Second Quarter Results

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART DIRECTLY OR INDIRECTLY IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

LSE-AIM: XEL

3 August 2016

Xcite Energy Limited

("Xcite Energy" or the "Company")

Second Quarter Results for the 3 and 6 Month Periods Ended 30 June 2016

Xcite Energy announces its second quarter results for the 3 and 6 month periods ended 30 June 2016.

Material information for the year to date

· Extension to the maturity of the senior secured Bonds granted until 30 September 2016, to continue negotiations with respect to a potential restructuring of the Bonds.

· Principal commercial terms agreed for development funding proposals for the first phase development of the Bentley field. Proposals will require a partner to join the development group to either guarantee the full funding package, or to provide any balance of funding required.

· Increase in 1P, 2P and 3P heavy oil reserves for the Bentley field to 236 MMstb, 267 MMstb and 298 MMstb, respectively, effective 31 December 2015 and based on an expected initial 35 year production period.

· Received extension of Bentley licence until 30 June 2017.

· Confirmed NPV10 (after tax) value of reserves for the Bentley field to be approximately US$2.3 billion, US$2.5 billion and US$2.9 billion on a 1P, 2P and 3P basis, respectively, effective 31 December 2015.

· Net loss for the six months ended 30 June 2016 of $0.9 million.

· Cash balance of US$7.4 million as at 30 June 2016.

Overview of Results

The Company has been in discussions with its principal Bondholders with respect to a potential restructuring of the Bonds, ahead of their maturity on 30 June 2016 and, while those negotiations have been constructive, no terms have yet been agreed. Whilst the Company is not able to make any further comment on the potential outcome of these negotiations until they are concluded, should agreement on the terms of a restructuring be reached, the Company believes it is likely that these will involve a reduction to the balance of the Bonds in return for an equity stake in the Company. On 30 June 2016, Bondholders agreed to a short-term extension to the maturity date of the Bonds until 30 September 2016, in order to continue negotiations to resolve terms for restructuring the Bonds.

The Company recently announced that it had agreed principal commercial terms for development funding proposals for the first phase of the Bentley project. Whilst the Company is not able to expand on the details of this proposal until it is secured, the structure does require a partner to join Xcite Energy in the development, to either guarantee the full funding package or to provide any balance of funding required. This support from providers of development capital is important in attracting a guarantor partner, but this will still be challenging in the current environment.

Whilst developing these funding options, the focus has remained on optimising the Bentley project execution strategy. As announced in our 2015 full year results, a tender process has been run with shipyards for the Engineering, Procurement, Construction, Installation and Commissioning contract for the mobile offshore production unit and floating storage and offtake facility. This has attracted significant interest, enabling the Company to utilise preliminary quotes in the March 2016 RAR, which as reported above has again confirmed the robust economics of the Bentley field.

Costs have been removed from the business in the last 12 months as we have limited the project scope to critical activities, lowered personnel costs, released contractors and reduced general operating overheads in response to the current circumstances.

The following tables summarise the unaudited, consolidated financial performance of the Company and its wholly owned subsidiary, Xcite Energy Resources plc, in the 3 and 6 month periods ended 30 June 2016 and comparatives for the 3 and 6 month periods ended 30 June 2015, and the Statement of Financial Position as at 30 June 2016, 31 December 2015 and 30 June 2015.

The Company's unaudited Consolidated Financial Results for the 3 and 6 month periods ended 30 June 2016 can be found at the following link:

http://www.rns-pdf.londonstockexchange.com/rns/0548G_-2016-8-2.pdf 

Going Concern and Basis of Preparation of Financial Statements

The Bonds were issued by the Company's 100% subsidiary, Xcite Energy Resources plc ("XER") in June 2014 and fell due for repayment on 30 June 2016. The Company and XER (together the "Group") met all of their covenants and paid in full all interest falling due under the Bonds to the original maturity date. On 30 June 2016 the Group's Bondholders agreed to an extension to the maturity of the Bonds to 30 September 2016.

The Group's current and forecast cash position is insufficient to repay the Bond capital in full by the extended maturity date of 30 September 2016 and, accordingly, it continues its discussions with Bondholders with respect to a potential restructuring of the Bonds.

Whilst the Bondholders agreed to a short-term extension to the maturity of the Bonds, it should be noted that there is no certainty that these efforts will result in funding being secured by the Group or, if funding is secured, the terms or timing of such funding and, therefore, the Group may be unable to realise its assets and discharge its liabilities in the normal course of business.

These circumstances continue to indicate the existence of material uncertainty in relation to the Group's ability to continue as a going concern. This is dependent on the Group's ability to renegotiate the key terms of the Group's Bonds which now fall due for settlement on 30 September 2016. However, having regard to the legal and financial advice received by the Board of Directors and having carefully considered the current liquidity position of the Group and the financing initiatives being pursued, the Board of Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future. On this basis, the Group continues to adopt the going concern basis of accounting in preparing the interim unaudited consolidated financial statements and they do not include the adjustments that would result if the Group was unable to secure its long-term funding and to continue as a going concern.

Forward-Looking Statements

This announcement contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the oil and gas exploration and production business. Whilst the Company believes the expectations reflected herein to be reasonable in light of the information available to it at this time, the actual outcome may be materially different owing to factors beyond the Company's control, or otherwise within the Company's control, for example, if the Company decides on a change of plan or strategy. Accordingly, no reliance may be placed on the figures contained in such forward-looking statements.

Notes to Editors

Xcite Energy (LSE-AIM: XEL) is an oil appraisal and development company with a portfolio of heavy oilfield assets in the Northern North Sea in the UK. Xcite Energy holds a 100% working interest in the Bentley field; a heavy oil field with 2P recoverable reserves of 267 MMstb, making Bentley one of the largest undeveloped oilfields in the UK Continental Shelf.