Mosman Oil and Gas’s Sagebrush Project: A Helium-Fueled Gamble with Big Upside?

Mosman Oil and Gas (AIM: MSMSN) has thrown down a bold bet with its maiden resource estimate for the Sagebrush Project in Colorado, announcing 205 million cubic feet (mmcf) of helium and 1.7 billion cubic feet (bcf) of hydrocarbon gases in a contingent resource estimate. The announcement marks a critical step toward commercializing what could be a significant helium deposit in the U.S., a commodity with strategic global importance due to its use in advanced technologies, healthcare, and defense. But is this a game-changing opportunity—or a high-risk speculative play?

The Numbers: Helium’s High Stakes

The Sagebrush Project’s estimates, based on a report by Four Corners Helium LLC, suggest a resource base that could position Mosman as a key player in the helium market. Helium’s value—critical for MRI magnets, semiconductor manufacturing, and space exploration—has been buoyed by supply shortages, with prices climbing to over $10 per cubic foot in recent years. At 205 mmcf, Sagebrush’s helium resource alone could be worth hundreds of millions if developed successfully.

The project also holds 1.7 bcf of hydrocarbons, which, while less valuable per unit, could offset operational costs. Crucially, existing infrastructure—including seven producing oil wells, a mothballed gas pipeline, and a “Held By Production” lease status—reduces upfront development costs, a major advantage in a capital-intensive sector.

The Infrastructure Advantage

The Sagebrush Project’s existing infrastructure is its strongest selling point. The seven wells currently producing ~40 barrels of oil per day (bopd) not only generate modest cash flow but also keep the project’s 10,000-acre lease viable under the “Held By Production” rule. The mothballed gas pipeline adds further strategic value, as it could be reactivated to transport helium and hydrocarbons to market—a critical step in reducing transport costs.

CEO Andy Carroll emphasized the project’s “fast-track potential,” citing the existing wells and pipeline as a foundation for rapid development. This contrasts sharply with greenfield projects that require building everything from scratch.

Risks and Contingencies: The Devil in the Details

While the resource estimates are promising, Mosman faces significant hurdles. The Geological Chance of Success (Pg) is rated 0.75, reflecting uncertainties in extrapolating well data to the broader 585-acre structural closure. The Probability of Commerciality (Pcom) is higher at 0.7, but this hinges on securing five critical contingencies:
1. Drilling & Testing: Extended flow tests are needed to assess unproven zones like the Lower Leadville Formation, which showed fluorescence but was never flow-tested.
2. Corporate Decisions: No final investment decision (FID) has been made, pending detailed feasibility studies and cost assessments.
3. Lease Extension: The current lease expires in 2030, requiring negotiations for more time.
4. Market Access: Gas separation facilities and sales contracts must be secured.
5. Commerciality Confirmation: Costs must be finalized to determine if resources can be converted into reserves.

The project’s success also depends on helium prices remaining robust. While current prices are favorable, any drop could undermine the economics.

The Future: Synergies with Coyote Wash and 3D Seismic

Mosman’s plans go beyond Sagebrush. The adjacent Coyote Wash Project, identified via seismic data, exhibits larger structural prospects in the Leadville Formation, the same reservoir that hosts Sagebrush’s helium. Data from Sagebrush-1’s flow tests could accelerate resource estimates for Coyote Wash, potentially creating a multi-project helium hub.

The company also plans to acquire 3D seismic data to refine reservoir models, a move that could increase confidence in resource estimates. An extended flow test of the Leadville Formation is a near-term priority, with results expected to validate—or invalidate—the project’s commerciality.

Market Context: Helium’s Strategic Value

Helium’s importance cannot be overstated. The U.S. is the world’s largest producer, but supplies have been constrained due to aging fields and geopolitical shifts. Sagebrush’s proximity to the Doe Creek field (50 miles north), a major helium producer, suggests geologically favorable conditions.

The project’s helium concentration—2.76% in the Sagebrush-1 well—is also promising. While not as high as some helium-rich fields, it’s sufficient for commercial viability with proper gas separation.

Data: Stock Performance and Valuation

Mosman’s shares have been volatile, reflecting the project’s high-risk profile. The stock closed at 7.2 pence on May 8, the day of the announcement, up 15% from a 52-week low of 6.2 pence. However, the company’s market cap of £14 million is tiny by industry standards, suggesting investors are demanding proof before pricing in success.

Conclusion: A High-Reward, High-Risk Gamble

The Sagebrush Project’s maiden resource estimate is undeniably exciting, but investors must weigh the potential against the risks. The project’s existing infrastructure and proximity to proven helium fields reduce some execution risks, while the high-value helium market adds a compelling upside.

Crucially, the 0.7 Pcom suggests a 70% chance of commercial success, a figure that hinges on cost controls and market access. If Mosman can secure a final investment decision and flow-test results in the coming quarters, Sagebrush could become a cornerstone asset.

However, the project’s success is far from guaranteed. The need for extended testing, lease extensions, and market contracts are all potential tripwires. For now, Sagebrush represents a classic “swing for the fences” opportunity: a small-cap company with a big resource play, but one that requires patience and a tolerance for uncertainty.

Investors should monitor two key catalysts:
1. Q3 2025: Results of the extended flow test and 3D seismic data acquisition.
2. Q4 2025: Potential final investment decision and updates on lease negotiations.

In a sector where helium’s strategic importance continues to grow, Sagebrush’s timing could not be better—if Mosman can execute.