Georgina Energy - Helium & Hydrogen Play Set to List on the LSE

• Georgina Energy PLC is set to list on the LSE on July 30th, focusing on helium, hydrogen, and natural gas well redevelopment in Australia.
• The company is raising £5 million through an RTO, with a market cap of £11.3 million at 12.5p per share.
• Management has invested over £2.5 million of their own money, with no salaries taken since the company's formation.
• The company plans to re-enter and develop existing wells, starting with the Hussar well in December 2024.
• Georgina Energy's strategy involves selling gas at the wellhead to offtakers, avoiding the need for significant downstream infrastructure investment.

Georgina Energy PLC is poised to make its debut on the London Stock Exchange on July 30th, 2024, presenting investors with a unique opportunity in the critical resources sector. The company's focus on helium, hydrogen, and natural gas well redevelopment in Australia sets it apart in an increasingly important market. With a clear strategy, experienced management, and a low-cost approach to production, Georgina Energy offers an intriguing proposition for investors looking to capitalize on the growing demand for these essential gases.

Company Background & Strategy

Georgina Energy was founded in 2019 by Anthony Hamilton and Mark Wallace. The company's genesis lies in the vision of John Heugh, a 50-year veteran of the Australian oil and gas industry. Heugh proposed the concept of re-entering previously drilled wells that had been closed or shut-in, originally targeted for oil but which had encountered gas.

This approach positions Georgina Energy not as an exploration company, but as an exploitation company. CEO Anthony Hamilton explains:

"We're not greenfields. We can simply take you to the site to the wellhead and show you where the wellhead is, and we can show you the well completion reports, we can show you the logs, we can show you the seismic, albeit 40-year-old 2D."

The company's strategy is focused on low-cost redevelopment of existing wells, with a plan to sell gas at the wellhead to offtakers. This approach minimizes the need for significant downstream infrastructure investment, allowing Georgina Energy to potentially generate revenue more quickly than traditional exploration and production companies.

Interview with Chief Executive Officer, Anthony Hamilton, and Executive Finance Director, Mark Wallace

Assets & Development Plans

Georgina Energy's primary assets are located in central Australia, with two key projects: Hussar and Mt Winter.

Hussar Project

The Hussar project is the company's immediate focus. Georgina Energy plans to commence drilling at Hussar in December 2024. The well is expected to be extended from its current depth of 2,400 meters to 3,200 meters. The company has already completed necessary preparatory work, including native title agreements, access agreements, and environmental impact studies.

Mt Winter Project

The Mt Winter project is at an earlier stage, with the company working to convert the application to a full Exploration Permit (EP). Georgina Energy plans to replicate the learnings from Hussar at Mt Winter, potentially extending the existing well from 2,400 meters to 3,400 meters.

Both projects benefit from existing infrastructure, including nearby highways, gas pipelines, and airstrips, which should help reduce development costs and time to production.

Resource Potential

While exact resource figures are yet to be confirmed through drilling, the company's Competent Person's Report (CPR) suggests significant potential. According to CEO Anthony Hamilton:

"The scalability, in terms of resource size, you're looking at, 303 Bcfg [Billion Cubic Feet of Gas] of helium, 308 Bcfg of hydrogen... and just under three Tcf [Trillion Cubic Feet] of natural gas."

These figures, if proven, would represent substantial resources, particularly in the context of the global helium and hydrogen markets.

Market Opportunity

Helium Market

The global helium market is experiencing significant supply constraints, driving prices to historically high levels. Helium is a critical component in various high-tech applications, including MRI machines, semiconductor manufacturing, and space exploration. Hamilton notes:

"NASA signed a contract for the supply of helium... about 18 months ago. It's a public document. They are now paying a dollar per cubic foot."

This price is substantially higher than the $0.28 per cubic foot used in Georgina Energy's conservative financial modeling.

Hyrogen Market

While the hydrogen market is less developed than helium, it represents a potentially massive opportunity as the world transitions to cleaner energy sources. Hamilton observes:

"99% of the production of hydrogen globally is through fossil fuels. It's an unfortunate inescapable fact that the cost of producing hydrogen artificially is enormously cost-prohibitive because of the energy required to generate it."

Georgina Energy's potential to produce naturally occurring hydrogen could position it favorably in this emerging market.

Natural Gas Market

The natural gas component of Georgina Energy's production provides a stable backdrop to the more volatile helium and hydrogen markets. Australia's domestic gas market is currently experiencing high prices due to significant export volumes, potentially providing additional opportunities for local supply.

Financial Strategy & Projections

Georgina Energy's financial strategy is built around a low-cost, high-margin approach. The company plans to sell its gas at the wellhead, avoiding the need for significant downstream infrastructure investment.

Hamilton provides insight into the potential economics:

"All our modeling has been based on the last auction price for helium... that was 28 cents a cubic foot. Now, once we're producing at volume, our all-in cost at the gross margin is 8 cents a cubic foot."

This suggests potential for significant free cash flow, even at conservative price assumptions.

The company has signed a non-binding offtake agreement with a UK-based company, demonstrating market interest in its product. While this agreement is not yet binding, it provides a proof of concept for Georgina Energy's business model.

Management & Corporate Structure

Georgina Energy's management team brings substantial industry experience to the table. CEO Anthony Hamilton has nearly 40 years of experience in the mining and oil and gas industries, while Executive Finance Director Mark Wallace has over 30 years of experience in the resources sector.

Importantly, management has demonstrated their commitment to the company by investing over £2.5 million of their own money. Hamilton emphasizes:

"There's absolutely no sweat equity, and in fact, we haven't taken a salary since the company was formed."

The company maintains a lean corporate structure, with no employees beyond the executive directors and company secretary. This approach helps to minimize overhead costs and maximize potential returns to shareholders.

Listing Details & Use of Funds

Georgina Energy is set to list on the London Stock Exchange on July 30th, 2024, through a Reverse Takeover (RTO). The company is raising £5 million at a price of 12.5p per share, implying a market capitalization of £11.3 million.The funds raised will primarily be used to finance the drilling and development of the Hussar well, with approximately £2.6 million allocated to this project. An additional £500,000 has been earmarked for development work at Mt Winter.

Risks & Challenges

While Georgina Energy presents an intriguing investment opportunity, it's important to consider the potential risks and challenges:

• Operational Risks: Drilling and production always involve inherent risks. While the company is re-entering existing wells, unforeseen technical challenges could arise.
• Market Risks: The prices of helium, hydrogen, and natural gas can be volatile. While current market conditions are favorable, future price movements are uncertain.
• Regulatory Risks: The company operates in Australia and is subject to local regulations and permitting processes. Any changes in the regulatory environment could impact operations.
• Funding Risks: While the initial £5 million raise should fund near-term operations, the company may need to raise additional capital in the future depending on drilling results and development plans.
• Environmental Risks: As Hamilton notes, "We could have a weather event, unseasonably large amount of rain... it actually floods out there." Such events could potentially delay operations.

The Investment Thesis for Georgina Energy

• Exposure to critical resources: Helium and hydrogen markets are growing rapidly
• Low-cost development strategy minimizes capital requirements
• Experienced management with significant personal investment
• Substantial resource potential if estimates are confirmed
• Near-term catalysts with drilling planned for December 2023
• Potential for early cash flow through wellhead sales strategy
• Unique position in naturally occurring hydrogen production
• Lean corporate structure maximizes potential returns to shareholders
• Multiple projects provide diversification and growth potential
• Favorable macro environment for helium and hydrogen markets

Georgina Energy presents a unique investment opportunity in the critical resources sector, focusing on helium, hydrogen, and natural gas production in Australia. The company's strategy of re-entering existing wells and selling gas at the wellhead offers a potentially low-cost path to production. With experienced management, significant resource potential, and exposure to growing markets for helium and hydrogen, Georgina Energy could be well-positioned for growth. However, investors should be aware of the risks inherent in early-stage resource companies and monitor key developments, including drilling results and offtake agreements, closely.

Macro Thematic Analysis

The global transition towards cleaner energy sources and advanced technologies is driving increasing demand for both helium and hydrogen. This macro trend underpins the potential opportunity presented by Georgina Energy.

Helium, a non-renewable resource, is critical in various high-tech applications, including MRI machines, semiconductor manufacturing, and space exploration. The global helium market has faced supply constraints in recent years, leading to price spikes and concerns about long-term availability. The U.S. government's decision to sell off its helium reserves has further emphasized the need for new sources of supply.

Hydrogen, often touted as a key component of the clean energy transition, is gaining attention as a potential replacement for fossil fuels in various applications, including transportation and industrial processes. While most current hydrogen production is "grey" hydrogen derived from fossil fuels, there's growing interest in "green" hydrogen produced through electrolysis of water using renewable energy. Georgina Energy's potential to produce naturally occurring hydrogen could position it uniquely in this evolving market.

The natural gas component of Georgina Energy's production provides a stable backdrop to these more specialized markets. Natural gas continues to play a significant role in global energy systems, often viewed as a "bridge fuel" in the transition to renewables.

The convergence of supply constraints in helium, growing interest in hydrogen, and the ongoing importance of natural gas creates a potentially favorable macro environment for Georgina Energy's unique approach to resource development.