In the last few weeks, Elk Petroleum has moved to acquire a second Wyoming oil field.

The Sand Draw South oil field has current oil production of 47 barrels of oil equivalent per day (boepd), which would increase the company's current daily production to about 67boepd.

Elk bought the field for $US775,000, funded out of existing cash reserves.

Sand Draw South includes a 100% oil interest in roughly 240 acres with two currently producing oil wells and considerable processing and storage facilities. Current oil production from this area is 35bopd (86.5% net revenue interest).

It also includes a 25% interest in 1920 acres surrounding the oil production, including one producing gas well and processing facilities. Elk's share of current gas production is about 75,000 cubic feet (25% NRI interest and equivalent to about 12bopd).

"Initial assessment undertaken by Elk Petroleum's production team indicates a redevelopment of the field can be undertaken by the installation of higher volume pumps in current producing wells, the re-entry of two other wells and the installation of high capacity pumps," the company said.

There was also potential to develop gas production opportunities in the 100%-owned 240 acres, according to Elk.

"Redevelopment of the oil reservoir will increase daily oil production from the South Sand Draw oil field to 140 net bopd and this will be undertaken within 12 months," the company said.

At its first oil field, Grieve, the Perth-headquartered oil producer has developed a four-stage, two-year recovery program based on modern technology and techniques to make the wells flow again at the historic 13 square kilometre block in Wyoming’s Wind River Basin.

Elk owns 100% of the field and its facilities, giving the company the potential to conduct uninterrupted operations, make its own decisions and act quickly.

The field, which was first drilled in 1954, has never been worked with secondary recovery techniques, such as waterflood or natural gas re-injection. Elk has said there was an independently estimated 12 million barrels of reserves that could still be recovered from Grieve.

By 2007, Elk aims to be getting 1000-plus barrels a day output from Grieve.

Oil extraction will be undertaken in stages: increasing current output to 100 and then 400 barrels a day by June next year in the budgeted $2.3 million first and second parts of the strategy. Then a year-long recovery program on the probable and possible reserves in 2006-07 could lead to passing of the anticipated 1000 barrels a day output.

Elk’s effort will centre on the hydrocarbons in the Grieve Sandstone, a sequence within the Muddy Sandstone Formation. The oil is a premium light sweet crude.

In 1960 the field was pumping about 12,000 bopd and the gas wells were producing 11, 500 cubic feet per day in 1987.

Non-executive director Matthew Wood said he was confident of reaching the company’s initial target production.

“We’re a production company, not an exploration company. It’s going to be good, steady growth. At a certain point we’ll be self-funding. In three months we will be producing more than 100 barrels and will exceed that performance as we learn more about the field and bring more wells on-line,” he said.

Wood was previously Iberian Resources’ managing director who last year successfully floated the Europe-focused gold and precious metal explorer.

Elk’s board of directors includes chairman Richard Wood who has more than 35 years in management, engineering and operations in the upstream oil industry.

Other team members include non-executive director Glenda McLoughlin – an investment banker, management consultant and industry policy analyst – and Elk president Bryant Mook, an industry professional and current chair of the Wyoming State Petroleum Section of the Society of Petroleum Engineers.

If the team’s efforts succeed, Grieve’s initial cash flows will not only finance the later advanced stages of its recovery program but will also contribute to the purchase of additional production assets.

Wood described the company’s business plan simply as: “Complete the initial stages at Grieve within the next three months, achieve increased production from 100 barrels to 400-plus barrels, acquire a second property, and continue to assess additional production assets within the US.”

The $4.4 million raised by Elk has allowed the company to follow the route the founders had chosen several years ago to redevelop and increase the output of producing and non-producing historic oil fields using modern extraction techniques.

At Grieve, the strategy’s first stage may also increase knowledge of the down dip possibilities within the field, but much will not be known until August.

By the end of stage two, Elk plans to have enough information to model the reservoir and decide whether extension wells to the down dip region are viable.

The company also plans to evaluate expanding the reserve base at the Grieve by exploring the previously untested Cloverly Sandstone 35m below the Muddy Sandstone formation, by extending selected existing during the redevelopment’s first stage.

But for Cook, what lies on the surface of Grieve is already giving pleasure after all the hard work organising the project.

“Grieve is like a beautiful old house that’s been neglected. It’s an incredible renovation opportunity,” he said.

Elk Petroleum … at a glance

HEAD OFFICE

2nd Floor, 675 Murray Street

West Perth, WA 6005

Ph: (08) 9226 1356

Fax: (08) 9226 2027

Website: www.elkpet.com

DIRECTORS/OFFICERS

Richard Wood, Robert Cook, Matthew Wood, Glenda McLoughlin, Timothy Flavel

MARKET CAPITALISATION

$12 million (at press time)

MAJOR SHAREHOLDERS

Timothy Flavel (5.65%)

Matthew Wood (5.4%)

Richard Wood (5.25%)

Robert Cook (5.25%)