Liability to Asset
Houston, we have a problem.
Many operators in the continental US are beginning to grapple with the implications of more stringent regulations on inactive wells. These are wells that are not currently producing (and often haven’t been for some time) but are not yet plugged and abandoned according to regulatory guidelines.
The Corporation Commission, which governs oil and gas operations in my home state of Oklahoma, shows over 200,000 active wells across the state. Over 800 are on the list to plug and another 12,000 are considered “orphaned”, without current production or funds to abandon. Bond requirements call for $25,000 per operator to cover plugging costs, but that amount may not even cover a single well in some areas. EPA estimates count upwards of 2.1 million “idle” wells in the US. Certainly a block of these are mechanical problems, but many are simply isolated from markets.
The Well Done Foundation team plugging Anderson #7.
Internally, these wells reflect a liability for the operator. A permissive auditor or equity backer may have overlooked idle wells in the past, but many now reflect the liability in financial models and reductions to bank revolvers as ESG initiatives become omnipresent. In addition to lost revenue, these wells now reflect lost opportunity.
Low-rate, isolated wells may not justify massive capital expenditure to reconnect pipelines, but they do need another look.
Enter Bitcoin mining.
With containerized Bitcoin mining datacenters, we can revitalize whole fields of idle wells with minimal infrastructure since the gas can be consumed directly on the location. If you can’t get your gas to market, let a better market come to you and change those liabilities back into productive, book-able assets.
Houston, we have a solution.
-Kyle Drew, Operations @ Nakamotor
Week in review —
The Difficulty Adjustment to beat all other Difficulty Adjustments
Coinshares with some fantastic Bitcoin introductory products
Alex B with some scathing Ethereum criticisms
Free alpha —
Compass’s North American Bitcoin Mining Index
Layer1 sneak peak at Texas immersion setup
Miner economics presentation by AJ Scalia on the Galaxy Digital research desk
Last but not least…. the team over at Glassnode points out that the Hash Ribbon has inverted again.
The Hash Ribbon, an on-chain indicator developed by Charles Edwards and presented by Glassnode, suggests that the flagship cryptocurrency tends to hit bottom during miner capitulation.