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Dejour Enterprises is
focused on three individual high impact energy areas of North America,
including the Athabasca Basin of Saskatchewan, the world’s number-one
uranium address,
the vibrant oil and gas lands in the Piceance/Uinta
Basins of Western Colorado and Eastern Utah,
and the gas rich Peace River Arch area of NW Alberta/NE British Columbia
Energy
Oil & Gas Exploration
(Amex: DEJ & TSX-V:DEJ)
Dejour Enterprises Ltd.
Suite 1100 – 808 West Hastings Street
Vancouver, BC, Canada V6C 2X4
Phone: 604-638-5050
Robert L. Hodgkinson
Chairman & CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
Published – June 22, 2007
BIO:
Robert L. Hodgkinson, Chairman & CEO
Over 30 years experience in public and
venture capital markets.
Previous founder of several publicly traded successful petroleum
exploration companies including: Optima Energy (Petroquest Energy NYSE-PQUE)
and Australian Oilfields Pty. (Equatorial Energy/Resolute Energy/Cordero
Resources).
Company Profile:
Dejour Enterprises
Ltd. is a micro cap Canadian company focused on oil & gas exploration and
production with a significant investment in uranium discovery. The company
acquires high-impact energy assets and strategically monetizes them through
partnerships and co-ventures to limit exposure and enhance returns.
Dejour has significant holdings in three of the world's premiere energy
resource regions. This includes 288,000 gross (60,000 net) acres in the
Piceance and Uinta Basins, a vast natural gas play in North America; and a
major interest in Titan Uranium Inc. (TSX-V: TUE), with 1.44 million acres
in the Athabasca and Thelon Basins, the world's most recognized areas for
uranium exploration. Finally, the company is successfully pursuing high
impact natural gas opportunities in Canada's Western Sedimentary Basin,
known as the Peace River Arch Projects, earning into lands totaling over
49,000 gross acres.
The Company is listed on the TSX Venture Exchange (DEJ.V), Amex (DEJ), and
Frankfurt (D5R). Dejour is a reporting issuer to the SEC.
CEOCFO: Mr. Hodgkinson, ‘premium assets
value realization’ is prominent on your website; what does that mean for
Dejour?
Mr. Hodgkinson: “Lynn, it is a pleasure
to be back here talking to you. Since we put Dejour together in 2004, we
have been focusing on three individual high impact energy areas of North
America. The first has been the uranium exploration and production area of
the Athabasca Basin in Saskatchewan, which is the world’s number-one uranium
address. Secondly.,we have provided a significant impact to our portfolio
with the addition of over 300,000 gross acres of vibrant oil and gas lands
in the Piceance/Uinta Basins of Western Colorado and Eastern Utah. This
particular regime is perhaps one of the largest natural gas accumulation
remaining in North America, an area where every major company is extremely
active now. A landholding such as ours is very significant for a company our
size. And thirdly, we have been active in is the natural gas region of the
Peace River Arch area of northern Alberta and northeastern British Columbia,
Canada. We are drilling our way to almost 50,000 gross acres there. We have
seven projects on the books now. We have been active in the three and we
have made two very significant discoveries. When we talk about premium
assets, that is where we begin; we want to be in the number-one areas of our
respective energy resources and we want to stay in North America.”
CEOCFO: Why do
you want to stay in North America?
Mr. Hodgkinson:
“Number-one, the prices are the best that you can get in the marketplace.
Number-two, I think our resources are much more secure here than they could
be elsewhere.”
CEOCFO: Where
are you in the various projects?
Mr. Hodgkinson:
“In the Athabasca Basin we purchased 1 million acres of exploration lands
from the Saskatchewan government in 2004 under the auspices of my mentor Dr.
Lloyd Clark, who was the head of research and exploration for SMDC which is
now called Cameco Corp(NYSE-CCJ). In 2005 and 2006, we added over $7 million
of very advanced geophysical interpretations of all of the data that we had
on that ground and shot significant new data. In late 2006, Titan Uranium
Inc. (TSX-V:TUE) acquired our uranium properties. We turned that $8 million
investment into about $45 million in stock in Titan Uranium Inc. We also
retained the 10% carried interest and an override on all of those
properties. This put Dejour in a very interesting position. It increased our
visibility to the potential of a uranium discovery to better than a
million-and-a-half acres of combined lands when combined with Titan. We own
33½% of Titan and that was after making sure that they had significant
additional capital. They have over $25 million in cash to devote to the
exploration of properties that they own by themselves and through the
combination of assets with us. They are actively drilling these projects as
we speak; their drilling budget will be $25 million over the balance of 2007
and 2008.
In the Piceance/Uinta Basins in Colorado and Utah, we have been analyzing
the land purchase that we made. We own 25% of those 290 thousand acres,
roughly 60 thousand acres net Dejour at this time. It is expanding in a
small degree every month. We have completed our diligence on what the
industry is doing and drilling around these projects and it is absolutely
massive; in fact in the next five years industry will drill about 43,000
wells in these intermountain basins and spend about $25 billion.
The Piceance Basin is the center of it all. The USGA indicates there is well
over 300 TCF of gas available in this basin in place and firms like Exxon
Mobil Corp. (NYSE-XOM) and Encana (NYSE-ECA), are actively drilling
thousands of wells every year trying to get that out. That particular basin
has the greatest proven reserves of any particular gas producing area in
North America.
Where we are is, that we have just received our permits to drill the first
two wells on our Barcus Creek prospect, which lies right in the heart of the
Rio Blanco Deep area, with Exxon drilling on one side and
Conoco-Phillips(NYSE-COP) drilling on the other side. We have just retained
a rig to drill our first two wells in a prospect area that will ultimately
will probably support somewhere between 20 and 24 wells. In addition we are
expecting approval from the Colorado Bureau of Land Management and the State
for the ability to drill another 20 wells and that will represent a total of
about a $50 million project, which will take about 2½ years.
In the meantime, we have made significant moves to open an office in Denver
and I expect that to be done by the end of June. We will be moving certain
personnel there to work closely with the industry with the idea of
exploiting the values of our land doing some
conscientious drilling and making the kind of deals we need to make
to bring seasoned operators into every aspect of what we are doing there.
The third area in the Peace River area, we have seven projects at this
point-in-time. We have made two discoveries and we expect the three wells to
be in line in August producing about 2 ½ mmcf/d net Dejour, and that would
be the equivalent of about 400 barrels a day. By the end of the year we
would expect that to basically double and hopefully by the end of the year
we would have drilled many of the balance of seven projects and earned our
way into essentially 50 thousand acres of oil and gas lands. If we are
successful there on a 50% percent basis, we will probably end up having 20
to 24 additional wells to drill. The idea here was to prove up about 30 BCF
gas net Dejour, which would be worth about 60 to $80 million or about $1.00
a share on a present value basis and $12 million a year net cash flow by the
end of 2008.”
CEOCFO: Are you
looking for additional land?
Mr. Hodgkinson:
“We are always looking for interesting new deals that represent the kind of
long-term vision and value proposition where we could see adding technology
or exploration techniques and finding more than one way to get our capital
back.”
CEOCFO: What do you and your group know
that others do not?
Mr. Hodgkinson:
“We have a particular vision that we are in a singular uptrend in the energy
cycle. Certainly uranium having gone from $18.00/lb. to where it is now
around $138.00/lb. in less than three years is one of the best up-trending
commodities that we have ever seen and I do not see any downside there for a
period of years. Oil and gas is a much more geopolitical tool, oil
particularly, but it has probably found a base at a $60.00 range. Even all
the conservative analysis of values base oil at $55.00, currently trading
north of $65.00. We think that it has the opportunity over the next three to
five years of being significantly higher. Natural gas on the other hand, is
much more of the regional fuel, but the downturn of natural gas prices from
February of 2006 until December has created a very unique set of attractive
circumstances. I personally feel that natural gas could be well into the
double digits by the end of 2008 and not coming back. With that kind of idea
in mind, the downturn that has taken place in North America has caused a lot
of exploration to be sidelined, particularly in Canada and in less economic
regions of the US market. We saw the other day that the pipeline from the
Beaufort Sea (Northern Canada) may be sidelined unless the government puts
in certain guarantees or subsidies. We are seeing many of the coalbed
methane projects being sidelined because they are not economical. All of
this stuff creates less of a cushion to assist us in times of energy
shortfalls when we are really being pushed. I feel that the North American
natural gas market is going up while the leverage that we can have in that
marketplace by virtue of the land and the kind of deals that we have done
here have the opportunity of creating huge profits for everyone that is a
shareholder.”
CEOCFO: You
recently have been listed on the AMEX; please tell us the significance for
the company.
Mr. Hodgkinson:
“The significance of the AMEX to us is the exposure that puts us on the
radar screen of a much more significant share holder base, potential
institutions, management capital groups, senior brokerage firms and the
coverage by energy analysts. We have over 15,000
shareholders and over half of those are in the United States, so it is very
important for us to be able to respect and react to that kind of fiscal
interest in our company. Of course this is not to say that we aren’t
maintaining actively our listings in Canada and overseas, which we are.”
CEOCFO: In
closing, there are many companies out there, why should potential investors
focus on Dejour?
Mr. Hodgkinson:
“There are few junior companies which could be so positively impacted by
discovery as Dejour. We manage our risk extremely well; we had a lot of
experience doing that yet we are in the places where we can make discoveries
that can make a huge difference to us. We have three separate focus areas,
two are in natural gas and one is in uranium. Our natural gas deals are
fundamentally very different. The Peace River Arch area is a pure natural
gas conventional play with a lot of science. The potential for very quick
production but the reserve base is paid out quickly.
The Piceance Basin on the other hand is just a
pulsing giant where we are not only competing against, but in harmony
with all of the majors who every time they drill a hundred wells to ours are
improving the values of our land. Therefore, it is a huge combination of the
ability to increase value through thoughtful exploitation, but also through
real estate rising prices caused by increased drilling densities which
really are proving out reserves on our landholdings. It is a tremendous call
on the energy market both oil and natural gas.
Uranium is like the pot of gold at the end of the rainbow. You have to drill
and the discoveries are few and far between considering all the companies
over the last fifty years that have been actively exploring the Athabasca
Basin in each of the two previous booms. However, it is still the best place
on earth to find the size and grade of reserves that can make a difference.
That’s what we are after.
The budgets that we have, with the science that we put into it, along with
the hand picking of the geographical areas in which we hold lands is exactly
what the market needs to have the opportunity to benefit from. We have
assessed it from the risk point of view. If you look at our balance sheet,
you recognize that we operate from a strong cash position with well over $20
million in cash, closer to $25 million. We have about $45 million in
publicly traded shares of other companies, which represents partly our
ownership in Titan, and that we can and will utilize strategically. We have
overrides and carried interests on these properties which have been
independently evaluated over $5 million.
We also have 25% of 290 thousand plus acres in the Piceance/Uinta basins,
which we think conservatively, are valued now at well over $1,000.00 an
acre. Our other oil and gas properties in the Peace River Arch are worth
over $6 million just from what we know, at this early date, from the proven
discoveries. We think we have about at least $2.10 a share in really
saleable hard assets: cash, securities, land and reserves. For a junior
explorer that relies on its success from discoveries, the discovery premium
is only .20 cents a share, which is very low in this environment.”
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