Helium One (LON: HE1) shares are down 12% today. HE1 shares are down because they're having problems getting hold of a drilling rig. Which, when you're intending to drill for gas, is something of a problem - no drilling rig, no drilling, obviously. The more specific problem seems to be that they chose the wrong subcontractor: “Helium One Global (AIM: HE1), the primary helium explorer in Tanzania, provides a rig update in relation to the Company's contractual relationship with SOFORI taking into account today's announcement by Noble Helium (ASX: NHE). The Company has previously issued a number of deadlines to SOFORI but continues to have concerns about the lack of operational and contractual progress required under the terms of the non-binding Letter of Intent ("LoI") and, pursuant to legal advice received by the Company, have issued SOFORI with a rectification notice.”#
The lesson from which might well be don't hire Tunisian gas drilling rigs. Noble Helium is drilling just right next door and their release: “The Company has withdrawn from the non-binding Letter of Intent with Sofori for its Drillmec HH102, due to ongoing delays.” Given that they've hired another rig this is obviously a solvable problem. For Helium One the same option is available - the worry would be over the effect of any delays upon cashflow rather than anything else.
Helium One share price from London Stock Exchange
We've covered Helium One before and their basic game plan seems just fine to us: “The creation process is that when uranium and thorium (well, complicated, but often this is true) decay they throw off an alpha particle. The other name for which is the nucleus of a helium atom. The other thing we know about helium is that it often turns up associated with natural gas deposits. So, think a little laterally and go looking for natural gas in areas where the rocks have a lot of uranium and thorium in them. We might well then find that the gas is high in helium. So far so good and that's just what Helium One has been doing. They've found exactly that in areas of Tanzania. OK, not everyone's favourite operating country but reasonable enough.” It's all entirely logical and it should be possible to make it work. Noble Helium is advancing with exactly the same plan that little bit to one side in the same country.
There are really only two risks here as we see it. One is this simple operational risk of hiring the right subcontractor, being able to actually get a rig and all that. The other is, well, what will the price of helium be at the date of any production?