Xcite Energy Regulatory News (XEL)

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TSX-V, LSE-AIM: XEL

20 February 2012

Xcite Energy Limited

("Xcite Energy" or the "Company")

Bentley Field Reserves Audit

Independent Reserves Audit

Xcite Energy is pleased to announce the results of the independent reserves and resources audit of the Company Assets (as defined below) effective 31 December 2011, as audited by TRACS International Consultancy Ltd ("TRACS"), an independent qualified reserves auditor and a wholly owned subsidiary of AGR Group (Holdings) Limited, in compliance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities and in accordance with the COGE (Canadian Oil and Gas Evaluation) Handbook.

The Company, through its wholly owned subsidiary Xcite Energy Resources Limited ("XER"), holds a 100% working interest in Block 9/3b, which contains the Bentley field (the "Field"), and a 100% working interest in Blocks 9/3c and 9/3d (both adjacent to the Field). These Blocks are located in the North Sea in the United Kingdom (collectively, the "Company Assets").

Reserves and Resources Summary

·; 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 (see "Cautionary Language" below for a general explanation of the method and assumptions used in these calculations);

·; Prospective resources for seven (7) prospects on the Company Assets remain unchanged and those assigned were, in the aggregate, approximately 18 MMboe on a risked "best estimate" basis.

Background to the updated Reserves Assessment Report

Subsequent to the Reserves Assessment Report prepared by TRACS dated 30 April 2011 for the Company Assets (which the Company described in its 10 May 2011 press release) (the "RAR"), XER has completed significant work in the latter half of 2011 to prepare for the Bentley Phase 1A work programme (including wells 9/3b-G and Gz to be drilled with the Rowan Norway) in 2012. The approval request for Phase 1A is now being undertaken through the conventional Well Operations Notification System approval procedures. The principal objective of Phase 1A is to provide XER with additional reservoir and longer term performance data to confirm and calibrate the existing reservoir model.

The Field Development Plan ("FDP") for the Field, comprising Phase 1B and Phase 2, was submitted for approval to the Department of Energy and Climate Change ("DECC") in the final quarter of 2011. The FDP will be updated with the information obtained from Phase 1A, resubmitted to and reviewed by DECC to seek confirmation that the phased development plan described in the FDP remains appropriate.

Following a letter received by XER from DECC regarding the Bentley Field Development Plan (available at www.sedar.com and on the Company's website) and receipt of certain technical questions relating thereto, XER commissioned TRACS to update the RAR, the summary results of which are given in this announcement.

In accordance with the AIM Rules, the information in this release has been reviewed and signed off by Tom Gunningham (C.Eng. MEI.), an associate at TRACS, who is a Chartered Petroleum Engineer, member of the Energy Institute and Independent Qualified Reserves Auditor compliant with COGEH requirements.

Richard Smith, Xcite Energy Chief Executive Officer, commented:

"The upgrade to 116 MMstb of 2P reserves for the Core Area on the Bentley Field is independent confirmation that Bentley is a major North Sea asset. Furthermore, the Bentley 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. We now look forward to a successful delivery of Phase 1A on Bentley expected later this year."

A complete filing of the Company's Statements of Reserves Data and Other Oil and Gas Information (form 51-101F1), Report on Reserves Data by Independent Qualified Reserves Evaluator or Auditor (form 51-101F2) and Report of Management and Directors on Oil and Gas Disclosure (form 51-101F3), is currently being prepared and will be available under Company's profile on SEDAR at www.sedar.com and on the Company's website as soon as possible, but in any event prior to the end of April 2012.

Cautionary Language

Oriel Securities Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Xcite Energy and for no one else in connection with the subject matter of this announcement and will not be responsible to anyone other than Xcite Energy for providing the protections afforded to its clients or for providing advice in connection with the subject matter of this announcement.

Morgan Stanley, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Xcite Energy and for no one else in connection with the subject matter of this announcement and will not be responsible to anyone other than Xcite Energy for providing the protections afforded to its clients or for providing advice in connection with the subject matter of this announcement.

The independent reserves and resources audit of the Company Assets effective 31 December 2011, as audited by TRACS is based on forecast and prices effective as at 31 December 2011 from McDaniel & Associates' October 2011 Brent oil forecast, less a 12% discount for Bentley crude ( www.mcdan.com).

The calculation of the NPV10 (after tax) for the Core Area disclosed above takes into account the following:  (a) UK Corporation Tax is charged at the rate of 30% on net taxable income; (b) UK Supplemental Corporation Tax ("SCT") is charged at the rate of 32% on net taxable income; and (c) heavy oil allowances of up to £800 million have been applied to offset the SCT to the extent possible.

Prospective resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development. Prospective resources are further subdivided in accordance with the level of certainty associated with recoverable estimates assuming their discovery and development and may be sub-classified based on project maturity.

There is no certainty that any portion of the prospective resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the prospective resources.

The principal risks and uncertainties associated with the recovery of the prospective resources which prevent them from being classified as contingent resources are that they have not yet been confirmed by appraisal drilling.

Glossary

"1P" means proved reserves.

"2P" means proved plus probable reserves.

"3P" means proved plus probable plus possible reserves. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves and there is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.

"best estimate" is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.

"boe" means barrel of oil equivalent. A boe, derived by converting gas to oil in the ratio of five thousand eight hundred cubic feet of gas to one barrel of oil, may be misleading, particularly if used in isolation. A boe conversion is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

"Core Area" means FPD and SPD.

"DECC" means UK Department of Energy and Climate Change.

"FPD" means First Phase Development in the core area of the Field.

"MMboe" means millions of barrels of oil equivalent.

"MMstb" means millions stock tank barrels.

"NPV10" means net present value in money of the day using a 10% forward discount rate, which values do not represent fair market value.

"SPD" means Second Phase Development in the core area of the Field.

"$" means US dollars.

Forward-Looking Statements

Certain statements contained in this announcement constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to the Company's future outlook and anticipated events or results and, in some cases, can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "target", "potential", "continue" or other similar expressions concerning matters that are not historical facts. These statements are based on certain factors and assumptions including expected growth, results of operations, performance and business prospects and opportunities. While the Company considers these assumptions to be reasonable based on information currently available to us, they may prove to be incorrect. Forward-looking information is also subject to certain factors, including risks and uncertainties that could cause actual results to differ materially from what we currently expect. These factors include risks associated with the oil and gas industry (including operational risks in exploration and development and uncertainties of estimates oil and gas potential properties), the risk of commodity price and foreign exchange rate fluctuations and the ability of Xcite Energy to secure financing. Additional information identifying risks and uncertainties are contained in the Company's annual information form dated October 26, 2010 and in the Management's Discussion and Analysis for the three and nine month periods ended September 30, 2011 for Xcite Energy dated November 14, 2011 and filed with the Canadian securities regulatory authorities and available at www.sedar.com. The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required under applicable securities regulations.

Statements relating to "reserves" or "resources" are deemed to be forward-looking statements or information, as they involve the implied assessment, based on certain estimates and assumptions, that the resources and reserves described can be profitable in the future. There are numerous uncertainties inherent in estimating quantities of proved reserves, including many factors beyond the control of the Company. The reserve data included herein represents estimates only. In general, estimates of economically recoverable oil reserves and the future net cash flows therefrom are based upon a number of variable factors and assumptions, such as historical production from the properties, the assumed effects of regulation by governmental agencies and future operating costs, all of which may vary considerably from actual results. All such estimates are to some degree speculative and classifications of reserves are only attempts to define the degree of speculation involved. For those reasons, estimates of the economically recoverable oil reserves attributable to any particular group of properties and classification of such reserves based on risk of recovery and estimates of future net revenues expected therefrom, prepared by different engineers or by the same engineers at different times, may vary substantially. The actual production, revenues, taxes and development and operating expenditures of the Company with respect to these reserves will vary from such estimates, and such variances could be material.

Consistent with the securities disclosure legislation and policies of Canada, the Company has used forecast prices and costs in calculating reserve quantities included herein. Actual future net cash flows also will be affected by other factors such as actual production levels, supply and demand for oil and natural gas, curtailments or increases in consumption by oil and natural gas purchasers, changes in governmental regulation or taxation and the impact of inflation on costs.

Neither the 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.