FN Media Group Presents Oilprice.com Market Commentary
LONDON, Aug. 10, 2023 /PRNewswire/ -- A daunting list of key industries the world over is now wondering where their future supplies of helium will come from. What battery metals are to gigafactories, helium is to everything from scientific research, medical technology and high-tech manufacturing to space exploration and national defense. Companies mentioned in this release include: Air Products and Chemicals, Inc. (NYSE: APD), Linde PLC (NYSE: LIN), Exxon Mobil Corporation (NYSE: XOM), Chevron Corporation (NYSE: CVX), Baker Hughes Company (NASDAQ: BKR).
None can survive without helium—a non-renewable natural resource typically recovered from natural gas deposits. Helium is unique among all elements because it can reach ultra-cold temperatures making possible everything from magnetic resonance imaging (MRIs) and semiconductors (which are now suffering from a supply shortage) to fiber optic telecommunications and even space exploration.
Multi-billion-dollar industries depend on this; yet, we have been in a state of helium shortage since 2016. And in 2022, the war in Ukraine effectively cut off helium supplies from Russia, a leading exporter with big expansion plans.
Now, with North America industries now experiencing a supply squeeze and geopolitical risk putting other major suppliers out of reach, Avanti Helium Corp.'s (AVN; ARGYF) two recent discoveries and first production planned for the first-quarter of next year, is a propitious development. And with helium worth hundreds of times more than natural gas, the opportunity is overripe for energy-sector investors.
Two Helium Discoveries Amid a Supply Squeeze
In June last year, Avanti discovered 187 million cubic feet of net recoverable helium gas, based on a raw gas estimate of 17 billion cubic feet recoverable and net helium concentration of 1.1% at its WNG 11-22 well in the Greater Knappen Property in Montana.
Then, in January this year, Avanti expanded the pool with the second well flowing 20 million cubic feet per day, also at Greater Knappen. That flow rate and helium percentage was more than double Avanti's initial expectations. The two wells will be brought into production in the first quarter of next year.
Avanti's Greater Knappen property is an 82,000-acre opportunity for North America. With 100% interest in this prospective helium play, and1-2% helium in its discoveries. This gives Avanti a clear North American advantage.
Risk-Reduction with a Major Midstream Deal
Just days ago, Avanti (AVN; ARGYF) signed an agreement with a veteran helium midstream company that already has over a dozen helium plants across North America. That is the biggest de-risking driver since Avanti's two discoveries because it fast-tracks the commercialization of Avanti's helium recovery plant with raw gas from its Sweetgrass helium pool. The plant is now set to begin operations in the first quarter of 2024.
The agreement with private company IACX gives Avanti even more experience, CAPEX power, supply-chain strength, and existing component inventory because IACX already operates over a dozen helium plants across North America.
The agreement calls for the construction, financing and operations of a helium recovery plant that will process raw gas from Avanti's Sweetgrass Helium pool in the Greater Knappen project. The plant is designed to initially process 10 million cubic feet per day of raw gas beginning in Q1 2024, with the option to ramp up to 15 million cubic feet per day.
The deal is also fee-based. For stakeholders, that means it will primarily be paid out of operational cashflow from the plant, making it unnecessary for Avanti to do a major equity raise, which would dilute shares, or obtain high-interest debt.
All the steps of this process amount to ~$211/Mcf (thousand cubic feet) initially and declining to ~$163/Mcf by year three. Additional costs such as royalties and power are expected to total ~$70/Mcf or less. That means that total operational costs of marketed liquid helium will be approximately $280-$230/Mcf over five years.
While last year, helium prices spiked because of hopes for plentiful supply were dashed, selling for $500 Mcf all the way up to $1,000/Mcf depending on purity and grade, prices remain opaque and vary from deal to deal.
Some insight comes from the recent contract announced by Royal Helium in early July. That contract was for $625/Mcf, without trucking and liquefaction. With trucking and liquefaction, that would make the gross price ~$750/Mcf. Using these numbers, we can arrive at a potential netback for Avanti of $470-$520/Mcf.
With the new helium recovery unit initially producing 10 MMcfd (million cubic feet per day) and ramping up in an estimated nine months to 15MMcfd, this could potentially position Avanti to earn as much as $14.9 million annually, using a netback of $500/Mcf. When it ramps up, the earnings could shoot up to as much as $22 million or more annually.
Beacon Securities, which has initiated coverage of Avanti, forecasts the company to generate $22.5 million of EBITDA in 2024.
Beacon also expects Avanti to resume exploration drilling on the Greater Knappen project once it is generating EBITDA early next year, with additional expectations that new drilling will lead to another helium recovery plant by the third quarter of 2025, with EBITDA then possibly nearing the $40 million mark.
Beacon referred to Avanti's (AVN; ARGYF) midstream agreement with IACX as "a major de-risking step in AVN's path to production of liquified helium that should receive a price of US$750/mcf or more". Beacon's forecast is that AVN is trading at an EV/EBIDTA multiple of 2.4x for next year, and only 0.9x for 2025. "With a compelling macro backdrop in the critical helium sector, we believe that multiple should be much higher". Beacon Securities maintains its $2.25 price target for AVN.
A Critical Junction for American Helium
Prior to 2016, helium supplies were not a concern. The U.S. was stockpiling helium as a matter of national interest beginning in the 1960s, at the height of the Cold War. That strategic supply of helium was stored at the Federal Helium Reserve in Amarillo, Texas, with controlled pricing. Nearly half of the U.S. supply of helium came from this reserve. That reserve is dwindling, and earlier this month, the Bureau of Land Management (BLM) announced that all the assets of the federal helium system would be auctioned off for sale in November. To offset this lost domestic supply of helium, a pure play exploration industry is developing.
Now, with the global helium market set to hit nearly $6.5 billion in just three years, Avanti is a clear industry leader with two discoveries, much more to explore, and a midstream deal to get its first helium recovery unit up and running by the beginning of next year.
Big Companies Could Tap Into The Helium Boom
Air Products and Chemicals, Inc. (NYSE: APD) is an industrial gas titan with a diverse portfolio of products that serve various sectors, from food processing to semiconductors. Their expertise in handling and delivering specialty gases makes them a key player in the realm of helium distribution. As we advance technologically, helium's role in cooling, healthcare, and electronics becomes even more vital.
The company's expansive global network enables it to deliver helium to industries across continents. Its state-of-the-art storage and delivery solutions ensure that the gas reaches its destination in the purest form, maintaining its efficacy. For APD, it's not just about supplying a gas; it's about supporting the innovations that this gas powers. Given the growing demands for helium and the company's pioneering efforts in its safe and efficient transportation, APD promises to be a major stakeholder in the helium-centric future.
Linde PLC (NYSE: LIN) is more than just a gas provider; it's a global leader in making our modern lives possible. From healthcare to clean energy, Linde's solutions have an expansive reach, and their ventures into the helium sector stand testament to their forward-thinking approach.
Helium, as a resource, is not just about balloons. It's instrumental in MRI scanners, semiconductor manufacturing, and even space exploration. Recognizing this, Linde has invested heavily in ensuring a steady supply chain, even as global helium reserves become harder to source. Their commitment to sustainability ensures that helium extraction doesn't compromise environmental standards. With Linde's emphasis on research, sustainability, and efficient distribution, they are poised to become indispensable in a world increasingly reliant on helium.
Exxon Mobil Corporation (NYSE: XOM) is synonymous with energy leadership. For decades, Exxon has shaped global energy trends, and their vast network and resources place them in a unique position to navigate emerging market shifts, like the increasing importance of helium.
While not their primary focus, helium extraction is an extension of Exxon's expertise in the natural gas sector. As helium reserves become scarcer, the capability to efficiently extract it from natural gas becomes a valuable asset. Exxon's extensive research and development facilities, like its LaBarge facility, are also constantly exploring efficient extraction techniques, ensuring they remain ahead of the curve.
Chevron Corporation (NYSE: CVX) is a name that resonates with energy expertise. From upstream exploration to downstream sales, their operations span the complete energy cycle. Chevron's prowess in natural gas extraction and refining offers an indirect avenue to the helium sector. Given that helium is often extracted alongside natural gas, Chevron's extensive infrastructure could provide a significant edge in capitalizing on helium opportunities.
While oil remains their mainstay, Chevron's vast natural gas operations open the doors to the world of helium. Their geoscientists, with an intricate understanding of underground reservoir dynamics, are perfectly poised to optimize helium extraction. As the demand curve for helium tilts upward, Chevron's robust infrastructure could make them a significant contributor to the global supply.
Baker Hughes Company (NASDAQ: BKR) epitomizes excellence in oilfield services. It has consistently demonstrated an ability to evolve, ensuring they stay relevant amidst changing energy landscapes. This adaptability makes them a name to watch in the helium sector.
With the technology to handle complex drilling and extraction projects, Baker Hughes is well-equipped to tap into the helium market. As helium often coexists with natural gas, their expertise in the latter could seamlessly translate to a focus on the former. Their reputation for harnessing technology to maximize extraction efficiency might just make them a dark horse in the helium race.
By. Michael Kern
IMPORTANT NOTICE AND DISCLAIMER
Neither the author nor the publisher, Oilprice.com, was paid to publish this communication concerning Avanti Helium Corp. The owner of Oilprice.com owns shares and/or stock options of the featured company and therefore has an incentive to see the featured company's stock perform well. The owner of Oilprice.com has no present intention to sell any of the issuer's securities in the near future but does not undertake any obligation to notify the market when it decides to buy or sell shares of the issuer in the market. This share ownership should be viewed as a major conflict with our ability to be unbiased. This is why we stress that you conduct extensive due diligence as well as seek the advice of your financial advisor or a registered broker-dealer before investing in any securities.
Readers should beware that third parties, profiled companies, and/or their affiliates may liquidate shares of the profiled companies at any time, including at or near the time you receive this communication, which has the potential to hurt share prices. Frequently companies profiled in our articles experience a large increase in volume and share price during the course of investor awareness marketing, which often ends as soon as the investor awareness marketing ceases. The investor awareness marketing may be as brief as one day, after which a large decrease in volume and share price may likely occur.
This communication is not, and should not be construed to be, an offer to sell or a solicitation of an offer to buy any security. Neither this communication nor the Publisher purport to provide a complete analysis of any company or its financial position. The Publisher is not, and does not purport to be, a broker-dealer or registered investment adviser. This communication is not, and should not be construed to be, personalized investment advice directed to or appropriate for any particular investor. Any investment should be made only after consulting a professional investment advisor and only after reviewing the financial statements and other pertinent corporate information about the company. Further, readers are advised to read and carefully consider the Risk Factors identified and discussed in the advertised company's SEC, SEDAR and/or other government filings. Investing in securities, particularly microcap securities, is speculative and carries a high degree of risk. Past performance does not guarantee future results. This communication is based on information generally available to the public and does not contain any material, non-public information. The information on which it is based is believed to be reliable. Nevertheless, the Publisher cannot guarantee the accuracy or completeness of the information.
FORWARD LOOKING STATEMENTS. This publication contains forward-looking statements, including statements regarding expected continual growth of the featured companies and/or industry. The Publisher notes that statements contained herein that look forward in time, which include everything other than historical information, involve risks and uncertainties that may affect the companies' actual results of operations. Factors that could cause actual results to differ include, but are not limited to, changing governmental laws and policies concerning, among other things, success of the companies drilling operations, the size and growth of the market for the companies' products and services, the companies' ability to fund its capital requirements in the near term and long term, pricing pressures, etc.
INDEMNIFICATION/RELEASE OF LIABILITY. By reading this communication, you acknowledge that you have read and understand this disclaimer, and further that to the greatest extent permitted under law, you release the Publisher, its affiliates, assigns and successors from any and all liability, damages, and injury from this communication. You further warrant that you are solely responsible for any financial outcome that may come from your investment decisions.
TERMS OF USE. By reading this communication you agree that you have reviewed and fully agree to the Terms of Use found here http://oilprice.com/terms-and-conditions If you do not agree to the Terms of Use http://oilprice.com/terms-and-conditions, please contact Oilprice.com to discontinue receiving future communications.
INTELLECTUAL PROPERTY. Oilprice.com is the Publisher's trademark. All other trademarks used in this communication are the property of their respective trademark holders. The Publisher is not affiliated, connected, or associated with, and is not sponsored, approved, or originated by, the trademark holders unless otherwise stated. No claim is made by the Publisher to any rights in any third-party trademarks.
DISCLAIMER: OilPrice.com is Source of all content listed above. FN Media Group, LLC (FNM), is a third party publisher and news dissemination service provider, which disseminates electronic information through multiple online media channels. FNM is NOT affiliated in any manner with OilPrice.com or any company mentioned herein. The commentary, views and opinions expressed in this release by OilPrice.com are solely those of OilPrice.com and are not shared by and do not reflect in any manner the views or opinions of FNM. FNM is not liable for any investment decisions by its readers or subscribers. FNM and its affiliated companies are a news dissemination and financial marketing solutions provider and are NOT a registered broker/dealer/analyst/adviser, holds no investment licenses and may NOT sell, offer to sell or offer to buy any security. FNM was not compensated by any public company mentioned herein to disseminate this press release.
FNM HOLDS NO SHARES OF ANY COMPANY NAMED IN THIS RELEASE.
This release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E the Securities Exchange Act of 1934, as amended and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" describe future expectations, plans, results, or strategies and are generally preceded by words such as "may", "future", "plan" or "planned", "will" or "should", "expected," "anticipates", "draft", "eventually" or "projected". You are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements as a result of various factors, and other risks identified in a company's annual report on Form 10-K or 10-KSB and other filings made by such company with the Securities and Exchange Commission. You should consider these factors in evaluating the forward-looking statements included herein, and not place undue reliance on such statements. The forward-looking statements in this release are made as of the date hereof and FNM undertakes no obligation to update such statements.
Contact Information:
Media Contact e-mail: editor@financialnewsmedia.com U.S. Phone: +1(954)345-0611
View original content:https://www.prnewswire.co.uk/news-releases/helium-wars-the-existential-battle-between-trillion-dollar-tech-giants-301897268.html
Voltar noticias em Inglês