Key Highlights 

• Rare early stage Helium Investment Opportunity
• Tier 1 Project Locations within the Montana Helium Fairway, US
• Historic Drilling at Ingomar confirms proven Gas in all target reservoirs with a P50 un-risked prospective Helium Resource of 2.3Bcf
• Rudyard project contingent resource of 0.48Bcf with in-situ value of > $250 million
  at helium price of $550/Mcf
• Helium a rare commodity with unprecedented short supply globally
• Skilled Management Team with a wealth of commercial experience
• Robust Scoping Study Economics (Ingomar Dome) , NPV8 $303M, with only $19.7M Capex requirement

Helium in Vogue

Helium companies are receiving a lot of attention right now and rightly so.

Helium has numerous applications. It’s widely used in cryogenics for cooling superconducting magnets in MRI machines and other medical equipment. It’s also used in the aerospace industry for purging and pressurizing fuel tanks, in electronics manufacturing for cooling semiconductors, in welding processes, and even in scientific research. Its use in MRI Scanners and Cryogenics accounts for some 30% of its overall usage. 

Helium is a non-renewable element and with global reserves rapidly depleting it will rely upon further discoveries whereby it’s commonly extracted as a by-product of natural gas extraction.

Helium is challenging to extract and transport (‘the escape artist’) and is commonly converted into liquid form however there is a time-frame of some c.30 days or so, whereby if it’s not delivered can evaporate if not insulated sufficiently to prevent ‘boil-off’ 

So with global reserves depleting (the US, Qatar and Russia controlling the largest reserves) and with political tensions further impacting supply concerns, Helium Exploration and Development companies such as Helix Exploration look to be a good place to get some exposure.

About Helix

Helix are a new entrant to the market having IPO’d in April 2024. Since IPO the share price has doubled reflecting the high demand from investors for Helium exposure. Unlike other popular Helium plays such as Helium 1, Helix are at appraisal stages, whereby upon a successful appraisal drilling campaign in Q3 2024 they should be able to start producing Helium within just 12 months following the construction of a processing plant.

Management

As with any investment, the Management team is a key consideration. You can have an outstanding project in an outstanding jurisdiction but if the Management team can’t execute or don’t have the commercial ‘nouse’, you may not see any return on your investment!

Thankfully, Helix have a particularly strong Management team with a wealth of commercial experience and one that also understands what dilution is and how to control it for the benefit of shareholders.

This was evidenced by them only taking what they needed in funding at IPO, despite being offered nearly 3x the amount. The reasoning here is the Management team see the value that will be created and if further funds were required that would be dealt with at a far higher less dilutive share price, already evidenced by the 100% increase in the share price value today from IPO!

I’m not going to go through the whole Management team but key names to note are CEO, Bo Sears, who has 25 years of helium exploration and production experience and who led the discovery of the Mankota project, the first project in Canada capable of producing grade A Helium.

Then we have Chairman, David Minchin. David also has many years of experience in the industry and will be well known for taking Helium 1 from a private company valued of less than £5m to a valuation of over £170m at its peak!

The Projects

Ingomar Dome

The Ingomar Dome project sits within what is known as the ‘Montana Helium Fairway’ and which is named after several helium discoveries made in the Cambrian Flathead formation on the western edge of the Williston Basin.

It is a Mapped Closure covering some 16,500 acres with P50 Gross Unrisked Prospective Resources of 2.3Bcf.

The Ingomar dome exhibits the perfect geology for helium discoveries. The Ingomar Dome itself was previously drilled and tested with assays of ~81% Nitrogen. The gas was however never tested for helium hence the up-coming appraisal drilling campaign to test for helium. Given the geology, nitrogen gas being an important indicator of the presence of helium and neighbouring helium discoveries/producers, the company are confident of discovering helium.

The company plan to run a single appraisal well through the stacked reservoir targets/formations to a depth of c.8000ft.

In fact the company have already executed a binding contract with the proposed drilling company who CEO, Bo Sears, has previously worked with.

Scoping Study

The company have just released the Scoping Study for the project which has delivered some exceptional project economics in the form of:

• • NPV8 of $303.1 million using a helium price of $550/Mcf and grade of 1.50%
  • Initial CAPEX requirement of only $19.7 million
  • Net revenue of $605.6 million (after CAPEX, OPEX, tax and royalty) over 29-year LOM

A key Point to note here is the exceptionally low Capex Amount required to bring the processing plant and project into production, just $19.7 million. Mining projects with similar NPV’s can cost anywhere from 5-10x this amount of Capex!

Path to Production

This is also a key thing to highlight, many projects from discovery/feasibility study can take years to bring into production. Helix believe with their knowledge, experience and other logistical factors that they can achieve first production within 12 months of a discovery.

This will involve building a processing plant that can deliver up to ~55,500 Mcf per annum. The company plan to then sell the helium to Tier 2 distributors end end-users by-passing industrial majors to get the best possible prices.

Given the short time-frame to production and that the company clearly know how to sell into the end market, Helix could be throwing off c.$40m in FCF per annum from Ingomar Dome in as little as 12 months from discovery. In fact the Chairman in a recent interview even mentioned dividends!

Given the companies control over dilution, i.e. they will look at non-dilutive funding options for the Capex, as an investor in the company today if they pull it off, returns could be incredible by way of share price appreciation and dividends. The company could also re-invest into further exploration and expansion as required.

Rudyard

Helix by way of a farm-in agreement announced in June 2024 they have acquired a 100% working interest in Rudyard which is located in County Hill, Montana.

The Rudyard project is a discovery with previously identified commercial quantities of helium where two adjacent wells have tested up to 1.3% helium with significant flow rates. The project gives Helix a maiden contingent resource of 0.48Bcf

The company also believe there could be significant exploration upside in the un-tested dry creek formation within the Rudyard project.  The company plan to do an appraisal drill at Rudyard immediately after the drilling campaign at Ingomar where an extended flow test over c.30 days will allow the company to convert Contingent Resources into Reserves and fast-track the project towards commercial production.

Upon completion of successful flow-testing the company plans to use the appraisal well as a production well.

Peer Comparison & Valuation Potential

The two helium assets combined could be producing anywhere between 55,000-80,000Mcf per annum. To put that into context, have a look at some other helium producers in the infographic below.

North American Helium is capped at c.$1bn and produces 155Mcf per annum. If Helix can produce anything close to half of that on an annual basis then you can see the valuation potential especially considering Helix is capped at just c.£25m today.

You can’t make an absolute direct comparison as you have to factor in other things but as a guide it does show where Helix as a producer could be valued and it’s many multiples of todays share price!

Helium Market – A Scarce Resource

Significant market changes, including the shutdown of the U.S. Helium Reserve and the geopolitical risk to the producers in eastern parts of the globe, have driven an explosion of interest in exploring for and developing helium reserves.

Helium is experiencing unprecedented demand due to short supply globally with end usage growing rapidly particularly in high-tech sectors.

The global market for this non-renewable resource is set to increase, even by a conservative estimate, at a compound annual growth rate (CAGR) of over 6.5 percent by 2025 (source: Eight Capital & USGS)

I’ve written a few blogs on the graphite market and much like graphite, helium pricing is not particularly transparent with most pricing contracts negotiated individually and subject to NDA’s.

The United States Geological Survey (USGS) estimates however recent pricing contracts for helium of anywhere between $300/mcf to $800/mcf, much depends on individual circumstances such as extraction, logistics and storage but pricing can typically be around 100x current US natural gas pricing.

So we know we need helium and the market demand is growing YoY, the supply has flat-lined and bar a trip to the moon to extract more helium (no joke, the moon has an abundance of it) how will the demand/supply gap be met? We’ll need to discover more of it and of course that’s where Helix Exploration fit in!

An eye on Risk

As with any investment it’s worth noting risks and at this stage I see two key risks worth noting:

Appraisal Success

There are no guarantees that the company will make a helium discovery at Ingomar or at least one with helium in concentrations that are commercial however the geology and neighbouring discoveries increase the chances and the company have mentioned that the project would still be economical at low helium concentrations.

Similarly, there is no guarantee of a successful flow-testing outcome at Rudyard, however this is also mitigated by neighbouring wells that have flowed 1.3% helium to surface.

Funding

Always a risk that should be considered. In the companies favour however, I don’t see any issues with them achieving debt funding for such a low comparative Capex amount at Ingomar on appraisal success given the size of the resource, mine life and robust economics.

Conclusion

So before I highlight all the fluffy bits and why those invested  could be sitting on significant returns we need to be aware that small cap companies in general carry high risk and that macro-events can dramatically change the land-scape for any investment so don’t be throwing the kitchen sink in, manage your risk !

Now back to Helix…

So hopefully in this brief research note I’ve helped you understand a bit more about the Helix proposition.

Despite the company experiencing a sterling share price rise since IPO, I think there is plenty more value here given the exceptional project economics at Ingomar, the Rudyard acquisition having been added to the portfolio with a significant contingent resource de-risking the portfolio and notably the pace at which both projects could be generating significant cash-flow for the company (and its shareholders!).

The company capped at c.£25m is less than one years potential FCF from either project and should they see success at the wells and with the level of experience the Management team have, the transition to a producing helium company could be swift.

That would then see a further material uplift in valuation with the possibility of dividends being paid not that far down the line. The peer comparison I showed in this blog gives a good guide as to where the company valuation could go in not that long a timeframe.

It’s certainly a compelling investment opportunity in my opinion but please ensure if you are considering it, that you manage your risk!