LONDON: Ascent Resources Plc (LON: AST) has made an investment into a private US holding company, GNG Partners LLC, that has been formed to acquire onshore US midstream gas distribution and processing facilities which includes helium purification and liquefaction.
This is the first shaping move for Ascent Resources following a period of deal origination / screening and the recent ECT claim distribution which cements the Company’s new forward US onshore gas and helium strategy.
The Company is also pleased to announce that, to fund the investment, it has raised gross proceeds of approximately $1.7 million via an equity fundraise and loan note issue, further details are set out below.
James Parsons, the Company’s Chair, commented: “We are delighted to share our forward strategy for the business, centred around the highly profitable US onshore gas markets and the short supplied, high value and exponentially growing global Helium market. Helium is a key requirement for many aspects of modern life including medical devices, super computers and data centres. We also expect a significant increase in demand for natural gas in the US and elsewhere to generate electricity to feed data centres and to power the artificial intelligence revolution.
Our initial investment in GNG Partners and strategic relationship with American Helium provides Ascent with access to a sizeable midstream business in a safe jurisdiction with significant upside, alongside potential future equity upstream production and operations. The world class GNG and American Helium teams are highly synergistic with Ascent’s executive and we look forward to success together.
Simultaneous to this first shaping move post the recent ECT claim distribution, and with a view to prepare for our new US onshore strategy, we have decided to review our Board composition. On behalf of the Board, I would like to welcome David and Edouard as proposed directors and thank Malcolm Graham Wood and Marco Fumagalli for their invaluable contributions to the business over recent years, without which this first transaction would not have been possible.”
Ascent Resources has today provided a convertible loan of US$1 million to GNG Partners LLC (GNG), a newly formed private US holding company, formed to acquire the assets of Paradox Resources LLC out of Chapter 11 Bankruptcy.
The Paradox Estate, according to the Chapter 11 documentation, comprises primarily a midstream gas processing and helium purification business with a liquefaction unit and access to over 500 miles of gas gathering pipelines as well as a downstream helium truck distribution business. Most notably this includes the 60MMcfd Lisbon Plant, in Utah’s Lisbon Valley (35 miles southeast of Moab).
GNG has acquired the Paradox Estate for a total consideration of US$16.5M plus cure costs relating to the assigned contracts and leases related to the continuing operations of approximately US$2M (“Consideration”). The Consideration has been paid via a 7-year loan note for an amount of US$10.5M with interest accruing at 6% per annum (payable in kind) (“PIK Note”) provided by some of the Paradox pre-insolvency creditors alongside new equity capital for the balance. Post disposal of the upstream assets (as set out below) the balance of the PIK Note relating to the remaining midstream and downstream business units owned by GNG will be approximately US$7 million.
Alongside this GNG acquisition, Ascent has provided an initial investment of US$1 million into GNG via a zero coupon unsecured two-year convertible loan note which converts, exclusively at the election of Ascent, into 1 million membership units of GNG, which would represent 10% of the issued member units of GNG if converted at the same time as subscription today. Ascent will collaborate with GNG to potentially provide further capital over time to accelerate the business into a premium US liquefied helium producer and distributor. GNG also has options for a further US$8.9 million of new capital which may be exercised at any time before 25 April 2024. Ascent shall have a right of refusal to subscribe for unexercised options at its sole discretion.
Gas processing & Helium purification and liquification business
The Chapter 11 documentation sets out that the Lisbon Plant is the sole operating natural gas processing plant in the Paradox Basin and is fed by over 500 miles (of which 279 miles are wholly-owned by GNG) of helium rich gas gathering pipelines which have access to helium rich gas sources with 7-8% He concentration in the four corners region, most notably in SE Utah and NW New Mexico.
The Lisbon Plant is a 60 MMcfd (million cubic feet per day) gas treatment plant which has a 1.1 MMcfd processing capacity for helium, a 45 MMcfd cryogenic plant and 10 MBpd (thousand barrels per day) fractionation train. The plant was built specifically to process the Paradox Basin natural gas that often has high CO2, H2S, N2 and He content. GNG believe that the Lisbon Plant can produce approximately 3.4% of the US liquid helium production (or 1.7% of the World’s liquid helium).
The Lisbon Plant is currently operational and processing gas and purifying helium which is sold as gaseous helium directly to industrial consumers via truck. The Lisbon Plant has a liquification unit which has been in care and maintenance since around 2013 (when the liquified helium price was only ~US$62.25 /Mcf versus the US$750-1,250 /Mcf range available today).
Underpinning the acquisition of the Paradox Estate and Ascent’s investment in GNG is a plan to quickly recommission the liquification unit to rapidly move back into premium markets of producing and selling liquified helium, as well as further opportunity to invest in iso-containers which would provide the business with even greater price command. Ascent and GNG have agreed to work together with a view to Ascent potentially providing capital for this critical value enhancing development.
The Paradox Estate also includes an upstream business which is simultaneously being onward sold to American Helium Holdings LLC and its affiliates (“American Helium”), a qualified operator in the region and affiliate of one of the major shareholders of GNG. According to the Chapter 11 documentation, the upstream element of the business spans 119,00 acres in the helium-rich Paradox Basin in South Utah and Colorado and includes 39 Bcf of net natural gas resources with significant upside both from exploration and the deepening of existing wells. Ascent and American Helium are in discussions regarding Ascent’s potential involvement in the upstream portfolio which will be the subject of a further announcement.
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