Bentley

Xcite Energy holds and operates 100% of the Bentley field located in Block 9/3b (Licence P1078), one of the largest undeveloped fields in the North Sea, containing some 881 MMstb in-place of 10°-12° API heavy oil. The licence was granted to Xcite under a Promote Licence in 2003 and converted to a Traditional Licence in 2005.

Xcite’s most recent drilling programme, the pre-production wells 9/03b-7 and 7Z, was successfully concluded in September 2012, having flowed for 68 days. The programme met its principal objectives, produced approximately 149,000 barrels of Bentley crude and substantially increased the understanding of the field, thereby materially de-risking it and the next phase of development.

The Bentley field is located on the East Shetland Platform in the UK Northern North Sea, 8 km southeast of the Bressay Field (operator: Statoil), 15 km east of the Kraken Field (operator: EnQuest) and 20 km north-northeast of the Bruce Field (operator: BP).

The Bentley Field, discovered in 1977, is a four-way dip closed structure of Lower Eocene and Upper Palaeocene Dornoch sandstone reservoir, containing around 881 MMstb in-place of 10°-12° API heavy oil. It is delineated by nine well penetrations and recent 3D seismic from a 2011 programme.

The 9/03b-5 well, was the first well drilled and tested by Xcite in December 2007 to January 2008, and was the first well on the field to flow hydrocarbons to surface since its discovery in 1977. Information gathered from 9/03b-5 enabled Xcite to drill, complete and flow test the subsequent 9/03b-6 pilot and 6Z horizontal sidetrack, which demonstrated commercial flow-rates and confirmed the drilling techniques to be used in subsequent well programmes.

The 9/03b-6Z well flow test performed significantly above Xcite’s highest modelled assumptions, flowing at a surface constrained, final stabilised rate, of 2,900 bopd and confirmed that a commercial development of Bentley is viable with existing technology.

The improved understanding of the reservoir and the techniques employed to access it supported the work programme for the most recent 9/03b-7 and 7Z wells in an Extended Well Test which was completed in September 2012.

The principal objectives of the Extended Well Test programme were to:

• Demonstrate the mechanical and operational aspects of the drilling, completion and flowing of the proposed well design for application in Phase 1B; and
• Understand the movement of gas, oil and water in the reservoir collect additional reservoir and production data to improve the calibration of the reservoir engineering model and production facilities design, thus enabling field development optimisation.

The Extended Well Test comprised two horizontal wellbore sections (9/03b-7 and 9/03b-7Z) totalling in excess of 4,200 feet of net reservoir. The 9/03b-7 well was placed at a depth within the reservoir close enough to the oil-water contact such that water would be produced during the period of the flow test. The 9/03b-7Z well was successfully geo-steered for over 2,000 feet within five to ten feet of the attic of the reservoir. Downhole control valves were successfully operated, delivering flow from each wellbore individually and in combination.

The timing of first water ingress to the wellbore and the subsequent rate of build-up was better than expected (i.e. less water was produced). As a result, the ratio of oil to water produced was also better than expected, providing important information for modelling long term oil recovery from the field. The flow test also confirmed the existence of a large, active aquifer, which will provide vital long term pressure support during the life-of-field production. During the programme, a cargo of approximately 149,000 barrels of Bentley crude oil was safely produced from the field, which was combined with approximately 58,000 barrels of diluent, and sold on to a major refiner in Europe.

During the Extended Well Test, Xcite has collected extensive data relating to the reservoir and fluid characteristics, and has significantly improved its understanding of the oil, gas and water movement within the reservoir. This confirms that the field is behaving within the range of modelled outcomes and should enable optimisation of the field development plan and facilities. The data also provides key information to plan an enhanced oil recovery programme for the field.

Xcite also conducted successful process facility trials during the Extended Well Test, including (i) design confirmation of offshore separation, metering and export systems; (ii) the effect on flow rates of demulsifier, defoamer and other speciality chemicals and diluents; and (iii) verification of all principal process simulations, including sub-surface diluent injection, downhole heating, pipeline flow assurance and crude oil blending.

The well has now been suspended, with both 9/03b-7 and 7Z wellbores being kept available for future use when bringing the field into production in the next phase of the field development.

The substantial amount of data collected from the seabed and downhole pressure gauges, the rig and from the extensive sampling programme, has been analysed and used to update the reservoir and economic models. This analysis has formed the basis for updating the Reserves Assessment Report  “RAR” and will be used in an updated Field Development Plan for submission to the Department of Energy and Climate Change.

On 25 October 2012 Xcite announced that it had been successful in the UK 27th Offshore Licensing Round, being offered licences over Blocks 9/4a, 9/8b and 9/9h. These blocks contain four significant prospects (Chadwick, Cartwright, Camm and Clement), which will be the subject of evaluation within the four year initial licence term on a drill or drop basis. The addition of these blocks to the portfolio, greatly enhances the development potential of the greater Bentley area and forms part of the Company's strategy for growth.

Bentley is planned as a phased development which enables:

• Lower initial costs
• Earlier first-oil
• Knowledge from early phases to optimise design of later phases

In estimating reserves, only those volumes that are economic and produced within the first 35 years of estimated field facilities service life are included.

Bentley carries the following Oil and Gas Reserves:

Reserves	NPV10 $MM	NPV0 $MM	Oil Reserves MMstb	Gas Reserves* Bcf	Total Reserves** MMboe	NPV10 $/Bbl	NPV0 $/Bbl
P90 (“1P”)	1,872.9	6,931.4	233.9	22.78	237.7	7.9	29.2
P50 (“2P”)	2,254.8	8,571.0	265.3	35.67	271.2	8.3	31.6
P10 (“3P”)	2,614.9	10,351.7	295.7	49.12	303.9	8.6	34.1

* Natural gas reserves assumes that 90% of produced gas is used for process heat and power within the Bentley facilities during ongoing operations.

** Gas reserves used in field operations (utilities and process heat) have been added to oil reserves using a conversion factor of 6,000 cubic feet of gas per barrel of oil equivalent (BOE)

Basis of disclosed NPV is 'forecast prices and costs', dated as at 31st December 2014. The oil price is based upon a 12% discount to Brent. The Brent forecast applied is the forecast dated 1st January 2015 on the McDaniel and Associates website; www.mcdan.com.

Beyond the 35 years initial facilities service life, an additional 15 years of economic production has currently been classed as Contingent Resources.

Bentley carries the following Oil Contingent Resources:

Resources	Mean	P90 ("1C")	P50 ("2C")	P10 ("3C")
MMstb	20.8	12.8	20.5	29.2

Xcite Energy anticipates that its reserves base will grow:

• Bentley Field optimisation
• With utilisation of enhanced oil recovery (EOR) techniques
• Through appraisal drilling on the surrounding prospects