Cannot understand some of the negativity with this.
I think a lot of MEL shareholders will be negative because, like me, the last thing they want MEL to be involved in is a smallish high-risk USA oil play. They rarely pay off and often become a huge money pit.
What's more, ELK shareprice has been hammered on the recent collapse of the oil price, with a pickup MEL will benefit.
Not really. ELK's share price has been continuously down-trending for the last two years, not the last two months, so it appears to me the decline in share price is mostly to do with the outlook for the company, not the recent decline in the price of oil.
I haven't read the annual report in full, but my initial impression is that, while the assets have potential, ELK seem to be making all the usual mistakes that bankrupt these small oilers so regularly: they start off with big plans but quickly become unfocused. They have a dabble at this and that, fail, and then trying something else. A good example is their Ash Creek oil field. Like their Grieve EOR project, they had big plans for Ash Creek, but ....:
With regard to the $7.3 million reported loss in the company’s 2013/14 Financial Statements, nearly half of this loss is due to non-recurring items that are attributable to Ash Creek. The divestiture of the Ash Creek oil field after the reporting period resulted in a $2.0 million impairment, $1.0 million was incurred for amortization and depreciation, and the net operating loss was $0.5 million, bringing the total Ash Creek loss contribution to $3.5 million.
And ELK have so much faith in their Grieve EOR project (the current main bread-and-butter of ELK) that they recently tried to sell it. But no serious offers were received, thus the merger with MEL. They're also trying to sell their 100% owned pipeline.
Despite being desperate for cash they recently purchased "the Singleton Unit" in Nebraska; yet another focus shift, yet another asset needing millions to develop.
And if the merger with MEL is successful we will no doubt face SPPs and/or rights issues to fund more development works in the US. If we choose not to participate we will be quickly diluted given our tiny current share price.
Ok, now for some balance. I'm a big shareholder of MEL (soph investor level) sitting on a huge loss, so I'm admittedly jaded by how things have turned out. I know next to nothing about ELK and have only presented the "negative case" in this post. The above is just my initial "gut feeling" and I could yet be convinced to support the merger if posters provide compelling arguments. I guess I'll be lurking in the ELK threads for a while.
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