This must surely rock even stalworts. I'd considered shutting off supply to be a low probability. Denbury has control of the JV, especially so since 9 Jan 13 when it purchased and so supplies the CO2, without a contract. It can sell to whomever, or use it elsewhere as it likes. Elk is a hanger on and is told what is happening.
So what is Denbury up to? Options:
- Denbury prefers immediate C02 for its 100% owned Bell Creek Field
- Denbury is well aware of Elks weak financial position and playing rough. Perhaps would forgive their $12m loan in return for the remaining 35%? (I wonder if the JV is contracted to pay for Denbury's facilities, even while not being used – wouldn't be surprised. Denbury would end up paying itself, but it would cost Elk)
- Denbury thinks (despite the sunk costs but given the slow repressurisation), the field is unsuitable for tertiary recovery and is cutting its losses
Every option is bad, yet Elk thinks otherwise.
Personally I'd opt for a combination of 1 & 2 and for Elk to be of value, entertainment value.
ELK Price at posting:
14.0¢ Sentiment: None Disclosure: Not Held
