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Elk Petroleum

Grieve fully funded

Update | Oil & gas | 26 Aug 2016

Elk Petroleum has completed the restructuring of its JV agreement with Denbury Resources for its 12.3mmbbls 2P Grieve enhanced oil recovery (EOR) project. A substantial equity plus debt injection in June/August 2016 will fund the Grieve project to first production in late 2017 or early 2018, with Denbury covering any cost overruns. Including additional equity from a shortfall placement, we estimate a base case valuation for Elk based on 2P reserves of A$0.15/share, with upside from both 3P reserves (an additional A$0.06/share) and 3C contingent resources (an additional A$0.17/share).

Elk Petroleum

Transition to organic growth: Low hanging fruit

Outlook | Oil & gas | 23 Aug 2018

Elk Petroleum (ELK) has completed a period of material inorganic growth with the acquisition of equity in the Madden gas field and assumption of operatorship at the Aneth CO2 enhanced oil recovery (EOR) project. ELK’s engineering review of Aneth has uncovered numerous near-term development opportunities that offer IRRs ranging from 22% to 87% at US$60/bbl WTI, at an average cost of US$6.8/boe. Projects are low technical risk asset enhancements, however, contingent on ELK’s re-financing expected in H2 CY18. ELK’s partner in Aneth, Navajo Nation Oil and Gas company (NNOGC), gained access to a US$80m debt facility in June 2018 to fund its share of Aneth development capex. Our risked valuation increases from A$0.12 per share to A$0.19 per share (61%) driven by the inclusion of near-term development potential, as well as higher short-term oil prices that we base on EIA forecasts (in the long term we remain at US$70/bbl). Funding of identified growth projects and refinancing of the company’s complex capital structure are key management objectives for CY18.

Elk Petroleum

Aneth adds another antler

Update | Oil & gas | 13 Nov 2017

Elk Petroleum’s (ELK) acquisition of a 63.7% operated interest in the Aneth Rocky Mountain CO2 EOR project from Resolute Energy transforms the company into one of the largest producers on the ASX. Management forecasts 2018 net production of 11mboe/d. At US$160m, the deal is priced at a discount to our 1P estimate of proven developed reserve value of US$178m (excluding US$23m, which ELK retains in escrow to cover abandonment costs). The Aneth transaction was funded through new equity and debt, with rapid debt paydown expected from Grieve, Madden and Aneth cash flows. We update our valuation to reflect forecast Aneth cash flows, with our NAV rising to $A0.12/share from $A0.09/share.

Elk Petroleum

Operator of Aneth CO2 EOR project

Flash note | Oil & gas | 19 Sep 2017

Elk Petroleum is to acquire a 63% operated interest in the Aneth Rocky Mountain CO2 EOR project, transforming the company into one of the largest producers on the ASX. Management forecasts 2018 net production of 11,000boe/d. At US$160m, the deal is priced at a material discount to management’s estimates of 1P (NPV10) at US$288m, with the consideration to be funded through a combination of new equity and debt. An equity placement to raise A$27.5m was priced at A$0.062 (a 22% discount to last close and 10% below the six-month trading average), with the balance funded through a US$98m debt facility from Riverstone Credit Partners and institutional lenders and up to US$55m in preferred equity provided by the AB Energy Opportunity Fund.

Elk Petroleum

Rockies CO2 EOR consolidation

Outlook | Oil & gas | 14 Aug 2017

Elk Petroleum (ELK) is an ASX-listed oil and gas producer and developer with a focus on enhanced oil recovery (EOR) from mature fields. The company's current focus is on CO2 EOR projects in Wyoming, US, where it's first EOR development project, Grieve, is due on stream in late 2017/ early 2018. Grieve, combined with the recent acquisition of a c 14% interest in the Madden gas field is due to turn ELK into a producer and material CO2 resource owner. We visited both Grieve and Madden in July 2017, which helped highlight a number of opportunities management is actively engaged in targeting. These include resource upside at both Grieve and Madden, numerous high IRR infrastructure optimisation opportunities and CO2 EOR opportunities in the vicinity of ELK's operated assets. Our valuation of ELK reduces from A$0.11/share to A$0.09/share due to a reduction in Edison's long term oil price assumption from $80/bbl (2022) to 70$/bbl.

Elk Petroleum

Acquires CO2 vertical integration and cash flow

Update | Oil & gas | 20 Apr 2017

Elk Petroleum (ELK) has acquired a c 14% interest in the ConocoPhillips-operated Madden Gas Field, as well as the 310mmscfd capacity Lost Cabin Gas Plant in Wyoming. This elevates ELK to producer status, with cash flow being generated from Madden methane sales. The Madden field is also a significant CO2 producer, fulfilling ELK's strategy of CO2 integration, securing supply for future CO2 enhanced oil recovery (EOR) projects. We incorporate Madden in our valuation along with recent changes to the company's capital structure o our base case 2P NAV stands at A$0.11 with significant upside in the event of oil/gas price recovery and/or incremental reserve/resource recovery above audited 2P estimates.

Elk Petroleum

EOR delivering in a down-cycle

Initiation | Oil & gas | 04 May 2016

Elk Petroleum (ELK) is developing the Grieve CO2 enhanced oil recovery (EOR) project in Wyoming. ELK sees its current US activities as providing a platform for leveraging its EOR expertise to create scalable growth, both in the US and overseas. Grieve, in production from late CY17, is expected to be strongly cash generative and will help fund growth.

Jameson Resources

Initial coal quality results positive

QuickView | Mining | 09 Dec 2013

Jameson Resources is developing the Crown Mountain coking coal project in the Elk Valley, British Columbia, Canada. The test results announced on 29 October for three of the seven large diameter drill holes at the Crown Mountain project indicated that washability recovery, which relates directly to plant yield, is higher than expected at 69.3%. The free swelling index (FSI) averaged 6.1 at an average ash of 8.6%, which is in line with typical Elk Valley coking coal products. Core from the remaining four holes is currently being processed.