There was a disappointing and stomach-churning plunge in the Helium One Global (LSE: HE1) share price today. Investors had high hopes the company’s Tai-1A exploration well would strike bountiful balloons of helium that could be tapped in commercial quantities.
More drilling for Helium One Global
But today’s completion-of-drilling announcement left shareholders feeling deflated. The drill bit had trouble verifying enough helium to make a voice squeaky. The company said it’s “encouraged” that it has identified a working helium system in the Rukwa Basin. But is “disappointed” not to have identified free gas within the Karoo Formation of Tai-1A.
And so it’s time to move on. The next step for Helium One Global will likely be more drilling “which may include redrilling of Tai prospect to test identified targets.” But exploration wells are expensive to execute. So it’s no wonder the share price fell on the news. It’s down by almost 50% today — ouch!
In some ways I view today’s lower share price as an opportunity. After all, the market capitalisation is now much lower at around £164m. And the move blew off some of the speculative froth from the price. But Helium One Global remains a highly speculative proposition and the company has very little to show for its exploration efforts so far. At least that’s true when measured against commercially exploitable assets.
Meanwhile, my attention is on Zephyr Energy (LSE: ZPHR). The company also delivered a completion-of-drilling announcement today. But the outcome of the firm’s exploration operations was far more positive than Helium One Global’s, and the stock is up by almost 15% on the news.
Zephyr strikes its target
The firm’s operations are in the Rocky Mountains region of the USA. And the State 16-2LN-CC well encountered its primary Cane Creek reservoir target “as well as multiple secondary targets in overlying reservoirs.”
The contrast with Helium One Global’s announcement is striking. Zephyr Energy said the Cane Creek reservoir target indicated hydrocarbon charge “across its entirety.” And the company set production casing in anticipation of upcoming completion and production testing activity. Chief executive Colin Harrington said the evaluation of the drilling logs is underway. And the company will keep shareholders informed of progress towards completing the well.
So far, 2021 has been a good year for Zephyr Energy shareholders. In January, the stock traded near 0.9p. And it’s since risen a long way to today’s price around 6.7p. But some impressive operational progress has driven the stock.
In 2020, a new management team moved in and restructured, refocused and rebranded the company. And the directors have clear ambitions to combine drilling success with carefully targeted acquisitions of distressed assets, including production capacity.
Zephyr Energy remains a speculative proposition and I could lose money on the stock. But at around £77m, it has a smaller market capitalisation than Helium One Global. And the idea of backing the winning horse attracts me which, in my view, is Zephyr Energy. The stock’s going on my watch list and I’m aiming to buy a few of the shares at opportune moments. Although I see the potential investment as quite risky.
