Blue Star Helium draws Helium One as farm-in partner at Galactica / Pegasus

Blue Star Helium draws Helium One as farm-in partner at Galactica/Pegasus
Helium One to pay US$1.5m and fund drilling of six development wells to earn a 50% interest in the project
Drilling to start in Q4 2024 with first production expected in H1 2025

Special Report: The prospectivity of Blue Star Helium’s Galactica/Pegasus project in Colorado has attracted AIM-listed Helium One to farm-in as a partner.

Under the agreement, Helium One will pay US$1.5 million to Blue Star in consideration for past costs and funding the drilling of six development wells to earn a 50% interest in the project.

Blue Star Helium (ASX:BNL) expects drilling of these six wells at Galactica, which represents Phase 1 of the broader Galactica/Pegasus development, to be carried out during Q4 2024.

Helium One’s move shouldn’t come as a surprise given the success of the State 16 SWSE 3054 development well, which was found to be capable of stabilised production of 250,000-350,000 standard cubic feet of gas per day (Mscf/d).

The well had previously flowed gas at a stabilised rate of 285Mscf/d with up to 1.9% helium content. This includes CO2 concentrations of up to 70%, which could add further to revenues as clean CO2 can be used in food and beverages, as well as chemical sectors.

Helium One said in their announcement that their investment “follows an extensive review of several potential asset acquisition targets over the past 12 months, in North America and elsewhere.”

“We are very pleased to welcome Helium One as a partner in the Galactica/Pegasus development,” managing director Trent Spry said.

“This partnership is 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.

“With Helium One’s farm-in, 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.

“The initial focus on Galactica represents Phase 1 of the greater Galactica / Pegasus development – it is set to deliver an exciting, high-value helium development as well as a critical CO2 co-product stream.

“Upon successful transaction completion, the Galactica/Pegasus partners are targeting first production during H1 2025.”

Key Farm-in agreement

Helium One earns a 50% interest in the Galactica / Pegasus project in exchange for paying US$1.5 million to Blue Star in consideration for past costs and funding the drilling of six development wells.

The 50% interest that is the subject of the farm-out comprises mineral leases in respect of 61,151.99 gross acres (51,479.37 net acres) in the Galactica / Pegasus development only.

Helium One’s obligation under the initial six well program is capped at US$450,000 per well.

Should drilling of any well cost more than this ceiling, the two companies will share excess costs equally.

Both parties will fund their working interest share of the tie-back, installation, and processing and other expenditures required for the Galactica/Pegasus development.

Five of the wells are already included in the Galactica/Pegasus OGDP I, which could be approved in late September.

Upon a positive hearing decision, Blue Star will apply for final permits to drill these wells. This final stage of the process is expected to take about two weeks, based on recent experience.

The company also has four other development well locations approved associated with Galactica and another six development well locations associated with Pegasus from which the sixth well can be selected from.

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.