Roth CH V (NASDAQ:ROCL) has entered into a definitive agreement to combine with New Era Helium at a pre-money valuation of $90 million.

Midland, Texas-based New Era owns and operates about 137,000 acres of exploitable territory in New Mexico, which it believes contains 2.5 billion cubic feet (BCF) of helium reserves.

The combined company is expected to trade on the Nasdaq once the deal is completed in the first half of 2024.

Transaction Overview

Roth CH V has about $16.8 million in its current trust after seeing 86.2% of its shares redeemed through extension votes, the most recent of which gave it the right to extend to up to December 3, 2024.

It has not yet announced any additional committed financing for the deal, but Craig-Hallum Capital Group, the SPAC’s joint underwriter and affiliate of its sponsor, plans to work as a placement agent to arrange one in connection with the close of the transaction.

The parties have not yet released their merger documents or an investor presentation, but Roth CH V’s profile page will be updated once additional information is made available.

Quick Takes: The proverb doesn’t exactly go, “If at first your deal doesn’t succeed, take someone else’s”, but Roth CH V may have pivoted to that as a strategy.

The serial SPAC team that previously closed deals in sustainability, then music, telecom, and solar energy, was poised to return to music when it announced a $160 million letter of intent (LOI) with Slacker Radio in April 2023.

But, that transaction withered on the vine, and the two sides allowed it to expire in October. Three weeks before it did so, however, fellow SPAC Accretion Acquisition Corp. announced an LOI of its own with New Era Helium that may have caught the Roth CH team’s eye.

Accretion did not name financial terms for the deal and it was ultimately more short-lived than the Slacker flirtation. In fact, just two months later, Accretion abandoned an extension effort and instead opted to liquidate, effective Christmas day.

Two weeks after that, New Era and Roth CH V have emerged today from the holidays arm-in-arm with new partners – one another.

This may not be the first time that the Roth CH team appears to have been eying someone else’s date at the dance. The team’s first announced deal was with sustainable packaging-maker PureCycle after the company was rumored to be the subject of negotiations with Graf I and an LOI with SCVX.

It would, however, be the Roth CH team’s first SPAC deal in traditional natural resources, although helium is not one generally thought of in the same vein as oil and gas. It is nonetheless frequently a byproduct of natural gas drilling and is currently in high demand, with global needs estimated at about 6.6 billion cubic feet (BCF) annually.

A combination of factors have contributed to the shortfalls including industrial accidents at plants in Australia and Kansas, but also the fact that Russian companies and infrastructure had contributed much of the global supply to date.

New Era believes it could capture 1% of North America’s demand once it fully develops its site about 20 miles north of Roswell. It is conveniently located within six of the US’ seven helium liquefaction plants and adjacent to major highways.

New Era is a decidedly greenfield venture, however. The company was founded earlier this year with a launch press release dated to July.

But, it is steered by veterans of the oil and gas industry with its co-founder and Chairman Joel Solis having also founded Liberty Pump and Supply, which provides oilfield services to the Permian Basin. CEO E. Will Gray II, meanwhile, has served as an executive at a number of upstream energy firms in the region since 2005.

And, it also launched the construction of its Pecos Slope Field plant that July, which it believes could produce about 32 million cubic feet (MMscf) annually. It anticipates it can get this plant online by the fourth quarter of 2024, after which it could draw out 477,000 million cubic feet of methane monthly as well as about 32,500 barrels of natural gas liquids.

If achieved, this initial build-out alone would get its helium production to 0.4% of the estimated global demand, not far from its 1% target.

New Era has already signed two off-take agreements with helium buyers and believes acquisition opportunities could help it scale more rapidly.

But, it remains unclear without further information how much New Era is expecting this transaction to fund these efforts. With the final shape of any PIPE still an unknown, proceeds would currently come from Roth CH V’s $16 million trust, which is likely to shrink considerably after transaction expenses.

The parties note that New Era shareholders expect to own about 65% of the post-combination entity, so, if the company is not independently wealthy, it is giving up a big slice of the pie for very little cash.

But, if New Era believes it can solve most of its financial needs once it reaches the public markets, then the Roth CH team is a good choice of transport to get it there. Only 10 serial SPAC sponsors have closed more than deals than Roth CH’s four in recent years and this vehicle still has about a year’s worth of time in its gas tank to get it done.

ADVISORS

• Company
  • Sichenzia Ross Ference Carmel LLP is acting as legal advisor.
• SPAC
  • Loeb & Loeb LLP is acting as legal advisor
• Placement Agents
  • Roth Capital Partners, LLC and Craig-Hallum Capital Group LLC are acting as placement agents for a PIPE transaction that is anticipated to close in connection with the closing of the business combination.