DEJ: Release of annual report; new Zacks estimates, target price
Dejour Enterprises (DEJ) on March 31, 2010 released its annual report with results dating from December 31, 2010.
On an adjusted basis, Dejour showed a loss per share of CAD 0.11 for the year (compared to our most recent forecast of a loss of CAD 0.08 per share) and CAD 0.03 for the fourth quarter (compared to our forecast loss of CAD 0.02 per share).
The company’s CAD 12.8 million net loss for the year was substantially larger than our most recent estimate (December 31, 2009) of a loss of CAD 7.1 million. The difference was primarily composed of CAD 5.4 million of oil and gas impairment write-offs, including CAD 1.4 million related to lease expirations.
Since the impairment losses are non-cash items, the company’s cash-basis (discretionary cash-flow) results were not affected, coming in at or very close to our 2009 estimates (a loss of CAD 0.01 per share for the year and a fraction of that for the fourth quarter).
Management also released guidance on 2010 production which substantially reduces expectations compared to our previous forecast (down to 385 barrels equivalent per day from our forecast of 575 barrels, a 33% reduction). Despite this, we continue to expect Dejour to be cash-flow positive starting with the second quarter of 2010.
The annual report also gave guidance limiting future capital expenditures to approximately CAD 20 million per year beginning in 2011. This would reduce the scale of the drilling programs at Gibson Gulch (Piceance Basin, Colorado) and other properties and therefore does have a substantial impact on cash-flow during 2011 through 2014.
Despite the effect of a slower drilling rate, the overwhelming factor continues to be the March 21, 2010 report from independent petroleum engineering consultants crediting the company with an additional 91 billion cubic feet of proved undeveloped reserves, all at its Gibson Gulch acreage.
Pending release by the company of its first-quarter 2010 financial statements (expected during the week of April 12th) our estimate of the intrinsic value of DEJ shares is now showing a per-share valuation for the company ranging between USD 1.29 and USD 1.40 (on a net-asset value basis), or USD 1.43 (on a discounted cash-flow basis, using only 2009 historical through 2012 forecast cash flows, plus a 30% residual). We therefore raise our 12-month price target for DEJ shares to USD 1.29 from USD 0.77.
We will provide a full update report once DEJ releases its first-quarter 2010 results.
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