Xcite Energy shares advance again as pivotal well reaches target depth
Monday, November 08, 2010 by Jamie Ashcroft
Xcite Energy (LON:XEL, TSX-V:XEL) shares shot up around 13 percent this morning, when it announced it had reached target depth in the horizontal section of the 9/3b-6 well on the Bentley field.
The company told investors that it has successfully tracked the top of the reservoir, and the well provides over 1,800 feet of gross reservoir.
Ultimately the results from the 9/3b-6 well are likely to be pivotal for Xcite and investors are eagerly awaiting the upcoming flow test.
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This morning the shares began the day strongly to trade at a new high at 277 pence, up 13 percent. Since then trading
has settled down somewhat as the morning progressed. Shares were changing hands at around 255 pence by midday, up 3 percent.
The shares have already risen over 500 percent in 2010 as the Bentley field development programme has drawn in investor interest.
Arbuthnot Securities analyst Dougie Youngson emphasised that most of this interest has come from the retail end of the market.
“Xcite's share price has increased by 235% since drilling started ... This increase has been primarily driven by the retail market,” Youngson said.
“Our target price of 247p was reached last Friday and given the strength of the appetite of the retail market for this stock it is very likely that the share price will substantially increase ahead of the flow test.”
Whilst the analyst maintained his ‘Strong Buy’ rating, he also stressed that it is the flow test that will determine the future of the project.
Work began on the hotly anticipated well in the North Sea during September. Last month the Ocean Nomad semi-submersible rig reach target depth in the vertical section, revealing that the oil column was around 40 feet thicker than expected, with 113 feet of oil in a high quality Dornoch reservoir.
The well’s main focus is the horizontal section, which also appears to exceed initial pre-drill expectations.
Xcite drilled the horizontal section to a planned total depth of 7,085 feet. The reservoir was encountered at an estimated 3,618 feet - 18 feet higher than the pre-drill prognosis.
“The drilling results so far have been extremely encouraging; we highlight that both the vertical and horizontal wells have shown that the reservoir is thicker, which increases the prospect that the oil in place will be towards the high case scenario,” Youngson added.
“The data collected so far, as well as the flow rate data, will be used to update the reservoir model and this will provide the basis for scoping any future development.”
The company plans to complete and test the horizontal section by the end of November.