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Citation Resources’ Atzam-5 well getting spicy, retains speculative buy from Perth broker

Published: 16:52 31 Mar 2014 AEDT

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Citation Resources’ (ASX: CTR) progress at the Atzam oil field in Guatemala continues to draw a Speculative Buy recommendation from Argonaut Equity Research with a price target of $0.046.

It has recently cased the Atzam-5 appraisal well above the first of multiple objectives and is preparing to commence drilling towards the target C18 and C19 carbonate reservoirs.

The following is an extract from the report:

Citation has a 60% interest in the Atzam Oil Field, onshore in Guatemala, through its ownership in the local operating company, Latin American Resource.

The first well in the recent program, Atzam-4, flowed at >600bopd from a secondary target and has been flowing at a choked back rate of 170bopd.

Additional potential on the permit is also considered likely with Atzam look-a-likes as well as other play types in which oil production has been proven.

One of the key positives about the Atzam field geology is that there are multiple prospective horizons starting at the C13 level.

During the drilling of Atzam#4, many interesting shows were seen but not tested as a standard drilling plan calls for drilling to Total Depth and then testing from the deepest horizon up.

A different approach is being used at Atzam-5 with production testing equipment so that testing can occur on the way down if anything interesting is seen. 

The primary targets remain in the deeper horizons; however, we are likely to get significant newsflow on oil shows as well as production testing from other horizons over the next few weeks.

Recommendation

The CTR share price has not behaved as predicted, given the near term potential uplift in value. We interpret this as being partly related to market conditions but also to delays in operations and unusual selling volumes.

This inexplicable selling appears to have been exhausted so our prediction for speculative uplift may now be possible, especially given our expectation on newsflow from shows and flow tests. We rate CTR as a Speculative Buy with a price target of $0.046.

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