Oak Securities sets 93p price target for Helix Exploration, following acquisition of Rudyard helium project

Oak Securities has set a price target of 93p for Helix Exploration (HEX)Follow | HEX, following the helium company’s acquisition of the Rudyard discovery in Montana for US$250,000 in cash and shares.

Helix’s current share price is 22.5p, which gives the company a market capitalization of just under £30m on the Aim market.

So Oak’s valuation is punchy, to say the least, and if realised will send Helix out of the ranks of the junior resources  companies and well and truly towards the mid-tier.

The foundation for such optimism lies with Rudyard itself, which Oak values at around US$85m, and which is estimated to contain contingent resources of 0.48 billion cubic feet (bcf) of helium. There’s also additional upside at greater depth, where there’s significant potential for further resources.

Oak’s unrisked valuation of Helix’s overall portfolio is, accordingly, 187p per share.

Helix, of course, already has an existing asset base of assets in Montana, and to a degree the market has recognized the potential of these assets already.

The shares have more than doubled since they were listed on Aim in the early part of April this year, in conjunction with an oversubscribed fundraising that Oak was also involved in.

At that point the key assets were unrisked prospective helium resources amounting to 2.3bcf in Montana, with the existence of gas already proven.

The acquisition of Rudyard not only adds to the resource base, but it also raises the possibility of near-term cashflow, something else that Oak also highlights in its note.

The contingent resources at Rudyard will in due course be reclassified as reserves, once a development plan has been agreed and a final investment decision taken. 

The addition to the helium, there is also some methane at Rudyard.

“It is clear that the acquisition of Rudyard is immediately accretive to the dollar value of the company,” Oak comments. 

“But even when accounting for the 510m shares issued to the vendor in respect of the consideration, the acquisition is accretive to shareholders too.”

View from Vox

Helix has rapidly moved to become one of the go-to companies for helium investors, and for anyone interested in next-generation assets generally. That this deal looks likely to add so much value at such minimal dilution is a positive sign, both in terms of valuation per se, and as regards the approach of management to deal-making generally. Using cash conservatively, and focusing big spending solely on the assets will be welcomed by investors. It may take a little while for the implications of this deal to sink in. But Helix has show itself to be agile and lithe, and willing to get creative when it comes to adding value.