Helium One shares rallied 25% in Thursday’s early deals after the company began drilling Tai-2 just over a week since the non-result of Tai-1 disappointed the firm’s retail investor base that has bought up the shares strongly in the months following its AIM market float in December.
Tai-2 aims to test the same targets that provided evidence of a helium system in Tai-1 but could not be evaluated properly due to poor hole conditions. It is located only 20 metres from Tai-1 and is being drilled from the same drill pad, which saves costs and allows a quick turnaround.
It also underscores what this programme is for Helium, a vital do-over.
To say that the company arrives at Tai-2 with more confidence after the events at Tai-1 perhaps feels disingenuous given the halving of HE1’s share price in the aftermath of the recent well, nonetheless, there’s some technical truth in such a statement.
Tai-1 very nearly ‘proved’ what was previously speculated – that the Rukwa project contains a natural source of helium. Such deposits are rare and the gas is very much in demand by global industry.
In Helium One’s words, Tai-1 proved a working helium system and it substantially de-risked the Rukwa basin.
Chief executive David Minchin, in Thursday’s statement, goes a little further saying the “free helium gas is waiting to be discovered.”
Helium One shares climbed 25.8% to trade at 14.47p on AIM as the start of the second well was confirmed, though the share remains some way shy of the 26p level seen immediately prior to the Tai-1 result.
“We are delighted to have started drilling activity at Tai-2, testing shallower targets that were not fully evaluated in Tai-1,” Minchin said on Thursday.
Plainly the plan is for Tai-2 to avoid and/or overcome the problems experienced in the first well so that pivotal data can be gathered to potentially confirm a helium discovery at Rukwa.
Tai-1 encountered helium shows in a total of five intervals of the Karoo formation, three of them had been identified pre-drill as targets.
Wireline logging of the uppermost interval did not find evidence of ‘free’ – i.e. movable and producible – gas though data indicated good reservoir potential with porosities of 15 to 20%, something that may bode well for other zones.
Unfortunately for Helium One and its investors this was the only interval among the five that could be examined in detail. Deeper intervals could not be logged nor tested due to poor and deteriorating hole conditions, it said earlier this month.
At the time, the company described the deeper intervals as “thicker and cleaner sandstone units”.
The company also told investors that through the Tai-1 programme it had “learnt a lot about the subsurface”.
Stockbroker SP Angel, in a note, similarly pointed to de-risking that precedes Tai-2.
“Whilst typical exploration risks will remain especially given the close proximity to Tai-1, investors can take some comfort from the evidence of Helium shows at multiple stratigraphic levels recorded during drilling of the first well of the programme,” SP Angel analyst Sam Wahab said.