Helium and LNG Projects

Industry

Natural Resources

Company Type

Development/

Processing/Distribution

Location

Utah/Arizona

Size

$110,000,000

Investment Type

Mezzanine Debt

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Helping Great Companies Grow

Overview

Arizona Energy Partners, LLC (“AEP” or the “Company”) is seeking +/- $110 million of mezzanine debt to develop, process and distribute helium and LNG for its two projects, the “Golden Eagle Gas Field Helium and LNG Project” in Utah ($55 million), and “Concho Dome Holbrook Basin Helium Project” in Arizona ($55 million).

  • Projects can be funded separately or together
  • AEP controls over 250,000 acres of some of the most significant helium reserves in the world
  • Unique vertically integrated business model to take advantage of access to extremely rich helium reserves, efficient air separation and purification technology, and option to acquire selective end‐user distribution capabilities
  • Multi-year off-take purchase agreements have already been executed with Praxair/Linde (Holbrook Basin project) and Uniper (Golden Eagle project), and discussions continue with Airgas/Air Liquide, Matheson/Taiyo Nippon Sanso, and the SK Group (South Korea), among others
  • End-users such as SpaceX and GE Healthcare have expressed a strong interest in sourcing their helium needs directly from AEP because of the helium shortage and its rising price
  • The company has invested about $9 million to date
  • Year 1 operations are expected to generate $109 million in revenues and a profit of $54 million for the combined projects. By Year 5, revenues are expected to grow to $452 million with $329 million in profits (detailed financial models with assumptions and sensitivity analyses available upon request)
  • Experienced management team has years of experience in the energy sector specifically including oil & gas and LNG as well as helium
Helping Great Companies Grow

Opportunity

  • Helium, scarce in commercial quantities, is a valuable commodity and is in short supply worldwide
  • Worldwide market for helium: 2018 production of 5.8 billion cubic feet and estimated 2019 demand of over 6 billion cubic feet; US alone represents about 40% of this market (2.3 billion cubic feet)
  • By 2021, annual global demand is forecast to reach almost 7.0 billion cubic feet with a greater share of the demand shifting from the US and Europe to Asia
  • Emerging technologies including hybrid air vehicles, helium-filled hard drives and Google X’s Project Loon, all requiring helium and driving market demand even higher
  • Prices have more than tripled in the past year because there is a worldwide critical shortage of helium due to political unrest, government sanctions, and the near-term closure of the U.S. BLM supply chain/infrastructure
  • Helium functions as a driver for many different technologies . . .
    • a cooling medium for MRI scanners, MNR spectrometers, hadron colliders, satellite instruments, liquid oxygen and hydrogen used in space vehicles
    • a lifting mechanism for decorative balloons, weather balloons and airships
    • a protective atmosphere for manufacturing fiber optics and semiconductors, and for arc welding
    • a leak detector for auto air‐conditioning systems and laboratory piping
    • a quick‐inflating gas for auto airbags
    • a breathing medium (80% helium & 20% oxygen) for deep‐sea divers and others working under pressurized conditions
    • a way to increase the speed, storage density and efficiency of computer hard disks
    • a method for enhancing optical resolution in helium‐neon gas lasers for barcode scanning and helium‐ion microscopes
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Helping Great Companies Grow

Solution/Strategy

Golden Eagle Project

  • Proprietary opportunity to finance the acquisition and development of existing natural gas wells in Utah on 26,800 acres of federal and state leaseholds that also contain commercial quantities of helium
  • The Golden Eagle project, with three wells already in-place, has a very strong natural gas reserve report written by RPS that will be updated for its helium content near-term (with very encouraging preliminary measurements in-hand)
  • AEP has negotiated an exclusive option for the purchase of this project including the Paradox Wells in exchange for $1.85 million
  • Post-closing, the project will own a 70% Net Revenue Interest in these leaseholds
  • Recent independent testing by Wyoming Analytical Labs has confirmed the presence of helium in the existing Paradox Basin wells, estimated to be about 2.25% of the gas stream
  • The next well will be drilled into the Leadville formation and is projected to show 7.0% helium
  • When fully exploited, AEP expects to have produced a total of 3 to 10 trillion cubic feet of methane/LNG and 68 billion to 225 billion cubic feet of helium
  • Executed a three year off-take agreement with Uniper; balance of production is expected to serve spot market opportunities
  • Next Steps/Use of Funds:
    • rework existing three shut-in wells
    • accelerate drilling program starting with a fourth well in a high-yielding helium zone, the Paradox Basin #4
    • update existing RPS natural gas reserve report for addition of helium
    • construct a cryogenic processing plant to separate, purify and liquefy the helium and natural gas/LNG
    • plan for reaching revenue‐generating phase in approximately 12 months

Concho Dome Project

  • Proprietary opportunity to finance the development of approximately 7,680 acres of very rich helium leaseholds in the Holbrook Basin, an area located in the Northeastern corner of Arizona
  • State and private land leases provide the project with a Net Revenue Interest of almost 80%
  • Construct a cryogenic helium processing plant
  • AEP executed a ten year off‐take agreement with Praxair for Concho Dome Holbrook Basin Helium Project; balance of production is expected to serve spot market opportunities
  • Just drilled a third well in June 2019 on the Concho Dome in the Holbrook Basin to approximately 3,602 feet, to help complete an enhanced reserve report to be issued by Ryder Scott by end‐August 2019
  • Next Steps/Use of Funds:
    • conduct a Front‐End Engineering Design (“FEED”) Study to finalize the technology program
    • accelerate drilling program
    • acquire and build‐out a field operations and storage facility
    • acquire a regional helium gas distributorship currently under purchase option
    • plan for reaching a revenue‐generating phase in approximately 12 months
Helping Great Companies Grow

Management

Gordon M. LeBlanc, Jr.

Founder and President

Third-generation member of the oil and gas industry. Over 43 years of experience as an oil and gas operator and consultant. Educated as a petroleum geologist. Worked almost three decades specifically in the Holbrook Basin – instrumental in identifying, acquiring, and funding key leasehold parcels that give AEP its most important asset. Founded PetroSun, Inc., a public energy and technology company, and was responsible for its transition into the renewable energy sector. Founded Torus TechWorks and is jointly engaged in the exploitation and development of oil and natural gas plays and the implementation of technologies such as enhanced oil recovery, modular purification and liquefaction of helium and natural gas, processing of produced and frac water from oil and gas wells, environmental remediation of petroleum hydrocarbons and paraffin control.

Gerald Bailey

CEO and Chairman

Retired President of Exxon Arabian Gulf. Over 55 years of experience in the petroleum industry with extensive engineering, management, and senior executive assignments. Worked in all aspects of the industry, both upstream and downstream, US domestic and offshore. Extensive helium and oil and gas experience. Expected to bring national recognition to AEP.

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Hi. We're not around right now. But you can send us an email and we'll get back to you, asap.

Thanks, Ken

Ken Margolis | Managing Partner Castle Placement, LLC
1460 Broadway Street, Rte 400
New York, New York 10036
(212) 418-1188 | C: (516) 712-7784
kmargolis@castleplacement.com

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