DESERT MOUNTAIN ENERGY CORP is pleased to announce that it has closed on the purchase of the West Pecos Slope Abo Gas Field and gas gathering system located in Chaves County, New Mexico. The Company has assumed operations and the revenue stream from the existing wells. The Company secured a contract for the near term to rent a compressor to boost natural gas sales during line pigging and plan for increasing gas flows. That compressor was hooked in and was online compressing gas into the sales line on 07/01/23.
Since the commissioning of the McCauley Helium Processing Facility in January 2023, the Company has been working diligently towards declaring commercial production of Helium from the plant. However, despite lengthy engagement with the Arizona regulatory authorities, the Company has become frustrated with repeated delays and long lead times associated with enhanced recovery permitting. At this point in time, the Board and Management have come to a decision to take advantage of the inherent flexibility of their proprietary plant design and will move the McCauley Processing Facility to its newly acquired West Pecos Abo Gas Field in New Mexico.
“The Company’s strong financial position coupled with our robust modular design make this agile move possible,” states CEO Robert Rohlfing. “Moving the plant to the West Pecos Slope Abo Gas field allows us to produce helium and condensates near term. Where most plants are designed to meet only the specific needs of a given area and subsequently, their inherent fixed design preclude moves of this nature.”
Current estimates for relocation of the plant are between 8-12 weeks, including reassembly and hookup. The primary permitted compressor location has the required air quality permits in place, sufficient for all intended operations. The Company is moving ahead with finalizing plans to pig flow lines to lower flow gathering system line pressures and will then begin removing the most critical choke points.
As stated in the previous press release on 06/19/23, the geologic team is evaluating initial wells for optimization to maximize helium production. DME’s goal is to target where independent gas analysis tests show helium values above 0.700% or where combined with low nitrogen, high condensate values and high BTU ratings. The Company has not independently verified the gas analysis provided by the seller. Those gas analysis tests are required to be conducted by an independent third-party testing laboratory on a yearly basis, this is done to ensure proper payments are made to the mineral and well owners by the gas purchasing company. DME will be conducting their own independent tests on all producing wells in accordance with rules and regulations. The Company anticipates initial helium production to average 0.50% until well workovers and optimization as previously described, have been completed. DME’s modular plant design can operate in a wide and fluctuating helium percentage environment. Under current contracts, the Company will not be due to pay royalties on any inert gases recovered through plant operations. The condensate and BTU values vary widely depending on location within the field and proximity to the compressor facility. Initially, The Company intends to maintain significant cash on hand through the judicious use of minimal funds and will use cash flow to complete ongoing scheduled work.
The Company’s workover rig will be moved to the West Pecos Abo Gas Field. Discussions have begun with a local company to generate revenue when not being utilized by DME for well work. In this area, it is not uncommon to have a 6-9 week wait period to schedule a workover rig. The Company’s strong financial position resulted in the ability to acquire a dedicated rig significantly below market, which allows quality and timely work to be completed in the best interest of all shareholders of the Company.
At this point in time, all planned drilling operations in the Holbrook Basin will halt and the Company will continue to work with the Arizona regulatory authorities as they modify and develop the state regulations specific to the helium industry. The Company will maintain their leases and wells in good standing and plans to re-enter the state with a new second facility once assurances and permits have been granted. While the order of production has shifted from Arizona to New Mexico, the capital raised in Q1 this year was already earmarked for a second facility (among other uses), and as such the overall development plan for Desert Mountain Energy has not altered in a meaningful way to the one that was previously set out to shareholders. In the meantime, the Company has already been contacted by a local power provider in NE Arizona, who will seek to tie the existing solar facility at the McCauley Plant site into the local grid until it is needed for the second facility.