FoxDavies Daily Monitor - Xcite Energy, Nostra Terra and Newpark Resources

Monday, February 20, 2012

Xcite Energy Limited (XEL LN, 154.5p, ▼ 6.3%) Reserve Upgrade. The Company has announced a resource upgrade. Oil reserves of the type 1P, 2P and 3P for the Core Area of approximately 96 mmstb, 116 mmstb and 140 mmstb, respectively; NPV10 (after tax) for the Core Area of $1.076 billion, $1.464 billion and $1.921 billion on a 1P, 2P and 3P basis, respectively; Prospective resources for seven prospects on the Company Assets remain unchanged and those assigned were, in the aggregate, approximately 18 mmboe on a risked best estimate basis. It is believed that the field is expected to contain significant upside potential from future appraisal of the non-Core Area prospects, as well as the application of enhanced oil recovery techniques. Even with the reserve upgrade and the recent amendment of its rig (Rowan rig) contract, the complexity of the fields formation and the prominent dialogues with Department of Energy and Climate Change (DECC) means that the jury is still out on Xcite Energy.

Nostra Terra (NTOG LN, 0.43p, ▲ 1.2%) Pilot Well Spudded. The Company has commenced drilling of its initial vertical pilot well in the Bale Creek prospect, located in Oklahoma in which Nostra Terra has a 30% working interest in. Drilling of the well is expected to be completed in approximately 30 days, depending on logging and possible formation tests. Following the interpretation of the seismic data, final selection of the drill sites was made, and site work began. The aim of the well is to determine the most promising of all the potential productive zones. The Bale Creek prospect has a Multi-pay potential from as many as eight reservoirs, so will be interesting to see if this well delivers.

Oilfield Services News

Newpark Resources (BUY) (NR US, $8.2, ▲ 1.00%) Newpark reported Q4 results with revenues at $263.5M and net income at $21.9 million compared to net income for the fourth quarter of 2010 of $14.8 million. These results were much as expected. The outlook comments were generally positive.

Newpark is a well-positioned mid-sized oilfield services company with attractive growth opportunities in the US gas shale basins and in international markets including the fast growing Far East and Brazilian market. This growth profile is not reflected in the undemanding and favourable valuation compared with its peers. The share price performance has been relatively weak recently on the back of soft US gas prices. We believe the latter to be temporary occurrence as the market is restored to balance through production cutbacks and consequently believe current price levels to be an excellent entry point into Newpark

Rig Count News. The Baker Hughes Rig Count is the key barometer for the oilfield services industry and in particular the drilling contractors. Last week's data (week ending (17/02/12) remained positive for the industry as a whole. The U.S. Rig Count stood at 1995, up 5 on the previous week and up 281 year over year with the number of land rigs at 1936. The number of oil rigs stood at 1,272, up 9 on the previous week.. Gas rigs stood at 716, down 4 as US gas prices remain low with the directional/horizontal rig count at 1,379. The Canadian rig count remained steady, down 4 on the previous week.

Contribution from FoxDavies Capital

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This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. More

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