Grand Gulf Energy back to promising Utah helium play as regulator greenlights well #2

Grand Gulf Energy (ASX:GGE) shares were buoyed 10% in the second hour of trade on Thursday as the company reported its receipt of drilling approvals for the second ‘Jesse’ well at the company’s project in Utah. 

In June last year, the company found concentrations of helium fivefold times higher than originally anticipated. 

That discovery added to the original success of May 2022 when the company intersected a 203ft gas column down-hole the Jesse-1A well responsible for both finds. 

The new well for which the company has received the greenlight today will be spud (read: drilled for the first time) adjacent Jesse-1A, as the company sniffs out how far gas extends beyond the site of that target. 

The company’s project sits nearby an available pipeline which runs straight to a helium processing plant operated by Paradox Resources. 

Grand Gulf and Paradox have already signed an offtake agreement and the former sees the infrastructure allowing for a fast-track to revenue and profit. 

Strategic plan for second well

The drillpath Jesse-2 takes will be informed by data collected during the process of putting Jesse-1A together. 

The second well is intended to hit known gas pay zones in the primary geological structure of interest, the Leadville formation, while avoiding groundwater.

A well which hits groundwater ultimately puts more time in between the company drilling the well and flowing gas through it (whether that be methane or helium).

“The Jesse-2 well engineering has incorporated the lessons learned from the evaluation program on the maiden helium exploration well to minimise risk of water production by staying high in the column,” Grand Gulf Energy Director Dane Lance said. 

“The compelling fundamental commercial pillars of the Project remain unchanged, with the ability to quickly monetise a commercial well to generate near term free cash flow with minimal time and cost.”

Wait, what? You can drill for helium? 

Like natural gas, helium occurs underground naturally in various geological structures which allow it. The gas can be synthesised, but simply mining it is often cheaper. 

Right now, only three relatively and ASX-listed smallcaps are doing just that. 

Following two plant malfunctions in Russia and the US respectively before the Russian invasion of Ukraine, and then after the supply chain disruption borne from that incident, the world is currently seeing a helium shortage. 

This, at first, only impacted weather balloons and kids’ parties. But as the shortage persisted through 2022, it eventually began to hit the tech sector. Fun fact: you need helium to make microchips and fibre optic cables. 

That shortage, at November 2022, did not show any sign of receding.

A glance at Grand Gulf's six month charts