Investors often identify themselves with a particular resource. There are lithium investors, cobalt investors, zinc investors, and gold investors. As strange as it may sound, it may now be time to add a new category – helium investors. Helium is experiencing a global surge in demand, and it’s poised to grow at a 9% compounded annual growth rate. This is attracting investor interest in this historically ignored resource. Tech giants such as Google and Netflix in particular are drawing a lot of attention towards helium as they integrate the resource into their own key initiatives. As a result, helium exploration companies now find themselves in a sweet spot. Dominant players in the industry include American Helium , Gran Tierra Energy Inc., Yuma Energy Inc., Ring Energy Inc., and Energy Fuels Inc..
Helium – A Key Ingredient To Tech Innovations
Helium-powered tech projects are a key area where usage of the inert gas is rising. While it’s hard to imagine nowadays, some parts of the world are still disconnected from the Internet, and this is problem Google aims to solve. Under its Project Loon initiative, a network of helium-filled balloons will float high into the stratosphere to offer Internet connections to the world’s rural populations. This will also provide cellular reception to governments and residents in the wake of a disaster. Netflix has also joined the growing list of helium consumers. Helium can increase the storage capacity of hard drives by 50% while reducing power consumption by 23%. These hard drives could soon be put to use by Netflix to improve its streaming video quality. HP and Huawei may be the next in line to use these helium-filled hard drives. Helium’s importance in technology is not new either. The gas is already an irreplaceable and critical component of cryogenics in MRI machines. In fact, it’s so important to the medical industry that doctors actually requested a ban on helium-filled party balloons a couple years ago to ensure there would be enough for medical applications.
Helium Price Soars On Supply/Demand Gap
Helium explorers have recognized a noticeable gap between demand and supply as industrial applications begin to expand, and are working on increasing the helium supply base. One company that’s looking to capitalize on this market situation is American Helium. The company is looking to become a leading helium producer for the North American and global markets, and currently is the first pure-play helium explorer operating in the U.S.. With its abundant acreage and attractive price (CAD $0.70/share as of May 28, 12:00 EDT), the company is an interesting candidate for consideration among prospective helium investors. In the helium market, the supply side remains volatile and often falls short of demand. Only a handful of countries are producing helium at the moment, which is driving the uncertainty of helium supply and volatility. Algeria, Russia, Australia, Canada, and Poland are the other countries that complement the U.S. in supplying helium to the world, with the U.S. alone accounting for a 55% share in world supply. Nonetheless, the price of helium continues to rise – up approximately 70% since 2008. Currently, it’s at an all-time high of $119 per thousand cubic feet. With even the most conservative demand growth estimate (6.4%) lying well above the supply, the price of helium should continue to trend upwards. This provides helium exploration and development companies such as American Helium extremely favorable market conditions.
A Pure Play Helium Producer Could Dominate The North American Market
As a pure-play helium explorer, American Helium is moving to position itself as a major producer in North America. The company is exploring for helium on its Utah acreage, covering 17,767 acres with high helium concentrations of 1-1.5%. David Sidoo, the company’s chairman, noted that: “The U.S. remains the heaviest user of helium worldwide and the incentives to discover new domestic helium reserves remain strong.” Thus, in 2021, when the key helium supplies from the U.S. Federal Helium Reserve in the Texas basin end (about 13% of global helium supply), American Helium would already be positioned to bridge the supply gap with its estimated 7.85 billion square feet of Helium reserves in Utah.
Other Prominent Producers Include The Following
Gran Tierra Energy Inc. – Gran Tierra is an independent energy company focused on oil and natural gas exploration and production in Colombia. As of December 31, 2017, the company had total proved undeveloped reserves of 19.6 million barrels of oil equivalent.
Yuma Energy Inc. – Yuma Energy is focused on the acquisition, development, and exploration for oil and natural gas resources, primarily in the U.S. Gulf Coast, the Permian Basin of west Texas and California. The company’s net average production for the year ended December 31, 2017, was 2,454 barrels of oil equivalents per day.
Ring Energy Inc. – Ring Energy is an exploration and production company engaged in oil and natural gas acquisition, exploration, development, and production in Texas and Kansas. As of December 31, 2017, the company has increased their proved reserves to an estimated 31.9 million barrels of oil equivalents.
Energy Fuels Inc. – Energy Fuels s one of the largest producers of uranium and vanadium in the United States. The company owns the White Mesa Mill in Utah, which is a conventional uranium recovery facility operating in the United States.
Helium Sits In The “Sweet Spot” Of High Demand And Low Supply
Certainly, the demand-supply equation stands in favor of helium producers. This favorable equation has placed helium onto investor’s radar, and might even create a new class of “helium investors”. This lighter-than-air commodity may just be the new Lithium – scarce, rare, and exciting to investors due to its novelty factor. From a producer’s perspective, American Helium seems well placed to tap the growing North American demand for helium and take advantage of these favorable market conditions.