co2 supply

In 6 weeks Rancher Energy is scheduled to begin delivery of a minimum of 25mcfd (upto a maximum of 40mcfd) of CO2 as per their agreement with Anadarko. My estimate is that they are about 18 months away from being in a position to accept it (pipeline needs to be built). In the meantime they are obliged to pay $14m p.a. to Anadarko under the "take or pay" terms.

It will be interesting to see if this creates an opportunity for ELK. Rancher is concentrating in the short-term on waterflooding it's fields and will leave CO2 injection as a longer term prospect. It may try to renegotiate it's contract and leave some opening for ELK.

The timing could be perfect for ELK, certification of reserves by RS and CO2 agreement by Xmas.