Further to the announcement of 15 September 2017, Elk Petroleum Ltd (ASX:ELK) (OTCMKTS:EKPTF) ("Elk" or the "Company") has today completed the acquisition of a subsidiary of Resolute Energy Corporation (NYSE:REN) ("Resolute") which holds the majority ownership in the Greater Aneth Oil Field for US$160 million (~A$205 million - see Note 1 below) plus future contingent consideration.

- Aneth is ranked as one of the Top 100 Oil Fields in the US

o Aneth Oil Field is ranked the 86th largest oil field (see Note 2 below) in the US by proven reserves

o One of the largest CO2 EOR projects in the Rocky Mountains

o A proven long-term producing oil field with a 30-year operating history

o Cumulative production to date of ~450MMbls

o Significant additional recoverable oil of over 300 MMbls through continued CO2 EOR development

- The Aneth acquisition is transformative for Elk - the acquisition delivers:

o Majority ownership (~63%) and operatorship of a major Rocky Mountain CO2 EOR project

o Significant Reserve and production growth - Adding ~59 mmbbls of 2P oil reserves (see Note 3 below) and 6,500 bopd oil production making Elk one of the largest oil producers on ASX

o Significant Revenue and free cash flow growth - Consolidated EBITDA of US$50-55 million with cash flow to equity of A$20-25 million in CY2018

o Significant organic growth to potential - ability to double production to over 14,000 bopd with ability to control the cost, scope and timing of further developments

o As operator, Elk is retaining Resolute's experienced Aneth operating team of over 90, including Denver technical professionals and Aneth field operating team

- Highly attractive acquisition economics:

o Acquisition is at a significant discount to 1P Proved Developed Producing Reserves PV10 value

o 1P Proved Developed Producing Reserves acquisition multiple of US$4.70/bbl

o Production acquisition multiple of approximately US$27,000 per flowing barrel

o Significant organic growth potential

Acquisition of Aneth Oil Field

Elk has now completed the purchase and sale agreement to acquire an entity which holds a ~63% operating working interest in the Aneth Field, one of the largest CO2 EOR projects in the Rocky Mountains from Resolute. Substantially all the remaining working interest in the Aneth Field, which is located on Navajo Nation lands, is owned by Navajo Nation Oil and Gas Company ("NNOGC"). Elk intends to continue the relationship with NNOGC established by Resolute with respect to the development of the Aneth Field in cooperation with the Navajo Nation.

The acquisition price included an up-front purchase price payment of US$160 million. The purchase price also includes additional contingent oil price payments (see Note 4 below) of up to US$10 million on the first and second anniversary date of the closing of the purchase in each of 2018 and 2019 and a third payment of up to US$15 million on the third anniversary of the closing of the purchase in 2020 depending on oil price performance.

As previously announced on 15 September 2017, the acquisition has been funded via Elk's recently completed A$27.5m placement of ordinary shares, with the balance funded by a US$98m senior term loan from HPS Investment Partners, LLC., Riverstone Credit Partners, L.P. and AB Energy Opportunity Fund, L.P., and US$65m of proceeds of preferred equity issued by Elk Petroleum Inc. to AB Energy Opportunity Fund, L.P. and other institutional investors. Further, Elk has put in place a $US20m senior revolving loan facility with Cross First Bank in order to, among other things, provide working capital support for its new Aneth operations.

Acquisition Strategic Rationale

- Transforms Elk into a Major CO2 EOR Producer and Operator

o Transforms Elk into one of the ASX's leading oil companies and operators by reserves, production & cash flow

o Position as field operator allows Elk greater control over pace and timing of cash flows

o Aneth brings high-quality, established operating and management team

o Achieve Elk's growth plan to own and operate CO2 projects (Grieve and Aneth fields) as well as CO2 supply (Madden field) in the geographically focused area of US Rockies

- High-Quality Acquisition

o The Aneth Field has a long history of continuous oil production since the late 1950s with ~450MMbls cumulative production to date

o Adds ~59MMbbls of 2P oil reserves and 6,500 bopd oil production effective 1 October 2017

- Significant Organic Growth Opportunities

o Delivers significant internally funded organic growth

o Development of Aneth has been constrained for the past 2-3 years as Resolute has allocated capital resources to its high-quality Permian acreage

o Opportunity to double production within 3-5 years significantly funded by internal cash flow

- Attractive Acquisition Economics

o Acquisition is at a significant discount to historical proven reserve and production value

o Strong cash flows allow for significant deleveraging over the next 2-3 years

o Consolidated EBITDA of US$50-55 million in 2018 with sustainable cash flow to equity of A$20-25 million

Strong Transition Plan to Operatorship in Place and Expanded US Management Team

To facilitate Elk becoming the operator of the Aneth Oil Field, Elk has entered into a transition services agreement (TSA) with Resolute to allow for orderly transition of the asset to Elk including the Aneth field staff. In addition, subject to final arrangements, Mr. James Piccone, currently President and Director of Resolute Energy, will be joining Elk as the CEO of Elk USA. Mr. Piccone was a founding director of Resolute Energy and has been instrumental in the development of the Aneth asset under Resolute's ownership.

Bradley Lingo, Elk Petroleum Managing Director, said:

"The Aneth Oil Field is one of the most significant EOR projects in the US, underpinned by a high-quality and established operating and management team. The field is highly complementary to Elk and represents an attractive opportunity for Elk to transform into one of the ASX's leading oil companies and operators by reserves, production and cash flow.

Elk is excited by the opportunities for its expansion. We have undertaken extensive due diligence, built a strong business case and established a seamless plan for integration, including the adoption of over 90 highly experienced Resolute staff across all areas of Aneth field operation and head office management. We are highly confident that under Elk's management, alongside the Aneth team, the field can continue to go from strength to strength."

Elk was advised on the Acquisition and the funding package by Miro Capital Pty Ltd and EAS Advisors, LLC. acting through Odeon Capital Group, LLC., a member of FINRA/SIPC/MSRB. RBC Capital Markets acted as Global Coordinator and Lead Manager on the completed Placement. Norton Rose Fulbright acted as Australian and US legal advisers to Elk on the transactions.


1 FX rate of 1 AUD = 0.78 USD used to convert all USD metrics in this announcement

2 U.S. Energy Information Agency report Top 100 Oil & Gas Fields March 2015

3 Based on Elk internal reserves estimate supported by independently audited reserve estimate of VSO Petroleum Consultants

4 First Contingent Oil Payment (Year 1): For each day that the WTI price is above US$52.50/bbl during the first 12-month period after the financial close, Elk shall pay Resolute US$40,000 capped at a max of US$10m

Second Contingent Oil Payment (Year 2): For each day that the WTI price is above US$55/bbl during the 12-month period after first anniversary of financial close, Elk shall pay Resolute US$50,000 capped at a max of US$10m

Third Contingent Oil Payment (Year 3): For each day that the WTI price is above US$60/bbl during the 12-month period after the second anniversary of financial close, Elk shall pay Resolute US$60,000 capped at a max of US$15m

To view the full release with figures, please visit:

About Elk Petroleum Limited

Elk Petroleum Limited (ASX:ELK) (OTCMKTS:EKPTF) is an oil and gas company specialising in Enhanced Oil Recovery (EOR), with assets located in one of the richest onshore oil regions of the USA, the Rocky Mountains. Elk's strategy is focused on applying proven EOR technologies to mature oil fields, which significantly de-risks the Company’s strategy of finding and exploiting oil field reserves.



Brad Lingo
Managing Director/CEO
T: +61-2-9093-5400
E: ir@elkpet.com

Alex Hunter
Chief Financial Officer
T: +61-2-9093-5400
E: ir@elkpet.com

Link: ELK closes Aneth Field & EOR Production Project Acquisition

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