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Citation Resources starts flow testing of Atzam-5 oil appraisal well

Published: 09:14 20 May 2014 AEST

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Citation Resources (ASX: CTR) will soon know the commercial significance of its Atzam-5 oil appraisal well in Guatemala with the first phase of flow testing now underway.

Atzam-5 had intersected multiple potential pay zones, with significant oil shows to surface and fluorescence in the cuttings from drilling through the targeted carbonate sections.

The initial flow test program will be conducted as an open hole test of the lower C18 and C19 carbonates from below the final casing point at 3,600 feet.

These sections comprise part of the primary reservoir target zones and were the zones that flowed more than 1,000 barrels of oil per day in Atzam-2 and which could not be tested in Atzam-4.

Citation is also waiting for results of the electric log analysis of multiple potential pay zones encountered.

Atzam-5 is running 66 feet high on structure to the Atzam-4 well and approximately 320 feet high to the Atzam-2 well.

“This revised reservoir structure depth profile for Atzam-5 has potentially very significant implications for the commercial prospectivity of Atzam-5 and the in place oil resource estimate for the Atzam Oil Field,” executive director Brett Mitchell said.

“The true structural extent and volumetrics of the Atzam Oil Field will only be clearly defined through a 3D seismic survey that is planned for 2014 as one of the key projects to follow the drilling of Atzam-5. 

“Atzam-5 is a step out well located approximately 1.2 kilometres from the Atzam-4 well, and the successful penetration of a number of potential pay zones we were targeting in Atzam-5 is very positive for the commercial potential of this well, and the total project economics going forward. “

Independent expert Ralph E Davis, Houston has been commissioned to complete an independent reserve report for Atzam 5 well and to provide a new Atzam Oil Project resource estimate.

Short-term financing

To fund well completion and additional testing and production work, Citation has secured a $2 million debt facility from sophisticated investors. 

Key terms of the facility are 10% interest rate, $2.4m repayable on or before 30 April 2015 at any time and the issue of 66 million unlisted options exercisable at $0.015 with a 3 year expiry. 

On the company completing a successful debt or equity raising exceeding $5 million, all outstanding amounts drawn under this facility will be repaid as a priority or the lenders may convert their loan amounts on the same terms as the next completed equity raise.

 

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