Helix Exploration comes to London this week after its AIM market IPO was heavily oversubscribed.
Looking to raise £7.5 million, institutions, family offices, and high net-worth investors were willing to commit £22 million to the helium explorer.
In the current market, where new listings have been at a premium and access to growth capital has been in short supply, this is nothing short of a minor miracle.
Wishing to minimise dilution (and one assumes to leave a buoyant after-market), the team at Helix opted to bank what they set out to raise.
So, on a pre-market valuation of £4.27 million, the company will be admitted to trading on AIM with a market capitalisation of approximately £12 million.
Helix Exploration comes to London this week after its AIM market IPO was heavily oversubscribed
The excitement lies in the nature of the opportunity for helium exploration and development in Montana, USA, which the directors intend to monetise in the long term to become a strategic producer of helium.
Assets comprise fifty-two leases along the ‘Montana Helium Fairway’, with mapped closures and a P50 resource base of 2.3 billion cubic feet.
Historic drilling and/or testing has identified gas in all target reservoir horizons. Helium is in unprecedented short supply, and demand from high-tech applications continues to grow.
The new CHIPS act, which includes US$39 billion in tax benefits and other incentives to encourage American companies to build new chip manufacturing plants in the US, is expected to boost domestic demand for helium, which is a key component of semiconductor production.
‘The influence of the CHIPS act cannot be overstated. It reinforces that we are operating in the right jurisdiction at a time when demand for helium continues to increase,’ says chairman David Minchin.
Minchin was previously chief executive of Helium One, which became one of the most followed stocks on AIM post-its IPO.
The on-the-ground expertise lies with chief executive Bo Sears. He is a 25-year veteran of the industry, who led the Mankota Project, Canada’s first Grade-A helium operation. He was also responsible for putting together Helix’s current land package which covers just over 11,000 acres.
Non-executive director Gregg Peters was previously director of helium for international gases giant Linde-Praxair for approximately ten years, while Keith Spickelmier has a breadth of experience in the industry having founded and chaired Westside Energy which sold in June 2008 for approximately US$200 million in enterprise value.
The company intends on building a processing plant which will deliver around 55 million cubic feet (55,000 mcf) of helium annually, and Minchin intends for the company to be in production phase by the fourth quarter of 2025.
So, what exactly is the plan? In the third quarter, Helix expects to begin drilling an initial appraisal well to assess the potential of the stacked reservoirs of Ingomar Dome in Montana, with a particular focus on the horizon known as the Flathead Formation.
Rather than being associated with natural gas, the area’s helium is found with large accumulations of nitrogen, and all nitrogen wells in Montana which have been tested have typically been found to contain helium.
Helix’s appraisal well, which is being drilled to a target depth of around 8,000 feet, hopes to determine concentrations.
A helium grade above 0.5% is considered highly commercial by the directors.
‘Here in this part of Montana, we anticipate commercial concentrations due to the fact that there is lots of uranium and thorium in the basement rock, which is a producer of helium via radioactive decay,’ said chief executive Bo Sears.
Results from the appraisal well, which is expected to cost around US$2.5 million, will provide information on flow rates as well as helping with the design of future production wells.
The data will also feed into an update to the company’s potential reserve and resource base.
After that, the focus will be on progressing to production with the processing plant estimated to cost around US$12.5-US$15 million.
On our call, Minchin also speaks about options to lease plant equipment from manufacturers which would reduce the company’s capital requirement, and owning tankers that would transport helium to the end customer, which would allow the company to target sales directly to end-users to ensure the best price for Helix.
However, the immediate focus is on getting wells into production to generate cash flow. Non-exec-Peters’ industry experience as former helium director at Linde-Praxair will be invaluable when it comes to identifying customers for its product.
‘At Linde-Praxair, Peters was responsible for price strategy, contracting, client portfolios, supply development and marketing, and we will look to utilise this expertise as soon as possible,’ Minchin added.
At a £12 million market capitalisation, it will be one of the smaller players, however, this is prior to taking into account the company’s targeted annual production rate of 55,000 mcf.
In terms of valuation, a good comparator would be New Era Helium, which is coming to market via a SPAC with a pre-money valuation of around US$90 million based on 32,000 mcf.
So, why, given the interest in Helix, didn’t Minchin and the team bank some additional cash over and above the £7.5 million they were seeking?
‘We wanted to keep a tight book. We also wanted to minimise the dilution,’ says the Helix chair.
‘Given the poor market backdrop, it [the interest in the Helix story] speaks to a level of excitement which people have. This is a helium enterprise coming to market with established assets and strong potential’
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