Dejour to complete 4 Kokopelli wells in early 2013 - Analyst Blog
03 Enero 2013 - 4:56AM
Zacks
Dejour to complete 4 Kokopelli wells in early 2013
By Steven Ralston, CFA
Dejour Energy (NYSE MKT:DEJ) announced that
a private Denver-based drilling fund has agreed to finance the
drilling of three additional wells from the existing pad at
Kokopelli and the completion (perforation and hydraulic fracturing)
of all four wells into the Williams Fork sandstone formation. A
completion schedule for the wells is expected in the near future;
however, management has indicated that the four-well project is
expected to be completed in early 2013.
The drilling fund is providing $6.5 million of capital for the
multi-well project in return for priority payout from initial
production until 125% of the capital contribution (or $8.2 million)
is received and for permanent ownership of a 46.5% working interest
in the four-well project. Also, until the $8.2 million is
collected, the drilling fund will hold ownership of Dejour's 71.5%
working interest in the four-well project. During the production
phase, Dejour will receive an infrastructure usage fee of $0.20 per
MCF of gas produced. The fund also has the right of first refusal
on the next multi-well project at Kokopelli.
The terms of the financing do NOT pertain to Dejour's 71.5%
working interest in the deeper Mancos shale gas play over the
entire 2,200 gross acres of the lease and Dejour's 71.5% working
interest in the gas sands of the Williams Fork formation over the
remaining 2,120 gross acres.
The access to $6.5 million in funding allows Dejour to fully
develop four wells on the first drilling pad site without issuing
debt or having to further access the company's bank line of credit.
Also, Dejour will achieve economies of scale by consecutively
drilling multiple wells from a single pad and by progressively
perforating and fracturing all four well bores during a single
developmental time period. Lastly, and according to management,
most importantly, this process of developing the first four wells
at Kokopelli minimizes Dejour’s risk exposure to potentially lower
natural gas and NGL prices while ostensibly demonstrating the
potential value of the Kokopelli lease.
Our rating on Dejour’s stock remains Outperform based upon the
expectations of increased production from the company’s Woodrush
property and the completion of the company’s first gas-producing
wells at Kokopelli. New reserve valuations (NPV-10) dated December
31, 2012 are expected on both Woodrush and Kokopelli.
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