RE: Hannam*23 Jun 2021 13:09
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$50/mcf increase in the helium price would increase our risked NAV by 6p/sh and unrisked by 33p/sh.
Helium One Global | Equity Research 23rd June 2021
GICS Sector Energy
Ticker LN:HE1 Market cap 22-Jun-21 (US$m) 180 Share price 22-Jun-21 (GBp) 20.5
NAV summary (p/sh)
Asset
Kasuku
Itumbula
Mbuni
Tai 314 Cash/other 3 3 Total NAV 128 25
Source: H&P estimates
>US$1bn
Unrisked value of the 4 prospects planned to be drilled in 2021
>650%
Share price performance of the 3 primary helium E&P companies in 2020
H&P Advisory Ltd is a Retained Advisor to Helium One. The cost of producing this material has been covered by Helium One as part of a contractual engagement with H&P; this report should therefore be considered an “acceptable minor non-monetary benefit” under the MiFID II Directive.
Anish Kapadia
Research Analyst
T +44 (0) 207 907 8500
E anish@hannam.partners Jay Ashfield
Sales
T +44 (0) 207 907 2022 E ja@hannam.partners
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