Xcite Energy announces that it has amended its agreement with BP Oil International Limited (“BPOI”), a wholly owned subsidiary of BP plc (“BP”), as announced on 28 January 2010, under which BPOI will provide the offtake services to market and sell the Bentley crude oil in return for an incentive-based fee per barrel.
Under the amended agreement the incentivised marketing and offtake fee to be paid to BPOI continues to be directly related to the realised price achieved by BPOI for the Bentley crude oil in relation to the prevailing Dated Brent crude price.
For the initial phase of up to three years under the amended agreement BPOI will deliver diluent products in-field to Xcite Energy for blending with the Bentley crude to maximise its value prior to offtake by BPOI, subject to BP offshore operational standards being met.
BPOI has undertaken that either BPOI or an associated BP company will, subject to certain conditions, provide US$5 million of financing for Phase 1B of the Bentley field development as part of the reserves based lending facility being negotiated with a group of commercial banks.
BPOI has also undertaken to provide further support to Xcite Energy during the initial phase of the amended agreement by reducing Xcite Energy’s working capital requirements for the diluent products to be used in the blending-in-field operations. At current oil prices, this working capital support is estimated to be in the range of US$20 million to US$40 million depending on Bentley crude oil production and blending requirements, in respect of which Xcite Energy would pay BPOI an appropriate commercial financing charge.
The increased financial commitments referred to above replace the previous commitment to procure US$20 million of financing from a commercial bank with credit support from BP.
Rupert Cole, Chief Financial Officer, commented:
“We are very pleased with this further endorsement and increased support from BP, with the amendment to the marketing and offtake agreement providing significant additional financing for Phase 1B of the Bentley field development programme, through a combination of reserves based lending and flexible working capital support. This amended agreement shows how Xcite Energy and BP have successfully focused on operational detail to deliver an amended agreement that assists Xcite Energy as it moves towards production of oil from the Bentley field”
Source: Xcite Energy, June 12, 2012