Helium Shortage: Explorer Taps Australia's Strategic Resource Potential

• Georgina Energy holds two early-stage helium, hydrogen, and natural gas assets in Australia.
• The company plans to re-enter existing wells to prove the presence and flow of these gases.
• Helium's high value could make the project commercially viable even with small volumes.
• The analyst sees significant upside potential if the company delivers on its promises.
• The project could be of strategic importance to Australia, potentially attracting government interest.

Helium Explorer Aims to Tap Strategic Australian Resource

Georgina Energy, a recently listed company on the London Stock Exchange, is poised to explore and potentially develop significant helium, hydrogen, and natural gas resources in Australia. With the global demand for helium rising and supply constraints becoming increasingly apparent, Georgina Energy's assets could represent a strategic opportunity for both investors and the Australian government. Based on insights from industry consultant Zac Phillips, this article examines the company's prospects, challenges, and broader implications of its projects.

Company Overview & Assets

Georgina Energy holds interests in two main assets in Australia: the Hussar Prospect in Western Australia, where it has a 100% working interest, and the Mt Winter Prospect in the Northern Territory, where it has the right to earn up to a 90% interest. Both assets are previous discoveries with recorded presence of helium, hydrogen, and gas, but have not been fully appraised or flow-tested. Phillips said:

"These are exceedingly large accumulations, as defined on seismic, have had penetrations in the Target Horizons, and they have recorded helium."

However, he notes that the exploration program was initially targeting oil and gas. When meaningful liquids were not found, the wells were likely overweighted and killed, leaving the potential for helium and hydrogen unexplored.

Exploration & Development Strategy

Georgina Energy's immediate focus is on re-entering the existing wells to prove the presence and flow of helium, hydrogen, and natural gas. The company is currently studying the feasibility of re-entering these wells, which Phillips describes as "good quality wells from what we've seen." The next steps involve desktop studies and field reviews to determine the cement plugs' status and the wells' overall condition.

The exploration stage is about 90% complete, with the company now needing to quantify the components and assess whether they can flow to the surface. Phillips emphasises the importance of this step: "It's largely immaterial if there's plenty of gas there, but it doesn't flow to the surface."

Market Potential & Economics

One of the most compelling aspects of Georgina Energy's project is the potential economics of helium production. Phillips highlights the significant price differential between helium and conventional natural gas:

"We're assuming that a wellhead price for gas will be between $2.80 and $3. For helium, we're very conservative, and we've assumed that the Australian government will regulate pricing. You're talking about US$270 per thousand cubic feet."

This price differential means that even small volumes of helium could make the project commercially viable. Phillips notes:

"It lowers your barrier to commerciality significantly. And when you're talking about such large structures with such high concentrations, you're talking in some instances maybe up to 8-9%, quite frankly you could probably have inerts for the remainder of the gas anyway, and it's still going to make money."

Technical Challenges & Development Timeline

While the potential rewards are significant, Georgina Energy faces several technical challenges. The company must prove that the helium can be extracted and processed efficiently. Phillips suggests that a modular approach to development could be feasible, potentially allowing for early revenue generation.

Regarding the timeline, Phillips states, "It's entirely feasible that with a fair wind, you could get a meaningful development well underway by 2029-2030." However, he also notes that a more modular approach, depending on regulatory approval, could potentially lead to earlier wellhead sales.

Strategic Importance & Government Interest

Given the strategic importance of helium for various industries, including semiconductor manufacturing and medical imaging, Phillips speculates that the Australian government might be interested in the project if it proves successful. "If, however, it's in line with their expectations, the size of the accumulation just from a helium perspective would probably make it a strategic asset to Australia," he says.

This could lead to government involvement in the development consortium or influence the pricing structure. Phillips suggests that government regulation could keep prices around $270 per thousand cubic feet, but in an open market scenario, prices could reach $1,200 to $1,500 per thousand cubic feet.

Investment Potential & Risks

From an investment perspective, Phillips sees significant upside potential in Georgina Energy if it delivers on its promises. His analysis applies a conservative approach, risking the project down to about 10-15% of its potential unrisked value. Even with this conservative approach, he arrives at a target price of 124p for the company's shares.

However, investors should be aware of the risks involved. The project is still in an early stage, and success depends on proving the gases' presence and flowability. Additionally, the development timeline and eventual market conditions remain uncertain.

Georgina Energy represents an intriguing opportunity in the niche but potentially lucrative helium market. With its assets in Australia, a country currently importing helium at high prices, the company could be well-positioned to capitalize on growing demand. However, significant technical and market risks remain, as with any early-stage resource project. Investors will need to monitor the company's progress in its well re-entry and testing program closely to gauge the true potential of its assets.

The Investment Thesis for Georgina Energy

• Strategic Asset: Georgina Energy's helium assets could be strategically important to Australia, potentially attracting government interest and support.
• High-Value Product: Helium's high price compared to natural gas means even small volumes could be commercially viable.
• Exploration Progress: The company has already completed 90% of the exploration stage, with the next crucial step being to prove flow rates.
• Multiple Revenue Streams: The presence of hydrogen and natural gas alongside helium provides potential for diversified revenue.
• Early-Stage Opportunity: Current valuation reflects risk, offering the potential for substantial upside if the company delivers on its promises.

Georgina Energy has initiated several operations as part of its programme to re-enter and develop the Hussar 1 well within its Hussar licence in the Officer Basin of Western Australia by December 2024. The company is legally changing its name from Mining, Minerals & Metals plc to Georgina Energy plc.

Key Operational Activities Include

• Scoping Study: The company has engaged an Independent Consultant to undertake a Scoping Study for capital and operating cost estimates of the proposed gas separation and purification plant.
• Off-take MOU: Georgina Energy is finalising an extension to its current Off-take MOU agreement, with terms aligning with the proposed development of EP513 Hussar & EPA155 Mt Winter projects.
• Drilling Permits: The company is securing land council clearance, updating environmental impact studies, and completing plans for DMIRS approval, including rig and operator safety plans.
• Resource Evaluation: Georgina Energy has secured access to recently available reprocessed seismic data better to define the potential Resource scale of the Hussar Project.
• Re-entry Logistics: The company has begun logistics planning discussions with various service providers. The road and access to the site have been enhanced by the planned re-grading of the 1400m airstrip adjacent to the Hussar well site.
• EPA155 Mt Winter Update: The company anticipates receiving a formal request to attend an on-ground meeting for EPA155 Mt Winter.

Anthony Hamilton, CEO of Georgina Energy, commented:

"We are delighted to have successfully delivered Georgina Energy to the Main Market of the London Stock Exchange and are now launching our work programmes to deliver low-risk projects in Australia for the development of our natural gas, hydrogen and helium projects through our well re-development programme."

The company holds 100% of the working interest in the Hussar Prospect and has a right to earn a 75% interest in the Mt Winter Prospect (with the potential to reach 90%). The Hussar Prospect hosts un-risked 2U Prospective (Recoverable) Resources of c.155 BCFG of Helium, c.173 BCFG of Hydrogen, and c.1.75 TCFGE of Hydrocarbons. The Mt Winter Prospect hosts un-risked 2U Prospective (Recoverable) Resources of c.148 BCFG of helium, c.135 BCFG of hydrogen, and c.1.22 TCFGE of hydrocarbons.

These operational updates demonstrate Georgina Energy's progress in advancing its helium, hydrogen, and natural gas projects in Australia. The company's focus on re-entering existing wells and its engagement with various stakeholders suggest a structured approach to resource development. However, investors should note that these are still early-stage activities, and success will depend on the outcomes of the planned studies and drilling programs.

Key Takeaways

Georgina Energy's helium exploration project in Australia represents a potentially significant opportunity in a niche but strategically important market. If proven commercially viable, the company's assets could position it as a key player in the global helium supply chain. The high value of helium relative to natural gas means that even modest production could be highly profitable. However, investors should be aware that the project is still in an early stage, with key technical challenges yet to be overcome. The company's success will hinge on its ability to prove the presence and flowability of helium in commercial quantities. The potential strategic importance of the project to Australia adds an interesting dimension, potentially attracting government interest and support. As the company progresses with its well re-entry and testing program, investors should closely monitor developments for a clearer picture of the project's true potential.

The global helium market is experiencing significant supply constraints amidst growing demand, creating a favourable environment for new entrants like Georgina Energy. Helium, a non-renewable resource, is critical for various high-tech applications, including MRI machines, semiconductor manufacturing, and space exploration. The closure of the U.S. Federal Helium Reserve, a major global supplier, has exacerbated supply concerns. This situation has led to price volatility and supply shortages, with some industries facing difficulty securing stable helium supplies.

Emerging markets, particularly in Asia, are driving increased demand for helium due to growing healthcare and technology sectors. The semiconductor industry, a major consumer of helium, is experiencing rapid growth, further straining supplies.

Australia, currently a helium importer, could become a significant producer if Georgina Energy's projects succeed. This would be economically beneficial for the country but could also enhance its strategic position in the global technology supply chain.

However, the helium market is not without challenges. The development of helium recycling technologies and the potential for hydrogen to replace helium in some applications could impact long-term demand. The high costs associated with helium extraction and processing also pose challenges for new projects. Despite these challenges, the current supply-demand imbalance in the helium market presents a compelling opportunity for companies like Georgina Energy. Zac Phillips notes that "Australia has already paid $1,200 per thousand cubic feet for a cargo earlier this year. So it's not a fictitious price; it's an observable price in the market today." This quote underscores the potential value of domestic helium production in Australia and the significant opportunity that Georgina Energy is pursuing.