Ann: Grieve EOR Project Progess Report , page-18

DJ

1. If you attend the AGM can you, or another HC attendee, try to clarify in more detail the options for getting Hereford gas to market. Some specifics would be nice, eg indicative CAPEX and pipeline costs, value and market for nitrogen.

2. Also at AGM, and in this forum, does anyone have a view on Grieve stage 1 LITE ( my terminology), by which I mean the possibility of a smaller and lower cost start up, say $5m, (instead of $20m) eg say 3 injectors (instead of 10) and use current wells, 1 or 2, with the object of getting some lesser start up cash flow, say 200 bblpd, which could incrementally fund the balance of the operation.

Consider say an initial 200 bblpd at profit $30 pbbl, gives about $2m pa to use on expansion, which would increase production exponentially, (doubling every year) so that in say 5 years the complete operation could be completed on an initial borrowing of say $5m and returning the high projected cash flow.

In this way the project would be much lower risk ( better for lenders and for ELK) and ELK could retain 100%.

I do not see why we should be fixated (and possibly frustrated and delayed), on a $20m start up price

If anyone thinks this has some merit (or not) please comment.