Helium hopes rise

Despite Renergen’s recent announcement that it has successfully produced liquid helium, there are still uncertainties surrounding its ability to profitably produce the resource.

Renergen announced on Monday, 6 May 2024, that it reached a significant milestone – it brought its coldbox to the appropriate temperatures to liquefy helium in batches from its wells.

The company said it is ensuring that operating conditions are up to standard to proceed with a performance test.

“To provide assurance that future shutdowns and restarts will be smooth, the helium train will be taken off-line, and the process will recommence from ambient conditions to ensure repeatability and that every process in the production cycle is documented and recorded with the OEM present,” the company said.

After this, its helium production will be put into full operation.

Renergen CEO Stefano Marani said all liquid helium produced during the performance checks will be recoverable and sold to customers.

This announcement sounds promising to investors who have been waiting for Renergen to deliver on its helium sales promise since 2018 when Renergen said it would start selling helium to Afrox.

However, what makes this milestone less exciting is that it is an almost exact repeat of what Renergen told investors in January 2023.

In its January 2023 announcement, the company said, “Renergen is proud to announce that with the production of first liquid helium at its Virginia Gas Project, it has now become the world’s newest producer of liquid helium.”

Since then, Renergen has failed to sell a drop of liquid helium, and with its most recent announcement, it is now at the exact same place it was 15 months ago.

Investors, therefore, may feel that this milestone Renergen achieved is not as significant as it may seem.

However, some investors are positive about the company’s prospects, as Renergen’s share price has risen by almost 7% following the announcement on Monday.

Linde tanker at Renergen’s Virginia site. Source: Renergen

Latest results

This announcement comes after Renergen released its results for the 12-month period that ended on 29 February 2024 last week.

The company’s results showed that the more liquid natural gas (LNG) it produced and sold, the bigger its losses. At the time of reporting, it had also failed to produce commercial helium.

Renergen, through its wholly-owned subsidiary Tetra4, commenced producing and selling LNG in September 2022.

Tetra4’s LNG production steadily increased in the first half of 2024, averaging approximately 17 tonnes a day.

However, the LNG plant was placed on maintenance from September 2023 to early February 2024.

Despite the maintenance, the positive start to the 2024 financial year contributed to an overall revenue increase of 128.4% – from R12 million to R29 million.

This is where the good news stopped. The revenue was minuscule compared to Renergen’s promised target EBITDA of between R5.7 billion and R6.2 billion by 2027.

Another major challenge is that costs increased far faster than revenue. Its operating expenses increased from R43 million to R147 million, a R104 million increase from the previous year.

Security expenditure increased from R322,000 to R7.5 million, and employee costs increased from R2.8 million to R25.7 million.

Renergen’s LNG selling and distribution expenses went up by 444% – from R1.5 million to R7.9 million.

Simply put, Renergen’s cost of selling LNG is rising much faster than its revenue from sales. The more it sells, the more money it loses.

As a result, the company reported an operating loss of R135 million. This means that for every R1 of additional revenue Renergen generated, it extended its operating loss by R6.1.

Renergen reported a net loss of R110 million thanks to a R37.2 million tax credit it received. It means the company made more “money” from this tax credit than the revenue it produced.