By Thomas Kerr, CFA
NASDAQ:USG
READ THE FULL USEG RESEARCH REPORT
Helium Industry Update
Helium has become a strategically important input for the AI and data center ecosystem, largely driven by its important role in advanced semiconductor manufacturing and next-generation cooling systems. It is used in the production of high-performance AI chips, including GPUs and TPUs, and is increasingly adopted for advanced cooling systems that reduce reliance on water- and air-based methods. Its inert nature and strong thermal characteristics make helium uniquely suited for cryogenic applications, which positions it as a critical enabler of energy-efficient, high-density computing.
Within AI and data center infrastructure, helium serves several important functions. In semiconductor fabrication, it is used to create controlled vacuum environments and provide cooling during etching and deposition processes, which prevents contamination and enables the production of increasingly small and powerful chips. In data centers and high-performance computing systems, helium’s very low boiling point enables efficient cryogenic cooling of advanced processors and superconducting components. It is also used as a tracer gas for ultra-sensitive leak detection in closed-loop cooling systems and to enhance performance and reliability in sealed hard drives by reducing drag and maintaining airtight conditions.
The importance of helium is accelerating due to structural shifts in computing workloads and infrastructure design. AI-driven workloads generate unprecedented heat, pushing traditional cooling methods toward their physical and economic limits and increasing the appeal of helium-based solutions. In addition, helium-enabled cooling can materially reduce or eliminate water consumption, aligning with growing ESG priorities and regulatory scrutiny in many states. These demand drivers, combined with historically constrained supply, have elevated helium to a critical raw material, prompting the U.S. and EU to prioritize domestic sourcing and supply chain resilience as AI and data center buildouts continue to scale.
Valuation & Estimates
We maintain our price target of $3.00 per share as we await further announcements on its industrial gas development program, as well as the release of U.S. Energy’s (NASDAQ:USG)10-K filing.
We utilize multiple valuation methodologies to arrive at our target price of $3.00 for USEG stock. These include Discounted Cash Flow (DCF) calculations, peer multiples, price to book value, price to asset value, and others.
Our DCF calculation assumes monetization of helium extraction begins in the 4th quarter of 2026. For calendar year 2026, we believe that helium revenues could total approximately $4.0 million, and EBITDA generation would be in the range of $1.0 to $2.0 million. We assume the oil and gas properties produce steady state revenues in the $6.0-$7.0 million range with EBITDA generation of approximately $1.0 million. Under this scenario, our DCF calculation is approximately $3.00 per share. This may prove to be conservative as we utilize a high discount rate of 12.5%. In addition, we do not incorporate any other industrial gas revenues or carbon sequestration-related benefits into our model at this time.
On a forward looking basis, assuming the helium extraction efforts are successful and create $8.0-$10.0 of annual industrial gas EBITDA, we can look at industrial gas peer valuations. Using a peer group including APD, LIN, and AIQUY, the average peer EV/EBITDA multiple is approximately 16x. Applying that multiple to the range of estimates for USEG’s industrial gas business would create a stock price in the $4.50- $5.70 range. We don’t incorporate that range into our target price at this time, but we are demonstrating the potential upside for USEG if the helium business is successful over time.
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