Most people never think about helium. Some market analysts, on the other hand, are giving it a lot of thought. And if their analysis is even partially correct, we could be hearing a great deal about this in the coming months.
Helium is a gas. Scientists say that it is the second lightest element in the universe; it is also the second-most abundant, which is fortunate because it is used in many applications. Helium is crucial for computer hard drives, supercomputers, scientific research, space travel, and MRIs, as well as more ordinary uses such as detecting gas leaks, cooling, and welding.
Most of the world’s reserves are found in natural gas fields, which means those fields could be lucrative for two reasons: their potential natural gas deposits, and also for the helium they may hold -- and these days helium adds a great deal of appeal.
Some months back, a shortage of helium began developing, and it has not only persisted but intensified.
“Supply is now at a critical level,” OilPrice.com reports. “The Russian war on Ukraine is compounding the supply crunch, stripping us of more global helium resources as natural gas is extracted and hurriedly shipped off to Europe to help avoid an energy crisis there -- without first stripping and liquefying the helium.”
Wall Street Watching
Any time a shortage develops, prices are sure to rise and savvy investors look for potential investment opportunities. The unfolding development with helium is no exception.
Investors interested in potential investments may consider several approaches. One is investing in “junior” explorers. However, they tend to be longer-term plays. Those hoping to profit from this unfolding shortage in the near term will be interested in other approaches.
According to OilPrice.com, one such option is Total Helium, a small company listed on the Toronto Stock Exchange.
Total Helium is impressive for a number of reasons. For one, their assets include a large tract of land in the Kansas-Oklahoma panhandle and production has already begun. Moreover, the company has a favorable agreement with Linde Plc, which is listed on the NYSE.
“Total Helium’s wildcatter team jumped on the helium prospects in the largest U.S. gas field before others saw the potential supply squeeze looming. Now, it has not only started producing but is also ready to sell and is rapidly expanding its helium holdings, with an eye to grabbing as much market share as it can against the backdrop of a major helium shortage,” OilPrice reports.
This shortage has driven helium prices up sharply -- recently to around 40 times the price of natural gas -- and this company is said to be “years ahead” of the competition.
Adding To The Enthusiasm
The helium market has already heated up, but several bullish developments are adding to the enthusiasm. Among these: the Federal government’s shutdown of its helium reserve in the third quarter of 2021, and the war in Ukraine, which is further pressuring supplies.
And several weeks ago, Algeria, which had been a large supplier of helium, was forced to close its helium business because of soaring natural gas demand in Europe.
Total Helium hopes to profit from the Hugoton natural gas field in the Kansas-Oklahoma panhandle. Hugoton, the largest natural gas field in the United States, has become one of the most important sources of helium in North America, and the company is working to expand there. It has already purchased an additional 115,000 acres in leases and wants to purchase even more land in the area as quickly as possible.
Each well they drill could produce over 27,000 cubic ft. of helium. The company is targeting a total of 70 billion cubic feet of potential helium, along with an estimated 8.5 trillion cubic feet of gas. If these goals materialize, it could be a win-win situation, since natural gas prices recently traded at $5 -- around double the price of a year ago -- and helium prices have not only soared, but given the current environment, may go even higher.
Total Helium started selling both helium and gas on March 15. It estimates drilling costs at about $600,000, and hopes those will be paid off in about 18 months. However, given its ambitious expansion plans and possible rising prices for both gas and helium, this time frame could be shorter.
“This is a relatively low-cost play that has the potential to become incredibly profitable in one of the biggest producing gas fields in the world, with one of the biggest helium partners in the world, and at a time of soaring prices and a supply squeeze that may only get tighter,” concludes OilPrice.
According to Yahoo Finance, other companies also are planning to profit from helium. They include large, well-known firms like DuPont, Air Products & Chemicals, Linde Plc, and Dow Chemical, and smaller companies such as Celestica and Turquoise Hill Resources. Of course, while an earnings boost from helium would make a greater impact on small companies, those tend to be more speculative. On the other hand, larger companies tend to be safer, but a boost from helium would have a much smaller impact on their bottom lines.
The Best Laid Plans...
Despite the optimism about helium in general and Total Helium in particular, this idea is by no means a sure thing. Over the last year, some highly-regarded and award-winning stock-pickers were taken to the cleaners, and many of their recommendations continue to plunge; clearly, even some of the smartest people make mistakes, so there are no sure things on Wall Street.
In addition, the factors that make helium intriguing could change suddenly. Besides, the market has become extremely volatile, and even shares in major companies get pummeled.
Total Helium is a very small and very speculative company. Although it has started to generate revenues, you’ll need a magnifying glass to see them. And the share price fluctuates sharply. For example, on March 21, the high was $0.99 but the stock closed at the low of $0.81. By April 5, shares were up to $1.44.
On April 12, the price was down to $1.21. On April 13, it was back up to $1.51. But on the 28th, they closed at $1.06. The market cap is less than $70 million. Clearly, this stock is not suited to everyone.
Readers, please note: The stocks mentioned in this article are presented for information purposes only and should not be considered as investment advice or recommendations. Neither I nor do any family members own shares in Total Helium. Always consult a financial expert before making investments of any kind.
Sources: bloomberg.com; oilprice.com; sciencing.com; yahoofinance.com