Blue Star Helium Limited (BNL) Earnings Call Transcript & Summary

Today, I'll run through our latest corporate presentation. You can find it online on our website. It's also on our ASX announcements. It's a new presentation. It's got quite a significant appendix in it. So I urge you to look at that after this presentation. It's got a lot more details in it. So let's get started. I'll just share the screen. Hopefully, everybody can see that. So Blue Star Helium, we are the latest and newest producer of helium in the U.S. So the theme of the presentation is to produce, sell and repeat. We have high-grade helium and CO2 from our Las Animas County assets. Helium production and sales from Galactica that started in July, new helium development at Pegasus already discovered, CO2 revenue stream in development and a large resource of upside in our exploration material. The disclaimer that you can read when you have time and you want to look at the pack. The thesis, one plant is proof, the next 3 plants are the point. We've proven Galactica. We took this from a prospect right through to production. So, we're now producing helium. We're selling it under an offtake. We have an offtake in an amazing helium market globally. CO2 revenue is to follow, and we have a follow-up at Pegasus already discovered, awaiting appraisal and development drilling. The plan going forward at Galactica is 3 more wells in 2026 that will increase production and see a step towards full capacity of the plant. Another 6 wells in 2027, which should get us to full capacity. And you'll see a little bit more CO2 infrastructure as we get ready to liquefy and sell that secondary product as well. Now Pegasus, again, already discovered. The first wells will be drilled in 2027. The second plant will be planned, if not put in, in that time as well. So that will give us the second plant on this already discovered resource. It is very scalable. We have up to 4 plants just to develop what we've discovered at Galactica and Pegasus. We already have a discovery at Voyager, which you may remember. We'll talk about that at the end. We have a discovery at Serenity, which is high-grade CO2 that we'll talk about a little bit later on as well. And a huge exploration portfolio over 275,000 acres of highly prospective resource in Las Animas County, which I see as one of the up-and-coming industrial gas hubs in the U.S. So we're building a multi-plant U.S. helium and CO2 producer. So the proof, as we've said, is Galactica. We've taken that from a prospect right through to sales. We have 6 wells on production at the moment. We had our first sales from July under an offtake. It's a fixed-term offtake, deliberately short term in this current helium market, and we will continue to balance pricing and longer-term contracts. There's a lot of interest, as you can imagine, for CO2 offtake given what's happening with the supply chain globally. We won't touch on that too much in the presentation, but there's a fair bit of information in the appendix, and there's a number of articles, which I've contributed to and others have contributed to where you can obviously get the scope of the supply chain issues globally for helium. We're in commercial discussions for our CO2, which is a co-product of our helium development and will be a significant resource in the future, and we have a number of discussions happening there. So, we've done very well to prove this up, first gas flow in December, first revenues in July and within 7 months. So that's the template. It's the Pinon Canyon plant. That's the actual plant associated with the Galactica project. It's repeatable by design. We're drilling into proven rock. We know the operating model now. We've learned a lot over the last sort of 6 months during our commissioning phase. Very attractive economics, a $13 per Mcf OpEx for output gas. And we're funded with our partner, Helium One Global for both Pegasus and Galactica. Over on the right-hand side, you can see the revenue scenario. This is the plant at full capacity, but it is -- and these are gross revenues, but they are after royalties. So significant numbers here with this price deck, which we didn't change before the current global crisis. So that's the plant at full capacity that we're aiming to get to. So the plan, like I said, I'd like to get Stage 1 done. We've proven that we can sell under a great offtake and that the rock and the reservoir in the plant and the template is working well. So for the rest of 2026, we're going to see 3 more development wells. Permitting is underway on those. We'll continue to refine the plant and gathering system. We've got most of that sorted. But as we bring more wells on, there's always refinement to do. We'll be deepening some of the existing wells. At the moment, we only have 50% of the Lyons -- upper Lyons reservoir flowing gas. We can increase that and get another 30%, we hope, of production out of that. So those will be done at the right times when there's downtime and when we're not busy filling trailers on a sort of weekly to 10-day basis into the current market. CO2 liquefaction and sales will continue or will follow as we've already discussed. And Pegasus appraisal and development planning will see a significant move forward in -- towards the end of the year. We have an appraisal well location ready to go if we choose to do that with a joint venture. And like I said, the resource is already discovered. All the learnings from what we've done at Galactica will go into the plan and the design of the Pegasus development. So 2027, we're going to build capacity and continue to repeat the process at Pegasus. So another 6 wells at Galactica moving us to full plant capacity. Long-term offtake portfolio, which will underpin that growth, including the growth of Pegasus. The first Pegasus development wells, again, building ahead of plant capacity. And you will probably see some exploration drilling. So we want to get some of the low-hanging fruit that we have in our exploration portfolio and start increasing our reserves behind the production that we're having. Move into 2028, and we'll sustain the full capacity at Galactica. We'll grow Pegasus to full capacity and then continue to bring on new exploration success as we have it. Just a little bit more on the repeat, which is Pegasus. You can see it over here on the right-hand side. It essentially sits on the same structure as Galactica. It's already discovered. We've got a historic well here, a well that we drilled, an exploration well that we drilled to define the prospect here with 3% helium, another one over here between 4% and 6% helium depending on which reservoir you win, [indiscernible] in the upper reservoir or the lower Lyons. Really, it's one giant structure. We keep the naming convention, which was the historic prospect naming convention because we believe we will develop this with a second plant. There's a very good chance that the plant will go into this location here and then be serviced through Highway 109 or it will go to the north and be serviced through this way here. Like I said, Galactica itself could have 30-plus wells. Pegasus is another 10-, 20-, 30-plus well development here. As we learn what the infill spacing is at the moment, we're very widely spaced on our wells. You can see them in the black over Galactica. They are the 6 wells that are producing. There's a lot of infill and a lot of extension potential, and you can see the same at Pegasus. I should also note, there is another operator here, Red Rocks, who's been producing for 2 years. So, we have the benefit of looking at their reservoir performance and what their wells are doing, and you can see how they've ramped up over a period of time as well. We own all the blue leases and all the green leases on this map. So, stepping out now a little bit more, we'll look at the exploration portfolio. So, what I've just shown you is just over here at Galactica and Pegasus on the right-hand side. So again, up to 30-plus wells at Galactica already producing and selling helium. The next or the repeat of that is going to be Galactica over in this location. We see potentially 4 -- at least 4 Galactica style plants servicing just the blue that we've discovered here. Now we also have a discovery called Serenity down here, which is high-grade CO2, almost 99% in the ground. There is a lot of interest from the CO2 industry on that project as well as the CO2 that we'll be selling from Galactica and Pegasus. We have another discovery over here at Voyager. You may remember when we discovered that field or that extension of the model dome field, which was the analog for the area, which had up to 10% helium, an average of 8%. We had relatively low pressure on the 2 wells we drilled. That doesn't mean the whole structure will have low pressure, but it did force us to stop that development to rethink how we can make it more economic. It was marginal at the time, and we moved over to Galactica. Now having a facility, a processing facility in the area, it opens up a lot of potential for Voyager. So, we could use our own production facility to enhance the economics here at Voyager, potentially trucking raw gas or slightly refined gas from Voyager to the Galactica or Pinon Canyon plant. So that's one potential option. Also with the learnings we've learned on processing power, et cetera, we could get the economics potentially to work there as well. So, you have Serenity to follow up after Galactica and Pegasus, you have Voyager to consider. And then on our green exploration acreage, there's a lot of resource potential. A lot of these prospects that we have covered looked like Galactica did before we drilled them. They've got gas with -- log shows with gas. They've got gas that flow that didn't burn when the historic explorers went through. To us, that means helium, CO2 and nitrogen. So there's a lot of potential there. Some of our favorites are down here in the South. Prometheus and having another shot at Enterprise because we have a number of wells there that prove that we were down dip. We have a small amount of gas, but there's definitely a significant amount of potential there as well. So upcoming events, CO2 commercialization arrangements. We'll tie in another well when that happens. It's a high CO2 well that will lift the production of the plant. Long-term helium offtake portfolio, again, we're balancing that deliberately at the moment. We're taking short-term contracts where the market is hot, but we will continue as we grow and grow our relationships with companies to look for a long-term portfolio of offtake. Drilling of 3 new development wells at Galactica, the permitting is underway, deepening of existing wells and a refinement of the gathering system associated with that. So potential increase in production there as well. Adoption of the Pegasus work program with Helium One, like I said, already discovered. We have an appraisal well ready to drill there. But 2027 is where a lot of the action will happen on Pegasus. You'll start to see our quarterly production being reported as we -- now we've got sustainable truck deliveries under an offtake. And exploration drilling across Las Animas County, potentially with farming partners as well. So just in summary, Galactica is producing and selling helium. The next phase is Pegasus and repeating the process, but with a lot of learnings. We're going to increase -- we're going to put on the CO2 revenue, and that may include Serenity as well and then the upside of the exploration portfolio. Just having a look quickly corporately, we have $5 million cash in the bank at the moment. We have no debt. And obviously, we now have revenue coming in from Galactica. My contacts are there, if there's any questions or anyone wants to reach out. Like I said earlier, there is a great appendix associated with this presentation, and there's a lot of information in there. So, I'd like to thank everyone for attending. I believe the Q&A or questions were open here. We will review those questions. And if there's a theme or if there is something that we feel that needs to address, we will endeavor to address those in future communications. But again, thank you for coming, and thank you for your interest in the company.