Investment Proposition

Xcite Energy is an oil appraisal and development company. Its primary asset, the Bentley field, is a discovered heavy oil reservoir located 160 kilometres east of the Shetland Islands on the western edge of the Viking Graben, covering an area of approximately 70 square kilometres.

Oil Reserves and Resources (effective 31 December 2014)

As announced by the Company on 30 April 2015 and as set out in the Reserves and Resources Assessment Report ("RAR") effective as at 31 December 2014, the Bentley field has been independently assessed by AGR TRACS International Limited and has assigned:

• Mean Petroleum Initially in Place for the Bentley field of approximately 881 MMstb;
• Oil reserves of the type 1P, 2P and 3P of approximately 234 MMstb, 265 MMstb and 296 MMstb, respectively;
• NPV10 (after tax) value of reserves of approximately $1.9 billion, $2.3 billion and $2.6 billion on a 1P, 2P and 3P basis, respectively*.

*See "Cautionary Language" below for a general explanation of the method and assumptions used in these calculations.

Future Potential

In addition to the reserves already assigned to the Bentley field and the subject of the future development costs set out above, the Company plans to undertake enhanced oil recovery ("EOR") tests which, if successful, will be followed by the implementation of an EOR  programme for the entire Bentley field as soon as practicable during First Phase Development.  It is anticipated that the EOR programme will incur additional costs to be met from cash flow being generated at the time, but will give rise to additional recoverable crude oil that, when sold, will generate additional revenue in excess of the associated costs.

Reserves estimates only include volumes that are currently planned to be produced within an initial facilities service life of 35 years.  It is intended that the assigned Contingent Resources assumed to be produced in the 15 years after this period will be the subject of optimisation and either brought forward within the initial facilities service life, accelerated and captured by implementation of the EOR facilities, or produced through life extension methods employed during the later stages of field life.  Funding for such work programmes is assumed to be available from cash flow generated from previous production from the field.  It is expected that these work programmes, if successful, will give rise to additional reserves being assigned to Bentley.

It is planned that prospective resources currently contained within the adjacent and other prospects will be the subject of separate appraisal and development programmes in due course, with funding for such work programmes assumed to be available from cash flow generated from the core area of the field. It is expected that these work programmes, if successful, will give rise to additional reserves being assigned to the Bentley field.

Cautionary Language

The RAR, as audited by TRACS, is based on forecast and prices effective as at 31 December 2014 from McDaniel & Associates’ 1 January 2015 Brent oil forecast, less a 12% discount for Bentley crude (www.mcdan.com).

The calculation of the NPV10 (after tax) for the Core Area disclosed above takes into account the following:   (a) UK Ring-Fence Corporation Tax is charged at the rate of 30% on net taxable income; (b) UK Supplementary Charge Tax ("SC") is charged at the rate of 20% on net taxable income with no deduction for finance charges and interest; and (c) investment allowances have been applied to offset the SC to the extent possible.

Glossary

"1P" means proved reserves.
"2P" means proved plus probable reserves.
"3P" means proved plus probable plus possible reserves. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves and there is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.
"Core Area" means FPD and SPD.
"DECC" means UK Department of Energy and Climate Change.
"FPD" means First Phase Development in the core area of the Field, or Phase 1B.
"MMstb" means millions stock tank barrels.
"NPV10" means net present value in money of the day using a 10% forward discount rate, which values do not represent fair market value.
"SPD" means Second Phase Development in the core area of the Field, or Phase 2.
"$" means United States dollars.
"$MM" means millions of United States US dollars.