Price Target Raised in Connection with Woodrush Acquisition and Kokopelli JV
New York, NY / ACCESSWIRE / July 24, 2014 / SeeThruEquity, a leading New York City based independent equity research and corporate access firm focused on smallcap and microcap public companies, today announced that it has issued a special update on Dejour Energy, Inc. (NYSE MKT: DEJ) and raised the price target on the company to $0.66 amid Dejour’s announcements regarding the closing of the Woodrush Acquisition and the Kokopelli joint venture as well as the retirement of $3.5 million in debt.
Highlights of the report are as follows:
DEJ Closes Woodrush Acquisition to Own 99% Working Interest
On July 3, 2014, Dejour announced the closing of the previously announced acquisition of a further 24% working interest in its legacy oil and gas project Woodrush, increasing its total working interest to 99%. According to DEJ, the Woodrush project currently produces 475 BOE per day with ~$40 per BOE netbacks. Furthermore, a $2.5mm development program is scheduled for 2H14 targeting Halfway oil and Gething gas, which could add ~50% to the current production threshold. The closing of this production acquisition increases the value of proven and probable reserves to $11.5mn on an NPV-10 basis. Following the transaction, we are revising our revenue estimates upwards by ~10% to $14.3mn ($13mn earlier) in 2014E, as DEJ would get almost the entire 475 BOE/day production to its hold with 99% working interest.
Closes $20mn Kokopelli JV and Commences Drilling
On June 30, 2014, Dejour closed a $20mn joint venture agreement with an U.S.-based E&P company to develop its core Kokopelli leasehold. Dejour received ~US$3.75mn at closing and is carried for 25% for US$16mn in drilling, completion and permitting expenditures beginning in August 2014. We believe the closing of the JV is a major milestone for DEJ as it helps to fund drilling of a minimum of 8 wells to at least the base of the Williams Fork gas/liquids bearing zone. Additionally, DEJ would obtain ~70% reduction in G&A expenses in Dejour USA, as it transfers operatorship of the project to the JV partner while retaining 25% working interest in the JV. We expect marginal addition to DEJ’s revenue from the Kokopelli JV as its working interest has reduced to 25% from the earlier 72%.
On July 17, 2014, DEJ announced that development operations related to the Kokopelli JV have commenced. Pad 21B is currently being built and equipped for the drilling of at least 8 wells. Upon completion and fracture of these wells by November 2014, each will be tied into the existing infrastructure that services the company’s current production base. We will be interested in the results of testing of the Mancos as this has the potential to create significant reserves for the company as early as this year.
Retirement of $3.5mm in Debt
DEJ retired C$3.5mm in debt from the U.S. property, reducing total debt by nearly half to $2.9mn. This would drastically reduce interest expenses to $0.4mn in 2014E from nearly $1.2mn in 2013.
“These are significant developments for Dejour which we believe will enable DEJ to increase production and drive revenues, operating income, and free cash flows over the next 2-3 years. As a result, we are raising our price target from $0.53 to $0.66 on the name,” commented Ajay Tandon, CEO of SeeThruEquity.
The report is available at: DEJ Company Update Note. SeeThruEquity is an approved equity research contributor on Thomson First Call, CapitalIQ, FactSet, and Zack’s.
Please review important disclosures on our website at http://www.seethruequity.com/.
Dejour Energy Inc. is an independent oil and natural gas exploration and production company operating projects in North America’s Piceance Basin (45,425 net acres) and Peace River Arch regions (17,000 net acres). Dejour maintains offices in Denver, USA, Calgary and Vancouver, Canada. The company is publicly traded on the New York Stock Exchange (NYSE MKT:DEJ) and Toronto Stock Exchange (DEJ.TO)
SeeThruEquity is an equity research and corporate access firm focused on companies with less than $1 billion in market capitalization. The research is not paid for and is unbiased. We do not conduct any investment banking or commission based business. We are approved to contribute our research to Thomson Reuters One (First Call), Capital IQ, FactSet, Zacks and distribute our research to our database of opt-in investors. We also contribute our estimates to Thomson Estimates, the leading estimates platform on Wall Street.
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