01. October 2021 | 12:45 CET
Royal Helium, Gazprom, NEL - Now it is worth taking another look!
Helium is a sought-after noble gas essential for numerous applications due to its outstanding chemical and physical properties. It is used, for example, as a non-conductive, non-reactive coolant in medical laboratory equipment or in space rockets. It is also in demand in the electronics and nuclear industries. On Earth, helium occurs only in very low concentrations in the atmosphere due to its high volatility, although it is the second most abundant element in the universe after hydrogen. Helium is often a byproduct of oil and gas production. How can investors profit?
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ISIN: ROYAL HELIUM LTD. | CA78029U2056 , GAZPROM ADR SP./2 RL 5L 5 | US3682872078 , NEL ASA NK-_20 | NO0010081235
"[...] We expect the first three wells to be drilled, cased, completed and tested by the second week of March [...]" Andrew Davidson, CEO, Royal Helium Limited
Royal Helium Ltd. - Good drilling data underlines potential
The Canadian Company Royal Helium focuses exclusively on helium projects and continues to develop them with the aim of starting production in the medium term. The Company owns a land area of more than 400,000 hectares in the Canadian province of Saskatchewan, which is known for its helium deposits. Royal Helium's first two drilling projects are focused on the Climax (7 wells planned) area in southwestern Saskatchewan and Bengough (5 wells planned) in south-central Saskatchewan. Both areas are well developed in terms of infrastructure.
The Canadians successfully completed the Climax I to III wells in the spring and confirmed an economically viable helium concentration. The Company announced that the Climax-4 well has been drilled to a total depth of 2,701 meters. The completion program is underway and includes analysis of the core samples taken, drill stem testing conducted over a continuous interval of 120 meters, and flow testing, all from the Regolith zone, now renamed Climax Nazare. This zone had the highest and most consistent helium values in the Climax block to date.
Based on the strong results, Royal Helium will now immediately expand the Climax Nazare program by applying for two additional drilling licenses for a potentially large pool that seismic indicates could extend over 30 square miles. Andrew Davidson, President and CEO of the Company, emphasized, "We intend to immediately expand our drilling and completion teams so that we can simultaneously drill test some of the highest historic helium deposits in southeast Saskatchewan while continuing to develop Climax Nazare without delay or compromise." With the results of Climax-4 and further drilling, the share price booster could soon be ignited. Currently, the Company is valued at CAD 65 million. The share certificates have corrected about 50% from the 12-month run high.
Gazprom - Share defies disturbing maneuvers
The share certificates of the world's largest natural gas producer have seen a solid upward trend since the beginning of the year. High commodity prices have kept profits buoyant. The stock trades at a 2022 P/E of just 4 and a dividend yield of 11%. That is an extremely attractive valuation level. Gazprom continues to expand its market power in Europe through new pipelines and contracts. This is not without problems, as economic and political interests are simply too great. Now a new gas contract between Russia and Hungary is causing a stir. Ukraine protested against this step, but this will not change the facts. The agreement between Gazprom and the Hungarian energy Company MVM Group has been signed for a term of 15 years.
NEL - Small steps get the job done
NEL is implementing several pilot projects with well-known partners in various fields of hydrogen technology. The Company focuses on the production, storage and distribution of hydrogen. The stock has corrected significantly in recent months. NEL will be in the red for the next few years until it reaches a critical production level. The Norwegians, who specialize in the installation of electrolyzers, have sufficient cash as of today to bridge the lean period.
Albeit in small steps, progress has been evident in recent weeks. A Swedish company recently ordered a hydrogen filling station from NEL, which is expected to be operational by the fourth quarter of 2022. Previously, the Norwegians had received an order each from Scotland and France. NEL's current stock market value of the equivalent of USD 2.3 billion includes a lot of future potentials. According to analyst estimates, revenues are expected to double from 2021 to 2022 to USD 160 million. If similar momentum follows in 2023, the Company could at least generate a small operating profit.
The stock market assesses the future. Sometimes market participants apply their own valuation standards. Gazprom, the world's largest natural gas producer, is trading at a P/E ratio of 4 and a dividend yield of 11%. Is the fear of falling crude oil prices or country risk too high? Can hydrogen specialist NEL grow into its USD 2.3 billion valuation, or will the Company run out of steam before breaking even? Royal Helium offers a good risk-reward ratio and an exciting investment story.