Dejour Energy Inc. announced Monday that it plans to drill its first vertical test well into the Niobrara formation of the Mancos Shale play in May.

The well will test the upper and lower Niobrara sections -- believed to contain both oil and gas --and will be drilled in Rio Blanco County, CO, where Denver-based Dejour owns 7,000 leasehold acres along the western flank of the Douglas Arch. The leasehold separates the Piceance and Uinta basins and is located directly south of the Rangely oilfield, a Chevron Corp. enterprise since the 1960s.

"The economics of assessing the production potential at South Rangely offers significant production upside with minimal capital expenditure," Dejour COO Hal Blacker said. "With a dry hole cost projected to be less than $500,000, this is a very low-cost test that may open the door to a much broader and more significant development project through the application of current horizontal well drilling and completion technology."

According to Dejour, private operators R.W. Bayless and Foundation Energy are currently exploiting the lower Mancos zone at a well approximately six miles southwest of Dejour's proposed well site. If that one is successful, Dejour plans to launch a formal horizontal well development program and evaluate a second target area for drilling known as Castlegate Sand, which is located in the upper Mancos Shale play.

Encana Corp. announced last Wednesday that it planned to transfer proven gas shale technology to its "liquids-prone" holdings, which include about 240,000 net acres in the Piceance and Denver-Julesburg (DJ) basins, which Encana said has liquids potential (see Shale Daily, April 21).

Despite the moves by Dejour and Encana, Newfield Exploration Co. COO Gary Packer described the Mancos as "pretty dry" during that company's earnings call on Thursday (see related story).

"I have heard the same rumblings...of some liquids in the Mancos, but the test that we had of it I think was pretty definitive and it was dry," Packer said.

According to the latest NGI's Shale Daily Unconventional Rig Count, the Niobrara-DJ Basin went from just three rigs in late April 2010 to seven rigs this year. Meanwhile, there are 32 rigs in the Piceance Basin currently, up two from the same period of 2010. The Uinta Basin has 19 rigs operating, down one from the 20 in action in 2010.