I’m expecting University of Oklahoma to present their preliminary report in the next month or so for chemical flooding and they should include NPVs for both Grieve and Ash Creek.
I had a bit of free time this morning so I calculated my own NPV for Ash Creek based on a chemical flood. I calibrated my model to the NPV provided by RS for Grieve and I used the following parameters:
- Long-term oil price $US85/bbl - Long-term exchange rate 0.85 - Discount rate 10% - Oil recovery from chemical flooding, 15% X 21MBOOIP = 3MBO - Production to start within six months, peak production in third year, 3MBO produced over 12 years - Capital costs at $US15M, staggered over 3 years. - Production costs at $US35/bbl
NPV comes to $68M or about $1.10 ps for Ash Creek redevelopment. This values the inground oil at $23/bbl.
If the recovery rate turns out to be 25%, then NPV jumps to $120M.
Just something to consider because I think this would be a fantastic option. ELK can get started on Ash Creek first. Develop it well by well and get a strong cash flow with minimal capital cost requirements and keep Grieve as a longer term development with the pursuit of CO2.
ELK Price at posting:
35.0¢ Sentiment: Buy Disclosure: Held