The Hormuz chokepoint, with the U.S.-Iran conflict about to enter its third month, remains closed, and global energy flows are being rewired. One industrial gas we've identified as facing supply disruption risks is helium, which threatens to upend end markets ranging from semiconductor production to medical imaging.
Earlier this month, we published a note titled "Wyoming's Helium Empire Ascends As Qatar Gas Goes Flat." The note focused on how ExxonMobil stands out as a major beneficiary of the helium disruption in the Gulf region.
We previously cited UBS analyst Manav Gupta, who noted:
XOM's LaBarge facility in Wyoming, provides 20% of the world's supply, which has not been impacted by recent events in the Middle East. With an estimated eight decades worth of helium left to produce there, LaBarge is poised to play a significant role through the end of this century.
That leaves the market searching for alternative helium suppliers that could become net beneficiaries of the Gulf-related supply shock.
One potential beneficiary is U.S. Energy Corp., which announced Monday that it has signed a five-year helium offtake agreement with an unnamed investment-grade global industrial gas company, giving the company its first contracted revenue stream tied to its Big Sky Carbon Hub in Montana.
The deal covers 100% of Phase 1 helium production, up to 1.2 million cubic feet per month, or 14.4 million cubic feet annually, under a take-or-pay structure. Phase 1 commercial operations remain targeted for early next year.
"The execution of this agreement with an investment-grade industrial gas company with global distribution infrastructure represents a defining milestone for U.S. Energy and validates years of development work at Big Sky," USEG CEO Ryan Smith wrote in a press release.
Smith noted, "This contract establishes long-term, contracted helium revenues and meaningfully de-risks Phase 1 commercial operations at Big Sky. It also reflects the strength we're seeing in the helium market today, where constrained global supply and increasing demand for reliable volumes are supporting a step up in long-term pricing."
He said under the agreement, helium pricing is fixed at $285 per MCF on a plant-gate basis, with no deductions, meaning the buyer assumes transportation, processing, and downstream costs.
Smith added that this agreement reduces risk for Big Sky's Phase 1 development by locking in long-term cash flow with a creditworthy counterparty.
USEG shares surged 35% by late morning in the US cash session.
USEG appears to be positioning itself as a major domestic helium supplier - not quite as big as XOM's LaBarge - but large enough to be noticed by the market, at a time when Gulf-related disruptions are exposing fragile energy supply chains worldwide.