Helium One (LON:HE1), the primary helium Company with exploration licences in Tanzania has announced the Company’s audited results for the year ended 30 June 2022.
Within the period:
· Completion of Maiden drilling programme, delivering a proof of concept and enabling the Company to de-risk the Rukwa Basin
· Working helium system demonstrated at Tai-1/-1A with the presence of good quality reservoirs, thick sealing units and multiple helium shows
· Commencement of Phase II exploration programme, providing the Company with the best information available to inform the planning and targeting for the Phase II drilling campaign
· Significantly strengthened management team
· Licence renewals and licence relinquishments concluded, enabling the Company to focus on more prospective remaining acreage, as well as saving capital
· Signed Memorandum of Understanding with Exalo Drilling S.A. for the supply of a drilling rig
· Letter of Intent with Baker Hughes for the supply of integrated wellsite services
· Phase II drilling programme planned to commence Q1 2023
Ian Stalker, Chairman, commented:
“This was a significant year for the Company as we completed our first two exploration wells in Rukwa and significantly de-risked the Rukwa project by identifying a working helium system at our Tai prospect. As Phase II exploration moves towards drilling, with the potential to prove up what we believe to be a world class helium province, Helium One is able to leverage the knowledge and experience of the team of experts that have joined us over the period allowing us to move more confidently into the next phase of our development.
“I would like to thank all our staff, shareholders, local communities and the ministers and Government of Tanzania for their continued support as we enter what will undoubtedly be a very exciting period for the Company and deliver what we hope will be a commercial discovery at Rukwa.”
David Minchin, Helium One Global CEO, commented:
“The last year has been an incredibly busy period for the Company delivering our first drilling programme and building on the data gained from that with our Phase II exploration programme. This has provided us with an exceptional dataset from which we have planned our Phase II drilling programme, targeted to commence in Q1 2023.
“As a team we are very excited about the year ahead, returning to Tai to target the intervals that we were unable to evaluate last year and with a view to confirm a discovery that we believe can unlock the value of an entire province.
“I would again like to thank all our stakeholders for their continued support and look forward to providing further updates in due course.”
Chairman’s Statement
The period under review has been another busy period for the Company. On the operational front, Helium One delivered its maiden exploration programme culminating in the milestone events of the Company’s first two exploration wells being drilled on the Rukwa Project in Tanzania – the first drilling campaign in Africa to target primary helium. The work undertaken in 2021 provided a proof of concept and has enabled the Company to reduce exploration risk in finding helium in the Rukwa Basin. The drilling carried out on the Tai prospect demonstrated a working helium system: with good to excellent quality reservoirs, thick sealing units, and helium gas shows at multiple prospective intervals.
Following this the Company then commenced Phase II of its exploration programme, building on information obtained from the 2021 campaign. This included the successful completion of a 220-line kilometre 2D seismic campaign, targeting the northern extensions of known structural highs that are believed to act as charge focus areas for helium migration. The Company also completed a multispectral satellite spectroscopy study over the entire licence area, which identified abundant near surface helium anomalies. An Electrical Resistivity Tomography survey was also carried out across nine lines, totalling 56-line kilometres, over selected targets which will contribute significantly to our understanding of potential shallow helium plays within the top 200 metres of the Rukwa basin.
All of the extensive work that the Company has completed to date ensures that the Company has the best information available to inform the planning and targeting for the Phase II drilling campaign. The challenge of finding a suitable rig for Phase II drilling was compounded by increasing demand from the large and medium size oil and gas companies resulting in a scarcity of rigs and ancillary well evaluation equipment available for the East African market. These challenges have been largely overcome and the Company has now signed a memorandum of understanding with Exalo Drilling S.A. (“Exalo”) for the supply of a drilling rig (“the Rig”) to be utilised in the Company’s drilling operation on the Rukwa licence.
In the period under review the Board continued to seek ways to improve its Environment, Social and Governance (“ESG”) impact. As part of our ESG strategy, we will continue our ongoing engagement with all stakeholders and governments to ensure that we operate our business in a way that is sustainable and benefits the local communities in which we have a presence.
During the year, the Company strengthened the team at Board level with the appointment of Nigel Friend as an Independent Non-Executive Director. Nigel is highly regarded in the oil and gas sector having worked as CFO and CEO for a number of successful companies. Given his expertise, this is a major endorsement for the Company, its strategy and potential. His deep industry experience and knowledge of commercialising significant gas discoveries will be invaluable as Helium One grows.
I would like to take this opportunity to thank the Board and all our staff for all their efforts and continued dedication in what has been an incredibly busy period for the Company. I would also like to thank the Government of Tanzania and the local communities in which we operate for their continued support which has enabled the Company to advance its operations at such a dramatic pace. We look forward to continuing our work with them in the year ahead, and to delivering our Phase II programme.
Finally, I would like to thank all of our shareholders for their continued commitment and support. We believe that all the work completed to date in the field at Rukwa assists in de-risking our planned 2023 drilling effort. This combined information, along with the knowledge base of our expanded team of experienced gas professionals will allow us to run an efficient Phase II drilling programme with the maximum chance of success and proving up what we believe is a world class helium province. The Company is able to leverage the vast knowledge and experience of the team of experts it has brought together under CEO David Minchin to grow the Company into a global explorer and producer.
Ian Stalker
Non-Executive Chairman
Chief Executive’s Statement
I am pleased to be reporting on the Group’s annual results for the 12 months to 30 June 2022. The period under review has been another busy year of considerable progress for the Group leaving the Company poised to commence its Phase II drilling campaign.
The period to 30 June 2022 saw the Company conclude the Phase I exploration programme at our flagship Rukwa project whilst also commencing the Phase II programme with an infill 2D seismic campaign over the Rukwa licence area to identify the most suitable drill targets also completed.
Operational Review
On 11th August 2021, the Company announced the completion of drilling at its maiden Tai-1/-1A exploration well to a total depth (TD) of 1,121 metres. The well successfully identified helium shows within all three target formations, including five helium show intervals within the Karoo Group, as well as secondary targets in the Lake Bed Formation and Red Sandstone Group.
The uppermost Karoo encountered a thick (130 metres) claystone sequence, demonstrating seal presence which is supported by the interpretation of the 2D seismic data. Wireline logging of the uppermost Karoo also indicated good reservoir potential with 15-20% porosity.
Unfortunately, due to poor downhole conditions, it was not possible to log the full Karoo sequence. Borehole washouts associated with interbedded sand-claystone sequences resulted in a series of ledges developing in the wellbore. The wireline tools subsequently became hung-up on these ledges and, after several attempts to clean the hole, the Company was unable to progress the tools beyond 880 metres.
Without wireline data it was not possible for the Company to assess the helium gas-bearing potential of the deeper, thicker, reservoir intervals which had demonstrated helium shows in the main Karoo Group. As no free gas was identified, and due to safety concerns caused by the deteriorated hole conditions, no drill stem test was conducted, and no samples of brine or gas were recovered to surface.
Whilst Helium One is disappointed not to have identified free gas within the Karoo Group of Tai-1/-1A, data acquired from this well significantly enhanced the Company’s understanding of the helium system in the Rukwa Rift Basin. By encountering helium shows in the Lake Bed Formation, Red Sandstone Group and Karoo Group, combined with QEMSCAN and petrophysical analysis confirming the presence of a seal and demonstrating good reservoir potential, the Board are encouraged that we have identified a working helium system in the Rukwa Rift Basin.
The Company subsequently spudded the Tai-2 exploration well on 17th August 2021. The well, despite not identifying helium gas, provided further valuable information on shallow trapping potential. The aim of this well was to target the continuation of a 2.2% helium show identified in a sandstone interval at 70.5 metres in Tai-1. Wireline logging of Tai-2 demonstrated a continuous clay over this interval, suggesting that the sandstone unit identified in Tai-1 pinched out but provides evidence for vertical and lateral seal potential in any Lake Bed targets.
Operations at the Rukwa project continued with the announcement on 1st November 2021 of the commencement of the Company’s Phase II 2D Seismic campaign. The 200-line kilometre 2D seismic campaign targeted the northern extensions of known structural highs that act as a focus for helium charge. Following encouraging early results, the Company decided to extend the survey with an additional 20-line kilometres of 2D Seismic to secure additional data over preliminary leads close to the Momba River.
Seismic acquisition parameters and line layout were based on the integration of data from the Phase I 2D seismic, the Company’s Airborne Gravity Gradiometry dataset, remote sensing of surface helium anomalies utilising Sentinel-2 satellite data, and Helium One’s technical understanding of charge and migration developed from Tai-1/-1A drilling results.
Phase II 2D Seismic was positioned further northwards into the basin than the Phase I 2D Seismic, which was limited to areas of prospectivity close to the basin margin and to target depths of <2500 metres. By advancing Phase II 2D Seismic investigation northward and targeting extensions of known structural highs and charge focus points, the Company’s aim was to identify targets with a lower charge risk and target depths down to ~2500 metres for testing with a conventional drill rig.
In January this year, Company announced the results of a Multispectral Satellite Spectroscopy (“MSS”) study providing a heat-map for helium at surface across the Company’s entire licence area. The study identified abundant helium anomalies indicating widespread helium charge and migration across the Rukwa, Eyasi and Balangida Rift Basins. The Company’s Phase II exploration programme continued in February with the Electrical Resistivity Tomography (“ERT”) survey over priority areas identified from Phase I and Phase II 2D seismic, as well as investigating surface helium anomalies identified in the MSS study. The ERT survey was designed to identify resistivity anomalies within the ultra-shallow zone (<200m), allowing a better understanding of near surface geology which is poorly resolved by seismic.
Also in February, the results of the Quantitative Evaluation of Minerals by Scanning Electron Microscopy (“QEMSCAN”) study on drill cuttings collected from the Tai-1/-1A wells at its Rukwa (100%) project area were announced. These results indicated good to excellent quality reservoir, demonstrating clean sands with very low clay content, whilst also confirming the presence of thick claystone units at the Top Karoo Group and Base Lake Bed Formation, as well as multiple intraformational claystone units.
Following the evaluation of all the data gained in the Phase I and Phase II exploration program, Helium One plans to commence Phase II exploration drilling operations at the Tai prospect which is the most advanced of all leads and prospects identified in the 1,898 km2 Rukwa Basin.
The Subsurface team selected the Tai prospect as their primary Phase II exploration target given the new data from the Phase II 2D Seismic campaign. This interpretation has not only provided improved resolution over the Tai structural closure but has also identified a newly defined closure in the Lake Beds which was not previously targeted.
Drilling at Tai is supported by stratigraphic information from the 2021 drilling campaign. QEMSCAN analysis on cuttings has provided additional information on reservoir distribution, mineralogy, seal potential and grain size distribution of the entire sedimentary sequence at Tai-1/-1A, indicating good to excellent quality reservoir. This data also confirms the presence of a thick claystone unit at the top of the Karoo Group as well as the presence of intraformational claystone and calcrete interbeds within the Lake Bed Formation.
The Tai prospect is further understood by the identification of multiple helium shows (helium identified in drilling mud) across all formations but which the Company was unable to log or test with wireline equipment. With a robust structural closure, detailed information on reservoir and seal, and the identification of subsurface helium which proves a working helium system. Tai is the lowest risked prospect in Helium One’s current AOI of the Rukwa Basin. Given this, Tai will be the focus of the Company’s exploration expenditure with a primary objective of proving a discovery in the 2023 campaign.
The Company has now signed a memorandum of understanding (“MoU”) with Exalo Drilling S.A. (ORLEN Group) (“Exalo”) for the supply of a drilling rig (“the Rig”) to be utilised in the Company’s drilling operation on the Rukwa licence, with a target spud date of Q1 2023 subject to the necessary funding for the drilling programme being in place.
Exalo Drilling (ORLEN Group) is a one of Europe’s leading onshore drilling contractors with a fleet of 35 drilling rigs allowing for well drilling up to 8000m of depth. Exalo Drilling is a global brand with branches in Pakistan, Tanzania, Kazakhstan, Czech Republic, Chad, and a subsidiary in Ukraine. The company has over 70 years’ experience operating in countries throughout Europe, Africa, and Asia and are known internationally for the delivery of high-quality drilling and oilfield services.
The Rig will be released from southern Africa on completion of current operations. Thereafter, subject to final contract negotiations and dependent on local ground conditions, the Rig will mobilise directly to operations in Rukwa. The Rig can be broken down into 28 tonne loads for ease of transportation, allowing for year-round transportation in a range of weather and road conditions.
The Rig was Helium One’s first choice during research following the 2021 drill campaign but had already been contracted for operations elsewhere. As the Rig is already engaged in drilling activities that exceed the total depth anticipated at Rukwa there is no requirement for an independent rig audit.
The Baker Hughes integrated service package will be transported from the same location and at the same time as the Exalo 202 Rig, meaning that drilling operations will be able to begin as soon as the Rig is in place and accepted as ready to commence.
Drilling will target the Tai prospect where Phase II 2D Seismic provided improved resolution over a robust structural closure at Karoo level, and also identified a newly defined closure in the Lake Beds which was not previously tested. With 2021 drilling providing detailed information on reservoir and seal, and the identification of subsurface helium on multiple horizons which proves a working helium system, the Company is confident that Tai prospect gives the best opportunity to make an economic discovery that unlocks the potential of the Rukwa helium province.
Licence Area Evaluation
Helium One submitted licence renewal applications over 12 of its licences which were due for second renewal during September and October 2022.
As part of the renewal process, Helium One conducted a review of all the Company’s licences held with a view to fully or partially relinquish licences that were not considered to be prospective for helium.
Prior to renewal, Helium One holds a prospecting licence footprint in the Rukwa Rift Basin totalling 3,448 km2. Following review two PLs were fully relinquished (PL10728/2015 and PL10711/2015), and a further six were partially relinquished (PL10727/2015, PL10712/2015, PL10710/2015, PL10725/2015, PL10709/2015 and PL10686/2015). The others remained unchanged. This combined relinquished area totals 1,549.27 km2 saving approximately $309,000 per year in licence fees.
The Helium One technical team selected the chosen areas for relinquishment based on the following criteria:
· inaccessible offshore areas with no, or poorly, defined exploration leads;
· onshore areas with no, or poorly, defined exploration leads; and
· onshore areas on outcropping basement i.e. no sediment fill therefore deemed to be non-prospective
Retained areas were selected based on the following criteria:
· existing prospective areas with 2D seismic data coverage;
· offshore areas with well-defined leads, i.e. defined by multiple seismic interpreters, and supported by gravity – magnetic data; and
· onshore areas with well-defined leads and prospects in areas with known surface helium seeps
By relinquishing portions of our licenced acreage, Helium One can eliminate those areas deemed to be non-prospective and ensure future work programmes are focussed more effectively on the remaining, higher ranked acreage that is leased.
Historically, expenditure on the licence areas has been capitalized on the Company’s balance sheet as an intangible asset. The Board undertakes an annual review of the carrying value of the Group’s intangible assets and as a result of the relinquishment, the value of the intangible assets has been impaired by the total of the expenditure on the relinquished areas. The total impairment charge for the year is $8,520,929.
Financial results for the year ended 30 June 2022
For the year to 30 June 2022 the Group recorded a total comprehensive loss attributable to shareholders of the Company of $13,356,151 an increase compared with $5,155,028 for the year to 30 June 2021. The largest contributor to the total comprehensive loss was the impairment loss of $8,520,929 on the relinquishment of licences as detailed in note 12 to the financial statements.
The Group’s net assets as at 30 June 2022 were $18,033,568 in comparison with $28,536,258 at 30 June 2021. The decrease is due to the impairment of the exploration assets as a result of the relinquishment of licence areas. At 30 June 2022, the Group cash position was $4,906,153.
Outlook
Helium remains an irreplaceable technology commodity in supply crisis: the Board believes that Helium One may have a significant asset which can help resolve this crisis. The year ahead promises to be another busy and very significant period for the Company as we deliver our Phase II drilling programme as we look to deliver a commercial discovery at our Rukwa Project. We have a strong and highly experienced management team clearly focussed on delivering a discovery at Rukwa.
I would like to take this opportunity to thank all our staff who have again worked so hard this year as well as the local communities and the Government ministries that have continued to work with us and support us enabling us to continue to drive our programme forward. Lastly, I would also like to thank all of our shareholders for their continued support and look forward to providing further updates as we progress our Phase II exploration programme.
David Minchin
Chief Executive Officer
