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I agree there's risk in any drilling operation but Galactica is significantly de-risked within an existing helium producing field and based on shallow drills in known geology. In that sense, these drills are slated for development wells rather than exploration wells (although naturally there's an exploratory element in each new location). They are being drilled with the expectation of gas gathering to the adjacent production plant. All 15 well locations are already permitted for development drilling (based on 4 previous exploration discoveries) and the immediately adjacent Red Rocks prospect is already selling helium to market. While there's no guarantee, it's long way beyond basic exploration.

"Colorado project will take 5 years to pay back the initial outlay"

Says who? Colorado should turn cash positive in Year 1, this year, and there is no initial outlay from company funds to pay back as it was financed by a raise not by debt. Might not be a lot but it isn't any kind of indebtedness and it's short term cash generating. That was the whole point of the acquisition strategy as Rukwa turned out to have a longer lead time.

I had the same thought watching the press call last night. Public procurement, local and national government, health services and so on, hasn't been flagged as a target market but would seem to be a big opportunity.

I think it's probably sensible to limit extrapolation to the 15 development wells envisaged for Galactica (6+9), all of which are already located within the existing development lease area. The first 6 are fully funded and the 9 shouldn't be much different in costings, other than being further away from the plant (the next 5 are the closest, but I guess the following 9 would tie back via State 16 so not really any longer pipework). I don't see why they should cost more than $4-5m split between BNL and HE1, and that's only about 1 year's projected income from the initial 6 wells, without any CO2 revenue, so it doesn't look problematic to me on paper (if all goes to plan). Adding some CO2 revenue and spreading the capex over years 2 and 3 would still put HE1 in cash profit from year 1, albeit marginal initially but rising to say at least $5m annually from 15 wells? All guesswork of course.

Hemo - Do keep in mind that you’re starting from a (moderately) optimistic estimate of gross revenue, not gross profit, or net profit. You need to subtract the capex reinvestment and the opex, and then future tax liabilities etc. The sales pitch for the acquisition was based on $2m pa accruing to HE1 from 6 wells over 5 years. If that could be scaled to 30 wells (and I would be cautious about simple addition) then maybe $10m a year. On the plus side, hopefully the potential 50% CO2 upside balances out any downside risks associated with adding more wells, depleting reservoir, longer tie backs, scaling up production etc. A minimum of $10m pa ROI by years 3-5 feels like a fair medium term objective for now anyway. If they could replicate that from Rukwa then there would be surplus to explore Eyasi or acquire interest in new global development projects. I think there’s a good investment case but we should be careful not to over egg expectations.

Zoffy - on the other hand, you could say 70% CO2 is commercial, whichever way you look at it, with or without 1.9% free He (although that’s also clearly commercial too and the primary target). For a first company development project it’s a good fit of risk/reward. Not without risk of course but a decent bet.

I think we can all agree it’s a very promising position to be fully funded for a first commercial project without debt. What’s not entirely clear to me is what portion of initial revenues, due from H1 2025, gross or net, might accrue back to the company (as implied in the RNS), whether it may contribute to working capital, or whether they’re fully committed to the reinvesting all of it. We have a contingency of $450k per well for phase one, which might be indicative of say $4-5m for the next 9 wells (to be split 50-50 between HE1 and BNL?). So maybe $2-3m out of HE1’s share as a baseline? Agree there may be economies of scale and each well helps to dilute cost of next, if all goes to plan.

I’m still not entirely clear from the available information on the proposition for reinvestment versus unimpeded revenue generation in early years. Is it all re-committed?

Just to be clear, gross profit after costs and after equity splits, not gross revenue from sales.

I suppose I’m trying to be conservative with a baseline rather than extrapolating or optimising too far. I’m assuming HE1 might end up with a 50% share in Rukwa and that Colorado is more like $10m pa. net. As I said, could be more, and there will be new projects as well.

Where are you getting $50 pa from? Gross maybe, for both projects at full development, without the equity split, net seems optimistic. I'd pitch for something closer to $20m, fully developed with equity splits.

yes, Rukwa might include both a conventional trap and seal reservoir in the Karoo layer and a perpetual carrier system in the basement (in theory). Without the hydrological and reservoir modelling it's impossible to know if the flow rates from ITW1 are in any way representative of what could be extrapolated in scaling up to 25-30 wells in a field (could be more or less). Even so, $1m gross revenue per well per year wouldn't seem too far out of place as a possible baseline (minus costs and any equity split), say a third of that net to HE1 could still be north of $10m pa (?), plus any hydrogen, plus water. Could be more of course but total guesswork at this stage. Colorado might even come in somewhere close to that in the end, but with a more limited lifespan.

Probably clearer to see on the 1 January image

https://apps.sentinel-hub.com/eo-browser/?zoom=15&lat=37.38702&lng=-103.50516&themeId=DEFAULT-THEME&visualizationUrl=U2FsdGVkX1%2B3ygc398CDCbKqvbCyoGOiUnD1KJv21kyZvX6FCJeqgirfFlLqqgfldiFQh17LBkTHjGIntUUAUeMCB1ipphpPUNc47C7mzbj9YIROn6hUjAnIZfl1E9%2Fi&datasetId=S2L2A&fromTime=2025-01-02T00%3A00%3A00.000Z&toTime=2025-01-02T23%3A59%3A59.999Z&layerId=2_TONEMAPPED_NATURAL_COLOR&demSource3D=%22MAPZEN%22

Gogs - you should be able to see the two pads as grey rectangles on this satellite imagery from 12 January (#31 in the upper left and #4 in lower right quadrant). The map co-ordinates for all the wells are on the ECMC drill permits.

https://apps.sentinel-hub.com/eo-browser/?zoom=15&lat=37.38552&lng=-103.50559&themeId=DEFAULT-THEME&visualizationUrl=U2FsdGVkX1%2BDxKsrNFNK%2FVy7aoQtXbFLmQaJ1BIM4Jc1V2dwSvvJU1fnHLBpLnDDlqldsiIm8OeLpPHV2wBxWPxZMCFIoc3eHYwus3PX8EwsgYePwjJRcF4L70IeQDuA&datasetId=S2L2A&fromTime=2025-01-12T00%3A00%3A00.000Z&toTime=2025-01-12T23%3A59%3A59.999Z&layerId=2_TONEMAPPED_NATURAL_COLOR&demSource3D=%22MAPZEN%22

Yeah, the post seems to be paraphrasing the company’s project summary but with errors

“ The closest town to the project is Mbeya which is approximately 130km away and is the fifth largest city in Tanzania. Mbeya can be accessed along the A7/TANZAM highway and excellent infrastructure exists in the town to support project operations.”

It’s a remarkable turnaround in 12 months by anyone’s book Zoffy. From near administration to drilling first of 6, 9, 15…30 production wells, cash in the bank, zero debt, no short term dilution, and mcap still over $50m. And Rukwa project still to come. Not without risk and no doubt plenty of volatility still to come, but a great starting point.

What’s not to like about spudding the company’s first two commercial development wells for production? Good news.

Quite a large portion of mid sized trades on AIM can be just arbitrage trading between MMs anyway, particularly on quiet days.

The mid price isn’t necessarily representative of the actual spread. Neither the volume nor the price movement looks unusual, barely £150k traded by lunch and -1.3%. So if that sell imbalance was real then the MMs want to take them without dropping the bid. Worth noting also that if any leveraged short bets are now closing then any shares hedged long against them may also be sold (but that would be just speculation).

Exciting times, news train finally leaving the station. The pivot from explorer to commercial producer begins. Should be plenty to interest the market over the next weeks and months.

They’ll be starting set up and rig up, spud will take a few days