Georgina Energy: helium & hydrogen, what's the plan?

Having recently covered Helix Exploration in depth, it’s time to take a look at another helium play coming to the LSE Standard Board. For Mosman and Zephyr investors, have no fear — your turn will come, but I’m operating on a first come, first served basis, and Georgina’s dynamic duo were simply available for a chat first.

Before we go any further, and it pains me to write this warning every single time, you are reading this article because you are interested in small cap helium/hydrogen play. Accordingly, you need to be aware that there is elevated risk in exchange for higher potential profits — and you should only be considering an investment from a position of financial resilience and within a diversified portfolio.

That’s not advice by the way, we don’t do that here. But for context the S&P 500 has delivered an 11% average annual return since 1957 — and if you want to beat this, you need to accept the accompanying risk.

And you might want to read the Helix piece, in addition to some generic helium information I’ve put together here.

Let’s dive in.

To start with, this is an RTO and not an IPO. Mining, Minerals & Metals Plc (you could not pick a more generic name if you tried) is the company that has actually conditionally raised the £5 million to acquire Georgina. 

As per usual, there are the standard conditions — getting the FCA green light, publishing the prospectus, legal details, getting shareholder approval for the transaction, regulatory sign-off, and readmitting shares to the LSE. It’s also worth noting that cornerstone investor Oak Securities is putting £250,000 into the company.

The duo was targeting late Q2 2024 for the RTO (i.e. June, this month) and remains on target. And as a pre-RTO piece, the question cannot be of past share price performance, but of whether the company can put £5 million to good use.

MMM Chairman Roy Pitchford enthuses that: 

‘This acquisition has huge potential to create a leading hydrogen and helium producer that will compete on the global scene. Georgina has done an excellent job advancing their highly prospective and low-risk projects in Australia and we are now near the conclusion of the transaction at a highly opportune time in the market. We see huge global demand coming for hydrogen and already there is a supply squeeze in helium making this an ever more attractive deal for MMM.’

Here’s the breakdown:

The majority of the interest in Georgina — at present — is for Hussar. This is because the company is marketing the asset as lower risk than the traditional approach, as it’s redeveloping existing wells that have already demonstrated proven gas flow.

Drilling is expected to start in Q4 2024 (UK Q4, not Australia’s mad system). And the exploration risk should be lower as every well drilled previously that has penetrated the subsalt Heavitree Formation in the Amadeus basin has produced high concentrations of Helium with Mt Kitty at 9%, and Magee at 6%. 

Georgina’s path to production is well laid out due to extensive historical drilling data showing the potential of its Helium and Hydrogen reservoirs. For the drilling program, the company is not relying on seismic data, instead using actual historical drilling data. And all prospects have been drilled before almost to the top of the targeted reservoirs.

So the plan is to simply re-enter and deepen existing wells to get the helium and hydrogen out. Of course, there will also be some natural gas — this can be used to power plants at the wellhead, to separate out the helium and hydrogen — with CO2 produced to be contained in mined salt caverns.

Assuming the basics like flow rate, grade, size and gas composition are economically viable, Georgina plans to mitigate its capital exposure by contracting to an offtaker currently under MOU to operate a specialist plant . For example, Linde offers a suitable field plant.

Georgina will (again pending good results) finalise an offtake agreement, with the gases purified via pressure swing absorption recovery — and those liquefied products stored in on-site bunkers or mined salt caverns, before being trucked to the Darwin plant. For perspective, Linde has a helium plant in Darwin that is currently underutilised.

The hydrogen can be converted to ammonia for transportation.

And then once this is up, running and profitable, further wells could be developed.

Of course, there’s also the possibility of selling the project entirely, but the key idea seems to be to sell gas feed at the wellhead (or enter into some kind of JV) to a major that would build, own and operate (BOO) a liquid helium/hydrogen plant.

What does this mean in English?

Okay, so the idea is to drill Hussar in Q4 — the company already has one Memorandum of Understanding signed but notes that others have already expressed interest. Given the part of the world Georginas is in, offtake partners are not going to be a problem.

Plenty of planning is going into Mount Winter, similar at Hussar, Native Title Agreements were executed February 2024 with the SPA converted to an EP in October 2023. 

Ongoing work includes processing data from aerial electromagnetic survey (AEM-PTP) from 2022, including reprocessing the seismic data from 2D to modern 3D. It’s worth noting that access to Hussar is already pretty reasonable, and unlike a typical explorer, management have been to site and can physically point to the well head. 

They have no plans to build their own plant, instead simply selling at the well head. There should be no need to raise capital — once Georgina has done a full analysis on the flow rate, grade and composition, it’s case of an offtake partner putting the plant and infrastructure in place and paying the company based on what they have.

Georgina has already spoken to several family offices and potential offtakers, who have intimated that once the company has data on what’s coming out of the gas head, they will be open to a deal. The company will therefore not be exposed to infrastructure cost — and have even conducted a salt cavern study (a common technique in the US) so that they can prove the method is viable to potential offtakers.

Once the gas is coming to the wellhead, Georgina expects to take about three to four months to analyse the results — and then it’s just a case of how quickly they can get an offtake agreement in place, and how long a partner would take to get a mobile separation plant on site — and 

Linde do sell mobile plants.

In the worst case scenario, Georgina can simply truck the gasses to Darwin for refining. It’s also got the hydrogen, and they know this because three historical wells saw 9% helium and 11% hydrogen with a 100% success rate.

So if all goes to plan, Georgina will be making profits by the end of 2025.

It’s not an explorer in the traditional sense; it’s a well redevelopment company with a capital light plan to bring in an off-taker with deep pockets. It’s going to re-enter and extend Hussar from 2,040m to 3,200m and intersect the Heavitree formation that retains helium and hydrogen within natural gas.

Interestingly, the AEM-PTP surveys done show there may also be a significant gas anomaly next door.

The question, of course, is how Georgina managed to snap up this asset. The team notes that there about 170 plugged in abandoned wells across NT and WA, all of them drilled in 1980s for oil and subsequently abandoned. Nobody was paying attention to the potential, and therefore as a private company, Georgina has been able to carefully analyse the area for the most prospective target without needing to disclose its strategy.

Others may now start to jump into the area (assuming the company proves the model). A good comparator might be Qatar — where hundreds of wells were drilled for oil and found only gas. Gas was out of favour, so operators plugged them up and left — and they were then the foundation of the country’s wealth when the fuel came back in vogue.

In terms of hydrogen, despite efforts to get hydrogen from green sources, the capital expenditure of doing this is still prohibitive and 95% of global hydrogen supply still comes from fossil fuels. It’s unlikely green hydrogen could compete with Georgina’s price point.

Georgina’s team has invested £2.3 million of their own money in the company which has been audited since 2019, its year of incorporation. If their geologists are correct — and the company thinks they are — they could be on to a winner.

Under a base model for profitability and current helium pricing, Georgina could be making $150 million in revenue. Every year. Just in situ values in the ground could be more than $5 billion billion of helium and hydrogen at Hussar. And these wells have at least a 30 year life.

Management

Anthony Hamilton is Managing Director & CEO, an accountant who raised $55 million for a successful Tean oil and gas operation — who was involved in the commissioning and development of Zimbabwe and North America’s first commercial diamond mines. 

Mark Wallace is Executive Finance Director, having held positions at Standard Chartered Capital Markets, Cantor Fitzgerald and Credit Lyonnais in London and Natwest Capital Markets in Sydney. He has extensive knowledge of funding junior resource assets in addition to off-take markets.

Executive Technical Director is John Heugh, founding Director and MD for 15 years of Central Petroleum, the biggest acreage holder in Australia of prime petroleum exploration and appraisal ground. Has raised over $100 million for exploration, initial development & discovery and orchestrated over $500 million of JV expenditure potential. 

Heugh discovered over one trillion tons of coal, a 300 km2 tight gas sand prospect, generated the first horizontal well onshore in Australia, and delivered first commercial oil to surface in the western Amadeus ever.