Featured Companies: Imperial Helium Corp.
Imperial Helium (TSX-V: IHC)(OTC: IMPHF) CEO David Johnson on Being a First-Mover in the Helium Production Space for the North American Market
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the CEO of Imperial Helium — Mr. David Johnson. David, first off, thank you for taking time today. I know you're a bit under the weather so I appreciate the time. How are you doing, sir?
David Johnson: Oh, I'm doing really well. Thank you very much, Gerardo. I appreciate being on the show.
Gerardo Del Real: I'm looking forward to helping tell this story because it's a unique one in an opaque market that's not very well understood. Now, before we get into helium and why it's such a critical strategic material, I have to highlight some of your experience.
Obviously, you've had roles in the past with little startups such as Shell Canada and ExxonMobil. Can you speak to that experience just a bit?
David Johnson: Sure. So, I'm a geologist; a Bachelor’s out of the University of Calgary. And I went to work with Shell Canada Resources. And then, I did a PhD in numerical modeling and subsequently joined Exxon Production Research organization and then went to ExxonMobil Exploration.
After that, I was brought up to help rebuild Husky Energy's Frontier International Group in Canada. We had a good run there for about eight years. Back then, a lot of the opportunities in southeast Asia and around China — the major bloc — were from 2002 through 2008. I did a startup called Sagres Energy. That went well; people did well out of that.
And then, I worked with a high-net-worth individual for a while with several companies that we were managing for him. Then, I left that to work in Kuwait and finished up in Kuwait as the head of exploration in the business development group. I came back to Canada in 2016 with the downturn and began working at Helium. And Imperial Helium is really an outgrowth of that effort.
Gerardo Del Real: You've managed to put together quite an impressive team for a company that has a market cap of sub-C$20 million. Can you just touch on the team a little bit because I think it's important moving forward for the asset that you are developing.
David Johnson: Well, we really have a very senior management team as a whole. There's myself, and I’ve got about 35 to 40 years of experience. Michael Zubkow is our chief operating officer. And Michael comes with a huge depth of roles in structural and field development engineering with a number of companies: Underwood McLellan, Amoco, Devon, Conoco, Penn West, and Canadian Natural Resources. Michael is just an extremely experienced, competent hand. He'll pretty much hold his hand to anything.
Barry Lappin has joined us as a financial officer; 20 years experience in the oil and gas industry in both private and public markets and with Deloitte & Touche in the UK. He's been a great addition to the team. Steven Anfort is our chief geologist. You know, there are geologists that are good at doing geology and there are geologists that find things. Steven is a finder. And he’s a great addition to our team with about 30 years of experience.
And then, Keith Edwards… he’s our chief geophysicist. And Keith has 37 years of experience, and he is just one of the best geophysicists I've ever had an opportunity to work with. That's the management team.
Gerardo Del Real: That's an excellent overview of the team. You were, I believe, going to touch on the behind-the-scenes folks that you have on your side as well, if I'm not mistaken, right?
David Johnson: Yeah, absolutely. So touching on the board because we have a very strong board with Kyler Hardy and Brad Hayes. Brad Hayes is from Petrel Robertson. Petrel Robertson has been a company that, as a consulting firm, has really incubated new ideas into coming into existence and has brought us on this with a number of companies: Central European Petroleum, with Osum, which is a heavy oil company in Alberta, and then with Imperial Helium as well.
Kyler Hardy does the same thing from the financial perspective with Cronin Capital; really takes companies from seed to IPO and has really been one of the two core parties behind getting Imperial Helium off the ground. Director Campbell Becher who brings 20 years of experience with investment banking. Steve Burleton who has started and runs his own mining companies. And he comes with a CFO from a financial background.
So we have Kyler, Campbell, and Steven with their strong financial strength. And then, Peter Putnam and Marty Wittstrom who both are on the board. These are two individuals who were both founders of startups and funded their own companies and bring a great depth of what it takes to run a company to the board.
Gerardo Del Real: That's an impressive group, again, for a company with a market cap of sub-C$20 million. The helium market is forecasted to reach US$18.2 billion by 2025. You have an advanced-stage asset with an expedited path towards production that you're targeting for Q4 2022 which, obviously, puts you right in the sweet spot of that profit window, right?
There are so many companies that have assets and they have the right market. But by the time they actually bring the production profile onboard, the market has changed and they've missed the boat. This is very opposite of that. Can we speak a bit to the asset in place and just the plan to get this asset towards production?
David Johnson: Our strategy from the very beginning has been to be as efficient with shareholders' capital and to keep the risk as low as possible. In order to do this, we need developing assets, or capturing of developing assets, that have already been identified.
That is, we've gone to places where helium already exists. And we’ve said, let's capture that asset and go forward. The asset that we've captured is the Steveville asset in southern Alberta. This is a land block of about 95 square miles that we've captured.
There are two major structures on this basement high, and one of them has a blowout called the Steveville blowout. Now, we've taken the approach that we are going to appraise the structure, and that's what we did. We drilled two wells to appraise the structure. That will take us to the place where we're able to bring the asset on-stream by Q4 2022.
Now, in order to get both wells on-stream, what we're projecting is 10 million cubic feet per day of raw gas from two wells with Steveville-2, which will be 5 to 8 million cubic feet from one zone, which we've already proven. And the Steveville-3 which is the planned producing well that we're planning to drill this fall going into the first quarter of 2022.
That gets the asset essentially defined. We know what it is. We know what the production risks are. We understand the opportunity, and we're ready to bring this opportunity on-stream.
Now, in order to monetize an asset and to de-risk that, what we've done is we've created a strategic alliance. So we've created these strategic partnerships between ON2 Solutions and Uniper.
ON2 solutions is a gas company that creates and manufactures a helium separator. And that's what they're doing for us. In fact, what they're doing for us, right now, is manufacturing a small-scale model of the plant we will be building next year to demonstrate our ability to produce 5-9 helium. And that'll be done by December.
In addition, what we've done with the strategic alliance is we have Uniper. And Uniper is a marketing transportation company. They’re about a US$14 billion company; they work in 40 countries around the world. They’re essentially a gas transportation and marketing company. And we're negotiating with them an off-take agreement, right now, for the gas that will be coming from the Steveville opportunity.
Gerardo Del Real: You are targeting, I believe, an independent resource certification by GLJ in Q1 of 2022, correct? That is a major catalyst for the company and a milestone. Is that still on target?
David Johnson: Absolutely. The independent resource assessment is still on target. The way that they work is GLJ is doing the preliminary work right now, and they will have a P1-P2 estimate — proven plus probable — probably in the late-fall. And then, once we get the second well down, then we'll finish doing the entire resource assessment and have proved resources for that entire block.
Gerardo Del Real: You mentioned the strategic partnerships that you've been able to develop; an impressive list of names there, obviously. For people that are not familiar with helium because of the opaque nature of that market, could you give us just a brief overview of why this opportunity now has presented itself in such a volatile way, right?
It seems like every year we hear more and more about helium shortages and the projections that are, obviously, very favorable. Can you speak to that before I let you go, David?
David Johnson: Absolutely. The opportunity before us, the sudden price-rise, really comes out of some global pricing dynamics. And what it really hinges around is that the US, in 2013, recognized that the helium they have — they needed to keep for themselves. So the public reserves that they were selling to commercial interests, they decided to take off the market in 2013. And they finished taking them off the market by 2018.
And at that point in time, the price shot up. That was 2.1 billion cubic feet of helium that came off the market at that point in time. So we’re looking to feed into that vacuum. The price is strong. We're using a price of US$375/MCF for economics for Grade-A helium. But to be clear, we are going to be producing Grade-A helium that's 99.999% pure helium. The price is high right now, and I think it's going to stay high.
Yes, we've heard about the new streams coming from Qatar and the new streams coming from Russia. But the fact of the matter is that there's a very small number of players that really control the market. There’s really only about six players that control the price of helium around the globe, and a number of these are the major gas companies. So there's economic rent that's been captured. And there isn't going to be a strong desire to break that control on the economic rent.
The other reason is that helium is hard to transport and store. It's really hard to store, and it's very hard to transport. As a liquid, you can only keep it in containers for about 40 days. So you have to get it from one place to another place… put it back into gas… and then it takes large volumes to store it. So you can't store it, which means the isolation of the market between different parts of the globe.
The US has experienced this downturn in volume; this increase in price — a downturn in supply and an increase in price. And we're feeding into that. So we anticipate seeing supported higher prices within the United States for the next five years, at least.
Gerardo Del Real: Insiders have pretty significant skin in the game… 19.56% the last time I looked, fully diluted, insider ownership. The market cap, again, sub-C$20 million. The opportunity, obviously, speaks for itself. You’ve got the team. You’ve got the asset. I think your timing is spot on.
Is there anything else that you'd like to add to that, David?
David Johnson: Yeah, we're really, really excited about where we're at and where the opportunity is in going forward. We have gone out and we have identified an asset. We're going to bring that asset onto production within 20 months from going to IPO.
So we're doing this in record time.
And the way we've gone about this is, really, to keep, as I said, the capital efficiency and the risk to a minimum: efficiency to a maximum; risk to a minimum.
And the way we've done that is, as I said before, capturing opportunities where we know they exist. We’re not guessing concentration volumes. We know what they are. We've integrated along the value chain so we can capture, essentially, any lost value along that value chain. And we expect to turn out a Grade-A product. And really, we're going to be the first people producing 5-9 helium in Canada.
So a lot of firsts, a great plan, and a great team that's making this all possible.
Gerardo Del Real: A lot to like. A very, very attractive valuation and entry point for those that are looking for quality exposure to the helium space. David, it's been an absolute pleasure. Get well and we'll chat again soon.
David Johnson: Great. Thank you so much. If anyone is interested, tell them to please feel free to call me. Thank you so much.
Gerardo Del Real: We'll put a link to the website. Thank you.Click here to see more from Imperial Helium Corp.