Blue Star spuds fifth US helium well; 2022 shortage hitting tech manufacturing (and weather balloons)

Blue Star Helium (ASX:BNL) has launched the drills on-site its Colorado acreage towards the completion of its fifth exploration well looking for natural helium deposits. 

So far, the company has spud the following four wells looking for helium gas, which is right now a highly valued product (more on that below):

• JXSN-1 (concentrations up to 3.1% He)

• JXSN-2 (concentrations up to 3.1% He)

• JXSN-3 (concentrations up to 3.1% He)

• Enterprise #16-1 well (gas composition samples pending) 

The well kicked off today is called Sammons 315310C, and is expected to take ten days to complete. Blue Star does not act as the operator for Sammons, but, has oversight and a significant stake of interest at 50%. 

Originally, the company had intended to spud the well in June, but delays pushed out the schedule until August. 

The well will target the Lyons formation, which is a well-known and lucrative hydrocarbon deposit in Colorado. 

Sammons the first of new prospect area 

Sammons 315310C is located in the ‘Serenity’ prospect area, a different portion of acreage to that containing the JXSN, and, Enterprise assets. 

Blue Star is optimistic successful results of helium-bearing gas flows from the Lyons formation found at Serenity will allow the company to update its gas reserves. Currently, estimates for the company’s overall acreage do not contain Serenity deposits. 

Three further Serenity wells are already pre-approved for drilling by state regulators, but, the company must first successfully produce gas from Sammons 315310C. 

Crucial context: the 2022 US helium shortage 

Two unplanned plant shutdowns earlier this year at a facility in the US, and another in Russia respectively, kicked off a US helium shortage that is echoing into global markets. 

The Russian facility has been further impeded by sanctions placed upon the Kremlin following the invasion of Ukraine in late February.

Blue Star competitors Grand Gulf Energy (ASX:GGE), located in Utah, are also seeking to produce helium for sale into the US markets as companies scramble to extract more of the gas from the ground. 

While helium can be synthesised, it is most often mined—and that is why a number of Australian companies are searching for the gas. Blue Star and Grand Gulf are joined on the bourse by Noble Helium (ASX:NHE) in Tanzania. 

What is the shortage affecting, exactly?

Helium is a crucial and often overlooked material in the manufacturing of many high-impact products—fibre optics cables and microchips among them.

As the microchip (semiconductor) sector continues to recover, it is likely helium demand will only increase. 

Then there's kids balloons. US company Dollar Tree, which sells helium balloons for parties among other products, in the last week published a statement on its website apologising for the shortage of helium balloons to American consumers. 

And if that wasn't bad enough, there are more concerning implications for a global helium shortage: in April, the US National Weather Service noted it wasn't able to release as many weather balloons.

That situation has only gotten worse since early 2022: last week, the US state of Denver stopped launching weather balloons altogether. 

In February, Blue Star was at 6c—since then, it's dropped down to 3c in the current environment. Is this a fair price, or is the company overlooked?