Google, Amazon and Netflix Are Fighting Over Falling Helium Supplies

February 14, 2022 - OilPrice.com


A dramatic – and potentially lucrative – scenario may now be unfolding in the markets for one of the most overlooked natural resources on the planet.

This essential commodity – helium – is used to drive innovation for many of the world’s biggest tech companies...and it is needed to help manufacture everything from medical equipment to computer chips.

Yet despite its critical importance – and growing demand – a potentially crippling lack of supply has put us on the brink of a critical shortage.

This supply-demand imbalance has triggered a fast-moving growth opportunity for any exploration and development company that can show potential for significant new helium discovery.  

Avanti Energy Inc. (TSX:AVN.V; OTCMKTS:ARGYF) is generating attention in the helium space as it announces successful results from the beginning of its three-well exploration drilling program on its property in the Greater Knappen region.

 

The Greater Knappen is a 69,000 acre property stretching from Montana to Alberta, Canada...and it may represent one of the best North American prospects for new helium discovery. 

Avanti Energy has a 100% operatorship of this property...and the company’s experienced technical team has identified 17 drilling targets in the region.

Avanti’s geological interpretation of the Greater Knappen property estimates an undiscovered resource potential of:

* Low case: 1.4 bcf of Helium

* Mid case: 4.4 bcf of Helium

* High case: 8.9 bcf of Helium.

Based on these estimates – and current helium prices – it’s possible that Avanti Energy Inc. (TSX:AVN.V; OTCMKTS:ARGYF) could be sitting on as much as $1 billion worth of helium.

And now the company’s initial drill testing is looking to validate the potential for Avanti’s Greater Knappen project. 

Initial Drill Testing on Avanti’s First Helium Well Shows Promise

On January 24, the company announced that it had completed initial open hole logging and drill stem testing on its first helium well, Rankin 01-17, on the Greater Knappen property.

The Rankin 01-17 well was successfully drilled to a depth of 5,860 feet and encountered all the targeted zones for helium potential. Open hole logging indicated five zones with reservoir characteristics (good porosity and low water saturation) suggesting further testing is warranted.

Drill stem tests were performed to high-grade zones for completions and two of the targeted zones showed economic helium potential.

This completion of the company’s first exploration well on the Greater Knappen property appears to bring strong potential for Avanti Energy Inc.

The company’s analysis has shown that there is potential for economic helium production in two of the three target zones.

And on January 27, the company announced that its second helium well, WNG 11-22, was spudded on the Greater Knappen property.

This second play concept in Greater Knappen is geologically distinct from the company’s first well, so success with WNG 11-22 would open the possibility for additional drill targets in the future for Avanti.

The next multi-well drilling program is expected to commence in Q1 2022.

Crunching the Numbers: What Success in the Greater Knappen Could Look Like for Avanti Energy

What makes the opportunity with Avanti Energy Inc. (TSX:AVN.V; OTCMKTS:ARGYF) so intriguing to us is the upside potential associated with success.

As mentioned earlier, with the 69,000-acre Greater Knappen property, it’s possible that the company could be sitting on as much as $1 billion worth of helium if the company’s estimates are proven to be accurate.

Just six miles from Avanti Energy’s Greater Knappen property, one of the company’s competitors is currently producing 55,000 cubic feet of helium per day...and it had a helium concentration rate of 1.4% in the raw gas stream.

It’s estimated that the company that owns this nearby well is seeing a payback on their well in roughly six months.

That’s impressive, to be sure – and it bodes well for Avanti Energy Inc.

In Avanti’s case – with a helium concentration potentially as high as 2% – it’s possible that the time to payoff for each well could be even shorter.

In fact, each well is projected to cost roughly $1.5 million...and the potential may exist for each of Avanti’s wells to be paid back in just 3 months.

And these are wells that could easily run for ten years or more...possibly even 20 years.

That would be an astonishing economic picture for any company – especially one in a bull market that continued to be red hot.

The Bull Market for Helium Shows No Signs of Slowing Down

As a noble gas helium is not combustible and has properties that make it irreplaceable for a number of important industrial applications.

Helium is the second most abundant element in the universe but it is extremely rare on earth.

With a global helium shortage looming, it’s estimated that the supply will not keep up with demand for the next 20 years.

And that is happening as industry demand is projected to increase at a compound annual growth rate of 11% each year through 2037.

While helium is most commonly thought of as being used for the inflation of balloons, the truth is helium is used in a number of critical parts of daily life.

* Medical Industry – Helium is used to operate MRI machines and as part of respiratory treatments.

* Cryogenics – Helium is the only element that can come close to reaching absolute zero.

* Internet Connectivity – Fiber optic cables must be manufactured in a pure helium environment.

* Electronics – Many electronics and semiconductors – including mobile phones – require helium to be used at various stages of the production process.

* Computers – Helium-filled hard drives offer 50% higher storage capacity with 23% lower operating power.

* Car Air Bags – Helium is the gas of choice for effecting the near instantaneous deployment of air bags in cars.

Helium is used by companies like Amazon, Google and Netflix to help cool their data centers. And both the U.S. and Canadian governments have recently added helium to their critical minerals lists.

Not to mention...approximately $12 million worth of helium is needed for a single space rocket launch.

In fact, the single largest buyer of helium is NASA, consuming almost 75 million cubic feet annually to cool liquid hydrogen and oxygen for rocket fuel.

And with the highly publicized rocket launches from Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin...that consumption of helium for space launches is only likely to increase in the months ahead.

That’s why for us Avanti Energy Inc. (TSX: AVN.V; US OTC: ARGYF) right now appears to be such an attractive potential investment.

Avanti Energy is Led By a Collection of Resource Industry Recognized Veterans

The Avanti Energy team is comprised of industry recognized veterans, some of whom were (while formerly at Encana) involved in the early stages of the discovery of the Montney Formation, one of the premier natural gas formations in North America.

Without question, the Avanti Energy team is among the most experienced – and most decorated – in the helium space, with direct experience in developing multi-billion dollar projects from their time at Encana.

Avanti CEO Chris Bakker has over two decades of experience in oil and gas, most recently working as a commercial negotiator with Encana (now Ovintiv) for major facilities and pipelines in the Montney gas play. 

His expertise includes all facets of Natural Gas Exploration like land acquisition, exploration, drilling, well production and facility integration and construction.

VP – Subsurface Genga Nadaraju has over two decades of experience in the oil & gas industry…Director - Geoscience Dr. Jim Wood has over 30 years of experience as a geologist specializing in reservoir characterization…VP - Engineering Ali Esmail has spent the past 13 years specializing in reservoir engineering …and Senior Geophysicist Richard Balon has over 30 years of experience in the Western Canadian Sedimentary Basin.

This is an experienced team with an impressive track record of work in the oil and gas industry.

And now they appear poised to leverage their expertise again.

Why The Window of Opportunity for High Upside Helium Potential Could Close Quickly

The results of the company’s initial drill testing appear to support the significant potential for Avanti’s Greater Knappen project. 

And Avanti Energy is moving quickly – with the second helium well already spudded...and the next multi-well drilling program anticipated to start in Q1 2022.

Assuming a continued red-hot bull market in helium, any company that shows the potential for exploration success could attract significant investor attention.

With a current market cap of approximately $80 million there is tremendous potential if Avanti makes a bona fide discovery.

Additional developments related to the company’s three-well drilling program in the Greater Knappen region could result in increased visibility and rapid moves for Avanti Energy Inc. (TSX:AVN.V; OTCMKTS:ARGYF).

Other companies that could benefit from a different kind of shortage…

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.

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.

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.

Cenovus Energy (TSX:CVE) is most known for its oil business, but it is also actively investing in renewable energy. More importantly, however, is that it has set truly ambitious sustainability goals for itself, aiming to cut emissions by a massive 30% in just 10 years.

This is one of the most actively traded stocks on the TSX. The potential is certainly here for this oil company, so for investors who are bullish on the return of the oil markets, this is a perfect pick in the Canadian market.

By. Michael Scott

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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 and that helium will retain its value in future due to the demand increases and overall shortage of supply; that Avanti will able to successfully pursue exploration of its licenses and properties; that Avanti’s licenses and properties can achieve drilling and mining success for commercial amounts of helium; that indications of potential for economic helium in Avanti’s initial wells will predict future results; that Avanti will be able fulfill its obligations under its licenses and in respect of its properties; that Avanti will be able acquire the rights to the helium on its prospective helium properties; that the Avanti team will be able to develop and implement its 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 on Avanti’s 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; that the Company may not fulfill the requirements under its licenses for various reasons or otherwise cannot pursue exploration on the project as planned or at all; that the Company may not be able to acquire the helium rights on its properties as contemplated or at all; 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, results of the recent drilling and exploration may be inaccurate or otherwise fail to result in locating or developing any commercial helium reserves on the Avanti properties, and that 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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