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Elk Petroleum Ltd to close restructure and financing simultaneously

Completion of the JV restructure is to result in a number of positive outcomes for Elk, including receiving 70% of the net cash flow of the first 2 million barrels of production.

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Elk Petroleum Ltd (ASX:ELK) will close the restructuring of its Grieve CO2 Enhanced Oil Recovery (EOR) Project simultaneously with the US$58 million loan facility on or before 5 August, 2016.

Financing is to fund the restructure of the Grieve Project in the U.S. with joint venture (JV) partner Denbury Resources.

EOR uses technology to extend the life of an otherwise depleted oil reservoir. Elk is the only ASX-listed EOR company.

Completion of the JV restructure is to result in a number of positive outcomes for Elk, including receiving 70% of the net cash flow of the first 2 million barrels of production.

Brad Lingo, managing director, commented: “Overall, this makes successful completion of the transaction much lower risk for both Elk and our joint venture partner, Denbury.

"All three parties - Elk, Denbury and Benefit Street Partners are all working together to make this happen.”


Loan facility


Benefit Street Partners received final credit approval to provide to Elk a US$58 million senior debt loan facility to be used in connection with the Grieve Project JV restructuring.

The closing of this debt facility is subject to definitive legal documentation, which is well advanced.

Benefit Street Partners and affiliates manage over US$11 billion in assets across a broad range of credit strategies, and is the credit arm of Providence Equity, a global asset management firm with US$45 billion in assets under management.


Restructuring the Grieve Project

Elk currently holds a 35% working interest in the Grieve Project located in the U.S. state of Wyoming.

Denbury is the operator of the project and holds the remaining 65% interest.

The restructure gives Elk the right to receive an effective 70% of the net cash flow of the first 2 million barrels of production from the project.

Elk is to fund a capped US$55 million fixed project development cost.

In order to maintain continued progress on the development of the Grieve Project, Elk has made a further payment to Denbury of US$1.5 million.

This is the final amount required to be paid at closing under the Grieve Project JV restructuring agreements.

The remaining $51.5 million expected to be funded by a combination of debt and equity.

Elk launched a $A30.7 million equity raising in June and is currently finalising a US$58 million debt facility with Benefit Street Partners.

 

Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX emerging companies with distribution in Australia, UK, North America and Hong Kong / China.

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