Broker comments after the fund raise.
Liberum:
Helium One (BUY, TP 17p) – Successful placing to fund second well this year
HE1 has successfully raised gross proceeds of £6.8m (c.US$8.5m), through a placing and retail offering at 6.7p/share (c.10% discount to last close). The funds will enable the company to drill a second well this year, and at a significant saving without having to demobilise crew, personnel and equipment following the Tai-C well. This is an opportunity made available to HE1 following the recent rig purchase which otherwise would not have been a financially viable option.
Our take: Another positive development for HE1 underlining ongoing shareholder support ahead of its high impact drilling campaign later this month. The funds raised now enable the company to drill a further prospect immediately after the planned well at Tai-C. If successful, this well could transform HE1’s valuation given the wider implications of the helium market. Our model forecast that each 350,000 mcf/year train could generate c.US$55m in free cash flow per annum, assuming stable helium prices of c.US$300/mcf. With an export price of US$400/mcf, we calculate that each production train could generate US$75m. At the current share price, this represents >130% free cash flow yield on each 350,000Mcf/yr module. We reiterate our BUY rating reducing our TP slightly to 18p/share to take account of the equity dilution.
Sam Wahab, Sam.Wahab@liberum.com, +44 (0)20 3100 2095
SP Angel:
Helium One (HE1 LN) 6.35p, Market Cap £53m: Adds second well to programme
Helium has raised £6.75m in gross proceeds @ 6p/sh (~10% discount) to fund a second Rukwa Basin exploration well on the Itumbula prospect, to be drilled after drilling on the Tai-C well has completed.
The Company commented that it can move quickly onto a second well ahead of the wet season, which should enable cost savings by utilising the personnel and equipment used on the Tai-C well.
Helium’s rig ownership provides a platform to enable it to move quickly into an appraisal phase upon success at Tai-C, as well as allowing accelerated exploration on the Rukwa, Eyasi and Balangida projects.
The positive market response to the raise implies that catalyst-driven investors are now prepared to get involved in the upcoming test of the helium potential within the Rukwa Rift Basin. Helium One considers the drill-ready Tai structure to be the best-defined prospect within the Company’s portfolio and is fully funded for drilling to commence this month via a £10m fund raise last December, with the new funds raised providing the opportunity for a further prospect to be tested ahead of the fast-approaching rainy season in November that will likely bog down operations. With a new management team in place, the Company is now looking to make good on a commitment to shareholders to test the helium potential within the Rukwa Rift Basin onshore south-west Tanzania. However, the science around helium exploration is still in its infancy and we look towards the drilling results from Helium One and Noble Helium (NHE AU) in 4H23 to shed further light on the region’s potential helium prospectivity and commerciality
