For personal use only

Transcription

1 Investor Presentation March 2016

2 Disclaimer & Important Notice This presentation does not constitute investment advice. Neither this presentation not the information contained in it constitutes an offer, invitation, solicitation or recommendation in relation to the purchase or sale of shares in Elk Petroleum Ltd ABN (the Company ) - in any jurisdiction. Shareholders should not rely on this presentation. This presentation does not take into account any person s particular investment objectives, financial resources or other relevant circumstances and the opinions and recommendations in this presentation are not intended to represent recommendations of particular investments to particular persons. All securities transactions involve risks, which include (among others) the risk of adverse or unanticipated market, financial or political developments. The information set out in this presentation does not purport to be all inclusive or to contain all the information which its recipients may require in order to make an informed assessment of the Company. You should conduct your own investigations and perform your own analysis in order to satisfy yourself as to the accuracy and completeness of the information, statements and opinions contained in this presentation. To the fullest extent permitted by law, the Company does not make any representation or warranty, express or implied, as to the accuracy or completeness of any information, statements, opinions, estimates, forecasts or other representations contained in this presentation. No responsibility for any errors or omissions from this presentation arising out of the negligence or otherwise is accepted. This presentation may include forward looking statements. Forward looking statements are only predictions and are subject to risks, uncertainties and assumptions which are outside the control of the Company. These risks, uncertainties and assumptions include commodity prices, currency fluctuations, economic and financial market conditions in various countries and regions, environmental risks and legislative, fiscal or regulatory developments, political risks, project delay or advancement, approvals and cost estimates. Actual values, results or events may be materially different to those expressed or implied in this presentation. Any forward looking statements in this presentation speak only at the date of issue of this presentation. Subject to any continuing obligations under applicable law and the ASX Listing Rules, the Company does not undertake any obligation to update or revise any information or any of the forward looking statements in this presentation or an changes in events, conditions or circumstances on which any such forward looking statement is based. The reserves and resources assessment follows the guidelines set forth by the Society of Petroleum Engineers Petroleum Resource Management System (SPE-PRMS). The Reserves and Contingent Resources in this announcement relating to the Grieve CO 2 EOR project, operated by Denbury Resources, is based on an independent review and audit conducted by Pressler Petroleum Consultants, Inc. and fairly represents the information and supporting documentation reviewed. The review and audit was carried out in accordance with the SPE Reserves Auditing Standards and the SPE-PRMS guidelines under the supervision of Mr. Grant Olsen, a Director of Pressler Petroleum Consultants, Inc., an independent petroleum advisory firm. Mr. Olsen is a Registered Professional Engineer in the State of Texas and his qualifications include a Bachelor of Science and Master of Science (both in Petroleum Engineering) from Texas A&M University. He has more than 10 years of relevant experience. Mr. Olsen is a member of the Society of Petroleum Engineers (SPE) and an Associate Member of the Society of Petroleum Evaluation Engineers. Mr. Olsen meets the requirements of Qualified Petroleum Reserve and Resource Evaluator as defined in Chapter 19 of the ASX Listing Rules and consents to the inclusion of this information in this report. The information in this presentation that relates to Reserve and Contingent Resources estimates for the Grieve CO2 EOR project and the Contingent Resource estimates for the Singleton CO2 EOR project have been compiled or in the case of the Singleton CO2 EOR project prepared by Mr. Brian Dolan, COO and VP-Engineering of Elk Petroleum USA who is a qualified person as defined under the ASX Listing Rule 5.11 and has consented to the use of the reserves figures in the form and context in which they appear in this presentation. Mr. Dolan is a full-time employee of the company. Mr. Dolan earned a degree in Mechanical Engineering from the University of Colorado at Boulder and has more than 23 years of relevant experience. Mr. Dolan has sufficient experience that is relevant to the company s Reserves and Resources to qualify as a Reserves and Resources Evaluator as defined in the ASX Listing Rules. Mr. Dolan consents to the inclusion in this presentation of the matters based on the information in the form and context in which it appears 1

3 Corporate Overview 2

4 Corporate Summary Only ASX-listed Enhanced Oil Recovery (EOR) company Focused on oil field redevelopment with proven technologies Key projects in proven EOR production fairways Committed to delivering current US projects Near term potential to capture additional growth projects Longer-term growth bringing core EOR expertise into untapped maturing Australasian oil provinces Capital Structure ASX code ELK Ordinary Shares/Fully Diluted 262.8m / 369.9m 52-week Low-High (A$ cps) Market 7.5cps (fully diluted) A$27.7m Cash A$1.6m Reserves + Resources (2P+2C)* ~9.3 mmbls Reserves and Resources as set out in the Company s Quarterly Activities Report ASX Announcement of 29 January Major shareholders Robert Healy 25.23% Begley Superannuation 11.52% Republic Investment Management Pte. Ltd 10.89% Elk one-year share price chart 12-months ending 18 February 2016 HSBC (Including Republic Investment Management) 9.9% Board & Management 7.0% 3

5 Board & Management Neale Taylor Non-Executive Director and Chairman, Melbourne Over 40 years of technical, operating and commercial experience in oil and gas exploration, production, planning and evaluation, acquisition and joint venture management with major industry players, including Esso Australia. Former Chairman of Tap Oil Ltd, former CEO of Nexus Energy Ltd and Cambrian Oil & Gas PLC Brad Lingo Managing Director and Chief Executive Officer, Sydney Over 25 years of experience in all phases of the oil & gas business ranging from business development, new ventures, exploration, development and production as well as mergers and acquisitions, equity capital raising and debt financing for both listed and private companies. Currently Chairman of Mont Dór Petroleum, a private oil & gas exploration and production company with operations in Indonesia and New Zealand and the former Managing Director & CEO of Drillsearch Energy Ltd and former CEO of Sunshine Gas Ltd. Tim Hargreaves Non-Executive Director, Sydney Over 35 years experience in technical and managerial roles in the petroleum and mining sectors in Asia and the Middle East for major companies including BHP, Fletcher Challenge and Union Texas Petroleum as well as start ups and small to mid-sized independents. He has led successful exploration and commercialisation campaigns in Pakistan and Egypt, which were dependent upon technical and commercial innovation in complex regulatory environments. Since 2009 he has been Research Director of Resources for Republic Investment Management, a Singapore-based investment fund, which is a major investor in ELK and the major participant in the Convertible Loan recently raised by the Company and, until recently, he was a Director of The Environmental Group Limited (ASX : EGL). Matthew Healy Non-Executive Director, Sydney Mr. Healy currently holds a management position at one of Australia s foremost property development and infrastructure groups, is an active investor in the resources sector and has over 15 years of experience working in management and operational roles. Russell Krause Non-Executive Director, Melbourne Over 25 years experience in Stockbroking and Investment Management with a primary focus on the resources sector. He has held a number of Directorships and Senior Management positions with a number of Australia s leading firms, including firms with US oil and gas assets. For the past ten years he has worked on a number of North American oil and gas projects in relation to Capital Raising and Corporate Advisory. Scott Hornafius President Elk Petroleum USA (Elk wholly owned US subsidiary, Denver) Over 29 years of exploration, technical, management, and funding experience in the oil and gas industry including 16 years with Mobil in the US, PNG and UK before founding MegaEnergy in As President of MegaEnergy, he was responsible for joint ventures involving play identification, land acquisitions, drilling and development programs and major funding programs and developed a 100,000 acre position in the Marcellus shale prior to being sold for over $100 million. He is a founding Director of Canning Petroleum Pty Ltd, which now holds very large onshore permit areas in Western Australia. 4

6 Where do we operate - Our Core US assets ELK PROJECTS Grieve Singleton Location of current CO 2 EOR projects and pipeline infrastructure Source: NETL

7 Recent Highlights Successfully negotiated a Letter of Intent (LOI) with Denbury Resources for the restructure of the Grieve CO 2 EOR Project Joint Venture Proposed restructure increases Elk s working interest and share in net 2P reserves Guarantees in place for cap on remaining Grieve development spending and timing for first oil production Preliminary funding commitments secured by Elk for US$55m remaining development work Completed acquisition of Devon Energy oil assets in the Denver-Julesberg Basin Low cost acquisition that significantly enhances Elk s existing Singleton Oil Field Redevelopment Acquisition includes new-build oil production facilities Significant new oil production development potential, with near-term production expected Material increase in Elk oil reserves and resources from Grieve JV restructure and Devon acquisition 52% lift in 2P reserves and 66% increase in 3C resources Strengthened financial position with A$2.5 million raised in strongly supported private placement 6

8 Material Increase to Reserves & Resources Estimated consolidated oil reserves & resources as of 27 Jan 2016 Reserves (mbbls) Contingent Resources (mbbls) 1P 2P 3P 2C 3C Pre-agreement Totals 0 3,504 4,707 2,460 7,957 Devon Oil Properties ,512 2,510 Grieve JV Restructure 0 5,251 6, ,110* Singleton CO 2 EOR Project ,460 3,280 TOTAL 54 5,329 6,900 3,972 12,900 *The Grieve Contingent Resources 3C values represent the probable 2P Reserves plus incremental resources captured from additional CO 2 7

9 Grieve CO 2 EOR Project 8

10 Proven Approach in Proven Fairways Elk s Grieve Project is located in a region where there is high EOR activity 9

11 Grieve CO 2 EOR Project - Overview Field easily accessible Located ~50 miles west of Casper, Wyoming, USA Many nearby oil & gas fields >70% complete to first oil, scheduled for Q Gross Project Investment to date = US$100m+ Initial agreement on restructure of Grieve CO 2 JV (1) : Elk (49%), Denbury Resources (51% & operator) (2) Elk 2P Reserves increase to 5.3 MMbbl (net) Denbury to deliver fixed price, set schedule turn-key development contract Elk to provide final US$55m to complete development Strong look forward parameters compare favourably to other tier 1 projects Modest remaining capex Robust margins Room for optimisation Major remaining project works Construct central processing/recompression facilities Scheduled to commence early 2016 (1) Refer to Elk announcement dated December 21, 2015 for further information in relation to the re-structure (2) Elk is initially entitled to 75% of the first 1 MMbbls of oil production, followed by 65% of the next 1 MMbbls of oil production. Following 2 MMbbls of oil production, Elk is then entitled to 49% over the remaining life of the project Grieve CO2 EOR Project Reserves & Resources Scenario Post JV Restructure (MMbbl) Gross Net 2P (Probable Reserves) P (Probable + Possible Reserves) Source: Elk ASX Release 29 January 2015 Grieve Reserve Update 3C (Contingent Resources)

12 Denbury LOI Highlights Material increase in project and reserves interest Initial 114% increase in Elk s project interest to 75% 51% increase in net 2P reserves (after royalties) to 5.3 MMbbl Superior proportional value Elk to contribute one third of total project development costs ($55m of $185m total) whilst extracting almost half of project value Elk due a higher share in project net revenue until gross cumulative oil production reaches 2 MMbbl Gross Cumulative Production of 0-1MMbbl: 75% production to Elk Gross Cumulative Production of 1 2MMbbl: 65% production to Elk Working Interest reverts to 49% / 51% thereafter to Elk and Denbury respectively Significant cost savings and controls Fixed development cost of US$55m Initial 59 Bcf of CO 2 at no cost to Elk Additional CO 2 at commercially attractive terms Denbury to contribute existing facilities and CO 2 pipeline to JV at no cost Denbury overhead costs not payable by Elk Cap on operators and supervisors costs Outstanding implied F&D and operating costs Elk net F&D costs estimated to be ~US$10/bbl (2P basis) Average operating costs over the first 5 years are low at US$13-14/bbl (excluding royalties) Robust and financeable economics Modelling and initial financier discussions show strong and financeable outcomes Project economics remain robust even in potential downside scenarios Elk interest highly leveraged to any improvement in 2P reserves and/or pricing Crystalize pipeline value Elk s Grieve Oil Export Pipeline to be used to transport oil production US$3/bbl (escalated) on 100% of production payable to Elk Ongoing litigation cancelled Release from outstanding Denbury loan No ongoing Facility tariff obligations Arbitration / litigation dropped 11

13 Production Cost & Margin 70 Production Cost & Margin (US$/bbl, Real) For personal use only Production margins remain robust, even in low oil price conditions Production Costs (Including Royalties) and Margin (US$/bbl, Real) Production Costs (first 5 years) Margin Oil Price (US$/bbl, Real) 12

14 Development Cost Comparison The Grieve Project compares favourably to other tier 1 energy developments globally Grieve Project 13

15 Development Certainty The turn-key contract with Denbury ensures development costs & schedule will be fixed Consideration Key Risk Factor Mitigating Factors Project Capital Cost Certainty of Total Development Cost Certainty of Project Completion Negligible ongoing Project Capex Denbury has committed to completing field on a fixed price turn-key contract basis Elk will only fund a fixed amount of US$55 million to complete the field development The US$55 million fixed price turn-key contract covers all pre-completion project costs including development capex and opex Any cost overruns during the project development are to be borne by Denbury Turn-key contract provides for penalties for delay and/or failure to complete Post-completion of initial development and first oil production virtually no ongoing capital expenditure for life of project 14

16 Production Cost Certainty Ongoing potential cost exposures have been carefully managed Consideration Key Risk Factor Mitigating Factors Ongoing Operating Cost Certainty Low overall operating cost with limited exposure to cost increases Limited 3 rd party cost exposure Elk s average projected cash cost of operations over the first 5 years is US$13-14/bbl (including royalties) making the project profitable even in current oil price environment Denbury will supply and cover the full cost of CO 2 required to reach facility start-up & projected point of positive operating cash flow Denbury assumes all project overhead costs limiting Elk s exposure to operating costs to direct field operations & maintenance costs Direct field operations and maintenance account for <10% of operating costs 3rd party operating costs essentially limited to CO 2 supply, electricity, crude oil transport cost, royalties & taxes costs Denbury providing CO 2 at no cost or on attractive commercial terms Fixed price, limited escalation crude oil and CO 2 gas pipeline transportation contracts Elk owns crude oil pipeline & directly benefits from oil transport costs Royalty & tax rates are fixed by legislation & directly linked to oil price 15

17 Grieve Production Profile Annual Production Profiles 2.0 For personal use only Pressler 2P (12.2 MMbbl) Pressler 3P (16.3 MMbbl) Pressler 3C (16.2 MMbbl) Total CO 2 Purchased and Recycled (Bcf) (1) Profile CO 2 Purchased CO 2 Recycled Pressler 2P (12.2 MMbbl) Pressler 3P (16.3 MMbbl) Pressler 3C (16.2 MMbbl) MMbbl

18 Grieve CO 2 EOR Project Where are we progress to date Work Completed New injection and production wells In-field CO2/water injection & oil production flow lines Power supply from local grid installed Site works and production manifold 3-mile CO2 supply line Crude oil export pipeline upgrade Reservoir repressurising 10+ million barrels water injected 20+ BCF of CO 2 injected Est. 30 BCF CO2 required to achieve first oil Currently injecting CO2 at MMCFD Reservoir pressure rising in line or ahead of forecast Remaining Steps Construction of oil processing & CO 2 recompression facilities Continue injection of water and CO 2 into Grieve field Commence H1 CY2016 Ongoing FIRST OIL TARGETED Q

19 Singleton Oil Field Redevelopment & Devon Oil Properties 18

20 Singleton DJ Basin Entry & Strong CO 2 EOR Project 100% Elk-owned & operated project Located in Nebraska Contingent Resources 2C = 3.0 mmbbls 3C = 4.0 mmbbls Excellent sand quality Setting ideal for CO 2 -oil miscibility Existing wells available for field redevelopment Expect rapid response to injected CO 2 Field in close proximity to CO 2 supply source Potential to develop in conjunction with near-by satellite fields to improve overall economics Singleton South J3 Oil Sands Singleton Unit - J Sand Isopach 19

21 For personal use only Denver-Julesburg Basin Significant Growth Area for Elk DJ Basin is a mature oil basin that has not had any tertiary oil recovery projects DJ Basin has over 1000 oil fields (shown in yellow) in Colorado and Nebraska Intensive drilling activity began in 1950 More than 52,000 wells drilled Similar to Grieve Project - Muddy Formation ( J ) Sandstone Water flooding of the J reservoirs began in the early 1960 s Most fields are nearing end of secondary recovery efforts Without EOR these fields will be abandoned Target projects 20

22 Corn Ethanol A Potential New Large-Scale CO 2 Supply 21

23 Devon Asset Acquisition enhances Singleton Redevelopment Acquisition includes: Devon s oil & gas leasehold interests covering 5,987 net acres Two oil exploration wells that have completed as oil productions Opis 1P (vertical well) & Opis 1H (horizontal well) All oil production, processing facilities, storage and oil truck load-out equipment Devon Oil Properties present compelling synergies for Singleton Capacity to commence oil production from Opis 1H well in the near-term Water produced from Opis 1P and 1H wells can provide water production necessary for repressurising the Singleton Oil Field for the initial CO 2 EOR phase Acquisition represents Elk s capacity for low cost asset accumulation that enhances the development potential of existing assets 22

24 Singleton South Devon Oil Properties Acquisition Low cost acquisition with existing new build facilities Significant resource additions with reserves and near term production Substantial J3 Oil Sands near term development potential Yellow in the map above shows the Elk Petroleum leasehold in Nebraska after the Devon Energy acquisition 23

25 Strategy for Value Creation 24

26 Global EOR Potential ~40 bn barrels ~120 bn barrels ~11 bn barrels ~50 bn barrels ~475 bn barrels ~16 bn barrels Global EOR market* Projected to grow at 8.8% CAGR Estimated to be worth $34.4bn by 2019 ~58 bn barrels ~40 bn barrels BCC Research, August 2013 Source: Society of Petroleum Engineers 25

27 Elk s EOR Capabilities 10-years focused EOR experience in a proven EOR production fairway JV with leading US independent entirely focused on CO 2 EOR project development Established relationships with CO 2 suppliers, pipelines & EOR engineering and oil field service companies Secured CO 2 supply and access to necessary infrastructure to deliver key Grieve Project Existing supply arrangement could provide access to additional CO 2 supply for growth in current and new projects Key personnel with track record of EOR field screening, selection and development experience across multiple technologies Water flood, CO 2, Chemical, Thermal Established second EOR growth production fairway Denver-Julesburg Basin rejuvenating mature oil assets through CO 2 EOR from man-made sources 26

28 Value-add Strategy Australasia Opportunity Grieve CO 2 EOR Development Singleton Oil Field Redevelopment Execute work programs for Opis 1P & 1H and repressurise field for production Asset Accumulation Current oil price environment provides opportunity to strengthen asset portfolio in existing geography and new markets Take EOR technology to largely untapped regions Australia, Indonesia and Malaysia Complete development, commence oil production 27

29 Elk Growth Potential Elk has identified additional EOR acquisition opportunities that are achievable in the next 12 months Potential 2P Reserves Net to Elk (MMbbl) Grieve (35%) Grieve (Increased Interest) Devon Oil Properties Singleton Grieve Bolt-on Projects Additional IOR / EOR Projects Indonesian Project (2) (1) (2) (3) (3) Total (1) Assuming an increased interest in Grieve reflecting current discussions with Denbury (2) Assuming conversion of 2C resources into 2P reserves (3) On the basis of initial exploratory engagement 28

30 ASX Peer Trading Comparables (1 of 2) Consolidating ownership in the Grieve Project will materially increase Elk s reserves position 2P Reserves (MMbbl) Cooper Elk Nido AusTex Tap Elk Blue NZOG Horizon Oilex Drillsearch Central (1) (2) (1) Elk current 35% interest in Pressler 2P reserves (2) Assuming an increased interest in Grieve reflecting current discussions with Denbury (100% in the initial 1.9 MMbbls and 49% in the remainder of production) Source: Company ASX announcements 29

31 An improved reserves position may result in a higher market valuation for the Company For personal use only ASX Peer Trading Comparables (2 of 2) Market Capitalisation (LHS) & EV/2P (RHS) Market Cap EV/2P Market Capitalisation (US$m) EV/2P (US$/bbl.) (1) (2) (1) Elk current 35% interest in Presser 2P reserves (2) Application of existing EV/2P multiple to enlarged reserve base. Assumes debt cancelled post-denbury transaction Source: Capital IQ (24/11/15), Company ASX announcements 30

32 Summary 31

33 So what do we need to do? The specifics Restructure the Grieve Project Negotiate a new deal with Denbury Repair the Grieve Oil Pipeline & put it back into service for Grieve & other shippers Complete the field redevelopment EOR project & commence production Acquire satellite fields for tie-back to Grieve Project water flood or CO 2 EOR Singleton South/Devon Oil Properties new horse in the stable Restart Mississippi Limestone oil production from existing Opis 1H well Build low-cost water pipeline to Singleton to dispose of Opis 1H water production Production test J3 oil sands in Opis 1P well Production test J3 oil sands with new horizontal from Opis 1H well Roll out J3 oil sand development in Singleton South Project area Singleton Project get it moving Confirm & lock-in Bridgeport CO 2 supply contract Commence water flood of Singleton Oil Field with Devon Oil Properties production 32

34 When will it happen? Activity Pipeline CY2016 CY2017 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Finalise Grieve JV restructure Secure US$5m funding for remaining Grieve development Commence construction of Grieve Facility Grieve Field repressurisation complete First Oil Production from Grieve Reconnect Production Facility to Opis 1H well site Recomplete Opis 1P testing and connect water to Singleton W-3 well Reactivate Singleton W-3 well and commence repressurisation of Singleton 33

35 The Investment Case EOR Expertise Extensive experience and expertise in Enhanced Oil Recovery (EOR) Existing Assets Existing US assets provide strong foundation for cash flow and growth Core Area EOR Opportunities Significant further EOR project growth potential in core areas Oil Price Current oil price environment presents unique opportunity for low cost EOR project accumulation Global EOR Opportunities Significant opportunity to apply EOR in largely untapped areas outside of the USA Strong Leadership Elk Petroleum has strong leadership with proven track record of value creation Near-term Transformation Strong news flow pipeline to first oil across several projects - targeted for CY

36 Contact: Level 1, 10 Bridge Street, Sydney,

37 Appendix 36

38 What is EOR / IOR? EOR/IOR are proven approaches successfully deployed for over 40 years Substantially increase overall oil recovery from & productive life of fields Deliver attractive economics even in low oil price markets Used extensively in North America & Middle East Largely under-utilized in Australasia Widely implemented techniques include: CO 2 injection Chemical injection Nitrogen injection Waterfloods Natural Gas injection Steamfloods Our Focus Source: Advances in Enhanced Oil Recovery Processes Romero-Zeron University of New Brunswick (2012) 37

39 How does CO 2 EOR work? Proven technology and most commonlyused form of EOR Secure CO 2 supply Transport via pipeline or truck Inject into oil field Accounts for nearly 60% of EOR production in the US Frequently sourced from existing natural fields with high CO 2 contents CO 2 can be supplied from man-made sources such as power plants Known as Green Oil due to ability to sequester CO 2 Currently only profitable carbon capture & storage (CCS) without subsidy Recognising cost of carbon will only further enhance CO 2 EOR potential 38

40 Enhanced Oil Recovery Positioned for a Low Oil Price Environment 39

41 Proven Approach For every barrel of oil extracted from oil fields in primary recovery phase, there remains 3-4 barrels of stranded oil left in the ground CO 2 EOR Successfully deployed for over 40 years Accounts for nearly 60% of EOR production in the US Accounts of ~6% of total US crude oil production ~123 projects across multiple US basins Source: US Oil Production from CO 2 EOR 40

42 CO 2 EOR Positive Environmental Impact + Attractive Economics Positive Environmental Impact Known as Green Oil due to ability to sequester CO 2 In 2012, 62 million metric tonnes of CO 2 supplied to US EOR operations 15% of total CO 2 supply came from industrial sources i.e. natural gas processing, ammonia and fertiliser plants Attractive CO 2 economics CO 2 flood efficiency ranges from 5-15 mcf of CO2/bbl of oil recovered CO 2 price is directly linked to price of oil - 1.3% to 2.5% of WTI Oil Price CO 2 cost/bbl ranges from US$2 to US$11/bbl depending on CO2 flood efficiency at US$30/bbl WTI oil price 41

43 EOR s Competitive Advantage We can t control the oil price, so we have to focus on how much we get out of the ground and what it costs CO 2 EOR Hydraulic-Fracking of Shale & Tight Oil Conventional production Low cost production: = <$15-25/bbl of recovered oil Low sustaining CAPEX/bbl High Recovery Factors = >50%-65% of OOIP Low production decline rates = <10% per year Economically captures & sequesters CO 2 Negative CO 2 emissions more stored than produced Applicable in 1000s of conventional old oil fields Unconventional High production costs = Avg. Shale Oil >$50-60/bbl High sustaining CAPEX/bbl Low Recovery Factors = <5%-10% of OOIP High production decline rates = >60%-90% over 3 years Does not capture CO 2 emissions Significant CO 2 emissions Applicable in 1000s of hard rock shale and tight oil sites 1/3 rd the cost, 5x the recovery, 1/6 th depletion of Shale 3x the cost, 1/5 th the recovery, 6x depletion of CO 2 EOR Source: Attractive operating costs in low oil price environment Company Field OPEX/bbls Evolution Petroleum Delhi (Louisiana) US$ 13.44/bbl Denbury Resources EOR portfolio US$ 19.31/BOE 42

44 Grieve CO 2 EOR Project Where are we progress to date 43

45 Grieve CO 2 EOR Project A Field-level View CO 2 Metering Station First Oil expected Q Central Facilities Location - Office - Power - Oil storage - Processing & compression - Distribution and gathering manifold centre Project Update: - CO 2 injection started March CO 2 injection at 40 MMCFD - Water well completed April Water injection at 17 MBPD (Upgrade water injection system capacity scheduled to be increased to 38,000 BWPD) * Based on Elk s own estimates 44

46 Grieve CO 2 EOR Project Field Pressure 45

47 Access to Markets - Grieve Crude Oil Export Pipeline Grieve Crude Oil Export Pipeline owned 100% by Elk Enables Grieve oil production to be directly shipped to Casper Refinery avoiding costly transport BLM Grieve Project Environmental Approvals only allow oil export via pipeline not trucking Pipeline commissioning works scheduled to be undertaken in H1 CY2016 Discussions on-going with prospective 3 rd parties shippers & potential pipeline purchasers Significant potential for Elk to monetise the pipeline resulting in a material cash inflow South Casper West Poison Spider CITY OF CASPER, WY Refinery Austin Creek Grieve Field Elk s 32 mile oil pipeline from Grieve to Casper Oil fields linked to the pipeline Oil storage facilities & oil point of sale Oil Refinery storage facilities & oil point of sale 46

48 US Market Opportunity Cumulative Oil Production (MMBO) Basin Name Total CO2 EOR Candidate Reservoirs Powder River 289 Bighorn 105 Wind River 45 Greater Green River 49 Overthrust Belt 12 Laramie 11 Denver Cheyene Source: SPE MS-Estimates of Potential CO 2 Demand for CO2 EOR in Wyoming Basins First commercial CO 2 EOR production commenced in 1972 ~100bn to 160bn barrels of stranded oil forecast for recovery by EOR technology* 1.5bn barrels produced through CO 2 EOR over past 25 years** *US Department of Energy **Visiongain Research, October

49 Australasia s Untapped EOR Potential EOR target in Indonesia (status January 2010) NAD Cumulative production Discovered, unrecoverable by current development (potential for EOR) Proved reserves Field A North Sumatra Central Sumatra ,438 12,293 1,830 7,327 1,256 Natuna 1, ,183 6,598 East Kalimantan Maluku Papua 59 WA Area of interest NT SA QLD NSW VIC South Sumatra 35 Sulawesi 5,707 West Java 1, East Java Indonesia (in MMSTB) 42,793 22,336 Field B Gas Processing facilitates 2,136 3,609 Company Fields Reservoirs Miscible Immiscible Medco Conoco Philips EP Prabumulih Ubep Adera Ubep Ramba Ubep Limau Prabumulih & Pendopo TAC/KSO Pertamina Total Northern Cooper Basin 0 8km To date the recovery has been only 3-4% of the original-oilin-place, and simulation studies indicate a recovery at abandonment of some 5-10%. Hence, it is envisaged that a suitable EOR scheme may help improve recovery. With a suitable gas injection process, it is estimated that the ultimate recovery would increase to 20-30% N Source: SPE Opportunities and Challenges of CO2 Flooding in Indonesia 48