Quantum Helium Limited (AIM: QHE) has reported highly encouraging results from the ongoing Extended Production Test at its Sagebrush-1 well in Colorado, confirming high-grade helium concentrations, strong reservoir characteristics and the unexpected discovery of commercial oil production.
The company said laboratory analysis confirmed helium concentrations of approximately 2.5%, significantly above typical commercial helium grades of between 0.3% and 1.0%, reinforcing the quality of the resource already identified at Sagebrush.
The test programme also successfully demonstrated connectivity with the reservoir’s natural fracture system following acid fracture stimulation. Pressure data showed reservoir pressure recovered to around 90% of virgin reservoir pressure within four days, providing further evidence of a robust and potentially productive reservoir.
One of the most significant outcomes from the programme was the discovery of commercial oil production from the Leadville Formation, an unexpected development that management believes could open an entirely new hydrocarbon play in the Sagebrush area.
More than 80 barrels of oil have already been recovered during testing operations, with the company’s technical team indicating the well could potentially support production rates of up to 40 barrels of oil per day gross following optimisation and clean-up operations.
Management believes the oil discovery materially enhances the economics of the project by adding a near-term hydrocarbon revenue stream alongside the project’s existing helium resource base.
The company is now moving into the next phase of operations, which includes additional perforations, commingling multiple production intervals, aggressive fluid recovery and the installation of rod pump and pumpjack equipment to further evaluate long-term production potential.
Quantum plans to submit the extensive production and reservoir data generated during the programme to independent consultants Sproule ERCE for review. Importantly, the newly discovered oil production was not included in previous resource assessments, potentially creating additional upside for future resource evaluations.
The update further strengthens Quantum’s position as one of the largest independently certified helium resource holders on the London market. Across Sagebrush and Coyote Wash, the company now holds independently verified 2U gross helium resources of approximately 1.104 billion cubic feet.
Chief Executive Howard McLaughlin described the results as exceeding expectations, noting that the programme has successfully confirmed helium-bearing gas, strong reservoir performance and commercial oil production while generating critical data to support future field development.
For investors, the key takeaway is that Sagebrush appears to be evolving from a pure helium story into a potentially dual-revenue helium and oil project, with the newly identified oil production adding a potentially significant value driver alongside an already substantial independently certified helium resource base.
