LONDON: Mendell Helium has announced that M3 Helium Corp. has signed an exclusive farm-in and fixed price helium agreement with Scout Energy Partners. This agreement covers 161,280 acres in the Hugoton gas field, one of North America’s largest natural gas fields.

As per the announcement on June 27, 2024, Mendell Helium has an option to acquire M3 Helium Corp., a Kansas-based helium producer with interests in six wells. However, there is no certainty that this acquisition will proceed or that the company will successfully re-admit to trading on the AQSE Growth Market.

The farm-in agreement includes:

• Coverage of 161,280 acres in the Hugoton gas field.
• A minimum of 25 new wells, with potential for up to 200 wells.
• All production to be delivered to Scout Energy’s gathering system and Jayhawk processing facility.
• Fixed helium price with an annual price escalator from January 1, 2026, to the end of 2029.
• Discounted royalties and operating expenses agreed with Scout Energy.
• Waived gathering and processing tariffs in return for methane from the new wells.
• Exclusive agreement with a right of first refusal over other farm outs in Scout Energy’s Kansas acreage.
• A $1 million payment due from M3 Helium when drilling commences or by March 31, 2025.

The agreement, which ends on March 31, 2027, covers seven townships in the Hugoton gas field in southwest Kansas. Scout Energy’s gathering system and Jayhawk gas processing plant, which processes around 4% of the world’s helium, are located nearby.

M3 Helium can choose drilling locations while maintaining a distance from existing wells operated by Scout Energy. The agreement requires a minimum commitment of 25 wells by March 31, 2026, with potential access to the Chase and Council Grove gas formations.

M3 Helium will only pay Scout Energy when the first well begins. If M3 Helium decides not to proceed, there will be no financial liability. The agreement allows for the drilling of vertical and horizontal wells.

Nick Tulloch, CEO of Mendell Helium, has been appointed as Chairman of M3 Helium’s board to oversee the farm-in agreement. A new COO has also been appointed to manage M3 Helium’s projects.

Tulloch praised the agreement, highlighting M3 Helium’s low-cost access to high-potential helium acreage and guaranteed production offtake at predetermined prices.

Scout Energy is a private energy investment manager focusing on upstream energy assets and midstream infrastructure across the United States. Their portfolio includes over 60 assets producing over 110,000 barrels of oil equivalent per day from more than 22,000 wellbores across eight states.

The Hugoton gas field, discovered in 1927, has produced over 30 trillion cubic feet of natural gas and significant quantities of natural gas liquids and helium. The field covers around 8,500 square miles, primarily in Kansas, Oklahoma, and Texas.

M3 Helium’s farm-in acreage has a helium content of about 0.6%, with an estimated well lifespan of 30 years. Drilling costs are expected to be under $300,000 per well, with potential cost savings if multiple wells are drilled consecutively.