Mendell Helium: helium remains hot
Time to get in on the ground floor?
Good afternoon everyone. One more to watch as you go into the weekend.
Helium remains red hot, and here’s why. Helix Exploration raised a bucketload of capital with their hugely popular and oversubscribed IPO earlier this year - and now everyone with half a hand on a helium asset is throwing their hat in the ring.
We took a gander at Pulsar very recently, but now it’s time to consider Voyager Life - rebranded to Mendell Helium - and its movement into the space.
Let’s dive in.
We can probably start from early June, when the termination of the merger with Northern Leaf (and thereafter, a second suitor) saw the company’s market cap fall to circa £600,000 - in a world where a shell is worth £1 million.
And in effect, that’s what Voyager became - instead of a cannabis-based company, it’s transitioning into helium. Mendell is disposing of the health and wellness operations and has an option to acquire Kansas-based M3 Helium via RTO through the issue of 57,611,552 new ordinary shares in Mendell representing 57% of the issued share capital of the business.
For context, according to recent unaudited figures M3 has total assets of $3.59 million with $320,250 of outstanding liabilities.
Let’s take a tl;dr look at M3 Helium:
it’s already producing helium and natural gas from three wells and is testing several others to see whether they will be economic to operate
through an arrangement with Scout, M3 Helium has access to existing infrastructure to transport and process helium in large quantities (specifically a pipeline to a processing plant)
the company arguably has the ability to scale up its projects to new drilling sites based on expected resource capacity from an independent resource report
it owns a modular hybrid plant to process and enrich helium - to be used in Fort Dodge where there is no immediate access to infrastructure
To speed along the acquisition, Mendell recently raised circa £864,000 at 3p per share, issuing one warrant for every two shares issued at an exercise price of 6p per share for the next two years until expiry.
This capital will be used to:
fund the development of M3 Helium's operations;
drill additional wells at Hugoton North Play
prepare an Admission Document in connection with its proposed re-admission to trading on AQSE Growth Market
general working capital
There is skin in the game here: Eric Boyle, Non-Executive Chairman, and Fetlar Capital(controlled by CEO Nick Tulloch and his spouse), each intend to invest £25,000 in the Fundraise.
The Company expects to exercise the option on re-admission to trading on AQSE Growth Market of the enlarged group and has loaned $500,000 to M3 Helium to advance its drilling programme (most of which has now been spent).
Let’s now consider the six wells controlled by M3, all in South-Western Kansas (USA):
Hugoton North Play
The Hugoton gas field is one of the largest natural gas fields in North America, covering more than 31,000 square kilometres - and has significantly contributed to the natural gas supply in the United States.
For perspective, more than 12,000 wells have been drilled in the Hugoton field, with over 30 trillion cubic feet of natural gas produced since its discovery during the Roaring 20s. Importantly, it’s also been the source of masses of helium.
M3 covers circa 250 square miles of tenure, with production to date at around 1.25% helium - commercial tends to be above 0.3%. Analogous wells drilled by other operators within the region have averaged over 0.44 bcfg per well, so M3 could potentially be controlling a potential recoverable helium resource of over 5.5 bcf across the entire area - assuming a standard average 1.25% helium content.
The north region of the field has historically been largely undeveloped because of the high nitrogen content, which makes natural gas extraction economically challenging, and high infrastructure costs.
This changed during April 2024 when Scout Energy acquired the pre-existing pipeline in the north, providing M3 Helium with a direct path to commercial sale through Scout’s Jayhawk helium plant. For perspective, helium sale prices at the Jayhawk helium plant are at around US$550 per MCF, less a 20% processing fee.
M3 Helium has an interest in five wells in its Hugoton North Play project. These wells are situated around Garden City in western Kansas, and for clarity, are all within or near the gathering network connected to the Jayhawk gas processing plant:
Carter 1 & 2 wells
Located approximately one mile apart, north of Garden City
M3 Helium owns 100% interest in both wells
Carter 1 well funded by third party, with the helium priced at $280/Mcf
Carter 2 well recently completed fracking
Geology in the northern area varies; Carter wells have higher water content
Low-pressure fracking used to avoid compromising the well
Early positive signs: vacuum observed in the wellbore after fracking
M3 Helium expects more insights on economic potential soon
Smith and Nilson wells
Located south of Garden City in Haskell County, near Sublette
M3 Helium owns 100% interest in both wells
Economic flow rates achieved, tied into Scout pipeline network
Meters installed
Situated in transition zone, east of Hugoton gas field core
Potential for upside due to access to formations overlooked by other operators
Smith well tested at 150 psi in July 2024, pressure may increase after partial water removal
Peyton well
Located south of Garden City, west of Smith and Nilson
producing around $2,000 per month net
M3 Helium owns 20% interest in the well
Produces without the need for a pump
Situated in the Hugoton gas field, a historically reliable producing area with limited water content
Steady production and long well life make it an attractive operational area
Fort Dodge
Aside from Hugoton North Play, M3 Helium owns a lease and existing well in Fort Dodge. Helium concentrations at Fort Dodge are as high as 4.6% - however there is no access to infrastructure meaning that M3 needs to use its owned mobile Pressure Swing Adsorption plant to process and enrich produced helium, before sending the gas to a Scout access point one hour away by road.
The 100% owned Fort Dodge lease allows for two additional similar wells to be drilled in addition to the existing Rost 1-26 well. These will be expensive at circa $800k a pop, due to the need for on-site processing and an injection well - but should come with a six month payback time.
The Rost well was tested in July 2024 by Shamrock Gas Analysis as containing 5.1% helium composition, while Thurmond-McGlothlin tested the pressure at 302.7 psi. Samples of gas were previously taken and measured at 47,100 cubic feet per day.
Recent updates
Mendell’s option exercise date has been extended to 31 January 2025 - with progress now being made on preparing and auditing M3 Helium's financials, alongside efforts to obtain a competent person's report.
There have been no other changes to the option - and at the current share price, this would value the enlarged group at approximately £3 million.
M3 Helium has also made significant progress since the Company entered into the agreement to acquire it. Two further wells, Smith and Nilson, have been tied into the local gathering system and brought into production. And Rost is expected to commence production shortly.
M3 Helium has also initiated a second, much larger frack on the Nilson well designed to stimulate further production. During the frack, a total of 210,000 gallons of gelled water was pumped into the well with pressure reaching 1,500psi at the peak of the operations (the first frack averaged only 550psi).
Seven frack pumps were able to deliver up to 80 barrels per minute of a gelled water and sand mixture - equal to 12 tonnes of mass per minute. The team will now assess the well's performance over the coming weeks, and M3 is already identifying further locations for new wells.
CEO Nick Tulloch enthuses:
‘It has always been our view that a particular attraction of M3 Helium is its proximity to local infrastructure. Production is an important metric but the ability to deliver helium to market cost-effectively and without restrictions is what can define our business. The speed at which we and M3 Helium have been able to develop their operations is testament to that and the involvement of local investors in the recent Nilson frack, in our view, is a powerful endorsement of our strategy.’
The bottom line
Mendell Helium is not a Pulsar or a Helix - these companies are attempting to prove up and exploit potentially world class assets.
Mendell is instead developing moderately profitable wells in an already proven system, using its strong working relationship with Scout Energy and the company’s massive Jayhawk helium plant.
It could well become a decent earner.