Oil and natural gas company Dejour Enterprises has signed a letter of intent with US Oilco, an exploration and production company, to form an exploration joint venture (JV) based on some of Dejour's Canadian landholdings.

As per the initial JV, Dejour will receive an option payment of a maximum of $1m if the company achieves specific objectives in the first quarter of 2011.

If the initial objectives are achieved, the JV is expected to fund land purchases up to $5m, with Dejour having 35% share and US Oilco having 65%.

Following that, two horizontal wells worth around $9m will be funded and drilled, with Dejour having 20% share and US Oilco having 80%.

The two companies will carry on developing the project on an equal share basis beyond the earning period.

Dejour COO Hal Blacker said that success in the ensuing tests could considerably increase the value of Dejour’s Canadian hydrocarbon reserves and enhance shareholder value.