This is more than 150% higher than the current price of $0.016 and is based on the large upside present at its Atzam oil field in Guatemala that will be further tested by the Atzam-5 development well.
The following is an extract from the research report:
Citation has announced commencement of drilling at its Atzam-5 well in Guatemala. The well had been delayed due to heavy rain and is now expected to reach total depth in mid-February.
We remain confident that large upside is possible at the project and the catalysts we referred to in previous notes are still to come, namely: increased flow rates, activity at Tortugas, longer term sales contract and independent assessment of the resource potential at Atzam.
Event & Impact | Positive
Citation earned its interest (60% in Atzam) mainly via funding the Atzam-4 well, which successfully flowed oil in February 2013 of 600 barrels per day on test.
Since August, the well has been producing at 120 barrels of oil per day on a restricted choke with good well head pressure.
Catalysts Delayed not Vanished
All of the catalysts highlighted in our initiation report are yet to come, including: increase in production from Atzam-4; spud of Atzam-5 (with strong newsflow as multiple target horizons are penetrated); longer term offtake contract secured; progress on access to Tortugas oil field and an updated Independent Resource Report.
Given the likely increase in newsflow as activity ramps up in 2014, we are confident of increased speculative interest in the stock, with share price appreciation likely.
Technical risk associated with Atzam-5 is considered low and we expect that multiple oil bearing horizons will be intersected.
Operational risk is considered partly mitigated by lessons learned from past drilling; however, remains at a moderate level.
Drilling of Atzam-5, combined with the other likely catalysts in the near term, should provide a speculative re-rating, with additional appreciation on any success.
We rate Citation as a Speculative Buy with a $0.046 price target.
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.