Strait of Hormuz blockage upends global helium supply. This U.S. company could benefit

Exxon Mobil stands to gain as the Middle East war continues to squeeze global helium supply , according to UBS. The five-week-old war against Iran could pose a threat to the semiconductor sector, alongside other industries that depend on helium, such as medical imaging and space rockets. The U.S. Geological Survey estimates that before the war, Qatar produced more than one-third of the world's helium supply. But as helium production in Qatar plunges in the wake of attacks on facilities, this could leave an opportunity for Exxon Mobil. "Exxon is a net beneficiary of the current helium market tightness, with upside to pricing and advantages in security of supply relative to certain industrial gas majors that rely on Qatar for production," wrote UBS analyst Manav Gupta. In a report out Monday, UBS reiterated a buy rating and 12-month price target of $171 on the nation's largest oil and gas producer, implying about 5% upside compared with Exxon Mobil's Monday close of $163.37. The oil and gas giant has surged 36% this year, excluding its dividend, currently yielding 2.56%. XOM 1Y mountain Exxon Mobil shares over the past year Exxon Mobil today supplies 20% of the world's helium supply from a natural gas plant near LaBarge, Wyoming that's unaffected by events in the Middle East, UBS said. "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. This facility, is capable of producing ~1.4 billion cubic feet per year of Grade A helium," Gupta wrote. "With over 30% of global capacity disrupted, this location will play a key role in meeting global needs for Helium which is a critical element for many advanced technologies." Extracting helium wasn't even part of the facility's original design when it began producing natural gas in the mid-1980s. But helium production soon became central to LaBarge's operations after large quantities were discovered. Spot helium prices have soared to $1,000-$1,200 per thousand cubic feet in the wake of the war, up from about $500 under some older, long-term contracts, the UBS report said. The investment bank estimates that every $100 increase in spot prices brings Exxon Mobil an added $119 million in earnings before interest, taxes, depreciation and amortization (EBITDA), assuming output is sold on the spot market and plant utilization at LaBarge is 85%. Assuming 100% utilization, the UBS model shows $140 million in added EBITDA at Exxon for every $100 increase in spot helium prices.