Xcite Encounters Heavy Oil-Bearing Sands at Bentley Field

XCite Energy's North Sea Oil and Gas Fie
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Xcite Energy Limited, a heavy oil company focused on the development of discovered resources in the UK North Sea, is pleased to announce a further and important update to the results of the 9/3b-5 appraisal well on the "Bentley" field. This update follows the review and interpretation by the Company's test partner, Schlumberger Limited, of the data and the hydrocarbon and fluid samples obtained from the well.

Well Overview

As set out in the Company's announcement on February 4 2008, the well was drilled with Byford Dolphin to a total depth of 4105ft. and, as anticipated, encountered heavy oil bearing Palaeocene Upper Dornoch Formation sands at 3712ft with 87ft gross (86 ft net) hydrocarbon column.

During the drill stem test, 100% crude oil production was demonstrated at rates of up to 150 bopd from the 50ft section of the oil column that had been successfully perforated. This flow rate was within the expected range for a test of this design and nature.

Data Review and Interpretation

The Company's well test partner, Schlumberger, has now reviewed and interpreted the data obtained from the well, together with the hydrocarbon and fluid samples recovered from the drill stem test. Based on this review and interpretation, Schlumberger has confirmed:

--Analysis of the pressure build up indicates a high permeability formation of greater than 5 Darcies, with a reservoir pressure of 1630 psi at 3730 ft MDRT.

--The well, as anticipated, demonstrated a high "skin" of 29, consistent with an appraisal well with drilling damage, limited entry perforations and a thick cemented zone due to bore hole washout during drilling. This high skin value significantly impaired the productivity of this vertical appraisal well.

--Adjusting the "skin" to 5 for production well conditions, assuming the use of a gravel packed 3000ft horizontal well 15ft from the top of the formation and using a kv/kh ratio of 1, the forecast flow rate from such a well in the reservoir would be circa 4,400 bopd with zero water cut. This low skin value, which is achievable for a production well using current technologies, demonstrates the expected productivity in reservoir conditions.

Future Activities

Based on these well test results and the Schlumberger data review and interpretation work, the Company believes that commercially viable production rates are achievable through the application of horizontal well technology coupled with appropriate artificial lift techniques, including submersible pumps. The Company is now planning for the next phase of the development process for the Bentley field, which will utilise EOR techniques consistent with the qualities of the reservoir and characteristics of the crude oil.

Following the success of the 9/3b-5 appraisal well, the Company is re-processing the 3D seismic data over the Block to confirm the results of its recent 3D interpretation, which indicated a material increase in STOIIP compared to the 2D seismic.

In addition, the Company has commenced the planning and identification of the optimum methodology for the future commercial development of the Bentley field. As part of this work programme, the Company has commissioned RPS Energy Canada Ltd to provide a revised Competent Person's Report.

Richard Smith, Chief Executive Officer of Xcite Energy, commented, "The Company was extremely pleased with the outstanding success of the 9/3b-5 appraisal well and the work that has now been completed by Schlumberger confirms our belief in the commercial potential of the Bentley field, one of the largest undeveloped heavy oil fields in the North Sea.

"The forecast flow rate of over 4,000 bopd from a single production well using current technologies means that we can proceed with the next phase of the Bentley development within the Company's expected timescale. We look forward to continued progress during the course of 2008."

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