We have upgraded our rating on Dejour (DEJ) to Outperform based upon a higher confidence level of a successful drilling program at Woodrush later this year, coupled with a more attractive valuation level of the stock. The company’s production profile should dramatically improve with the new wells.
In addition, the removal of allowable production constraints is expected next year when the water flood project is completed. Our price target is $1.05.
Significant fundamental events can considerably increase a stock’s valuation in a step-fashion. One such event would be Dejour’s achievement of positive profitability, in which case the stock could experience rapid price appreciation. We now expect the company to achieve profitability in the fourth quarter of 2010.