Xcite Energy's subsidiary cancels Rowan rig option

AIM-listed heavy oil appraisal and development company Xcite Energy has reported that its subsidiaryXcite Energy Resources (XER) has cancelled its option for a jack-up drilling unit from British American Offshore, a subsidiary of Rowan Companies.

The rig contract was initially entered into in February 2011 and amended in February 2012 ahead of the pre-production extended well test on the Bentley field, which was completed in September 2012.

Following the extended well test, which the group said had led to the significant increase in reserves and updated field development plan, the company said that it no longer believed the terms and structure of the rig option would be appropriate for its commercial objectives.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Xcite Energy Resources said that it had been in constructive dialogue with other drilling rig providers to develop alternative commercial solutions, which potentially would deliver better strategic alignment and fit for purpose structures to reflect the amended Bentley field development programme.

Consequently, it said that expressions of interest had been issued to a number of drilling rig providers to formally develop an optimised drilling solution for the Bentley field.

Rupert Cole, Chief Executive Officer of Xcite Energy, commented: "We are grateful for the provision of the Rowan Norway and the associated drilling support during the successful extended well test last year."

He added:"The amendments to the Bentley field development plan have given us the opportunity to construct a more commercially attractive and longer term approach to drilling up the field, and we are encouraged by the alternative structures that the industry has to offer."

Xcite Energy's share price was p 1.45% to 105p at 08:40 on Friday.

MF