eesc presentation apr 2015april 2015 legal disclaimer 2 the information contained in this...
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EESC Presentation
APR 2015
April 2015
Legal Disclaimer
2
The information contained in this presentation (“Presentation”) has been prepared by Xcite Energy Limited
(“Xcite Energy” or “Company”) and is being delivered for informational purposes only. The information
contained in this Presentation is provided as at the date hereof and is subject to change without notices and
does not purport to contain all information about the Company.
Certain statements contained in this Presentation constitute forward-looking information within the meaning
of securities laws, including statements relating to the estimated reserves, resources and exploration activities
associated with the oil and gas properties in which the Company holds an interest. All information other than
information of historical fact is forward-looking information. Forward-looking information may relate to the
Company’s future outlook and anticipated events or results and, in some cases, can be identified by
terminology such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”,
“predict”, “project”, “target”, “potential”, “continue” or other similar expressions concerning matters that are
not historical facts, and are intended to identify forward-looking information. No assurance can be given that
this information will prove to be correct and such forward looking information included in this presentation
should not be unduly relied on. These statements are based on certain factors and assumptions including
expected growth, results of operations, performance and business prospects and opportunities. While the
Company considers these assumptions to be reasonable based on information currently available to it, they
may prove to be incorrect. Forward-looking information is also subject to certain factors, including risks and
uncertainties that could cause actual results to differ materially from what we currently expect. These factors
include risks associated with the oil and gas industry (including operational risks in development, exploration
and production, delays or changes in plans with respect to exploration or development projects or capital
expenditures, the uncertainty of reserves and resources estimates and projections in relation to production,
costs and expenses, health, safety and environmental risks and offshore exploration risk), the risk of
commodity price and foreign exchange rate fluctuations and the ability of the Company to secure financing.
Additional information identifying risks and uncertainties are contained in the Company’s annual information
form dated 26 October, 2010 and in the Management's Discussion and Analysis for Xcite Energy dated 26
March 2014, filed with the Canadian securities regulatory authorities and available at www.sedar.com. The
Company disclaims any intention or obligation to update or revise any forward-looking statements whether as
a result of new information, future events or otherwise, except as required under applicable securities
regulations.
Statements relating to “reserves” or “resources” are deemed to be forward-looking statements or information,
as they involve the implied assessment, based on certain estimates and assumptions, that the resources and
reserves described can be profitable in the future. There are numerous uncertainties inherent in estimating
quantities of proved reserves, including many factors beyond the control of the Company. The reserve and
resources data included herein represents estimates only. In general, estimates of economically recoverable
oil reserves and the future net cash flows therefrom are based upon a number of variable factors and
assumptions, such as historical production from the properties, the assumed effects of regulation by
governmental agencies and future operating costs, all of which may vary considerably from actual results. All
such estimates are to some degree speculative and classifications of reserves are only attempts to define the
degree of speculation involved. For those reasons, estimates of the economically recoverable oil reserves
attributable to any particular group of properties and classification of such reserves based on risk of recovery
and estimates of future net revenues expected therefrom, prepared by different engineers or by the same
engineers at different times, may vary substantially. The actual production, revenues, taxes and development
and operating expenditures of the Company with respect to these reserves will vary from such estimates, and
such variances could be material.
The reserves, resources and future net revenue from the Company’s properties have been independently
audited by TRACS International Consultancy Ltd (“TRACS”) in its Reserves Assessment Report (“RAR”) of the
Company’s properties dated 25 February 2014 and effective 31 December 2013. Reference is made to the
Company’s Statement of Reserves Data and Other Oil and Gas Information (Form 51-101F1) report dated 25
February 2014 for more information about the reserves and resources information prepared by TRACS for the
Company.
Consistent with the securities disclosure legislation and policies of Canada, forecast prices and costs are used
in calculating reserve quantities included herein.
Actual future net cash flows also will be affected by other factors such as actual production levels, supply and
demand for oil and natural gas, curtailments or increases in consumption by oil and natural gas purchasers,
changes in governmental regulation or taxation and the impact of inflation on costs.
The estimated future net revenue contained herein does not necessarily represent the fair market value of the
Company’s reserves and resources. There is no assurance that the forecast price and cost assumptions
contained in the RAR will be attained and variances could be material. The recovery and reserves estimates on
the Company’s properties described herein are estimates only. The actual reserves on the Company’s
properties may be greater or less than those calculated.
All recipients of this Presentation are encouraged to obtain separate and independent verification of
information and opinions contained in this Presentation as part of their own due diligence.
This Presentation should not be considered as the giving of investment advice by the Company or any of its
shareholders, directors, officers, agents, employees or advisors. Each party to whom this Presentation is
delivered or made must make its own independent assessment of the Company after making such
investigations and taking such advice as may be deemed necessary. In particular, any estimates or projections
or opinions contained in this Presentation necessarily involve significant elements of subjective judgement,
analysis and assumption and each recipient should satisfy itself in relation to such matters. In no
circumstances will the Company be responsible for any costs, losses or expenses incurred in connection with
any appraisal or investigation of the Company.
This Presentation does not constitute, or form part of, any offer or invitation to sell or issue, or any solicitation
of any offer to subscribe for or purchase any securities in the Company, nor shall it, or the fact of its delivery,
making or distribution, form the basis of, or be relied upon in connection with, or act as any inducement to
enter into any contract or commitment whatsoever with respect to such securities.
The delivery, making or distribution of this Presentation in or to persons in certain jurisdictions may be
restricted by law and persons who receive this Presentation should inform themselves about, and observe, any
such restrictions. Any failure to comply with these restrictions may constitute a violation of the laws of the
relevant jurisdiction. In particular, this Presentation has not been approved by an authorised person pursuant
to Section 21 of the Financial Services and Markets Act 2000 (“FSMA”) and accordingly, it is being
communicated in the United Kingdom only to persons to whom this Presentation may be communicated
without contravening the financial promotion prohibition in Section 21 of the FSMA. Those persons are
described in the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (“Order”) and
include persons who fall within the category of person set out in Articles 19(5) and 49(2) of the Order. In
addition, in the United Kingdom, this Presentation is only being communicated to and directed at persons who
are a “qualified investor” (within the meaning of Section 86(7) of the FSMA) acting as principal or in
circumstances to which Section 86(2) of the FSMA applies. Any investment activity to which this Presentation
relates in the United Kingdom is available to, and will only be engaged with such persons and this Presentation
should not be acted or relied upon in the United Kingdom by persons of any other description. No offer of
securities in the Company is being or will be made in the United Kingdom in circumstances which would
require a prospectus to be approved by the UK Financial Services Authority (“FSA”) under Section 87A of the
FSMA.
By accepting this Presentation, the recipient represents and warrants that it is a person to whom this
Presentation may be delivered or distributed without a violation of the laws of any relevant jurisdiction. This
Presentation is not to be disclosed to any other person or used for any other purpose and any other person
who receives this Presentation should not rely or act upon it.
Nothing in this disclaimer shall limit or exclude any liability which by law or regulation cannot be limited or
excluded.
See the slide titled “Glossary” at end of Presentation for definitions of those defined terms in the Presentation.
April 2015
Talk on North Sea Oil and Gas to
The EESC
With Focus on Xcite and the
Bentley Field Steve Kew
Chief Operating Officer
Xcite Energy Resources
3
April 2015
Agenda
–UK Oil and Gas Industry
–The European impact areas
–Xcite’s Bentley Field
4
April 2015 5
North Sea From Google
April 2015 6
April 2015
The North Sea About the Industry Key facts
• Operations
• 99% of UK oil and gas production occurs under the seas surrounding the UK, from the seabed known as the UK continental shelf (UKCS).
• There is a network of 14,000 km of pipelines linking 107 oil platforms, 181 gas platforms and a large number of subsea installations.
• There are 383 producing fields, including 17 new ones which started production in 2008.
• Since 1965, 3,970 exploration and appraisal wells have been drilled at a cost of £58 billion (2008 money).
• In 2008, £1.4 billion was spent drilling 109 exploration and appraisal wells and 300-400 million barrels of oil and gas equivalent (boe) were discovered.
• The average size of the oil and gas fields discovered between 2000 and 2008 was 26 boe, compared with an average of 248 million boe in the ten years from 1966.
• Since 1965, over 6,000 development wells have been drilled to bring new discoveries into production.
7
April 2015
The North Sea About the Industry Key facts
• Over the last 45 years, exploration and development of the UK’s oil and gas
reserves has created a supply chain with an unrivalled range of products,
services and expertise; there are now over 3,000 companies involved.
• Today, the supply chain provides to exploration and development companies
goods and services for reservoirs, wells, facilities, marine and subsea activities
as well as support services.
• The capability of this supply chain continues to grow as the UK develops new
fields in increasingly deep waters and faces the challenges of extending the
operating life of many mature assets in one of the most demanding oil and gas
provinces in the world.
• The supply chain's goods and services are now in strong demand in oil and gas
provinces around the world. Exports are estimated at about £6 billion annually
8
April 2015
• The industry in 2012 is providing employment for 440,000 people across the whole country:
• The exploration for and extraction of oil and gas from the UKCS accounts for around 340,000 of these, comprising:
– 32,000 directly employed by oil and gas companies and their major contractors
– 207,000 within the wider supply chain
– 100,000 jobs supported by the economic activity induced by employees’ spending.
• In addition, a thriving exports business is estimated to support a further 100,000 jobs.
• Each £1 billion spent on the UKCS supports 15-20,000 jobs.
Employment Key Facts
April 2015
But Without Investment Support The Key Hubs Will Close Within 10
years
April 2015
• The Industrial Emissions Directive– including the Integrated Pollution Prevention and Control Directive (IPPC) and the Large
Combustion Plant Directive (LCP).
– Implications of the Medium Combustion Plant Directiveon UKCS oil and gas production
• The EU Emissions Trading System (EU ETS)
• Offshore Safety Directive
• European Commission’s proposed Hydrocarbons BREF
- Where does all the data go?- Who is analysing it?
- Can we access it?
European Issues
April 2015
Xcite and The Bentley Field
12
April 2015 13
The North Sea Can be a Tough Place
April 2015
Introduction to Xcite Energy
Overview Independent Certified Reserves and Resources
35 year production profile
14
• E&P independent listed on AIM (London) & TSX-V
(Toronto), ticker XEL
• 100% holder of 2 licences over 4 blocks in UK North
Sea
• Key asset: Bentley field, 257 MMstb 2P Reserves and
48 MMstb P50 Contingent Resources
• 35 year production profile; projected first phase peak
production of 45,000 bbls/day
• USD 250m Extended Well Test (“EWT”) proved key
technical and commercial aspects of the field and
simplified development plan
• Key development partners being selected – MOUs
signed with Baker Hughes, Teekay, AMEC and Arup
• Next phase of pre-FEED/assurance engineering with
partners to optimise development concept and refine
costs and schedule for project execution
• Intention to sign binding contracts, subject to FDP
approval, once engineering completed by end of 2014
Strategy to Reduce Project Risk by EWT and
Upfront Engineering
0
50
100
150
200
250
300
350
400
1P (P90) 2P (P50) 3P (P10)
MM
stb
Reserves Contingent Resources
April 2015
Well Appraised and Understood Heavy Oil Field
Well
NameCompleted Oper ator Hydr ocar bons Tests
9/3-1 1977 Amoco
Encountered 12°
API oil – 81 ft oil column
Nitrogen evacuation. Oil
too heavy to flow (no pump)
9/3-2A 1983 Conoco 92 ft oil columnESP lifted DST. No flow
due to pump failure
9/3-3 1986 ConocoDry hole on
separate structureNone
9/3-4 1986 Conoco 84 ft oil column
Not tested (commitment
well, low oil price environment)
Well
Name
Completed Oper ator Hydr ocar bons Tests
9/03b-5 2008 Xcite 87 ft oil column ESP lifted, average 125
stb/day with high skin
9/03b-6 2010 Xcite 113 ft oil column Logged and pressure
tested
9/03b-6Z 2010 Xcite 1,821 ft oil section
(horizontal)
ESP lifted, 36hr DST
reaching stabilized
2,900 stb/day
9/03b-7 2012 Xcite2,214 ft oil section
(horizontal)
ESP lifted ex tended flow
test, reaching 3,500
stb/day
9/03b-7Z 2012 Xcite2,042 ft oil section
(horizontal)
ESP lifted ex tended flow
test
Pre-Xcite Wells – 1970s and 1980s
Xcite Wells – 5 successful penetrations
15
• Since 1977, Bentley has been
appraised with a total of 8
reservoir penetrations
• Latest 3D seismic shot in 2011
• Xcite has drilled 3 wells plus 2
horizontal laterals, including a 68
day pre-production EWT
April 2015 16
• Bentley is currently one of the largest, proven and undeveloped assets in the UK North Sea
• Long reserves production profile extending to 35 years, and beyond to 50 years assuming contingent resources
converted to reserves
• Optimisation and Enhanced Oil Recovery expected to further increase reserves
One of the Largest, Proven and Undeveloped Assets in the UK North Sea
Source: Wood MacKenzie database for all other fields than Bentley. Certified 2P reserves for Bentley as of
31.12.2013.Source: DECC, UK Annual Oil Production by Field, 1 Apr 2014. Cubic metres converted to bbls at conversion ratio
of 2.898.
* Bentley projected data, as currently modelled by the Issuer
Oil fields UKCS (remaining reserves) 2013 UKCS Oil Production
0 50 100 150 200
BUZZARD
FORTIES
CAPTAIN
FOINAVEN
ALBA
NELSON
DON SOUTH WEST
BACCHUS
NINIAN
TELFORD
CLAIR
HARDING
MACHAR
FRANKLIN
CALLANISH
ETTRICK
BERYL
BLAKE
CORMORANT NORTH
SCOTT
Mstb/day
Bentley projected
second phase peak
production, 57,000
bbls/day*
Bentley projected
production after 17
years (c.15,000
bbls/day)*
Bentley projected
production after
35 years (c.8,500
bbls/day)*
April 2015
EWT Designed to Test Water Cut and Long Term Productivity
9/3e
17
• Demonstrated successful multi-lateral
drilling
- 9/03b-7 (B6) lower lateral well
geosteered 60ft above OWC to ensure
water break-through and measure
increase in water cut during test period
- 9/03b-7Z (B5) upper lateral well
geosteered 5-10 ft from reservoir roof,
flowed and left as future producer
-3750
-3700
-3650
-3600
-3550
100015002000
De
pth
(ft
TV
DSS
)
Offset (m)
B6 Trajectory
B6 Top Dornoc h OWC
Top of Reservoir
Wellbore Path
Oil water Contact (OWC)
-3750
-3700
-3650
-3600
-3550
100015002000
De
pth
(ft
TV
DSS
)
Offset (m)
B5 Trajectory
B5 Top Dornoc h OWC
Oil water Contact (OWC)
Wellbore Path
Top of Reservoir
Well 6Z
Well 6
• Wells flowed for 57 days uptime, within 68 day test period which
included shut-ins/build-ups, production chemistry, etc
• Water break through better than expectations
April 2015
Xcite Managed Service Providers and Produced c.149,000 Barrels of Bentley Oil
18
9 Mattresses
• Heated, de-gassed and co-flowed with water
• Blending managed to optimise marketability
• Confi rmed viability of FSO dehydration solution and offtake to market
Rig to Tanker offset 1.5 km – 1.7 km
Tether base &
8 Mattresses
1 x 300m “Lazy S” Riser
with distributed buoyancy
Water Depth 113m
Shuttle tanker with 750,000 bbls Storage
Tanker Manifold
Coupling Head
Upper Hose
(5 x 300m seabed lay)Swivel
1 x ‘Pipeline Chute’ with
max tension safety device
(1 x 300m ‘J Lay’ Riser)
Jack-Up Drilling Rig
‘Rowan Norway’
De-gas
Dehydrate
Blend
April 2015
Key Development Questions Answered
Question How Xcite has addressed this
Is there sufficient oil in the ground for a
viable development?
What is the nature of Bentley fluid and its
flowing properties?
Can Bentley fluid be flowed at commercial
rates?
Can oil-rate be sustained following water
break-through?
Can development plan contact a large area of
the field at reasonable cost?
Can produced fluids be processed and
exported efficiently?
Can exported fluids be sold at a reasonable
market price?
Mapping has consistently shown large in-place volume.
Current P50 = 907 MMstb
Vertical well 9/03b-5 flowed first oil and provided data
to predict flowing properties
Horizontal well 9/03b-6Z flowed at 2,900 stb/day per
lateral. Re-confirmed with 9/03b-7, 7Z, reaching 3,500
stb/day per lateral
Horizontal well 9/03b-7 EWT demonstrated better
than expected water break through behaviour
Long-reach, multi-lateral, horizontal wellbores. Over
6,000 ft reservoir drilled to date confirmed
methodology
Processed and delivered export quality crude to
market. Dehydration in 8-12 days = FSO solution
Approx. 150,000 stb Bentley crude sold supporting a
12% discount to Brent
19
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April 2015
Bentley Development Partners: Evolution of First Phase Concept
20
AMEC, Arup Baker Hughes and Teekay have joined the development group to undertake pre-
FEED/assurance engineering with Xcite and move Bentley through FDP approval and on to long term
development
First Phase Development
April 2015 21
The Bentley Vision
April 2015
From an Unloved Bentley to ……..
April 2015
To the Beast