Helium One Global Ltd (LON:HE1), the primary helium explorer, has provided an update on progress at its Rukwa (100%) project area in Tanzania including details of its planned Phase II drilling campaign.
Summary
· Letter of intent (“LOI”) signed with Baker Hughes to provide integrated services to Rukwa Phase II drilling campaign;
· Target spud date of January / February 2023 – subject to successful completion of rig audit and contract agreement;
· Baker Hughes has provided a low-cost solution by mobilising equipment already active in Southern Africa;
· Rig audit continues to demonstrate value by identifying and resolving engine component wear issues prior to mobilisation to Rukwa; and
· Licence renewal process commenced including relinquishment of non-prospective licence area totalling 1,548 km2 saving $309,600 per annum
David Minchin, Chief Executive Officer, commented:
“The focus of our attention in August has been to advance the Phase II drilling campaign at our Rukwa Helium Project both efficiently and effectively, therefore we are delighted to be able to announce milestone partnerships and a target timeline to drilling commencing in January / February 2023.
“Our partnership with Baker Hughes, a world leader in the delivery of integrated well services, ensures we have the best equipment on site to evaluate our Phase II drilling at Rukwa. Mobilising equipment currently in operation in Southern Africa allows us to deliver a cost-effective solution to overcoming the scarcity of downhole tools experienced globally.
“Delivery of our exploration programme commencing in January / February is dependent on concluding contract negotiations and completion of the rig audit conducted by ADC on our preferred rig in Kenya. The audit is progressing well, and we are pleased that issues that are being identified are in the yard where they can be easily fixed, rather than out in the field where rig problems are exponentially more difficult to resolve.
“Continued shortages in the global helium market have seen record prices in contract and spot pricing at $400/Mcf and $1,000/Mcf respectively. With demand from end users clearly demonstrating the requirement for a new source of high-grade primary helium, Helium One remains committed to delivering a successful Phase II drilling campaign at Tai, where robust closure at multiple stratigraphic levels and multiple subsurface helium shows identified in 2021 drilling gives us the best opportunity to make an economic discovery that unlocks the potential of the Rukwa helium province.”
Drilling services
Helium One have signed a LOI with the tier one services company Baker Hughes to provide drilling fluid, cementing, wireline evaluation and downhole gas sampling services on the Company’s Phase II drilling campaign. Integrated services are essential to successful operation and data collection from the planned drilling campaign and, due to scarcity of suitable tools globally, have become the long-lead items in planning a timeline to drilling.
Baker Hughes have agreed with Helium One to offer equipment and tools that are presently being utilised by operators in Southern Africa. These will be mobilised at the end of their current operations, giving a targeted commencement date of January / February 2023 for Helium One’s planned drilling campaign. Timeline to drilling commencing is contingent on contracting with Baker Hughes, the completion of operations and release of equipment from Southern Africa, as well as the successful completion of ADC audit, contracting, and export approval for the rig in Kenya.
Waiting for the equipment has several benefits for Helium One:
· All the equipment for the three service lines can be mobilised from a single point, significantly reducing costs compared to gathering a set of tools from multiple locations around the world;
· Cost-to-Company is further reduced as Helium One can share demobilisation/mobilisation with the current operator, who contribute a portion of their demobilisation fee to the mobilisation of Baker Hughes equipment; and
· The equipment will be “warm”, having been recently working, avoiding the many maintenance issues associating with equipment that has come from storage and avoiding downtime during operations.
With the scarcity of available tools and equipment globally, Helium One believes that the proposal from Baker Hughes benefits the Company by presenting a low-cost solution to the difficult problem of delivering a full suite of services to the Rukwa Basin.
Rig Audit
Helium One has re-commenced the ADC audit of the proposed drilling rig (“the Rig”) which remains ongoing. During the process of running the audit ADC noticed irregularities in the operation of the Rig’s CAT C-27 diesel engine. The engine was stripped and the issue traced to advanced wear on the engine’s twelve fuel injector nozzles. Spare parts have been sourced and are in transit to Kenya. Once these parts have been installed, ADC will continue and complete the audit.
While it is disappointing that rig related issues have delayed completion of the ADC Audit, Helium One is pleased that these issues are being identified in the rig yard, where they can be easily fixed, rather than in the field in Rukwa, where a delay would be considerably longer and more expensive. In this way the ADC audit is doing exactly what it is designed to do – identifying and resolving issues that save the Company both time and money in the long run.
Helium Market
Global demand for helium continues to grow exponentially while the Russian invasion of Ukraine has prevented any additional new supply being developed from the Amur facility in Siberia as Linde, Air Products and Air Liquide have officially suspended all activities in Russia. With no end in sight for the current supply shortage, both spot and contract helium prices have continued to rise throughout the last six months.
Notable milestones from August include:
· Contract pricing from Qatar into China exceeding $400/Mcf. With no domestic helium sources and growing high-tech manufacturing industry, China is the world’s largest importer of helium consuming over a billion cubic feet of helium gas every year. As Qatar provides the majority of Chinese helium supply, the rise of average import price to over $400/Mcf reported by Akap Energy is significant and highlights the upward pressure on long term bulk helium contract pricing seen by consumers around the world.
· Spot pricing reported at over $1,000/Mcf. Argonon, who are attempting to create a transparent spot price for trading helium, announced in August the auction of one million cubic feet of helium gas from South Africa. Despite the tender being ex-works without transport and the maiden load from a new plant, bids reached a range of $800-$875/Mcf. Taking into account logistics costs and the distributor’s margin, this implies a delivered price into US or Asia of well over $1,000/Mcf.
Continued significant price rises in both contract and spot pricing highlight the tight global helium market and demonstrate the requirement for a new source of high-grade primary helium to satisfy global demand.
Licence Renewal
Helium One has submitted licence renewal applications over 14 of its 18 licences, which are due for second renewal during September and October 2022. As part of the renewal process, Helium One conducted a review of all the Company’s licences held with a view to fully or partially relinquish licences that were not considered to be prospective for helium.
The Helium One technical team selected the chosen areas for relinquishment based on the following criteria:
· inaccessible offshore areas with no, or poorly, defined exploration leads;
· onshore areas with no, or poorly, defined exploration leads; and
· onshore areas on outcropping basement i.e. no sediment fill therefore deemed to be non-prospective
Retained areas were selected based on the following criteria:
· existing prospective areas with 2D seismic data coverage;
· offshore areas with well-defined leads i.e. defined by multiple seismic interpreters, and supported by gravity – magnetic data; and
· onshore areas with well-defined leads and prospects in areas with known surface helium seeps
Prior to renewal, Helium One holds a prospecting licence footprint in the Rukwa Rift Basin totalling 3,448 km2. Following review two PLs were fully relinquished (PL10728/2015 and PL10711/2015), and a further six were partially relinquished (PL10727/2015, PL10712/2015, PL10710/2015, PL10725/2015, PL10709/2015 and PL10686/2015). The others remained unchanged. This combined relinquished area totals 1,548 km2 saving $309,600 per year in licence fees.
By relinquishing portions of our licenced acreage, Helium One can eliminate those areas deemed to be non-prospective and ensure future work programmes are focussed more effectively on the remaining, higher ranked acreage that is leased.
