Option award to Directors and Management Team

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

TSX-V, LSE-AIM: XEL

1 January 2011

Xcite Energy Limited

("Xcite Energy" or the "Company")

Option award to Directors and Management Team

Xcite Energy announces the award of in aggregate 1,630,000 options to purchase ordinary shares of the Company to each of the following Directors and members of the Xcite Energy Resources Limited (the Company's wholly owned subsidiary) management team:

Roger Ramshaw, Gregory Moroney, Timothy Jones, Scott Cochlan, Richard Smith, Stephen Kew, Rupert Cole, Jonathan Dale, Barnaby Brennan, Richard West, Charles Lucas-Clements and Thomas Blystad.

The options, which vest immediately, were granted under the terms of the Company's share option scheme by reference to the closing price of the Company's ordinary shares on 31 December 2010. All options have an exercise price of CAN$5.95 per ordinary share and are exercisable for a period of five years. This award recognises the outstanding outcome to the 9/3b-6 well on the Bentley field.

Following these option awards, the Directors of the Company have the following aggregate number of ordinary shares under option:

Neither 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.