Acquires CO2 vertical integration and cash flow

Elk Petroleum (ELK) has acquired a c 14% interest in the ConocoPhillips-operated Madden Gas Field, as well as the 310mmscfd capacity Lost Cabin Gas Plant in Wyoming. This elevates ELK to producer status, with cash flow being generated from Madden methane sales. The Madden field is also a significant CO2 producer, fulfilling ELK’s strategy of CO2 integration, securing supply for future CO2 enhanced oil recovery (EOR) projects. We incorporate Madden in our valuation along with recent changes to the company’s capital structure – our base case 2P NAV stands at A$0.11 with significant upside in the event of oil/gas price recovery and/or incremental reserve/resource recovery above audited 2P estimates.