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Grateful for all your responses and i thoroughly enjoyed reading them.
KeithOz, as you said, it takes time for helium to be generated from the natural radioactive decay of heavy radioactive elements such as thorium and uranium, for instance, so that is not how it may be refiled quickly as we extract it. Having said that, what I understood is that the source rock, at a much much deeper level, releases much of the helium that was produced by the decay via the various seismic tremors that the region is very famous for so the refilling may happen quicker than we all think.
Please, any one with better knowledge feel free to correct me.
OK,DBD, I got the wrong end of the stick. I think we will have gone through about 1km of rock that has lots of different strata - some will be porous, others pretty solid, some completely impervious. That will mean lots of different mini-reservoirs with different concentrations of gas, with seals of varying effectiveness, and migration of different speeds. If that is the case, I would guess that the thicker, more porous strata with higher concentrations of He would be designated reservoirs, and these would be tested for commerciality during the appraisal phase, when a larger diameter well bore allows more comprehensive testing. To treat the whole lot as one reservoir with an average He concentration would be highly unusual, since much of that volume would not be commercial, or even gas-bearing, and god knows how you would work out the average He concentration.
I would expect DM to stick to the well understood definitions of reservoir, discovery etc since to do otherwise would start to raise questions over the credibility of the results. At some future time, fracking may be required to maximise production, and that would be done by horizontal drilling into a specific stratum - a good idea to identify these now.
With regard to recharge, yes He is constantly produced from the basement rocks at great depth (the Rukwa sediments are believed to be 12km thick in places) but I very much doubt it is being produced at such a rate to refill reservoirs at the same rate we are able to extract gas. I think the term recharge is being used to differentiate ongoing He gas migration over millions of years, as opposed to a hydrocarbon system where basically it is just one shot and that's your lot.
Helium show: a meaningful proof of concept
We think it is important to distinguish between a helium show in this basin and an oil and gas show when drilling a hydrocarbon exploration well. A helium show in a virgin basin is highly significant as for the first time it proves the existence of helium in the subsurface. Also, only a relatively small volume of helium is required for commercial production as it is a high value gas. We think that it is relevant that the helium show was directly below a shale sequence as it demonstrates that the helium is being trapped by traditional siliciclastic sediments which are found throughout the Rukwa sedimentary sequence.
Next steps for the exploration well: further drilling, logging and then testing
The well is likely to take around three weeks to reach total depth in the Basement. It will drill down to the base of the Lake Bed Formation at a depth of 400m, and will then continue into the Red Sandstone Group and the Karoo Group. The Karoo is the primary reservoir target and is expected to contain stacked reservoir and seal units which will be more consolidated due to the age and depth of these sediments. If helium is present, it will be possible to perform drill stem tests on this interval and recover undiluted helium samples for grade analysis. We see the potential for Helium One to release further details of helium shows being encountered over the coming weeks if they are significantly larger than the first helium show. We would expect details from logging data to be released with pay zones being identified and potentially drill stem testing details at the end of hole.
Valuation: ~6x upside on an unrisked basis
We are keeping our risked NAV is unchanged at 25p/sh for now as we await further detail on Tai, however we only carry 4p/sh in risked value for Tai, which is worth 31p/sh unrisked. On an unrisked basis, we have a NAV of £1.33/sh or ~6x upside. Further to this are the follow-on prospects that are not included in our NAV and its other exploration areas. A US$50/mcf increase in the helium price would increase our risked NAV by 6p/sh and unrisked by 33p/sh.
http://www.helium-one.com/analyst-research/
The May presentation shows two Targets at 600 milli seconds, and 1100ms, not metres as I first thought..
I believe the first at 600ms corresponds to the 400m zone that was cased and not tested.(600x1.4x0.5)
The sidetrack depth, an unexpected show on the way to TD
The 2.2% show(70m, lake beds) readings were made on the Micro Gas Chromatograph, which had not yet been calibrated in the field.
The bubbles indicating free gas where no value was given was in the Red Sandstone Group between 552 and 561 metres, and unexpected. Measured by the on-line gas chromatograph, and supported by indications of gas visually identified as bubbles in drilling mud returns at surface.
""Visual identification of bubbles in mud returns also offers circumstantial evidence of free helium gas in the sub-surface. However, it is important to note that this interval needs to be logged with wireline before a pay zone can be determined. "
So going deeper we have moved to visual identification
Hello KeithOz
Indeed, and fully concur about show vs discovery process - what it requires as you have stated.
My speculation is on a different sub topic though eg going back to basics, its about what constitute a reservoired He system. Eg do we need a strong seal or sufficient with a weaker seal but the system is continually charged therefore reservoired? In that sense, we can dst it, wireline it, and well test it as there are sufficient He in place?
Anyhow, again, my thoughts here are nonsense so please don't take anything from it. Purely educational debate / discourse. Nothing more.
DBD: re your interesting speculations. It is my understanding that several things differentiate a 'show' from a 'discovery'. We know that so far we have had at least two shows, one of those had a composition of 2.2% He, but that has NOT been confirmed by analysing a direct gas sample, only from bubbles appearing in the mud. We do not yet know any details about the deeper show, nor of the existence of other shows, so can not yet assume that He concentrations increase as we drill deeper, although it seems reasonable to assume that will be the case.
To turn a show into a discovery, it will be necessary to
1. run a wireline to confirm the existence of a reservoir formation, with acceptable porosity
2. show that the reservoir pores are occupied by gas, not water
3. correlate the reservoir formation with the depths at which gas shows were recorded
4. perform a DST to obtain a gas sample that can be properly analysed for He content.
This all takes time, and DM will want to get it absolutely right. If there are multiple potential reservoirs, we will need a DST and analysis for each one, so as someone remarked earlier, the longer this takes the better will be the news.
Yes, the word "historic" does raise the bar somewhat.
It suggests that this "find" will alter helium prospecting and the market for years to come.
I don't think they would use that word without some justification - they know things but can't yet say them, or they are still going though the figures to reach a definite conclusion which can be published.
And contrast the upbeat tone with the June newsletter - the tone in July is certainly more confident, that of June more cautious.
With regard to what is happening, geologically, to my mind (I'm no geologist) it is still all explained in basic form by the diagram on p91 of the admission document. He is coming up the fault line from below and then getting trapped. When the lower reservoir overflows, due to the He is being produced continually, it migrates upwards through the rock layers (microseepage - not along the fault line), until it is trapped again, and the same process begins, reservoir, overflow, migration upwards, but again, crucially, not along the fault line.
There was a thin seal layer at 70M, 2.2% He, obviously this was not a compressed rock layer, but still managed to trap some He. The evidence at 561M of enhanced He levels, I took to mean that there was a seal only a relatively short distance below 561M, and the enhanced levels were from the overflow, the microseepage, from that reservoir.
The May 2021 presentation suggested that there was a potential trap and seal at 580M (and then another at 1100M), so the anticipated geology appears to line up with what they may have found - and they now appear confident that they have found it.
Everything that we know - albeit only a little - appears to line up with what they expected in their most optimistic projections.
The newsletter also hints at the potential for an intraday RNS, although no doubt the share price will start to move immediately prior to any announcement.
this is a bit out of whack (therefore purely speculation from me - don't believe what I write please) but i wonder:
1. we (market, industry) talk about He system being the same as HC (trapped, seal strength etc), understandably as in general, He production today are co-produced with HC - Oman etc.
2. However Rukwa is unique in that there is no HC associated with it, and in addition the system is being continually charged and we see the increase in He concentration as HE1 drills deeper and with "gas bubbles" show.
I wonder whether they are debating (including with reserve certifiers) what constitutes a reservoired He system, and, if what we see now - even with "marginal sealing unit" is sufficient to declare a discovery (particularly if it can be produced) eg due to the continuous and highly charged system at play. It is not HC play therefore does the definition for trap and seal need to be the same?
I suspect the deeper they drill, the better reading they are getting, consistent to what they have seen now and the bubbles continue to be seen ...
Its a bit of a whacky thought of course, anyhow all in good time we will know. Any geologist out there? :)
personally i liked the word " historic" you can be a prolific offender/criminal but unless you are the naughtiest EVER you are not likely to be considered historic !! :) good word!
Yes the newsletter gives us a nice positive vibe. The wording/editing has been carefully ‘built’ (in contrast may I say to some of the recent ‘Twits’). A few more quotes from CEO ‘you betcha’ ….. ‘drilling is drilling’ …. And ‘news will flow when it’s ready’….. just for the icing on the cake….
Sure all LTheliumers are going to have a great day today.
Keep the faith
PJ ….. £2.30
That's what sold it again to me as well, DBD. After the 77m helium show on that pathetic seal very high up I told myself, we are certainly sitting on a mammoth pool of helium deep below..just hold dude, just hold.
And with the gas show at 550m I am sure DM is still waking up at 0600 with a spring in his steps to join the day crew on the drill bit site. The clock is ticking and we can get an RNS at any second now. I am certainly looking forward to news when they come.
ATB
this is the sentence that does it for me - The gas show, trapped beneath a marginal mudstone sealing unit, indicates a prolific helium system with the potential for helium to be trapped under even "marginal sealing units". -
Two things I love about that newsletter - firstly the graphics whereby the concentric circles look like helium bubbles popping in the water, secondly the use of the word “PROLIFIC”.
Agree, seems very upbeat indeed.
Probably overthinking the ‘use of English’, but “identified targets” vs (say) ‘targets that are / might be identified’, is phrased very positively?
We know we have at least one ‘show’ and this seems to imply more than one target identified.
GLA
Link to newsletter
http://www.helium-one.com/2021/08/03/helium-one-company-news-july-2021/
The Newsletter released is very upbeat and admittedly tells us what we already know. The important thing for me is I do not read any "expectation management" in it; it states the previous great news and promotes the expectation of a discovery we are all waiting for. Wy impression is that perhaps the author knows something exciting but cannot say it, so just has to emphasize what was said last time, I like the "in case you missed it" bit for emphasis.