Rockhopper 14/10-4 well spuds

Rockhopper have issued an RNS confirming that the 14/10-4 well has spudded on 19th February. The well is 2.3km from the discovery at Sea Lion 14/10-2.  This is an anticipated 38 day drill, but inevitably results are released before this, lets assume mid March.

2008/2009 financial crisis - U.S. Financial crisis enquiry commission report and conclusions

On January 27th, the U.S. Financial Crisis Enquiry Commission delivered its report. It was created to "examine the causes, domestic and global, of the current financial and economic crisis in the United States." The Commission was established as part of the Fraud Enforcement and Recovery Act (Public Law 111-21) passed by Congress and signed by President Obama in May 2009. This independent, 10-member panel was composed of private citizens with experience in areas such as housing, economics, finance, market regulation, banking and consumer protection. Six members of the Commission were appointed by the Democratic leadership of Congress and four by the Republican leadership. The Commission’s statutory instructions set out 22 specific topics for inquiry and called for the examination of the collapse of major financial institutions that failed or would have failed if not for exceptional assistance from the government.

The Commission's findings are available at:

Conclusions: http://c0182732.cdn1.cloudfiles.rackspacecloud.com/fcic_final_report_conclusions.pdf
Full report: http://c0182732.cdn1.cloudfiles.rackspacecloud.com/fcic_final_report_full.pdf

Pessimism virus infects Rockhopper - great for a Contrarian!

I have been thinking about my Rockhopper (RKH) investment quite a bit recently as the share price continues its rapid decent following the 14/10-3 well result. Following the euphoria of Rockhopper's Sea Lion discovery on May 6th, 2010 not much has gone right for the Falkland Island oil explorers. Desire Petroleum exemplified the issues with wild oscillations in its share price, which inevitably lost most private investors money, and culminating in the disastrous Rachel North 14/15-2 well which was announced as an oil discovery on December 3rd 2010 and then 3 days later, news came it was actually water.

Its easy to fall in love with a share and when it comes to the Falkland Island explorers I do not fall into this camp. I generally have a massive degree of scepticism. Though I was lucky enough to benefit from Rockhopper's Sea Lion discovery, I manage my investments in the Falkland Islands oil explorers on fundamentals not on luck.

So looking at Rockhopper you have to reexamine the facts to be sure that your investment is not just a speculative no hoper.

Rockhopper has:

• 170 million barrels of oil confirmed reserves following a CPR at Sea Lion (14/10-2) which is commercial on a standalone basis
• Current market capitalisation of £700 million underpinned by Sea Lion find
• Around £200 million in cash for at at least 6 further wells in the North Falkland basin
• Live oil shows found 8km from Sea Lion with 14/10-3 well (though non commercial on a stand alone basis). The well encountered good quality reservoir; hydrocarbons were present; and the sands were charged. (see FT.com note below)
• Given the proximity of the next well 14/10-4 (2 km from Sea Lion) high probability of success
• Full programme of 3D seismics due by second half 2011

At the end of last week Sam Moody was pitching the story to the City, particularly the prospects for the next well (14/10-4) which is due to spud next week. It seems things went well, probably because the facts speak for themselves. The froth has left the Falkland Island oil shares and excessive pessimism is the watch word for now. Rockhopper is still risky and a lot rides on the next well but the probability of success looks enticing and Moody is almost laying his reputation on the line with the comments he was using last week. Though I was not at the meeting, I have a good source and he was impressed with the story, lets hope the market is next week!

Note:
Correction: Rockhopper Sea Lion discovery

Published: February 14 2011 04:47 | Last updated: February 14 2011 04:47

http://www.ft.com/cms/s/0/545dbce6-37e6-11e0-b91a-00144feabdc0.html#ixzz1EXNa0TZT
Saturday’s FT incorrectly stated that Rockhopper’s Sea Lion discovery was uncommercial on a stand-alone basis. Instead Rockhopper’s announcement on Friday referred to a recently drilled exploration well, 14/10-3, which it considered to be uncommercial on a stand-alone basis, despite encountering live oil.

Rockhopper Exploration Edison report 14th February 2011

Summary of Edison report on Rockhopper (RKH) 14th February 2011:
Although a significant oil find would have been the optimal outcome from well 14/10-3, two out of three successful wells would be at the upper stretch of exploration odds. This aggressively located exploration well was testing the extent of the Sea Lion fan and located 8km from the Sea Lion discovery. We see some clear positives from the result: the well encountered good quality reservoir; hydrocarbons were present; and the sands were charged. Reservoir development looks encouraging in the northern lobe of the fan and potentially in the newly identified S2 feature. RKH will now focus on drilling a number of appraisal wells on the southern lobe of the Sea Lion feature. We do not believe this result has any impact on the P50 for Sea Lion. The work moves from exploration geology to development geology. The sharp fall in the share price presents an interesting opportunity ahead of the lower risk first appraisal well, located within the Sea Lion Discovery Area.

The long game: Significant work programme ahead
A second CPR could be coming in H211. The timing will allow for data from the current drilling campaign and the additional 3D seismic currently being shot to be incorporated. It leaves time for the work required to model the reservoir distribution across the multiple stacked fans in Sea Lion. The system has an aerial extent of over 50km2, with current seismic showing strong indications of good reservoir packages elsewhere in the fan, which appears to have been confirmed by this well. Rockhopper has indicated that up to six wells may be required to fully appraise the field, and discussions are progressing to agree a new contract consisting of a possible three firm wells and five option extensions.

Valuation: Covered by existing find, with exploration upside
The current EV is c $701m. Using an $8/boe value for a commercial discovery (the RPS Energy CPR uses $17/boe) would suggest the market is pricing in net reserves of 87mmbbls. RKH believes that Sea Lion is commercial as a standalone discovery. While there are some concerns about a waxy crude, associated gas could be used for power and heat for an FPSO and we do not believe this will prove to be a major issue. Borders & Southern has made similar indications around its acreage, suggesting that a 100mmbbl find would be commercial. As the RKH acreage is in significantly shallower water, drilling and operating costs are likely to be lower.

Note: Net cash = $374 million (estimated post November placing)

UK biotech and pharma heads into troubled waters

Early in 2010, Anglo Swedish group AstraZeneca (AZN) announced that it was closing its UK Research and Development centre in Loughborough by the end of 2011 with the loss of up to 1800 jobs.  In January, U.S. based Pfizer (PFE) announced the closure of the Sandwich research facility with the loss of 1300 jobs. The excuse has been the continued consolidation of research facilities and the loss of incentives to operate in the U.K. versus other developed markets.

It is true that a series of drug price cuts in the U.K. under the last Labour government under the PPRS (Pharmaceutical Profit Regulation Scheme) to try and offset the rising drugs bill, has given less incentive to spend millions of pounds on facilities such as Sandwich, and more incentive to use low cost operations in places like India or those with higher tax breaks such as the United States. As I wrote in a previous Contrarian Investor UK post, "Is the big pharma model broken for good?,  the major pharmaceutical companies are beset by rising drug development costs, yet with a less productive research system than ever and large numbers of big selling products going off patent (http://contrarianinvestoruk.blogspot.com/2011/01/is-big-pharma-drug-model-broken-for.html).

U.K. biotech is not fairing much better. Many of the hoped for stars of the industry have had major drug failures over the last few years highlighting the fact that as few as 16% of new drugs ever make it through clinical trials. Those companies with just one or two development products have significant risks. There are plenty of home grown examples to illustrate this point.

The most infamous is probably British Biotech, a company founded in 1986 and once close to membership of the FTSE 100. Peter McCullagh was ditched as Chief Executive in 1998 when a whistleblower, Andew Millar, alleged that investors were deceived with an over-optimistic view of its cancer drugs.

Its key product marimastat was touted as the "cure for cancer", but ultimately failed in clinical studies and Millar alleged that bad data was concealed. Co-founder, Brian Richards (now Sir Brian), went on to be Chairman of Alizyme, which would ultimately have it own problems.  In May 2006, British Biotech's shares peaked at just shy of £33 valuing it at £1.3 billion, when the company merged with Vernalis in 2003, it was worth around £50 million.

Alizyme (AZN) had several promising compounds in late stage development for obesity (cetilistat), ulcerative colitis (Colal-Pred) and irritable bowel syndrome (renzapride). It ultimately went into receivership at the end of 2009 when all its products failed late stage clinical trials. It was particularly unlucky for Alizyme given the drugs had passed through earlier stage clinical trials having reached their end points successfully and about 50% of drugs fail phase III testing. It was floated on AIM in 1996 and moved to the full list in 2000, before it folded in 2009.

Antisoma (ASM) once a promising company focused on anti-cancer drugs, has seen all of them fail human testing. A few years ago, Antisoma was trading close to 50p, now it is 3p! Antisoma's last hope, AS1413 in leukaemia recently had disappointing results after its lead product AS1404 for lung cancer (in partnership with Novartis) bombed in phase III trials. Its has £23 million of cash left but little else.

Ark Therapeutics (AKT) shares were once over 150p, now they are less than 5p, after the company had to withdraw its European filing for its brain cancer drug Cerepro (sitimagene ceradenovec) after a negative opinion from European regulators in December 2009 who requested additional clinical trial data.

Recently skin care specialist, Renovo (RNVO), lost nearly three-quarters of their value after the scar treatments developer admitted that its main treatment Juvista has failed to meet its goals in a phase III clinical trial in scar revision surgery. Unlike Antisoma, Renovo has £44 million in the bank and one product left in phase II trials, Prevascar, and results from this study are expected in the second half of 2011 for skin scarring reduction.

Not many examples of out and out successes come to mind from U.K. biotech, though we have major pharmaceutical players such as Glaxo Smithkline, Astra Zeneca and Shire pharmaceuticals. Compare this with the U.S., where they have Genentech (now part of Roche), Amgen, Genzyme (now part of Sanofi Aventis), Imclone (now owned by BMS), Medimmune (owned by Astra). Why the difference? - luck or judgement?

Next Contrarian Investor UK stock review for end February?

So I've done the following AIM company reviews since the start of 2011:

• Gulf Keystone Petreoleum (GKP) - http://contrarianinvestoruk.blogspot.com/2011/02/gulf-keystone-petroleum-interesting.html
• Xcite Energy(XEL) -http://contrarianinvestoruk.blogspot.com/2011/01/xcite-energy-should-prove-highly.html
• Range Resources (RRL) - http://contrarianinvestoruk.blogspot.com/2011/02/range-resources-look-to-have-good.html
• Weatherly International (WTI) - http://contrarianinvestoruk.blogspot.com/2011/01/weatherly-international-namibian-copper.html

Only Xcite Energy and Weatherley International have made it into the portfolio so far, though Range looked interesting.

I'd like ideas for reviews on AIM stocks outside the commodity area, since the Contrarian Investor UK portfolio is way too skewed towards oil and gas. Please comment with any ideas.

U.S. regulators recommend steps to prevent another Market Flash Crash

On May 6th 2010 U.S. Flash Crash the Dow Jones industrial average lost nearly 1,000 points in 20 minutes starting at 2.40pm (GMT-5). It finished the day down only 3% after losing nearly 10% during the Flash Crash when the market lost over $850 billion dollars in minutes. The Flash Crash caught out the Contrarian Investor UK portfolio given I had some Dow Jones index CFD positions which closed fortunately on guaranteed stops, but I still lost several thousand pounds that day.

A committee set up by the U.S. regulator, the SEC (Securities and Exchange commision), has said that 90% of all trading is now done by high-frequency computer driven trading and a third of all trades are related to ETFs (exchange traded funds), which can add to the lack of liquidity in a market during periods of excessive market volatility. During the Flash crash, sellers overwhelmed the market with sell orders and there were not enough buyers to soak up the demand.

To prevent another May 6th debacle, the committee has recommended charging high frequency traders higher access fees during peak hours, a “limit up/limit down” system that would allow stocks experiencing rapid declines to continue trading within a narrow range of prices and a ban on “naked access” by requiring that all direct access order routing to the market to occur through a registered broker.

The Times: Four rules to follow if you want to plunge into oil and gas

From TheTimes:  http://www.thetimes.co.uk/tto/business/columnists/article2919361.ece


Four rules to follow if you want to plunge into oil and gas
Martin Waller: Tempus
February 19 2011 12:01AM

When last our vessel approached the wilder shores of the oil and gas exploration sector, I did warn that these were choppy waters. These are shares much loved by private investors but not for widows and orphans, mostly. There are an unbelievable 87 oil and gas companies quoted on the Alternative Investment Market alone.

The City gossip mill suggests that there are a number of others eyeing a stock market float, encouraged by the surge in the oil price to above $100 a barrel since the start of the year. These include such exotica as 3Legs Resources, owned by the wealthy Jeffcock family of the Isle of Man, hence the name. This extracts gas from shale in Poland, the first time this controversial technique has been used in Europe. The company has lined up Tim Eggar, a former energy minister, as a potential chairman.

There are, as I see it, four ways of approaching investment in oil and gas. One is to go for the blue chips, companies that have been around and have proven reserves. You will not make a fortune out of these, but you may not lose one, either.

The granddaddy of the sector is Premier Oil, in the North Sea from 1971 and now active in Vietnam and Indonesia, ramping up oil production from 44,000 barrels per day (bpd) in 2011 to 75,000 bpd next year.

One of Tempus picks for 2010 was Northern Petroleum, a tiddler with reserves in the North Sea off the Netherlands. The shares are now trading, I am pleased to say, at 134¼p, 23 per cent above the price when I tipped them.


The second is to follow people who have a strong track record. Sir Bill Gammell is the former Scottish rugby international who founded Cairn Energy in 1980. Cairn is locked in an uncomfortable dispute with the Indian authorities over the sale of its Rajasthan reserves to Vedanta Resources, which would bring in a windfall of up to $9.6 billion. There is no guarantee that the deal will go through, but some analysts see this as a two-way bet. If Cairn is required to hold on to the asset, it will still be worth more than when the sale was announced in August. Angus McPhail, the veteran oil-watcher now at Investec, says that it is in the interests of the Indian authorities to allow the deal through, given their need for indigenous diesel fuel to power coal and iron ore production. Phil Corbett, at Royal Bank of Scotland, agrees: “Does the Indian Government really want to put a black mark over investment in India?”. Sir Bill wants to spend much of the money from Vedanta on exploring off Greenland. This is unproven territory, but his loyal army of investors would happily back him.

Also bogged down in local political issues is Tullow Oil, which is trying to sell assets in Uganda and only this week abandoned a well in Mauritania. The Ugandan deal has been delayed by the election there but, on the assumption that Yoweri Museveni is re-elected as president, the parties should go back to the negotiating table, Mr McPhail says.

The third approach is to plump for a region that, for geopolitical reasons, looks promising. There are several Western explorers in Kurdish Iraq again involved in a political dispute, including Heritage Oil, which this week disappointed investors with the discovery of gas, rather than oil, there. Heritage remains one of the sector’s possible bid targets.

In the Falklands, the stock market high flier Rockhopper also disappointed with a drilling report this month, having raised £206 million to fund further exploration in November. The company insists there are reserves near by; expect more news shortly.


The third area exciting investors is off Vietnam and Thailand. David Farrell, at Evolution Securities, likes Soco International, which should be producing 35,000 bpd in the not too distant future from two wells there. Mr Corbett also singles out Soco, whose assets alone support the share price, with unproven exploration in the Democratic Republic of the Congo probably thrown in for free.


Soco is another bid candidate. “Historically, this is a company that has been looked at by potential predators,” Mr Farrell says. Last year Dana Petroleum was bought by the Korea National Oil Corporation for £1.9 billion, after a hostile takeover battle. KNOC still plans to spend £3 billion or more on acquisitions, while its Chinese equivalent is equally deal-hungry.

Mr Farrell’s colleague, Richard Griffith, likes Cove Energy. This is partnering with Anadarko Petroleum, one of the biggest oil independents in the world, in offshore Mozambique, and there are further opportunities further north off Kenya.

Dana’s founder Tom Cross believed the deal undervalued the company, and the rise in the oil price suggests he may have had a point. Mr Cross is back as chairman of Parkmead, an AIM-quoted penny share that typifies our fourth investment strategy in oil and gas stocks, the wildcat stock pick. Latching on to a company with little in the way of assets is an easy way to make money if you choose the right one, but it is a lottery, even if it is linked to someone with a track record such as Mr Cross. The shares have rocketed since he joined, and Parkmead still has much to prove.

Portfolio review of the week - 19th February 2011

Despite continued violence in Bahrain and an increase in Chinese interest rates to curb inflation, the FTSE 100  ended only marginally down at 6,083, a decline of 4 points giving a 20 point or 0.3% rise over the week.  The Dow Jones Industrial Average  rose 73 points, or 0.6%, to 12,391 its highest close for two and a half years.The Nasdaq rose 2, to 2,834, its highest close since October 31, 2007.

Violence is escalating in Bahrain between Sunni Muslim rulers and its Shiite majority population. Though ICE Brent for April was slightly lower at $102.52, after trading from $100.73 to $103.50. WTI U.S. crude finished at $86, down 0.2%.

Despite a strong oil price this week, the Contrarian Investor UK portfolio has suffered a second week of weakness. Its been a week of selling as I have de-leveraged on Xcite Energy (XEL) and sold my stake in Angel Mining.

Xcite Energy (XEL) - Xcite lost 29p or nearly 8% this week to finish at 353p as rumours continue to grow of a fund raising at around 350p to accompany the CPR (Competent Persons Report) which will move contingent resources to proven reserves and allow field development to begin. Though the CPR is expected to be positive, giving reserves of 225-250 million barrels of oil for the Bentley field, at least £200 million in shares is likely to be placed with institutions. With the price spiking to close to 400p last week on takeover rumours and with the likelihood of share price weakness, I took the opportunity to sell some of the holding to allow funds for acquisitions of other shares in the case of a market fall.

Bowleven (BLVN) - Bowleven dropped yet another 3.2% this week with news from the Sapele 1 side track several weeks away. At 318p, this appears bargain basement given the resources already discovered in Cameroon but sales by the BT Pension fund have helped move down the price. Frustrating given the upside potential in this share and it is now 9p below the last placing in October 2010.

Rockhopper (RKH) - Rockhopper dropped another 5% this week with the impact of the market disappointment from the 14/10-3 North Falklands basin well still being felt. The spudding of 14/10-4 which is much closer to the SeaLion discovery is due any day.  On fundamentals Rockhopper now looks very cheap. Its market capitalisation of £682 million, means that with £200 million in the bank deducted, Sea Lion's 170 million barrels are valued at just over $4 a barrel with no upside whatsoever. 14/10-3 is likely to add 40 million barrels to the discovery alone. Painful to be down on this one, but I believe patience will be rewarded and buyers will return with 7 wells yet to be drilled and a high COS (probability of success) on the new well.

Angel Mining (ANGM) - I lost patience with Angel Mining after we went into the 3rd week of February with no news from their Nalulaq gold mine. In my view no news is bad news, so I sold. Good long term prospects but things are very tight on cash flow and the last thing investors need is a cash call or increase in the SEDA (equity drawdown agreement).

Weatherly International (WTI) - Good to see copper miner Weatherly bounce on Friday to 12.4p (but still 5% down on the week) on news that Blackrock Smaller Companies has built a 7% share. This doesn't surprise since the constantly widening spread seemed to indicate the the market makers were playing some sort of game to accomodate some large block buys. Its good to see Blackrock involved to a greater extent a long with Gartmore as production ramps up in this really exciting Namibian copper company.  I am sure that we won't be seeing 12p for long with Copper at record highs and so much news to come from WTI in the coming months. I put a big slug into my SIPP pension plan earlier in the week because the risk/reward was excellent at less than 12p.

Warren Buffett's tips for investment success

As an avid Buffett and Berkshire Hathaway follower, I try to remember his investment advice which has served him well. If readers are wondering why I took the decision to top up on Rockhopper (despite its relatively high risk profile) and sell some Xcite (despite my liking of the company and its excellent prospects), please see points 1 "stay liquid", point 2 "buy when everyone else is selling",  point 7 "defense beats offense" below. 

As another of my investment heroes Jim Cramer also says, "diversify, diversify, diversify". I am failing badly here, too many oil and gas stocks and too much in Xcite Energy. But I have known this for some time, and hence taking exit points when they arise on Xcite. Though I am in loss positions on both Rockhopper and Bowleven  (though made some profits on both in earlier sales in 2011), I won't be selling these at a loss. The fundamentals still justify an investment on a risk versus reward basis. Lets not forget that Buffett was buying preferred shares in Goldman Sachs in 2009 when everyone else on Wall Street wouldn't touch the sector and for his risk he got an 8% coupon! This is the contrarian style of investing that I favour....and sometimes its damned hard being a Contrarian when the momentum is the other way.

Extract from March 2010 post (http://contrarianinvestoruk.blogspot.com/2010/03/warrne-buffets-berkshire-hathaway-shows.html).

Buffet’s advice for investment success is :

Stay liquid. "We will never become dependent on the kindness of strangers," he wrote. "We will always arrange our affairs so that any requirements for cash we may conceivably have will be dwarfed by our own liquidity. Moreover, that liquidity will be constantly refreshed by a gusher of earnings from our many and diverse businesses."
Buy when everyone else is selling. "We've put a lot of money to work during the chaos of the last two years. It's been an ideal period for investors: A climate of fear is their best friend ... Big opportunities come infrequently. When it's raining gold, reach for a bucket, not a thimble."
Don't buy when everyone else is buying. "Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance," Mr. Buffett wrote. The obvious corollary is to be patient. You can only buy when everyone else is selling if you have held your fire when everyone was buying.
Value, value, value. "In the end, what counts in investing is what you pay for a business-through the purchase of a small piece of it in the stock market-and what that business earns in the succeeding decade or two."
Don't get suckered by big growth stories. Mr. Buffett reminded investors that he and Berkshire Vice Chairman Charlie Munger "avoid businesses whose futures we can't evaluate, no matter how exciting their products may be.". Most investors who bet on the auto industry in 1910, planes in 1930 or TV makers in 1950 ended up losing their shirts, even though the products really did change the world. "Dramatic growth" doesn't always lead to high profit margins and returns on capital. China, anyone?
Understand what you own. "Investors who buy and sell based upon media or analyst commentary are not for us," Mr. Buffett wrote.
Defense beats offense. "Though we have lagged the S&P in some years that were positive for the market, we have consistently done better than the S&P in the eleven years during which it delivered negative results. In other words, our defense has been better than our offense, and that's likely to continue." All timely advice from Mr. Buffett for turbulent times.

(original source: marketwatch.com)

Derisked holding in Xcite Energy

The word in the City is that the Xcite's CPR is due any day and its positive. No need to re do the flow test that's for certain. The directors aren't so stupid to sign for the Rowan Norway rig with that sort of scenario.
But the rumours of a placing to accompany this news is building. Somewhere in 350p region seems to be consensus, but i hear talk of less. I sold a little more on the spike up this morning, to diversify the portfolio more. Still love the Xcite story but no point taking a big hit. The institutions aren't handing out cash like they were and want a big discount. The number of commodity flotations pulled in the last 2 weeks underscores the weakness in the market for new listings and placings. I am hoping that the Bentley Alliance route is used rather than institional money but details are vague here. I'm taking a cautious approach and this may be nothing more than a "storm in a teacup". 

Finally some common sense on Rockhopper

I was talking to a guy yesterday who knows one of the brokers that did the last Rockhopper placing and he was saying that 14/10-3 was a duster. Now quite rightly I said actually there was live oil and it was right at the northern lobe 8km (5 miles) from sea lion so the COS was always going to be on the low side. To say it was duster was wrong, wrong, wrong. Just too small to be commercial on a standalone basis but it does add to the Sealion recoverables. If a broker was getting it wrong, what does it say!!??
Fortunately the offshore magazine article (link below) on Rockhopper puts things nicely into context that 14-10/3 was a discovery, but small. 14/10-4, the next appraisal well much closer to the Sealion discovery has much better chances of a good hydrocarbon show. When it went below 260p this morning it was crazily cheap and I had to buy more. Have far to many, but sometimes in life there are risks, and there are educated risks. This is the latter, a no brained, with enough cash for 7 more wells. It's up 5 percent now so the markets have now decided the madness must end.

http://www.offshore-mag.com/index/article-display/2367306901/articles/offshore/drilling-completion/latin-america/20110/February/sea-lion_delivers.html

First Energy initiates Xcite Energy coverage with £5.10 target

http://www.firstenergy.com/research/documents/Focus-C-XEL_LN-2011-02-15.pdf

Some key highlights:

• Outperform rating and £5.10 12 month target
• Large Resource Base with Significant Upside: Xcite holds 200 mmbbl in contingent resources (company estimate). Following the award of the 9/3c and 9/3d blocks during the 26th UK licensing round, Xcite also has 207 mmbbl in place of potential low cost tie-in upside. We currently carry no value for these tie-in assets in our target price but believe that over time these assets could contribute up to £3.95 per share to the current share price.
• produce in excess of 15 mbbl/d, with first production as early as Q4 this year or early 2012. This could generate US$197 mm in cashflow for Xcite in 2012, increasing to US$416 mm by 2013.
• Given the size of the project we anticipate Xcite will need additional funding. We have used a 50% equity  financing (for FPS towards first production) and 50% debt financing (post first production of the FPS) for the project, anticipating that Xcite will need up to US$399 mm in additional funding.
• In February 2009, RPS Energy published a CPR for block 9/3b, assigning contingent resources development pending to the fi eld with a probability of commercial success of 70% and base case resources of 122.5 mmbbl. Subsequent to the CPR, based on reprocessed 3D seismic, Xcite has shown the Bentley East feature to be part of the overall Bentley field. The Bentley field now includes a second drill centre to the south to access Bentley East and the southern areas of the field, thereby adding approximately 40 mmbbl to the base case resources. The horizontal 9/3b-6z well also encountered significant thicker sands than previously anticipated. The thickness of the reservoir was anticipated to be 72ft thick but instead proved to be 114ft. Furthermore, the net to gross rate of close to 100% also supports this case. Bentley is supported by a 400ft underlying water driver, although an electrical submersible pump will be needed to achieve commercial production rates.
• The first phase of the development involves five wells on the Bentley field and includes a two to three year pilot production facility that could produce approximately 15 mbbl/d from these five wells, and following the successful flow test, Xcite hopes to be able to book between 20 to 30 mmbbl of 2P reserves through this well, which it aims to confirm through a reserves report in the first quarter of this year.  The RPS report in 2009 that determined 120 mmbbl (P50) resources with a low to high range (broadly equivalent to P90 to P10) from 109 to 220 mmbbl, assumes conventional, cold flow recovery, utilizing pumps to lift the oil. There is considerable up-side in the field through application of enhanced oil recovery techniques, which has the potential to double the recoverability.
• Development drilling will continue to increase production which we expect to peak in 2018 at 65 mbbl/d, which we feel could be conservative as this is only marginally above the previous base case scenario which was based on 120 mmbbl contingent resources.
• We have projected early cashflow from the FPS of US$1.1 billion funded by a US$190 mm equity raise in early 2011. We have assumed the shares will be priced at £3.50 per share.
• The UK government’s recent fi scal changes in favour of heavy oil assets will allow Xcite to claim up to £800 mm in tax credit spread out over five years. We expect the Company will not pay any tax until 2017

Dual listed U.K. commodity shares and therefore ISA elligible

The following dual listed shares can be included in a U.K. ISA (individual savings account) and hence any gains will be free of CGT (Capital gains tax).

Bowleven below November placing price

Back in late November last year Bowleven (BLVN) successfully placed 22 million shares at 327p in record time. So at today's 325p we are below the placing price. The share price has slipped in recent weeks as JP Morgan and the BT pension fund have been offloading some of their stake (an RNS re BT's stake was released yesterday) presumably to derisk their portfolios with the significant share price increases in 2010.

But plenty of news to come in the coming months including the flow test results from the tertiary Sapele-1 sidetrack in the next 6 weeks or so.