Helium Is Essential For Modern Society, But Supply Is Dwindling – This Producer Holds A Critical Lease In South Africa
Stefano Marani, CEO of Renergen was recently a guest on Benzinga's All-Access.
Renergen is an emerging helium and liquefied natural gas producer with existing production and sales of compressed natural gas. The company holds the first and only onshore petroleum production rights in South Africa, giving it a first-mover advantage in the distribution of domestic natural gas.
Helium is critical in many aspects of modern life but is in dwindling supply. It is necessary for the production of semiconductors and is thus necessary for modern technology.
Renergen is an emerging helium and liquefied natural gas producer with existing production and sales of compressed natural gas. The company holds the first and only onshore petroleum production rights in South Africa, giving it a first-mover advantage in the distribution of domestic natural gas.
Helium is critical in many aspects of modern life but is in dwindling supply. It is necessary for the production of semiconductors and is thus necessary for modern technology.
Transcript
00:00 (upbeat music)
00:02 - Steph, how's it going?
00:06 - Well in yourself, looking sharp, eh?
00:08 - Thank you, see, I love it.
00:09 You just keep, you know what,
00:10 let me get these dopamine hits.
00:12 I love it.
00:12 You know what, you just got yourself
00:13 a few minutes of extra air time.
00:15 (laughing)
00:16 Man, look, I'm really excited for this one,
00:18 especially like I mentioned,
00:19 there are a lot of executives and CEO
00:21 that don't wanna address the elephant in the room.
00:23 I know I'm gonna have the opportunity
00:24 to do that with you here, hopefully.
00:26 But before we get into the meat of things
00:27 and look under the hood,
00:28 just give me a brief overview
00:30 of what is it that your company does.
00:32 - So we were the world's first listed helium company.
00:36 Now, I'll elaborate a little bit on what helium is
00:40 because it's a little bit more than balloons,
00:42 but we listed in 2015.
00:44 And then from there, we got a secondary listing
00:48 in Australia in 2019.
00:51 Now the key behind the company is that
00:53 we are South Africa's first
00:54 and only onshore petroleum production right holder.
00:57 So just consider that for one second.
00:59 Imagine if you were in the United States
01:01 and you were the only company
01:02 in the whole of the United States
01:04 that held a license to extract petroleum.
01:06 And that's essentially what we have.
01:09 So we've got that, but then interestingly,
01:11 we've got two byproducts that come out of the gas.
01:14 We've got methane, which we use to produce LNG.
01:16 And then we have at present
01:18 the world's highest richest known concentration
01:20 of helium on planet earth, which is quite opportune,
01:23 given the fact that helium is fast running out.
01:26 So that's the geology that we're sitting on at the moment.
01:31 And we're funded by the United States government
01:35 on the basis that helium is critical
01:37 to basically to pretty much everything that we do.
01:40 And that's the thesis behind the business.
01:43 So we extract critical minerals,
01:45 we're supported by the US government,
01:47 and now we're embarking on the next steps of the company,
01:52 which will see us become a major player
01:55 of helium globally.
01:56 - Yeah, I'm glad you mentioned the balloon thing,
01:58 'cause there's two things I knew about helium
01:59 before this conversation, the balloon aspect,
02:01 and my mom told me to stay away from it otherwise.
02:03 So I'm glad we got that all taken care of as well.
02:05 You talked about helium, why it's important.
02:07 Any more insights on like the key demands
02:10 of the end markets here?
02:12 - So helium is absolutely critical in a number of areas.
02:17 First and foremost, its biggest use at the moment
02:20 is in the manufacture of MRIs and the running of MRIs.
02:24 So you go to the hospital, you need an MRI,
02:26 it can't happen without helium.
02:28 That's about 20% of the market.
02:30 But more importantly, pretty much everything today
02:35 uses helium.
02:36 And I say that quite, you know,
02:40 without fear of being contradicted,
02:42 because it goes into the manufacture of semiconductors.
02:46 So if you think about it,
02:48 if you have an electric toothbrush,
02:50 right from your electric toothbrush
02:52 through to your car, through to your laptop, your phone,
02:57 none of that technology could ever exist without helium.
03:01 And helium is one of those critical points
03:03 where if you don't have helium,
03:06 the fab goes down for the day.
03:07 And to give you an idea,
03:09 one day's worth of loss of production in the fab
03:12 is worth more than the entire company's purchases of helium
03:16 for the manufacture of those chips.
03:18 So it's a completely inelastic commodity.
03:21 The other big use is obviously launching of rockets.
03:23 Now it doesn't burn, but it's used as a propellant
03:26 in the same way that you use a propellant
03:28 to get the antiperspirant out of the deodorant
03:30 when you spray your armpits in the mornings.
03:33 You use the propellant to get the fuel into the rockets
03:36 in order to combust.
03:37 So it's used in things like rockets,
03:39 the manufacture of fiber optic cables, airbags in cars.
03:43 They discovered that early airbags using nitrogen
03:46 were causing third degree burns to people's faces.
03:49 Whereas switching it with helium,
03:51 the gas reacts differently.
03:52 And the result is that now it doesn't burn your face
03:54 when you're in an accident.
03:55 It's used in quantum computing.
03:59 You name it, it's pretty much everywhere
04:02 in modern day lives.
04:03 And the problem is, is that it's very scarce.
04:06 It's very rare and it's running out quickly.
04:09 - Where do you fit into this aspect of it though?
04:14 We've kind of seen the products,
04:15 we've seen everything else of that.
04:16 What's your core asset?
04:17 I mean, a lot of companies have a lot of different things,
04:19 but what is your core asset
04:21 that you want the viewers to know about?
04:23 - So we hold the petroleum production
04:25 right in South Africa.
04:26 It's about 440,000 acres, give or take.
04:30 And that holds proven reserves of methane and helium.
04:35 On the methane side, it's probably about 400 BCF of methane,
04:39 which is not much in the grand scheme of things.
04:41 But bearing in mind that we're selling methane
04:43 in South Africa at around 20 bucks per MMBTU,
04:46 which is a very, very different prospect
04:49 to Henry Hub's $3 or $2.
04:51 So there's big margins to be made
04:53 because of South Africa's energy scarcity
04:55 and energy insecurity.
04:57 The key is the helium.
04:58 Now you've got to look in context.
05:02 There are seven countries in the world that have helium.
05:05 The lowest concentration in the world is Qatar.
05:08 They're on 0.01% helium in their gas.
05:12 It then goes all the way up to the United States
05:14 of those seven countries, that is the highest.
05:16 That's 0.35% on aggregate.
05:20 Our concentration is 3% on average,
05:24 and we've got wells clocking in at 12%.
05:27 So we really do have a completely outsized field,
05:32 and it's geographically exceptionally well located.
05:36 And in terms of proven reserves,
05:38 we've got a 1P or proven of about 7 BCF,
05:42 which is equivalent to the entire United States'
05:46 federal helium reserve.
05:47 That's our 1P.
05:50 Our 2P is two times that.
05:52 So it's huge.
05:53 - So you've clearly got a lot of inventory.
05:56 I think we just kind of took care of that.
05:58 Now, two things you mentioned there was
06:00 the geography aspect of it and the US aspect of it.
06:03 There's two elephants in the room for me.
06:05 One of them is the fact that you're in,
06:07 you're listed on the Johannesburg Exchange,
06:09 and you're also listed on the Australian Exchange.
06:11 We've got a worldwide audience, no doubt,
06:13 but why are you here today talking to what I believe
06:17 is mainly like a US audience?
06:18 What are you hoping to gain out of this?
06:20 - Well, I'm sensitizing the market of EIA
06:22 to the fact that this project is important
06:25 to the United States.
06:27 The project was divided into two phases,
06:29 phase one project and a phase two.
06:31 Phase one was a proof of concept.
06:33 That proof of concept is coming online.
06:36 The LNG is online.
06:37 We're bringing the helium online imminently.
06:40 That was funded by the US government.
06:42 The second phase of the project is a very, very large project.
06:46 That's about a $1.2 billion project.
06:48 750 million of that is already debt funded,
06:52 debt confirmed, again, $500 million from the US government
06:56 through the DFC, and then another $250 million
06:59 from the local bank in South Africa called Standard Bank.
07:02 That means that we are now raising equity.
07:06 We've done a private equity transaction,
07:08 and that private equity transaction was done
07:11 at an implied valuation of the overall company
07:14 of about 520 million US, give or take.
07:17 So that's the first tranche of equity
07:21 that's already been done.
07:22 That was a small slug,
07:24 and now we're obviously preparing
07:26 for a listing on the NASDAQ,
07:27 and that'll happen over the course of the year this year.
07:30 We've already made all of the necessary disclosures
07:32 on the relevant exchanges,
07:35 and from our perspective,
07:37 we're going through the motions with the SEC
07:38 in terms of the filings.
07:40 - Yeah, now, I love to take questions from the chat,
07:43 so I'm gonna go ahead and kind of bring this one up
07:44 from Jay Rice, 'cause that's kind of where I wanted to go,
07:46 talking about, you're the largest helium producer.
07:49 Unfortunately, your stock isn't really doing so hot.
07:54 What's the reason for that?
07:55 What's going on there?
07:57 - So, and he gets right to the number of it.
07:59 We're not the biggest helium producer.
08:00 We have gargantuan reserves.
08:02 We're going into production.
08:04 Now, what ended up happening was that
08:06 as we started to build the plant, COVID hit.
08:09 So now you're building a plant during COVID.
08:11 We had massive delays from COVID.
08:13 Then we had the shipping delays
08:14 with the whole shipping crisis in China, blah, blah, blah.
08:17 So, you know, big, big sob story.
08:19 We ended up being over time in terms of the construction.
08:24 More importantly, and most recently,
08:28 while we had a sell-off,
08:29 was the delays that we suffered on turning on the helium.
08:34 And that is what it is.
08:37 We were meant to turn the helium on,
08:39 and as we turned the helium system on,
08:40 we discovered a leak in the cold box,
08:42 and that needed to be repaired.
08:44 And you don't just repair a leak in the cold box.
08:46 You have to remove the cold box and then open the cold box.
08:49 And so that's delayed us a couple of months.
08:51 So, you know, the market has penalized us quite heavily
08:54 on the fact that we haven't turned on
08:56 the helium for phase one.
08:58 That also conversely means that the market
09:02 is very actively watching when we do turn the helium on,
09:07 because that then becomes a catalyst.
09:09 And from where we stand right now,
09:12 we have already come out to the market telling everyone,
09:14 A, the leak is fixed, B, we've tested the helium,
09:17 and C, we have everything that we need
09:20 in order to progress towards the turning on.
09:23 So we believe that we're in line
09:27 for a catalyst very, very soon.
09:29 - Makes perfect sense.
09:31 And again, I appreciate you kind of having
09:32 those conversations with me.
09:33 You mentioned catalysts,
09:34 which I'll get to here in a moment as well,
09:36 but let's talk about your competitors
09:38 or your peers in this space.
09:40 Mainly, you kind of briefly touched on this,
09:42 but mainly in terms of your current valuation
09:45 compared to your peers.
09:46 I know you mentioned the private sale
09:48 and, you know, allocations and things like that,
09:50 but compared to your peers,
09:51 where's your current valuation?
09:53 - So being the only natural gas company
09:56 listed in South Africa,
09:58 I mean, just think about being the only oil and gas company
10:01 listed on an exchange, that's bizarre, right?
10:03 So we're the only one.
10:04 Yeah, as it stands right now,
10:06 I think because the South African investor community
10:09 just doesn't get it,
10:10 they're used to FMCG and financial services.
10:13 We're trading at roughly call it a 0.2 times EV to 40,
10:17 but down.
10:18 - Yeah.
10:19 - So very, very, very low, very low valuations.
10:21 That also has to do with the fact
10:24 of the late helium turn on, et cetera.
10:26 There've been some recent updates
10:29 and announcements in the market on the US side.
10:32 Critically, there's a D-SPAC of a Roth SPV
10:36 by a company called New Era Helium.
10:39 And they've announced that they have a 2P reserve
10:42 of around 2 billion cubic feet of helium.
10:46 And they've come out with $135 million valuation.
10:49 Then you have the United States' BLM,
10:54 the strategic reserve built by the Secretary of Defense.
10:57 They sold off 2 billion cubic feet of helium
11:00 and that fetched $353 million for gas still underground
11:04 yet to be brought up to the surface
11:06 and purified and liquefied.
11:08 - Yeah.
11:09 - Now that's 2 BCF and these are numbers of 135
11:12 and $353 million respectively.
11:16 - Yeah.
11:17 - Our 2P number, just to give you a like for like comparison
11:21 is 13.6 BCF as compared to two.
11:26 - Right.
11:26 - And then you look at where we are
11:28 from the valuation standpoint
11:29 and the fact that we've done a private equity deal
11:32 which puts us at a valuation at around 500 million.
11:35 - Yeah, so I have a billion there, yeah.
11:37 - But you've got a market cap
11:38 which is completely dislocated
11:40 and call it around the $100 million market.
11:43 So, yeah, I'm firmly of the view
11:47 that there's bound to be some correction
11:52 as we start to see the catalysts come in.
11:54 - Makes perfect sense.
11:55 And yeah, if you see me looking down,
11:56 this is how I take notes during an interview.
11:58 I just want you to know.
11:58 I'm over here, just whatever numbers you're spewing.
12:01 I'm like, okay, here's where their competitors are.
12:03 Here's where the valley is.
12:03 Here's how much you've got in the tank.
12:06 But listen, I promise you a couple more minutes.
12:07 I'm gonna be a man of my word there.
12:09 Let's talk catalyst, right?
12:10 I know you've teased a couple of things.
12:12 I know you've mentioned directly a couple of things
12:14 but I wanna directly kind of give you the floor
12:15 to talk to our viewers.
12:17 Some of them have brought up questions in the chat as well.
12:19 What are the next major catalysts for your stock?
12:23 And then you also have the floor to talk about anything else
12:25 that you wanted to bring up that I did not.
12:27 - Yeah, all right.
12:28 So the next major catalyst for us,
12:30 first and foremost is turning on the helium,
12:32 which is a much anticipated event.
12:34 That is first and foremost on everyone's lips.
12:37 Once that's taken place,
12:39 we're then squarely in the position
12:41 where we then focus all our attention
12:43 towards the raising of the equity for phase two.
12:48 But then they will, obviously in operations,
12:53 there will be updates.
12:55 We've had some spectacular drilling results
12:57 and we've already made some of those announcements.
12:59 Obviously there'll be more of those to come.
13:02 But the key for us now,
13:04 there are a few major events before we list on the NASDAQ.
13:06 One is the appointing of an EPC contractor for phase two.
13:09 Phase two is our big project.
13:11 And then there is the securing of the equity for phase two.
13:16 I believe that all of these
13:19 are gonna stand us in good stead
13:21 and take us to where we need to get to
13:22 in terms of turning the plant on.
13:26 Not turning the plant on,
13:26 but having a successful IPO later this year.
13:30 - All right, so those are the things
13:32 to kind of look forward to.
13:33 And again, I appreciate you also putting a timetable
13:35 on when we're gonna expect an IPO.
13:37 One thing that I did have written down here
13:39 in my chicken scratch notes,
13:40 did you have an ETA that you're able to give?
13:43 'Cause I know there's some things you can't talk about
13:44 given your position in the company.
13:46 Did you have an ETA on when you're hoping
13:48 to turn the helium on?
13:49 - The only thing that I'm gonna tell you
13:52 is that it's not far in the distant future.
13:56 It is very, very close.
13:58 It's very close.
13:59 - All right, well, hey, I appreciate it.
14:00 Now, this was, again, this was a great conversation
14:02 and I really, really do appreciate you
14:04 not just leading the company,
14:05 but having these conversations that,
14:07 with questions that the viewers actually want to know about.
14:10 Whether it's like, hey,
14:11 why is your stock price suffering?
14:12 What's coming up next?
14:13 And what can you tell us about where we're headed as well?
14:15 I really do appreciate your transparency
14:17 in that aspect, Steph.
14:19 - Thank you.
14:20 And it was great being on your show.
14:21 (upbeat music)
14:24 (upbeat music)