Georgina Energy - upcoming IPOGeorgina Energy - upcoming IPORare opportunity in heliumGeorgina Energy is an energy company offering investors exposure to an increasingly supply-constrained commodity - helium.Helium is an important industrial gas with applications in medical, industrial and technology industries (details on p2). There is a limited global supply of helium, with growing demand and no direct substitute available. The imbalance of supply and demand is becoming increasingly evident in market terms, with the most recent global helium auction showing a 135% increase year on year, and the US government placing restrictions on exports to conserves supplies for domestic use. More detail on the market p2-4.Georgina Energy is acquiring the licence on a major project in the Northern Territory, Australia, with significant helium potential. The company will seek to raise up to £10m, and has already secured over £2m with strong expressions of interest for the balance.The EP127 Georgina ProjectThe EP127 Georgina Project in the Southern Georgina Basin, consists of 4 million acres with 10 wells drilled variously from 1988 to 2014. An independently produced Competent Persons report has identified the required elements to yield significant helium accumulations within the permit. Significant factors include:• Geological structure analogous to the Amadeus Basin that lies further south, which has high levels of helium present.• Potential to host up to 138 BCFG, at high concentrations - possible 6% helium.• The presence of uranium, which is a key predicator for helium deposits. Previous wells were drilled for potential natural gas, and until recent years it was not routine practice to test for helium. These existing wells offer a cost effective route of Georgina Energy to begin new evaluations.The property is suitably located for road transportation of partially refined helium, which could be delivered, for example, to existing facilities in Darwin which are currently under-utilised.Value to shareholdersIt is too early to produce a definitive valuation of the helium opportunity at EP127. However, we can scope the potential as follows:• Georgina Energy has an initial target of 29.7BCF of helium. Delivered over 16 years, at the current spot price of 28 US cents, then this would represent US $0.5bn of revenue per year.• Assuming a 55% net profit margin (70% gross margin, minus 3% royalty, minus UK corporate tax), and a discount rate of 10%, this gives a net present value of US$2.1bn.This could represent substantial upside for shareholders, even without any further squeeze higher in the helium price. The company plans an application to list on the LSE standard segment by 30th September, with an offer price of 20p.
Anyway! Food for thought and much discussion I’m sure! Bring on the dogs lol.
GLV Price at posting:
0.2¢ Sentiment: Buy Disclosure: Held
