Voyager Life PLC (AQSE:VOY) Rost 1-26 well – Pre-production

Yesterday, Voyager Life PLC announced that preparations to bring the Rost 1-26 well owned by M3 Helium Corp. (“M3 Helium”), into production are now well advanced.  Sales of helium from that well are expected to commence by the end of September 2024.

Yes, it is one of the few companies that are producing and selling directly to the U.S. market.

The Rost 1-26 well, located in M3 Helium’s Fort Dodge prospect, was tested by Shamrock Gas Analysis, Inc. and contained a gas composition of 5.1% helium in July 2024. Thurmond-McGlothlin, LLC, an independent professional firm, also tested a well pressure at 302.7 psi in July 2024 while taking the samples. 

These tests follow on from a flow rate that was measured at 47,100 cubic feet per day (47.1 Mcfd), with this result being achieved even though brine levels were 1,058 feet over the perforations. 

Rost Pre-production

Where is the Rost well?

The well is in south-west Kansas just a few miles outside of Dodge City of western movie and Wyatt Earp fame.  It’s around an hour’s drive east from the Hugoton gas field.

What makes this area so interesting to Voyager?

The Kansas oil & gas industry is best known around the Hugoton gas field, one of the USA’s most prolific producing areas over the last 90 years.  However, Kansas production is by no means confined to this field and there is an opportunity for Voyager/M3 to produce from regions that may have been overlooked in the past by the majors.  The Fort Dodge area is an undeniably smaller prospect overall than the Hugoton but individual well performance could be exceptional.

Rost 1-26 is a case in point.  The well has previously been tested by Shamrock Gas Analysis, Inc. to contain a gas composition of 5.1% helium. At the same time, Thurmond-McGlothlin, LLC tested the well pressure at 302.7 psi.  These tests follow on from a flow rate that was measured at 47,100 cubic feet per day (47.1 Mcfd).  What is potentially more remarkable is that this flow rate was achieved with brine levels 1,058 feet over the perforations.

What is the well’s economic potential?

Geology can be unpredictable so it’s obviously important to recognise that static data may not be repeated once the well is in production but, nevertheless, data gathered at this stage is a strong guide to what may be realised.

Taking the core data available so far – a flow rate of 47.1 Mcfd and a helium concentration of 5.1% – if that was to remain constant then Voyager could potentially produce 2.4 Mcfd of helium.  At current pricing, that should be worth over $1,000 per day to the company.

Furthermore, if management are right and de-watering the well increases the flow rate, then that revenue potential could rise significantly.  Put simply, clear the well perforations of brine and more gas should flow.

How will the helium be sold?

Unlike the company’s wells in the Hugoton, the Fort Dodge area is not proximate to Scout’s gathering system so a direct tie in will not be economic.  However, M3 owns a Pressure-Swing Adsorption (PSA) modular processing unit which could concentrate the helium to around 20 – 50% onsite.  From there, it can be taken by road for further processing.

If, for example, the company was able to source a 100 Mcf tube trailer (which would be small) then it could potentially be shipping 20 – 50 Mcf of helium per load.  In other words, maybe somewhere in the region of $8,000 – $20,000 at a conservative price of $400 per Mcf.  Management report there are two potential offtakers, each within an hour’s drive so transport costs will not be significant.

What are the next steps for production?

According to the company’s last RNS, power is expected to be connected to site this week and then the PSA will be commissioned around 10 days later.  The pump and water tanks are already installed.  Therefore production by the last week of September seems realistic.

What does this mean for Voyager?

Assuming the Rost well performs as expected then the company will most likely drill further wells in the area.  There is relatively little data on Fort Dodge (after all one of the attractions is that it has historically been overlooked) but management expect the reservoir to be tightly defined and they have cautioned against the same number of wells that may be available for drilling on the Hugoton.

But if Rost performs as outlined above and if Voyager was able to drill just 3 wells at Fort Dodge then that’s already $1 million of revenue per year for the company.  Maybe more if de-watering works as expected.

In the context of Voyager’s market cap this type of opportunity is capable of being a company-maker.

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