Mendell Helium PLC (AQSE:MDH) has announced that M3 Helium Corp, the Kansas-based company for which the company has an option to acquire, has just entered into farm-in agreement over a project that envisages at least 25 new wells.
M3 has inked the agreement with Scout Energy, for the Hugoton gas field which spans some 161,280 acres in Kansas.
The upside to the project could in time see up to 200 wells drilled, with the production earmarked for Scout Energy’s gathering system and nearby Jayhawk processing facility.
It would see M3 Helium secure a fixed helium price from 2026 through to the end of 2029, and, notably, the proposal would also see Scout waive gathering and processing fees in exchange for methane output from M3’s wells.
The potential deal also includes discounted royalties and operating expenses. M3 would also secure a right to first refusal over royalties and operating expenses. M3 would be required to pay $1 million to Scout when it begins drilling or by 31 March 2025.
"M3 Helium now has low-cost access to some of the world's most prospective acreage for helium extraction,” chief executive Nick Tulloch said in a statement.
“Furthermore, its partnership with Scout Energy guarantees an offtake of all of its production at pre-determined price levels and low operating costs.
“Natural resources exploration is inherently uncertain but M3 Helium's agreement provides a level of predictability that many companies in this sector may never achieve.”
“To put the financial terms of this agreement in context, M3 Helium's management estimates that a conventional oil and gas lease over land of the type included in the farm in agreement could be at least US$50 per acre implying an indicative value of the farm in acreage of over US$8 million.
“The US$1 million fee M3 Helium will pay on commencement of drilling represents just 12% of that, plus M3 Helium also receives access to established infrastructure and processing facilities as part of the arrangements.”
Tulloch added: "Global demand for helium has naturally generated investor interest in the sector. Across UK-quoted companies alone, there are a number of different strategies.
“Ours is straightforward. We have the right to drill new wells in a proven helium-producing region. We have a low-cost model, partnered with the biggest operator in the region. And we have access to nearby infrastructure and processing."
Mendell Helium is an Aquis Exchange-quoted micro-cap which in June - prior to its rebranding from its previous guise as Voyager Life Science - secured the option to acquire M3 Helium through a share-based reverse takeover transaction.