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  • Citadel Exploration, Inc. (COIL) Secures $1.39M Private Placement, Major CAPEX Springboard For E&D Of California Hydrocarbon Acreage 0 comments
    Feb 5, 2013 5:33 PM | about stocks: COIL

    Citadel Exploration, an operator with some 52k acres at their Rancho Grande project in the San Joaquin Basin and another 688 acres at Project Indian in the Salinas Basin, reported raising $1.39M today via a 4.086M share private placement at $0.34 per common share (no commissions paid).

    This is a huge move for the company as it will allow for serious exploration and development at the company's two primary sites in the heart of the oil-hungry California market, which currently is only able to field roughly 37% of its refined oil via in-state production. Rancho Grande in particular holds abundant recovery potential and Citadel, alongside operating partner Sojitz

    Energy Ventures, is in a prime position to exploit that potential, having identified 23 prospects on the site already with multiple hydrocarbon zone targets.

    President and CEO of COIL, Armen Nahabedian, whose family has been active in oil exploration in the San Joaquin Basin region for generations now, called the raising of this capital a real testament to the abilities of recently hired CFO, Phil McPherson. Nahabedian said this deal really cements McPherson's position with the company and projected huge return value for shareholders should the planned, upcoming drilling programs be successful.

    Not much reason to expect they wouldn't be after even a cursory analysis of the acreage currently within striking distance, as the primary site, Rancho Grande, affords a host of targets in conventional oil zones from 1.5k all the way down to 22k feet (immediate shallow and longer-term horizontal potential). The company plans to start drilling at Rancho Grande as soon as March, and the well by well engagement basis for COIL (various working interests depending on prospect) leaves the company in a very de-risked/spry position with tremendous upside. Projections for recovery are quite nice as well, with around 50 to 200k BOE per prospect and 100 to 200 BOPD, with operators like Occidental Petroleum on adjoining leases showing superb results from both conventional and horizontal drilling activities.

    Also, given the advanced state of logistics in the area, it should be really easy for the company to bring new infrastructure online quickly and get product out to the LA refinery market, just a 60 mile drive away. Permits are already obtained for portions of Rancho and the company is currently making determinations about the well program, with every intention at COIL being to update markets as soon as the specifics are hammered out.

    The Project Indian leasehold over in the Salinas Basin is actually on land owned by Occidental Petroleum subsidiary, Vintage Petroleum. Citadel, again acting as operator, is currently looking at a 5-well pilot program here and is in a 60/40 WI position alongside JV partner Sojitz. Permitting is in its final stages with a Q2 kick off this year slated for the start of the pilot program.

    The project is noteworthy because roughly half of CA's oil production comes out of shallower heavy oil via thermal recovery methods, and the pilot program is designed from the ground up to test the overall economic viability of this approach (11 to 17 API oil via prior drilling). Given the upwards of $10.00/barrel premium over WTI prices currently fetched by heavy oil's like Midway Sunset (as per Chevron's data) and the rapidly expanding natural gas markets associated with historically record-low gas prices, heavy oil is extremely compelling from a profitability and longer-term development standpoint. The natural gas technology already cropping up around the idea of all this abundant domestic production is enough to make the dynamics compelling on its own, even before considering the 100M barrels plus of original oil in place estimated at Indian.

    Veteran management with an even generational knowledge base in the regional geology, as well as a deep understanding of the history of techniques for E&P in the region, is something that gives COIL a real edge on the competition here and markets will be eager to look for more news in coming weeks as the finer points of the company's drilling programs emerge.

    For more information on Citadel Exploration, visit

    Please see disclaimer on the QualityStocks website:

    Stocks: COIL
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