Strength in numbers: Fully funded Grand Gulf to optimise helium well design
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Grand Gulf is fully funded for the drilling of at least two helium exploration wells in Utah after raising $11m through a share placement.
This is a massive increase to the minimum of $8m the company had sought for the placement and a cracking endorsement from domestic and international institutions, sophisticated investors and existing shareholders.
The placement of shares priced at 4.4c each includes one free attaching option – exercisable at 8c with a three-year term from the date of issue – for every three shares subscribed.
Importantly for Grand Gulf Energy (ASX:GGE), the successful placement means it has the funds to optimise the well design with a larger production tubing diameter that allows for between two to three times higher flow rate.
This is based on further assessment and strategic advice from regional operators, including the neighbouring Doe Canyon Field where high raw gas flow rates have been recorded.
Jesse#1A, the company’s maiden well is expected to spud later this month and is now expected to cost US$3.3m (A$4.4m) to drill and complete.
Jesse#1A is the first earn-in well in the Red Helium Project with a carry of US$1.5m and the extra cost split 70/30, bringing the company’s commitment to US$2.7m.
Following the drilling of the well, Grand Gulf will have a 70% working interest in Valence Resources LLC, operator of the Red Helium Project, with potential to earn up to 85% by drilling a further two earn-in wells each with a US$1.5m carry.
Continued strong demand and supply side pressures from outages and geopolitical pressures ensure that the helium market is a lucrative one to pursue.
The company already has a strategic alliance and gas sales agreement in place with helium refiner and seller Paradox Resources, which owns the Lisbon Valley Helium plant in Utah, around 20 miles (32.2km) north of the Red Helium project.
Successful drilling at Red Helium could unlock enough supply for Paradox to restart its liquefier, which is capable of producing high-purity 99.9995% helium, attracting premium pricing of more than US$1,000 per thousand cubic feet.
The alliance has also identified several options for CO2 disposal including the expansion of existing carbon sequestration activities at Paradox’s Lisbon Plant to include CO2 from Red Helium and the use of Red Helium CO2 for enhanced oil recovery.
This article was developed in collaboration with Grand Gulf Energy, 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.