Blue Star charges into helium future with approval of Voyager development wells

Helium production could be on the horizon for Blue Star after it received the green light for the drilling of the first two development wells at the high-grade Voyager project in Colorado.

The Colorado Oil and Gas Conservation Commission (COGCC) granted the final approval for the BBB 33#1 and BBB 34#1 helium development wells, which offset the BBB#1 helium discovery well that had intersected a 134ft (40.8m) gas column and flowed gas containing 8.8% helium to surface.

Blue Star Helium (ASX:BNL) expects to drill the first well either late in the current quarter or early in the third quarter. This will include subsequent flow and pressure testing evaluation.

In addition to these wells which will be completed for production, the company is already putting in place plans to increase its potential production of the valuable gas with an additional five-well Oil and Gas Development Plan to be submitted to COGCC in the first week of May.

These wells will give Blue Star a robust inventory from which to select its first three to four helium production wells at Voyager.

Notably, it comes as COGCC advised that it is implementing a revised permitting process that is designed to shorten the time between submission and hearing from the current average of seven months to 4.5 months.

Development plans

Commercial discussions for the provision of a leased helium production facility are also well advanced with execution of a facilities agreement expected in the coming weeks.

Leasing the facility enables Blue Star to avoid the requirement for any substantial debt funding, which would have necessitated the execution of long term offtake contracts, rather than delivering the ability for immediate sales into the premium priced spot market.

It previously noted that the plant will have raw gas throughput of 2 million cubic feet of gas per day for an expected 98%+ purity helium product gas output of 38 million cubic feet in its first full capacity year.

Helium is a rare commodity on the ground, which when combined with its role as a critical – and often irreplaceable – component in the semiconductor, medical, research, space and defence industries, makes for some serious sticker shock.

US spot market prices hit as high as US$2,000/mcf last year (an increase of around 300% since 2021) and with supply remaining constrained, there is reason to believe that further increases are likely, though at a considerably more restrained level.

Voyager has a best estimate Contingent Resource of 643 million standard cubic feet of helium, at least a portion of which could be converted into reserves following successful drilling and testing of the development wells.

The company says it remains on track for first helium production in the second half of this year.

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.