Increase in Equity Line and Operations Update

THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED STATES

TSX-V, LSE-AIM: XEL

10 October 2011

Xcite Energy Limited

("Xcite Energy" or the "Company")

£50 million Increase in Equity Line and Operations Update

Funding

Xcite Energy announces that it has increased its Standby Equity Distribution Agreement ("SEDA") with YA Global Master SPV Ltd ("Yorkville") by £50 million to £150 million. This is subject to TSX Venture Exchange approval.

Funding under the SEDA will be used as future working capital for the Company and to fund the work required to achieve first oil from the Bentley field.

Prior to this SEDA increase, £32.65 million was available for draw down, such that a total of £82.65 million is now available. Under the terms of the SEDA increase, the Company will pay Yorkville a fee of £250,000, of which £125,000 will be payable when the increased facility is accessed by the Company and £125,000 will be paid on 01 October 2012.

The Company is engaged in discussions with potential lending banks in connection with the first stage production programme on the Bentley field. In addition, the Company is in discussions for the provision of additional borrowing facilities to supplement its existing financial resources.

Operations

The Company continues to make good operational progress as it moves towards first oil from the Bentley field.

The Rowan Norway jack-up rig has arrived in Dundee and is currently being prepared and certified for operations, including crew training and equipment testing. Following this programme, the rig will be made available to the Company for its own preparatory work prior to being moved to the Bentley field. The required long lead items have been ordered and delivery times are expected to coincide with the deployment of the rig.

The Company is finalising the selection of the necessary in-field storage facility for the first stage production programme, which is intended to be contracted in line with the work programme to first oil.

Consistent with the rig deployment timing, progress toward receiving approval of the Field Development Programme for the Bentley field is satisfactory as the Company continues its positive dialogue with the Department of Energy and Climate Change.

Richard Smith, Xcite Energy Chief Executive Officer, commented:

"The Company continues to make good progress with its funding initiatives and operations as we move toward first oil. Together with the recent rig arrival and our positive dialogue with DECC, these are important milestones on our way to delivering significant value for shareholders."

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Rothschild, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Xcite Energy and for no one else in connection with the subject matter of this announcement and will not be responsible to anyone other than Xcite Energy for providing the protections afforded to its clients or for providing advice in connection with the subject matter of this announcement. 

Oriel Securities, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Xcite Energy and for no one else in connection with the subject matter of this announcement and will not be responsible to anyone other than Xcite Energy for providing the protections afforded to its clients or for providing advice in connection with the subject matter of this announcement.

Morgan Stanley, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Xcite Energy and for no one else in connection with the subject matter of this announcement and will not be responsible to anyone other than Xcite Energy for providing the protections afforded to its clients or for providing advice in connection with the subject matter of this announcement.

Forward-Looking Statements

Certain statements contained in this announcement constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to the Company's future outlook and anticipated events or results and, in some cases, can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "target", "potential", "continue" or other similar expressions concerning matters that are not historical facts. These statements are based on certain factors and assumptions including expected growth, results of operations, performance and business prospects and opportunities. While the Company considers these assumptions to be reasonable based on information currently available to us, they may prove to be incorrect. Forward-looking information is also subject to certain factors, including risks and uncertainties that could cause actual results to differ materially from what we currently expect. These factors include risks associated with the oil and gas industry (including operational risks in exploration and development and uncertainties of estimates oil and gas potential properties), the risk of commodity price and foreign exchange rate fluctuations and the ability of Xcite Energy to secure financing. Additional information identifying risks and uncertainties are contained in the Company's annual information form dated October 26, 2010 and in the annual Management's Discussion and Analysis for Xcite Energy dated March 24, 2011 filed with the Canadian securities regulatory authorities and available at www.sedar.com. The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required under applicable securities regulations.