Helium is known to be the second most common element and second lightest gas in the universe. While there is plenty of it available in rocks on the Moon, here on Earth it is a rare to find it in economically feasible quantities. Enormous amounts of helium lost has been blamed on waste. Recently, helium has been placed on the US’s list of minerals which are critical to economic and national security, and already sits on a similar list compiled by the EU. As a relatively difficult element to produce, store and recycle, helium is big business for leading companies that can meet the world’s growing demand. Dominant players in the oil and gas sector are Baytex Energy Corp. (NYSE: BTE) (TSX: BTE), Pengrowth Energy Corp (NYSE: PGH) (TSX: AHE), Tamarack Valley Ltd. (TSX.V: TVE), Surge Energy Inc. (TSX: SGY), and helium gas newcomer American Helium Inc. (TSX.V:AHE) (OTC:AHELF) (XFRA: 43UB), which is showing great promise as a prospective helium producer.
Holbrook Basin Could Be Brought Back To Life
American Helium announced the Holbrook Basin exploration venture to undertake an exploration drill program in Arizona with Holbrook Basin Energy LLC. The Holbrook Basin has been a well-established helium production district with two of the world’s richest historic producing helium gas fields, the Pinta Dome and the Navajo Springs located in the region. Arizona’s original helium discovery was in 1927 and named Great Basin Oil #1. This discovery is approximately 4 miles Southwest of Holbrook and 14 miles East of Helopolis in the Holbrook Basin. The concentration level reported gas flow of 1.12% helium back in 1927.
According to American Helium’s recent press release, the concentrations of gas in the Holbrook Basin range from trace amounts up to 10%. The industry benchmark for commercial grade helium range from concentration levels of 0.3% to 1%. The potentially high concentration levels and the rich nature of the area has some saying “Arizona is the Saudi Arabia of helium”.
David Sidoo commented,
“I’ve always had great success being the first mover in a hot sector. Recognizing early opportunities where supply has dwindled and demand is sky rocketing. I’ve done it in the Powder River Basin and the Bakken Oil Fields. I’ve done it in the Lithium markets. Next is helium. There is a massive rush underway to secure high quality helium assets in the United States and AHE sits at the forefront of this cycle.”
A Focused Helium Opportunity
American Helium (TSX.V:AHE) (OTCQB:AHELF) is currently the only company in the U.S. whose focus is placed solely on helium. Furthermore, two of the company’s largest competitors in the U.S. market are known to have declining helium sources. This raises the significance of American Helium’s newly announced Holbrook Basin venture alongside it’s 17,767 acre Carbon County, Utah property.
American Helium also represents one of the safest assets on the international plane. One of the world’s other leading helium-producing nations, Qatar was subject to a boycott by Arab neighbours which removed the equivalent of approximately 25% of global demand from the helium market.
Clearly, other major global alternatives suffer from far less geopolitical stability. Here again, American Helium takes the edge on its international competitors, with a focus solely on helium production in the US where the business and investment environment is significantly more stable. In fact, of five leading global producers, two are experiences decreasing output whilst the second-largest in Qatar cannot offer stability to the global markets.
Like the helium markets in general, American Helium (TSX.V:AHE) (OTCQB:AHELF) has gone under-analysed and under-appreciated to date, despite having assets due to enter production and facing competitors who are struggling to supply. The upside of this is that the company offers a well-timed investment opportunity in the commodity markets.
Another of American Helium’s key advantages is the very commodity in which it deals, with helium demand and prices steadily on the increase. The natural shortages of the element alongside political events interfering with global supplies means that the company will likely be able to sell its own stores as historically high prices.
Helium Proves Critical in New Technologies
Helium already has many well established industrial uses, such as in healthcare for cooling the superconducting magnets in MRI and other machines, in breathing equipment used in diving to prevent nitrogen narcosis or “the bends”, and in the aerospace and aircraft industries.
However, now the element also looks set to play a critical role in many emerging and future technologies, from quantum computing to potential use in nuclear fusion, and at the pinnacle of modern physics research in particle accelerators such as the Large Hadron Collider in Switzerland.
Google’s Project Loon’s “Balloon Powered Internet for Everyone” Helium filled balloons delivered internet to 100,000 people in Puerto Rico after Hurricane Maria. Netflix runs on Helioseal technology using HGST helium filled drives. In fact, Netflix increased capacity by 50%, while reducing energy usage by 23%.
As an inert element, meaning that it is unreactive, helium can be combined with other components without causing a chemical reaction. The element also has an ultra-low boiling point, almost at the temperature of absolute zero, and an extremely light atomic weight.
All these features render helium a unique and virtually irreplaceable component in those industries which rely upon its properties. Global demand for helium is expected to rise by 9% each year over the next three years alone and shares of companies like American Helium, should re-rate in line with the price increase of the physical.
Other Emerging Players In The Oil & Gas Game:
Baytex Energy Corp. (NYSE: BTE) (TSX: BTE) is an oil and gas corporation based in Calgary, Alberta. The company is engaged in the acquisition, development and production of crude oil and natural gas in the Western Canadian Sedimentary Basin and in the Eagle Ford in the United States. Approximately 80% of Baytex’s production is weighted toward crude oil and natural gas liquids.
Pengrowth Energy Corp (NYSE: PGH) (TSX: AHE) is an intermediate oil & gas producer based in Calgary, Alberta. With operations across Western Canada, Pengrowth produces light oil, heavy oil, and natural gas. Over the past year, the Company has undergone significant restructuring, as it plans to reduce debt via asset sales. Moving forward, the Company plans to focus on long-term development at its Lindbergh (thermal oil) and Montney gas properties.
Tamarack Valley Ltd. (TSX.V: TVE) is an oil and gas company focused on acquiring and operating oil and gas properties in the Western Canadian Sedimentary Basin. The Company’s producing properties are Cardium Oil, which produces at a capacity of ~9,000 barrels of oil per day (BOE/D) at 54% liquids and Viking Oil, which produces at 7,300 BOE/D at 67% liquids.
Surge Energy Inc. (TSX: SGY) is an oil focused E&P company that has a high quality crude oil reserve, production and cash flow base. Surge has elite, operated properties characterized by large OOIP crude oil reservoirs with low recovery factors, an extensive 14 year inventory of more than 700 net low risk development drilling locations and several high quality waterflood projects.
The Importance of New Supply has Never Been So Great
Helium is a critical element used across a range of established and newly emerging technologies. With global production threatening to lose pace with an ever-increasing demand, the importance of establishing new supplies has never been so great, nor the need to establish new production in the U.S. to replenish dwindling stores and helium-producing assets.
As the only company focusing solely on helium gas in the U.S., American Helium Inc. (TSX.V:AHE) (OTC:AHELF) (XFRA: 43UB) is a ripe and underappreciated opportunity with significant stores of the element and new production due to come online imminently.
For more information on American Helium, please visit Microsmallcap.com for a free research report.