Wednesday, 10 April 2013
Xcite Energy - progress at long last
It is a while since I posted on any of my share portfolio. Eagle-eyed readers without ad blocks will note that our one time site sponsorship with spreadbetmagazine (still a fab blog for trading insights) is at an end and during that time I posted about trading more over there.
So now there maybe a slight renaissance on this site from time to time.
Most of my trading has long since slowed down since I ended up in events based shares where there has been a lack of events. This tends to mean a diminution of value over time and so it has proved. However, having the courage of my convictions I have remained on board with most of them - of the for highs of trading the big dipper and upper of 2008/9/10. That as both fun and very profitable.
However, this week, perennial no-news or bad-news only, has pulled a stormer. Being a small north sea explorer who at one time had found only 22 million barrels of confirmed reserves was a real trial, seeing it high share price drop by over 75%. Now though, after all, the speculation turns out to be true and they have confirmed 250 million barrels of oil. Even in the North Sea this is a big find for a company that owns 100% of the field.
Now since the highs of 2010 there has been significant dilution, which perhaps means the days of £4+ are distant. But even so, current deals in the north sea see reserves changing hands for about $6 a barrel - Xcite is currently priced at $2. So even a quick raid by a predator would result in an upside of say 200%-300%. This is more like it.
However, Xcite's board voted in a poison pill to stop bids sometime ago and it does not expire for another year. So instead the Board are looking for a field partner to develop what will be a very expensive field - BP are already involved a little and companies like Premier and Cairn Energy have not had much luck drilling recently overall and maybe tempted to acquire reserves. This is before far eastern companies take a look.
This will take a few months yet and given that Xcite has a history of under-performing on financial needs, it is not surprising the share price has not budged much even as reserves double. Given it is an AIM share there will be wobbles along the way and maybe even opportunities to buy at nearer a pound; but long-term the assets are worth treble this so I am happy to hold for another year or so as the story unfolds.