£86m funding deal to Xcite the markets

XCITE Energy, the Aberdeenshire-based oil explorer, yesterday announced an £86 million funding deal as it prepares to start work on its Bentley field in the North Sea.

The company said it had secured a £25.8m private placement with Bermuda-based investor Socius and has also entered into a £60m equity credit facility with Esousa Holdings.

Aim-quoted Xcite is currently awaiting approval from the UK government’s Department of Energy & Climate Change (Decc) for its plans to begin work on the Bentley field.

There has been speculation from analysts that concern over whether the company had the financial firepower in place to proceed with its original plans led to Decc asking the company to submit a less ambitious field development timetable.

Xcite also said yesterday that it had ended its existing standby equity agreement with New Jersey-based YA Global, in place since last September.

Xcite chief executive Richard Smith said: “Against a challenging economic backdrop, we are very pleased to have further strengthened our balance sheet as we move forward with the field development plan towards first oil.”

On Monday Xcite had reiterated its commitment to producing oil from the Bentley field by issuing a stock exchange announcement to reassure shareholders over recent drops in its share price. A number of investors had raised concerns over the fall in market value.

Shares in Xcite, one of the most hotly-traded stocks over the past year, have lost more than three-quarters of their value since January when they hit a peak near 400p amid excitement surrounding the development of the oil field.

The stock was hit by an independent audit, which estimated that there would be 22-35 million barrels of oil produced from the first stage of the Bentley field, with a further 87 million barrels in reserve. Those figures were well below the combined total of 200 million barrels that analysts had previously pencilled in for the North Sea field.

The company, which is also listed on the Toronto stock exchange in Canada, has recently said it was hiring the Rowan Norway jack-up rig to work on the Bentley project and is kitting out the vessel in Dundee with the rig expected to be ready to enter service in February.

Shares in Xcite closed down 3.75p at 98p yesterday, valuing the company at £187m.