Van het ii forum:
A certain site posted this:
Two weeks ago, my colleague Red Evans wrote this speculative piece wondering whether or not Xcite Energy (XEL) stood to lose everything as a result of the Wood Review into North Sea Oil. At the time, I thought Red’s conclusion missed the point of Xcite’s recent shift in strategy. The company clearly laid out a new plan for developing Bentley and the signs in April suggest it means to carry this out. And quickly.
Quoting Red’s original piece, he said “if Xcite cannot find an operating partner (it has so far failed to do so) the new Regulator may well look unfavourably on it and its inability to integrate its asset within the basin.” What this missed was that Xcite’s board had made explicitly clear that they did not expect to secure a farm-out soon, so were now pursuing an alternative strategy.
When it announced this new strategy, in its year-end results on March 27th, Xcite’s stock price took a hammering. Exasperated shareholders, weary at the perpetual delays, threw up their hands in collective disgust and stampeded for the exit. Tired of waiting for that elusive farm-out, many seemed to sell on the basis of this statement from Xcite’s board:
“Discussions with industry service partners are progressing and, while a number of farm-out discussions continue, progress is slow, and our emphasis is now moving in favour of a development partner solution which we can influence and direct.”
Without further detail, it is understandable why so many felt that enough was enough with this stock and went hunting elsewhere. I even penned a piece suggesting that, although I liked the look of Xcite’s innovative strategy, “this sleeping giant continued to snore” and I didn’t expect any fireworks soon.
I think I was partially wrong.
Although the market reaction has been muted, over the last fortnight Xcite has issued three successive RNSs, which all suggest that development of Bentley could happen quicker than many expect.
First, on April 7th, Xcite announced the signing of a memorandum of understanding (MoU) with Teekay Shipping for the provision of a Sevan floating storage and offloading facility (see an example of one here).
This was followed, on April 9th, with news of the next MoU, signed with AMEC Group and Ove Arup & Partners. This concerned an agreement reached by the three parties to work together in designing and developing Arup’s “self-installing, steel ACE platform for the Bentley field.” You can read the full RNS here and it explains in detail the technical and operational significance of this move. In summary, this arrangement could lead to considerable cost and time savings for Xcite and further suggests that development of Bentley is being accelerated.
Finally, Xcite announced yesterday the extension of its Equity Line Facility Agreement with Esousa Holdings, until July 30th 2017. Normally I view such funding arrangements as the beginning of a death spiral for a stock, but in the case of Xcite this particular cloud could have a genuinely silver lining. The untapped £30.84million of this equity line means that Xcite has access to the funds it needs to keep pursuing its unconventional strategy for developing Bentley.
Although Xcite has plenty still left to do to realise its long term ambitions in the North Sea, if it can build on the momentum of April’s quick fire series of announcements, this could do wonders for repairing damaged sentiment towards this stock. Remember that Bentley has an estimated 257mmboe and if Xcite’s board can convinced a sceptical market that this isn’t just another “jam tomorrow” play on AIM, I could see the same herd that gave up on this stock at the end of March, returning in force, at a significantly higher price to today’s 69p.
Grtz Bara