The good side is that this field has already been pressurised with CO2 .
Elk have managed to avoid the massive capex before cash flow and waiting period which Denbury and Elk experienced with Grieve . This transaction gives Elk scale too if they can manage the additional headcount etc .
The terms of the financing look ruinous ; placing at 22% discount , debt holders charging a high rate and preference share holders agreeing a fair old penalty if the company decides to call the preference shares in .
In the current presentation there is no mention of taking EOR beyond U.S. shores which was one of the reasons which attracted me to Elk .
The seller has Permean Basin acreage which we are told is high quality .
The bottom line is nobody really makes any real money at current oil prices with light tight oil or EOR so this is an example of snapping up an asset for the future .
One still must ask the question of why they are selling if the asset is so good ?
ELK Price at posting:
7.9¢ Sentiment: Hold Disclosure: Held
