Xcite signs MOU with AMEC

Xcite Energy has entered into a memorandum of understanding (MOU) with AMEC Group, setting out commercial principles for future co-operation to support the development of the Bentley Field in the UK North Sea.

The companies will shortly commence a front-end engineering and design (FEED) programme, during which the terms for a wider services agreement are expected to be formulated to include project and programme management and controls, further detailed engineering and design, fabrication management, sub-contractor management, hook-up and commissioning, operations and maintenance planning and system build, and Duty Holder services.

In addition, Xcite Energy and AMEC intend to build on the already agreed MOU principles to optimise the commercial benefits for all stakeholders and provide a strong foundation for the life-of-field technical and operational solutions.

"We are very pleased to have developed our existing relationship with AMEC to create the basis for these commercial arrangements," commented Xcite Energy chief executive Rupert Cole. "I believe that AMEC's expertise and track record in delivering major UK Continental Shelf offshore and heavy oil projects will complement the company's own skillset to deliver a best-in-class development programme.

"This is another industry confirmation of Bentley as one of the largest development-ready North Sea fields and provides further, complementary support to the current farm-out process as we progress towards development."

Interactive Investor view

"This is just a MOU and doesn't mean that a take-over is off the cards," stressed Interactive Investor discussion board user 'takahe2'. "Rather it might hasten a next step from an interested party e.g. Total or Statoil."

'MARKETCHASER' added: "Seems as though we are progressing towards real value realisation with another significant announcement [on Wednesday]. Happily invested and looking forward to the bigger announcement which must surely now be closer than ever before."

'Great bull' stated: "Planning for future production does not mean Xcite will not get taken over in the future, but it does mean we are not going to sit around idle when we have a job to do, we have millions of barrels of oil to recover and sell so let's get on with it.

"AMEC [is] a good company and will enhance our reputation."

Analyst view on AMEC

"The value of the contract has not been announced but the past few days have certainly been good for AMEC," noted Malcolm Graham-Wood, analyst at VSA Capital. "The expertise in the North Sea is clearly being recognised and complex developments such as the heavy oil found at Bentley necessitate this."As we have mentioned recently however, we do expect margin pressures in these regions and the stock looks to be forming a downward trend."