Oil firm Petroceltic International (PCI:AIM) could gain momentum ahead of results in late February from its Shakrok well in Kurdistan, northern Iraq. The company remains one of our key selections due to its exploration potential (see Plays, Shares 6 Jun ‘13).

That plans for a test programme on the well have already been announced (7 Jan) suggests drilling to date may have provided some encouraging indications. If the well is unsuccessful the £323 million cap would likely come under some pressure. However, the group trades at a significant discount to Canaccord Genuity’s 319p valuation of its producing fields and development assets so any downside should be limited.

In a success case Canaccord estimates Shakrok would be worth $450 million based on pre-drill expectations and says the company may seek to realise some of this value through a farm-out deal or asset sale. Any funds accrued could be used to pay down the group’s net debt position of $246 million.

Last week (see Commodities, Shares 16 Jan) we discussed how the Kurdistan Regional Government is progressing plans for a pipeline to export its crude through Turkey and progress here could also be a catalyst for Petroceltic. The company is set to commence operations on a second well in Kurdistan next month, testing the Shireen prospect.

Like the consensus we think there could be upside from 185p.