Dejour Energy - updates on Kokopelli and Woodrush - Analyst Blog
26 Noviembre 2012 - 5:35AM
Zacks
Dejour Energy - updates on Kokopelli and Woodrush
By Steven Ralston, CFA
Dejour Energy (DEJ) reported results for
the third quarter a few weeks ago. Though there was not a
conference call, we have since been able to speak with management
in order to get some color on the progress at Kokopelli and delve
into lower-than-expected oil production at Woodrush during the
quarter.
Located approximately 30 miles southwest of Glenwood Springs,
the initial well at Kokopelli was drilled in September. The
8,440-foot well intersected five gas bearing zones in the Mesaverde
formation. Two zones of this gas column are without groundwater and
are the targets for perforation and hydraulic fracturing
Schlumberger is in charge of perforating and fracturing this
initial Kokopelli well. Apparently Halliburton has a significant
market share in this gas field, and Dejour Energy negotiated an
attractive financial arrangement with Schlumberger that minimizes
Dejour’s upfront development costs while giving Schlumberger a
foothold in the gas field. Schlumberger is expected to perforate
and fracture stimulate the well in the upcoming weeks.
According to management, the lease on the entire 2,200 gross
acres at Kokopelli has been preserved through a two-year extension
on the original 10-year lease dated November 2002. Though the lease
is not yet held-by-production, the diligent drilling effort, which
includes not only the drilling of the well in September but also
the surface work completed in the last couple of months (the
construction of a fracturing fluid management pit and the
installation of separators and tanks) is sufficient for the
Colorado's Bureau of Land Management to extend the lease for two
years. Dejour Energy has a 71.5% working interest of 2,200 gross
acres (or 1,573 net acres).
Concerning the lower-than-expected production at Woodrush,
during the early part of the third quarter, it was noticed that the
production from well A-1–I was not progressing as expected.
Initially, it was believed that the replacement of the subsurface
electrical pump with a larger model would correct the situation.
However, production did not expand despite the pump replacement.
Finally, it was determined that a gas cap had formed in the oil
pool. A coiled-tubing workover was performed whereby a continuous
steel tube was injected through the control head into the well,
which ultimately allowed additional gas production from the gas
zone.
As a result of the unanticipated curtailment of production
during the period of time of pump replacement and the remedial oil
pool operations, field oil production declined 15.8% sequentially
to 181 BOPD during the third quarter. However, a positive response
is now being seen after the gas cap blowdown.
Our rating on Dejour’s stock remains Outperform based upon the
expectations of increased production from the company’s Woodrush
property 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. New reserve valuations (NPV-10) dated December 31, 2012
are expected on both Woodrush and Kokopelli.
To access a free copy of the most recent DEJ research report,
please CLICK HERE.
DEJOUR ENERGY (DEJ): Free Stock Analysis Report
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