I can't imagine how MEL will raise debt in March to support this deal. MEL no longer has any certified reserves of its own and in March the merger won't have been completed. The first court hearing to approve sending the scheme booklet to ELK holders is not even scheduled till the end of April. So MEL cannot use ELK assets to raise the proposed funds.
Even if they could access ELK assets, it is difficult to see how MEL could raise any extra debt against them. ELK themselves have been trying to raise debt to fund Grieve for several years now. Except for the funding provided by Denbury, they have been spectacularly unsuccessful in finding anyone prepared to provide debt or even to refinance the Denbury loan. The Denbury loan is secured against early cash flow from the field and with first oil now scheduled for 1 March 2017, it is unlikely ELK will see any cash flow necessary to service additional debt until 2018.
Even though ELK was required to use reasonable endeavours to secure an extension to AUD 1.25 million loan which expired last week, they obviously could not find any takers.
So I can't see how MEL could access debt funding by March.
Trying to get a handle on the potential economics is also very problematic. ELK continue to base all their presentations on work carried out by Ryder Scott back in February 2013 (before field repressurisation had started). At that stage Ryder Scott assigned 2P reserves of 18.6 MMBbls total to the project. ELK's share 6.5 MMBbls and Denbury's share 12.1 MMBbls. ELK has continued to promise an update to these figures based on work completed by Denbury, but so far no update has been provided. But it is interesting that in presentations Denbury makes to the market, such the 12 Dec 2014 Corporate Presentation, they only assign 6 MMBbls to their interest in Grieve - less than half that implied by ELK.
(20min delay)