DME has trace amounts of neon and other rare noble gases (xenon, argon) in their first well. With the price of neon up 800% after the invasion of Ukraine, the neon in DME’s possession will be a nice bonus to the balance sheet.
However, the parts needed to separate these noble gases won’t be available until probably next year. In the meantime, DME has engineered a simpler processing facility made from off the shelf components, which is being manufactured as we speak and should be ready soon.
After 90 days of optimization (during which time DME will be selling any helium they put through the plant to the US government), DME will be selling helium directly to end users, who supply their own trucks for picking up the gas from the plant.
Instead of signing off-take agreements, DME will be selling their helium at spot price, since there could be more upside to the 300% increase in the price of helium since the start of the year. Initially DME plans to sell their helium to welding companies, and companies that use it as a lifting gas.
Eventually DME plans to sell their helium at a greater purity to tech companies and other users of high grade helium, but that will most likely happen next year after their second and more robust processing facility comes online.
The city of Flagstaff put a restraining order on DME’s well #3, as the city was concerned that DME’s well would interfere with the city’s aquifer. An appellate court ruled that the restraining order be removed and DME now had access to the well.
There hasn’t been any news of well #3 being tested yet, but I would speculate this might have something to do with DME hinting that they found helium-3 in the well. Perhaps an NDA with the US government is preventing DME from discussing this well, as there hasn’t been anymore information about it since the news of the court ruling came out on March 25th. DME used to talk about helium-3 in news releases from last year, but this isn’t the case anymore.
Initially DME plans to bring online wells #2,4,5,6, and 7. They are currently drilling well #8, and we should have news about its completion as early as tomorrow. This will be their fifth wildcat well, and it’s phenomenal that they have been 4/4 when the industry success rate of drilling wildcats is 18%. Their success has mainly to do with CEO Robert Rohlfing, who has been looking at this property since 1999, and of the over 250 wells he’s drilled in his career, he’s only missed on two occasions.
One more offset well from the McCauley field (wells 4,5,6,7) is also planned for this year, so five to six wells producing should have their first plant close to full capacity, which is 10,000 mcf of raw gas per day. Multiply that by an average helium concentration of 3.5%, and a recently quoted price by DME’s president of $2,500/mcf for their helium, and you get an idea of what this company will be capable of before year end. Multiply that by 60 to 70 more wells just in the Holbrook Basin alone, and you should have a good idea of where the company is headed in the next few years.
Something else that’s becoming a major development for the company is their discovery of a pure hydrogen field, which they say is a first in North America if not the world.
DME says they are working with the Arizona government to help them bring more hydrogen wells online. To do so, they are looking to have the legislation changed that says you can only drill one well per square mile in Arizona. This law was made with drilling for hydrocarbons in mind, and so DME is hoping their low environmental impact wells could be exempt from this law, with the intention of bringing hydrogen online to power electric car charging stations.
More hydrogen wells would probably mean more helium along with the hydrogen, and DME’s outlook of 60-70 wells in the basin could possibly be multiplied. Not to mention the company plans on expanding to other states in the region like Utah, Colorado, and Kansas.
