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Helix Exploration is coming to London this week after its AIM market IPO was heavily oversubscribed.
Institutions, family offices and wealthy investors wanted to raise £7.5 million and were willing to commit £22 million to the helium researcher.
In today’s market, where new listings are expensive and access to growth capital is scarce, this is nothing short of a minor miracle.
Wanting to keep dilution to a minimum (and one assumes a thriving aftermarket remains), the Helix team opted to bank what they wanted to raise.
So at a pre-market valuation of £4.27m the company will be admitted to trading on AIM with a market capitalization of around £12m.
Helix Exploration is coming to London this week after its AIM market IPO was heavily oversubscribed
The excitement lies in the nature of the helium exploration and development opportunities in Montana, USA, which the directors want to capitalize on in the long term to become a strategic producer of helium.
The assets include fifty-two leases along the ‘Montana Helium Fairway’, with mapped closures and a P50 resource base of 2.3 billion cubic feet.
Historical drilling and/or testing has identified gas in all target reservoir horizons. There is an unprecedented shortage of helium and the demand for high-tech applications continues to grow.
The new CHIPS law, which includes $39 billion in tax breaks and other incentives to encourage U.S. companies to build new chip factories in the U.S., is expected to boost domestic demand for helium, which is a key component of semiconductor manufacturing .
“The impact 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,” said Chairman David Minchin.
Minchin was previously CEO of Helium One, which became one of the most followed stocks after AIM’s IPO.
The on-site expertise lies with CEO Bo Sears. He is a 25-year industry veteran having led the Mankota Project, Canada’s first Class A helium operation. He was also responsible for putting together Helix’s current land parcel, which covers just over 11,000 hectares.
Non-executive director Gregg Peters was previously director of helium for global gas giant Linde-Praxair for approximately a decade, while Keith Spickelmier has extensive industry experience having founded and chaired Westside Energy, which was acquired in June 2008 for approximately $200 million was sold. in terms of enterprise value.
The company plans to build a processing plant that will supply approximately 55 million cubic feet (55,000 mcf) of helium annually, and Minchin plans for the company to be in the production phase by the fourth quarter of 2025.
What exactly is the plan? In the third quarter, Helix expects to begin drilling an initial evaluation well to assess the potential of the Ingomar Dome stacked reservoirs in Montana, with a particular focus on the horizon known as the Flathead Formation.
Rather than being associated with natural gas, the helium in the area is found with large amounts of nitrogen, and all nitrogen sources tested in Montana are generally found to contain helium.
Helix’s evaluation well, which is being drilled to a target depth of approximately 8,000 feet, hopes to determine concentrations.
A helium content above 0.5% is considered very commercial by the directors.
“Here in this part of Montana, we expect commercial concentrations due to the fact that there is a lot of uranium and thorium in the basement rock, which produces helium through radioactive decay,” said CEO Bo Sears.
Results from the evaluation well, expected to cost approximately $2.5 million, will provide information on flow rates and aid in the design of future production wells.
The data will also contribute to an update of the company’s potential reserves and resources.
After that, the focus will be on progressing to production, with the processing plant estimated to cost approximately $12.5 million to $15 million.
On our call, Minchin also discusses options to lease plant equipment from manufacturers, which would reduce the company’s capital needs, and owning tankers that would transport helium to end customers, which would allow the company to direct sales directly to end users to ensure the best price for Helix.
However, the immediate focus is on tapping production sources to generate cash flow. Non-exec Peters’ experience as a former helium director at Linde-Praxair will be invaluable when it comes to identifying customers for his product.
“At Linde-Praxair, Peters was responsible for pricing strategy, contracting, customer portfolios, offering development and marketing, and we will look to leverage this expertise as quickly as possible,” Minchin added.
With a market capitalization of £12m it will be one of the smaller players, but this is before taking into account the company’s target annual production rate of 55,000 mcf.
In terms of valuation, a good comparator would be New Era Helium, coming to market via a SPAC with a pre-money valuation of around $90 million, based on 32,000 mcf.
So given the interest in Helix, why didn’t Minchin and the team raise some extra cash on top of the £7.5m they were looking for?
‘We wanted to keep strict accounts. Moreover, we wanted to minimize dilution,” says the Helix chairman.
‘Given the poor market backdrop, the interest in the Helix story speaks to the level of excitement people have. This is a helium company coming to market with established assets and strong potential’
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