ELK - Elk Petroleum

[PureCoco]

Hi Ken, I am writing so you don't think you are talking to your self. I did buy a small parcel last week at a price it just touched on. This is my first oil / gas purchase.

From your information and my own research I believe that they do have strong fundamentals. At least they are well underway with production. Keep up your the study . Thanks.

 

[Ken]

I sense we are very close to announcement from ELK.

I get the impression it could be a delayed one which may punish the share price a little bit more. Hopefully I am wrong, but an announcement is days away I think.

Hopefully they inform us that production has increased and they have secured CO2.

They are still making $15,000 + a day, which is a little bit less than MAE plans to, which hasn't produced a single barrel yet, and it is trading way above ELK's market cap.

The sell off in share price is probably from the silence on the announcement side of things, along with tax time coming around.

 

[Ken]

Volume is dropping off with ELK.

To me it says the big sellers have finished.

The market depth has thinned out a little also. So less downwards pressure.

Some positive news would be handy within the next few days I think.

 

[Robert_Q]

I've been following Elk for quite some time and believe it has potential. You are right Ken, the sellers look like they have finally thinned out a bit. I've read through the analysis on this site and want to point out a couple of things.

Elk is producing oil and according to the last qtrly report is now operationally cash positive. Most production comes from the SDS field which is heavy oil and sells at a discount to WTI. It looks like it sells about USD40-45 per barrel. Now that it is finally producing in some volume the marginal cost of production is getting lower. There are some announcements I've been waiting for and these include:

- the 2 workover wells at SDS
- the appraisal well for the upper sands at Grieve
- securing CO2 supply for Grieve
- definition of reserves and development plan for the EOR at Grieve
- announcement of JV partner for Grieve
- new well at SDS for virgin oil
- new reserve estimate for SDS

Positive news from any of these should be positive for the share price.


The company took a battering last year because the appraisal of the upper sands didn't go well. It was inconclusive because mostly due to mechanical problems, hence the new well which should be drilled any day now. It is shallow and will only take a week to drill.

Also, last week I did a search on google and happened upon an add for a petroleum engineer at Elk. Does this mean they are expanding or just filling a vacated postion?

 

[Ken]

Do we have any ideas whether we have any farm in partners coming on board?

 

[Robert_Q]

That is one of the announcements we are waiting for. I guess once the CO2 is secured then it would be easier (and on better terms for ELK) to negotiate a JV with a third party.

It's very frustrating waiting for things to happen but for us that believe in this company, we need to have plenty of patience.

Did you know that the CO2 pipeline running through the Grieve lease is owned by Anadarko and they have built a reputation as being a leader in CO2 as an EOR technique for mature fields. They are one of the leading producers in the USA using CO2. Have a look at their website. They could offer alot of expertise to ELK.

I read somewhere that Anadarko bought the Salt Creek field (near Grieve) back in 2002 for USD250M for 50MBLS of oil. That was $5/barrel inground value when oil prices were half what they are today. when I read things like this I really think Elk is not being fully valued but hopefully that will change when it starts to develop Grieve.

 

[Ken]

ELK was mentioned on the same page as YML in the smart investor magazine in 2005.

I am sure the author knew what he was writing about.

 

[Robert_Q]

I haven't seen that article. What did it say about Elk?

I noticed that MAE has gone up again, now valued over $220M. Hard to comprehend value there and makes ELK look grossly undervalued. At least ELK is producing oil, making money, has cash on hand and has alot of potential through oil not gas.

Don't forget that Grieve oil is light sweet so will command WTI price, currently about USD65 / barrel.

 

[Robert_Q]

I was hoping to see some announcement by now, especially regarding the workover at SDS and the new well into the upper sands at Grieve.

I did some research and there is a company called Rancher Energy redeveloping some oilfields near Greive with CO2. Similar situation as Elk. Rancher have already secured CO2 from Anadarko and are building a 50 mile pipeline.

I found a presentation by EORI and they make a mention of companies looking to use CO2. Elk rates a mention.

http://eori.gg.uwyo.edu/downloads/Tech_Transfer.ppt

 

[Ken]

Its hard to say what is going on with ELK. Very silent.

It being bumped down the last few days but is closing at .28 more often that not. So not sure why that would be the case.

I will continue to hold in the hope that a good announcement is sooner rather than later.

It has never been a company to gloss things up in the hope of drawing in new investors.


You never whats around the corner, keep the faith.

 

[Alien]

Hey Ken,

Keep the faith. Grabbed this from another forum. The delay on approval for Upper Grieve is over. Bureau has approved the drilling, so we should get an ANN real soon. Included in this upcoming ANN should be the affect from the #1 well workover at SDS. This should add another 50 BOPD onto the current prod of about 300.

Here is the info about the approval. Not sure of its source, but assume BOLM?? I expect these pieces of news to bring out some support.

Permit to drill received 1/6/07, news soon.

Permits To Drill
Reporting Period 05/20/2007 - 06/03/2007

49-025-23515
ELK PETROLEUM INC
GRIEVE No. 31-21
NW NE Sec 21 T32N R85W 560 FNL & 2130 FEL
Received 05/31/2007 Approved 06/01/2007

 

[Alien]

Thanks for the info on Rancher Energy - Robert Q.

Anyone interested in ELK Petroleum should listen to their CEO's podcast at a presentation on CO2 recovery.

http://www.rancherenergy.com/newsstory.asp?newsID=19

Very interesting to hear of what constitutes a decent field suitable for CO2 injection and the fact that it is so important to have a field located closely to a CO2 source or pipeline. Apparently CO2 cannot be piped/transported too far when it is compressed for CO2 injection due to its weight.

The company has a market cap of about US$100m and spoke about its plans to purchase field in its own blueprint (Wyoming). I would think that Elk/Grieve would make a cheap purchase at current prices.

On other interesting notes, Rancher Energy paid US$25,000,000 for the Big Muddy field in Wyoming to be used for CO2 injection. This field produced 52MMBO, so is not that disimilar to that of Grieve.

Let me know your thoughts on the podcast.

 

[Robert_Q]

Hi Alien,

The podcast is very interesting and is very applicable to Elk. Grieve field is only 3 miles from the CO2 pipeline so it will not cost much to build a connection.

Also, ineteresting about the carbon trading and the potential to get half the costs back from carbon trading when it happens (and it will the way things are going).

I guess the SDS field could also benefit from CO2 injection. I think it is also pretty close to the pipeline.

I am hoping the announcements coming soon and we see an uplift in the price.

 

[Robert_Q]

Hey Ken, I noticed MAE is up again today. Now their market cap is about $340M.

Certainly makes ELK looks very undervalued!

 

[Ken]

Yogi! if your out there would be great if you could do a time line for ELK.

All things taken into consideration, it would take an aggressive buyer or seller to send the share price a fair way in either direction. Market depth is very similar to that of a newly listed uranium stock.

 

[ta2693]

http://www.rancherenergy.com/newsstory.asp?newsID=19
in the audio, the director mentioned they can purchase oil field similar to ELK at 51c/barrel.
ELK has 12million barrel in is main project.
So the market value is only around 6.12m

It is not very exciting from my point of view.

 

[Ken]

Market depth does seem to be thinning out, which I like to see.

It may not be exciting, but ELK has bounced between 25 cents and 40 cents before.

 

[Robert_Q]

It's good to see an announcement finally! Although it wasn't the one I was hoping for it did manage to kick the price up a little.

I think we'll have some result from this new well in about 2-3 weeks. It'll take a week to prepare and a week to drill.

It seems the going rate for old depleted fields is less than USD1 per barrel because they need to be redeveloped to get the oil out. CO2 is an effective way of recovering oil and if you don't have a source then the oil is worthless. Once ELK secures the supply it should be rerated.

Rancher's new pipeline is costing about $18m to build, by my estimates ELK's connection will be less than $1m ($30,000 per inch mile, 30mmcfd capacity will need 8inch pipe size for 3 miles). The feasability seems to stack up.

ELK has production, is cash flow positive and SDS has reserves of at least 3MBLS. I still think the company is undervalued.

 

[Ken]

ELK is not a takeover target so it doesn't really matter how much others are willing to pay for an inground oil well, that is not producing.

ELK has got a possible 12 million barrels of oil that they can sell for $50 a barrel. Potential there for 600 million dollars in revenue.

Obviously there are just gearing up, and its not all going to get pumped out in one hit.

ELK has no political risk, which is also another positive.

31 cents is still a long way off old highs, but I guess you could say its 20 per cent higher than where it was a few weeks ago.

 

[Robert_Q]

I agree with you Ken. I think there is loads of potential.

It's interesting to note Rancher Energy's presentation. They say that CO2 recoveries typically range from 15% to 25% of OIP. They are using 20% to calculate their reserves. ELK is being conservative in using 15%. That means Grieve could have anywhere from 12MBLS to 20 MBLS of light sweet crude worth around USD60 per barrel.

I think they will announce CO2 supply and reserves confirmation at the same time so that it is more enticing to JV partner.

Then there is the potential in upper sands and SDS!