Useful to keep the details of the separate Madden and Aneth...

Useful to keep the details of the separate Madden and Aneth acquisitions straight - both of which appear to be terrifically value-adding for Elk shareholders.

I made the observation previously that Madden had achieved investment payback already in under 15 months following transaction-close in March-2017.  Acquisition cost of US$17.5 million in March 2017;  revenue averaging above $1.5 million per month in the 15 months since purchase; overall projected lifetime revenues of $165-195 million for Elk.   

The excess cashflow from Madden - beyond paying down the 3-year term-loan - is available for working capital or to strengthen Elk's balance sheet.   Overall, a great story on Madden - bargain price for an asset whose cashflows have already funded the purchase-price . . . and that will evidently be producing for decades into the future.

Elk's Series-A (US$25 million) and Series-B (US$40 million) preferred shares were issued in November 2017 as part of the financing to purchase the Aneth asset.  Both tranches are not related to purchase of the Madden asset, which was done and dusted in March 2017.

The terms detailing the rights to dividends of the Elk Series A and B share-holders, together with their entitlements in the event of Elk being sold, or listing shares in the USA, are documented on pages 25-26 of Elk's half-yearly results presentation for FY-18 (July to December, 2017).  You can study the terms for yourself at this link: https://wcsecure.weblink.com.au/pdf/ELK/01962515.pdf

Elk - the company - has the right to redeem either/both the Series A or Series B preference shares by paying a 20 per cent premium over the liquidation value.  Not a cheap or trivial redemption-penalty.  But a relative bargain compared with the value-addition created through purchase of the Aneth oilfield.  Let's be clear that both the Series-A/B pref-shares were issued in order to make purchase of the Aneth asset possible.

I trust Elk management's judgement to determine whether it makes best sense to include redemption of the A/B pref-shares as part of their pending balance-sheet restructuring.  They will weigh those costs against continuing to pay dividends to the preferred-shareholders, while deploying that capital on things like 180-day-duration-payback increase of production volumes from individual Aneth wells.  Or perhaps even to buy some other entirely-new-to-Elk asset with similar economics to Madden or Aneth ?