Pulsar Helium Inc. (TSX-V: PLSR): Material increase to the size of the prize. CO2 upside. Listing on AIM
• The 2C (mid case) contingent helium gross recoverable resources at Topaz have been estimated at 22.9 mmcf (+44% vs previous estimate). We view the Pmean estimate of 79 mmcf as more representative. The deeper and more laterally extensive gross recoverable prospective helium resources estimated to at 1.3 bcf (Pmean) with an upside case of 2.8 bcf (P10).The overall resources estimate is much larger than previously estimated (C3 continent plus P10 prospective resources of 0.3 bcf) and more than we carried in our valuation (0.6-1.0 bcf). 50-80% (contingent and prospective, respectively) of these resources are associated with the proportion of the structure on adjacent State lands over which Pulsar is in discussions to secure access.• The new contingent resources estimate reflects the result of the Jetsteam#1 well with gas with high helium concentration (9.9% on average) encountered across multiple fractures rather than a single fracture. Pulsar has been ascribed no contingent resources associated with vugular permeability. This could be due to mud invasion during drilling, which could offer some upside to the estimated volumes if this can be proven. The contingent resources have been ascribed a chance of development of 65% (in line with our expectations).
• The prospective resources are associated with an extended gas filled fracture network deeper than the penetration of the Jetstream #1 well and more laterally extensive. Pulsar is planning to raise £5 mm of new equity through a listing on AIM by the end of October to fund the deepening of the Jetstream#1 well (+500 m) and a step out well to derisk these volumes. Our unrisked NAV for Topaz including the Pmean prospective resources is ~C$3.80/sh. As we incorporate the value of the new volumes partially offset by the dilution associated with the upcoming equity raise, we have increased our target price to C$1.90/sh.
CO2 upside
Topaz is estimated to hold 0.6 bcf of Pmean contingent resources plus 10.1 bcf of Pmean prospective resources of CO2 (~72% concentration in the raw gas). Bulk CO2 is currently purchased at a price of ~US$32/mcf. According to Pulsar, the only additional cost to develop the CO2 at Topaz would be a cryo plant estimated at US$15-20 mm. Our unrisked NAV for the contingent plus prospective CO2 resources is ~C$1.60/sh.
Valuation
We have assumed that the new equity is raised at the current share price. Our new unrisked NAV for the company is C$5.50/sh (C$4.15/sh previously) with a ReNAV of ~C$1.90/sh. This assumes that Pulsar has access to the proportion of the resources on State lands.
Auctus Advisors is a specialist Equity Capital Markets and Advisory business with a focus in the Energy Sector.
The partners have complementary skill sets, with decades of experience across Equity Capital Markets, Investment Banking and the Energy industry. We have worked at Société Générale, Canaccord Capital, BMO Capital Markets and Schlumberger. Most recently we have worked together for many years at GMP FirstEnergy.
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