Range Resources Associate Increases Guatemala Oil Production
Range Resources (ASX: RRS) associate Citation Resources (ASX: CTR) has increased oil production from its Atzam-4 well in Guatemala to 140 barrels per day, up from the initial 100bpd.
Notably, production remains on a restricted 8/64ths choke due to limited in site storage with Citation estimating that open choke production could exceed 1,000bpd of oil.
Range has an indirect attributable interest of 23.93% in the Atzam project, consisting of a 19.9% interest in Citation and a further 10% interest in the project.
Negotiations are underway with potential offtake parties for current and future Atzam oil production. These include ongoing discussions with a tier one, global oil and gas company.
Once this is place, the company will be able to bring the well up to full production.
Citation also expects an independent report on Atzam-4 reserves shortly. This is expected to be up from the previous Probable Reserve estimate of 2.3 million barrels of oil based on logging data.
Notably, upside potential exists in untested sections in Atzam-4. This include a 13 foot zone in the Upper C17 section that has better logs than the current producing zone as well as the C13 and C14 carbonate sections that have yet to be perforated and tested despite producing impressive oil shows during drilling.
The Upper C17 section had produced oil at an average rate of 610 barrels per day over 24 hours with a submersible pump during initial testing.
Citation plans to spud the Atzam-5 well in the September 2013 quarter. This will target the C13 and C14 sections.
These sections are the main producing zones in the nearby Rubelsanto Field about 17 kilometres northeast of Atzam that has produced over 30MMbbl of oil to date from eight wells.
Rubelsanto continues to produce more than 1,000bpd of oil, 36 years after its discovery.
Analysis
The increasing production despite restrictions on the choke size highlight the productivity of the Atzam-4 well which is reinforced by the operator's expectation that the well is capable of producing more than 1,000bpd of oil once this restriction is removed.
An offtake agreement will both add value to Range Resource's associate Citation Resources and give the company some cash flow through its 10% stake in the project.
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