DXIEF DXI Capital Corporation (CE)

Steven Ralston, CFA

Zacks report highlights South Rangely discovery

In June 2011, Dejour (DEJ) announced that its vertical 3,863 foot exploratory well encountered approximately 90 feet of hydrocarbon bearing siltstone in the Lower Mancos “C" sands. The company is reviewing the well data before releasing specific information. In addition, the well will be completed, fractured and flow tested to determine the commercial potential of the discovery. If warranted, Dejour will follow-on with a horizontal well program. An announcement is expected in the third quarter.

Dejour conducted exploratory evaluation drilling at South Rangely, financed by the stock and warrant offering in January. Having conducted two deep seismic soundings, a vertical well at South Rangely was drilled to test both the upper and lower Niobrara sections of the Mancos Shale, which consists largely of offshore marine shale with a middle sandy interval. The shale deposited by the western Cretaceous Seaway, a quiet inland sea that crossed the North American continent throughout the Cretaceous era, 145 to 65 million years ago. Considerable geological research has been conducted concerning the Mancos Shale and the hydrocarbon deposits that exist within it.

Dejour Energy has a 70% working interest of 7,100 gross acres (or 5,000 net acres) in South Rangely area on the western flank of the Douglas Creek Arch, which is directly south of the Rangely Oil field that has been operated by Chevron since the 1960's. The acreage is immediately adjacent to an oil producing property operated by a private operator. Dejour has a 30% working interest in the test well and an average 56% working interest in the surrounding acreage.

We rate Dejour an Outperform with a price target of $0.95.
 

For a free copy of the full research report, please email scr@zacks.com with DEJ as the subject.

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