Shares in Xcite Energy jumped for the second day in a row yesterday as anticipation grows about the potential of its Bentley heavy-oil field, about 100 miles east of Shetland.
The British Virgin Islands-registered company announced in the morning that a flow test had now been completed successfully, adding tens of millions of pounds to its stock market value in just a day. Xcite, which has a base at Banchory, said flow rates showed both the commerciality of the Bentley field and the reservoir properties being above the upper end of modelled expectations. Bentley was previously thought to have up to 220million barrels of recoverable reserves and there is speculation that this figure could now be upped in the weeks ahead. Xcite chief executive Richard Smith said: “This is an outstanding outcome for the Xcite team and for the industry contractors to deliver this successful well test on Bentley. This flow test fully demonstrates the commercial potential of the Bentley field and the long-held belief that Xcite has maintained in this major North Sea asset.
“We now move on to the first-stage production planned for 2011 with an excellent platform.”
Shares in the company on the AIM market in London were as high as 425p yesterday and finished the day up 62.5p at 381.5p. This follows Monday’s rise of 45.5p.
Xcite is also listed on the Toronto Stock Exchange.
The success of Bentley will make wealthy men of Mr Smith and colleagues Stephen Kew, the exploration and development director, and Rupert Cole, the chief financial officer. Each have more than 6million shares in Xcite.
Xcite said last month it had agreed a deal with British American Offshore to hire the Rowan Norway, a deepwater jack-up unit, designed and built for simultaneous drilling and production.
The rig is expected to be available to begin production from Bentley in the fourth quarter of next year.
The initial commitment is for 240 days and will allow drilling of up to six wells on the Bentley field as part of the anticipated three-year first-stage production.
Mark McCue, who is a divisional director at investment management and financial planning specialist Brewin Dolphin in Aberdeen, said: “Shares in Xcite have hit a fresh high for the year following the successful flow test. This is a transformational result for Xcite. Having traded as low as 36.5p earlier in the year, a share price of £4 would value the company at around £625million.
“The success highlights the still vibrant opportunities for investors in the North Sea with the likes of EnCore Oil and Nautical Petroleum also doing extremely well at present. Technological progress is making heavy oil prospects in the North Sea much more economically attractive and this news bodes very well for the continuing prosperity of Aberdeen and the north-east.”
Andrew Reid, Aberdeen-based managing director of energy consultancy Douglas-Westwood, said: “Bentley is one of the largest finds in the UK continental shelf in recent years, far exceeding the average discovery size of 26million barrels since 2000. Significant investment will be required to put the field into the development phase. This will have a beneficial impact on the north-east economy.”