the co2 option

The chemical flood requires about $20m in capex to access 5.8MBO for an NPV of about $100m.

The CO2 flood was targeting about 19MBO with an NPV of about $300m. I can't remember a capex figure, but I would guess it was at least $50m (and capitalising the CO2 cost would probably have made it much higher).

My thought is that if ELK is having trouble getting $20m in finance then there is no way that they could get $50m, so why bring the CO2 option back into play as suggested in the annual report.

I hadn't researched CO2 for about 2 years thinking it was long gone as an option, but I googled it this afternoon and found some interesting articles.

"Denbury has been busy buying up aging oilfields in the region for "enhanced oil recovery" via CO2 injection. The company recently acquired the historic Bell Creek oilfield in southeast Montana. Much of the CO2 for Bell Creek will come from ConocoPhillips' Lost Cabin gas plant where Denbury is already contracted to receive about 50 million cubic feet of CO2 per day.

But Denbury needs more CO2 for Bell Creek and its other oilfield properties in Montana. Evans said Denbury is interested in picking up more oilfields in Wyoming, too, for CO2 injection."

Source: http://trib.com/news/state-and-regional/article_0b487430-b61b-525b-b4da-057d7b13bff7.html

"The Bell Creek Field has an estimated 350 million Bbls of original oil in place, with approximately 221 million Bbls remaining. The CO2 project is expected to yield an incremental 30.1 million Bbls of oil and generate over $800 million of net cash flows for the Company over the project?s estimated 20 to 25 year life at current strip prices. The Company expects to begin to see production response within six months to a year after first injection."

Bell Creek 30MBO vs Grieve 19MBO. Grieve is a much smaller field but high recovery which would make it more efficient/economic that Bell Creek.

My point is that there seems to be alot of interest in CO2 injection and with pressure for the emitters to sequester their CO2, Grieve could be an attractive play for any number of parties.