Dejour Primed for Piceance/Uinta Project



Dejour Enterprises Ltd. this week plans to submit to the TSX Venture Exchange the required National Instrument 51-101 report (Standards of Disclosure for Oil and Gas Activities) for the Piceance/Uinta natural gas resource project, according to Robert L. Hodgkinson, the company’s president.

The 51-101 report, authored by Ryder Scott Co., Petroleum Consultants, is based on the acquisition of 267,152.29 total gross acres (254,640 net), including an additional 14,104 net strategic acres, in the Piceance/Uinta Basins pursuant to its agreement with Retamco Operating Inc. originally announced on May 11, 2006. Dejour has a binding letter of intent, subject to regulatory approval, with Texas-based Retamco to own and participate in the drilling of this large accumulation of conventional and unconventional oil and gas leases located in the Piceance/Uinta Basins of western Colorado and eastern Utah. These basins hold one of the largest natural gas resource/ production reserves in North America.

Dejour considers the project a “tremendous opportunity” because it comprises two distinct project types involving roughly 267 leases covering 18 geological prospects within these basins.

Key highlights of the Piceance/Uinta Basins are:

  • 6000+ square miles estimated to contain more than 300 trillion cubic feet of conventional and unconventional gas in place and as much as 3 billion barrels of oil
  • Established resource, with significant deeper exploration upside
  • Low political, economic, and development risk
  • Repeatable drilling play utilizing the latest completion techniques that provide for 60-80% recovery rate per well, estimated at 100bcf/section
  • Multiple wells per location, effective drilling economies of scale
  • Well advanced pipeline network, growing with capacity
  • Largest natural gas resource play in the mainland U.S. that has attracted major industry players (i.e., Encana, ExxonMobil, Chevron, The Williams Co., Bill Barrett Corp., ConocoPhillips)
  • Dejour land position creates significant beneficial shareholder leverage

The project consists of two types. The "Natural Gas Resource" project is a well-defined stratigraphic gas resource, covering more than 198,561.2 gross acres (188,422.47 net) of leases that include low-geologic-risk natural gas assets plus the opportunity for deeper Jurassic reserves. The second project is a massive deep "Overthrust oil" project covering 68,591 gross (66,218.2 net) acres of leases in the northern Piceance/Uinta Basins with a high reward potential and commensurate risk. This project is a deep-seated oil prospect with the geological potential to contain up to 3 billion barrels of oil, directly analogous to the Rangeley field located immediately adjacent, having produced more than 1 billion barrels to date.

Dejour will acquire a 25% net working interest in the "Natural Gas Resource" project and a minimum 12.5% net working interest in the "Overthrust Oil" project. Leasehold acreage will have a minimum 80% net revenue interest. Dejour will pay its proportionate share of all exploration expenses including seismic, drilling, completion, or abandonment and equipping for a minimum 25% working interest in the entirety of the "Natural Gas Resource" project, and similar proportional costs for a minimum 12.5% working interest in the "Overthrust Oil" project.

The total land cost to Dejour now totals $22,153,157, comprising $5 million cash and 5.5 million common shares valued at $10,726,700 ($2.17 per share) payable at closing, with the assumption of a $5 million zero coupon note maturing December 31, 2006. Dejour is adequately funded to fulfill its financial obligations pursuant to this agreement. It has been agreed that the additional land costs will be settled with Retamco through the issuance of a 2-year debenture ($1,426,457) convertible at $1.35 per unit, bearing an 8% coupon, payable quarterly, subject to exchange approval. Each unit consists of one common share and one share purchase warrant exercisable at $1.50 per share.

Working interest and operator partnerships are currently being finalized. Dejour expects drilling to commence early in Q4 of 2006.

Dejour Enterprises Ltd. is a Canadian energy company focused on exploration and development of uranium and oil and gas while leveraging opportunities that exist as a result of the global market's decreasing conventional supply and increasing demand for energy. The company is listed on the TSX Venture Exchange (DJE.V), OTC (DJEEF), and Frankfurt (D5R). Dejour is a reporting issuer to the SEC.

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