Helium One Global Ltd (AIM:HE1, OTCQB:HLOGF) should have ample time before the rainy season to complete its phase-two drilling campaign at its Rukwa project in Tanzania where it hopes to prove it contains the world's largest primary helium resource.
In its announcement on Tuesday, the AIM- and OTC-listed company announced that an independent audit of its planned drilling rig is 80% complete, with the key components tested and operated successfully.
Orders have already made for casing and drill bits, which have long lead times, and management is working with tier-one service providers to confirm mobilisation timelines and planning the logistics of getting the rig to Tanzania to begin the drilling campaign, which will take around one month.
With the company expecting audit activities to resume in mid-August, there should be “plenty of time” to complete the drilling campaign before the rainy season starts in mid-November, said analyst William Larwood at house broker Liberum.
The analyst said it was “unsurprising” that it has been challenging to find a suitable rig for the drilling campaign given demand from oil and gas companies amid the sky-high crude prices.
However, he said Helium One is taking “appropriate steps” in ensuring that the rig is fit for purpose, and risks of equipment failure are mitigated.
The rig the company has secured is a containerized, conventional rig, rather than the slimline rig that was used in the previous drilling campaign.
This means that the company should not run into the same borehole washout issues as it did in the phase-one drilling campaign, Larwood said.
One the audit has completed audit, the rig choice and the contracting of a tier 1 oil and gas services provider “should provide Helium One with the best chance of success in its Phase II drilling campaign”.
Liberum values the company’s shares at 19p, indicating a 150% premium to the last close price.
This price target is derived using a discounted cash flow basis, post discovery and production, incorporating a 35% chance of geological success.