Trades and observations from a British contrarian stock investor

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Monday, February 7, 2011

Clock ticks down to Xcite Energy rig deadline

February 11th is the latest rig signing deadline with British American Offshore for the Rowan Norway rig. A 1% decline today, I'm guessing because private investor are moving money around into Rockhopper etc.. I'm as disappointed as anyone that the share price is well below the intra day highs achieved after the flow test in December. At £3.58 Xcite is close to its resistance level, but with news so close I am surprised the share price is quite so low.

The rig signing deadline has been moved a couple of times so interest seems to have wained in this share. I am not sure why - it is one of the surest bets on AIM by a long way. With the CPR (Competent Persons Report) a few weeks away at worst which could fix reserves at a likely level of 200 million barrels plus (see my previous posts from oilbarrel etc. why this is the case). Lets not forget that pre Flow Test, Xcite's Bentley heavy oil field could have been a dudd - literally 150 million barrels of oil that could not be economically extracted. Now we know that oil is flowing at the upper end of expectations and the oil column is significantly higher than earlier estimate. Investors can argue, "well the price has gone up hugely in the last 12 months". Though that is true, prior to the flow test the share price deserved to be low because there was a good possibility that oil could not be extracted given its viscosity.

The reasons for the delays in the signing of the rig could be many, but just contractual bickering seems unlikely. Though I have Rockhopper and Bowleven in my portfolio, Xcite remains the safest and largest investment of them all. This share has been hugely derisked, now its not long to wait for news.
Posted by Contrarian Investor UK at 9:03 PM
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3 comments:

  1. AnonymousFebruary 7, 2011 at 9:25 PM

    I have to agree that with so much potential to come from this company it is disapointing not to see the share price begining to trend upwards.

    Equally frustrating is watching other opportunities pass for the fear of being out of XEL at the wrong time!

    Hardcore patience required, our time will come.

    Would love to know your views on GKP if you have any?

    Regards

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  2. AnonymousFebruary 8, 2011 at 7:07 AM

    Oh this is like 'daddy or chips' for me. (You're probably not that old!). RRL/XEL?...RRL/XEL?...I can't be in both in an ISA and my money's in XEL. Decided to stick with XEL. Not least because I like the BoD and they seem to be able to pull rabbits out of hats but because - as the great man said - on measure for measure, the rewards are the same for both companies but Somalia for Range still holds uncertainty, and Georgia may wobble on what could still be a duster in and among. XEL are proven, Bentley has got over its hurdles and can only go forward. This quiet time will be history once CPR is released and hopefully upgraded. On this basis and balanced against the risk of international uncertainty for Range I stay with XEL. Having said that Range are potentially explosive with a great/savvy captain in Mr Landau. So it was a tough call but I'll go with the BoD that's so far delivered more than expected.

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  3. Contrarian Investor UKFebruary 8, 2011 at 10:27 PM

    Ah yes, the Mccain chips ad was wonderful, so old enough. Check it out on YouTube http://www.youtube.com/watch?v=Ksmb6iwPZYo

    I think Daddy and chips then!!!

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