This right here is the burning question on the minds of every wildcatter since Edwin Drake’s 1859 discovery of the precious hydrocarbons lying beneath earth’s surface. Make no mistake about it, methods of exploration, drilling and production in today’s world are lightyears beyond the time of the “Drake Well” and Patillo Higgins’ “Spindletop”. In fact, the accuracy, predictability, and safety with which modern E&Ps are able to execute is all but sorcery compared to the early explorers whose success relied on little more than a hunch and a prayer.
While the industry has shifted immensely over the past 150 years, one thing has remained constant, and that is the consideration of a capital investment followed by some level of anticipated return. Whether it’s 1859 or 2023, the brass tax questions to consider are, “what is this going to cost me?”, “how quickly will I recoup the costs?”, “what are returns post-payback?”, and “what is my risk of failure?”
To get off the ground, we made an initial $6 million capital investment. At this time Bitcoin was in a fever pitch, Bitcoin mining was immensely profitable and the capex load to acquire the infrastructure was at an all time high. To put that into context, the equivalent realized gas price mining Bitcoin at this time was $40 per Mcf. November to February 2022 was spent designing and deploying our first Bitcoin mine. Acquiring the infrastructure was costly but the expected return on investment was very attractive… So long as we executed flawlessly and Bitcoin maintained its high levels…
Drilling & completions costs: $5M
Initial return on invested capital: ~5 years ($2/mcf, 1500 mcf/d)
And the risk of failure? Well, it’s certainly lower than that of our pioneering forefathers who struck man a dry hole, though still not entirely risk-free given the potential for unexpectedly low production and other unforeseen issues.
When considering if the juice is worth the squeeze, time has shown that the answer is often yes. After all, this is the status quo - the way things have always been done.
When 360 Energy entered the O&G production space however, we saw the distressed economics of our own natural gas assets as well as the broader gas market, and saw opportunity. Rather than capitulate to the unfavorable status quo, we developed our In-Field Compute solution which enables us to realize 8-10x value for our gas. For us, the decision of “to drill or not to drill” was an easy one - “No!”, not when an In-Field Compute can recoup the same $5M and get on to generating profits in a fraction of the time.
“Drill Baby Drill” is a familiar mantra that has undoubtedly carried our industry and transformed our world. However, there’s no denying that today’s wildcatters posit a compelling alternative - “Mine Baby Mine”.
You've probably seen some of the headlines regarding bitcoin's recent price jump, reaching $45,000 this month, the highest it's been since April 2022 and 70% higher than where it was in early Oct. That said, we want to share how this makes right now an interesting time for O&G producers to consider leveraging 360 Energy's In-Field Computing solution.
