Helium One Global (LON: HE1) shares are down 28% today. Again. HE1 shares fell on the fuller results from the drilling of the Tai-3 well. Those are being described as interesting and hopeful and that’s not, we think, quite the right way to be thinking about them. For what’s been found - at least so far - is a level of helium that we can find in many to even most gas fields. And the concentration is such that it’s unlikely to be able to compete with liquefied natural gas production trains.
Now, we could be being a bit previous here but we do think we’ve got this right. For we’ve been following Helium Once for some time now, we do grasp what it is that they’re doing, what the basic plan is. As we’ve said before about HE1 shares: “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 not just that we follow that logic, it’s that we think it is good logic. The helium found in natural gas is a product of that radioactive decay. So, more decay, more helium, right?
Now, that’s something that needs to be tested, which is what has been done.
Helium One Global share price from Google Finance
However, as we said about the preliminary results from the Tai-3 well for Helium One: “Which makes us worry about today’s announcement: “Elevated helium shows, up to six times above background, have been identified in the Lower Karoo Group and Basement targets. Helium shows increased in frequency and quality with depth, as anticipated”
Well, yes, that could be good. Could also be bad. Background helium levels are in the 3 to 5ppm range. 6x that is 30 ppm - which is decidedly non-economic. A waste, a disaster in fact. So, what is it that they’ve found, or nearly found? Is it a reservoir of helium that is slowly leaking to give that higher than background level? Or a source of helium generation - that U and Th - which has been leaking all along and therefore there’s no reservoir? “
And now we get the fuller announcement: “Onsite pressure-volume-temperature analysis of downhole fluid samples have yielded helium concentrations up to 8,320 parts per million ("ppm") helium, which measure significantly above normal background levels of approximately 5ppm”. Yes, that’s higher than background. But at 0.8% that’s really not very interesting indeed. We’d normally not bother to try to recover from a natural gas well with that sort of level. We would if that level were already to go through an LNG plant (because much of the expense of He extraction is covered by the LNG process itself). But as a standalone helium well? That’s not interesting in the slightest.
Now, it’s possible that further investigation will produce higher levels but it’s only economic if it does. So far this isn’t working for Helium One. Which might also be the case for Noble Helium, just over the hill.
