Not to distract from the potential of Grieve, shallow gas and...

Not to distract from the potential of Grieve, shallow gas and Ash creek, I was thinking of ELK's cash flow from the SDS field and what this field would be worth.

WTI is currently about $130, and with a $15 differential Wyoming sour is bringing about $115 per barrel.

We know from the December half-yearly that production costs are about $35 per barrel, giving a gross margin (on today's prices) of $80.

SDS is producing about 200 bopd net so gross profit is $16,000 per day, $480K per month or around $6 million p.a.

SDS has 2P reserves of 1 mbls so current production can be maintained for 12 years. A PE ratio of 10 would be reasonable, so ELK should be worth $60 million on SDS alone.

Looking at it another way, the inground value of oil is valued roughly at one third of the current market price. When oil was $30, oil reserves were traded at about $10/barrel. Last year oil reserves were traded at about $25/barrel when oil was trading at $70-$80. At $130, oil reserves should be valued around $40-$45/barrel.

SDS's 1 mbls should be worth around $45M.

If ELK was to sell SDS, it could attract a price between $45M and $60M (worth 75 to 100 cps).

This is just one facet of ELK's portfolio which is way undervalued. The time will come when the market re-rates ELK based on the true value of all it's assets.