e Elk Petroleum LtdABN 38 112 566 499 Elk Petroleum Ltd ABN 38 112 566 499 11 October 2013 AGREEMENT TO ACQUIRE THE SINGLETON UNIT, NEBRASKA HIGHLIGHTS • Elk has executed a purchase and sale agreement (PSA) to acquire the Singleton Unit in the Singleton oil field located in the south-west Nebraska • The Singleton Unit is in the highly regarded Denver-Julesburg (D-J) Basin • The Unit has enhanced oil recovery (EOR) potential of 2 – 4 million barrels of oil • Other D-J Basin mature oil field prospects are being evaluated Elk Petroleum Limited (ASX Code: ELK) is pleased to advise that the Company has executed a purchase and sale agreement (PSA) with Coral Production Corporation to acquire the Singleton Unit in southwest Nebraska. The PSA has a number of conditions, including due diligence, that must be completed to the parties’ satisfaction before the agreed closing date of 10 January 2014. Elk plans to undertake studies to determine the most suitable enhanced oil recovery (EOR) method to apply to the redevelopment of the Singleton Field. Previous oil production of approximately 11 million barrels was achieved out of two J sands, which have favourable reservoir parameters for initiating EOR from the remaining oil-in-place of about 10 million barrels of oil. Preliminary screening indicates potential for recovery of an additional 2 – 4 million barrels of oil from the Unit. Expenditure at the Unit will be limited until the results of Elk’s EOR studies are completed. Elk identified the Singleton Unit as a unique opportunity for a number of reasons: 1. It covers a J sand oil field that has produced a large cumulative oil volume in the south west Nebraskan section of the D-J basin and represents a substantial EOR target, 2. Elk sees this as an anchor project for expanding its EOR interest in the D-J Basin, 3. The unit has 18 wells that are capable of being re-entered at low cost, 4. Reservoir rock and fluid parameters are very suitable for initiating an EOR project, 5. Primary/secondary production performance was good; the field was capable of 20 BOPD when last on sustained production; it is expected this rate or better can be re-established for a modest expenditure prior to advancing to an EOR project, 6. Water supply and disposal permits are in good-standing, allowing operations to be re- commenced without any regulatory delays Elk’s Chief Executive Officer, Dr. Scott Hornafius, commented “When this agreement with Coral Production Corporation (Coral) is completed, the acquisition of the Singleton Unit will open a new focus area for Elk. This area has seen prolific oil production with many very successful waterfloods, which are strong indicators of the likelihood of success with EOR to achieve oil production up to 50% above that already produced. The rocks are very suitable, the Nebraska Government is supportive of further oil and gas development and the target sizes fit Elk’s financial and technical capabilities.” For personal use only
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e Elk Petroleum LtdABN 38 112 566 499 Elk Petroleum Ltd ABN 38 112 566 499 11 October 2013 AGREEMENT TO ACQUIRE THE SINGLETON UNIT, NEBRASKA
HIGHLIGHTS • Elk has executed a purchase and sale agreement (PSA) to acquire the Singleton
Unit in the Singleton oil field located in the south-west Nebraska
• The Singleton Unit is in the highly regarded Denver-Julesburg (D-J) Basin
• The Unit has enhanced oil recovery (EOR) potential of 2 – 4 million barrels of oil
• Other D-J Basin mature oil field prospects are being evaluated
Elk Petroleum Limited (ASX Code: ELK) is pleased to advise that the Company has executed a purchase and sale agreement (PSA) with Coral Production Corporation to acquire the Singleton Unit in southwest Nebraska. The PSA has a number of conditions, including due diligence, that must be completed to the parties’ satisfaction before the agreed closing date of 10 January 2014.
Elk plans to undertake studies to determine the most suitable enhanced oil recovery (EOR) method to apply to the redevelopment of the Singleton Field. Previous oil production of approximately 11 million barrels was achieved out of two J sands, which have favourable reservoir parameters for initiating EOR from the remaining oil-in-place of about 10 million barrels of oil. Preliminary screening indicates potential for recovery of an additional 2 – 4 million barrels of oil from the Unit. Expenditure at the Unit will be limited until the results of Elk’s EOR studies are completed.
Elk identified the Singleton Unit as a unique opportunity for a number of reasons:
1. It covers a J sand oil field that has produced a large cumulative oil volume in the south west Nebraskan section of the D-J basin and represents a substantial EOR target,
2. Elk sees this as an anchor project for expanding its EOR interest in the D-J Basin,
3. The unit has 18 wells that are capable of being re-entered at low cost,
4. Reservoir rock and fluid parameters are very suitable for initiating an EOR project,
5. Primary/secondary production performance was good; the field was capable of 20 BOPD when last on sustained production; it is expected this rate or better can be re-established for a modest expenditure prior to advancing to an EOR project,
6. Water supply and disposal permits are in good-standing, allowing operations to be re-commenced without any regulatory delays
Elk’s Chief Executive Officer, Dr. Scott Hornafius, commented “When this agreement with Coral Production Corporation (Coral) is completed, the acquisition of the Singleton Unit will open a new focus area for Elk. This area has seen prolific oil production with many very successful waterfloods, which are strong indicators of the likelihood of success with EOR to achieve oil production up to 50% above that already produced. The rocks are very suitable, the Nebraska Government is supportive of further oil and gas development and the target sizes fit Elk’s financial and technical capabilities.”
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LOCATION
The Singleton Oil Field is located in the northeast flank of the D-J Basin, which overlays large areas of Colorado, Wyoming and Nebraska, as shown on the following map. The D-J Basin contains oil and gas fields and is a very prolific petroleum province that is currently the location for numerous unconventional oil and gas discoveries. Nebraska is regarded as having a fiscal regime that is designed to attract petroleum development in the state. There is a ready and abundant supply of experienced labour and oil field services in the immediate area.
Location of the Singleton Field in the Nebraska portion of the Denver-Julesburg Basin
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FIELD DESCRIPTION The field was discovered in 1958. The two producing Singleton J sands in the Cretaceous Muddy Formation occur at a depth of about 5700 feet; they have a combined thickness of up to 24 feet, permeability in the range of 200 to 800 md and a porosity of +/-20%. The oil has a low gas-to-oil ratio (GOR), a gravity of 37° API and is regarded as a sweet crude. The Singleton Unit covers an area of 2,385 acres and the SHL lease covers 80 acres.
Wells in the Single Unit that produced from the J Sand in the Muddy Formation and the J Sand thickness
PRODUCTION HISTORY The field has produced about 11 million barrels of oil from an original oil-in-place (OOIP) of approximately 20 million barrels. Forty wells were drilled on the field for oil production and later for water injection. The field produced at a peak oil rate of about 4,000 BOPD during its primary production stage. The J Sands are stratigraphically sealed and water re-injection was required to maintain pressure and improve sweep efficiency.
POTENTIAL Elk believes the J sands are very suitable for re-development as an enhanced oil recovery (EOR) project. Elk plans to review various EOR technologies for application at Singleton. These technologies typically can recover 10-20% of the OOIP; this yardstick implies potential for 2-4 million barrels of additional oil recovery at Singleton. While conducting related EOR studies, Elk plans to bring a number of wells back on production to re-establish oil production and cash flow from the Unit; this work will involve only modest expenditures on a number of simple workovers and installation of pumping, separation and storage facilities. Once infrastructure is in place, Elk can see significant potential to apply EOR at other mature fields in the D-J Basin. In 2012-13, a mid-sized exploration company drilled two wells (one vertical and one horizontal well) targeting the Permian and Pennsylvanian geological intervals below the J sands and close to the Singleton Unit boundary. Elk plans to test this interval in due course and dependent upon results from the nearby wells.
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For further information please contact: Scott Hornafius, CEO Phone: +1 307 265 3326
Elk Petroleum Limited ABN 38 112 566 499 (ASX: ELK) is an oil and gas producer and developer with assets located in one of the richest onshore oil regions of the USA: the Rocky Mountains. Listed on the ASX in 2005, Elk’s strategy is focused on applying established enhanced oil recovery (EOR) technologies to mature oil fields. This strategy significantly de-risks the process of finding and exploiting oil field reserves. Leveraging proven EOR technology and experience, Elk is currently developing two mature oil fields in Wyoming and is pursuing other opportunities that will benefit from the application of EOR technologies. For more information on Elk, see Elk’s most recent Investor Presentations which are available on Elk’s website www.elkpet.com.
