Elk Petroleum Ltd's (ASX:ELK) chairman, Neale Taylor, has taken the opportunity to increase his stake in the company through an on-market purchase.
Taylor picked up 125,000 shares at $0.08 for a consideration of $10,000, boosting his position to 840,000 shares, along with some unlisted options, retention and performance rights.
Elk is a very unique company, and holds the position as the only ASX-listed Enhanced Oil Recovery (EOR) company, which is therefore focused on oil field redevelopment with proven technologies.
EOR comprises of the technologies employed to extend the life of an otherwise depleted oil reservoir and is often regarded as the third phase (tertiary recovery) after the primary stage (post discovery phase) and secondary stage (e.g. water flood or gas cycling).
It currently accounts for about 10% of oil production in the U.S.
Elk holds key projects in proven EOR production fairways, such as Elk’s Grieve Project, located 50 miles west of Casper, Wyoming, U.S.
Grieve is near oil & gas fields, and is circa 70% complete to first oil, scheduled for Q3 2017.
The gross project investment to date is around US$100 million.
Elk was recently well-supported in raising A$2.5 million from professional and sophisticated investors.
Grieve was discovered in 1954 by Forest Oil in Wyoming's Wind River Basin and produced 30.2 million barrels of oil with the peak rate of 12,000 barrels of oil per day (BOPD) in 1960.
Elk owns 100% of the oil export pipeline, which runs approximately 32 miles from the project to the west side of the city of Casper. The pipeline connects directly into the main oil marketing hub in Casper, Wyoming and is the sole export route for crude oil production from the field redevelopment providing Elk with direct access to a competitive market for the production from the project.
Use of this pipeline to transport Grieve oil provides the opportunity for Elk to generate supplementary income by charging a tariff to transport Grieve oil to Casper.
Casper has a number of points of sale for Grieve oil either to the local refinery or to refineries at other locations within or beyond Wyoming through an extensive network of oil pipelines and rail lines that pass through Casper and capable of wider distribution of Grieve oil.
In 2011, Elk signed an agreement with leading U.S. EOR player Denbury Resources to joint venture the project, with Elk holding a 35% working interest and Denbury holding a 65% stake as operator.
However, a recent restructure negotiated between the two companies has set up Elk to increase its working interest to 49% with the right to receive 70% of the net operating cash flow from the first 2 million barrels of production.
A letter of intent regarding the ownership restructure would also increase Elk's net 2P reserves to 5.3 million barrels of oil.
Improvement in Elk's oil inventory has otherwise been seen in an acreage acquisition late last year which held an estimated 2.5 million barrels of 2P and 3C reserves and contingent resources.
The properties adjacent to Singleton in Nebraska represent a 25-35% increase in the company’s current 3C contingent oil resources and a near term production opportunity.
Subject to securing appropriate regulatory approvals, the company plans to put wells at the site back into production in the first half of calendar 2016.
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