Here are my comments which I posted on SS last night. Bear in...

Here are my comments which I posted on SS last night. Bear in mind that the proven reserves they currently have is LESS than 500,000 barells and has not been added to since they floated.

From SS:

"I don't think the announcement has been mis-interpreted at all. But before I explain, let's first recall that ELK were going to work-over the Cloverly formation late last year because of its prospectivity for discovering more oil. In their wisdom they delayed this when they became interested in what was emerging in the Upper Sands. Make no mistake: ELK had high hopes for Cloverly stating in their March Investor Presentation the "potential for Cloverly to be a significant hydrocarbon reservoir". After this morning's announcement though, we have only bad news - water not oil. Not good.

Having initially put off this exploration of the Cloverly ELK commenced the work-over of the Upper Sands units, leading to the "discovery" of what the independent consultants estimated to be a 51m barrell discovery with estimated recoverable reserves of 18m barrels.

This Upper Sands discovery was ABOVE the existing Muddy Formation from which they are currently producing. In their March Investor Update ELK also made it clear that the Grieve Field consisted of 10 sand formations, of which the Muddy was the only producer at present.

ELK went on to explain the Upper Sands comprised of 8 separate formations and that the 4 larger ones of these had yet to be assessed but were "expected to result in further significant increases in potential oil recoveries". And so it was in May that ELK announced they would first do some appraisal work of the Lower Sussex formation within the Upper Sands because their consultants had identified it as "being one of the most promising prospects based on significant oil shows in samples" (see ELK's Operations Update of 15th May).

Unfortunately, the appraisal work proved very disappointing - as was outlined in their 14th July Operations Update. Not only that but testing they did on another of the Upper Sands formations - the 1st Frontier Formation - encountered drilling problems and "appraisal of its oil potential...was not possible" either.

So, in summary, this is what we have:

* Existing proven reserves in the Muddy formation are less than 500,000 barells (check the initial prospectus)

* As recently as March we were told that production would be 70 BOPD but it still looks to be less than 45 (17,511 barrels net sold at 30th June less the 9750 number they reported at end 2nd Qtr = 7761 for the last 6 months)

* Cloverley failed.

* The "most promising prospect" of the Upper Sands - the Sussex formation - failed.

* The drilling of the Upper Sands 1st Frontier formation has also failed.

So, basically, we don't have ANY good news on any front.

These failures are definietly in the Upper Sands where all the prospectivity and "new" oil discoveries were supposed to be and with each failure it erodes the credibility of the report put together by MHA Petroleum & ELK management. Unless the other Upper Sands can find something (and lets not forget that 4 of these formations weren't assessed at all) ELK have problems - if drill tests fail to identify oil in the places where they DID look, why would you think there was oil in the places you HADN'T looked).

The market understands all this very clearly and that is why the price has collapsed. I think the share price would be even lower if someone like Evolution Capital or AMP started selling all their shares as well.

Unfortunately guys, with each failure, the chances of ELK getting back to 80/90c look more and more remote but...that is the nature of the oil business and ELK may yet strike it lucky.

ELK and MHA saw some oil somewhere but their pronouncements back in March are looking very "shaky" right now.

I hold and will keep my fingers crossed for a miracle. We'll need it. Hopefully the 2nd Frontier formation will have something for us because we can ill afford yet another failure".

Good luck to holders Coop