Helium One Global Ltd (AIM:HE1, OTCQB:HLOGF) shares soared higher in Monday’s trading as the explorer seized control of its own drilling destiny in Tanzania, as it opted to acquire its own drill rig rather than see its timeline stall without a contractor.
The company expects to start drilling a well at the Tai project before the end of the third quarter, thanks to the deal.
Whilst acquiring the rig promises to secure the project timeline it also reflects a committed view of the project’s ongoing potential.
Helium One today highlighted that with the rig in place it could potentially advance more quickly to the appraisal at Tai, subject to the upcoming well results.
The deal also removes perceived risks over the company’s previous agreement, jointly alongside Tanzanian neighbour Noble Helium, with contractor SOFORI – on Friday, Helium One noted its frustration as the proposal had yet to reach a definitive contract and acknowledged it was mulling alternatives. And, before that, Noble signed up a separate rig contractor for its project.
In London, Helium One shares gained 2.04p or 39.9% changing hands at 7.14p each.
UK-based stockbroker SP Angel, in a note, commented that the pair of helium explorers took these steps ahead of Tanzania’s rainy season which is described as “fast approaching”(it begins in November).
Importantly, according to SP Angel, the news puts the exploration share on the radar for speculative investors to trade into the shares before the potentially pivotal well programme.
“The [prior] rig share initiative between Helium and Noble, following on from a co-operation agreement, was designed to enable both companies to save significant costs on mob/demobilisation based on a rig contract for a three-well drilling programme commencing in 3Q23,” the broker said in a note.
“However, with the rainy season fast approaching, both have now acted independently to maintain their drilling schedules in response to the delays in finalising a rig contract with Sofori.
“Although we would expect the new contracts to be less cost-effective, given the inability to share costs, the companies have now also mitigated the market’s perceived higher risk associated with the Tunisian rig contractor.”
SP Angel added: “The significant share price jump in early trading (+45%) implies that catalyst driven investors are now prepared to get involved in the upcoming test of the helium potential within the Rukwa Rift Basin, onshore Tanzania.”
Helium One today told investors that it has acquired an Epiroc Predator 220 drilling rig - an oil and gas type rig capable of drilling to depths in excess of 2,000 metres – which is already in Tanzania and is being mobilised to Helium One’s Rukwa project.
It described the deal as a “significant achievement” and highlighted that ownership of the rig provides the opportunity to move quickly into further exploration drilling.
Moreover, subject to results, the company expects that it can advance the appraisal of the Tai prospect without additional costs related to keeping a rig on standby or the challenges of mobilising rigs to the country.
Helium One chief executive Lorna Blaisse commented: "We are delighted to finally have reached this significant milestone … This has been an exceptional effort by all the team to ensure we had an executable option after recent disappointments and setbacks, in order to still fulfil our Q3 drilling target.”
Ian Stalker, Helium One chair, meanwhile, said: “This is indeed a milestone event for the company and opens up a range of ancillary options for the company as well as, most importantly, securing the control of our own drilling programme and any future appraisal and further exploration activities.
He added: “This rig acquisition is a strategic move in ensuring fast-track appraisal and development in a success case at Tai.
“The rig has been mobilised from the East Africa region and, when compared to mobilising rigs in from elsewhere, the cost differential is significant- in simple terms more cost-effective and time efficient."
Work streams are currently underway to ensure drilling can commence in September – civil works are underway, it is ordering remaining well equipment, and it is sourcing an experienced rig crew.