Elk Petroleum

AU: ELK

AU$23m market cap

AU$0.01 last close

Elk Petroleum has three key assets: Grieve, Aneth and Madden. The Grieve CO2 EOR project was commissioned in April 2018; Madden is a gas producer that provides strategic ownership of CO2 and Aneth is one of the largest CO2 EOR projects in the Rockies.

Investment summary

Elk Petroleum (ELK) has completed a period of material inorganic growth with the acquisition of equity in the Madden gas field and assumption of operatorship at the Aneth CO2 enhanced oil recovery (EOR) project. ELK’s engineering review of Aneth has uncovered numerous near-term development opportunities that offer IRRs ranging from 22% to 87% at US$60/bbl WTI, at an average cost of US$6.8/boe. Projects are low technical risk asset enhancements, however, contingent on ELK’s re-financing expected in H2 CY18. ELK’s partner in Aneth, Navajo Nation Oil and Gas company (NNOGC), gained access to a US$80m debt facility in June 2018 to fund its share of Aneth development capex. Our risked valuation increases from A$0.12 per share to A$0.19 per share (61%) driven by the inclusion of near-term development potential, as well as higher short-term oil prices that we base on EIA forecasts (in the long term we remain at US$70/bbl). Funding of identified growth projects and refinancing of the company’s complex capital structure are key management objectives for CY18.

Y/E Jun
Revenue (US$m)
EBITDA (US$m)
PBT (US$m)
EPS (fd) (c)
P/E (x)
P/CF (x)
2017A 5.0 (5.2) (8.1) (0.9) N/A N/A
2018A 95.1 (87.4) (109.0) (8.9) N/A N/A
2019E 170.5 90.8 48.7 1.2 0.6 N/A
2020E 202.5 123.4 80.8 2.5 0.3 N/A
Sector
Oil & gas
Share price graph
Balance sheet
Forecast net debt (A$m) 150.1
Forecast gearing ratio (%) 131
Price performance
%
1m
3m
12m
Actual 0.0 0.0 (81.1)
Relative* (1.1) (3.7) (82.2)
52-week high/low A$0.1/A$0.0
*% relative to local index
Key management
Brad Lingo CEO
Alexander Hunter CFO

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