Xcite Energy fails to please despite well test beating expectations -UPDATE

20th Sep 2012 08:59

Xcite Energy, an AIM-listed North Sea oil and gas group, saw its shares fall on Thursday morning, despite its pre-production well test results on the Bentley Field exceeding management expectations. During the well test the firm produced around 147,000 barrels of crude oil, and significantly improved its understanding of the oil, gas and water in the area. Less water was produced than expected. The pre-production test comprised two horizontal wellbore sections. One was placed at a depth within the reservoir close enough to the oil-water contact such that water would be produced during the period of the flow test. The second well was successfully geo-steered within five to ten feet of the attic of the reservoir. The resulting crude has been sold to a major refiner in Europe.The flow test also confirmed the existence of a large, active aquifer, which will provide vital long term pressure support during life-of-field production.Rupert Cole, Xcite Energy Chief Executive Officer, said: "We are extremely pleased with the outcome of the Phase 1A work programme, which has exceeded our expectations. We have gathered very substantial quantities of high quality data, which has materially de-risked the project. This will enable us to confirm the full field development plan and advance our commercial strategy. "As a result of the expertise within the Xcite team, supported by our contractors and service providers, we have safely delivered an outstanding pre-production well test on Bentley, one of the largest remaining, undeveloped North Sea oil fields." Reacting to the news, analysts at Seymour Pierce wrote in today´s pre-open that: "Whilst today's announcement is largely priced in given Xcite's ongoing operational news flow to date, we expect investors to react positively to further confirmation of the successful programme. The shares have rallied in recent weeks as the market anticipates a potential farm-in partner on the back of encouraging flow test data. Today's announcement highlights the attractiveness of the Bentley field. On this basis, we expect the shares to continue to strengthen today." The broker is currently telling clients to buy shares of Xcite, with a price target of 242p.Despite this, the share price fell 4.21% to 125p by 09:23.NR