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I agree an end result of self sufficient revenue generation with zero debt will be a great outcome for the company, if that is the outcome. The means of getting there haven't been great for shareholders but that's not surprising on AIM. From the company perspective, it doesn't really matter what the Galactica capex cost if it delivers the gas producer in 2025 milestone, establishes baseline financial security, and leverageable asset collateral, with zero debt. Hopefully the ROI also starts to stack up if they can roll out the further development. I agree $10m annual earnings is possible for the project in the future if all that falls into place but I'd like to see a clear roadmap for how that happens without debt or share raise.

I agree with you Pete, it's a bit of a mystery and deserved a better explanation to the market than one off the cuff remark in an interview about overrun or undefined overspend. I honestly can't tell from the published information if the acquisition raise was intended to fully fund phase one to 'first gas' or whether it was always the case that additional capital was needed for the plant (although I accept that the CO2 processing kit probably wasn't included). I agree that the ROI looks a bit odd if the second raise isn't funding some phase two development.

I think when you read back over the RNS and the transcripts of meetings it's evident that the CO2 processing certainly wasn't in the cash flow projection a year ago, and very possibly the whole processing plant wasn't either. There was wording about buying into the farm-in costs, drilling the wells, and tying them back, but there wasn't anything specifically committing capital for the plant (only talk about designing and specifying the plant). I may be reading between the lines there.

I think MC makes some fair points about maximum potential and best case scenario planning. I suppose what I'm trying to get to is a more realistic or mid range estimate for production and revenue over the short to medium term, and where that might position them in say 12 months time, based on the investment they've made. The base case of $2m annual profit, reiterated at the AGM, was based on helium projections that were confirmed close enough by the well flow tests. That could be added to if, (a) the field stabilisation effect extrapolates to other wells (while noting that State 16 is the most northerly well, and/or (b) more infill wells can be drilled (while noting that tighter well spacing might have an inverse effect on field stabilisation). I can clearly see that the better than expected CO2 concentration and purity is a big bonus to the base case. I'm less clear about the timeline for adding more wells. If we opt for MC's one well every four months funded by profits then we get closer to a dozen wells by end of next year (at rough drilling cost of $2m) and tie those back to the plant to bump up the revenue, but we end 2026 with roughly break even net zero earnings due to the reinvestment of profits. Is that right?

Totally agree that $2m is just the base case, which is why adding the CO2 is important. But just to clarify, the helium well tests have come in slightly under expectation or on target as an average. Jackson 29 flowed 3.3%, which is great, but that's the outlier. If you take a flow weighted average across the seven wells I think the helium concentration comes out at 1.71% (using either Max Projected Flow Rate or Initial Stabilised Flow Rate range), with CO2 averaging just under 75%.

From the AGM - "We have issued independent reports on this and they state that approximately 2 million US per annum will be accrued to the company over the coming years, that's on a helium only basis and of course it's worth remembering, as Lorna's alluded to, we plan to tie in the CO2 aspects of the project later next year and that will add to that revenue number. So the base case is 2 million a year from helium but will be increased once we get that CO2 online."

https://youtu.be/tWrq7ExUeR4?si=SzowGSk402j5EITp&t=2838

Why then the projected $2m per year stated in the independent appraisal and repeated at the AGM?

The acquisition farm in was based on an independent assessment of c. $2m net per year accruing to HE1's 50% share in the project, over 5 years (and confirmed by the chair at the AGM). The flow tests on the phase one wells were on target for helium concentration, on average. The CO2 was initially valued up to 50% more but now looks like it could be more (based on higher than expected concentration and beverage grade purity). So, presumably we're hoping for somewhere above $3m per year earnings from this phase of the project?

As per the AGM presentation, the full capacity processing output from 6-8 wells would be 32,100 Mscf. At a mid price of $450 for the low grade helium that's just under $14.5m (gross), minus opex, leasing costs etc, then split between the two parties. The chair confirmed the projected c. $2m pa net to HE1, so I assume that's $4m from the project split between HE1 and BNL (somewhere around a 30% profit margin?). Then add in the high grade CO2, which I'm guessing comes close to the same value as the helium, better than expected.

I'm unclear where the £6-8m (c. $10m) EBITDA from for HE1's half share.

Transitioning from pre-revenue to first revenue is a major milestone for any AIM startup company, and hopefully they can set out their roadmap from first revenue to optimising capacity at the processing plant in 2026, tying in the remaining 3-4 wells and drilling new infill wells where they can etc. Then there's a choice whether to use the income for working capital, to reinvest it in further development, whether to take on debt against the asset, whether to prioritise expansion of the Galactica-Pegasus field or to cross subsidise proof of concept in Rukwa (to reach a final investment decision end of 2026).

MC - what kind of P/E or P/CF ratio would you be hoping for to reach 0.55p – 0.65p from the Colorado cash flow alone (i.e. £60m / $80m mcap)? Are you assuming something like P/E 20 at £3m earnings (e.g. $2m from helium + $2m from CO2)?

They already received the authority to issue shares and in the past the ASX suspension notice has been followed by notice of subscription. I’d guess they have the funders lined up.

"Pursuant to ASX Listing Rule 17.1, Blue Star Helium (ACN: 009 230 835) requests an immediate trading halt of the Company’s securities, pending the release of an announcement regarding a capital raising by the Company."

As Pete says, they have other project operations so it's not necessarily funding Galactica.

I'm well aware of that and the resulting cash position is positive. I'm talking about the raise itself. The first raise for project acquisition included "up to US$2.55 million in in respect of the Company's 50% participating interest share of the tie-back, installation and processing expenditures required for the development of the Galactica Project". The RNS on completing the farm-in referred to "The initial six development-well drilling programme, together with the State-16 well, to form part of the initial gas gathering into the Galactica helium production facility". Last year's AGM, just prior to drilling, confirmed that all planned operations were fully funded and ring fenced in the accounts. There was no mention anywhere of needing another $6m "to continue to fund the USA Galactica helium-CO2 development to first gas" until the CLN fund raise RNS (I'm assuming the processing plant was not actually in the budget for the first capital raise, but no one said so at the time).

Yes, but all of that was 'fully funded' by the acquisition raise up to production of first gas. We haven't had any tangible explanation for the CLN raise with an allocation of millions of dollars to Galactica, other than a passing reference to unspecified delays and overspend. It's comms issue. The processing plant was in the 50-50 cost split. We know HE1 closed their CLN deal as soon as a cheaper leasing solution was identified (so we can deduce that they are using the second raise to pay for the plant, which was either more expensive, or not budgeted, or not explained to the market at the time of the farm in). It would great if they explained these things rather than leaving as much to speculation and guesswork. If the plant cost twice as much as expected due to some complexity or other then just say so and avoid the market uncertainty. Simply doubling the capital raise out of the blue with no explanation left them wide open to aggressive speculators.

HE1 project farm in and the drilling budget were fully funded by the original acquisition raise.

MC - the agreement clearly states that any overrun costs would be divided in proportion to equity, 50-50. The only explanation we've had at the time of the raise was due to delay/overspend (unquantified). We knew about the snow melt delay and resurfacing the gravel access road but there were no drilling delays and completion was announced as free from major incidents, so I'd assume overrun was limited and not in the millions (that would also reflect BNL's more limited raises). So, I assume HE1 has banked contingency for additional operations or acquisition of interest, or just contingency towards future development. I certainly hope that's the case, otherwise the ROI would start to look weak.

And what's your explanation for the amount of the capital raise allocated to Galactica?

"The bizarre thing is theres' never been a proper explanation as to why they raised so much to invest in it for so little returns. That's what the market doesn't like."

I think it really depends if that extra capital covers the planned infill wells, or/and expansion of the field into phase two. If it was only to cover overrun then BNL would have to make similar capital provision as those costs were split 50-50 in the agreement. So it must be mostly for development or contingency, otherwise BNL have to raise an unrealistic amount of equity to match it and their raise was nowhere near.

*50-100%

At the mid price assumption presented at the AGM it should be around $1m per well year gross (minus operating costs) plus sale of CO2 (which could be anywhere from 50-10% more). It might possibly tip $2m per well if the CO2 production came in high at beverage quality. Initial production is for three wells tied in, then gathering the others and possibly infill wells as they go along.

Good to see the longer term Rukwa development proposal ticking up to 66 wells on the AGM slides (the indicative modelling after the EWT estimated commercial viability around 20-30 wells). It would be good to see some numbers underpinning their assumptions and commercial projections, which haven't been revealed to the market, but there's enough in the CPR to read between some of the lines. Here's another attempt but hopefully someone else can correct or improve on what we know. Suggestions welcome. I'm assuming maybe $450-550 Mscf to a helium offtaker.

According to the CPR, the unpublished feasibility study seems to assume that ITW1 can represent a 'typical well' for scenario planning of future development. So, the best case scenario is that the ESP can flow a sustained 20,000 barrels of fluid a day (max capacity of the pump) at a stabilised gas-water ratio of 0.25 and a helium in gas concentration averaging 5.5%, to yield around 6.2 Mscf per day of helium production (roughly equivalent to say $1m gross value to market per year ?).

Next, they're hoping to drill five production wells with similar characteristics (4-6 weeks drilling per well), to start producing gas in Q3 2026. Early processing capacity seems to be 100,000 barrels inlet fluid (i.e. five wells pumping maximum 20,000 barrels), or 600 Mscf inlet gas, at 4.591%, with a production efficiency of 95% (which is around 5.5 Mscf helium processed output per well per day). Gas water ratio will be relevant to economics but at max gas inlet that might suggest potential gross revenue maybe c. $5m per year from end 2026? Construction costs in 2026 and opex so far unknown.

Then, a Final Investment Decision will be taken end 2026, whether to go ahead with a Central Processing Facility and drilling 15 more wells, bringing total capacity to 400,000 barrels fluid, or 2,000 Mscf gas inlet per day (2,000 x 0.04591 x 0.95 = 87.229 Mscf helium output per day). Presumably that 20 wells is roughly where they cross the line of commercial viability (in line with the original RNS announcement). Potential revenue from the max gas inlet capacity maybe c. $15m+ per annum gross). Construction costs in 2027 and opex so far unknown.

At the AGM, they presented a long term vision of up to 66 wells, spread over 480km2. This would involve other facilities for gas processing and water management and we know they've done FEED studies for production with different options for sizing, capacity, and cost (although we don't know what those are yet). In theory, if the modelling and well spacing is right, then the recurrent revenue might be perpetual (the CPR shows the more conservative reservoir depletion model for comparison over time).

Any thoughts?

That's the point though isn't it Punter, where's the business plan, what are the investment, cost and revenue assumptions? Much of the wilder speculation and market uncertainty that affects shareholders is due to a basic lack of clarity in presenting basic numbers. Did the recent CLN capital raise cover the cost of developing Galactica phase one up to full capacity, or not? Does it cover drilling the infill wells, what about phase two development? When does the initial project revenue start to wash its face? How does that increase over time? What is the timescale for the ROI? It's just basic stuff that shareholders should know.