Xcite Energy (Lon:XEL) will hold its Annual General Meeting this month as it continues to seek out a partner for its Bentley field development and continues negotiations for a possible bond restructuring.
Chairman Timothy Jones said: “The past year has been extremely challenging across the oil and gas industry as I highlighted in our full year results, but we have continued to focus on our efforts to develop the funding required to take the Bentley field into development. Not only have we continued to engage with potential partners, but we have also worked hard to try to ensure that the Bentley development remains positioned as an attractive project in a highly capital constrained environment.”
The company leader said the firm’s Reserves Assessment Report had pinpointed a full field lifecycle cost per barrel for the Bentley field to $30 per barrel.
Traditional funding methods for the North Sea development were not on the table, according to Mr Jones. Instead, the operator is in talks regarding a structure that would require a partner to develop Bentley alongside Xcite.
“Despite the continuing low oil price environment, we have continued to engage with potential partners and have undertaken several due diligence processes during the past year,” he added.
“Whilst ‘traditional’ sources of funding for major offshore projects are continuing to stay away from the UK North Sea, we have spent a significant amount of time looking for alternative and innovative funding sources. We recently announced that we had agreed principal commercial terms for development funding proposals for the first phase of the Bentley project. Whilst we are not able to expand on the details of this proposal until it is secured, the structure does require a partner to join Xcite in the development, to either guarantee the full funding package or to provide any balance of funding required.
“In working with supportive providers of capital, who see the opportunity to fund the Bentley project at a time when development capital is in short supply, we believe that our ability to attract a guarantor partner will be improved by such a proposal, although it will still be challenging in the short term, in the current environment. We are fully committed to this process and concluding funding on this scale would be a major achievement in the UK North Sea.”
The firm, like others, has been forced to cuts costs including limiting “project scope to critical activities, lowered personnel costs, released contractors and reduced general operating overheads”.
It’s also making savings in the tendering process for the development.
Mr Jones added: “We have been running a tender process, as highlighted in our full year results, with shipyards for the Engineering, Procurement, Construction, Installation and Commissioning contract for the mobile offshore production unit and floating storage and offtake facility. This has attracted significant interest, enabling us to utilise preliminary quotes in this year’s RAR, and we are now evaluating a short-list of yards.
“The construction of the jack up drilling rig continues in Singapore. However as with all our potential contracts, we monitor the market and engage with suppliers where opportunities arise to further reduce costs or improve terms, and we shall continue to do so while the current market environment offers such opportunities.”
Finally, the company leader revealed it was in restructuring talks with its principal bondholders. It has since secured a short-term extension.
Mr Jones said: “The company has been in discussions with its principal Bondholders with respect to a potential restructuring of the Bonds, ahead of their maturity on 30 June 2016, and while those negotiations have been constructive, no terms have yet been agreed. Whilst we are not able to make any further comment on the potential outcome of these negotiations until they are concluded, should agreement on the terms of a restructuring be reached, we believe it is likely that these will involve a reduction to the balance of the Bonds in return for an equity stake in the company.
“On 16 June 2016, we requested a short-term extension to the maturity date of the Bonds until 30 September 2016, in order to continue negotiations with Bondholders and allow us to resolve terms for restructuring the Bonds. The Bondholders granted the extension to the maturity date at a Bondholders’ Meeting on 30 June 2016.”
The AGM will take place in Calais, France, on Wednesday, 27 July 2016 at the Holiday Inn Coquelles Hotel, Avenue Charles de Gaulle, 62231 Calais, France from 1pm local time.