Steven Ralston, CFA
Dejour files Master Development Plan for Gibson Gulch
Dejour (DEJ) filed a Master Development Plan with the Bureau of Land Management (BLM) for up to 68 wells from four new well pads on its Gibson Gulch properties in Colorado. The acreage is in close proximity to the producing properties (some within one mile) in the Kokopelli Field owned by Bill Barrett Corporation (BBG:NYSE). Interestingly, Bill Barrett filed its second Master Development Plan (Gibson Gulch II) on July 10th for sites immediately adjacent to Dejour’s proposed well sites. The similarity and close propinquity of the Master Development Plans bodes well for a timely approval process for both projects.
Thereafter, Dejour should be able to secure permits and complete the financing for the project. In the July 11th press release, the company announced that it was actively involved in discussions to secure debt financing for Gibson Gulch project. Dejour has received multiple offers to finance the debt.
Dejour’s management plans to drill 16 natural gas wells per year into the Williams Fork structure starting in the fourth quarter of 2011. Initially, we expect two-to-three wells to be drilled in 2011 so that the group can be economically fracked together. Dejour plans to take advantage of the new extension of the Williams pipeline from its Grand Valley gathering system to the Kokopelli Field. This new Kokopelli Field gathering system, based on the same nodal model, will provide an efficient method to transport Dejour’s natural gas into a large-scale, high-volume distribution system. Dejour’s production from Gibson Gulch is expected to commence in the first quarter of 2012.
Dejour Energy has a 72% working interest of 2,200 gross acres (or 1,585 net acres) in the Gibson Gulch area of the Williams Fork sandstone formation located in the Piceance Basin. After financing these initial wells with non-equity funding, management expects that the remaining wells of the 60-plus planned in the drilling program will become self-funding in 2014.
We continue to rate Dejour an Outperform with a price target of $0.95.
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