Xcite Energy completes £24.9m placing to fund Bentley field development

Xcite Energy (TSX-V, AIM: XEL) has closed its £24.9m (C$38.4m) placing of new ordinary shares, principally to institutional investors. The company issued shares at £0.40 per share to investors in the UK and at C$0.62 per share to North American investors. The proceeds will be used in the development of the Bentley oilfield in the North Sea.

"This fund raising represents a significant step forward for the company in the overall achievement of the development plan for the Bentley field”, Xcite Energy chief executive Richard Smith said. “now that we have the finance in place, we have the resources to drill the 9/3b-R well expected to commence during the summer of 2010".

Xcite said the net proceeds, together with US$4 million committed by Challenger Minerals, are expected to primarily fund the drilling and flow testing of the 9/3b-R pre-development well on Bentley. Subsequently, the balance of the proceeds will be used for general working capital purposes.

To facilitate the equity financing the company hired Arbuthnot Securities in the UK and Octagon Capital Corporation and CIBC World Markets in Canada. The respective parties signed agency agreements on the 9th March.

With the support of its development partners, collectively known as the Bentley Alliance, Xcite has been making rapid progress in the development of the Bentley field. The planned pre-development well represents the company’s next step towards full production following the BP (LSE: BP) off-take agreement signed in January 2010.

The international oil major’s BPOI unit will sell the crude from the Bentley field in return for an incentive-based fee per barrel. The off-take fee is directly related to the realised price achieved by BPOI for the Bentley crude oil in relation to the prevailing Brent crude price, thus incentivising BPOI to maximise the price per barrel achieved for XER by minimising the discount to Brent crude.

Furthermore the FTSE100 constituent is also supporting the commercial development of the Bentley oilfield. BPOI will procure US$20 million of financing from a commercial bank for Xcite and provide credit support from BP once Xcite moves to full field development. Drilling of the 9/3b-R development is planned for this summer.

Xcite last week said its subsidiary Xcite Energy Resources Ltd has signed a legally binding agreement with Challenger Minerals (North Sea) Lrd for CMNS to farm in to the Bentley field, commencing with the forthcoming 9/3b-R well.

CMNS, a subsidiary of Transocean Drilling UK Ltd, will provide US$4 million as its share of the 9/3b-R test well costs in exchange for 4% working interest in the Bentley field through an earn-in mechanism, which allows CMNS to join the Bentley field licence at any time prior to the commencement of the first phase development of the field.

On February 10, it announced  two separate agreements with third party contractors, one with AMEC (LSE: AMEC) for the provision of technical expertise, engineering and project management, and another with Transocean Drilling, which will supply a heavy duty, deep water jack-up drilling unit.

AMEC has been hired to advise Xcite on 9/3b-R well, and will support the company further through the planned works on early production systems and the full field development in due course, Xcite said. The services to be provided by AMEC will include project management, engineering, facilities design, planning and programming, supply chain management and operational support.

According to Xcite, the Bentley field is among the largest undeveloped heavy oil prospects in the North Sea. Its resource estimate was last year upped to 690 million barrels of oil (mbo) with the upside at nearly 890 mbo following a 3D seismic survey.