Pulsar Helium Inc. (PLSR:TSX.V) recently announced that its Jetstream #1 appraisal well has been tested at a rate of up to 0.8 mmcf/d with helium concentration ranging from 8.7% to 14.5%. Auctus Advisors analyst Stephane Foucaud, in a research report published on June 10, 2024, provided an update on the company following this encouraging development, reiterating a target price of CA$1.80 per share, implying a total return of 112% from the share price at the time of the report of CA$0.85.
"The flow rate initially reached 0.15 mmcf/d with flowing tubing head pressure of 34 psi. The bottom hole pressure was 162 psi," Foucaud noted. "A compressor was then installed at the wellhead to reduce the flowing tubing head pressure to 20 psi, thereby increasing the difference between the flowing pressure and the reservoir pressure. The greater pressure differential resulted in the flow rate increasing to ~0.8 mmcf/d."
The analyst highlighted that the compressor used during the operation was not sufficient to further reduce the wellhead pressure to the target of less than 10 psi, suggesting that further compression could result in an even higher flow rate. Additionally, the flow rate was constrained by the presence of drilling fluid in the well.
"Assuming a flow rate of 0.75 mmcf/d and a helium concentration of 12.5% suggests the well could generate revenue of ~US$22 mm (at US$650/mcf for helium) during the first year of production (with no decline)," Foucaud stated. "This suggests the economics of the project remain very strong given that a development well should cost <~US$2 mm. In addition, CO2 concentration exceeds 70%, which could boost the economics of the project."
Pulsar Helium will now commission a new resource report, expected in July, which could have an impact on the estimated resources due to the good reservoir characteristics encountered at Jetstream #1. The pressure rebounded to 70% of the initial pressure (162 psi) within the first hour of post-flow shut-in, further supporting the project's potential.
Foucaud increased the chance of development for the Topaz project from 55% to 65% and assumed a 6-well development to reach 5 mmcf/d gross production, with production expected to start in Q4 2025. "Given the low drilling cost, this does not have a significant impact on our valuation," the analyst noted.
Auctus Advisors' unrisked net asset value (NAV) for Pulsar Helium, based on a 5 mmcf/d (gross gas) development, is more than C$2.00 per share. The upside case, including additional resources, leads to an overall unrisked NAV of approximately CA$4.15 per share.
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Disclosures for Auctus Advisors, Pulsar Helium Inc., June 10, 2024
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