The Elk 2012 Annual Report has been released.It is a must read...

The Elk 2012 Annual Report has been released.

It is a must read for all those who own the shares as well as those that are thinking about buying the shares.

I draw your attention to page five of the report. Read the section "sales' and it is quoted as take from the report:

"SALES

The terms of the Grieve joint venture agreement with
Denbury require Elk’s share of revenue from the Grieve
oil production to be accrued against future expenditures.
Hence, Elk did not receive any cash revenue from Grieve
oil sales for 2011-2012."

My reading of this indicates that Elk will not get any cash or cash flow from Grieve for the foreseeable future.

The report does not state when Elk may actually get any cash or cash flow, but IMO the plan has two phases or stages. ELK, I believe, is responsible for part of the expenditures (35%) for the second part of the joint venture expansion as far as their 35% ownership stake is concerned.

Hence I am of the opinion that ELK will need to find other sources of cash to run the company.

My reading of this means that any operations the company wants to undertake will not be able to use that cash or cash flow from Grieve and IMO that includes any debt using the cash or cash flow as security.

IMO I therefore rate the shares a LT SELL.