April 15, 2021/OilPrice.com

It’s been a while since I’ve shared any new opportunities with my readers, but we’ve been playing a wait-and-see game for what I think are some of the biggest changes taking place in the global energy sector.

In my view, never have we witnessed such a dramatic change in markets and market sentiment, and we’re always following the Big Capital. 

And yes, oil prices seem to be back on the rise, despite the demand culling of COVID-19, but I’ve got something which I think is far more exciting for you right now…

It’s what I believe is the next great supply squeeze … 

But it’s not about energy. 

It’s what I think is one of the most overlooked looming supply squeezes in the markets, and that’s what makes it the most uniquely interesting opportunity I’ve looked at since the cannabis and crypto booms. 

We’re talking about a niche commodity that some experts say we are running out of. 

That commodity is helium, and it’s led me to what I believe is the best investment opportunity of the year. 

The play is Canadian Avanti Energy Inc. (TSX: AVN.V; US OTC: ARGYF), which I think is far more than a simple helium play. It’s got an experienced management team who have already helped discover natural gas in the Montney… producing almost 300,000 boe/d over the past decade and a half as one of the largest discoveries in North America.

Now, I think it’s right on target in an exciting new play, where it’s just acquired the license for 6,000 acres from the Government of Alberta. 

You may want to be a part of what some think is the next commodity supercycle

This isn’t about balloons. 

I fully expect that the helium sector may have even more upside than the first cannabis boom–and even the second one that’s looming. 

Why? Because I think demand is soaring from multiple sectors. 

A lot of companies need helium. The tech giants – Amazon, Alphabet, Facebook, Netflix – all need helium for their data centers. That demand may well surge along with our almost endless appetite for data. 

The health sector needs helium, too. As the element with the lowest melting point, helium is a vital part of cooling the magnets in MRI machines. 

It may also be critical for our global pandemic because helium is an important element in respirators, not to mention a line-up of other key medical equipment. 

The only saving grace of a helium shortage that experts say was already looming before the pandemic was that the 10% that was sucked up in party balloons was freed up temporarily, partly because medical science asked helium balloon retailers to let it go. Apparently, it was that bad. 

In 2019, the global helium market was worth approximately $10.6 billion. By 2023, it is expected to reach approximately $16 billion. 

That is, if we can produce enough. 

Until recently, experts say everyone was pretty relaxed about our helium supply. Apparently, that’s because the U.S. Federal Helium System controlled by the Bureau of Land Management (BLM) in Amarillo, Texas, had seemed to have an inexhaustible supply for the past seven decades. It’s reported to have provided some 40% of the world’s supply. As of September 30th 2021, the Bureau of Land Management will apparently no longer manage it.

But guess what? It’s out. Supply is being exhausted and what’s left in the stockpiles may only be used by the federal government. Reports say we need more, and we need it quickly. I think that’s an advantageous position for a small-cap explorer and developer in this market to be in right now.  

Without new discoveries, supply appears to be in for a fantastically tight ride – a scenario that I think could send prices much higher between now and 2023. 

That’s why Avanti is my big pick of the year, and I’m going all-in. 

Not only has Avanti’s team recently acquired (in March) the license for over 6,000 acres of land from Alberta, but the company says that land is highly prospective for helium. 

Now, it’s reported that most of the big supplies of helium in the world are found where drilling for natural gas takes place. 

This may be no different. Avanti’s new position is on the site of previous exploration for oil and gas wells drilled by the government of Alberta. Avanti’s project resides in an area with confirmed reservoir rock that has seen multiple DSTs (drill stem tests) with analyzed gas. 

We’re also looking for high-grade helium here. 

Anything above 2% for helium is considered high-grade–and compares favorably to the commercially viable grades ranging from 0.3% to 1%. 

A previously drilled well on the property returned gas with high helium content (2.18%) and high nitrogen content (96%).

The property apparently fits well with helium tests in multiple nearby wells and the potential for viable helium reservoirs over a larger basement structure. 

I was already interested in Avanti earlier this year. My interest was increased on April 9th, when Beacon Securities Limited initiated coverage, seeing many of the same things I was seeing. 

Beacon initiated coverage on Avanti, calling it an “enticing investment opportunity” because of its “world-class team” and “supportive market fundamentals”. 

So, let’s look at those fundamentals again…

It’s not just that experts say we’re running out of helium, even though it’s quite abundant on earth. It’s that demand appears to be increasing. That set-up has reportedly resulted in helium prices going up by more than 200%. 

Helium may not just be important for critical medical equipment, tech giants, and semiconductors… Experts say even space exploration, quantum computing, and nuclear power have applications that need helium. 

As of March 2021–the same time as Avanti acquired its 6,000-acre license – the Canadian government added helium to its critical minerals list.

In my opinion, the fundamentals make Avanti one of the most interesting exploration stories to watch over the next few years. Starting now. 

New sources of supply will ideally come from North America, which in my view adds geopolitical importance to Avanti’s exploration efforts.  

And I think Beacon is definitely right about the team. 

This is a management story as much as it is a supply squeeze story for an important commodity, and members of Avanti’s team have important previous experience. 

Just like oil and gas, it helps to have a solid team behind a helium exploration project. If a small cap company’s team doesn’t have a previous track record of experience, investors should run for the hills. 

Members of the Avanti team have already been involved in the development of a helium resource–the Encana/Ovintiv Montney production in British Columbia. They helped identify and develop it. And according to reports, it’s producing almost 300,000 boe/d.

Now, they’re getting ready to try it again…

Avanti’s, Genga Nadaraju, Dr. Jim Wood, and Ali Esmail are developing a plan to target significant helium accumulation that may strengthen North America’s position on this gas map at a time when a supply squeeze appears to be looming. 

It’s that plan and the fact that some of their team have helped to do it before that really piqued my interest. As in the natural gas industry, Avanti may use “conventional” exploration to identify structural traps and high points for drilling. Apparently, Avanti is pursuing an 80%-20% targeted model approach. Experts say that means it may do 20% of the exploration using standard industry conventional strategies, while 80% may be their own models.  

That 80% model – what I think is the exploration key to help unlock the opportunities in this 6,000-acre project and possibly others–is being kept confidential, but members of the Avanti team have helped to do something like this before in the Montney, and I’m trusting in this team to try to do it again. 

That’s exactly how I think a small-cap explorer may come out on top with a major advantage during what looks to be a great supply/demand setup. 

Avanti’s new 6,000 acre project is just north of the US border …

 
And as I mentioned above, the Alberta project appears highly prospective for high-grade helium. 

Avanti may also hope to slip across the border and add more land in Montana, where it’s already started putting its plans to work… and where they’ve already identified drill targets. 

In the US Midwest, Avanti has also identified two parcels of land consisting of 2,749 acres with potential helium reserves. 

In other words, I think we may be looking at a string of new acquisitions here in the very near future. 

I believe this may be a quality asset in a relatively short period of time. That’s why I’m all-in early on, from the beginning of the 6,000-acre license acquisition. This is an experienced team looking at what appears to be a highly prospective play for my new favorite commodity. 

Beacon says the potential returns here may be “very high”. 

In fact, they note that with a raw gas rate of 2-2.5 mmcf/d (which they say is extremely feasible for 2,500-3,000 meter wells), a helium content of 1-2%, helium price of $300-$500, DCCT costs, operating costs and royalties, we may see some great potential numbers: Possible operating netbacks of C$309/mcf (with $300 helium prices) and C$548/mcf (with $500 helium prices). 

But the real sweetener: According to Beacon, Avanti’s wells may “payout in only two to eight months and generate an IRR of 122-635%.” 

Wells which may pay out in only 2-8 months and generate those kinds of returns is a very good opportunity in my opinion. 

I think helium may be the new cannabis of commodities. And armed with support from Beacon’s initiation of coverage report, I’m sharing this opportunity with you after a bit of a winter hiatus. 

This looks like helium’s time to shine. It’s always been produced as a byproduct of natural gas … but what seems to be important to understand now is that we may need to actually explore and produce helium on its own. Unless we’re just filling balloons, producing it as a byproduct may no longer be enough. We’re running out. 

Avanti may be the best helium play I know. Yes, it’s still early stage. It’s speculative. But based on what I know about its management team… what they’ve already helped to achieve and what I think they may achieve in the future, plus what I suspect may be a string of additional project acquisitions in potentially helium-rich areas. Just like helium itself, I would expect AVN’s enterprise value to continue to go up.

You can read the full Beacon report here: https://avantienergy.com/wp-content/uploads/2021/04/AVN-2021-04-09.pdf 
The company’s corporate presentation is here: https://avantienergy.com/wp-content/uploads/2021/04/Avanti-Corporate-Presentation-April-2021.pdf 
Their website is: https://avantienergy.com 
Their Canadian ticker is: https://finance.yahoo.com/quote/AVN.V?p=AVN.V 
Their US ticker is: https://finance.yahoo.com/quote/ARGYF/?p=ARGYF 

I really think this one is worth a look.

James Stafford
Publisher, Oilprice.com