Member Info for KeithOz

Not sure why KAV hasn't released anything, but drilling at Ditau has begun.

https://www.londonstockexchange.com/news-article/POW/ditau-project-botswana-drilling-commences/15414762

Part 2.
My conclusions.

There is reasonable potential for 500 Bcf @ $225/mcf = $112.5 Bn = £86 Bn = £140 per share He in place (NB – NOT share price). Of course there will be massive partner dilution, but still seems like a reasonable risk/reward ratio to me. I will put a proper NPV calculation on here once most of the current unknowns are better quantified.

This is no cottage industry stuff. Forget the idea of a couple of pipes feeding into a cheapo separation/compression unit, filling up an ISO tanker truck once a week. This will be transformational for Tanzania. There will be (is) a queue of interested major parties lined up. There is a large number of suitable O & G drill rigs available, might cost more than DM wants, but that incremental cost is nothing compared to delaying production by a year. $10-20M for an initial drill campaign this summer is a drop in the ocean. This will go ahead - how, when & where will be announced very soon.

Still unsure? Chairman Ian Stalker has almost 11 million shares & 5+ million options in HE1. Take a look at his CV on Linkedin:

https://ca.linkedin.com/in/ian-stalker-a556b887

Take particular note of paragraph 2, sentence 1.

Part 1.
Here's my take on where we are, and where we should be heading. You may not agree, that is your prerogative, and in any case you should formulate your own views before investing.

This time last year.

CPR gives 2U/P50 (unrisked best estimate Prospective Resource) of 138 Bcf He, assuming 4% He. Risked equivalent is 14 Bcf. Risk factors relate to source and migration of He, presence of reservoir rocks, structural traps, and adequate seal, all unknown factors at that time. This is Rukwa only, no Balangida, no Eyasi. Crazy President John Magafuli had just died. Market cap £48M.

Now.

Source and migration of He confirmed - 2.2% at 70m in Upper Lake Beds, detected in Red Sandstones at 552-561m, detected in 5 separate depths in Karoo Sandstones, plus MSSI data shows extensive surface seepage related to fault-delineated prospects. Reservoir rocks of 15 - 20% porosity confirmed by drilling, suitability confirmed by QEMSCAN. Seal rocks up to 130m thick confirmed by drilling. Additional deep structural traps identified by multiple geophysical methods, ERT to detect traps shallower than 200m (seismic only works well below 200m). Integrated prospect definition data available imminently. The only reason a discovery has not been declared is due to engineering issues - underpowered drill rig, too narrow a borehole- nothing to do with the geology. The HE1 team has been expanded to include geophysicists specialising in O & G, drilling specialists, and a NED with gas commercialisaton expertise. New President Samia Suluhu Hassan has demonstrated a competent, businesslike and resource-friendly approach to running Tanzania. Market cap £71M.

Later this year.

Rukwa basin is already essentially derisked, so the likely resource as per the original CPR is a lot closer to the 138 Bcf rather than the original risked 14 Bcf. CPR assumed 4% He, expect it to be double this - so maybe the resource should be 200+ Bcf. Several new, larger prospects have been identified (details very soon), with thicker seals, so perhaps a new CPR of 300-500 Bcf, and this will move from Prospective to Contingent Resource upon successful discovery - discovery merely being the recovery of a quantified concentration of He from a previously identified prospect. Finally, flow testing may result in a declaration of commerciality and statement of Reserves - upon which point all hell will break loose (figuratively, not literally, we're not drilling that deep!)

contd...

I don't put a lot of faith in CA's, I would much prefer to be shaking my stick at MOU's or LOI's, or better still, signed binding contracts.

Sorry to poo on the party, but a Boart Longyear 350 is a diamond drill mineral rig, roughly the same as HE1 (mis)used last year, just with a bit more oomph. It will drill at NQ & PQ, which are only 7.6 & 12.3cm diameter. This year HE1 will use an O & G rig, which is one whole lot larger, especially with regard to the hole diameter, which is all-important when drilling in the soft sediments and expanding clays of the Lake Bed formation.

It might seem counter-intuitive, but drilling a large hole quickly (for which you need a lot of horsepower) results in less likelihood of washouts and blockage. Drilling slowly means that the drill mud will be sloshing around in the hole for longer at any given depth, thus increasing erosion of loose material in the sidewall. The narrow hole will then be easier to block and/or lose the drill string in. For this reason, you start with a large diameter hole, if there are still problems, this can be cased and drilling continued with a smaller bit. O & G bits are measured in imperial, not metric. The smallest O & G bits are 6", and can go all the way up to 28", although I am absolutely certain we will not be using the latter.

Josh - the 'today's price of $450/mcf' is not what HE1 would receive. That is the spot price, being paid to the gas wholesalers by small end users who do not have a supply contract. HE1 will not be selling to end users - there aren't any handy to Rukwa. HE1 will almost certainly sell their entire output under contract to a major industrial gas supplier. Such contracts ex-well head are currently running at $225/mcf +/- 10%. Don't worry, this still leaves us with an eye-watering margin.
There is a very reasonable expectation that such an offtake agreement is currently being finalised, including an amount for an expedited drilling campaign. Watch this space.

Dai - PRD has more than doubled so far, but just like HE1 imminently awaiting the big announcement of how they finance drilling such a vast resource. These are both high risk but enormous potential reward, very favourable ratios imho, so twice as much anticipation/frustration for me, but hell, that's what we're here for :-)

Long update on Moroccan activities from Sound today, interesting parallels to PRD strategy:

https://www.londonstockexchange.com/news-article/SOU/operational-and-strategic-update/15412518

* Tendrara phase 1 LNG progressing.
* Tendrara gas stage 2 announced in November 2021, they are still discussing finance packages with a number of parties.
* Looking to frack the TAGI sands originally drilled in 2000 - 06.
* "Energy Transition" (sounds familiar?) projects including solar, gas storage & gas importation.

No, not the bad guys from Hamlet - these are excellent energy analysts, great favourites over on the PRD BB. Here is their latest blog, recorded yesterday, well worth a listen:

https://www.youtube.com/watch?v=5pqQ7oM_PP0&ab_channel=InvestingNews

0:00 - Intro
0:19 - Breaking down oil and gas sanctions on Russia
2:19 - Oil market "extremely tight" prior to Russia/Ukraine
4:49 - Will current events spur oil and gas spending?
7:28 - Opportunities in oil and gas stocks right now
11:21 - "We're in a full blown energy crisis"
15:53 - What will the energy mix look like in 10 years?
18:27 - The two biggest oil and gas misconceptions
21:03 - Outro

Happy listening, Keith

Walletinvestor is a nonsense website, "forecasts" are based on a straight line projection, even their own numbers are contradictory. If you follow their calculations, they are actually predicting a 12-month price of 30.43p (not £3.043 as shown), and a 5 year price of £1.268p. If there is a commercial discovery this year, their straight line projection will point to a share price of some £000s in 5 years, which would be nice, but unlikely. I suggest that fundamental analysis of the HE1 opportunity will give you a more realistic figure. Failing that, Trek's famous £5 for 5 years time is more likely than not to be about right.

Looked in at this (my) breakfast time, and all I see is a whole page of green - filtered posters. I'm very pleased I have saved so much time by not reading empty nonsense.

Metalhead - absolutely right, that is obviously KAV's thinking, just there is an awful lot of data to pull together, and it takes time to prioritise the numerous opportunities.

Cap'n T: I asked Ben about that this morning. I'm sure he won't mind me quoting his reply:

"We’re working hard to get a comprehensive KSZ update out as soon as we can, but in terms of drilling we’ve already announced our plan is to keep the diamond rig in the field beyond Ditau. The only question is where we take it next, but that decision will be driven by what happens next. I’m not ducking answering your question. Everything will become clearer once we update"

Obviously if drilling at Ditau reveals something very interesting, KAV wish to retain the flexibility to keep the DD there a bit longer. For clarification, the rig to be used at the KCB is a different one - RC (reverse circulation) that is fast to use, but brings up the drilled rock as bits rather than continuous core. The holes are a lot shallower than at the KSZ, with more predictable stratigraphy - the same strata have been drilled countless times nearby - so results should come quickly.

Dai, thanks for the link, I had already seen this article, which is from Kornbluth Helium Consulting - the same people I quoted as saying that bulk liquid Helium price was going to be in the range $220-$250 for 2022. I am still puzzled by the DME release that talks about declarations of force majeure and tripling of prices. The only current force majeure declaration that I can find is by US wholesaler Airgas, but they are not a tier 1 supplier, and they are still actually supplying Helium, albeit with delays. I have a suspicion that DME (the only people who are making these claims) have conveniently found someone paying a very high spot price for an urgent delivery, and are using this statement to bolster their share price ahead of a placing, or some similar dodgy business.

I have contacted Phil Kornbluth to ask his opinion of the actual situation.

Nick, Regrettably you are reading that incorrectly - that is an option payment only, i.e it gives PRD the right to secure the rig for a certain time, but there will be substantial additional costs for the actual drilling. This is why the current share price is so low compared to the potential value of these Contingent resources - drill finance has yet to be arranged. We are all awaiting the RNS that tells us the who, how and when of drilling, since that will result in a very smart increase in market cap.

Phoebus - I have always found your contributions to the ECO board to be of great value, I am very pleased to see that you are now posting here. Yet another knowledgeable O & G person who sees the value in PRD that is being overlooked by the market.

Latorre - Your 3 points have each been well known for some months, but it is only in the last few days that talk of a huge price rise has been circulated. Could you please quote your source that "Due to this critical shortage, the Specialty Gas Suppliers have declared Force Majeure and cancelled all supply contracts resulting in Helium increasing 300% in price over the last 6 weeks", because I can not find any independent source that confirms this. Thanks!

Forgot to add, Noble Helium is listing on the ASX tomorrow. If you think AIM is a casino, you should see some of the things that happen here. HE1 & NHE have similar licence holdings in Tanzania, and a lot of the folks who bought in to the NHE IPO big time would love to see a rise on debut to approach HE1's market cap, so they can get out fast and double (or more) their money. The HE1 sp spiked yesterday on no news, and statements like "the He price has tripled in just 6 weeks" have been thrown around, without verifiable references. I smell manipulation.

I see a lot of different (and often very optimistic) prices quoted on this board for Helium, this is because there are very different prices for different customers and purchased quantities. The price which is of relevance to HE1 shareholders is the price that HE1 will receive. There will be very little, if any, direct purchase at spot market price by end users, since Rukwa is a very long way from any likely end user. Sales will be almost entirely purchased by an industrial gas major under long-term contract, at bulk rates for liquid He.

Kornbluth Helium Consulting estimated that during 2021, almost all of such bulk purchases by the big industrial gas companies were at $220/MCF, +/- 10%. Kornbluth also suggest that the peak bulk price of $250/MCF occurred in 2019, and will be relatively stable during 2022, between $220 - $250.

You will appreciate that this is a long way below some of the numbers being bandied about by certain individuals, which are in fact spot prices for small quantities purchased by end users. I will leave it to you to decide why these individuals and entities are increasing expectations beyond the reality, and to you to factor in the price you choose for your calculations.

I should emphasize that even at $200/MCF HE1 is likely to be spectacularly profitable, and I am sure we will hear some extremely interesting comprehensive news very shortly.

I've read through the very few comments, and don't see either rubbish or anything positioned as a fact, so would you care to elaborate?