Not yet halfway through August and oil and gas company Helios Energy Ltd‘s (ASX: HE8) share price has already posted a 15.4% gain for the month. That compares to the 3.0% gain for the All Ordinaries (INDEXASX: XAO).
Like many ASX shares, particularly energy related shares, Helios’ share price was more than cut in half during the COVID-19 induced bear market. The share price fell 53% from 21 February through to 18 March.
It wasn’t until July that the Helios share price truly began to recover, closing at 15 cents per share on Wednesday, up 88% from 18 March. That gives Helios a market capitalisation of $232 million.
Year to date, Helios’ share price is down 21%.
What does Helios Energy do?
Helios Energy is an oil and gas company with both of its major projects in Texas in the United States. Its predominant focus is the Presidio Oil Project located in Presidio County. To date, Helios has drilled two vertical wells into the Presidio Oil Project.
Its other project, the Trinity Oil Project, is located along the borders of Trinity, Houston and Walker. Trinity is comprised of 3,128 acres of oil and gas leases.
Why is Helios Energy’s share price running higher in August?
With both of its oil projects in Texas, one of the states that’s been hit hardest by the raging pandemic, you might expect Helios’ share price to fall, not gain 15.4% to date in August.
I see three apparent reasons for Helios’ share price leap.
First, the price of oil has trended higher this month. West Texas Intermediate (WTI) crude oil has gained 4.4% in August, currently trading for US$42.07 (AU$59.25) per barrel.
Second, investors are likely betting on higher crude oil prices to come when the world emerges from the coronavirus driven slowdowns. This should see a large increase in the demand for petrol and other products derived from oil.
Third is Helios’ quarterly report which was released to the ASX on 3 August. While noting the company’s compliance with Texas COVID-19 ordinances, Helios also stated its 2D seismic results had increased its Ojinaga Shale Formation play area by 50% to approximately 300,000 acres.
The Helios share price gained 7.7% on 4 August, following the release of its quarterly report.
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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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