Elk Petroleum Ltd (AX:ELK) is to acquire a 63% operated interest in the Aneth Rocky Mountain CO2 EOR project, transforming the company into one of the largest producers on the ASX. Management forecasts 2018 net production of 11,000boe/d. At US$160m, the deal is priced at a material discount to management’s estimates of 1P (NPV10) at US$288m, with the consideration to be funded through a combination of new equity and debt. An equity placement to raise A$27.5m was priced at A$0.062 (a 22% discount to last close and 10% below the six-month trading average), with the balance funded through a US$98m debt facility from Riverstone Credit Partners and institutional lenders and up to US$55m in preferred equity provided by the AB Energy Opportunity Fund.
Aneth oil field and CO2 EOR production project: the Greater Aneth oil field is one of three largest CO2 EOR projects in the US Rocky Mountains alongside Salt Creek and Rangely; oil initially in place is estimated at 1.5bnbbls, with 31% recovered to date. Remaining 2P reserves (net 58.8mmbbl) imply recovery of 37%.
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