e-mail: debbie.lewis@canaccord.com e-mail: david.pescod@canaccord.com January 29, 2010

XCITE ENERGY (V-XEL) $0.78 n/c

CRUDE OIL (Ouch!) $72.72 -0.92

Today we do an interesting interview with Richard Smith

and Rupert Cole with Xcite Energy (the full interview should

run next week). They own probably one of the biggest oil

plays in the North Sea that you’ve never heard of—the

Bentley. Some reports suggest it could have as much as

500 to 700 million barrels, which of course is the good

news.

The bad news is this is the heavier stuff that some of the

companies that originally put holes into it, simply dismissed

it 30/40 years ago. With five wells already into the

pool there is a bit of a reassurance as to its size and some

now suggest that as much as 170 million barrels of this

play could be recoverable.

Management has had a lot of balls in the air on this

story over the last while and in the last few days announced

a major marketing deal with British Petroleum.

Now they have to get a financing done in the coming

months and they expect to be drilling this summer with rigs

and equipment that would get production much closer than

had originally been scheduled. The bad news of course is

that drilling that was expected to be starting as early as

March, is now this summer and drilling is what usually

causes the excitement.

We also got an update from Smith and Cole on the tax

regime for many of the North Sea plays and we came away

understanding that taxes in the North Sea are not quite as

straight-forward as many people have long believed. In

fact, it’s confusing as heck! But the way that it’s worked

out is that it is offering little companies like Xcite, a chance

for some of the plays that don’t seem to attract as much

interest from the seniors.