6 November 2024
Mendell Helium
plc
("Mendell
Helium" or the "Company")
M3 Helium signs exclusive
farm-in agreement for Hugoton field with Scout
Energy
Mendell Helium is pleased to
announce that M3 Helium Corp. ("M3 Helium") has signed an exclusive
farm-in and fixed price helium agreement with Scout Energy Partners
("Scout Energy") over 161,280 acres of the
Hugoton gas field ("Leases"), one of the largest natural gas fields
in North America.
As announced on 27 June
2024, the Company has an option to acquire M3 Helium Corp., a
producer of helium which is based in Kansas and holds an
interest in six wells. There is no certainty that the
Company's option to acquire M3 Helium will be exercised, nor that
the enlarged group will successfully complete its re-admission to
trading on the AQSE Growth Market.
Highlights
·
Farm-in covers 161,280 acres (252 square miles)
of the Hugoton gas field
·
Minimum of 25 new wells but estimated by M3
Helium's management to be a potential 100 - 200 well
opportunity
·
All production to be delivered to Scout Energy's
gathering system and the Jayhawk processing facility
·
Fixed helium price with an annual price escalator
based on the consumer price index from 1 January 2026 through to
the end of 2029
·
Discounted royalties and operating expenses agreed
with Scout Energy
·
Gathering and processing tariffs waived by Scout
Energy in return for methane from the new wells
·
Exclusive agreement with Scout Energy includes a
right of first refusal over any other farm outs in Scout Energy's
Kansas acreage
·
US$1 million due from M3 Helium when drilling
commences or by 31 March 2025 (whichever is the earlier). In the
event that M3 does not proceed with the agreement no fee will
become payable.
Overview of the Farm-In
Agreement
With a term ending on 31 March 2027,
the farm in agreement covers seven townships in the Hugoton gas
field, with each township being 36 square miles (23,040 acres). The
townships are in south-west Kansas, within Scout Energy's gathering
system and proximate to the Jayhawk gas processing plant which is
estimated to process around 4% of the world's helium,
processing approximately 700,000 cubic feet per
day of crude helium. Scout Energy is the
second biggest producer of helium in the United
States.
Under the terms of the agreement, M3
Helium is entitled to nominate drilling locations of its choice
subject only to maintaining a distance of 1,500 feet from any
existing well operated by Scout Energy. The M3 Helium
management team estimate potential for not less than 100 wells
within the allocated area and up to 200 wells. The agreement
has a minimum commitment of 25 wells by 31 March 2026. The wells
are permitted to access the Chase and
Council Grove gas formations, being around 3,000 feet deep.
M3 Helium management estimate that a conventional oil & gas
lease over land of the type included in the farm in agreement would
be in the region of US$50 per acre. This implies an indicative farm
acreage value of over US$8 million.
M3 Helium has no obligation to make
any payment to Scout Energy until the first well is commenced
(which must be by 31 March 2025). At that time, a one-off fee of
US$1 million is due. Should M3 Helium decide not
to proceed with the farm in agreement, then it has no financial
liability to Scout. If the fee is not received by Scout
Energy on or before 31 March 2025, the agreement will be terminated
with no further action required by M3 Helium or Scout
Energy.
Each well drilled will be connected
to Scout Energy's gathering system. Scout Energy will manage the
operations of the wells and the parties have agreed a discounted
rate, reflecting the nature of their partnership. Likewise,
royalty payments on production have been reduced by a third to
support M3 Helium's expansion plans.
M3 Helium is able to drill both
vertical and horizontal wells under the farm in
agreement.
If M3 Helium completes and connects
at least 25 wells on or before 31 March 2026, M3 Helium shall have
the right, but not the obligation, to continue to drill wells and
earn wellbore assignments pursuant to the agreement until 31 March
2027.
In the event that M3 Helium fails to
drill a minimum of 25 wells prior to 31 March 2026, it may extend
the drilling period for a further 12 months to 31 March 2027 by
making a further payment (by 31 March 2026) of an amount equal to
the shortfall from the 25 wells multiplied by US$50,000. There are
no other payments due to Scout Energy, aside from operating
expenses, for the remainder of the agreement.
Provided that M3 Helium remains in
compliance with the terms of the farm in agreement, its right to
drill wells over the acreage specified in the agreement is
exclusive. More importantly, the agreement provides M3 Helium
with a right of first refusal should Scout Energy be approached by
any third parties to farm into its Kansas lands which, in
aggregate, amount to over 1 million acres.
Overview of the Hugoton gas
field
The Hugoton gas field, located
primarily in southwestern Kansas, western Oklahoma, and the Texas
panhandle, is one of the largest natural gas fields in North
America, deriving its name from the town of Hugoton, Kansas.
Discovered in 1927, this field which covers around 8,500 square
miles has significantly contributed to the
natural gas supply in the United States. Over its long history,
more than 12,000 wells have been drilled in the Hugoton
field.
The field's cumulative production is
substantial, with over 30 trillion cubic feet of natural gas
produced since being discovered. Additionally, it has yielded
substantial quantities of natural gas liquids and helium.
The natural gas in the Hugoton field of
Kansas and Oklahoma, plus the Panhandle Field of Texas,
contains unusually high concentrations of helium, ranging between
0.3% to 1.9%. Because of the large size of these fields, they
contain the largest reserves of helium in the United
States.
Natural gas is produced from several
different rock layers and many individual fields. Most of the gas
is produced from two rock units, the Chase and Council Grove
groups, that were deposited during the Permian Period, about 280
million years ago.
M3 Helium's farm in acreage covers
an area where production to date has indicated a helium content of
around 0.6%. M3 Helium estimates that the average life of
vertical wells in the Hugoton gas field is around 30 years and
management models an 8% annual decline. Drilling costs are
expected to be under $300,000 per well with the possibility of cost
savings if several wells are drilled in succession. Tie and frack
costs are expected to amount to less than $200,000 with the exact
cost being dependent on the size of frack proposed.
Overview of Scout Energy
Scout Energy is a private energy
investment manager focused on the acquisition, operation and
improvement of upstream energy assets and associated midstream
energy infrastructure throughout the
contiguous United States. Scout Energy's
portfolio currently consists of over 60 assets currently producing
over 110,000 BOEPD from over 22,000 wellbores across more than 4
million acres in eight states: Kansas, Texas, Oklahoma, New Mexico,
Colorado, Utah, North Dakota, and Montana.
Management changes at M3
Helium
Nick Tulloch, CEO of Mendell Helium,
has been appointed as Chairman of the board of M3 Helium as the two
companies work closely together to execute the farm in agreement
and finalise the exercise of the Company's option to acquire M3
Helium. A new COO has also recently been appointed by M3
Helium to oversee the company's portfolio of projects.
Nick Tulloch, Chief Executive
Officer of Mendell Helium, said: "This
agreement with Scout Energy is the culmination of several months of
research of suitable opportunities within the Hugoton gas field and
discussions with the Scout Energy team.
"M3 Helium now has low cost access to some of the world's most
prospective acreage for helium extraction. Furthermore, its
partnership with Scout Energy guarantees an offtake of all of its
production at pre-determined price levels and low operating
costs. Natural resources exploration is inherently uncertain
but M3 Helium's agreement provides a level of predictability that
many companies in this sector may never achieve.
"We said at the time of our proposed acquisition of M3 Helium
that we would demonstrate a scalable business plan. The framework
set out in this farm-in agreement establishes that plan and does so
on very advantageous terms.
"To put the financial terms of this
agreement in context, M3 Helium's management estimates that a
conventional oil & gas lease over land of the type included in
the farm in agreement could be at least US$50 per acre implying an
indicative value of the farm in acreage of over US$8 million.
The US$1 million fee M3 Helium will pay on commencement of drilling
represents just 12% of that, plus M3 Helium also receives access to
established infrastructure and processing facilities as part of the
arrangements.
"Global demand for helium has naturally generated investor
interest in the sector. Across UK quoted companies alone,
there are a number of different strategies. Ours is
straightforward. We have the right to drill new wells in a
proven helium producing region. We have a low cost model,
partnered with the biggest operator in the region. And we
have access to nearby infrastructure and
processing."
This announcement contains inside
information for the purposes of the UK Market Abuse Regulation and
the Directors of the Company are responsible for the release of
this announcement.
ENDS
Enquiries:
Mendell Helium plc
Nick Tulloch, CEO
|
Tel: +44 (0) 1738 317 693
nick@mendellhelium.com
https://mendellhelium.com/
|
Cairn Financial Advisers LLP (AQSE Corporate
Adviser)
Ludovico Lazzaretti/Liam
Murray
|
Tel: +44 (0) 20 7213 0880
|
SI
Capital Limited (Broker)
Nick Emerson
|
Tel: +44 (0) 1483 413500
|
Stanford Capital Partners Ltd (Broker)
Patrick Claridge/Bob Pountney
|
Tel: +44 (0) 203 3650 3650/51
|
Brand Communications (Public & Investor
Relations)
Alan Green
|
Tel: +44 (0) 7976 431608
|
Overview of M3 Helium
Mendell Helium, formerly Voyager
Life plc, announced on 27 June 2024 that it has entered into an
option agreement to acquire the entire issued share capital of M3
Helium through the issue of 57,611,552 new ordinary shares in
Mendell Helium to M3 Helium's shareholders. The exercise of
the option will constitute a reverse takeover pursuant to AQSE Rule
3.6 of the Access Rule Book and is subject to, inter alia, publication of an admission
document.
M3 Helium has interests in six wells
in South-Western Kansas of which three (Peyton, Smith and Nilson)
are in production. Five of the company's wells are within the
Hugoton gas field, one of the largest natural gas fields in North
America. Significantly these wells are in the proximity of a
gathering network and the Jayhawk gas processing plant meaning that
producing wells can quickly be tied into the
infrastructure.
The sixth well is in Fort Dodge and
was tested in July 2024 as containing 5.1%
helium composition. Although not within direct access to the
gathering network, M3 Helium owns a mobile Pressure Swing
Adsorption production plant which could be
used to purify the helium on site.
M3 Helium has also signed a farm-in
agreement with Scout Energy Partners over
approx. 161,280 acres of the Hugoton gas field giving it the
potential to drill between 100 - 200 new wells. All
production will be handled by Scout Energy's gathering network and
the Jayhawk gas processing plant.
FORWARD LOOKING STATEMENTS
This announcement includes
"forward-looking statements" which include all statements other
than statements of historical facts, including, without limitation,
those regarding the Company's financial position, business
strategy, plans and objectives of management for future operations,
or any statements preceded by, followed by or that include the
words "targets", "believes", "expects", "aims", "intends", "will",
"may", "anticipates", "would", "could" or "similar" expressions or
negatives thereof. Such forward-looking statements involve known
and unknown risks, uncertainties and other important factors beyond
the Company's control that could cause the actual results,
performance or achievements of the Company to be materially
different from future results, performance or achievements
expressed or implied by such forward-looking statements. Such
forward-looking statements are based on numerous assumptions
regarding the Company's present and future business strategies and
the environment in which the Company will operate in the future.
These forward-looking statements speak only as at the date of this
announcement. The Company expressly disclaims any obligation or
undertaking to disseminate any updates or revisions to any
forward-looking statements contained herein to reflect any change
in the Company's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statements
are based unless required to do so by applicable law.