pipeline valuation

You have that backwards. DNR has ELK over a barrel with regards to the pipeline. The pipeline has been 'for sale' for a long time and there have been no bites.

The reasons are numerous:

1. ELK has put a notional value of $9 million on the pipeline which IMO is ridiculous.

2. There is no oil from DNR to transport through the pipeline as DNR has declined to use it.

3. The production of oil has been put off and that makes the value of the pipeline until first production worth nothing as it has no revenue.

4. As the production of oil has been delayed any income from the pipeline is also delayed.

5. Even with oil production being started there will not be enough oil to put the pipeline into operation and ELK's 35% even if put into the pipeline will not be enough for a long time.

The only time that the pipeline will have any value at all is when the total production from the filed becomes too great and costly to transport by truck.

Once there is enough oil to transport by pipeline then one has to figure the toll per barrel which has never been mentioned at all. This toll has to be cheper than the alternative option of trucking it as well.

Even at 2000 bopd and a $4 toll per barrel it would take three years transport just to get the $9 million back and 2000 bopd is a long, long way off.