Brian Zinchuk is editor and owner of Pipeline Online
Helium Evolution’s first well. Photo courtesy Yasmin Abdul
McCORD – One more helium operator has put bit to ground in Saskatchewan, making it the third in recent years to begin drilling in Saskatchewan.
Helium Evolution Incorporated announced on June 28 it had spudded its first well at HEI 06-12-006-05W3M (“HEI-1”) on June 25. It joins North American Helium and Royal Helium in the drilling game in recent years.
The well is on the company’s 100 per cent owned and operated McCord property in southern Saskatchewan. The location is approximately 12 miles due east of McCord, Saskatchewan, north of the east block of Grasslands National Park.
Additionally, Helium Evolution has closed its non-brokered, brokered and strategic investor private placements announced on June 9. This raised aggregate gross proceeds of $6,918,200 through the issuance of 17,295,500 total units at $0.40 per unit.
First Well Spud at McCord Property
Drilling of HEI-1 is expected to take approximately 15 days from the spud date to reach total depth of approximately 2,670 metres targeting the Deadwood formation. This is the same formation other helium producers in Saskatchewan have targeted in initial exploration, and is the deepest sedimentary formation in southern Saskatchewan above the granitic Precambrian.
That’s key, because helium derives from the decay of uranium and thorium in the Precambrian rock.
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The company said the HEI-1 well location targets a structural high, a geological characteristic typically associated with high concentrations of helium, and was selected based on detailed geological and geophysical seismic interpretation of the Deadwood formation. Offsetting wells have been drilled in the immediate area by other operators.
“Spudding our first well at McCord is another significant milestone for HEVI. The HEI-1 drill represents one of six locations already identified on the McCord property in our inaugural 2022 drilling campaign,” said Greg Robb, president and CEO of HEVI, in a release. “Our drilling program is a critical step in successfully proving up our acreage at McCord and supporting our broader commercialization plans. As a result of our farmout agreement, HEVI’s program will be complemented by North American Helium Inc. (“NAH“) drilling five, 100 per cent funded wells across other land blocks in HEVI’s portfolio, with the view to validating the prospective nature of our overall helium land base.”
Helium Evolution’s first well. Photo courtesy Yasmin Abdul
North American Helium has been the most active helium developer in Saskatchewan to date, having drilled the most wells and having built a helium purification facility near Consul, Saskatchewan.
As announced on June 9, that farmout agreement will see NAH will drill a total of five wells, incurring 100 per cent of the drill expenditures, on three predetermined blocks of land in Saskatchewan comprising approximately 2.3 million acres located west of the third meridian. For each well, NAH shall have earned an 80 per cent operated interest in the section on which the well was drilled plus nine contiguous sections of land adjoining to the well, up to a maximum of 32,000 acres. The farmout agreement specifically excludes HEVI’s current drilling focus in the McCord area. Helium Evolution will retain a 20 per cent working interest in the earned lands and each successful well drilled by NAH.
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NAH must notify HEVI of its five drilling targets within six months following the execution date of the farmout agreement, with a requirement to drill all five wells within 24 months. NAH must drill one well in each of the three blocks, with no more than three wells drilled in any given block.
“This farmout agreement with North American Helium truly sets us apart, as we are able to work with one of the helium industry’s leading operators, and to welcome them as a strategic equity investor,” said Robb in a June 9 press release. “Having this farmout agreement validates our original strategy to acquire sizeable acreage in Saskatchewan in regions featuring a high probability of helium reserves, while the offering allows HEVI to successfully fund the farmout arrangement with North American Helium and provides substantial financial flexibility to continue executing our overall strategy.”
Testing
Once drilling concludes on its first McCord well, the HEI-1 well will be completed over a 14-day period, during which the company will conduct flow testing. Preliminary results from the flow test are anticipated by the end of July, with further wells expected to be drilled predicated on the success of HEI-1. Since the spring of 2022, HEVI has also been advancing the engineering and design required for processing facilities while also engaging in discussions to secure an offtake agreement.
Helium Evolution’s first well. Photo courtesy Yasmin Abdul
In connection with the entering into of the farmout agreement, HEVI and NAH have entered into a standstill agreement pursuant to which NAH will be subject to certain standstill restrictions relating to, among other things, the acquisition of HEVI securities for a 24-month period following completion of the offerings (as defined herein). In addition, HEVI and NAH have entered into a pro rata participation and board nomination agreement pursuant to which NAH will be permitted to maintain its pro rata undiluted percentage of HEVI common shares following completion of the offering for a 24-month period. Furthermore, should NAH’s ownership reach over 10 per cent in the next two years, NAH will have a right to appoint a nominee to the HEVI board of directors.
Private Placement
The press release described the private placement as such: Pursuant to the offering, HEVI issued: (i) 8,750,000 Units to NAH for total gross proceeds of $3,500,000 (the “Strategic Investor Private Placement”); (ii) 3,175,500 units via a non-brokered private placement for gross proceeds of $1,270,200; and (iii) 5,370,000 units via a brokered private placement with Peters & Co. Limited acting as sole bookrunner, for gross proceeds of $2,148,000.
Each unit is comprised of one common share of HEVI and one third of one common share purchase warrant with each whole warrant entitling the holder thereof to purchase one common share of the company at a price of $0.70 at any time on or before the date which is 24 months from today. If the 30-day volume weighted average trading price of the common shares on the TSX Venture Exchange is at or above $1.20 per common share, the company may accelerate the expiry date by giving notice thereof to the holders of the Warrants, and in such case the expiry date will be the day that is 30 calendar days after the date on which such notice is given by the company. Notwithstanding any of the foregoing, the expiry date will be no less than six months from June 28.
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