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March
30
2022

Free-For-All In Helium Market Could Send Prices Sky-High
 Tom Kool

The gas that is critical for everything from supercomputing and space travel to MRIs and medical and scientific research was facing a supply shortage even before Russia launched a war on Ukraine. 

Now, the supply squeeze is on war-footing, and some investors are on the lookout for a North American supplier that can get this gas to the market–fast. 

The gas is helium…

The backbone of much of our existing technology …

And the beating heart of our future technology. 

While a helium land rush was already at full throttle after the Federal government shut down its helium reserve in the third quarter of last year, the supply of this gas is facing another big hit with Russia’s war on Ukraine. 

Earlier this week, Algeria–a key supplier–was forced to shut down its helium operations because of soaring natural gas demand in Europe. 

Algeria extracts helium from natural gas while it is compressing that natural gas into a liquid form for transportation. Because of Russia’s war on Ukraine, which has led to a natural gas crisis in Europe, Algeria is now being forced to send natural gas to Spain via pipeline. That means no helium extraction. 

Helium prices, which are already 100x those of natural gas, are now soaring even further. 

And while some investors are eyeing longer-term bets on junior explorers who hope to be able to extract helium from natural gas fields, where it normally occurs, there’s a near-term opportunity that answer a supply squeeze without any exploration time. 

Total Helium (TSX.V:TOH; OTC: TTLHF) is years ahead of its competition, with a helium play in the biggest conventional natural gas field in the United States that is already producing–and already selling.  

Downstream, Total Helium has a deal with $158-billion Linde (NYSE:LIN) one of the biggest downstream companies in the sector and a member of what some refer to as the helium “oligopoly”. 

The world needs helium right now. 

Explorers may be a longer-term bet, but the supply crisis is already looming, and smart money is looking for helium that can get to the market immediately, with prices on war-footing … and without footing the bill for facilities that cost tens of millions of dollars. 

America’s Biggest Helium Play?

In our view, Total Helium is parked in the right place at exactly the right time. 

The “right place” is the Hugoton natural gas field in the Kansas-Oklahoma panhandle. 

Hugoton is the largest natural gas field in the United States, and the largest conventional natural gas play in North America, having already produced 75 trillion cubic feet of methane. 

The field has already produced some 300 BCF of helium. 

Now that the Federal Helium Reserve in Amarillo, Texas, has been shut down and all its helium auctioned off, Hugoton has become one of the most important helium supply sources in North America. 

Armed with technology that completely changes Hugoton’s role in one of America’s most critical resources, Total Helium is expanding this massive field–eyeing a potential 1.65-million-acre extension that is all about helium. 

So far, they’ve scooped up over 115,000 acres in leases and farmout agreements with various other players in the area, and are looking to continue the expansion at breakneck speed. 

Target: 70 Billion Cubic Feet of Helium

With Total Helium (TSX.V:TOH; OTC: TTLHF) estimating that each well they drill could produce over 27,000 Mcf 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 produced gas, enriched with liquids.

If achieved, this would be a win-win either way, with natural gas prices around $5, double what they were just 12 months ago … 

And helium prices that could be as high as $500-$600 Mcf. 

In our perspective, Total Helium has a clear advantage. 

Already in Q4 2021 and January this year, they drilled and completed their first two production wells, got them hooked up to the sales pipeline and started producing. 

This quarter, they’re aiming to expand their developmental drilling and completion program, add more to the leasing campaign and work out subsurface storage rights with giant Linde. 

Expected Payout in Only 18 Months

Total Helium is already producing, and on March 15th, it announced it has started selling its first helium and methane. 

Its helium is already in the pipeline and will be on its way to Linde’s plant, where the helium will be liquified and the liquids stripped out.  

The economics look brilliant. 

With Total Helium’s drilling completion costs estimated at about $600,000, its net from 300 Mcf means a payout that is anticipated in less than 18 months. As dewatering continues and assuming production rate increases as expected, this could come down to 6 months. That could surpass shale producers in terms of potential return on investment. (In fact, some shale boom investors may only now be starting to get their ROI thanks to soaring oil prices on the back of Russia’s war on Ukraine.)

Total Helium (TSX.V:TOH; OTC: TTLHF) expects it can drill up to 180 wells with these economics and they are working to expand their land position to implement their plans to drill many more wells.

Lower costs are anticipated because Hugoton is a shallow gas play, and because there are processing facilities nearby, Total Helium doesn’t expect to be paying any big transport-processing capex. 

*RPS Confident Person’s Report – P50 Case – Updated with Current Prices

Agreement with A Member of the Helium Oligopoly

An exciting point for investors is Total Helium’s purchase and sale agreement with Linde, which enjoys a helium market share of around 40%, and which runs one of the biggest helium plants in the world, in Kansas, among others in Qatar, Algeria and Australia.  

Total Helium has generated over $2.2 million in current and upcoming cash flows from its agreement with Linde.

When a giant–and a member of the helium oligopoly–agrees to help fund your exploration program, that’s an exciting opportunity for any explorer. 

And this agreement should also give Total Helium a cost advantage, giving it access to Linde’s massive helium infrastructure. A processing plant for helium can cost tens of millions of dollars to build. Total Helium expects its output will go directly to Linde’s plants via pipeline. 

The Technology Transforming Hugoton’s 100-Year Legacy 

The technology here is important: If you haven’t heard of giant Hugoton before, it’s because this field, discovered back in 1922, fell off the radar amid the shale boom, leaving the rest of its gas resources in the ground, waiting for new technology that could tap into it.  

Hugoton is a conventional field, but its proven reservoirs have high water concentrations, which make recovery very challenging without the right technology. 

That’s where Craig Steinke comes in–a wildcatter now famous in the industry for bringing us some exciting resource plays while many were distracted by the obvious. And Steinke is all about putting the right technology to work in places that have been all but forgotten. 

If you’re not familiar with the name, Steinke is the wildcatter behind Recon Africa (RECO/RECAF) who discovered the giant Kavango Basin in Namibia–another conventional onshore play currently being explored that could end up being the last major onshore discovery we will ever see. 

In Hugoton, the problem was that no one could handle the water with their existing technology, but Total Helium’s team has this specific experience. Additional volumes of water produced go into an injection zone and the water disposal system is the key to keeping the costs down. 

Total Helium is using a de-watering production technology, and the economics appear to work because they have a prolific disposal zone: They only have to drill one salt-water disposal well for every ten producing wells. 

Exactly the Right Time

Helium is non-renewable, and it can’t be replaced by any other gas. It’s extremely lightweight, non-reactive, and can liquify at extremely low temperatures.

There is no supercomputing without helium. There’s no big data either. All of our hard drives are now essentially helium drives. There’s no fiber-optic telecommunications without it. A helium shortage would likely be devastating, too, for medical equipment and scientific research. Space travel progress would grind to a halt without helium. A NASA space shuttle requires 1 million cubic feet of helium just during the launch countdown.

Now, we’re facing a market free-for-all, which is also why prices are soaring. 

Since WWI, the U.S. Bureau of Land Management (BLM) has provided us with the bulk of our helium, stored at the reserve in Texas. In fact, that’s where Linde itself acquired much of its helium before it was shut down last year. 

Now, the oligopoly is looking elsewhere … to Algeria … to Qatar … to Australia … and, were it not for the invasion of Ukraine and severe Western sanctions, they would be looking to Russia, too. 

That makes a North American helium play a matter of national interest. 

And we think it makes Total Helium (TSX.V:TOH; OTC: TTLHF) a very attractive opportunity with a potentially very fast payout. 

While the immediate opportunity looks advantageous enough on its own, there may be a lot of additional potential upside here. They have already leased 115,000 acres where they could drill up to 180 wells. Then they could also infill more wells into the existing acreage in the future. Furthermore, they are continuing their leasing campaign with a total potential area of up to 1.65-million acres where they could drill many more wells, and a helium storage partnership with Linde that could provide ongoing revenue potential beyond Total Helium’s production and expansion plans. 

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. 

Management has skin in the game on this one, and these are innovative wildcatters who have likely seen it all before. In our view, helium has never looked better, and Total Helium looks set to promise the fastest payout. 

Other companies set to benefit from the industrial gas squeeze:

Linde plc (NYSE:LIN) has been in the business of manufacturing and distributing gas for over 130 years, making it one of THE oldest companies still operating today! It was founded by Carl von Linde who invented an improved process for liquefying air. Today they have customers all around the world including hospitals (especially ones that use anesthesia), petrochemical plants, steel mills – you name it; if there's anywhere with a demand on atmospheric gases then likely someone at this factory can help meet those needs.

Linde is also involved in engineering. Linde Engineering designs and builds large-scale chemical plants for the production of industrial gases including oxygen, nitrogen, argon, hydrogen and carbon monoxide. These chemicals are used in a variety of industries from food to medicine manufacturing as well as other places like welding or gas appliances. The engineering division also develops process plants that use technologies related to natural gas processing so they can provide energy efficient solutions for their customers around the globe who want safe operations with minimal environmental impact

The company is currently looking forward to new projects such as renewable energies where it will be developing an innovative solar project combining steam power generation technology (SPG) with thermal storage modules. The 130-year-old industry giant might not have some of the incredible upside potential of newer companies in the space, but that doesn’t mean it’s not

DuPont Corporation (NYSE:DD) is a global science company. DuPont’s motto of “Better Living Through Chemistry” was applied to the development of products that help make agriculture sustainable and improve our daily lives. The company has introduced nylon, Lycra (spandex), Kevlar fiber, Tyvek home insulation and other new fibers as well as innovative solutions for existing materials such as color TV tubes, paints and coatings. DuPont developed some of the world's most important innovations in chemistry – like Teflon®, Corian® solid surfacing material, Kevlar®, Tyvek®, Nomex® protective clothing fabric and Sulfinol® fuel cells. 

Over 20 years ago, DuPont was already knee-deep in the fuel cell game, forming an entire division dedicated to hydrogen fuel cell technology. Richard J. Angiullo, then-VP of DuPont Fluoroproducts explained, ``Increasing global energy requirements and the desire for new, alternative energy sources in many markets make fuel cells an exciting new growth opportunity for DuPont.” adding, “Fuel cells are a natural fit for DuPont technology and capabilities. More than 50 percent of a PEM fuel cell stack, the real transactional center of a fuel cell, can be made from DuPont materials.”

Air Products & Chemicals (NYSE:APD) has been at the forefront of global hydrogen production for years. They recognize that this clean alternative fuel can help make an impactful dent in boosting our country's green energy initiatives as well as reducing carbon emissions across industries by decreasing reliance on fossil fuels like coal and petroleum products, etc., which Air Product’s own extensive experience with helping others achieve sustainability goals through chemical innovation will bring about even more progress than before

Air Products and Chemicals has well over 60 years of experience producing hydrogen, and more than two decades designing fueling stations. It’s SmartFuel stations have been deployed across the globe and support a number of different unique and interesting transportation applications. The fully-integrated stations include compression, storage and dispensing systems that have proven to be safe and reliable for its customers. Though Air Products has been around for some time, the $66 billion company has had a particularly strong year in 2021 thanks to the growing interest in Hydrogen applications.

Westinghouse Air Break Technologies Corporation (NYSE:WAB), is an international technology provider who offers equipment and services geared towards solving problems within the freight rail industry- specifically related to cars or trains moving heavy loads across long distances without ever losing traction.

In the global market of freight and transit, Wabtec stands out. They are a company that provides technologies to help with everything from building new switcher locomotives to supplying railway electronics for various transportation modes in order to fulfill their mission: "We make what moves you."

Westinghouse has had a pretty solid year. Since March of 2021, it has seen its share price rise by as much as 25 percent. And this could accelerate in the coming years. Why? Because rail transport is undergoing somewhat of a renaissance. Thanks to greener tech, rail and freight is about to get a whole lot cleaner, and perhaps equally as important, more efficient.

Dow Chemical Company (NYSE:DOW) is an American multinational chemical corporation headquartered in Midland, Michigan with over a century in operation. This company has been called "the chemical companies' chemical company" as its sales are to other industries rather than directly to end-use consumers and it employs around 54 thousand people worldwide. Along with being one of the three largest producers of chemicals in the world, they also make plastics, agricultural products and more.

George Kehler, Dow’s commercial manager for Fuels and Energy, notes, “One of Dow’s options to develop a diverse portfolio to power our facilities is to produce energy off the grid through cogeneration, as well as having renewables become an increasingly more important part of the mix”

Dow is also teaming up with GM to produce hydrogen for fuel cells and reduce their reliance on natural gas. Dow produces chemicals that help the environment as well as plastics, which can be used in everyday items like water bottles or cell phones; but now they're looking into something more than just a single product line! In addition to reducing costs by using another company's resource (hydrogen), this partnership will also provide clean energy while making it easier - these two companies are committed not only toward improving our technological future...but extending it so we never run out!

Maxar Technologies (NYSE:NYSE, TSX:MAXR) is one of the leading space companies. Founded nearly 20 years ago, Maxar has a variety of services, including satellite development, space robotics, and earth observations. One of their most well-known products is the Canadarm2 robotic arm for the International Space Station (ISS). The ISS has been operational since 1998 with more than 100 missions to date. Maxar Technologies has had a history of partnering with NASA to maintain the ISS's systems as well as providing them with new technologies such as the Canadarm2 robotic arm. is a moon-bound tech stock to keep an eye on. While space firm specializes in satellite and communication technologies, it is also a manufacturer of infrastructure required for in-orbit satellite services, Earth observation and more.

Not only will helium play a vital role in Maxar’s future, the company is going all in on battery tech, as well. Maxar’s subsidiary, SSL, a designer and manufacturer of satellites used by government and commercial enterprises, has pioneered research in electric propulsion systems, lithium-ion power systems and the use of advanced composites on commercial satellites. These innovations are key because they allow satellites to spend more time in orbit, reducing costs and increasing efficiency.

Magna International (TSX:MG) is a really interesting and roundabout way to get in on the explosive commodity market without betting big on one of the new hot stocks tearing up among the millennials right now. More than a decade ago, Magna International was already making major moves in the battery market, investing over half a billion dollars in battery production while the market was still in its infancy. At the time, electric vehicles as we know them had barely hit the scene, with Tesla launching its premiere car just two years prior.

Magna’s massive investment in batteries, however, has paid off in a big way. Since its controversial bet of yesteryear, the company has seen its valuation soar by tens of billions of dollars, and it has solidified itself as one of the leaders in the increasingly competitive battery business.

Westport Fuel Systems (TSX:WRPT) isn’t necessarily a resource play, but it is an important company to watch as new fuels and new forms of energy take the spotlight. Especially as the world races to leave behind traditional gasoline and diesel-powered vehicles. That’s because, while it is a manufacturing play at heart, it offers a particularly unique way to gain exposure to the alternative fuels market. As a key manufacturer of the hardware needed to build natural gas and other alternative-fueled cars, Westport is definitely a company to watch in this scene.

Celestica (TSX:CLS) is a key company in the resource boom due to is role as one of the top manufacturers of electronics in North America. Celestica’s wide range of products includes but is not limited to communications solutions, enterprise and cloud services, aerospace and defense products, renewable energy, and even healthcare tech.

Due to its exposure to the renewable energy market, Celestica’s future is tied hand-in-hand with the green energy boom that’s sweeping the world at the moment. It helps build smart and efficient products that integrate the latest in power generation, conversion and management technology to deliver smarter, more efficient grid and off-grid applications for the world’s leading energy equipment manufacturers and producers.

Turquoise Hill Resources Ltd. (TSX:TRQ) is a key player in Canada’s resource and mineral industry. It is a major producer of coal and zinc, two resources with distinctly different futures. While headlines are already touting the end of coal, zinc is a mineral that will play a key role in the future of energy for years and years to come.

In addition to its zinc operations, Turquoise Hill is also a significant producer of Uranium. Uranium is a key material in the production of nuclear energy, which many analysts are suggesting could be a major component in the global transition to cleaner energy. While the mineral has not seen significant price action in recent years, there are a number of new projects set to come online across the globe in the medium term, which could be a boon to Turquoise Hill, especially as alternative energies gain traction in the marketplace. 

By. Tom Kool

**IMPORTANT! BY READING OUR CONTENT YOU EXPLICITLY AGREE TO THE FOLLOWING. PLEASE READ CAREFULLY**

Forward-Looking Statements

This publication contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this publication include that helium prices continue to increase or remain at current levels; that helium will remain or grow in importance for future of many different technology applications; that Total Helium (the “Company”) will be able to continue to successfully explore for and produce helium, methane and/or natural from its exploration properties and that the Company will be able to commercialize the production of any helium, methane and/or gas reserves found and recovered on its properties; that current technology, including the implementation of appropriate water disposal systems, will allow the Company to successfully explore and develop potential helium and/or gas reserves on the Company’s properties; that the Company will achieve its anticipated return on investment on drilled wells; that the Company will be able to minimize the costs incurred during the exploration and development process; that the Company will be able to store any recovered helium in its agreement with Linde; that the Company and Lind will be able to develop the only alternative helium storage facility to the U.S. federal helium reserve in the entire world; that the U.S. federal helium will be auctioned off to private investors; that the Company will generate ongoing cash flow from its deal with Linde; and that management of the Company can leverage experience from other exploration projects to achieve success. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information.  Risks that could change or prevent these statements from coming to fruition include that helium prices may not increase in the future and may actually decrease for various reasons; that helium may be replaced with other resources such that its importance in technology applications may decrease in future; that the Company may fail to successfully continue its exploration and production of helium, methane and/or natural from its exploration properties or that the Company is unable to commercialize the production of any helium, methane and/or gas reserves found or recovered on its properties; that current technology may be inadequate or cost prohibitive for the Company to successfully explore and develop potential helium and/or gas reserves on the Company’s properties; that the Company may not achieve a return on investment on drilled wells as anticipated or at all; that the Company’s exploration and development efforts, if any, may be more costly than anticipated; that the Company may be unable to leverage its production agreement with Linde for the storage of any helium it recovers and the Company may be unable to develop a helium storage facility as anticipated or at all; that the Company may fail to generate cash flow from its deal with Linde; that the Company may be unable to deliver sufficient quantities of helium to Linde as required under the agreement and that the agreement with Linde may otherwise not be completed or otherwise fulfilled; that management of the Company may be unable to leverage any of its experience from other exploration projects; that the Company may be unable to secure any necessary financing to continue its operations; and that the business of the Company may ultimately fail for various reasons. The forward-looking information contained herein is given as of the date hereof and we assume no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.

 

 

Tom majored in International Business at Amsterdam’s Higher School of Economics, he is Oilprice.com's Head of Operations

 

 

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