Helix Exploration: Strategic Producer Targets US Helium Supply Gap

• Helix Exploration recently acquired a key helium processing plant for $500K that will enable them to begin producing helium from their wells this year
• The company has transitioned from speculative helium resources to proven reserves of at least 300 million cubic feet, worth around $200M at current prices
• Helium is a valuable, non-substitutable commodity critical for high-tech manufacturing that has seen repeated shortages and price spikes to $1,000/mcf
• Major industrial gas companies are unable to increase helium production as they are already at maximum capacity, creating opportunity for new producers like Helix
• Helix plans to bring their first well into production by summer 2025 and drill 2-3 additional wells this year to further expand their helium reserves and production

Helium is far more than the gas that fills party balloons. This unique element is a critical, non-substitutable input for some of the most important high-tech manufacturing processes in the modern economy. From producing the silicon wafers used in semiconductor chips to cooling MRI scanners, helium has a wide range of essential applications where no alternatives exist. As emphasized by Bo Sears, CEO of Helix Exploration:

Without helium, we are living in the Stone Age. It is so valuable in chip manufacturing, in MRI scanners. The high-tech list goes on and on.

A Chronically Undersupplied Market 

The combination of helium's criticality and lack of substitutes has made it a chronically undersupplied market prone to severe shortages. Over the past two decades, helium end-users have experienced four or five major shortages where supply was rationed and prices spiked.

In times of short supply, prices have gone up to as high as $1,000 per thousand cubic feet (mcf). Right now we're sitting at about $400 or $500 per mcf. So it's an extremely valuable commodity.

During shortages, even top-tier users like GE, Siemens and major chip manufacturers face supply allocations, while lower-priority users like balloon distributors can see their volumes cut by 80% or more. This creates major disruptions, as helium is produced and consumed on a "just-in-time" basis - there is little excess inventory in the supply chain to buffer against shortfalls.

New Demand Drivers Emerging 

Looking ahead, the supply-demand imbalance in the helium market appears poised to intensify. The CHIPS Act is incentivizing a buildout of new semiconductor manufacturing capacity in the US, and those fabs will require enormous volumes of helium to operate.

Each one of those [fabs] will require enormous amounts of helium in order to produce the silicon wafers that you use every day.

This represents a major new source of helium demand that will layer on top of baseline market growth. Meanwhile, the global push to reduce reliance on Russian energy in the wake of the Ukraine invasion has cut off one of the major sources of helium supply. Algeria and Qatar remain major producers, but the US is unlikely to become reliant on them, underscoring the need for new domestic supplies.

Interview with CEO Bo Sears

Incumbents Unable to Increase Supply

Historically, the helium industry has been controlled by a handful of major industrial gas companies that produce helium as a by-product of their natural gas operations. However, these incumbents are ill-equipped to bring on new supply to meet market needs.

The beautiful thing is they can't turn it up. They are operating at maximum capacity right now. It's not that simple - they can't just turn the switch and say let's produce more helium. They are governed by the prudent flow rates of each particular well that goes through a gathering system and into a plant.

So while there is little scope for helium supply to become even tighter, there is also no excess capacity waiting in the wings. The only way to meet growing demand is for new entrants to discover untapped helium resources and bring them into production.

Helix Exploration's Opportunity 

This is where Helix Exploration (LSE:HEX) sees opportunity. The company is a pure-play helium explorer and developer whose value lies in three key assets:

1. Recently proven helium reserves from its Rudyard gas field
2. A newly acquired processing plant that will enable near-term production and sales
3. An inventory of high-potential drilling locations to expand its reserve base

The company's Rudyard field in Montana has recently confirmed a helium discovery that enabled Helix to transition from speculative resources to proven reserves. As CEO Bo Sears explains:

we have transitioned from resource to reserve and that is extremely important because now we have deliverable helium.

The well delivered a commercially attractive helium concentration of 1.1% with the balance being inert nitrogen, making it relatively simple to process.

In Rudyard ...it's principally nitrogen and air... you produce the helium out of the nitrogen and you vent the nitrogen with no adverse effect at all.

Sears estimates the reserve at a minimum of 300 million cubic feet, which at current helium prices of $400-500/mcf would be worth approximately $200 million - significantly higher than the company's current £20 million market cap.

Processing Plant Enables Near-Term Cash Flow

In parallel, Helix has acquired a key helium processing plant in Kansas for just $500,000 - a major discount to the $4 million cost to build a new plant. The facility utilizes pressure swing adsorption (PSA) technology, which Sears highlights is ideally suited to the company's high-purity discovery.

The composition of our gas is quite easy - it's all nitrogen with some helium. There's no CO2 to worry about and other nasty stuff.

The modular nature of the PSA plant means output can be readily scaled up by adding additional membrane units as Helix drills more wells. This capital-light model will allow the company to maintain efficient operations as it grows.

Sears expects the plant to be relocated to Montana and operational by mid-summer 2025, putting the company on a path to first cash flow in the second half of the year. Importantly, the plant can be generating revenue even as the company continues to drill additional wells to prove up its full resource.

The Investment Thesis for Helix Exploration

• Proven, high-grade helium reserve base: 300+ mmcf valued at $200M+ (10x current market cap)
• Near-term path to production: Processing plant to be online by mid-2025, enabling first revenues in 2H
• Development Plans: Drilling at least 2-3 additional wells in 2025 at Rudyard field, with each well costing $1.2M to drill and complete.
• Exposure to rising helium prices: Prices at $400-$500/mcf with further upside as new demand emerges
• Potential acquisition target: Strategic location and asset base in undersupplied US market

The helium market offers a compelling opportunity for investors due to its unique supply-demand dynamics. On the demand side, helium is an essential, non-substitutable input for mission-critical applications like semiconductor manufacturing and MRI machines. The US CHIPS Act is poised to drive a step-change increase in domestic helium demand as new fabs are built out.

On the supply side, helium is a rare and depleting resource, and existing producers are already operating at maximum capacity. With Russia cut off from western markets, there is no excess supply waiting in the wings. The only way to meet growing demand is to bring new projects into production. As Helix Exploration CEO Bo Sears sums it up:

Helium's value will grow as new supply comes online. It's a commodity of extremely high value, and once we find more supply, the demand will grow to fill it.