Elk Petroleum Limited (ticker: ELK) has commenced production on its Grieve CO2 EOR Project. The company said it expects initial gross oil production of 1,100-1,200 BOPD.
CEO Brad Lingo commented, “I’m exceedingly pleased to announce the start-up of oil production from the Grieve CO2 EOR project. Reaching this point has been the result of the commitment and dedication of the Elk team to deliver the project. We would also like to thank our JV partner Denbury for safely delivering a ‘’best in class’’ facility under the turnkey agreement and timeframe. We also couldn’t have asked for a better time to begin Grieve ramp up production as the oil price hits a three-year high.”
The company’s independent petroleum engineers and reserve auditors for the Grieve Project, VSO Petroleum Consultants, Inc., projected that base 2P reserves gross production is expected to increase to approximately 2,100 BOPD by CYE 2018 and achieve a peak gross production rate of over 3,400 BOPD within the first 13-months. VSO has also estimated that upside gross production rates could be as high as over 3,500 BOPD under a 3P reserves case and over 6,000 BOPD under a 3C contingent resource case.
Grieve’s production will initially fill the Grieve Crude Oil Pipeline (100% owned and operated by Elk) in stages taking approximately 10 days. After completion of filling the Grieve Crude Oil Pipeline, all the Grieve CO2 EOR Project oil production will be shipped via the pipeline and oil sales will commence via Enbridge’s Express System Crude Oil Terminal and the Platte Crude Oil Pipeline facilities at Casper, Wyoming. Initial crude oil production will be sold to the Sinclair Crude Oil Refinery at Casper, Wyoming.
Initial oil sales are expected to be made by May 1, 2018 and under the restructured JV agreements negotiated in 2016, Elk will receive 75% of the operating profit from the first million barrels and 65% from the second million barrels produced.
Grieve startup continues to build the company’s production base
According to the company, Elk plans to grow production to approximately 11,500 BOEPD by year-end 2018. Currently, the company produces about 10,000 BOEPD
The Grieve project represents a significant step toward that goal with initial production making up roughly 18% of the company’s stated goal. Elk believes it will generate EBITDA of USD$50 million this year as the company works towards corporatizing its balance sheet. The Grieve project is expected to generate $17-$19 million in free cash flow per year for the first five years of production which will help the company reach its goals.
Elk’s PDP reserves are 41.7 MMBOE, with 1P reserves of 47.8 MMBOE and 2P reserves of 82.7 MMBOE – this equates to about 21 years of production life for the company’s entire asset portfolio.
The company also plans to bring the Aneth Field asset it purchased from Resolute Energy (ticker: REN) online before the end of 2018, which the company believes will add an additional 5,680 BOPD to its current production levels.
