Blue Star Helium looks to pick up producing assets in Colorado

Blue Star Helium reports option agreement to pick up producing assets
Assets strategically located near flagship projects in Las Animas County
Well testing activities planned during the option period

Special Report: Blue Star Helium has executed an option agreement to purchase discovered and producing helium assets in the Great Plains field and Kregel well of Colorado, USA, in a move set to consolidate the company’s holdings in the region.

This deal with Wiepking-Fullerton Energy (WFE) and several other parties grants the company the option to purchase either WFE’s helium assets; or WFE’s entire asset portfolio in Lincoln and Cheyene Counties, Colorado.

And both the Great Plains and Kregel assets hold some solid appeal. Historic testing at the Great Plains field shows helium concentrations of 1.36% to 2.02% with raw gas flow rates of 5,000 to 10,000 Mcfd.

The asset also hosts existing well discoveries, substantial existing production infrastructure, and is close to helium liquefaction at the Ladder Creek processing facility – opening potential for a capex-light development opportunity for the company.

Kregel well on the other hand, produces at 1.38% helium, and is already tied into the Tumbleweed gas gathering system, which feeds the Ladder Creek helium processing liquefaction plant – meaning there’s potential for offset wells and expansion to increase gas through Ladder Creek.

Helium taking off

Helium is a vital gas used in the manufacture of MRIs and semiconductors and has applications across fibre optic cable manufacturing, hard disc manufacture and cooling, and even space exploration.

It’s also in short supply, with most reserves found as a byproduct of the extraction of natural hydrocarbon gas.

Transformational helium opportunity

In addition, the WFE assets are also strategically just 100 miles north of Blue Star Helium’s (ASX:BNL) flagship projects in Las Animas County, Colorado, offering strong operational synergies and further connectivity to key helium infrastructure in the area.

“A transformative opportunity like this is rare,” managing director and CEO Trent Spry said.

“To have numerous discovery wells that can be recompleted in zones where helium has already been discovered, coupled with existing infrastructure and processing site enabling a capex-lite development, is a compelling and accelerated helium production proposition.

“In addition, having a connection to the Tumbleweed gas gathering system, which feeds to the Ladder Creek helium processing liquefaction plant, allows for further opportunity for offset wells and expansion to increase gas though the Ladder Creek facility for on-processing to liquid helium.”

Spry said the option resulted from an ongoing search to add additional helium producing reservoirs centrally located in the US to its portfolio, and that it had presented itself predominantly due to Blue Star’s technical and specialist helium expertise.

“We see this opportunity as an ideal fit with our existing portfolio and rich with operational synergies, being located approximately 100 miles from our existing Las Animas helium assets,” he said.

Short development timeline the key

“Having another set of premium helium assets with a short development timeline in the heart of the largest market in the world, and located proximal to processing and transportation infrastructure, sets our business up to be a serious and reliable supplier of high-grade helium.”

Spry said the opportunity to diversify by purchasing all WFE assets, including existing oil and gas production delivering immediate cash flow, is “a game changer with the potential to further accelerate our organic growth in both Las Animas and Lincoln and Cheyene Counties.”

“We are currently evaluating potential acquisition funding options, including debt and/or strategic JV partnerships, prior to exercising the option, that will enable us to capitalise on this opportunity,” he said.

Looking forwards, well-testing will commence in the near-term.

“We are excited to start testing the existing discovery wells quickly,” Spry said.

“Our plan, during the option period, is to evaluate existing helium zones [at the Great Plains field], along with additional zones believed to contain helium, across the Morrow V11 and Keyes formations – in order to test our model and confirm commerciality.”

At Kregel well, there’s also extensive exploration upside with approximately 283 square miles of exclusive 3D seismic.

“We believe additional opportunities may exist in the roughly 283 square miles of exclusive 3D seismic data,” Spry said.

“This area has not previously been interpreted with a focus on helium prospectivity and we look forward to bringing our subsurface skills to the area and unlocking potential vast additional helium volumes.”

The company stresses that the execution of this agreement does not alter its focus to bring the world-class Galactica/Pegasus helium project in Las Animas into production during H1 2025, “nor our intent to advance ongoing commercialisation activities across our key helium resources in Las Animas County,” Spry said.

As part of those activities, drilling is expected to start, subject to weather, in mid-January 2025 at Jackson #31 followed by drilling at Jackson #04. A further 3 approved wells are scheduled for this campaign in the Galactica helium project.

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.