Exxon Mobil is positioned to benefit from the global helium supply disruption caused by the ongoing conflict in the Strait of Hormuz, according to a UBS report.
Conflict Impact on Helium Supply
- The five-week conflict in the Strait of Hormuz has disrupted helium production in Qatar, which previously supplied over one-third of the global helium supply.
- Spot helium prices have surged to $1,000-$1,200 per thousand cubic feet from around $500 under older, long-term contracts.
Exxon Mobil's LaBarge Facility
- Exxon's plant in LaBarge, Wyoming, remains unaffected and currently supplies about 20% of the world's helium.
- The facility has an estimated 80 years of helium reserves and produces approximately 1.4 billion cubic feet of Grade A helium annually.
- Helium extraction was not part of the original design but became central after large quantities were discovered.
UBS Analysis and Financial Outlook
- UBS analyst Manav Gupta states that Exxon is a net beneficiary due to pricing upside and supply security relative to competitors reliant on Qatar.
- The bank maintains a buy rating with a 12-month price target of $171, implying about 5% upside from the current price of $163.37.
- Every $100 increase in spot helium prices could add $119-140 million to Exxon's EBITDA, assuming 85%-100% plant utilization at LaBarge.
Broader Industry Effects
- Helium is critical for semiconductor manufacturing, medical imaging, and space rockets.
- The disruption threatens these industries, highlighting the strategic importance of stable helium supply and Exxon's role in meeting global needs.