RE: Hope to God…27 Apr 2026 21:08
Courtesy of Lord on the Telegram group.
They just announced an offtake deal, why is the sale price so low?20:56Claude responded: That's a fair question, and it's one investors are likely debating today.Searched the webSearched the webThat's a fair question, and it's one investors are likely debating today. Here's the context:
The deal price: $285/MCF plant-gate
The contract fixes pricing at $285 per thousand standard cubic feet (MCF) on an all-in plant-gate basis, with no deductions, and the buyer assumes all transportation, processing, and downstream costs. Yahoo Finance
Why it looks low vs. market prices
Current market prices are significantly higher. Long-term contracts in the industry are generally sitting around $500–$600/MCF, while spot market prices have breached $1,000/MCF in shortage-hit zones. So at $285/MCF, USEG is pricing well below both prevailing long-term contract rates and spot prices. OpenPR
The key trade-offs that explain the discount:
Plant-gate pricing shifts all costs to the buyer. The buyer takes on transportation, liquefaction, and downstream distribution — costs that can be substantial. So while $285 sounds low, USEG has zero logistics burden.
It's a first-mover, pre-production deal. USEG hasn't produced a single cubic foot of helium yet. First commercial operations are targeted for Q1 2027. Locking in a guaranteed buyer before you've produced anything typically comes at a price discount — the buyer is taking on execution and ramp-up risk. CoinCentral
The take-or-pay structure has real value. The counterparty is obligated to purchase, or pay for if not taken, 100% of helium production over the five-year term — up to 1.2 MMCF/month. That guaranteed revenue is worth accepting a lower headline price to secure. Yahoo Finance
The counterparty is investment-grade. By shifting transportation and downstream costs to the buyer and securing a high-credit-quality offtaker, USEG established helium as the initial contracted revenue stream within its multi-revenue platform. A blue-chip, creditworthy buyer commands better terms. TipRanks
CPI escalation and a year-3 reset offer upside. Starting March 1, 2028, the price escalates annually in line with CPI-U, and the contract includes a structured price redetermination at year three. So if helium markets stay elevated, USEG has a mechanism to capture more value. CoinCentral
Bottom line: The $285/MCF is a below-market price, but it reflects the reality of being a pre-production company securing its first long-term customer. The certainty of fully contracted revenue, zero logistics costs, and a creditworthy take-or-pay buyer arguably justified the discount — especially as it allowed USEG to close its financing and fully fund Phase 1. Whether the discount is too steep is a legitimate debate.
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