Elk Petroleum Ltd (AX:ELK) is developing the Grieve CO2 enhanced oil recovery (EOR) project in Wyoming. ELK sees its current US activities as providing a platform for leveraging its EOR expertise to create scalable growth, both in the US and overseas. Grieve, in production from late CY17, is expected to be strongly cash generative and will help fund growth.
Grieve to achieve production status in late 2017
ELK is developing, in a JV with Denbury Resources (NYSE:DNR:NYSE), the Grieve CO2 EOR project in Wyoming. DNR has successfully commissioned c 25 EOR projects in the US. Grieve will propel ELK to producer status by late CY17, with strong initial cash flow from more than 1mmbbl pa project production in our base case and around 2mmbbl pa in our upper case. Decline rates are lower than for conventional oil production. For the first and second 1mmbbl of production, ELK receives 75% and 65% of net operating cash flow, with 49% thereafter. ELK is aiming to develop its second EOR hub in the Denver-Julesburg (DJ) Basin (ELK 100%). Although smaller, this has the potential to grow in size and significance through acquisitions.
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