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Elk Petroleum's Grieve Enhanced Oil Recovery Project On Schedule And Within Budget

Elk Petroleum (ASX: ELK) is advancing the construction phase of the Grieve oil field enhanced oil recovery project in Wyoming on schedule and within budget.

CO2 injection is expected to begin in November 2012.

The Grieve Project, which is operated by partner US$6.7b valued Denbury Resources (NYSE:DNR), is fully funded and is expected to produce up to 1,000 barrels of oil per day net within three years, and possibly up to 5,000 barrels of oil per day by five years.

Importantly, EOR delivers almost as much production as primary and secondary oil recovery. The U.S. Department of Energy estimates there is 3.2 billion barrels recoverable from the Rocky Mountain region using CO2 EOR.

Bob Cook, managing director, commented on the positive progress: "We are very pleased at the rapid development being undertaken by Denbury at the Grieve field.

"Denbury's successful business model is one that we are looking to emulate and their commitment to both the Rockies and to CO2 EOR as a business strategy continues to strengthen - just yesterday they announced the acquisition of a significant part of ExxonMobil's acreage in Wyoming.

"Denbury's considerable, and growing, investment in the Rockies demonstrates their strong commercial interest in the region and its potential for significant production from CO2 EOR -validating Elk's current position and future strategic direction in the Rockies."

Grieve progress

Anadarko has installed the CO2 pipeline tie-in connection to the Grieve field. The tie-in connects Anadarko's existing 16 inch diameter pipeline to the new 8 inch diameter branch pipeline that will carry CO2 to the Grieve oil field.

Lengths of the 8 inch diameter coated pipe, which will make up the new branch pipeline, are currently being distributed along the pipeline route, in readiness for them to be welded together and buried.

Concurrently, the installation of in-field flowlines to and from the Grieve wells is underway.

The extensive site preparation work at the Grieve field is nearing completion and the first of the concrete foundations for the new field facilities has been poured.

As operator of the Grieve project, Denbury has submitted an Application for Permit to Drill to the Wyoming Oil and Gas Conservation Commission for the Grieve #62 well.

This is the first of the wells to be drilled to the Madison formation, to a target depth of 3,231 metres, to source water for the injection and accelerated re-pressuring of the oil-bearing Muddy formation.

Reserves reclassification

Given the compelling evidence that the Grieve EOR project is progressing and regarded by both Denbury and Elk as a commercial venture, independent certifier Ryder Scott is currently considering re-assessing its Reserves classification of the Grieve field.

In 2008, Ryder Scott certified an 18.6 million barrel Possible (3P) Reserve estimate at Grieve.

Elk has a 35% working interest in the Grieve EOR project while Denbury holds the remaining 65%.

Analysis

Elk's primary focus is on EOR project in the U.S. Rockies. EOR delivers almost as much production as primary and secondary oil recovery.

The U.S. Department of Energy estimates there is 3.2 billion barrels recoverable from the Rocky Mountain region using CO2 EOR.

Elk has flown under the radar in Australian for reason of lack of knowledge about EOR plays. However, it is emulating the direction and success of $6.7b valued Denbury and there are strong reasons for investors to pay close attention to Elk's progress.

Despite the recent run up in share price, Proactive Investors continues to be bullish on prospects of further share price increases in Elk beyond $0.30.

Proactive Investors is a market leader in the investment news space, providing ASX "Small and Mid-cap" company news, research reports, StockTube videos and One2One Investor Forums.