All road, pad and pit construction has been being completed in preparation of drilling of the #2-12 and #1-12 North Barcus Creek wells to the base of the Iles formation of the lower Mesaverde Group sands at 11500'. The drilling program comprises a two-stage process. Lang Exploratory Drilling has contracted to drill 2 wells to a depth of approximately 3,000' and case the surface holes. Subsequently, a deep rig will drill each well to a total depth. Combined drilling and testing time for these first two wells is estimated to be 100 days.
The #2-12 well will be drilled first, followed by the #1-12 well. (Refer to http://dejour.com/projects-north-barcus-creek.htm) The #1-12 well is a direct offset to a well drilled in 1979 to a TD of 15,700', known as the Federal #22-12 well. Dejour engaged Gustavson Associates, Boulder Co. (Geologists - Engineers - Appraisers) to conduct a petrophysical analysis of the Federal #22-12 well in comparison with the pending #2-12 and #1-12 wells. In its report, Gustavson discloses that it is their interpretation from log (logged by Schlumberger) analysis and tests run on the #22-12 well, that there exist reservoir properties, inclusive of over 260' of possible pay, that are similar to other wells in the Rio Blanco County area, which produce gas from the Williams Fork/Mesaverde formations. The Gustavson report states that "the planned twin well and nearby permitted well will be expected to produce gas using modern fracing and completion techniques" and "the twin to this well, being in a favorable location and based on the petrophysical analysis results, should encounter similar zones of gas."
Gustavson further reports that these reservoirs in general, and particularly the upper Mesaverde Group, are composed of many vertically stacked fluvial to alluvial sand bodies that are interbedded with shales and often coals. However, the lower Mesaverde Group- the Iles formation- is comprised of near shore and shoreline sandstone reservoirs that are much more laterally extensive.
Estimated 100% drilling and completion costs (including a comprehensive fracing and testing program to be carried out by Halliburton, recognized as one of the most technically experienced completion consultants in the Basin) are US $4.3 million for each of the North Barcus Creek wells. Dejour will fund its 25% share of these costs on an unpromoted basis
These two wells are the first wells to be drilled by Dejour and its partners on almost 290,000 acres of land holdings in the Piceance - Uinta Basins respectively of Western Colorado and Eastern Utah, acquired since July of 2006. The North Barcus Creek prospect, covering 1590 acres, is one of 3 separate land holdings totaling over 5000 acres within the highly promising 'Rio Blanco Deep' project area of the Piceance Basin.
Within the same project area, Williams Cos. is comprehensively testing several wells drilled to the base of the Iles formation on Exxon lands. The Williams' wells offset initial 'Rio Blanco Deep' production established by Bass Operating of Fort Worth, Texas from 3 wells, now placed on line with pipeline and related facilities recently completed to access this new production area.
The Williams Cos. wells represent the initiation of an extensive exploitation program by Exxon to drill 1000 wells on its land holdings as expediently as possible. Also within the same project area, Conoco-Phillips has 2 rigs continuously drilling on extensive land holdings held in JV with Encana USA. Dejour and its partners hold 640 acres of leases within the confines of this Conoco-Phillips/ Encana USA JV.
Dejour and its partners plan to drill a total of 4 separate locations at North Barcus Creek. If satisfactorily completed, Dejour expects that these lands will be fully developed on maximum 40-acre spacing units. The partnership strongly believes that this project area, with access to the deepest basin centered reservoirs of the Piceance Basin, has the potential to yield significantly more natural gas with greater long term deliverability than is the average to date in the Basin. Accessible pipeline facilities lay within one mile of the lease boundaries.
Dejour is on track to open its Denver operation's office September 1, 2007, to be headed by Doug Cannaday, President, jointly with Gustavson Associates, which has over thirty years of technical experience and contacts throughout the Rocky Mountain regions, with its head office based in Boulder, Colorado. This new office for Dejour will focus on maximizing the value of its Piceance-Uinta Basins' projects and serve as a base to develop other accretive energy based opportunities consistent with Dejour investment objectives. An Open House will be held August 14th at the new Denver offices with details to be further announced.
R. Marc Bustin, Ph.D., P. Geol., FRSC, is the qualified person for Dejour's oil and gas projects.
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