Ann: Quarterly Activities and Cashflow Report, page-10

Dan,

 

I am interested to know where the 89 BOPD for October is fromnot that I am doubting it. The September figures from WOGCC have just beenreleased and that had September’s average at 54.3 BOPD up from 29.4 BOPD forAugust. The cumulative production to the end of September was 3,536 barrels andthen we were assured on 26-October that by the end ofOctober (subsequent to the end of the quarter) 5,000 bbls of oil had beentransferred into the Grieve Oil Pipelineso with 89 BOPD forOctober, we also have another 1,300 barrel in storage.

 

Good News

Contrary to my back of the envelope estimate (post earlier in October) that wemight have to wait quite a few more months before we saw a response to thegravity stable flood, one up dip well (Grieve #10) appears to be respondingassuming Denbury is reporting accurately to the WOGCC. Grieve #10 rate isincreasing (up from 5 BOPD to 25BOPD in September) and its watercut is dropping (down from 96.6% to 84.0% in September), both healthy signs that we are seeinga response to the CO2. The only downside is that Denbury is not reporting anygas production – I would have expected to see some CO2 with the increasingproduction at Grieve #10. Are the compressors running and recycling CO2 and ifso, where is it coming from and why isn’t Denbury reporting gas production toWOGCC?

 

Bad News

Things could have been a lot better if Denbury had notdiverted Grieve CO2 to their Bell Creek field in Montana. Apart from having100% of Bell Creek, the tax concession offered by Montana for EOR projects certainlywas another decider for Denbury to move Grieve CO2 to Bell Creek. That is soonto be compounded by North Dakota offering an even more attractive taxconcessions than Montana for EOR production and Denbury’s interests in CedarCreek Anticline (CCA) and Cedar Hills South (CHS) oil fields (in Nth Dakota). Denbury’sGreencore pipeline moving CO2 from Wyoming to Bell Creek is being extended toCCA which in Denbury’s words is the largest potential EOR property that we own andcurrently our largest producing property, contributing approximately 24% of our2017 total production. – and that ispre-CO2-EORA case where biggestfairs best in the matter of CO2 allocation. Wonder where Grieve sits inDenbury’s asset seriatum? 

 

What is the contractual agreement for the supply of CO2 toGrieve? What is being done to see that Denbury observes its obligations?

 

Good News/Bad News

Of course the half full storyis that if Denbury is ever obliged to meet its CO2 supply contractualobligations to Grieve, the make-up CO2 will attract Donald’s Q45 tax creditswhich Elk would not have received if the CO2 had delivered to Grieve correctlypre-Q45. That could amount to US$36 million in tax credits to Elk.  As it is, Denbury is currently dudding Elkfor about US$400,000 per month in tax credits in the CO2 they are not supplyingor a total of US$4.6 million since Donald approved the Q45 Bill in February.

 

Mysteries

We still need an explanation forwhat is happening to the CO2 being injected in the down dip wells and of coursewhy Denbury is recycling the produced water. WAG is a wank for Grieve.

 

And there is a continuing significantimbalance between the volume of injected fluids and the volume of producedfluids, 778,000 barrels and 308,000 barrels respectively for September – Thatis an additional 470,000 barrels squeezed in somewhere in the Grieve Muddyformation in September. The injected figure does not include the other 33,000barrels of water disposed of in the Cloverly formation.

 

Back to Good News?

Dan, can you tell if the extra35 BOPD for October is coming from Grieve #10 – that would be really good news.