal to have that level of discount. It would be more typical for a net asset value to market cap to be approaching 1.”

$1.35 billion is about £834,000,000 at today’s rates, or about 505p per share.
The share price closed today at around 146p.

MT

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Xcite Energy - General Discussion

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Cuthbert C

147 comments

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