DXI Capital Corp. (DXIEF)

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Chairman's letter to shareholders

http://www.dejour.com/docs/letter.pdf

C H A I R M A N’ S L E T T E R
May 9, 2011
Re: Gibson Gulch / Piceance Basin Developments
__________________________________________________________________________________________
Dear Dejour Stakeholders,
Gibson Gulch (northwest Colorado) represents one of the lowest cost North American sources for natural gas.
With thick natural gas accumulations primarily in the Williams Fork formation, it is known for both low risk reserves
and NGLs (liquids) that enhance the net Mcf price. Currently, there are several large companies aggressively
developing this highly prolific resource with extensive capital expenditures slated for 2011 and beyond.
Who are the major players at Gibson Gulch?
Bill Barrett (BBG- NYSE) $ 1.95 B Market Cap
Williams (WMB-NYSE) $18.40 B Market Cap
What are these major players doing?
Bill Barrett drilled approximately 148 wells in 2010 and disclosed that they plan to drill an additional 100 wells for
2011. They currently have approximately 750 producing wells and have a stated goal of increasing NGL revenue
through an accelerated program at Gibson Gulch.
Williams is the 10th largest natural gas producer in the United States with one of their primary production areas in
the Piceance. Williams has 50 wells in this region and expect to drill at least 100 additional wells. It should be
noted that they had previously acquired property by paying $30K/acre. A new pipeline is scheduled for
completion during the second half of 2011.
What interesting developments have occurred elsewhere in the Piceance Basin?
Encana (ECA-NYSE) ($24.02 B Market Cap) drilled 125 net wells in 2010 in their Piceance resource play and
have been there since 2001. They produced 458 MMcfe/d over a broad stretch of the basin during 2010. Some of
Encana’s most prolific new horizontal wells are in close proximity to Dejour acreage located a few miles from
Gibson Gulch.
What is the Value Opportunity for Dejour and our Shareholders at Gibson Gulch?
Dejour is the only junior E&P with a sizeable stake at Gibson Gulch. With 220 well locations, our land position is
surrounded by adjacent production with neighbors who are committed to furthering their investment in the region.
As per our latest reserves report for Gibson Gulch, we have been assigned a PV-10 value of $165 million. This
value is exclusive of the deeper Mancos gas resource being developed elsewhere in the basin.
With a modest $50M market cap and a multi well drill program slated to commence in Q4-2011, Dejour plans to
bring its Gibson Gulch reserves into production early in 2012. Gibson Gulch represents significant revenue and
value growth for Dejour on the immediate horizon to supplement current rising oil/gas production at Woodrush NE
BC ($8.2 M in revenue for 2010, up over 20%). Please note this is just one component of our total portfolio of
properties that currently encompasses more than 120,000 acres and 11 oil and gas projects. Again, all within a
$50M market cap company.
Thank you for your continued interest in Dejour.
Robert L. Hodgkinson,
Co-Chairman & CEO
Dejour’s Gibson Gulch Project
Premiere proven asset
? 2,200 acres in the Piceance Basin (Colorado)
? Company paid $250/acre versus $30k/acre paid by competitors in recent transactions
? 185Bcfe of proved and probable undeveloped reserves, PV10 of $165m+ (compared to
company market cap of $50m)
? Liquids rich, solid economics even in current pricing environment (est. $7.50+ realizable/mcf)
? DEJ’s acreage is adjacent to the significant GG operations of Bill Barrett and Williams
Development plan
? In final stages (permits and financing) - 1H 2011
? Williams GG pipeline in place by Q4 2011
? Expect to begin drilling in Q4 2011, revenue in 2012
? 220 potential wells at 10 acre spacing (72% WI)
Additional upside
? Niobrara (Mancos) play potential
Statements