where elk sits in the global implosion, page-5

My thoughts...

I'm not particularly concerned about ELK at the moment for the following reasons:
1) ELK survived the last Global Financial Crisis when the oil price dropped to as low as $34/bbl in 2008. They are definitely in a better position now with the Grieve JV now in place.

2) While the oil price may have tumbled 5% to $85/bbl overnight, Management have always used $85/bbl in their financial models for Grieve. Denbury have used $80/bbl in their numbers. Even if the oil price continues to drop, I can't see it falling lower than the $34/bbl we hit in 2008.

3) I am a believer in Peak oil. Oil is a finite resource and we are not able to find new sources of oil faster than we are consuming oil. This was clearly evidenced in 2007 when the largest oil producing countries were not able to increase their production even when oil hit $147/bbl.

4) At 17cents, ELK's market cap is only less than $20million. Grieve alone is valued at 35cents per share and the project is now in good hands. Denbury has vast experience in EOR and had $122million in cash reported in their latest quarterly so I doubt they will be in any financial difficulty anytime soon. As Davo has pointed out, EOR opex and capex is quite low with Denbury forecasting $33/bbl so the price of oil will have to seriously crash before it effects the viability of Grieve.
5) In relation to our cash position, I have been informed by management that steps are currently being taken to control the company's cash burn rate. This was clearly evidenced in the latest quarterly mainly due to Denbury assuming responsibility for Grieve operations. Future reductions are apparently expected from the changes to the operation of the Australian Office.

Will be adding to my position if the share price continues to fall. Lets hope ELK's ability to survive another financial crisis will not have to be tested.

All the best.