Mr. Timothy Jones reports

RESULTS FOR THE YEAR ENDED 31 DECEMBER 2014

Xcite Energy Ltd. has released its results for the year ended Dec. 31, 2014.

Highlights:

• Uplift in Bentley 2P oil reserves from 250 million stock tank barrels to 257 million stock tank barrels in February, 2014, with a further 48 million stock tank barrels of contingent resources assigned;
• Signed memorandums of understanding with Amec Group Ltd., Aibel AS, Ove Arup & Partners Ltd., Baker Hughes Ltd., China Oilfield Services Ltd. and Teekay Shipping Norway AS;
• Signed collaboration agreements with Statoil (U.K.) Ltd., Shell U.K. Ltd. and EnQuest Heather Ltd. to evaluate potential development and operational synergies with neighbouring fields;
• Refinanced balance sheet, with new debt financing of $135-million (U.S.) of secured 12-per-cent-coupon bonds, with repayment of the existing $80-million (U.S.) unsecured 12.5-per-cent loan notes;
• Cash balance at year-end of 32.5 million British pounds;
• Extension to the Bentley field licence from the Department of Energy and Climate Change until Dec. 31, 2016;
• Continuing discussions with potential co-venturer partners despite challenging oil price environment.

Commenting on today's announcement, Rupert Cole, chief executive officer, said: "Despite yet another challenging year across the oil industry, we have continued to make significant progress with the Bentley development project in those areas within our control. We believe that this work supports our commercial discussions with the contractor group and ongoing funding discussions with potential co-venturer partners. Our focus remains on delivering the financing required to bring the Bentley field into production."

Timothy S. Jones, chairman, said: "I am pleased to present my first report to shareholders as chairman, having taken over from my predecessor, Roger Ramshaw, in May last year. Roger ably led the company from its formation and public flotation and I would like to pay tribute to his contribution.

"Our industry is currently facing major challenges, but I remain optimistic that we will successfully transition through the next phase of our journey towards development of the Bentley oil field. A year ago, we commented on the changing environment in the U.K. North Sea, and how our experience had seen a reduction of the resource allocation into the region and the beginning of restrictions on development spending, which combined with a continuing escalation of the cost base, was leading to projects being delayed or cancelled and new investment simply not being made.

"Today, we have a much lower oil price environment to contend with, currently around $55 per barrel, and many more oil companies announcing reduced investment in development and exploration spend, delayed or cancelled projects, further sales of assets and ongoing head count reductions. It is clearly a difficult environment for all participants and definitive government and industry action needs to be taken to ensure the continuing health of the U.K. North Sea sector. The measures announced in the budget are certainly a step in the right direction.

"Oil & Gas U.K. recently released its annual activity survey for 2015, in which it reiterated the three major challenges facing the U.K.'s offshore oil and gas basin: high costs, high taxes and an underresourced regulator. On this basis, it has called for a major effort on cost reduction, production improvement and fresh investment. Importantly, Oil & Gas U.K. also highlighted the need for the right balance between investment and cost control, recognizing that cost control alone would diminish the industry and, that to survive, investment must be sustained with an urgent need for significant regulatory and fiscal reform.

"We fully support Oil & Gas U.K. in its conclusions, and believe that the Wood Review identified another key issue which the industry does not yet embrace; being the need for much greater and genuine collaboration. Perhaps surprisingly for an industry such as ours, collaboration is not a natural operating model and the wider adoption of this would represent a substantial behavioural change in the way that operators, service providers and the government interact for mutual benefit. Indeed, this has also been highlighted by the oil and gas authority, together with the need for a cultural shift in the industry to adopt behaviour that is likely to tackle the challenges ahead.

"We experienced the changing environment in 2013 first-hand and realized that a different approach was needed to attract investment for new development projects. The cost environment was unsustainable, projects were rarely, if ever, delivered on time or on budget, and the fiscal environment of the U.K. North Sea was neither sufficiently stable nor attractive enough to enable this situation to continue.

"In this environment, we engaged with a number of key integrated service providers to develop an innovative commercial structure which comprised collaboration and greater accountability and apportionment of risk and reward. The intention was to develop a structure to align all the key stakeholders on the successful delivery of the development project, on time and on budget whilst providing sustainable and long-term production volumes in an efficient manner. As a result, we are now working with major international companies to provide the key services and assets required for the Bentley development project. We believe this is an innovative structure for the U.K. North Sea, which is designed to address some of the major risks and deliver a successful, economic field development.

"We have made considerable progress in many areas within our control, but we cannot escape the fact that the current oil price environment has had a further substantial impact on the industry and availability of resources and investment globally to new development projects. Nevertheless, we continue with our innovative approach to managing this changing environment, in particular in relation to pursuing the funding required for Bentley, as an important U.K. North Sea development project. The development work we have undertaken has been primarily focused on the field development plan, but we have also achieved further validation in the key areas of costs, execution strategy and subsurface definition, in order to support our funding discussions.

"We remain fully committed to progressing the Bentley field towards a successful outcome. On behalf of the board, I would like to thank the entire Xcite team for their continuing hard work and I look forward to being able to deliver the positive news that shareholders are awaiting."

Mr. Cole said:

"At this time last year, we set out our principal objectives for 2014 -- to select our key preferred development partners for the Bentley field; to commence a number of engineering programs to achieve greater definition of the development concept; to agree draft contracts with a view to signing for the project execution phase following approval of the field development plan; and to continue to work to clarify the funding requirements based on the work with our partners and thus be able to evaluate the available funding options. On the back of these objectives, we also set out our intention to work towards the submission of a full FDP including a funding package, however, it became clear during the latter half of 2014 that the impact of the declining oil price had further changed the commercial environment and we updated the market throughout the year on the impact of these changes.

"In spite of the increasingly challenging environment, we have achieved much of what we set out to do, with the signing of important memoranda of understanding with development contractors, the drafting of commercial contracts, the completion of key pre-FEED/assurance engineering programs, continuing discussions with potential co-venturers and ongoing work on developing asset financing solutions for our principal field development assets. We also entered into two collaboration agreements, which have the potential to deliver material capital and operational cost savings in the future. We also took the prudent step of refinancing our balance sheet through the issue of a $135-million (U.S.) two-year bond and a $5-million (U.S.) private placement of ordinary shares.

"In February, 2014, we confirmed 2P reserves for the Bentley field of 257 million stock tank barrels in an updated reserves assessment report, with an NPV10 after-tax value of approximately $2.1-billion (U.S.). This RAR also assigned a further 48 million stock tank barrels of P50 contingent resources to the Bentley field, representing the additional economic production barrels that could still be achieved after an initial 35-year facilities life cut-off had been applied to the development plan. The RAR was followed at the end of March, with the confirmation from DECC of an extension to the Bentley oil field licence until Dec. 31, 2016, which was a material extension to our licence terms. More recently, in January, 2015, we relinquished the licences to blocks 9/3c and 9/3d in accordance with their terms -- neither block was material, with only approximately 16 million stock tank barrels of P mean prospective resources assigned to them in aggregate in the RAR and with zero economic value. It is intended that the RAR as at Dec. 31, 2014, which will be published in due course, should incorporate much of the work undertaken during the past year for the current development plan, together with the updated acreage and the recent fiscal changes in the 2015 budget.

"The selection of development partners during 2014 was initiated with our signing of an MOU with Amec Group Ltd. and with Ove Arup & Partners Ltd. in April, for the design and development of Arup's self-installing, steel ACE mobile offshore production unit. This was closely followed later that month with an MOU with Teekay Shipping Norway AS for the supply of a bridge-linked Sevan FSO facility. The pre-FEED engineering for the FSO was completed at the end of 2014. In July, we signed an MOU for the engineering, procurement and construction of the ACE platform with Aibel AS, followed in September by a successful offshore geotechnical survey, which completed the overall offshore assurance process for this phase. The Baker Hughes Ltd. MOU in October, 2014, set out the principles for the provision of oil field services and we have been working extensively with Baker Hughes to develop and enhance our subsurface and drilling strategy. In November, China Oilfield Services Ltd. became the final key partner to join the development group, when we signed an MOU for the provision of a new-build N Plus class jack-up drilling rig, which is due to be built in the Keppel FELS yard in Singapore. The N Plus class drilling rig will be one of the largest harsh-environment, deepwater jack-up rigs in operation in the U.K. North Sea, which will allow for an additional four wells to be drilled from the MOPU, and we believe it will offer several material advantages to optimize the drilling strategy.

"During the year we also entered into collaboration agreements with the operators of two neighbouring fields: the first in May, 2014, with Statoil (U.K.) Ltd. and Shell U.K. Ltd., which allowed all parties to share field-specific technical and operational information to evaluate potential synergies and collaboration between the Bentley and neighbouring Bressay fields. The second, in September, with Statoil and EnQuest Heather Ltd., enabled the sharing of field-specific technical and operational information to evaluate the potential of common gas import infrastructure between the Bentley, Kraken and Bressay fields. These initiatives are part of a longer-term strategy, which have the potential to enhance the future economics of these fields by offering material capital and operational cost savings; they also align with our underlying collaboration model which we believe was one of the key areas highlighted by the Wood review as being important for the continued success of the U.K. North Sea. Xcite Energy's actions clearly demonstrate our support for this approach to maximize economic recovery and we hope that the government will also support such behaviour for the benefit of the U.K. North Sea as a whole.

"We refinanced our balance sheet in June, raising a total of $140-million (U.S.) (83.1 million British pounds) through the placing of a $135-million (U.S.) (80.1 million British pounds) secured, two-year bond and a private placement of ordinary shares, which enabled us to repay the outstanding loan notes and provided additional capital to complete the pre-FEED/assurance engineering work program."

The development group model

"We established our commercial development model against the early backdrop of a tightening industry environment, as the chairman has already mentioned, but it was also driven by the need to drive for a more competitive and efficient cost base with shared accountability into our development project and exercise greater control over the key aspects of a field development; an important goal, especially in the current challenging oil price environment.

"The development group which we selected are not only leaders in their respective fields, but also companies that have demonstrated their willingness to operate within a new, innovative and collaborative model for the Bentley development, in which they are accountable for delivering key elements of the project with a balanced risk and reward mechanism. The more work we have undertaken with the development group partners, the greater our conviction has become that this collaborative model will deliver a cost-effective, efficient and sustainable project in the future. As with many innovative solutions, it is not always straightforward, but we have achieved a great deal during 2014.

"We successfully completed the planned technical and engineering programs, which have delivered greater functional and cost definition at this stage, and we have advanced our reservoir modelling to provide more subsurface certainty as part of our overall reserves strategy, which will be incorporated into an updated reserves assessment report in due course. We are making good progress with our commercial discussions with partners and have reached agreement on many of the fundamental principles, which are being integrated into the contract documentation. An integral part of this contractual structure is the early definition of project costs and, given the current environment, we are continuing to do further work in this area in order to capitalize on the cost benefit opportunities that are slowly working through into the sector. We anticipate that this will allow a further revision to the cost and execution strategy to further maximize economic recovery and this will continue to be a core focus during 2015."

Funding the development

"We have consistently stated that the technical and commercial work streams were our focus for 2014, and that we would only be able to submit a formal FDP when we could demonstrate to DECC both the technical and financial capability required. As mentioned above, the technical and engineering work streams are largely complete and our commercial negotiations with development group companies continue to make progress.

"Given the impact on the project economics, we remain focused on optimizing the overall project costs and also on accessing alternative sources of capital in order to limit the development capital sought from any potential co-venturer and, so far as possible, mitigate the impact of the current investment environment. During the year we spent valuable time creating an asset financing model to fund the construction of the MOPU. In recent months, it is clear that the declining oil price is affecting the overall project financing environment and, as a result, we have extended these discussions into new geographic regions where there appears to be a longer-term strategic view.

"We have also actively continued our discussions and diligence process with a number of potential co-venturers during the year. Whilst the development financing landscape has remained difficult, we have committed a great deal of time and energy into addressing the important issues relating to the Bentley development to support these discussions. Our emphasis has been on delivering a cost-effective and sustainable development plan, supported by a clearly defined execution strategy with an externally validated cost base, whilst continuing reservoir modelling which has been focused on delivering greater subsurface clarity and certainty. We continue to actively pursue our process to deliver a co-venturer partner."

Outlook

"Whilst recognizing the current uncertainty in the industry, we believe that the anticipated development timeline for the Bentley field should mitigate short-term oil price volatility and we remain optimistic about the long-term economic viability of the project, which should also benefit from the tax changes announced in the recent budget. We have undertaken a significant amount of work over the past year, which has moved the development plan forwards and created a greater level of certainty with which to engage potential co-venturers. With a project the size of Bentley, and in the current market environment, the company remains focused on optimizing costs and reducing risk and uncertainty, which is even more important than it was 12 months ago. Having completed our engineering programs in 2014, we are entirely focused on developing our commercial and funding discussions in 2015.

"Once again, I strongly encourage shareholders to read the information and updates provided by the company, rather than uninformed sources. We will inform the market when we have relevant and material news to share, as would be expected and in accordance with our public company reporting obligations."

                        INCOME STATEMENT INFORMATION
           (in millions of British pounds, except per share amounts)

                                       Year ended    Year ended   Year ended
                                          Dec. 31,      Dec. 31,     Dec. 31, 
                                             2014          2013         2012

Revenue                                         -             -         13.3
Other income                                    -          11.4            -
                                           -------       -------      -------
Net (loss) profit                            (3.2)          6.6         (1.7)
                                           =======       =======      =======
(Loss) earnings per share (basic)
in British pence                             (1.1)          2.3         (0.7)
(Loss)/earnings per share (diluted)
in British pence                             (1.1)          2.0         (0.7)

We seek Safe Harbor.