Dejour Energy drills and cases first well at
By Steven Ralston, CFA
announced today that its first well at Kokopelli has been drilled
and cased to a depth of 8,440 feet. Dubbed Federal 6/7, the well
targets the liquids-rich gas stacked discontinuous sands in the
Lower Mesaverde formation, which is part of the Mesaverde Total
Petroleum System designated by the U.S. Geological Survey (USGS).
Management expects to perforate, fracture stimulate and complete
the well in the fourth quarter. It is critical for Dejour to begin
production at Kokopelli in order to preserve the lease on the
entire 2,200 gross acres (by changing its status to a
held-by-production lease). Dejour's stock rallied over 16% on the
The well bore encountered strata consistent with the Mesaverde
formation and a gas column thickness comparable to nearby wells
drilled by Williams Companies
and Bill Barrett Corporation. The acreage of Dejour's Kokopelli
project is proximate to the Douglas Creek Arch, where the depth of
the Mesaverde formation moderates to less than 500 feet. However,
the well bore intersected multiple formations of potentially
gas-producing zones that total 2,500 feet. The zone targeted in the
Lower Mesaverde formation is comprised of sands, silts, coals and
shale, which are typical of the Mesaverde Group in the Kokopelli
Field. The source rocks for the Mesaverde formation include coals
and carbonaceous shales from which gas has been expelled and
subsequently has migrated into the sandstone beds.
Dejour Energy has a 71.5% working interest of 2,200 gross acres
(or 1,573 net acres) in the Kokopelli area of the Williams Fork
sandstone formation located in the Piceance Basin of Colorado. The
acreage is immediately adjacent to the producing leaseholds in the
Kokopelli Field, owned by
Williams Companies (
As previously indicated by the company, management decided to
reduce the number of wells in the initial development of the
Kokopelli field from four wells to one well due to weak NGL prices.
The successful completion of this single well, including the
attainment of a certain minimum quantity of paying gas, will
require only the minimum required capital investment to maintain
the lease on the 2,200 gross acres. Additional drilling has been
deferred until 2013, and the number of wells will be dependent on
Also, late last week, Dejour announced the addition of
approximately 31,000 net acres in northwestern Colorado to the
company's exploration portfolio. The acquisition of the acreage is
a result of a restructuring of an exploration joint venture (JV)
with Brownstone Energy, which has been in place since 2008.
Our rating on Dejour's stock remains Outperform based upon the
expectations of increased production from the company's Woodrush
property in the second half and the successful completion of the
company's first gas-producing well at Kokopelli, along with the
stock's continued attractive valuation level of the stock relative
to its reserve valuation.
Please visit Steven Ralston's coverage page at
to access a free copy of the full research report.
BILL BARRETT CP (BBG): Free Stock Analysis
DEJOUR ENERGY (DEJ): Free Stock Analysis Report
WILLIAMS COS (WMB): Free Stock Analysis Report
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