Elk Petroleum - Aneth adds another antler
Elk Petroleum’s (ELK) acquisition of a 63.7% operated interest in the Aneth Rocky Mountain CO2 EOR project from Resolute Energy transforms the company into one of the largest producers on the ASX. Management forecasts 2018 net production of 11mboe/d. At US$160m, the deal is priced at a discount to our 1P estimate of proven developed reserve value of US$178m (excluding US$23m, which ELK retains in escrow to cover abandonment costs). The Aneth transaction was funded through new equity and debt, with rapid debt paydown expected from Grieve, Madden and Aneth cash flows. We update our valuation to reflect forecast Aneth cash flows, with our NAV rising to $A0.12/share from $A0.09/share.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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