Update 👍👌27 Jul 2023 09:12
Brokers update 10th July
Helium One (BUY, TP 20p) – Rig secured in Tanzania
In a positive update, HE1 confirmed the acquisition of an Epiroc Predator 220 drilling rig - an oil and gas type rig capable of drilling to depths in excess of 2,000m. The rig is now in Tanzania and is currently being transported to the Rukwa site. Importantly, a 2022 inspection report confirms that the rig is in good condition and a more recent inspection by HE1 prior to acquisition, has confirmed it remains in working order. Management has also confirmed that long lead items such as drill bits, bottom hole assemblies, casing and drill pipe that the company had already purchased for the Drillmec HH102 rig are compatible with the Epiroc Predator 220 rig, and this will keep additional cost spend to a minimum, and some of this equipment has already been mobilised to site in anticipation of the forthcoming operations. HE1 has now terminated its association with SOFORI after having previously served a notice of rectification. Having now secured a rig in Tanzania, HE1 is targeting to commence drilling Operations in September. Once the civils work is complete, the rig will be mobilised to the Tai-C wellsite. In the meantime, the Company will order remaining well control equipment, await the arrival of drill pipe and source an experienced crew. The company has also executed a contract with leading energy technology company, Baker Hughes, who will provide wireline services as well as cementing and drilling chemicals and fluids for the Tai-C well.
Our take: Following last week’s frustration with regards to delays with HE1’s previous drilling contractor SOFORI, investors will be impressed with the speed of which management has secured an alternative drilling rig ahead of its Q3 targeted spud date in Tanzania. Core focus will now centre on this high impact drilling campaign, which has the potential to rerate HE1’s valuation in a success case. The company has conducted extensive work and completed additional analysis since the Phase I programme, including 220km of additional 2D seismic above its Tai prospect. Correlating data has allowed for mapping of the subsurface structures to identify faulting, and thereby identify migration pathways, closures and potential gas accumulations. QEMSCAN analysis on cuttings from Phase I have also provided information on reservoir distribution, mineralogy, seal potential and indicates a good-to-excellent quality reservoir and a thick claystone unit at the top of the Karoo Group. From this work, Tai remains HE1’s most compelling, and lowest risk priority, and the intention remaining to spud in Q3. BUY
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