New research, page-5

Hi spec

Thanks for the note. Keep watching, I reckon you have a couple of months before we start to see some action.

You are right that they will do another raising, not because they only have 800k in the bank, but because they will be raising cash from US investors for their secondary listing over there as part of their overall strategic plan.

The cashflow from Aneth from Oct to Dec 2017 will provide a sizable boost to cash reserves. None of these 6000 BOPD are hedged ( Aneth hedges kick in from Jan 2018) and the rise in the WTI oil price has provided a significant boost to cashflow, way over budget. Oct cash flow after royalties and taxes was over US 8 million, with Nov oil averaging Us$ 5 a barrel more ,ELK will pocket an extra $900,000 for the month. I expect to see a few million in the bank at the end of the Dec quarterly after they pay the bills.

As to why the smaller equity raise, this was to minimise the common shareholder dilution. The long life of Aneth, the slow decline curve and the cash flow throw off, the Aneth field was readily gearable with the ability to refinance at much better terms the whole Grieve/ Aneth debt package. This deal diluted the common equity base by 50% to achieve a 150% increase in production and a 300% increase in 2P reserves.
The debt load looks scary for sure right now but they are acting on that as we speak.

Brad has a modus operandi and his priority is to get ELK revalued on US multiples to match ELK's American peers.

IMO the plan of action will be something like the following.

Firstly the start of Grieve in early 2018 and the refinancing of their Grieve construction loan and Aneth acquisition loan will provide a boost to the share price.

Secondly, there will be a 1 for 10 - 1 for 20 share consolidation to get the share price over the dollar mark probably in 2019 which will then facilitate a capital raise in the US (possibly at a premium) to refinance/ convert the preferred equity to common equity. This may also involve swapping/ the Aussie equity to US listed paper. The sweetener for this CR may be a dividend.

Along the way Brad will pursue further acquisitions etc to ramp up production up the the 25000 BOEPD as expressed at the AGM, which will involve further debt and equity and or corporate action.

Brad and his team know how to successfully build and manage companies, they have already proven this with what they have achieved at ELK over the past 2 years.

Hope you come aboard .

Cheers

Dan