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Waterflood successful - Dejour to host first earnings call

May 27, 2011 | Comments : 0 Recommended this article: (0)
DEJ

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Steven Ralston, CFA

Waterflood successful – Dejour to host first earnings call

Dejour ( DEJ ) announced that the waterflood at the Woodrush Field has been successfully implemented. After two months of water injection, the producing gas/oil ratio (GOR) indicates that the secondary recovery process has been effective, with the GOR having declined from 2,700 CF/BBL to less than 900 CF/BB. Since production is no longer constrained by the well allowables imposed by the British Columbia Oil and Gas Commission (OGC), well production can be gradually increased from 180 BOPD (barrels of oil per day) to 400 BOPD in July, bringing gross field production (oil and gas) to more than 800 BOEPD (barrels of oil equivalent per day). Management expects to further increase oil production throughout 2011 and into 2012, when peak oil production should reach 1,000 BOPD and gas production continue to be maintained at 400 BOEPD, bringing gross production to 1,400 BOEPD, 100 BOEPD above management’s prior guidance of 1,300 BOEPD.

Also, Dejour has contracted AJM Petroleum Consultants (independent reservoir engineering consultants) to quantify (via a 3D reservoir simulator) the expected performance of the Woodrush Field. AJM Petroleum Consultants is also expected to produce a NI 51-101 compliant reserve report in the third quarter that could result in a positive valuation step-shift of the company’s stock, along with reducing the company’s cost of capital.

Lastly, but very importantly, Dejour's management will host its first earnings call on or before June 14, 2011, detailing the results of the first quarter of 2011. This is a major milestone for the company and ultimately will increase the company’s exposure to a larger pool of sophisticated investors.

We reiterate our Outperform rating based upon the attractive valuation level of the stock and the company’s improving production profile from the company’s Woodrush producing property in northeast British Columbia. Our current price target is $1.00 based on NAV analysis.


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