Big Star Energy acquires ‘transformational’ helium lease package in Colorado

Oil and gas explorer Big Star Energy (ASX: BNL) has shelled out $107,000 at a state land auction to acquire 63 new helium leases in Colorado, increasing its acreage by 1,400%.

The leases are spread over 88.31 square kilometres and have transformed the company into the region’s dominant player.

They are for an initial five-year term with an optional 12 month extension, and require an annual rental payment of $3.69 per acre payable in advance.

The acquisition price comprises the first year rental costs of $80,505 and lease bonuses, application and other fees of $28,604.

In the event that Big Star successfully produces helium or other products from the lease area, the company will be required to pay the State of Colorado a 20% royalty and the lease term will be extended indefinitely until production ceases.

The leases do not include any minimum work commitments.

Managing director Joanne Kendrick said the acquisition was a “transformational moment” for the company.

“These acquisitions, in addition to our existing acreage, bring us to 271sqkm gross across nine prospects, significantly exceeding our targets and making us by far, the dominant player in this highly prospective area,” she said.

Soil gas survey

Of the nine prospects, Ms Kendrick said three include locations sampled during the company’s mid-year helium soil gas survey over several of its 30 helium prospects and leads.

All samples returned positive helium readings of up to 50% above normal atmospheric levels, confirming an active helium system in the area.

The company will now commence the design and planning of a five-well drilling program where any discovered high-concentration helium accumulations would potentially be developed using a pressure swing adsorption plant.

“A standard-size PSA plant can process 2mmcf/day of raw gas (with up to 10% helium) to a saleable product stream containing >98% helium concentration and requires up to 10,000 acres to fill to capacity,” Ms Kendrick said.

Big Star’s prospects and leads ranking have been driven by regional and local structural mapping, proximity to historic high-concentration helium wells and the active helium systems proven by the regional soil gas survey completed this year.

Continued integration of survey data into the geologic model over the last two months has resulted in improved delineation and greater confidence in prospect sizes and ranking.

Strategic element

Helium is a unique industrial gas which exhibits dual characteristics of a bulk commodity gas and high-value specialty gas.

It is considered a “high-tech” strategic element.

Helium’s unique chemical and physical qualities have seen it become a vital element in the manufacture of magnetic resonance imaging machines and semiconductors and is critical for fibre optic cable manufacturing, hard disc manufacture and cooling, space exploration, rocketry, lifting and high-level science.

There is no way of manufacturing helium artificially and most of the world’s reserves have been derived as a byproduct of the extraction of natural hydrocarbon gas.

At midday, shares in Big Star were up 40% to $0.007.