production figures

The main talk here has been about CO2 recovery from Grieve and the 23M BBLS of oil that may be recovered. I think this is a potential company maker for ELK, but I just thought I would bring attention to the fact that ELK is also a producer.

It is currently producing about 220-240 bopd from SDS and about 20 bopd from Grieve.

I went through the annual report and did some analysis:

2005/06 full year production was 17,511 bbls (average 48 bopd) and production costs were $AU1,234,023. Average production cost was $AU70 / BBL.

2006/07 full year production was 49,630 bbls and production costs were $AU1,764,967. Average production cost was $AU36 / BBL.

However, incremental production costs were $AU17 / BBL, ie. it cost $AU530,944 to produce an additional 32,119 BBLS (which were a result of the SDS workover program).

If we assume total production is 240 bopd gross, then net (after royalties) to ELK is about 210 bopd. If the first 48 bopd is only just covering costs we can assume that 162 bopd is produced at $AU17 / BBL.

My guess of prices received are:
- Grieve is a light sweet oil and is priced at WTI less $US5 differential.
- SDS is a heavy oil (but improved since production from the phosphoria formation) and is priced at WTI less $15 differential.

At today’s price of WTI at $US86, ELK’s production would realise an average of around $US70 /BBL. The exchange rate is 0.90 so price received translates to $AU77 / BBL.

The margin is $77 less $17 = $60 /BBL
Daily production at 162bopd (remember we assume the first 48 bopd is high cost, no margin) gives gross margins of $9,720 per day, $290K per month or $3.5M p.a.

These are quite handy figures for a company valued at $25M.