Elk Petroleum Limited’s (ASX:ELK) shares are trading 21% higher intra-day after acquiring a majority ownership in the Greater Aneth Oil Field in the Rocky Mountains, Utah for US$160 million.
The Aneth Oil Field is one of the largest CO2 enhanced oil recovery (CO2 EOR) projects in the Rocky Mountains.
Bradley Lingo, managing director, commented: “The Aneth Oil Field is one of the most significant EOR projects in the U.S., underpinned by a high-quality and established operating and management team.
“The field is highly complementary to Elk and represents an attractive opportunity for Elk to transform into one of the ASX’s leading oil companies and operators by reserves, production and cash flow.”
One of the top 100 oil fields in the U.S.
The Aneth Oil Field is ranked the 86th largest oil field in the U.S. by proven reserves
The project has a 30-year operating history and circa 450 million barrels of oil cumulative production to date.
Importantly, the Aneth Oil Field has significant additional recoverable oil of over 300 million barrels.
Elk transforming into one of the largest oil producers on ASX
The acquisition adds circa 59 million barrels of 2P oil reserves and 6,500 barrels of oil equivalent per day of current oil production.
Elk will now become one of the largest oil producers on the ASX with forecast 2018 net production of 11,000 barrels of oil equivalent per day.
The company is expecting significant revenue and free cash flow growth - consolidated EBITDA of US$50-55 million with cash flow to equity of A$20-25 million in CY2018.
Well-funded for Aneth operations
The acquisition has been funded via Elk’s recently completed A$27.5 million placement of ordinary shares, with the balance funded by a US$98 million senior term loan from strategic investors.
These include HPS Investment Partners, LLC., Riverstone Credit Partners, L.P. and AB Energy Opportunity Fund, L.P.
Elk also received US$65 million via the issue of preferred equity shares to AB Energy Opportunity Fund, L.P. and other institutional investors.
Further, Elk has put in place a $US20 million senior revolving loan facility with Cross First Bank in order to, among other things, provide working capital support for its new Aneth operations.