elk petroleum seeks a$5 million at 25 cent, page-24

Ah a 30% effective disount - typical of the Elk that most have seen in the past.

So what is the $3.5 million going to used for?

We can only guess, but:

1. The underwriter will get some compensation - maybe a couple of hundred thousand.

2. Elk will use funds for operational purposes and based on the schedule in the presentation it looks like nothing is coming in until January if they are able to sell part of the pipeline so that means another $600 to $800,000 there. The pipeline is probably not in 100% good condition and it will need repairs. How much?

3. As we don't know how much has been spent in September and how much is required for Ash Creek, we can only guess, but I'd guess that the amount will be substantial.

Given the schedule in the presentation IF the pipeline isn't sold for a substantial amount ELK will be back in the market for more cash in late January or early February 2013.

Regardless of the uses for the funds, the fact of the matter is that there is more dilution for ordinary holders.

At one time ELK shareholders had about 1/2 a barrel of oil backing each share.

Prior to this capital raising it was down to 1/20th of a barrel of oil per share.

It is now going to be even less.

In the oil business the goal is increase the amount of oil backing each share and not to reduce it.

IMO that is a perfect measure of effectiveness and in that regard ELK has failed miserably.