Enanced Oil Resources, Inc. : The Word Is Helium

Enhanced Oil Resources, Inc. (ticker: EORIF) is up almost 32% over two days. The story here is Carbon Dioxide.

Enhanced Oil Resources has a large, proven CO2 reserve, the St. John Helium/CO2 Field in Southern Arizona and New Mexico. EORIF's strategy is to extract the CO2 for the purpose of Enhanced Oil Recovery (E.O.R., aka "Tertiary Oil Recovery") from mature fields in the famed Permian Basin. On April 20'th, EORIF issued a press release announcing that it inked a five year contract with Kinder Morgan CO2 Company, L.P. to deliver CO2 for their various E.O.R. projects. While this is certainly good news for EORIF, it is not the whole story.

Let us take a closer look at the Helium part of Enhanced Oil Resources' St. John Helium CO2 field. EORIF claims that it represents the largest known, undeveloped Helium source in North America. Why is this important? Because the World is in the initial stages of a looming Helium crunch.

Helium is a distinctly non renewable resource moving forward into the foreseeable future and demand is going up. Helium is vital to a variety of government, research and commercial/industrial applications including purging gas systems, cooling magnets in MRI machines, certain types of welding, particle accelerators and more. A slightly dated article, "Helium Shortage Hampers Research and Industry" from a 2007 issue of "Physics Today" sums up the issue nicely. An OP-ED piece "Going, Going, Gone" over at "Seed" magazine's website offers a contemporary take on the issue. Clearly, the depletion of Helium supplies in an age of increasing demand is going to be no small problem.

Enhanced Oil Resources known Helium reserve clearly has the look of a gold mine about it. What makes EORIF's St. John Helium/CO2 field even more attractive from an investment standpoint is that the company has a fifteen year "Take or Pay" contract for the Helium with industrial gas purveyor Air Liquide once production starts. "Take or Pay"...that is pretty strong contract language and strikes me as a fair indicator that EORIF will enjoy future revenues.

Enhanced Oil Resources, Inc. is a development stage company and is a "penny stock" which are both turn offs to many investors. However, EORIF has three things on hand that make it an attractive investment: they are increasing oil production at their own E.O.R. projects, they have the 5 year CO2 contract with Kinder Morgan and they have the 15 year Helium contract with Air Liquide. These factors look like a recipe for future revenue and revenue growth.

DISCLOSURE: I hold shares in Enhanced Oil Resources, Inc. and I am a unit holder of Kinder Morgan Energy Partners, L.P..

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