Helium One (HE1) - Seismic Acquired and Drills Turning in May

April 13 2021, 14:49 GMT+01:00

Helium One Group

  • LSE: HE1
  • Shares Outstanding: 499.76M
  • Share price £0.13 (13.04.2021)
  • Market Cap: £56M

Helium One is focused on exploration, development, and ultimately aims to become a producer of high-grade Helium for the international market, a critical material essential in modern technologies. Helium One holds 4,512km2 of exploration licences in highly prospective Helium provinces in Tanzania. The Company holds 100% of these licences and has exclusive rights to develop the assets. 

We caught up with David Minchin, CEO of Helium One, who has just spent 3 months in the country where the team is preparing to commence the drill programme in May. We previously spoke to David in January when he explained in detail the Helium macro and the green investing element, the hybrid nature and the scale of their project.

A Progress Update: What has Been Achieved in 3 months?

The key activity which Helium One has commenced during the last 3 months is the acquisition of Seismic. They have a team of nearly 100 people out there at the moment driving it forwards as it is a key technical hurdle to overcome before they start drilling. The team is focused specifically on the traps that they've targeted, to improve the resolution of those traps, to ensure that when drilling starts, they are directly on the crest of closure, rather than drilling off on the shoulder and receiving a false negative. They need to have meaningful data to ensure that they drill right in a crest closure. As gas rises, it collects in the top of the closures which is the part to target for the traps.Helium One (HE1) - Seismic Acquired and Drills Turning in May

The Drill Program: Timing & Who They're Working With

Helium One plans to commence drilling in the middle of May. They have appointed Mitchell Drilling, who are well-known drilling contractors with 50-years’ experience, 115 rigs in various parts of the world and have negotiated a good deal with them. Mitchell Drilling has agreed to do the third hole and an optional fourth hole being paid in shares, which is almost unheard of for a drilling contract to take 50% of a contract in equity. This gives Helium One a lot of optionality to identify new targets in the Seismic campaign, as they have the capacity to expand their exploration programme to test those targets.Helium One (HE1) - Seismic Acquired and Drills Turning in May

Exploration VS Appraisal Drilling

Mitchell Drilling will be drilling down to a depth of 1,200m. There is no need to drill as deep as 10,000m to get a commercial accumulation of Helium because it's a high-value gas which comes from quite shallow traps. Exploration drilling will test if there is gas present and will attempt to take a sample of that gas. Appraisal well drilling will understand the composition of the reservoir and to test the flow rate of that reservoir. 

Helium One is also going to try to do a drill-string test to try to flow the Helium to the surface which might work. If they get a good show on the wireline and a good show on the mud rock, it gives confidence to move on to appraisal drilling which is a much wider diameter hole of 7-inch wide, with a core of 6 and 3/4 inches, which can go for petrological studies. The core has porosity probability testing and they can measure the flow rate to see how the pressure drops when you flow it, which gives more understanding of the characteristics of the reservoir and how it's going to behave during production. The appraisal well provides the information needed to design the production holes.

By using the same drill rig, it will save about USD$500,000 and importantly, it's saving between 4-6 months in getting equipment out of the country, finding a new contractor, contacting the rig and bringing it into the country. If the company can go directly from exploration into appraisal and can complete all of their field evaluation programmes this year, it means that next year they can focus on engineering, permitting and construction.

Helium One is working very hard to make sure that the exploration programme continues on schedule and on budget. They have done what they said they were going to do, which in Africa has been tricky in the midst of a pandemic. People are waiting for the results from the drill programme to show evidence of gas in the ground. Helium shows in mud, gas identified in the wireline, if they can flow the Helium to the surface, they can hold up a sample of it. Once they have a Helium discovery, they can expect to see the same levels of explosive growth that their peers have seen in the marketplace.Helium One (HE1) - Seismic Acquired and Drills Turning in May

Helium One has an ambitious project with a green field target which has never been explored but what they have has great potential. They have 138Bn cubic feet as a pre-50 resource and it has the capacity to provide a meaningful quantity of 10-15% of global demand over the next 100 years.  

All of the indicators are there to show that the Helium is underground at the project. It bubbles up to the surface at 10.5%. Average production at the moment comes from anything from 0.5% down 0.3%, so 10.5% is 50-200x higher than anything that's currently in production, and it's in a nitrogen gas carrier, so they don't have to deal with hydrocarbon greenhouse gases, etc. They can produce zero-carbon Helium, which is going to be increasingly important as the century evolves. 

Exciting the Market & Creating Growth: Is There a Plan B?

Helium One has announced that drilling will commence in mid-May and as they start mobilizing rigs and start mobilizing equipment, the catalyst is going to become more and more apparent to the market and hopefully as a result the share price will start to creep up.

Helium One has 3 projects. Rukwa is the most advanced because of the wealth of historic data they have available, but Eyasi and Balangida are both equally unique in terms of geology and are also slightly different. Eyasi and Balangida are both salt lakes. In the subsurface there are horizons of salt, which is the grade A capstone, so if they find a problem with Rukwa, then they would go to Eyasi and Balangida, where they know that the salt formations are going to be a perfect seal, and start again from there.Helium One (HE1) - Seismic Acquired and Drills Turning in May

Meaningful Change & Primary Focus Going Forward 

The primary focus for Helium One at the moment is to get the drill bit into the ground and get it turning to add value for their shareholders when they make that discovery. The company has also made good relationships with the government and with the contractors. 

Helium One is one of the more interesting stories in a rather niche space that not many people pay attention to which they have introduced to us. Helium margins are growing and as a high grade producer this company looks very interesting to us. We are keen to see how this market grows and expands over the course of the next year or so and will follow this story with interest. 

To Find out more, go to the Helium One website

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