Citation Resources : Atzam Project Update

ABN 90 118 710 508

Ground Floor, 1 Havelock St West Perth WA 6005 t: +61 8 9488 5220

f: +61 8 9324 2400

www.citation.net.au info@citation.net.au

26 March 2014 ASX Announcement

 Atzam #4 well continues to produce at ~170 bopd, flowing tubing pressure steady at +200psi

 New reservoir pressure testing data indicates up to 325,000 barrels recoverable oil from current

 Atzam #5 well successfully cased and cemented to top of carbonates at 1246 feet - Indications of initial hydrocarbon shows at casing point

 Atzam #5 well prognosis to Atzam #4 on track, with initial target reservoirs expected from

 Following analysis of the initial shows at casing point, production testing equipment has been installed at the well head ahead of recommencement of drilling program

 Flow test tanks and separator unit installed - Operator now has ability to immediately test potential commercial producing zones throughout planed drilling program down to total depth

 Drilling expected to recommence by end of week now testing facilities in place

 Primary reservoir targets expected from 2,700ft to 4,100ft - C17, C18 and C19 carbonates

 Atzam #5 well targeting the same carbonate sections as the Atzam #4 production well

Citation Resources Ltd (ASX: CTR) (Company or Citation) previously advised that the Atzam #5 well at the Company's Atzam Oil Project in Guatemala had drilled down to 1,250 feet and the Operator (Latin American Resources) had successfully set and cemented the first intermediate 13 3/8 inch casing string in the well. This was a critical operational phase successfully completed by the Operator due to the complex limestone geology that is present down to this depth until the carbonate units are encountered. The well is cased to the top of the first carbonate sections and drilling operations are expected to be recommenced within days.
Following drilling through the limestone section and setting casing at 1,246 feet, analysis of the well data produced indications of initial hydrocarbon shows at casing point. Although not material shows in the context of a commercial reservoir section, these are considered encouraging by the Operator that the well prognosis is on schedule. Following the interpretation of these initial shows, the Operator has installed flow testing tanks and a separator unit at the well head to have this equipment in place to be able to immediately test any potentially commercial carbonate zones as they are drilled through. This will enable a more efficient commercial production testing program if a carbonate zone produces material flows to surface whilst being drilled through, and not waiting to test the zone until after the well has been drilled to its planned depth of
4,100 feet.
The Atzam #5 well location is approximately 1km to the south-east of the Atzam #4 production well, with the well located and designed to test the same carbonate reservoir intervals that were intersected and produced oil shows in Atzam #4 and to quickly tie into production on success. The Operator plans to run a second intermediary casing string once the well is drilled down to approximately 3,200 feet, setting the second casing string above the primary C18 and C19 carbonate reservoirs.
The Atzam #5 well will be drilled to a target depth of approximately 4,100 feet and will target the C18 and C19 carbonate reservoirs as the primary objectives, in addition to the producing C17 carbonate reservoir in the Atzam #4 well. The C18 and 19 carbonates were intersected in Atzam #4 and produced strong oil shows at surface during the drilling of the well but were unable to be flow tested. The drilling and flow testing of the C18 and C19 carbonates are a major objective for the Atzam #5 appraisal program as they could not be flow tested and commercially evaluated as the primary objective in Atzam #4.

The Atzam #4 production rate has been strongly consistent over the past month, continuing to produce at approximately 170 bopd whilst maintaining a flowing tubing pressure over 200 psi following the Operator increasing the choke to 18/64 ths (from 16/64ths) in February. The performance of the reservoir to date continues to be very encouraging with production continuing without any associated water to date.
Recent downhole reservoir pressure testing data has confirmed that the strength of the reservoir energy from this producing 6 foot perforated section in the C17 carbonate. The shut in downhole pressure testing recorded in excess of 500 psi, only slightly lower than the virgin reservoir pressure recorded on perforating this section in June 2013. Following the recent testing program, an initial independent report on this 6 foot producing zone has increased the potential recoverable reserves to 325,000 barrels of oil.
The well continues to produce from natural reservoir pressure without the need for a submersible pump to assist flow rates, which is usually required for producing these carbonate reservoirs. The well production plan is to continue increasing the choke over a period of time to establish the optimal production rate for this producing carbonate section.
The Operator estimated that following the initial flow testing program in June/July 2013 this producing 6 foot C17 carbonate section (2846-2852ft) could produce in excess of 1,000 bopd on an open choke based on the flow rates recorded to date on various choke sizes up to 32/64ths, together with the downhole and well head pressures data from this zone. But this will not be undertaken as it is likely to damage the reservoir and inhibit the zones long term production potential.
For and on behalf of the Board

Brett Mitchell

Competent Person Statement

The information included in this Announcement that relates to resources was prepared by Mr Allen L. Kelley, who is an executive

with Ralph E. Davis Associates, Inc. based in Houston, Texas. Mr Kelley has over 30 years of oil and gas experience and is a Certified Petroleum Geologist (Certificate Number 6092). Mr Kelley is a member of the American Association of Petroleum Geologists, Houston Geological Society, and the Society of Petroleum Engineers. In addition Mr Kelley has been a contributing member of the Potential Gas Committee for over 20 years holding positions of Eastern Region Vice President, Chairman of the Gulf Coast and Atlantic Committees and currently is on the Editorial Committee and Chairman of the Alaska Committee. Estimates as to recoverable hydrocarbon volumes contained in this Announcement are based upon certain assumptions. Accordingly, actual results will differ, and may differ significantly and materially, from those presented.

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