Helix Exploration (LSE:HEX) - Drilling for Helium To Commence in Montana, Targets Production by 2025

Company Interviews

Interview with David Minchin, Chairman of Helix Exploration

Our previous interview: https://www.cruxinvestor.com/posts/helix-exploration-lsehex-strategic-acquisition-aiming-for-near-term-production-5576

Recording date: 30th July 2024

Helix Exploration is positioning itself as a key player in the burgeoning helium market, with two large-scale, low-risk exploration projects in Montana. The company's strategic focus on helium, a critical component in various high-tech applications, sets it apart in the resource sector and offers investors exposure to a commodity with robust demand growth and constrained supply.

Chairman David Minchin emphasizes the unique nature of their product: "Helium is a technology commodity, it's not an energy commodity. It's not a transition, it is technology for the high-tech lifestyle that we live now." This underscores the critical role helium plays in industries ranging from healthcare (MRI machines) to electronics manufacturing (microchips) and aerospace.

The company's near-term catalysts make it particularly interesting for investors. Drilling is set to commence in Q3 2024, with production targeted before the end of 2025. This accelerated timeline from exploration to potential production is a key advantage of helium projects compared to traditional oil and gas ventures.

Helix's first drilling target at the Ingomar project builds on historical data, reducing exploration risk. The company is twinning and deepening a well that previously discovered non-flammable gas but was never assayed for helium. This approach, coupled with modern exploration techniques, enhances the probability of success.

Financially, Helix is well-positioned. An oversubscribed IPO in April raised $9.5 million, with the two-well drilling program budgeted at $4.1 million. This leaves substantial funds for development work and potential production setup. The capital efficiency of helium projects is noteworthy, with Minchin suggesting that a $19 million investment could potentially yield an NPV of over $300 million, assuming a 1.5% helium concentration.

The helium market dynamics strongly favor new entrants like Helix. Prices have been increasing by 20% annually over the last decade, driven by growing demand and constrained supply. Bulk spot prices have risen from $100 per mcf to $500, with some buyers paying over $1,000 per mcf.

Investors should be aware of the risks, primarily centered around the upcoming drilling results. Key factors determining success include helium grade, flow rates, deposit size, and gas composition. Results are expected by the end of September 2024, providing a near-term catalyst for potential value realization.

Montana's strategic location between the East and West coasts of the United States offers logistical advantages for distribution, enhancing the project's potential profitability. The macro environment for helium is favorable, with increasing demand driven by the growth of AI, the Internet of Things, and the trend of onshoring high-tech manufacturing to the United States. Traditional sources of helium as a byproduct of large-scale LNG operations are not keeping pace with this demand growth, creating opportunities for dedicated helium producers.

For investors, Helix Exploration represents an opportunity to gain exposure to a critical commodity in the tech sector. The company's well-funded position, efficient project economics, and strong market dynamics make it a compelling prospect. However, as with any early-stage resource company, thorough due diligence is essential. The upcoming drilling results will be crucial in determining the company's future prospects and potential returns for investors.

View Helix Exploration's company profile: https://www.cruxinvestor.com/companies/helix-exploration

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