Blue Star banks US$1.5m plus US$2.7m free carry on Galactica-Pegasus helium project farm out

Helium One pays US$1.5m for 50% stake in Galactica/Pegasus
It will also fund drilling of a six-well program capped at US$450,000 per well
Helium demand expected to grow from 6Bcf to 8.5Bcf by 2030

Special Report: Blue Star has completed the farm out of a 50% interest in its Galactica/Pegasus project in Colorado, USA, to Helium One Global for US$1.5 million, plus US$2.7m free carry.

As part of the free carry, London-listed Helium One will also fund the drilling of six development wells on top of the already producing State 16 well to form part of initial gas gathering into the Galactica helium production facility.

The swift completion of the deal comes on the back of drilling permits being rubber-stamped by the Colorado Energy and Carbon Management Commission via an Oil and Gas Development Plan.

Each well is being funded to a cap of US$450,000 each and drilling is expected to kick off during this quarter, with an aim for first helium production from Galactica/Pegasus slated for H1 2025.

Lofty prices

Helium, the gas stars produce when they smash two hydrogen atoms together, is highly valued and a finite resource because once released into the atmosphere, the helium molecules – because they are so light – escape Earth’s gravity and are lost into space forever.

It’s used in semiconductor manufacturing, nuclear energy production, solar panels, optic fibre and to cool superconducting magnets in MRI scanning machines, with global demand expected to balloon from 6 billion cubic feet (Bcf) to 8.5Bcf by 2030.

Developing Galactica/Pegasus

The Galactica/Pegasus field was discovered by Blue Star Helium (ASX:BNL) in 2022 via the JXSN#1, #2, #3 and #4 wells, which showed gas bearing columns of up to 230 feet containing gas with between ~2-6% helium and initial recorded flow rates of between 125-412Mcfd.

In June this year, BNL drilled the State 16 well, which promisingly flowed 1.9% helium at 285Mcfd in addition to 70% CO2.

Subsequent independent tests and data reviews including the adjacent Red Rocks helium development established likely initial production flow rate estimates of 250-615Mcfd for future development wells.

The Galactica/Pegasus wells and exploration and development leases. Pic: BNL

“The completion of our landmark agreement with Helium One marks the first step in our strategic plan to accelerate growth across our large Las Animas asset portfolio, and to rapidly build and expand our production operations in the region,” BNL CEO Trent Spry says.

“With the farm-in complete, we can now apply our full weight behind executing the Galactica project.

“We are excited to soon be drilling an additional six development wells, following the successful drilling of the State 16 development well earlier this year.

“Together these wells are expected to form the initial gas gathering system into the Galactica helium production facility, delivering exciting, high-value helium and critical CO2 co-product streams, with first production on target for H1 2025.”

This article was developed in collaboration with Blue Star Helium, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.