With several updates expected in the coming weeks through to the commencement of drilling of Hussar is Georgina Energy ready for lift off?
“…there is a clear and realistic pathway to production with drilling expected to commence in Q4 2024…”
Newly listed Georgina Energy (LON:GEX), developing a set of highly prospective assets in Northern and Western Australia’s vast Amadeus and Officer Basins, may offer a relatively low-risk entry point to the increasingly critical helium and hydrogen market.
GEX joined the LSE Main Market in July through a reverse takeover by special purpose acquisition company Mining, Minerals & Metals, after heads of terms were agreed last October. A gross £5m was raised from the IPO, building on previous investment of £6.5m in the company over the past five years, £2.5m contributed by directors.
The most recent operational update from the Company was a very pleasing read.”This is a very busy period for Georgina as we focus on multiple workstreams to fulfil obligations for the Hussar drilling permit in order to commence operations in December. Additionally, following the successful meeting on 11thSeptember with the CLC and the traditional landowners for the Mt Winter prospect, we expect to receive formal confirmation from both groups shortly. Concurrently, we have completed the evaluation of the additional re-entry targets which will shape our post-Hussar and Mt Winter work programme, and have approached several parties regarding potential opportunities” said CEO Anthony Hamilton,
GEX holds a 100pc interest in the Hussar Prospect, and has an option to earn a 75pc interest in the Mount Winter Prospect, with the potential to reach 90pc. Together the two ventures cover 3,951 km2 in Western Australia, a region with proven gas potential.
The Hussar Prospect hosts unrisked 2U Prospective (Recoverable) Resources of some 155 BCFG (155 million MCF) of helium, approximately 173 BCFG (173 million MCF) of hydrogen, and around 1.75 TCFGE (Trillion Cubic Feet Equivalent) of hydrocarbons. GEX says ‘Hussar is considered by independent consultants to be one of the most potentially lucrative resource basins in the Asia Pacific region’ due to its significant helium, hydrogen, oil and natural gas potential.
The Mount Winter Prospect hosts unrisked 2U Prospective (Recoverable) Resources of circa 148 BCFG (148 million MCF) of helium, around 135 BCFG (135 million MCF) of hydrogen, and some 1.22 TCFGE (Trillion Cubic Feet Equivalent) of hydrocarbons. The Mt Winter-1 well was drilled in 1982 to a total depth of 2,650 metres, but did not penetrate the subsalt Heavitree Formation in the region’s Amadeus Basin, the then targeted reservoir, reaching total depth in salt just above it.
When penetrated by historic drilling, the Heavitree Formation has flowed gases with unusually high concentrations of both hydrogen and helium, up to 11pc hydrogen and 9pc helium, among the top 5pc of concentrations so far discovered anywhere in the world. GEX is targeting the analogous subsalt Townsend Formation, also in the Amadeus Basin. Both basins are sub-basins of the Neoproterozoic Centralian Superbasin.
GEX says the ‘remarkable uniformity of the Centralian salt sealing formations’ indicate that ‘wherever Helium appears to be a viable target … relatively high concentrations of Hydrogen may well be found’. The Dukas 1 well recently drilled by Santos in the Amadeus Basin, close to the Heavitree Formation, reported high concentrations of helium and hydrogen. The presence of ‘proven gas flowing from the original drilled wells, established infrastructure for the projects as well as a recognised supply chain’, encourages GEX’s conviction that ‘there is a clear and realistic pathway to production with drilling expected to commence in Q4 2024’.
Progress at Hussar and Mt Winter since IPO
Since listing GEX has pressed ahead with that objective, which is fully financed by the money raised at IPO. A few days after going public the company announced several operations designed to re-enter the licence’s Hussar 1 well ‘by December’. The company said it was working towards securing land council clearance for development, updating its environment impact study, and completing plans for approval by Australia’s Department of Energy, Mines, Industry Regulation & Safety (DEMIRS), including rig and operator safety schedules, and a proposed re-entry programme.
GEX had also commissioned a scoping study to deliver estimates for capital and operating costs for a proposed onsite separation and purification plant, and had secured access to newly available reprocessed seismic data to assist in the better definition of Hussar’s potential resource. An Independent Competent Person would be synthesising the fresh data with existing information to ‘assist not only in better quantifying the Resource scale at the Hussar Project but possibly other independent structures within the highly prospective c.900,000 acres.’ Access to the site had been further enhanced by the planned re-grading of a 1400 metre airstrip immediately adjacent to the well site.
By mid-August GEX was ready to announce details of its Well Re-development Programme. Engaging Aztech Well Construction to project manage the re-entry, consultants that have drilled more than 40 wells in the Perth Basin between 2011 and 2023, the programme plans to extend the original well drilled in 1982 from 2040 metres to 3400 total depth metres, seeking to penetrate the targeted Townsend Formation. The company was ‘completing the required process for engineering design, HSE and environmental approvals’ and ‘meeting its obligations under the Native Title Land Access agreement.’
A further update reported that the work programme had been submitted for approval to DEMIRS, and that consultants had been engaged to complete required environmental assessments. Planning for site preparation and civil works was well underway, and all available seismic data was being analysed to enhance pre-drilling structural mapping of the prospect. GEX confirmed expectations that drilling operations would commence on schedule.
Concurrently, GEX has advanced negotiations to secure the consent from traditional aboriginal landowners necessary to farm-in to the 75pc interest in the Mt Winter Prospect. Following an invitation from Australia’s Central Land Council the company has presented its plans to the owners for exploration, development and re-entry at Mt Winter, detailing the process for deepening the well to access the Heavitree Formation and test for helium, hydrogen and natural gas.
GEX also confirmed that an off-take MoU applicable to both Mt Winter and Hussar, with Harlequin Energy Limited, has been extended for an additional 12 months. The non-exclusive agreement permits GEX to hold discussions with other potential parties. The company intends to mitigate infrastructure costs by supplying gas direct from the wellhead.
New development targets
While pressing ahead with work at Hussar and Mt Winter, GEX has identified additional high potential re-entry and development targets.
The company is evaluating 10 priority re-entry targets from a possible 168 plugged and abandoned wells within the Centralian Superbasin ‘with potential to recover material volumes of helium, hydrogen and natural gas’. The top two candidates for re-entry will be determined subject to clarification of ownership rights. GEX has entered into a confidentiality agreement with ‘a well-established producing Australian Oil & Gas exploration & production company’ as part of the evaluation process.
GEX CEO Anthony Hamilton said that while the company’s ‘main focus is the commencement of drilling at Hussar before year end … and the award of the Mt Winter Exploration Permit, we are excited about the possible additions of complementary well re-entry projects.’ Several updates are ‘expected in the coming weeks and through to the commencement of drilling of Hussar.’
The helium and hydrogen supply squeeze
GEX is working to position itself to take advantage of increasingly severe supply shortages in both the helium and hydrogen markets.
Helium gas, produced by radioactive decay in rocks and sediments, is the second most abundant element in the universe, but relatively rare on earth. Long used for military and medical applications, helium is in increasing demand for technological and industrial processes such as cryogenics, welding, inert atmospheres, electronics, lifting, pressure and purging, hybrid vehicles and helium-filled hard drives.
Demand is rapidly outpacing supply, notably since the US Bureau of Land Management, a major historic supplier, held its final Crude Helium Auction in 2018. Supply has been further imperilled by conflict in Ukraine, leaving the world increasingly dependent on a handful of fresh sources in the US and Qatar to make up the shortfall.
The tightening bottleneck has forced the price of the gas to all-time highs. Having risen by 10pc a year over the past decade the average price in 2019 was $288/MCF, an increase of $160/Mscf, or 135pc, from the previous year. The squeeze is drawing increasing interest from big gas producers including Gazprom, the United States Natural Gas Fund, Praxair, and Air Products & Chemicals.
Demand is also rising for hydrogen, sought after for the possibilities it affords for greening heat-intensive industrial processes and long-distance transportation, both of which resist electrification. Hydrogen fuel cells open the possibility of powering large vehicles such as trucks, ships, and even planes, beyond the capacity of the lithium-ion batteries that have driven the electric vehicle revolution. As a clean molecule that burns in a similar way to natural gas, hydrogen promises to substantially decarbonise the production of everything from food, packaging and textiles, to ammonia, fertilisers, cement, iron and steel. Hydrogen can also be stored and deployed as necessary to stabilise the grid, compensating for the fluctuating output i inherent to renewables such as wind and solar.
With the ideal of purely green hydrogen remaining elusive due to the cost of the electrolysis process necessary to split hydrogen from water, suppliers such as GEX, producing hydrogen as natural product along with gas and helium, are well placed to meet demand now and into the foreseeable future. Natural gas pipelines can be readily adapted to transport hydrogen.
Outlook
GEX presents a relatively low-risk entry point to the increasingly straitened helium and hydrogen markets. Focused on well re-development rather than greenfield exploration, and with access to an established infrastructure and a reliable supply chain, it is well advanced compared to other exploration and development companies in its peer group. The company’s vast licence area offers opportunities for significant hydrogen, helium and/or gas exploration and production. Updates indicate that preparations for the first Hussar well are on track for re-entry in December, operations that will inform work at Mt Winter, should that prospect get the anticipated green light from stakeholders.
GEX is led by an experienced oil and gas team. CEO Anthony Hamilton has more than 35 years’ experience in mining, oil and gas and exploration and production, and CFO Mark Wallace over 25 years’ experience in the global financial markets. Executive Technical Director John Heugh was the founding director and MD of ASX-listed Central Petroleum, and Non-Executive Director Roy Pitchford brings more than 30 years’ executive and managerial expertise in resource development.
The company’s share price, 9.68p at the time of writing, taking the company’s market cap to just under £9m, offers upside should Hussar progress as planned: GEX peaked at just over 18p as recently as August. Prospective investors should make sure to check out the company’s updated presentation for a comprehensive overview and additional details on operational progress.
As Tony explains to Sarah Lowther in this video interview, coffers in future will be filled by revenue generated by selling gas at the wellhead with development costs potentially reimbursed by an offtaker.
