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  • Citation Resources: Second Oil Sales Contract At Atzam Oil Project 0 comments
    Sep 29, 2013 8:55 PM

    Citation Resources (ASX: CTR) has confirmed the economic credentials of the Atzam Oil Project and good fiscal terms for oil producers in Guatemala with oil sales generating netbacks of about $65 per barrel.

    Notably, the Atzam-4 production well continues to produce oil on a highly restricted choke while maintaining a constant well head pressure in excess of 300 psi with no water production.

    Operator Latin American Resources (LAR) is progressing preparations to drill the Atzam-5 development well in October.

    Citation has a 60% interest in the Atzam Oil Project.

    Atzam Oil Project

    LAR had this week completed the Atzam Oil Project's second oil sales contract this week, with the sale and delivery of a further 3,500 barrels of oil to Perenco Guatemala.

    This brings total sales completed during August and September over 9,000 barrels.

    Atzam-4 production continues on a highly restricted choke, with plans to increase the choke over time to in order to maintain the reservoir integrity during this initial production phase.

    This will establish the optimal production rate for this producing C17 carbonate section once the associated gas being produced from this zone naturally depletes and the upgrade on the Atzam oil storage facilities is completed in the next month.

    While LAR estimates this section could produce more than 1,000 barrels of oil per day on an open choke, independent reservoir engineers Ralph Davis have recommended that the well be produced at an optimal production rate of 466 bopd, whilst maintaining the reservoir's structure and integrity.

    Importantly the ongoing production from the C17 carbonate section has continued from natural reservoir pressures and without assistance from a submersible pump, which is normally used for producing these carbonate sections.

    In addition to the upcoming Atzam-5 well, the company is also planning to carry out two well workovers in early 2014. These wells at the neighbouring Tortugas oil field have Proved and Probable Reserves of 600,000 barrels of oil.


    Spudding of Atzam-5 was delayed due to heavy unseasonal rainfall during September, delaying the construction of the drilling pad and location.

    Construction of the drilling location is now underway with long lead items secured.

    Atzam-5 well will be drilled to target the same oil bearing carbonate structures that were encountered and are currently producing in the Atzam-4 well.

    These include the primary target C17 and C18 carbonate sections that generated significant oil shows during drilling but which were unable to be flow tested in Atzam-4.


    Guatemala has a favourable business climate for oil companies with the following key facts about its fiscal regime:

    - Base royalty of 20%, increases with oil quality;
    - 31% corporate tax rate; and
    - 100% of capital expenditures are recoverable.

    It is also politically stable with a democratically elected Government since 1983.


    Citation Resources has the keys for success, an oil producing field with good margins, a supportive fiscal regime and a developmental pathway.

    Investors will closely watch Atzam-5, which targets the primary target C17 and C18 carbonate sections that were not flow tested at Atzam-4, which notably produces from a secondary target.

    Shares in the company are set to grow once production at Atzam-4 is increased. Successful results from Atzam-5 will provide further impetus for a share re-rating.

    Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.

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