The HE1 share price has crashed: will it rise in September?

The HE1 share price has collapsed in August thanks to disappointing drilling results. Is there still hope? Roland Head investigates.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

August has been a difficult month for Helium One Global (LSE: HE1) shareholders. The HE1 share price has crashed on two separate occasions, falling by around 65% in total over the month.

The latest slump came on Thursday morning, when the company said it had ended its drilling campaign after its second well had failed to find any gas. However, Helium One says the data gathered has defined “a working helium system” in the Rukwa Basin. I’ve been reviewing the latest news to see if I want to take a small punt on this speculative situation.

What went wrong?

Helium One has been drilling for helium in Tanzania’s Rukwa Basin. Today’s drilling results reveal that the company’s second well — Tai-2 — has been completed “without identifying helium gas”.

This follows the disappointment of the initial Tai-1 well, which confirmed “the presence of a working helium system” but was not able to identify any free gas within the target Karoo Formation.

Chief executive David Minchin is putting a positive spin on the situation. He says that although the drilling campaign failed to flow any gas to the surface, it’s produced “significant information”. Mr Minchin says this has enabled Helium One to define “a two-track exploration route to develop Rukwa”.

The company’s progress so far has disappointed the market. But I think the HE1 share price could still bounce back. It’s worth remembering the stock is still up by 100% on one year ago — early investors are still in profit and may stick with the business.

New plans

Helium One says that this year’s drilling programme has identified a working helium system, with “seal, reservoir and trapping geometries”. The company now plans to carry out some additional seismic surveying to gather additional information about the Top Karoo formation. It’s hoped these will help the company to design a deep drilling programme for 2022.

Alongside this, management is also hoping to carry out additional work to understand the shallow traps identified by the Tai-2 well. Helium One believes these could potentially offer “a low-cost route to explore and develop a helium gas deposit”.

Management clearly believes the Rukwa Basin still has significant potential. Fortunately, the company still has £10m of cash on hand to fund further work.

HE1 share price: big upside potential?

Helium One has no revenue and no proven commercial reserves. Drilling results so far have been disappointing and there’s no guarantee things will improve. With a speculative stock like this, I’d only invest money I would be happy to lose.

However, I can see some potential here. If the company’s assessment of the Rukwa Basin is accurate, then it could be a commercial resource with the potential to replace ageing helium supplies elsewhere.

I expect that Helium One will issue some positive updates on seismic surveying and 2022 drilling plans over the coming month or so. In my view, Helium One shares could make modest gains in September as investors hope to catch the stock before a rebound.

However, I’m concerned that any increase in the HE1 share price could be short lived. Even if future good progress is made, my sums suggest the company will need to sell new shares to raise cash to fund drilling in 2022, diluting existing shareholders.

On balance, this situation is too risky for me. I won’t be investing.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

How much would I need to invest in income shares to earn £300 a month?

What kind of lump sum would be required to earn £300 a month by taking advantage of some of the…

Read more »

Investing For Beginners

Up 31% in a month, could this FTSE 250 stock be getting bought out?

Jon Smith takes a look at speculation that's pushing the share price of a FTSE 250 share higher and considers…

Read more »

Investing Articles

Here’s how I’d follow Warren Buffett to start building passive income in 2025

Ben McPoland highlights one FTSE 250 firm with a strong competitive edge that he thinks can continue rewarding investors with…

Read more »

Investing Articles

Burberry shares: undervalued FTSE gems that are ready to rocket?

Burberry shares soared at the beginning of the week as the takeover rumour mill went into overdrive. Is Paul Summers…

Read more »

US Stock

Here are the latest share price forecasts for S&P 500 giant Amazon

Amazon has generated monster gains for investors over the last decade. And Wall Street analysts believe the S&P 500 stock…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »