Elk Petroleum - Acquires CO2 vertical integration and cash flow
Elk Petroleum (ELK) has acquired a c 14% interest in the ConocoPhillips-operated Madden Gas Field, as well as the 310mmscfd capacity Lost Cabin Gas Plant in Wyoming. This elevates ELK to producer status, with cash flow being generated from Madden methane sales. The Madden field is also a significant CO2 producer, fulfilling ELK’s strategy of CO2 integration, securing supply for future CO2 enhanced oil recovery (EOR) projects. We incorporate Madden in our valuation along with recent changes to the company’s capital structure – our base case 2P NAV stands at A$0.11 with significant upside in the event of oil/gas price recovery and/or incremental reserve/resource recovery above audited 2P estimates.Elk Petroleum is engaged in developing enhanced oil recovery (EOR) projects. Co.'s activities consist of the development of a CO2 EOR project at the Grieve oil field in Wyoming, U.S., continuation of operations at the Singleton Unit in Nebraska for future implementation of an EOR project, and via its acquisition of the Singleton South oil field in Nebraska, the development of potential by-passed oil pool on the southern flank of the Singleton Unit. Co. has two operating segments: Australia, which comprises the corporate head office function; and the U.S., which comprises administration, production, exploration, evaluation and development of oil and gas fields and ownership of pipelines.
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