It is a long time since I have felt the urge to write a longer post but the future is looking extremely bright.
Previously we have seen massive rises on less significant announcements than the co2, yet we are drifting only about 20% higher since the announcement due to Elks lack of exposure within the investment community, however I expect this to change dramatically over the next few weeks/months. Elk is currently not on the radars of the general shareholding community due to previous form. However recently the board was cleared out due to shareholders concerns over the performance of the company. The current board is very well aligned to shareholders expectations and is already showing the results shareholders expect, Elk even made mention of shareholder input within the quarterly which is a good sign. I have spoken to a number of large holders since the co2 announcement and I might add they are all extremely happy with the progress and direction of the company over the last couple of months, that enthusiasm is not yet reflected by the smaller holders who may not follow as closely.
Current market cap around $23mil.
Going forward Any day now.......... Ash creek should come online with 2 production wells, Elk are hoping for them to stabilise around 30bopd, however are likely to come online higher, based on expected flow rates and oilcuts #9 could be around 60bopd initially. Considering the lower Shannon has not been waterflooded then this should be a good performing formation. There are approx another 20 wells that could potentially be brought online. As part of the research into chemical flooding Ash Creek Elk need a core from the shannon formation. They already have 1 new well permit which is likley to be used for this purpose as it has added upside in that the well is higher on the structure and could contain pure oil, It would not surprise me if this kicked of around april/may. Based on expected fluid flow rates from the #1 well of upwards of 400bopd, this well could be significant in dramatically increasing cash flow. If the first 2 wells perform to expectations then I expect Elk to move straight to the other 2 wells previously identified as 1st stage workover wells within the next 6-8 weeks. 5mil barrels accessible.
Within the next 4 weeks...... Elk expect to have a feasibility study completed on Hereford. to access a net 15bcf of gas for power generation and associated Helium. If the study is positive it opens up a number of other drilling location and they can either market the project for JV or sale.
Within 8 weeks......... With the co2 contract in place up to 23mil barrels becomes accesible. A finance JV deal expected within the coming 8 weeks which should significantly re-rate the company. Make no mistake a deal will be done with the party willing to offer the best terms. Ryder Scott put an NPV of over $300mil on Grieve at an Oilprice of $85US. Currently Nymex futures suggest the period of production will be a few cents short of $100. considering the current market cap I suspect only attributes around $10mil to the project there is significant upside. Companies with these sort of reserves have market caps in the hundreds of millions of dollars once producing.
Within the next 4months Elk should have farmed out the Niobrara as they are expecting to be in a position to drill during Aus winter. Being a horizontal well with plenty of fractures you can bet the punters will get on board and give the shareprice a serious shove. Last time Elk did a verticle well punters added 30c to the shareprice. Grieve is 3000acres, $3000 an acre has been seen recently for Niobrara acreage.
Certainly the next 6 months look to be very exciting for Elk and it is hard to see there wont be a significant re-rating in the short term. Cheers
ELK Price at posting:
19.5¢ Sentiment: Buy Disclosure: Held
