BY: CRITERION From: The Australian September 29, 2012 12:00AM
THE US-focused oil explorer must be the only Aussie company looking for new sources of carbon dioxide, rather than desperately getting rid of the stuff before the climate police come knocking.
Elk Petroleum (ELK) 24.5c
Elk is also an oddity among the ASX oil juniors, in that it's the only one pursuing enhanced oil recovery (EOR), which involves injecting CO2 into pre-loved wells in order to "loosen up" the residual oil.
CO2 EOR is not new, having been used in the US since 1972. But as an alternative to controversial "fracking", it's getting more airplay.
CO2 is a valuable ingredient and Elk's advantage is that its Grieve field, in Wyoming's Rocky Mountains, is close to natural CO2 reservoirs and a pipeline network.
Elk is partnered by EOR leader Denbury, which has a market cap $US6 billion ($5.7bn) and which took a 65 per cent Grieve stake in return for funding the $US100 million or so to get to first-oil stage (including the cost of the CO2).
Elk is targeting attributable output of 1000 barrels of oil per day (BOPD) within three years, with a "possible" 5000 BOPD within five years.
While Grieve was well worked by previous owners, 65 per cent of the oil (55 million barrels) remains in place.
"We will put CO2 in the ground in November and would expect some response by the middle of next year," Elk president Bob Cook says.
There are more antlers to the Elk story, involving the possible hiving off of CO2 pipelines and a second Wyoming prospect, Ash Creek. Elk (market cap $44m) is a spec buy because of Denbury's backing and its focus on sweet crude, which attracts a much better price than US domestic gas.
ELK Price at posting:
27.0¢ Sentiment: Buy Disclosure: Held
