elk is extremely undervalued, page-6

Interesting - 56 views, 3 days, no answer. Perhaps some people surprised themselves by their inability to answer such a simple question?

Elk hopes to be carried on the coat tails of Denbury's involvement in the JV and the related businesses. It's probably the only practical strategy. Potential upside, but I've have learned to always dissect the downside. Committed followers will always perceive this as negative, but it's just a complete analyses.

I maintain files on potentially interesting companies. For the small % who were curious enough to dig, here are some sections on Elk.

Denbury

Denbury, with no financial involvement of the JV, has built and owns the 3-mile connecting pipeline and the new surface facilities. It built these following the assignment (to it, not the JV), of the purchase agreement for CO2 ex Exxon Mobil's Shute Creek plant and the transportation agreement using the Anadarko pipeline. The facility is now completed for CO2 injection. By the time first oil flows, it will be completed to separate the oil, gas, CO2 and water, plus to compress and dehydrate the CO2 for recycling back into the reservoir.

Over the life of the project, Denbury will charge the JV a monthly lease fee (sufficient to recover the capital cost - $53m). They will also invoice the JV for the C02, for facility operating costs and (presumably) for a margin on everything. Imo, this is a low risk business which will generate a pre-programmed return for Denbury - possibly about 15% pa compounding in line with corporate objectives.

The JV Business – Creation and First Funding (18 months)

The Grieve JV transaction becomes clearer. The funding has been disclosed via undefined phases - 1 & 2 ($28.6m & $34.3m). By lumping 2 types of transaction together, this gives near zero insight imo. [Proof – no holders answered my simple question.]

Denbury didn't make any upfront payment. It acquired its 65% interest in the JV by committing to fund the first US$10m of Elk's future funding commitments into the JV. That values Elk's 35% stake at $5.4m - but there is more to consider.

Denbury also provides a $12m loan facility, for Elk's next $12m of JV funding commitments. This will be repaid to Denbury (with interest), from Elks first $12m of surplus cashflow. This totals $22m of funding and Denbury will inject a proportional $40.9m for its 65% share.