Press

Elk Petroleum: Grieve CO2 EOR Project Oil Production Commences


ASX Announcement / Media Release – 18 April 2018

HIGHLIGHTS

  • Elk's Grieve CO2 EOR project has commenced production
  • Project completed within scope and budget under Fixed-Price Turnkey Contract
  • Initial gross oil production expected to be 1100-1200 BOPD and to increase to over 2100 BOPD by CYE2018
  • Elk to receive 75% of the operating profit from the first million barrels and 65% from the second million barrels produced

We very pleased to announce the start of oil production from the Grieve CO2 EOR Project. The construction and commissioning of the Grieve CO2 EOR Production Facilities was completed by our joint venture partner, Denbury Resources Inc. within scope and budget under a fixed price turnkey construction contract and production has commenced within project start-up deadlines. The Grieve CO2 EOR Project is owned by Elk with a 49% non-operated working interest and Denbury Resources with a 51% operated working interest. As previously outlined in the ASX releases of 21 December 2015 and 5 August 2016, Elk holds an effective 60% economic interest in the project.

First oil production is expected to be in the range of 1100 to 1200 barrels of oil per day (“BOPD”). The Company's independent petroleum engineers and reserve auditors for the Grieve Project, VSO Petroleum Consultants, Inc. (“VSO”) has projected that base case 2P reserves gross production is expected to increase to approximately 2100 BOPD by CYE 2018 and achieve a peak gross production rate of over 3400 BOPD within the first 13-months. VSO has also estimated that upside gross production rates could be as high as over 3500 BOPD under a 3P reserves case and over 6000 BOPD under a 3C contingent resource case.

Grieve 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 Grieve Crude Oil Pipeline and oil sales will commence via Enbridge Inc.'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 1 May 2018. 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.

With Grieve production start-up, Elk will be working with our independent reserves auditors to reclassify current net Grieve 2P reserves of 5.3 MMbbl to 1P Proved Developed Producing Reserves as part of our June 30th, 2018 audited reserves report. VSO has stated that based on projects previously reviewed by them, the Grieve Project will rank among one of the highest permeability miscible CO2 floods ever performed. Due to Grieve's high reservoir quality, VSO believes that the Project's 2P recovery rate will be towards the high end of 18% of original oil in place and that 3P recovery may achieve 24%.

Elk's 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 3-year high.”



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