The US federal government is on the cusp of a significant move in the helium industry – the sale of the Federal Helium System.
Managed by the Bureau of Land Management (BLM), this system is a major supplier of helium worldwide. In fact, the Federal Helium System is responsible for 15% to 17% of the global helium supply, according to Phil Kornbluth, president of Kornbluth Helium Consulting LLC.
The sale, set to commence on July 12, 2023, was mandated by Congress through the Helium Stewardship Act of 2013. This major event will include a variety of critical assets including the Cliffside Gas Plant and the Bush Dome, a natural geologic reservoir containing both federally- and privately-owned helium. Also up for auction will be federally owned plant equipment, mineral rights, natural gas wells, and the federal helium pipeline.
This significant sale is happening amid a challenging time in the helium industry. An ongoing shortage has driven helium prices to unprecedented levels, making the upcoming sale even more noteworthy.
As the helium industry battles this prolonged shortfall, the future global supply of helium has become a focal point, casting the spotlight on the impending opportunity. This potential influx of supply could provide much-needed relief to the strained helium market and offer stabilization in a time of escalating prices.
Energy companies such as Exxon Mobil Corporation, which has a big helium operation in Wyoming's Riley Ridge deposits, dominate helium production in North America. However, pure-play helium producers have developed in recent years, hoping to capitalize on privatization measures in the United States and rising helium prices.
Helium exploration and development company First Helium Inc. (TSXV: HELI) (OTCQX: FHELF) is making significant headway in the burgeoning helium market. Led by a multifaceted Senior Executive Team with expertise spanning oil and gas exploration, mining, finance, and capital markets, First Helium is advancing two key helium projects. These include the Worsley Helium Project in northwestern Alberta, and the Southern Alberta Helium Fairway Project, positioned close to existing helium production.
First Helium is making particularly impressive strides in its Worsley Property. The team has completed successful drilling of multiple wells. The noteworthy 15-25 well, with a robust helium content of 1.3%, has a best estimate contingent resource volume of 323 million cubic feet (mmcf) of helium.1 This well's projected value surpasses $35 million, calculated at $600 per mcf pricing.2 First Helium has an ambitious timeline, targeting helium production by mid-2024. The company is also set to widen its operations footprint, acquiring rights to over 26,000 acres of fresh exploration lands, inclusive of sought-after territories at East Worsley.
On July 11, First Helium provided an update on its recently completed 5,200 acre proprietary 3D seismic program over a portion of its most recently acquired lands at Worsley. First Helium's exploration team's first data analysis reveals the presence of a number of highly prospective drill targets on trend with and inside the same Leduc reef complex as the successful 15-25, 1-30, and 4-29 wells. These additional drilling possibilities supplement the company's vast current portfolio of Worsley locations. These targets are currently being evaluated by the company for priority inclusion in subsequent drilling programs.
We are very pleased to have completed our 3D seismic program at Worsley on time and within budget said Ed Bereznicki, President & CEO of First Helium. Building on the exploration model established with the acquired 3D seismic programs and through the successful drilling of the 15-25, 1-30, and 4-29 wells, we are extremely excited to further test the model on these targets on our new exploration lands, added Mr. Bereznicki. Located on contiguous lands east of our successful wells, these newly identified drilling targets are anticipated to yield helium rich gas which would give us the opportunity to deliver additional potential volumes to capitalize on our helium gas offtake agreement, concluded Mr. Bereznicki.
On May 24, First Helium solidified a long-term helium supply agreement with a leading global gas company. Under the arrangement, the company commits to sell 80% of its produced helium to the buyer, with an option to sell up to 100%. This deal, structured around a "take-or-pay" agreement, could generate up to US$100 million in potential revenue over the first five years of production, contingent on the pace of helium production escalation at Worsley.
For the second half of 2023, The companys agenda includes finalizing engineering design for the Worsley helium processing facility, selecting construction contractors, and beginning construction of the facility. The company also plans to kickstart new drilling activities in the Worsley area and expedite exploration and development efforts on its newly acquired lands, backed by data from a recently completed 3D seismic program. Lastly, the company is preparing to drill one high-impact exploration well at its southern Lethbridge property.
Click here for more information about First Helium Inc. (TSXV:HELI) (OTCQX:FHELF).
1) Sproule Associates Ltd., Independent Evaluator, March 31, 2023. See First Heliums Final Prospectus dated June 28, 2021, filed on First Heliums SEDAR profile at www.sedar.com for additional information.
2) Management Estimate, Net Present Value, discounted at 10%.
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