Why Are These Oil And Gas Execs Betting On A Helium Boom?

December 10, 2021 - Global Investment Daily

The biggest land grab going on right now is all about helium—the world’s most unique and irreplaceable rarified gas that some billion-dollar industries can’t survive without.

It’s worth up to 100 times more than natural gas, even as natural gas prices soar globally.

That’s what happens when 40% of U.S. helium supply long held in a federal reserve is depleted and when the U.S. accounts for over half of the world’s total supply.

Explorers are just now scrambling to make new discoveries and develop new resources at breakneck speed.

The last time there was a land rush of this magnitude was the American shale boom.

Now, helium is the new shale, and it’s a market that’s on track to top $18 billion by 2025.

Competition in this space is heating up but the takeaway is brilliant news for junior E&P companies who have made the shift from oil and gas to helium: Major players are

swooping in for deals with pre-production junior explorers …

By August, Renergen Ltd (JSE: REN) (ASX: RLT) had already inked numerous offtake deals for its pre-production helium with global gas giants and multinationals Linde, Messer, Siemens and Helium24.

The minute a junior helium company proves up a discovery, it can almost guarantee pre-sales contracts in this environment of shortage.

That situation is the perfect setup for the next junior explorer to start drilling, and Avanti Energy Inc. (TSXV:AVN; OTCMKTS:ARGYF) has two advantages …

It has helium pedigree with oil and gas executive giants behind the wheel.

And it’s just announced an initial three-well drill campaign and expects the first drill results sometime early in the New Year , and that could lead to one of the fastest-paced news flows in this space.

Drilling Starts Now, and News Flow Will Be Swift

Avanti has ~69,000 acres in the Greater Knappen area extending from northern Montana to Alberta, Canada.

This is believed to be prime helium land, and the first well planned to be drilled in a matter of weeks, in early December. The company is expecting results sometime early in the New Year.

The first three wells will target three separate pay zones: two in the Beaverhill Lake formation and one in the Basal Sandstone formation.

Initial results should show investors the helium concentration, with flow rates come in January through pressure test results. While this stock could gain nicely with favorable initial results and helium concentrations, it will be the flow rates that could set it apart and really test the market here.

The medium-term goal for Avanti is to have its own facility built within a year and be producing from one of these wells.

Between now and April or May, Avanti Energy Inc. (TSXV:AVN; OTCMKTS:ARGYF) says it expects to drill up to six wells, which could extend the rapid-paced news flow for at least another quarter.

Favorable drill results, which are based on a smart acquisition of 3D seismic that has given and Avanti Energy Inc. (TSXV:AVN; OTCMKTS:ARGYF) 17 initial drill targets in its core area could lead to a strategic industry partner for expanded exploration and potential development. The drill targets all reside over closed structural highs that exhibit ~80m to >200m of relief and are highly prospective for helium.

The Greater Knappen Area Highly Prospective for Helium

Avanti has 100% ownership in ~69,000 acres in highly prospective helium territory.

The other wells surrounding Avanti’s Greater Knappen land have high helium shows in multiple Devonian and Cambrian targets, with helium percentages of up to 2% and nitrogen percentages of up to 96%. Experts generally consider anything from 0.3% to 1% Helium percentages to be commercially viable.



Avanti’s geological interpretation of this area estimates a low-end unrisked, undiscovered resource potential of 1.4 billion cubic feet of Helium and a high-end estimate of up to 8.9 billion cubic feet, undiscovered and unrisked. And that’s based only on the interpretation of 7 out of 10 structures, so far.

A potential 8.9 billion-cubic-feet helium play could mean $2.5 billion in helium based on Bureau of Land Management’s (BLM) 2019 average price. That would make for a wildly undervalued stock for a small, ~$70-million market cap company

When the BLM held its last helium auction for the federal reserves in 2019, it fetched a price for helium that represented a 135% increase over the previous two years. At the high end, it fetched $337/Mcf (thousand cubic feet), and on average it brought in $280/Mcf.

But helium, which isn’t traded like a commodity, has been known to fetch even higher prices, from $400/Mcf to $600/Mcf.

That could be why insiders are buying big right now, just ahead of the first drill turning.

Avanti’s CEO, Chris Bakker, recently bought over $500,000 in stock at levels double where it is now. Now that drilling is launching, he’s buying again.

It’s also why Beacon Securities has a 12-month target price at $3.80 on Avanti Energy Inc. (TSXV:AVN; OTCMKTS:ARGYF), which it hasn’t updated since September .

Beacon’s confidence stems partly from the management behind this play, noting: “The technical acumen is a main advantage that Avanti has in its exploration for helium and we continue to have high expectations for the Greater Knappen area,” Beacon wrote in a note to clients. “The initial drilling program is Montana and Alberta will just be the start of a multi-year exploration and development program for AVN.”

These Are Oil & Gas Executive Giants

Not all explorers are equal, even those sitting on highly prospective resource territories. It’s management that sets them apart, and management that makes or breaks an exploration play.

In the case of helium, the ideal setup is an oil and gas track record because most helium will be found in gas fields.

This is where Avanti really stands out. Big oil and gas explorers are shifting to Helium to take advantage of the shortage, natural-security-level demand and the fact that oil and gas explorer does this best.

In Avanti’s case, we have several figures from a giant Canadian E&P company, $10-billion market-cap company Encana (now Ovintiv).

More specifically, we have two main figures involved in the biggest natural gas find in recent history: The Montney Shale. Avanti CEO Chris Bakker and VP of Subsurface Genga Nadaraju played key roles in the identification and development of the Montney for Encana.

They’ve done this before, and they’re gearing up to do it again—this time with Helium.

And they’re stealing a successful strategy page from the Montney playbook, as well: The Avanti team is building a geological model to understand helium migration and accumulation at a fundamental level—the same approach used in the Montney Shale. The strategy follows an 80/20 split of opportunities between what they call “elephants” and regular assets in order to find bigger, longer-lasting resources at Greater Knappen.

The Race for Helium

Helium is the key to innovation, and the key to medicine and big tech. It’s unmatched cooling power makes it instrumental in everything from MRIs and semiconductors to fiber optic telecommunications and space travel.

Computer hard drives are now helium drives. Semiconductors are already experiencing a severe shortage, and medical research is threatening to come to a standstill in the face of a helium supply squeeze.

Simply during launch countdown, a NASA space shuttle requires 1 million cubic feet of helium.

We’re running out because the U.S. Federal Helium Reserve in Amarillo, Texas, has now closed down, taking 40% of the U.S. supply of this irreplaceable gas off the market.

Now, it’s all about who gets to commercial helium first. And in the helium exploration space, this can come down to a question of management. This is the Avanti Energy Inc. (TSXV:AVN; OTCMKTS:ARGYF) advantage, and the news flow from here on out should be rapid-fire.

It should also be full picture: That means recoverable resources plus flow rate. High concentrations of helium mean little without a flow rate. What investors will be looking for sometime early in the New Year—and what we expect from Avanti’s world-class executive management—is a daily recoverable rate.

This one is moving fast. The drill bit will hit the ground in the coming weeks, with results sometime early in the New Year for the real production numbers.

Helium is now one of the most prospective territories for JV deals and pre-production offtake sales, and a company with management from the best oil and gas giants and a strategy borrowed from one of the biggest natural gas discoveries in recent years could very well be on the top of the shopping list.

While helium is taking the center stage, a number of resources, from lithium to oil and beyond, are also facing a number of bullish catalysts:

Royal Dutch Shell (NYSE:RDS.A) has a massive global presence and is one of the world's largest oil companies. Founded in Holland over 100 years ago, it employs more than 90 thousand people around the globe with operations on every continent but Antarctica. As Royal Dutch Shell tries to meet worldwide demand for energy sources while balancing environmental concerns, they are faced with many challenges that come as no surprise given their size and reach--despite this however, there have been improvements made by focusing on lessening emissions through cleaner burning fuels such as natural gas or electric vehicles powered by renewable energies like solar panels.

Despite being one of the largest names in Big Oil, Shell is also working hard to create and harness new forms of energy, particularly hydrogen. Shell is leading several hydrogen projects worldwide, including the NortH2 project in the Netherlands, expected to be the largest European green hydrogen project by 2040. In December 2020, RWE and Equinor joined the NortH2 partner consortium.

Shell also bets on hydrogen as one of the fuels that could help cut emissions in the shipping industry. “We believe liquid hydrogen to be advantaged over other potential zero-emissions fuels for shipping, therefore giving a higher likelihood of success,” the supermajor said in its 2020 report ‘Decarbonising Shipping: Setting Shell’s Course.’

Chevron (NYSE:CVX) is a global oil and gas giant founded 142 years ago by John D. Rockefeller himself. It is a leader in the industry, and the second-largest oil company on the New York Stock Exchange. Chevron is now looking to invest in low-carbon technologies such as hydrogen and carbon capture, utilization, and storage in its “Plan to Deliver Higher Returns, Lower Carbon.”

Obviously, Chevron is still an oil company at its core, but it is quickly emerging as one of the fossil fuel industry’s biggest advocates of hydrogen. In fact, Chevron playing a major role as a global advisory body to the Hydrogen Council in order to provide a long term vision for the role of hydrogen in the green energy revolution.

Chevron still has not fully recovered from the massive hit it took back in March 2020, where it dropped to a 5-year low of just $59, the oil giant has made some progress thanks to recovering oil prices. Sitting at $110 at the time of writing, Chevron is slowly recuperating some of its losses, but its embrace of green energy, and hydrogen especially, will likely help it recover nicely as Joe Biden prepares a multi-trillion dollar infrastructure and green energy plan.

Magna International (NYSE:MGA; 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 (NASDAQ:WPRT, 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.

Westport Fuel has been making major moves in the market over the past year, and its efforts are finally coming to fruition. Since May 2020, the company has seen its stock price rise by 322%, and with more potential deals like the one it has just sealed with Amazon to provide natural gas-powered trucks to its fleet, the stock has even more room to run in the coming years.

Wabtec Corp. (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."

Lithium Americas Corp. (TSX:LAC) is one of America’s most critical and promising pure-play lithium companies. With two world-class lithium projects in Argentina and Nevada, Lithium Americas is well-positioned to ride the wave of growing lithium demand in the years to come. It’s already raised nearly a billion dollars in equity and debt, showing that investors have a ton of interest in the company’s ambitious plans.

Lithium America is not looking over the growing pressure from investors for responsible and sustainable mining, either. In fact, one of its primary goals is to create a positive impact on society and the environment through its projects. This includes cleaner mining tech, strong workplace safety practices, a range of opportunities for employees, and strong relationships with local governments to ensure that not only are its employees being taken care of but local communities, as well.

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.

Teck Resources (TSX:TECK) could be one of the best-diversified miners out there, with a broad portfolio of Copper, Zinc, Energy, Gold, Silver and Molybdenum assets. It’s even involved in the oil scene! With its free cash flow and a lower volatility outlook for base metals in combination with a growing push for copper and zinc to create batteries, Teck could emerge as one of the year’s most exciting miners.

Though Teck has not quite returned to its January highs, it has seen a promising rebound since April lows. In addition to its positive trajectory, the company has seen a fair amount of insider buying, which tells shareholders that the management team is serious about continuing to add shareholder value. In addition to insider buying, Teck has been added to a number of hedge fund portfolios as well, suggesting that not only do insiders believe in the company, but also the smart money that’s really driving the markets.


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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 prices for helium will significantly increase due to global demand and use in a wide array of industries (including key technology sectors) and that helium will retain its value in the future due to the demand increases and overall shortage of supply; that the Avanti team will be able to develop and implement helium exploration models, including their own proprietary models, that may result in successful exploration and development efforts; that historical geological information and estimations will prove to be accurate or at least very indicative of helium; that high helium content targets exist in the Alberta and both Montana projects; and that Avanti will be able to carry out its business plans, including timing for drilling and exploration. 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 demand for helium is not as great as expected; that alternative commodities or compounds are used in applications which currently use helium, thus reducing the need for helium in the future; the degree of success of the coming drilling campaign; the accuracy of the initial estimates of helium on the land; the commercial viability of any obtainable helium, the ability to get any helium obtained to market; the accuracy of the production timeline estimates; that the Avanti team may be unable to develop any helium exploration models, including proprietary models, which allow successful exploration efforts on any of the Company’s current or future projects; that Avanti may not be able to finance its intended drilling programs to explore for helium or may otherwise not raise sufficient funds to carry out its business plans; that geological interpretations and technological results based on current data may change with more detailed information, analysis or testing; and that despite promise, there may be no commercially viable helium or other resources on any of Avanti’s properties. 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.

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