Auction hots for North Sea quality asset

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One of the largest undeveloped oilfields in the North Sea the Bentley field, owned by Xcite Energy, having some 267 milllon of P50 (2P) barrels of heavy oil has been up for sale.

FTI Consulting was appointed as liquidators on December 5 by the court at Virgin Islands and have been responsible for carrying out the sale of Xcite Energy Resources (“XER”) that holds the rights to the Bentley field and is a subsidiary of the previously listed company Xcite Energy Limited (“XEL”).

As of early January 2017, the liquidators have confirmed they are still inviting bids from interested parties to purchase the shares of XEL in Xcite Energy Resources. There should, however, be only a short time window left as the successful bidder is expected to be selected later this month.

Some 26 eligible parties had been approached as part of the sales process by December 14, 2016 according to a communication by the liquidators addressed to XEL shareholders. It was also confirmed in the same letter that 16 parties are currently or have been engaged in due diligence since 2013.

What may prove a crucial factor in determining the number of parties interested as well as the ultimate price they are prepared to put forward and negotiate is that in the last days of the auction there have been firm signs of improvement in the oil market largely resulting from the decision by OPEC members and non-OPEC countries to take concert action to cut production levels. Brent oil price has climbed from $46.2 per barrel on Oct 31 to $53.5 on Dec 5 (day that the liquidators were appointed) to over $56 on Jan 6.

Due to the confluence of circumstances including the oil price crash and the management of the owner of the Bentley field being unable to finalise a deal for the development of the field, the company failed to refinance a 2 year bond that matured in October 2016.

The total liabilities stand at over $152m. The Bentley field would normally be expected to fetch a price significantly higher than that amount as it is is projected to need a price of around $30 per barrel to break-even and the net present value of the cashflows (NPV10) to be generated out of the field have been assessed to be worth $2.5bn according to the Reserves Assessment Report by AGR TRACS International dated 31 December 2015.

In addition, the company should have some hundreds of millions of tax allowances that ought to be passed to the new owner.

Xcite Energy Resources is still a going concern and holds the Bentley license and the main assets. The license of the field would need to be renewed by the new owner of the field as expires on June 30 2017.

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