Imperial Helium Corp (TSX-V:IHC, OTCQB:IMPHF) has received plaudits from analyst firms Eight Capital and Auctus Advisors after the company released positive test flow results from its IHC-Steveville-3 well earlier in March.
Tests conducted by IHS Markit calculated an absolute open flow rate of 13.3 million cubic feet of gas per day (mmcf/d), and the capability of sustaining production rates of 2.5 mmcf/d for three years before decline.
Eight Capital's analysts called the results “positive” as the two production test results from the Blow Out Zone (BOZ) and Sub-Salt Zone (SSZ) confirm the capacity of the reservoir to supply a 10 MMcf/d gas facility.
READ: Imperial Helium reveals positive results from independent tests on the Sub-Salt Zone in Steveville-3 well showing "valuable" gas
They noted that gas composition testing showed the helium concentration in the SSZ was 0.51%, which is 19% higher than in the BOZ. The test also confirmed two distinct stacked reservoirs in the region, with the SSZ more valuable due to its higher helium concentration, according to Imperial.
Additionally, the minimal amount of carbon dioxide in the SSZ which means that there will be no expenses associated with its removal.
“Production testing confirms commerciality of the SSZ,” the Eight Capital analysts wrote in a note. “Positive test results at IHC-Steveville-3 is leading IHC to re-enter Steveville-2. IHC will re-enter Steveville-2 in order to test whether or not the SSZ is commercially viable from this location. We see this test as being important because it will increase the extents of the SSZ and provide further upside value as this reservoir zone is de-risked.”
They also noted that volumes from both the BOZ and SSZ support IHC's facility capacity of 10 MMcf/d.
"Very good reservoir characteristics"
Meanwhile, Auctus analysts noted that the SSZ horizon at IHC-Steveville-3 flowed 2.34 mmcf/d on test using a small 18/64 inch choke.
“The very small change in reservoir pressure suggests very good reservoir characteristics,” they wrote. “It also indicates that the well will be able to sustain 2.5 mmcf/d production for a several years (estimated at four years) based on a 15% draw-down. The full field life is estimated at more than 15 years.”
The Auctus analysts noted that they now have an unrisked value of around C$0.20 per share for the SSZ zone.
“The successful flow test will probably be accretive to volumes of helium already discovered,” the analysts said. “Pending the result of the upcoming connectivity test, we have already increased the probability of development of the SSZ resources from 40% to 85%. The two wells could probably recover the entire reservoir in the order of 0.3 bcf of helium from both zones.”
Eight Capital has a 'Buy' rating and a C$1.00 price target, while Auctus has a target price of C$0.80 on the stock.
Imperial Helium stock was trading around C$0.18 on Monday morning.
Contact Angela at angela@proactiveinvestors.com
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