Helium Evolution Positions For Long Term Success
Calgary-based startup Helium Evolution sprung onto the green helium scene early this decade, quickly amassing a massive land position in southern Saskatchewan in a relatively under the radar fashion.
HEVI’s 5.5 million acres of helium land permits rank second to industry leader North American Helium (see NAH Is Leader Of Green Helium Pack), with Helium Evolution’s land holdings generally to the east and abutting NAH’s prospective acres.
In June, HEVI announced a farmout deal with NAH, which was amended and enhanced in October to further strengthen the relationship between the two companies (see Helium Evolution Expands and Accelerates Its Drilling Program). To learn more about Helium Evolution and its relationship with North American Helium, the Bulletin undertook an extended interview with Greg Robb, HEVI’s president and CEO.
“We started HEVI in March 2020 because it appeared to us the helium industry was about to change dramatically and that there was an opportunity to position ourselves early in the new industry,” says Robb. “So, we started researching potential [green] helium plays and the industry as a whole. It was a pretty steep learning curve in some respects, but we were able to put together a team of highly experienced people very quickly that knew how to assess exploration data, post land, purchase and shoot seismic and run an exploration strategy.”
“We looked at numerous jurisdictions including Montana, Alberta, and Saskatchewan as potential areas for helium exploration. These areas all have substantial helium exploration opportunities, but from a land and economic opportunity perspective, we concluded that Saskatchewan was the best focus area. This was due to the helium discovery and production potential in Saskatchewan, the ease of access, the positive political environment in the province, and the ability to amass a world class land base there.”
And to support its efforts in Saskatchewan, HEVI was able to bring Brad Wall, the province’s well respected former premier, onto its board of directors. “Mr. Wall came into Helium Evolution through his personal relationship with our chairman Jim Baker,” says Robb. “Brad is Mr. Saskatchewan. His career has focused on advocating for job creation and economic growth in the province. Brad is knowledgeable, personable and he really knows the lay of the land in Saskatchewan. This makes him a huge asset for our company.”
Prime real estate
“Once we decided that we were going to jump into the helium space in Saskatchewan we realized that to do it in a meaningful way we would need a lot of land,” says Robb. “We were still a private company then, so we weren’t very visible, and we also used a land agent to submit our postings, making it a bit of a double blind I suppose.”
“We had some Saskatchewan Geological Survey maps that indicated where there were likely to be the basement structures that we think are a key to the play and we proceeded to post as many of the anomalies as we could. We submitted our first postings in October of 2020 and got our first permits in March 2021. We obtained our last posting in October of this year. So, it took two years to put all the land together, but most of it was done or in the queue before we went public in March 2022.”
“It’s very early in the play to really know where the best lands are, which is one of the reasons why we posted such a large position,” says Robb. “But based on the data we have to date, and on North American’s interest in our lands, we think there is a lot of helium potential on our acreage.”
“The primary play in the southwest of the province is the Basal Cambrian, and while we have that in our lands in south-central Saskatchewan, we also have a sandstone called the Earlie to the east which has very good reservoir parameters. From an exploration perspective, it is advantageous to have the potential to encounter multiple producing helium zones while drilling [as is the case for the Earlie] because this increases the probability of encountering commercial helium resource.”
“Corporately we view the NAH farmout deal as a strategic, near-term opportunity to accelerate shareholder value as we pause our own drilling program,” says Robb. North American Helium is providing the capital and expertise, while HEVI retains a 20 per cent working interest in each of the exploratory wells drilled on their land. “This was the prudent thing to do to protect our balance sheet, during a difficult time in capital markets, and still be able to move the play forward.”
Robb cited this recent change in capital markets as a key driver for HEVI forging the farmout deal with NAH, along with his company drilling two unsuccessful exploratory wells — despite gaining a lot of valuable data from the latter. “Money was getting tight and expensive. We saw that some of our peer group were having a bit of difficulty financing while we already had a relationship with North American,” he says.
“In addition, as a new start up public company, we realized it would take many years to get to all of our company’s extensive 5.5 million a-re land base. The farmout represents less than one per cent of the total.”
“For HEVI there are several good things about the North American deal,” says Robb. “We will learn a lot [about finding commercial quantities of helium] from the leading company in the industry. We get five to eight exploration wells drilled to evaluate our lands. We get additional seismic data from the seismic option parts of the deal. And with exploration success on our lands, we get to participate in the development drilling and move to the production phase much faster than we could have done on our own.”
“The farmout affords HEVI the opportunity to further evaluate, compare and refine our technical understanding and interpretation of internally generated prospect opportunities as NAH drilling results come in. More data and additional drilling and reservoir information will ultimately reduce overall risked capital as the company moves forward.”
“In a nutshell, the farmout allows HEVI a continued focus on our internally generated exploration opportunities with our experienced technical team while NAH explores on a small portion of our lands,” says Robb.
Future wildcat wells
On that note, HEVI is hoping to be back wildcatting for helium on its own dime by the second half of 2023, according to Robb, although a few conditions must be met in the interim to do so. “We will have to see how the exploration with NAH goes of course, and how the overall economy is six to nine months from now,” he says. “NAH are generally aggressive on exploration and development and we know they have some production facilities ready to deploy. Given drilling success, we expect that they would move to production quickly on the farmout lands and HEVI could have cash flow in the second half of 2023.”
And based on Helium Evolution’s 20 per cent share of the agreed upon 80/20 revenue split with NAH, cash flow from the farmout deal could quickly become significant since helium prices are expected to remain high for the foreseeable future (see Helium Shortage 4.0 Likely A Prolonged Affair).
“Pricing is apparently very good, although not very transparent, and it is expected to stay that way for quite some time,” says Robb. “Anticipated Russian production has been delayed and the geopolitical uncertainty related to that makes it uncertain if, or when, that production will come online. On the demand side, tech industries are the main drivers of helium use, and they will continue to expand. There are no substitutes for helium, and it can’t be synthesized, leading even small increases in demand or small declines in supply to cause large price increases.”
- New Energy