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Chris Alfano, welcome to the Center of Hash.

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Parker Lewis, it's great to be here.

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Yeah.

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Before we get into the topic of the day, we co-work here out of Bitcoin Park.

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It's mid-July in the Texas summer.

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How's the summer been?

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It's been hot, good, rainy.

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You know, we've done some family trips and stuff like that, so try to get out of it.

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We're heading to California end of this week.

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so upstream mining that isn't impacted by the 4 cp you're in texas no natural gas mining

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no grid no 4 cp no curtailment smu footballs on the horizon uh on the horizon and rising

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you uh you were at happy valley for that i was disastrous that was a uh not our best not our

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best effort cool experience though our expectations is high this expectations are high

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coach is uh saying big things he's a good target for other schools so got to keep him happy at smu

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but you know good transfer portal given texas run for the money as best team in texas i'll be uh

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very pleased if we make it to another playoff that might not happen again in quite some time but

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that's what i said last year with will cole when we were sitting here in the summer looking at the

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team but you know should be better this year than we were last year so very pumped well uh hopefully

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hash price is higher in come football season in a month that would be nice got to get the uh

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ordinal people back selling uh their jpegs that's controversial we'll talk about that towards the end

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but um we'll use that as a segue into um the topic of the day so in the in in the first couple

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episodes we've discussed mining at a very broad high level and today we're going to go deep on a

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specific energy strategy and mining strategy um chris is the co-founder and ceo of 360 energy

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um chris just give a little bit about your background and what 360 does and kind of what

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defines your strategy yeah yeah so 360 energy right before 360 uh i went to smu if it wasn't

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obvious before um studied finance and economics there and started a company 2016 with a hedge fund

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manager in dallas called keyman intelligence and built that company for four years sold that

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company in 2020 and started 360 and uh what did that company do that we did a sas solutions for

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private credit hedge funds so we would uh standardize a bunch of the reporting data from

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you know these these clo's have 300 positions in private credit um so a bunch of companies that

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aren't publicly traded don't adhere to gap and so uh what we would do is aggregate all the data

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that all of those portfolio positions would report so like their financials um sims credit

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agreements everything like that we'd aggregate that all into uh our platform and we'd standardize

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it um so customers of ours like other hedge funds clos would have access to the platform they'd log

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in they'd be able to see all their borrowers uh be able to see kind of standard financial data

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across their whole portfolio, right?

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If different borrowers report in different ways

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and even in borrowers quarter to quarter.

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So yeah, it was just a tool to make analysts

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more efficient at actually analyzing,

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kind of get them out of the monkey labor

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of having to spread financials

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and figure out where pieces of information were.

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So it was just kind of like a database

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with standardization for everything to do

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with their portfolio positions.

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And how'd you get from there to 360?

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Well, sold the company, moved down to Austin, was out of a job at that point, kind of figuring out what I wanted to do next.

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COVID happened.

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So I'm a Bitcoin class of 2020 going down the rabbit hole at that point, kind of right after the company.

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And obviously fell in love with Bitcoin for many of the same reasons everyone else does.

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And being a finance guy, being a tech guy, really made a lot of sense in my mind.

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And so I wanted to start another company.

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I was kind of sick of doing software stuff.

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Networked around Austin.

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I met a great guy named Mike Hamilton, kind of told me all about this Bitcoin mining thing,

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which sounded really cool.

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And so kind of started going down the Bitcoin mining rabbit hole.

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As anyone does, you try to figure out, okay, now I can basically plug in a Bitcoin miner

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anywhere, but how do I do it, you know, cheaply for a long term to kind of protect the downside,

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protect the margin, all that stuff.

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So for us, that was looking at grid, looking at solar, looking at many different, you know, potential options to power our miners kind of settled on natural gas as something that's very abundant in Texas and something that's relatively cheap.

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We wanted to take it a step further and actually vertically integrate the natural gas into the Bitcoin mining as a way of kind of controlling that future, having, you know, decade at a single location, having complete operational control.

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And so built a team with Sean Milmo, my co-founder and a few other guys that had a lot more oil and gas background than I did to stand up 360 energy.

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And at that time, the company's objective was self-mining through the ownership and operation of the natural gas assets.

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So we went out and bought some old producing gas wells in the Barnett Shale right outside of Fort Worth, just 20 minutes north of downtown Fort Worth.

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And that's really how we got our start. So took over those wells, put our first Bitcoin mine out there in late 21 and started, you know, mining at probably the worst possible time to be mining and buying infrastructure and stuff like that.

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But yeah, that was really what it was all about was, you know, how do we find these old, relatively unattractive natural gas assets to traditional oil and gas people and turn that into something much more profitable, much more valuable through Bitcoin mining.

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Two questions.

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What initially, so you mentioned in 2020, what made you go down the Bitcoin rabbit hole just quickly?

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And then second, you started out vertically integrated, owning the assets, but that's evolved a bit.

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Yes.

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Yeah.

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I mean, the rabbit hole was a function of time and a function of just kind of the macroeconomic conditions in the U.S.

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Right.

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Knowing enough to know a ton of money printing is probably not good.

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and seeing all the free money that was going out there was concerning.

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And so, and also, you know, I'd actually been, you know, I've heard about Bitcoin.

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My first experience with Bitcoin was actually in 2011.

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I bought some Bitcoin for one function only,

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which is actually purchasing some fake IDs for me and all my high school buddies.

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Common amongst the youngins.

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So I refuse to look back at how much Bitcoin I had at that time.

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But, you know, it was purely buy Bitcoin, send it to China, get fake IDs.

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And so I've kind of known about Bitcoin, but never spent the time kind of throughout college and in my first job really learning about it.

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And so selling the company, having the time, having all of the QE infinity printing COVID madness all like, you know, put me down the rabbit hole.

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Yeah. One of the things that I, if I'm explaining Bitcoin to somebody having nothing to do with energy or mining, just using the example that people can't drill an oil well and then sell, you know, in terms, it's not sustainable to do that operation and all of the capital that requires human capital, physical capital, monetary money and time and energy, and then sell it for something that can be easily printed.

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that can be created on a computer screen in the Fed.

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And today we're going to be talking a lot about natural gas,

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but talk a little bit about how your strategy has evolved.

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And then I want to talk about the natural gas market specifically

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in terms of how you guys arrived at that part of the energy system

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to be used as a fuel source for mining Bitcoin.

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Yeah.

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Yeah, so getting into natural gas Bitcoin mining,

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um you know it's i like to say uh sean's background you know is finance investment

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banking private equity right my background was in software so he's really good at spreadsheets i'm

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really good at code and so when we built the model for 360 we're like oh you know it looks

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good in excel i'm used to fixing problems in the real world with you know just changing lines of

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code. So the first deployment we did was anything, you know, it was not what we expected at all. It

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was a lot more expensive, a lot more time consuming to actually commercialize this model in the oil

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field. There's a lot more that, you know, I naively thought, hey, you just plug a Bitcoin miner,

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it's going to work, right? But there's plenty of considerations in Bitcoin mining, people would

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you know, cooling server type, stuff like that. And then on the natural gas side, there's,

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there's plenty of stuff there as well. So it really took us two and a half years. And so

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to, to actually go from first deployment to a fully standardized, repeatable,

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dependable gas offtake and monetization system kind of through Bitcoin mining. And during that time,

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you know, gas prices had gone up tremendously after the, you know, Nord Stream, Russia,

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Ukraine thing. And then they fell, you know, just as fast. And we were actually approached by a few

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other upstream oil and gas companies in the Barnett Shale who had caught wind of what we were doing

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and how much money we were making by mining Bitcoin on our assets. And they asked us

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to help them do the same thing. And so that was like a big turning point for the company,

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realizing, you know, that the big realization was like when we started the company,

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it was, hey, oil and gas is means to an end for Bitcoin mining. Those ends are, you know,

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sub three cent power, control, long term deployments, no counterparties, right? That's

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what we were after when we started 360. Becoming an upstream oil and gas producer, talking to other

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producers, talking to our field personnel, we kind of realized that the paradigm exists on the exact

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the other end with Bitcoin mining being a means to an end for oil and gas outcomes.

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And so during that two and a half years figuring this thing out, we were realizing like,

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hey, you know, we have really cheap power for Bitcoin mining.

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But if you look at the rewards of Bitcoin mining, how much money we're making, then

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you put that in oil and gas terms like that is a much better market to monetize natural

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gas than, you know, selling gas into the pipeline.

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So we realized like, hey, this is actually very impactful for oil and gas companies who

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don't really care about Bitcoin or Bitcoin mining, but care about being commercial and making money.

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And then you combine that with other EMPs asking us to do the same thing for them. And that really

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launched our services business, which is our main focus today. So today, 360 goes, we deploy and

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operate these, you know, we call them, call it apex gas offtake is what we call it, but it's really,

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generators, data center servers that we go deploy out for other EMPs to help them solve their natural

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gas problems. The benefit to them is they're not having to go down the same school of hard knocks

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we did, learning all the same things, making the same mistakes, spending all the time doing it.

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They'd rather, just like an oil and gas company would hire Halberton to go frack wells because

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it's highly technical and nuanced, they'll hire 360 to go do this gas offtake system for them.

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So that's been really successful for us.

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It's really interesting, you know, taking this model and selling it as a service to oil and gas companies.

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And you guys don't have the capital intensity of then also having to purchase the wells.

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Yeah, exactly. Exactly.

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So now we're doing it on behalf of people who have wells.

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So we're not having to go take on any of the upstream operations or the capital expenditure to actually go take down the asset.

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Do you guys think of yourselves as an oil field services company?

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Yeah, I think, you know, in the simplest terms, it's what we're providing is a service to the oil field. You know, I think of it maybe more as like a distributed energy infrastructure company. You know, but it's, you know, six one way, half a dozen another.

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well let's back up and i want to talk about specific

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use cases upstream you know in terms of mining at the well site leveraging natural gas i want to

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just kind of zoom out to paint the picture of the of the natural gas market it's at least specific

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to the US. And so, you know, approximately 40% of the market is of natural gas is ultimately

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converted to the electric power industry. Approximately 32% is for industrial purposes.

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I think like 14% is residential, 10% commercial, and then 4% transportation, just in terms of the

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end market for natural gas. And now increasingly some of that say electric power is being used to

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to mine Bitcoin and avenues are being leveraged upstream,

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like what you guys are doing to monetize natural gas before it ever hits a

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pipeline.

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But talk a little bit just about the market for natural gas in the United

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States,

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where natural gas is typically drilled and how you guys arrived at what I think

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is typically North Texas and West Texas for opportunities to monetize Bitcoin

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mining or to use Bitcoin mining to create a solution in the oil field.

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Yeah. Yeah. So, I mean, natural gas is extremely abundant all over the United States, really in many parts of the world.

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You know, in the Northeast, you have the Marcellus, which I think is the biggest natural gas play in the U.S.

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It's like Pennsylvania, West Virginia.

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You know, then the Bakken in North Dakota, there's a bunch of oil and gas there.

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Then you keep going down Powder River in Wyoming, DJ Basin in Colorado.

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You get into New Mexico, San Juan Basin, but further south, Permian Basin, which then bleeds over into Texas.

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So you start moving east through Texas.

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You have the Permian Basin, which is probably the biggest oil and gas play in the U.S.

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You have the Eagleford in south Texas, tons of oil and gas there.

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You have the Haynesville, which is predominantly a gas play in East Texas.

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And then you have you know the Barnett Shale North Texas you get into Oklahoma you know Scoop Stack And you keep going up There natural gas in Michigan and in Nebraska and Kansas

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You know, there's a ton of oil and gas all over.

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Now, I think what's really interesting about oil is there's effectively, you know, WTI is kind of the benchmark for oil.

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You can truck oil.

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You can move oil pretty much anywhere.

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And there's effectively one benchmark for oil prices, whereas natural gas is highly localized markets.

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So, you know, not all, you know, gas can have the exact same composition, can look the same, but can earn widely different prices for that gas.

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Just depending on the local hub you sell that gas into and then the terms of your midstream agreement.

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So in Hainesville, for example, there's a tremendous amount of gas.

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Where's the Hainesville?

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East Texas.

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Okay.

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Tremendous amount of gas in East Texas.

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And it earns a really good price.

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They're, you know, getting not far off from Henry Hub, which is kind of the benchmark or Houston Ship Channel.

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Whereas you go to West Texas and the Permian, those guys are selling into Waha, which is usually trades at like a $2 discount.

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and often goes negative to, you know, prices in East Texas and elsewhere.

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San Juan Basin, you know, that gas going west earns sometimes higher than even Henry Hub.

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So as we...

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Explain some of those dynamics that cause that.

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And then also if you said that in West Texas at the Waha Hub,

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it might trade at a $2 discount for an order of magnitude to Henry Hub,

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like give some sense of where henry hub is today just so you have an order of magnitude of what

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that discount looks like yeah so henry hub is at you know three dollars fifty cents that's no

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for mcf it's like the benchmark for for gas um your haynesville producers are probably after

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midstream fees are getting maybe three dollars twenty cents an mcf so they're getting pretty

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close tight a tight band to henry hub whereas in west texas you know i think waha is trading at a

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two dollar discount today to henry hub so that same molecule of gas and then after midstream fees

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you know might make a dollar an mcf um and not two dollars on fifty dollars like you know yeah

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it's like a 60 70 discount and the gas can look the exact same it could be the same quantities

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but widely different revenue generation potential just based on where it is.

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I think, you know, why that is, right, there's a lot of gas in the Hainesville, there's a lot of gas in the Permian.

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Well, the Hainesville is really close to the coast, all the LNG export terminals, a lot of industrial uses, Houston and the Gulf Coast.

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So there's a lot of demand for natural gas in that particular demographic.

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Whereas the Permian in West Texas, there's no industrial, I mean, hardly any industrial uses out there.

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So it's really a function of supply and demand. There is a ton of supply of natural gas in West Texas. There's no real localized demand for it. And there's not enough takeaway capacity with pipelines to bring it to where demand centers are.

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And so just economics 101, you have a way oversupply of natural gas compared to the ability to actually transport it to major markets.

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And so that's why you have this large differential to Henry Hub.

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You know, and I would say the band of like the discount that Waha gets to Henry Hub is actually a lot better today than it was this time last year.

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I think Waha was negative for more than 20% of last year.

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So Henry Hub could have been $2.50, $3 an MCF.

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But the differential in Waha was more than Henry Hub.

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And so if you're an oil and gas producer in West Texas and Waha is negative,

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like you're selling gas into a pipeline,

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but you're actually getting charged to put it into a pipeline because the price is negative.

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You're not making revenue.

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You're actually having to pay to get that gas taken away.

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I think most people might be familiar with when solar power or power trades at a negative cost in West Texas because of production tax credits or various different tax incentives that might dictate an abnormal economic situation.

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what would cause a economic scenario, obviously way more supply than there is demand, but why would the market be producing all of that if there's not similarly some tax anomaly that's causing the distortion?

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Yeah, that's a really good distinguisher, right?

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So in your Haynesville, like those are wells drilled with the intention of finding natural gas.

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but those are natural gas only wells and so when they're underwriting drilling those wells it's

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it's for gas economics whereas most natural gas in the permian is called associated gas

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so that's gas coming out of a well that was drilled for oil and so the main economic driver

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in the permian you're like you're not there for the gas like the gas is a byproduct that you really

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wish you didn't have to deal with um you're there for oil and so you know no one is going right now

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was like drilling, you know, banger gas wells in the Permian because the market is so bad for that

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gas. Um, but they are drilling for oil, um, and a lot of it. And so, you know, and then getting a

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little more technical, like a lot of that, like tier one acreage in the Permian has been, you

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know, drilled up. And so now they're moving on to, you know, tier two, tier three, uh, around the

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Permian basin, which is, is gassier. And so they're, you know, still after oil, you know, but they're

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those wells inevitably going to produce more gas than those tier one wells are. So it's really

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the continued growth of natural gas supply in the Permian Basin is a function of more and more

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drilling for oil and more and more associated gas coming up with that oil. And, you know,

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Permian's getting gassier over time as gas oil ratios widen. So if there was no oil in the Permian,

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you wouldn't have this problem because people probably wouldn't be drilling much in the Permian

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at all because again that gas market is so bad and then you know on top of that you can have

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you know you can have pipelines that need maintenance that get shut in that you know

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compressor stations need to be overhauled things like that that can have like temporary decreases

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in the ability to move gas out of the Permian and that'll cause that differential that Waha price

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to be worse than, you know, it's trading at today.

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And with another example, something like the Marcellus,

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is that more like the Haynesville where they're drilling for natural gas specifically?

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Correct.

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Versus in the Permian being associated gas.

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The primary asset that they're trying to get out of the ground is oil

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and there's this associated gas and it's highly variable.

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Correct.

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And I guess the other thing that you said is now that they're at tier two,

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you know, tier one might've been wells that were expected to be

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predominantly oil literal little associated natural gas that now increasingly wells oil

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wells are being drilled that have more gas yeah yeah so then use that maybe to describe

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the connection between um that dynamic and why what the why that creates an opportunity to mine

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bitcoin more it being more attractive potentially in west texas versus the haynesville or the

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ourselves yeah yeah so then to answer that question gets into the next like two distinctions

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of gas it can be associated gas or not but it can also have a pipeline like associated gas can be

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sold into a pipeline maybe talk a little bit about that like okay now go to a well out in west texas

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and what happens from there to get gas to market conventionally?

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Yeah.

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I mean, no matter where the well is,

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to get gas to market conventionally, you need a pipeline.

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So whether it's a well drilled for natural gas in the Haynesville

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or associated gas coming out of an oil well in the Permian,

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to get that gas to market, it has to go into a pipeline.

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um so people in the haynesville that are drilling wells like they're not going to go drill a gas

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well if they don't have line of sight on offtake on a pipeline right that wouldn't make any sense

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so those guys yeah again they're underwriting it all around natural gas economics and they

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have a pipeline and so you do have a ton of gas in the haynesville but you also have a ton of

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takeaway capacity for all that gas um whereas in the permian

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ideally you are drilling wells and you have takeaway for that gas even if the terms of that

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takeaway are pretty bad given waha um but oftentimes you're there for the oil and you'll actually go

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flare the gas so the the big distinction is stranded gas versus non-stranded gas

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stranded gas can occur everywhere it can occur in the haynesville and the marcellus

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um you know and in the permian there's a higher propensity of stranded gas in predominantly oil

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plays because again gas is the byproduct and they're just trying to get to the oil so um you

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know you'll flare that gas off because you can't sell it into the pipeline um because there is no

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pipeline or the pipeline's going maintenance or or anything like that um and that that's kind of

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what creates the opportunity so if we talk about as we look at our opportunity set as a services

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company like what assets are we chasing like who's the ideal customer profile um talking about

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pipeline connected gas wells we have never done a deal in the haynesville because that gas is

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pipeline connected and it's making great netbacks and so those oil and gas companies that do have

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those you know pipeline connected gas wells that get good price like they don't feel the pain

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they don't need a solution an economic solution for that gas like they're a-okay selling it into

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the pipeline like there's just not a lot of value for our services there but if you look at pipeline

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connected gas in the Permian, especially if you looked, you know, six, nine months ago when it was

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negative, like you might as well just flare it, right? Because the pipeline's not paying you

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anything for the gas. So like that's, you know, finding just purely talking about pipeline connected

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gas wells, the opportunity lies in the worst markets. So find me the gas wells that have the

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worst midstream contracts selling into the worst hub. And those are the best opportunities because

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the uplift that Bitcoin mining provides over what they're getting from the pipeline, that chasm is

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much wider. Whereas the uplift it provides in the Haynesville, you know, it's still there, but it's

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just not as attractive. So purely on pipeline connected gas wells, we're targeting, you know,

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the Permian Basin, the Bakken, areas where there's an oversupply of natural gas and the realized gas

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price even if it does have a pipeline is bad um talking stranded gas you know that if it's

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stranded it has no pipeline it has no market and so bitcoin mining works anywhere stranded gas

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exists and so when you talk when you specifically say stranded gas it is where there's a oil and

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gas well where gas is the byproduct or a gas well that doesn't have a pipeline but typically they

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wouldn't drill a purely gas well if they didn't already have the pipeline correct correct so a lot

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of like your gas wells that are stranded are older production where the pipeline company's gone away

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or the pipeline company's lines 30 years old and they're not going to invest in overhauling it and

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maintaining it and so that can strand those wells because you know if the pipeline goes away you

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have nowhere to sell your gas um so again like it's not as common in the haynesville to have

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you know stranded gas um but you do have pockets in the haynesville and elsewhere where

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you know like in wharton county we're looking at a deal um it's like texas gulf coast like

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warden county county is texas on the gulf coast um you know where you have all these producers

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impacted by a pipeline decommission so you have this pocket of like nine different companies that

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all produce in the same region that all sell into the same pipeline and the pipeline's going away

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so all those guys are effectively stranded now and why would the pipeline be decommissioned just

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because like the decline curve of the gas yeah decline curve of the gas the age of the pipeline

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the pipeline company's cost to maintain overhaul it like eventually gets to the point where the

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juice isn't worth the squeeze for the pipeline company and so they'll abandon the line effectively

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give notice and you know the upstream producers are you know out of luck and just to map out that

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picture starts at a well there's a pipeline it goes to a typically a natural gas processing plant

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and then from there goes further downstream to either you know uh lng on the coast to atmos

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power plant on course power plants um you know like the barnett gas is pipeline quality in many

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parts coming out of the ground it's like you know i know our asset in the barnet like that

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is literally like energy transfer transports that directly from our pad to the gas power plant that's

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you know five ten miles away like doesn't touch a processor at all it's just field gas going

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straight into power plant so not all gas is created the same however and so and like in the

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Permian, like all of that gas is going through processing plants before it is reaching its end customer.

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Talk about specifics in terms of the set of scenarios that create a tangible opportunity to mine Bitcoin.

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And what incentives dictate mining upstream off of natural gas.

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yeah so there's three main value propositions that bitcoin mining in the oil field provides

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an oil and gas company the first two you call it environmental um slash oil related right so

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um in in these cases think of oil and gas companies that are flaring natural gas

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right so they don't have a pipeline but they have to keep producing the well to get the oil out

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gas has got to go somewhere. Their best option is lighting it on fire in a flare.

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Business as usual has changed over the last five years where it's becoming harder and harder,

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more costly to flare at the federal level from the EPA, but also at the state level.

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And so gone are the days of companies drilling big oil and gas wells and just flaring gas into perpetuity even in Texas large quantities of gas And not based on one political party or the other No no

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It's just kind of been a slow burn in that direction.

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And then you have states like New Mexico and Colorado that tend to be more liberal leaning

329
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who have statewide mandates.

330
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So it's a lot harder to flare New Mexico and Colorado than it is in Texas.

331
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But even in Texas, you can't be flaring large quantities of gas forever.

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because that hits like federal thresholds.

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And even Texas has some state rules around that.

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So if you think of an oil and gas company,

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you're like, okay, I am here in New Mexico

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in the Permian Basin.

337
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I'm a big top 20 oil and gas company

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producing all of this oil.

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And I'm only allowed to flare this gas

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for a little bit of time.

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And if I don't have a pipeline,

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I am in a bad spot

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because eventually I can't flare.

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And if I can't flare,

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and I have nowhere for the gas to go, I have to shut my well in. But I'm not there for the gas,

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I'm there for the oil. And I have to shut my well in, I'm foregoing, you know, hundreds of barrels

347
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of oil per day. That's, you know, 7,000, 10,000, $15,000 a day of revenue that these guys are not

348
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able to produce. And so taking a step back, I talked to value props like environmental, some,

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you know, big public like Exxon, companies like that are, you know, by 2030, we're not going to

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flare any gas at all. So even if it's not jeopardizing their oil, like they have a mandate to

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reduce flaring. And so purely a company could deploy a Bitcoin mine for no other reason than,

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00:32:17,580 --> 00:32:21,960
hey, flaring is bad for the environment. Burning that gas through, you know, 360s clean burning

353
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generators is better for the environment. I am not flaring anymore. I look good for my ESG score.

354
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Like that is a very real value prop, especially your bigger companies that are worried about that.

355
00:32:32,340 --> 00:32:39,820
more often is the case where that flaring is actually starting to jeopardize the well itself

356
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and their ability to produce oil so yes it's environmental great you know we've reduced our

357
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emissions by going with 360 but that's really not the primary driver the primary driver is

358
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if i don't have a solution in two months like i'm gonna have to shut my oil well in and that's a

359
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million dollars of revenue i'm not going to be able to produce and that's a very real very impactful

360
00:32:59,800 --> 00:33:06,760
problem that that we're solving for we are giving people an outlet for natural gas so that they can

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produce more oil uh you know we're working with you know one of the top 20 u.s onshore oil and gas

362
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producers uh on the you just to kind of put a real example around it like it's helpful you know this

363
00:33:18,680 --> 00:33:24,680
is a site in the texas gulf where you know they drilled this great oil well it's making 350 barrels

364
00:33:24,680 --> 00:33:30,860
a day has been for the last you know three years um doesn't make a ton of gas makes around you know

365
00:33:30,860 --> 00:33:36,020
two megawatts worth and they're flaring all that gas like they have this big that seems like a lot

366
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of gas two megawatts yeah well i mean there's a lot you know go to the bakken and the permian

367
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there's a lot more quantities of gas being flared but for this company like it was okay

368
00:33:46,580 --> 00:33:51,000
you know they're flaring as much as they're able to flare but they want to go drill other wells

369
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like in the on this lease because they have a great oil well but there's never going to be a

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pipeline getting to the site and they're already at the capacity of what they're able to flare so

371
00:34:01,320 --> 00:34:07,100
they've been kind of sitting on their hands for the past five years in with an inability to

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drill more wells and so we're working with them now we've deployed um you know we've we've done

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two different deployments with them to capture that gas so now like they're still producing the

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oil and now they have a solution for the gas. Their flaring has gone way down. Their emissions

375
00:34:23,140 --> 00:34:26,380
have gone way down. What does that mean? Well, now they've drilled and completed another well

376
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and brought another, I think this new one's doing like 450 barrels of oil a day. So,

377
00:34:31,760 --> 00:34:37,100
you know, yes, this Bitcoin mine is making them a little bit of money on the gas. Yes,

378
00:34:37,140 --> 00:34:41,900
it's a feel good emission story. But what we've really done is unlocked their ability to make

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00:34:41,900 --> 00:34:46,720
another 450 barrels of oil a day. And that's worth, you know, well over a million dollars of

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00:34:46,720 --> 00:34:52,980
annual revenue and so that's where you're really starting to add value it's like that's really the

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00:34:52,980 --> 00:34:58,000
sites where after we're putting another one up in the powder river uh it'll be a little over three

382
00:34:58,000 --> 00:35:04,260
megawatts where's the powder river powder rivers in wyoming okay and so you know you know this is a

383
00:35:04,260 --> 00:35:09,120
top 50 onshore oil and gas company that you know has a very similar problem they're you know the

384
00:35:09,120 --> 00:35:15,300
biggest producers in wyoming and so um you know these problems are prevalent right these are

385
00:35:15,300 --> 00:35:22,400
widely like this is one site in wyoming these guys operate thousands of wells and this is not

386
00:35:22,400 --> 00:35:29,100
a one-off thing it's you know portfolio wide across many different assets um so that's so

387
00:35:29,100 --> 00:35:34,560
finishing long-winded answer your question like that's the emissions oil value problem and one

388
00:35:34,560 --> 00:35:41,480
way to think about that is you're it's it's less about the bitcoin mining economics it's more about

389
00:35:41,480 --> 00:35:45,680
combination of reducing a liability, flaring,

390
00:35:45,920 --> 00:35:49,840
as well as

391
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unlocking an asset, being able to

392
00:35:53,440 --> 00:35:57,460
tap more capacity on the oil side that you wouldn't otherwise

393
00:35:57,460 --> 00:36:01,640
be able to because of limitations on the environmental

394
00:36:01,640 --> 00:36:05,460
side. Correct. That's exactly right. And then

395
00:36:05,460 --> 00:36:09,740
where are then the opportunities

396
00:36:09,740 --> 00:36:11,300
or how do you guys think about

397
00:36:11,300 --> 00:36:14,040
where it's actually about the Bitcoin mining economics

398
00:36:14,040 --> 00:36:15,840
and how does that vary from a setup

399
00:36:15,840 --> 00:36:17,340
that you just described?

400
00:36:17,420 --> 00:36:19,820
And if you could give some specific examples,

401
00:36:19,820 --> 00:36:20,640
that would also help.

402
00:36:20,900 --> 00:36:21,340
Yeah, definitely.

403
00:36:21,560 --> 00:36:23,240
So then the third value prop

404
00:36:23,240 --> 00:36:24,880
is an economic value prop.

405
00:36:25,320 --> 00:36:27,200
So purely people saying,

406
00:36:27,460 --> 00:36:30,120
I can monetize my gas in a Bitcoin mine

407
00:36:30,120 --> 00:36:31,780
and make, you know,

408
00:36:31,820 --> 00:36:34,800
I said Henry Hubbs at $3.50 in MCF,

409
00:36:34,880 --> 00:36:36,580
like mining Bitcoin with new gen servers

410
00:36:36,580 --> 00:36:38,900
in the oil field is $13.50.

411
00:36:38,900 --> 00:36:47,160
cents. It's $10 more in MCF to go mine Bitcoin. And so you have people that again, find me like

412
00:36:47,160 --> 00:36:52,240
this is a better fit for pipeline connected gas producers in the Permian that are sick of getting

413
00:36:52,240 --> 00:36:57,580
ripped off selling gas into the pipeline for nothing. Like they can say to hell with that.

414
00:36:57,660 --> 00:37:03,720
I'm going to deploy one of 360 energy systems on my site and I'm not going to sell gas to the

415
00:37:03,720 --> 00:37:06,380
pipeline. I'm just going to monetize it, you know, through the Bitcoin mine.

416
00:37:06,380 --> 00:37:12,240
um and so you know we've done a lot of deal like when we first launched the services company like

417
00:37:12,240 --> 00:37:16,640
those first two deals in the barnet like that's what they wanted they wanted to fund all the

418
00:37:16,640 --> 00:37:21,880
capex buy all the infrastructure and mine bitcoin at their site so they can make a lot more than

419
00:37:21,880 --> 00:37:26,700
they were getting in the pipeline and we've continued to do uh deals like that i think

420
00:37:26,700 --> 00:37:34,380
those deals like i mean there's just so much gas out there there's plenty of opportunity to do that

421
00:37:34,380 --> 00:37:42,020
I think the challenge there is most oil and gas companies don't know anything about Bitcoin,

422
00:37:42,260 --> 00:37:48,340
certainly don't know anything about Bitcoin mining and hash price, nor are they in the

423
00:37:48,340 --> 00:37:56,920
business of spending millions of dollars of capital to, with that payback and that return

424
00:37:56,920 --> 00:38:01,340
being determined by Bitcoin mining economics is very out of pattern for an oil and gas company.

425
00:38:01,340 --> 00:38:12,520
And so, you know, our customers that have done that model tend to be smaller, family owned, multi-generational, independent oil and gas companies.

426
00:38:12,960 --> 00:38:18,860
And we've deployed that particular model where they're purely chasing the economics, you know, all over Texas.

427
00:38:19,080 --> 00:38:24,300
Not in the Haynesville, but we've done that in the Panhandle, in the Barnett, in the Permian, and other places.

428
00:38:24,300 --> 00:38:30,000
again for those you know even if you did have that same characteristic multi-generational you

429
00:38:30,000 --> 00:38:33,460
know family owned oil and gas company in the haynesville they're still probably not going to

430
00:38:33,460 --> 00:38:37,560
do it because they're not feeling the pain they're getting you know three dollars 25 cents an mcf

431
00:38:37,560 --> 00:38:42,420
that same guy in west texas you know he might be willing to go spend two five ten million dollars

432
00:38:42,420 --> 00:38:48,180
on a bitcoin mine because the chasm and the uplift that this provides is is so much better

433
00:38:48,180 --> 00:38:54,160
because if because functionally the revenue side of the equation for either of those mines looks

434
00:38:54,160 --> 00:38:59,620
almost identical to each other but the cost side of the natural gas

435
00:38:59,620 --> 00:39:08,420
there's a there's a material differential in terms of if you could make 320 or 350 depending on

436
00:39:08,960 --> 00:39:17,360
Houston chip channel or Henry hub index versus a dollar then that would be a spread that would

437
00:39:17,360 --> 00:39:22,240
create an economic incentive potentially to mine bitcoin yeah like bitcoin doesn't care but

438
00:39:22,240 --> 00:39:25,500
hash rate's going to be created anywhere and it's going to get cleared out at hash price

439
00:39:25,500 --> 00:39:32,180
so you can deploy this anywhere natural gas is available uh it's just where does it provide the

440
00:39:32,180 --> 00:39:42,160
most uplift maybe walk through the like in a in a tangible way like you mentioned 1350 mcf if

441
00:39:42,160 --> 00:39:47,340
you're mining bitcoin but it comes with additional infrastructure just maybe talk a little bit about

442
00:39:47,340 --> 00:39:51,820
what the actual operation looks like.

443
00:39:51,940 --> 00:39:54,440
There's infrastructure on the gas well,

444
00:39:54,620 --> 00:39:56,540
but you have to bring infrastructure out

445
00:39:56,540 --> 00:39:58,700
and how that, you know,

446
00:39:59,240 --> 00:40:01,120
it's not, you're not just getting the benefit

447
00:40:01,120 --> 00:40:04,320
of the differential between a buck

448
00:40:04,320 --> 00:40:07,180
or a buck 50 and 1350 of,

449
00:40:07,660 --> 00:40:10,320
hey, if I were to go down the traditional route,

450
00:40:10,460 --> 00:40:11,880
this is what the economics would look like.

451
00:40:11,940 --> 00:40:14,520
But if I brought on incremental infrastructure,

452
00:40:14,700 --> 00:40:15,960
took on the capital costs,

453
00:40:15,960 --> 00:40:26,100
what that incremental kind of bottom line looks like on a gas unit yeah yeah so traditionally

454
00:40:26,100 --> 00:40:31,220
on the upstream side only on the oil and gas side they're going to drill well they're going to have

455
00:40:31,220 --> 00:40:38,220
you know tank battery and facilities to separate water and oil and gas and they're going to have

456
00:40:38,220 --> 00:40:44,640
storage tanks for water storage tanks for oil and they're going to have some offtake for that gas

457
00:40:44,640 --> 00:40:49,900
which would there be a pipeline or it'll be a flare stack um it's like that's your traditional

458
00:40:49,900 --> 00:40:57,480
you know that's what exists on wells all over the world right that typical facility um on the

459
00:40:57,480 --> 00:41:03,540
bitcoin mining side you know to go deploy these at one of these sites you're talking big natural

460
00:41:03,540 --> 00:41:09,580
gas generators that's the first component um so you're you're plumbing you're having to plumb that

461
00:41:09,580 --> 00:41:15,560
natural gas generator into their system where the gas is flowing um and then downstream of that

462
00:41:15,560 --> 00:41:21,120
generator you know so that generator is consuming all of the gas um create a bunch of electricity

463
00:41:21,120 --> 00:41:26,720
right and then where's that electricity go well you know 10 feet away you wire that

464
00:41:26,720 --> 00:41:33,640
generator into one of these data center boxes um and inside one of those boxes are hundreds of

465
00:41:33,640 --> 00:41:41,680
servers. And so that's, you know, a very simple way of talking about the three main components.

466
00:41:42,340 --> 00:41:46,420
You know, there's, we, you know, we have to meter the gas, you know, we put separators and volume

467
00:41:46,420 --> 00:41:51,000
tanks and pressure regulation. There's a lot of other little nuanced infrastructure between all

468
00:41:51,000 --> 00:41:55,480
these steps, but the three main components that you have to add to an oil and gas site is a generator,

469
00:41:55,480 --> 00:42:03,580
data center servers and you know data centers are air cooled or immersion or hydro and servers

470
00:42:03,580 --> 00:42:09,240
there's old ones new ones efficient ones different deals come together in different ways that warrant

471
00:42:09,240 --> 00:42:17,980
different infrastructure for us we only deploy one type of generator that works very well on

472
00:42:17,980 --> 00:42:23,440
associated gas and a wide range of natural gas right i think the hardest part about this business

473
00:42:23,440 --> 00:42:29,860
is the continuous operation of converting gas into electricity for Bitcoin mining.

474
00:42:30,480 --> 00:42:32,360
And the mining servers are relatively dumb.

475
00:42:32,780 --> 00:42:35,220
You know, as long as they're getting power, they're pretty much going to run.

476
00:42:35,900 --> 00:42:38,080
And as long as you have a Starlink satellite, you're good.

477
00:42:39,820 --> 00:42:43,860
But the proof is in, like, the uptime is really in the power side,

478
00:42:43,960 --> 00:42:45,760
the ability to consistently generate power.

479
00:42:45,760 --> 00:42:48,380
And so we've, as a company, been through many different generators.

480
00:42:48,380 --> 00:42:56,960
small big paralleled island mode and can go on and on but that's the typical infrastructure we're

481
00:42:56,960 --> 00:43:01,740
putting out at every site every site's going to have generator data center servers it's just a

482
00:43:01,740 --> 00:43:10,180
matter of who owns the equipment and what the servers produce in terms of hash rate

483
00:43:10,180 --> 00:43:33,300
And so if you're looking at a site that is particularly attractive to actually mine for the Bitcoin economics and the mining economics versus reducing liability or unlocking an asset, like, you know, being able to drill more oil, do the scale of those differ typically?

484
00:43:33,300 --> 00:43:37,620
or what is the traditional, like, what is the typical scale that you guys work at in terms of,

485
00:43:37,620 --> 00:43:41,380
you know, the, the, the size of a generator or the ultimate conversion?

486
00:43:41,380 --> 00:43:48,800
Yeah. So we only deploy one type of generator, right? We deploy Waukesha's and those are 1.3

487
00:43:48,800 --> 00:43:53,720
megawatts a piece. So for us to do any type of deal, you know, it has to be at least, you know,

488
00:43:53,720 --> 00:44:02,300
300 MCF a day of gas, which is enough to feed that Waukesha. We use the same, most of our sites

489
00:44:02,300 --> 00:44:10,220
use the same air cooled data center um and then the servers can vary widely so no matter who owns

490
00:44:10,220 --> 00:44:18,580
the asset like we have two different commercial models which we can get into um the ability to

491
00:44:18,580 --> 00:44:25,380
convert gas into hash rate is really a function of what servers you have the new 2025 best in class

492
00:44:25,380 --> 00:44:33,220
what's miners or or ant miners like those are what's making 1350 an mcf um they just make a

493
00:44:33,220 --> 00:44:37,980
lot they're way more efficient at producing hash rate from the same amount of power um you know

494
00:44:37,980 --> 00:44:43,760
some of our sites were deploying old 2020 miners used miners that are very very cheap to get and

495
00:44:43,760 --> 00:44:49,560
you know make significantly less dollars per mcf they're three times less efficient they're you

496
00:44:49,560 --> 00:44:54,420
know four times cheaper um so it really just depends for the customer you know what they're

497
00:44:54,420 --> 00:45:00,960
after um you know should i talk about the commercial models yeah if you could yeah so

498
00:45:00,960 --> 00:45:06,980
we have a rental model and we have a purchase model right as what i talked about earlier

499
00:45:06,980 --> 00:45:10,660
focusing on purchase first that's where the oil and gas company will actually buy the generator

500
00:45:10,660 --> 00:45:17,280
by the data center by the servers they're doing that purely for the economic value prop

501
00:45:17,280 --> 00:45:23,300
of bitcoin mining of bitcoin mining the uplift that that provides versus what the pipeline will

502
00:45:23,300 --> 00:45:30,400
pay them or if the gas is stranded. Typically what we've seen is those customers prefer best

503
00:45:30,400 --> 00:45:35,420
in class miners. So they're trying to maximize the Bitcoin production in the shortest amount of time

504
00:45:35,420 --> 00:45:40,400
possible before the next halving. You know, they're bullish on Bitcoin, they're bullish on hash price.

505
00:45:41,180 --> 00:45:45,520
And so they'll want to deploy the best servers and hodl as much of the Bitcoin that they mine.

506
00:45:45,520 --> 00:45:57,200
That product is not a great fit for your oil and gas companies that have the environmental

507
00:45:57,200 --> 00:45:58,200
oil problem.

508
00:45:58,200 --> 00:46:19,290
What we heard over and over from customers is and just from traditional oil and gas patterns right These guys don want to fund capital into anything other than drilling wells What they will do is rent compressors rent production equipment rent gas treatment facilities It like it much easier for them to spend OPEX versus CAPEX

509
00:46:19,290 --> 00:46:27,910
And so, you know, and especially as, you know, if we're after these curtailed oil situations,

510
00:46:28,150 --> 00:46:31,610
these environmental situations, those are usually bigger EMPs, like your big pubcos,

511
00:46:31,610 --> 00:46:38,410
your big privates, uh, who, you know, have a lot of gas. Um, they're a better fit for rental

512
00:46:38,410 --> 00:46:44,490
because one, you know, renting infrastructure is way more in pattern for them. Um, you know,

513
00:46:44,530 --> 00:46:51,390
the, what we'll do in rental, they'll pay us a fat flat fixed monthly cost. We own all the assets.

514
00:46:51,590 --> 00:46:58,230
So same exact generator, same exact data center, but we're putting in older used miners, uh, which

515
00:46:58,230 --> 00:47:04,970
are a lot less capital intensive. It's more a function of getting their rental cost to be

516
00:47:04,970 --> 00:47:11,090
achievable and not offensive, while also still giving us the ability to make a return

517
00:47:11,090 --> 00:47:18,130
on our capital investment on our units. So in the rental, you know, they will pay fixed flat

518
00:47:18,130 --> 00:47:23,010
monthly cost to us. They'll get the Bitcoin mining rewards. Traditionally, these are big companies,

519
00:47:23,010 --> 00:47:27,830
they don't have the accounting to custody Bitcoin, they don't want to custody Bitcoin,

520
00:47:27,830 --> 00:47:35,030
they just get cash at the end of the month and so same system different servers owned by 360 will go

521
00:47:35,030 --> 00:47:41,290
deploy to capture that gas for them they'll get the u.s dollars at the end of the month it's not

522
00:47:41,290 --> 00:47:49,190
1350 in mcf because we're using you know 2020 2021 servers um so net net net they're paying us 50

523
00:47:49,190 --> 00:47:54,090
you know 50 grand 60 grand 40 grand depending on the site and how many units we're deploying and

524
00:47:54,090 --> 00:47:58,430
the term length but they're coming out of that you know right now making about five grand a month

525
00:47:58,430 --> 00:48:06,490
um however if hash price is that what does that translate to on a mcf basis about a dollar an mcf

526
00:48:06,490 --> 00:48:13,110
right but it's highly sensitive to and realistically in those scenarios those operators care less

527
00:48:13,110 --> 00:48:18,710
about yes exactly what the uplift is to their natural gas they are not there chasing gas

528
00:48:18,710 --> 00:48:24,610
economics. If they can subsidize the rental rate with, you know, the cash they get at the end of

529
00:48:24,610 --> 00:48:29,310
the month, like that's great. But the reality is like, even if they're losing 20 grand a month,

530
00:48:29,310 --> 00:48:34,870
let's say hash, you know, Bitcoin goes from 120 today to 70 grand. Like all of our customers on

531
00:48:34,870 --> 00:48:39,190
rental are not making money. They're losing money. They're paying us a rental rate. Cash they get

532
00:48:39,190 --> 00:48:43,590
back at the end of the month is not more than the rental rate. Right now it is more and it comes out

533
00:48:43,590 --> 00:48:48,850
to about a dollar an mcf but the point is like those guys are not there for gas economics most

534
00:48:48,850 --> 00:48:53,750
leases they do in the oil field are cost centers and so this right now is great because it's you

535
00:48:53,750 --> 00:48:58,330
know it's not a cost center for these guys but what they're the reason they'll still do this

536
00:48:58,330 --> 00:49:02,490
even if they're losing money every month on our deal is because they're getting oil out of the

537
00:49:02,490 --> 00:49:09,370
ground yeah it's a cost center or in in certain scenarios it's a marginal profit center but it's

538
00:49:09,370 --> 00:49:16,710
really there to enable yes uh the monetization of an asset they couldn't otherwise exactly exactly

539
00:49:16,710 --> 00:49:20,610
so that's that's exactly right like they're willing to lose you know call it 20 grand a month

540
00:49:20,610 --> 00:49:26,290
on our deal because now they're making an extra 500 grand a month of oil that they wouldn't be

541
00:49:26,290 --> 00:49:30,970
able to produce without us there so it's it's cost of doing business and then walk through

542
00:49:30,970 --> 00:49:37,770
the economics of us of a typical site in the in the other scenario where they're actually going

543
00:49:37,770 --> 00:49:45,830
after the Bitcoin, it's a stranded gas play in terms of a lot more capital, so more costs.

544
00:49:45,830 --> 00:49:51,870
They might be getting the $13.50 in MCF, but they're investing what per MCF and what does

545
00:49:51,870 --> 00:49:59,650
the uplift look like versus what they might get from selling to a pipeline like the Waha,

546
00:50:00,570 --> 00:50:02,810
assuming it's not negative, but it's a dollar in MCF.

547
00:50:02,810 --> 00:50:19,350
Yeah. So in that case, right, focusing on best in class, right again, same generator, you know, same data center, and then best servers cost roughly $2 million per megawatt per 300 MCF a day of gas.

548
00:50:19,350 --> 00:50:29,010
that infrastructure stack deployed at their site turns around and makes call it 1350 an mcf

549
00:50:29,010 --> 00:50:36,250
of top line revenue which comes out again you're investing 2 million and across a year that's about

550
00:50:36,250 --> 00:50:42,390
1.7 million dollars of top line revenue after all your mining expenses generator maintenance expenses

551
00:50:42,390 --> 00:50:51,310
site expenses like OPEX, you know, you're making about, call it $11 in MCF, $10 in MCF of EBITDA

552
00:50:51,310 --> 00:51:01,610
per MCF, which is substantial, which rounds out to about 1.3, $1.4 million of EBITDA per year.

553
00:51:02,170 --> 00:51:07,490
So our customers who are making this big investment in the infrastructure are also

554
00:51:07,490 --> 00:51:12,030
looking at really attractive paybacks. And so, you know, they're making their money back in

555
00:51:12,030 --> 00:51:18,010
in less than two years at current hash price. Um, it's a good time to do that. Miners are

556
00:51:18,010 --> 00:51:21,570
obviously a lot cheaper than they were, you know, when we started the company back in 21 and hash

557
00:51:21,570 --> 00:51:27,430
price was at $400 today, hash price is about $60. So, you know, and all the things hold true. Like

558
00:51:27,430 --> 00:51:31,450
it's just funny. And the payback on the same well would be far longer if they were just

559
00:51:31,450 --> 00:51:38,230
selling to a pipeline. Yeah, generally. And, and so then the next question,

560
00:51:38,230 --> 00:51:42,130
because you mentioned this before, like the variability in hash price.

561
00:51:42,130 --> 00:51:47,390
And I would presume that the first scenario where it's less about the mining economics

562
00:51:47,390 --> 00:51:52,890
are more agnostic to the variability in hash price.

563
00:51:53,130 --> 00:52:01,410
But talk about how you got 360, how you manage this operationally,

564
00:52:01,450 --> 00:52:07,550
but then also how you manage it in evaluating target situations or target sites.

565
00:52:08,230 --> 00:52:18,290
In terms of managing volatility of Bitcoin, as well as volatility in natural gas, because, you know, almost at the start, you talked about the scenario where natural gas.

566
00:52:19,810 --> 00:52:24,410
What was the scenario where natural gas went to like nine dollars?

567
00:52:24,570 --> 00:52:26,550
Yeah. Yeah. So that's a perfect example.

568
00:52:26,550 --> 00:52:36,410
But just talk about that generally, but also potentially specifically to scenario planning and site planning of how you manage volatility of both of those.

569
00:52:37,230 --> 00:52:47,250
The Bitcoin price and hash price, as well as the cost of natural gas, which is revenue potential.

570
00:52:47,490 --> 00:52:47,790
Totally.

571
00:52:48,010 --> 00:52:55,450
I think the best way to look at that would be like our company owned Wells and site and Bitcoin mine in Fort Worth.

572
00:52:55,450 --> 00:52:55,850
Right.

573
00:52:55,850 --> 00:53:00,990
So when we started the company, gas prices were at $3.

574
00:53:02,650 --> 00:53:05,410
Mining Bitcoin was $40 at MCF.

575
00:53:05,710 --> 00:53:11,330
So it was like worth deploying that infrastructure to realize that outsized gain.

576
00:53:14,030 --> 00:53:15,910
Because that chasm was so wide, right?

577
00:53:15,950 --> 00:53:19,130
And then kind of play it out over the next year and a half.

578
00:53:20,130 --> 00:53:22,770
Operationally, we were not doing well.

579
00:53:22,770 --> 00:53:25,170
Like we're trying to figure this thing out for the first time.

580
00:53:25,170 --> 00:53:27,950
Like we were not, you know, having to spend way more money.

581
00:53:28,110 --> 00:53:32,630
The uptime was not good, you know, and then what you had happen was, you know, FTX and

582
00:53:32,630 --> 00:53:39,870
Sam Bankman freed and Bitcoin went from, you know, 63,000 to 17,000, 16,000 and hash price.

583
00:53:40,590 --> 00:53:41,030
Yeah.

584
00:53:41,170 --> 00:53:41,910
Just 22.

585
00:53:42,090 --> 00:53:47,190
And like coincide, like, you know, happenstance, Russia, Ukraine happened, Nord Stream blew

586
00:53:47,190 --> 00:53:48,850
up, gas prices went to $9.

587
00:53:49,490 --> 00:53:54,250
At that period of time, you know, the mining rewards were $7 in MCF.

588
00:53:54,250 --> 00:53:59,730
gas prices were nine dollars in mcf we had all these operational issues we actually shut our

589
00:53:59,730 --> 00:54:06,410
well or shut our bitcoin mine completely down for six months hired halberton fracked three more

590
00:54:06,410 --> 00:54:14,850
refracted recompleted three of our wells um went from you know 400 mcf a day to well over 2000 mcf

591
00:54:14,850 --> 00:54:19,810
a day which is really a function of these two uncorrelated markets it was like well the hell

592
00:54:19,810 --> 00:54:24,770
with the Bitcoin mine, you know, if we can sell gas for $9, let's go invest in our wells and,

593
00:54:24,770 --> 00:54:31,410
you know, make a great return in natural gas. And so you do have these two uncorrelated markets,

594
00:54:31,770 --> 00:54:35,310
you know, a lot of, some of our customers look at this as like revenue optionality.

595
00:54:35,830 --> 00:54:40,790
Why have one market when you can have two? And so, yeah, there certainly is like a function.

596
00:54:40,950 --> 00:54:43,730
Describe that, like just like that idea of having the optionality.

597
00:54:43,730 --> 00:54:53,830
um like do people when you're talking to customers does that resonate it definitely resonates

598
00:54:53,830 --> 00:55:03,010
it's you know the challenge is like to make a return on the bitcoin mine you need to be running

599
00:55:03,010 --> 00:55:09,910
the bitcoin mine 24 7 and so it people have many different ways of thinking about it um

600
00:55:09,910 --> 00:55:17,970
but generally you know having a pipeline there and having a bitcoin mine gives you optionality

601
00:55:17,970 --> 00:55:22,910
so you can sell gas for gas prices or you can effectively sell gas into the bitcoin mining

602
00:55:22,910 --> 00:55:29,910
market you know for a widely different gas price and historically the bitcoin has way outperformed

603
00:55:29,910 --> 00:55:34,990
henry hub um we have a chart on our website that plots it out over five years like the only

604
00:55:34,990 --> 00:55:39,350
crossover was for three months kind of during that refrac period that we had.

605
00:55:40,750 --> 00:55:44,690
Generally, customers, if they're going to go do this, are thinking about like, it would

606
00:55:44,690 --> 00:55:46,750
be very bad if I was having to sell gas to the pipeline.

607
00:55:47,870 --> 00:55:52,370
You know, they're doing this thinking Bitcoin mining is going to be the sole offtake for

608
00:55:52,370 --> 00:55:55,050
that gas, you know, for the foreseeable future.

609
00:55:55,790 --> 00:55:58,250
And so we had a conversation previously.

610
00:55:58,250 --> 00:56:07,010
My understanding, though, is that certain midstream pipeline agreements basically dictate under all scenarios they have your gas.

611
00:56:07,090 --> 00:56:08,250
So you don't have that optionality.

612
00:56:08,330 --> 00:56:11,690
So you might be looking at scenarios where they do have the option.

613
00:56:11,770 --> 00:56:12,890
Correct. Yeah, correct.

614
00:56:13,250 --> 00:56:24,450
I would say just overarching theme here is it's a lot harder to do any type of deal on pipeline connected gas because that gas is earning some nominal or attractive gas price.

615
00:56:24,570 --> 00:56:28,150
First and foremost, to your point, you're alluding to like acreage dedication.

616
00:56:28,250 --> 00:56:35,850
so why can we do this at our site in the barnett but maybe not at you know exxon site in the permian

617
00:56:35,850 --> 00:56:41,710
right i think you know what our wells were drilled in 2007 right at that time

618
00:56:41,710 --> 00:56:47,110
and these are gas wells right so traditionally when a new well is drilled in oil and gas

619
00:56:47,110 --> 00:56:52,650
you have an offtake for that gas energy transfer targa or one of the big midstream companies

620
00:56:52,650 --> 00:56:58,950
they'll say okay you know you need to get this gas sold i will build the pipeline to you i will

621
00:56:58,950 --> 00:57:03,270
invest in the infrastructure so energy transfer will go pay you know a million bucks or however

622
00:57:03,270 --> 00:57:08,210
far they have to build out but in return for that they're going to say and i'm going to do this for

623
00:57:08,210 --> 00:57:14,110
you but you have to sell all your gas to me under all scenarios no matter what for the next 5 10

624
00:57:14,110 --> 00:57:22,630
20 years right and so it's unfortunate because in west texas like you'd think everyone would

625
00:57:22,630 --> 00:57:27,550
be doing this but a lot of guys especially last year when waha was negative uh you know if you're

626
00:57:27,550 --> 00:57:34,990
dedicated to targa like you can't siphon off gas to go mine bitcoin even if gas prices are negative

627
00:57:34,990 --> 00:57:41,190
right all that gas has to go into the pipeline company contractually because they invested to

628
00:57:41,190 --> 00:57:48,230
build out to you um and so again the acreage dedications are a big there's like two main

629
00:57:48,230 --> 00:57:52,110
disqualifiers in natural gas bitcoin mining acreage dedications are one they're really hard

630
00:57:52,110 --> 00:57:56,010
to get out of and around. And you definitely don't want to go toe to toe with these big

631
00:57:56,010 --> 00:58:01,010
mainstream companies and violate those terms. And then, you know, gas composition, like if you have

632
00:58:01,010 --> 00:58:05,970
a lot of H2S, like sour gas, can't really do much about that. It's very cost prohibitive to treat

633
00:58:05,970 --> 00:58:09,570
sour gas. And so like, if it's sour, it's really not much you can do because that's highly corrosive

634
00:58:09,570 --> 00:58:14,810
will destroy your generator dangerous for people. So those are the two main deals. But, you know,

635
00:58:14,830 --> 00:58:18,430
I'd say in the Permian, like there are a lot of dedications. And so you'd think a lot of pipeline

636
00:58:18,430 --> 00:58:23,850
connected guys out there would be doing this but you know your newer wells your five year old wells

637
00:58:23,850 --> 00:58:28,810
and newer like if there is a pipeline like the acreage dedicated we run into that a lot when

638
00:58:28,810 --> 00:58:34,490
we're talking to your top 150 oil and gas companies you know that have newer production

639
00:58:34,490 --> 00:58:40,910
they're you know tied in with the midstream and they can't do anything i would also gather that

640
00:58:40,910 --> 00:58:48,010
even if you were someone that owned an asset and looked at this equation and understood it and

641
00:58:48,010 --> 00:58:54,170
wanted the optionality that in most cases, if you want the pipeline, you don't have any leverage to

642
00:58:54,170 --> 00:59:01,870
preserve optionality in just in terms of negotiating power with a midstream company.

643
00:59:02,050 --> 00:59:07,170
Yeah. I mean, like you're every deal we've done on pipeline gas has been older production.

644
00:59:07,170 --> 00:59:12,890
We've not done any like new wells because chances are it was dedicated at one point and the

645
00:59:12,890 --> 00:59:17,970
dedication's rolled off. It's termed out 10 years later, five years later. So now those guys do have

646
00:59:17,970 --> 00:59:22,270
optionality like they're not mandated to sell gas to the midstream companies they do have the

647
00:59:22,270 --> 00:59:29,690
functional ability to do something else with that gas um but again it's it's asset by asset

648
00:59:29,690 --> 00:59:36,810
so from a customer segmentation standpoint like when we're looking at selling the product where

649
00:59:36,810 --> 00:59:42,970
the oil and gas company purchase it like we're finding we're targeting like the worst potential

650
00:59:42,970 --> 00:59:50,570
assets from a gas realization perspective, which would imply like Permian Basin,

651
00:59:51,230 --> 00:59:57,770
older conventional wells that, you know, don't have oil. It's like there's, you know, pockets of

652
00:59:57,770 --> 01:00:04,690
the, you know, southeastern Permian, like Valverde, Crockett County, where you have older production

653
01:00:04,690 --> 01:00:11,390
that's predominantly gas. It's old, you know, 20 years plus. They have a pipeline, but chances are

654
01:00:11,390 --> 01:00:13,510
the midstream company is not taking very good care of it.

655
01:00:13,790 --> 01:00:14,510
It's not dedicated.

656
01:00:14,690 --> 01:00:18,010
So like those would be great targets for those companies specifically.

657
01:00:18,770 --> 01:00:19,550
Like those turn,

658
01:00:19,670 --> 01:00:20,830
those wells turn into cost centers,

659
01:00:20,990 --> 01:00:21,210
right?

660
01:00:21,230 --> 01:00:23,950
If they only produce gas and you have to pay a guy to go out there and

661
01:00:23,950 --> 01:00:27,270
chemicals and everything to actually produce the gas and you're selling it

662
01:00:27,270 --> 01:00:28,350
for 50 cents or a dollar,

663
01:00:28,350 --> 01:00:30,810
like chances are like those wells are shut in,

664
01:00:30,870 --> 01:00:32,330
not producing because they're on economic.

665
01:00:32,470 --> 01:00:34,430
Like that's where this would be a great fit.

666
01:00:35,410 --> 01:00:38,830
Do you just basically being in the market,

667
01:00:38,830 --> 01:00:46,050
do you expect midstream companies you know it would be unlikely to to mine upstream but to

668
01:00:46,050 --> 01:00:50,650
start mining at the point of aggregation and do you see that as competitive

669
01:00:50,650 --> 01:01:00,970
not necessarily competitive but potentially um a competitive dynamic when evaluating sites of

670
01:01:00,970 --> 01:01:07,170
what would make something an attractive site to mine bitcoin upstream yeah i think

671
01:01:07,170 --> 01:01:11,950
midstream companies are very conservative they are um they like to clip their fee

672
01:01:11,950 --> 01:01:21,110
just by moving molecules so i don't foresee in the near future uh you know again just like oil

673
01:01:21,110 --> 01:01:25,330
and gas companies their dollars are to drill wells like midstream companies dollars are to

674
01:01:25,330 --> 01:01:31,630
drill i'm not to drill but to build pipe and processing so for them to go way out of pad

675
01:01:31,656 --> 01:01:37,596
And then at these gathering centers that these military companies have, I mean, shit, it's like hundreds of megawatts you could do.

676
01:01:37,776 --> 01:01:44,976
So like, I don't see those companies doing this themselves and capturing the spread.

677
01:01:45,576 --> 01:01:50,096
Very, very easily, like energy transfer could go do that in the Permian right now.

678
01:01:50,356 --> 01:01:52,216
They have custody of the gas.

679
01:01:52,436 --> 01:01:57,216
They're stripping out all of the valuable parts of the gas, like the NGLs and propane and all that.

680
01:01:57,216 --> 01:02:01,996
they're left with the least valuable, which is just the methane, like the dry gas.

681
01:02:03,536 --> 01:02:07,056
You know, they very easily could do that. I think what we're seeing is more

682
01:02:07,056 --> 01:02:13,856
those guys facilitating, energy transfers of the world, facilitating sales to your hyperscale

683
01:02:13,856 --> 01:02:19,416
data centers or your big Bitcoin miners, where they'll say, you know, look, we have all this gas,

684
01:02:19,416 --> 01:02:24,736
you can buy it from me for some premium over Waha, that energy transfer, like some premium

685
01:02:24,736 --> 01:02:29,816
over energy transfer would get just moving it down the pipe. So I don't see that as competitive.

686
01:02:30,276 --> 01:02:34,716
I don't think that kind of runs into any of our evaluation like that particular one. I mean,

687
01:02:34,776 --> 01:02:39,776
I do think it'd be, there's a future where midstream leverages Bitcoin mining as a way to

688
01:02:39,776 --> 01:02:45,096
maybe win more deals. So like if you're a midstream company, you want this big Exxon pad,

689
01:02:45,796 --> 01:02:51,176
right? You say, hey, Mr. Exxon, this is in New Mexico. I can help you complete these wells three

690
01:02:51,176 --> 01:02:55,256
months faster than any of the other midstream companies because i can put a mobile gas offtake

691
01:02:55,256 --> 01:03:00,656
solution while the pipeline's being built out i do see that as a future for for midstream

692
01:03:00,656 --> 01:03:10,556
one one last question on kind of the evaluation of of sites and then i want to zoom out to

693
01:03:10,556 --> 01:03:17,976
more of the bitcoin side of it how do you guys manage the client curves of wells you talked about

694
01:03:17,976 --> 01:03:23,096
those scenarios where you know customers actually going to buy the infrastructure to mine they're

695
01:03:23,096 --> 01:03:30,996
buying that latest high sm machine it is highly efficient but expensive

696
01:03:30,996 --> 01:03:38,576
how do you guys in mining bitcoin at as high utilization as possible is most ideal if you

697
01:03:38,576 --> 01:03:45,496
have those expensive machines how does that factor into evaluating the sites and then also

698
01:03:45,496 --> 01:03:50,616
thinking about the duration of how long one of these solutions is at an individual site and

699
01:03:50,616 --> 01:03:55,436
moving between sites yeah like those are like that's a great question to just kind of go and

700
01:03:55,436 --> 01:04:01,936
going into like wow there's a lot more to this than i thought in 2021 um because you're totally

701
01:04:01,936 --> 01:04:07,756
right like old conventional wells like are producing flat like new horizontal wells are

702
01:04:07,756 --> 01:04:15,376
dropping off a cliff in the first two years right and so and then gas composition right is widely

703
01:04:15,376 --> 01:04:21,936
different and different gas compositions will perform differently in the generator will you know

704
01:04:21,936 --> 01:04:28,636
really lean dry gas low btu that's less efficient in the generator than like a richer 1200 btu gas so

705
01:04:28,636 --> 01:04:34,076
moral of the story is like our customers both in rental and in the purchase model like they're

706
01:04:34,076 --> 01:04:42,696
leaning on us to evaluate with them how many units how long where this makes sense which means

707
01:04:42,696 --> 01:04:47,596
Are we talking about a single well? Like that's not ideal. Um, single point of failure. We're

708
01:04:47,596 --> 01:04:52,316
talking multiple wells, a gathering system. What's the decline on all these wells? Show me the

709
01:04:52,316 --> 01:04:55,876
production history over the last three months. Show me the gas composition. Is the gas composition

710
01:04:55,876 --> 01:05:01,556
for all the wells the same? Um, the ambient conditions of the site, you know, is it high

711
01:05:01,556 --> 01:05:07,416
elevation? Is it cold? Is it hot? Um, the pressure, like flowing field pressure of the gas, like,

712
01:05:07,416 --> 01:05:14,056
are the wells on artificial lift? Are they free flowing? Like there's all these considerations

713
01:05:14,056 --> 01:05:22,416
to really evaluate the quality of a site to put a Bitcoin mine on there and have it be a legitimate

714
01:05:22,416 --> 01:05:26,256
24 seven operation. And how many units do we need and how long can they be there for?

715
01:05:26,656 --> 01:05:33,496
So like that's part of every, you know, customer journey evaluating those fine details to actually

716
01:05:33,496 --> 01:05:37,956
propose them something that we're confident in and something that they can be confident in.

717
01:05:39,336 --> 01:05:46,856
And all of this adds up to Bitcoin mining solving an upstream energy problem.

718
01:05:47,756 --> 01:05:50,696
Describing principally two different types of problem.

719
01:05:50,916 --> 01:05:54,156
One, unlocking oil, reducing environmental liability.

720
01:05:54,156 --> 01:06:00,836
The other side, greater monetization of natural gas than could otherwise be monetized traditionally

721
01:06:00,836 --> 01:06:02,316
or conventionally.

722
01:06:03,496 --> 01:06:13,056
Zooming out, for someone that's a traditional energy professional that might know less on the Bitcoin side,

723
01:06:14,256 --> 01:06:21,556
how do you personally, but then also 360, think about Bitcoin, the money side,

724
01:06:21,556 --> 01:06:26,056
in terms of what is actually creating this demand?

725
01:06:26,056 --> 01:06:54,956
And so I'd just like to hear your views on that, of the actual source of the demand, because I can envision you're talking to customers, talking about how you can get $13 an MCF versus $1 an MCF or $10 to $11 of EBITDA, or talking to someone about eliminating environmental liability and being able to unlock oil.

726
01:06:54,956 --> 01:06:59,816
and that tracking and then saying, well, how do I know this is going to exist in two years or three years

727
01:06:59,816 --> 01:07:05,316
if I invest in this infrastructure? So just talk a little bit from your own perspective of how you think about

728
01:07:05,316 --> 01:07:13,516
the Bitcoin side of what is actually creating the demand to make this sustainable.

729
01:07:15,216 --> 01:07:19,656
So what's kind of like just Bitcoin in general? Like what am I telling customers?

730
01:07:19,656 --> 01:07:37,696
Yeah. You know, I think, I mean, I'm a 360. We're very bullish on Bitcoin. Always have been and try to maximize our holdings. And so when we're talking to customers, like, you know, I tell them I don't have a crystal ball. Like, I can't tell you a Bitcoin is going to be at 200,000 at the end of the year or 50,000.

731
01:07:37,696 --> 01:07:43,476
What I can tell you is, you know, it's, if you look at the last, you know, you look at

732
01:07:43,476 --> 01:07:48,236
the history of Bitcoin, it's the best performing asset over the last 15 years.

733
01:07:48,236 --> 01:07:54,696
And you just look at some of the macroeconomic tailwinds of the ETFs are a big one, right?

734
01:07:54,696 --> 01:08:12,446
A lot of our customers are old school but when I can say look BlackRock is the biggest purchaser of Bitcoin Fidelity is buying Bitcoin Texas has a strategic reserve The US has a strategic reserve Wisconsin Pension Fund just bought you know 250 million And some of those like tangible

735
01:08:12,446 --> 01:08:19,546
macroeconomic tailwinds really help people come to terms that like Bitcoin is not, you know,

736
01:08:19,546 --> 01:08:26,986
fly by night, um, snake oil scam. Right. And then, you know, the fixed 21 million, uh, Bitcoin

737
01:08:26,986 --> 01:08:32,526
supply. And then in light of, you know, trillions of dollars, you know, they can keep printing them,

738
01:08:32,566 --> 01:08:37,486
right. It's you have, and then the deficit, I mean, you, you can get really philosophical on

739
01:08:37,486 --> 01:08:47,406
Bitcoin, but I think the main diffuser for customers is like talking about Texas, talking

740
01:08:47,406 --> 01:08:50,666
about BlackRock being like, look, if it's good enough for these massive institutions,

741
01:08:50,666 --> 01:08:57,986
like it's not going anywhere. So I think that is how we frame it. I can't tell you what hash price

742
01:08:57,986 --> 01:09:02,386
is going to be, but I can tell you that, you know, things are going to continue to get better for

743
01:09:02,386 --> 01:09:08,546
Bitcoin. If you look at some of the things that are happening right now, I think that helps people,

744
01:09:08,706 --> 01:09:11,786
you know, come to terms with it. Make no mistake, if someone's going to go buy

745
01:09:11,786 --> 01:09:16,406
$2 million plus of our infrastructure, like they are going to have to go down the Bitcoin

746
01:09:16,406 --> 01:09:20,466
rabbit hole themselves some of them already have some of them are are more new to it some of them

747
01:09:20,466 --> 01:09:24,726
are more risk takers wildcatters families that know they want some bitcoin exposure and this is

748
01:09:24,726 --> 01:09:32,806
a way to get it um on the rental side again like that level of evangelism like frankly doesn't

749
01:09:32,806 --> 01:09:36,386
happen because they could give a shit about bitcoin it's about getting oil out of the ground

750
01:09:36,386 --> 01:09:42,046
like i'm not having to like they're not worried if they make 10 grand this month or lose 10 grand

751
01:09:42,046 --> 01:09:46,046
next month on our deal they're worried about getting oil out of the ground and if this works

752
01:09:46,046 --> 01:09:50,306
and we have the track record and customers and backing and they know it works like they're fine

753
01:09:50,306 --> 01:09:55,606
with it you know irrespective of bitcoin and in that scenario they're just renting equipment for

754
01:09:55,606 --> 01:10:02,346
you so they don't really care if two years from now three years from now doesn't turn out because

755
01:10:02,346 --> 01:10:05,546
they don't have a huge amount of capital investment so now now they in theory could

756
01:10:05,546 --> 01:10:12,706
have gone and drilled an oil well and then if you're not able to continue to to pay because

757
01:10:12,706 --> 01:10:19,006
but worst case scenario like bitcoin goes to zero like this will still function as the same service

758
01:10:19,006 --> 01:10:23,786
that off takes gas that lets them produce oil so like if bitcoin's at zero like we can still run

759
01:10:23,786 --> 01:10:27,746
i would challenge that well i mean you could still run the cost so you could you could i guess what

760
01:10:27,746 --> 01:10:33,386
you're saying is you could still reduce the emission yeah just be i'm still unlocking oil

761
01:10:33,386 --> 01:10:37,866
for them and if they're paying us you know 50 grand a month and they're getting zero dollars

762
01:10:37,866 --> 01:10:44,526
back but now they're making 500 grand of oil like still you know it's less attractive but

763
01:10:44,526 --> 01:10:49,666
again for them it's not really about how much money am i going to make on this bitcoin mining

764
01:10:49,666 --> 01:10:56,726
deal it's about how much more oil am i getting out of the ground and then how do you think about

765
01:10:56,726 --> 01:11:03,246
this is obviously in the oil field i presume even though this is people have been mining upstream

766
01:11:03,246 --> 01:11:07,166
for probably a decade now.

767
01:11:08,206 --> 01:11:09,846
It's still very nascent.

768
01:11:10,566 --> 01:11:12,086
It's still a drop in the bucket.

769
01:11:15,806 --> 01:11:19,126
Do you see, or I don't want to say, do you see,

770
01:11:20,126 --> 01:11:22,666
what would Bitcoin in terms of scale

771
01:11:22,666 --> 01:11:27,726
need to be to more meaningfully change

772
01:11:27,726 --> 01:11:32,146
maybe how the legacy industry sees the map

773
01:11:32,146 --> 01:11:41,186
such that they're more proactive about using Bitcoin to solve these problems rather than having you show up to try to educate them.

774
01:11:42,366 --> 01:11:51,226
Yeah, I mean, my business partner, Sean, always says that, you know, one day the Bitcoin mining is going to be a tailwind for 360 energy, not a headwind.

775
01:11:51,226 --> 01:11:55,726
Right now, it's a headwind because, you know, a lot of customers are like, can you do anything else?

776
01:11:56,206 --> 01:11:59,986
Can you do AI? Can you do any? Does it have to be Bitcoin? Right.

777
01:11:59,986 --> 01:12:03,546
Because they still have this phobia that Bitcoin is, you know, a scam.

778
01:12:03,746 --> 01:12:05,586
So that is changing, though.

779
01:12:05,686 --> 01:12:07,026
Like, it's absolutely changing.

780
01:12:07,206 --> 01:12:13,506
I think the level of evangelism we're doing now is a lot less than we've been doing.

781
01:12:13,606 --> 01:12:21,646
I think that's also a product of being more mature as a company, having real institutional backing, you know, track record, being producers ourselves.

782
01:12:21,646 --> 01:12:23,786
Like, we come across more trustworthy, more proven.

783
01:12:25,866 --> 01:12:28,526
But, you know, I don't know.

784
01:12:28,526 --> 01:12:32,946
know i don't you know if it's 500 000 bitcoin i don't know if it's the u.s buying five percent of

785
01:12:32,946 --> 01:12:41,426
the outstanding supply um i don't know if they'll ever do this or if they'll continue to outsource

786
01:12:41,426 --> 01:12:47,266
it i mean i think you can look at as maybe as a comp is you know some of these big super major

787
01:12:47,266 --> 01:12:51,506
exxon bp getting into some more the renewables and they're kind of dabbling into geothermal

788
01:12:51,506 --> 01:13:00,066
which is at least more tangential on the energy side like i don't think in the next three years

789
01:13:00,066 --> 01:13:04,766
and i don't even know if it's a bitcoin price signal i just don't see these big oil and gas

790
01:13:04,766 --> 01:13:11,326
companies wanting to go invest a huge amount of money in bitcoin mining to go do this themselves

791
01:13:11,326 --> 01:13:17,446
in the near future i think they'd rather outsource it via the rental product

792
01:13:17,446 --> 01:13:24,846
to get the oil and gas value propositions

793
01:13:24,846 --> 01:13:25,506
that they're looking for.

794
01:13:25,626 --> 01:13:26,206
I could be wrong.

795
01:13:26,366 --> 01:13:27,366
I just...

796
01:13:27,366 --> 01:13:29,166
Now, when you guys look at the map,

797
01:13:31,746 --> 01:13:35,406
what percentage of wells that you would say,

798
01:13:35,526 --> 01:13:37,486
hey, this would be a great opportunity

799
01:13:37,486 --> 01:13:43,066
to unlock oil production for an EMP company,

800
01:13:43,446 --> 01:13:46,106
what percentage of them have some type of solution?

801
01:13:46,106 --> 01:13:49,546
Is it 1%? Is it 0.1%? Is it, you know?

802
01:13:49,746 --> 01:13:51,166
Yeah, that's a great question.

803
01:13:53,986 --> 01:13:56,106
I don't want to get the statistics wrong,

804
01:13:56,486 --> 01:13:59,926
but I believe about half a percent,

805
01:14:01,146 --> 01:14:06,426
the 1% of natural gas in the United States was flared last year of produced

806
01:14:06,426 --> 01:14:10,226
gas. I think it's a half a percent.

807
01:14:10,406 --> 01:14:12,846
I think pretty sure it's half a percent,

808
01:14:12,986 --> 01:14:14,366
somewhere between half a percent, 1%.

809
01:14:14,366 --> 01:14:19,086
So that's all stranded gas that's creating emissions that may or may not be curtailing

810
01:14:19,086 --> 01:14:20,086
oil production.

811
01:14:20,086 --> 01:14:21,086
That's addressable.

812
01:14:21,086 --> 01:14:22,086
What does that mean?

813
01:14:22,086 --> 01:14:36,256
That over two gigawatts of electrical generation Bitcoin mining capacity just in the US of gas that specifically being flared and that not talking about gas that being sold into waha or negative that not talking about

814
01:14:36,256 --> 01:14:43,776
wells that are shut in because they the market's uneconomic um that addressable market you know

815
01:14:43,776 --> 01:14:48,916
is four to five times larger in the middle east it's about the same size if not bigger in south

816
01:14:48,916 --> 01:14:58,536
America. Um, you know, and so for us, you know, all over Texas today, putting stuff in New Mexico,

817
01:14:59,356 --> 01:15:05,396
Wyoming, you know, going to be going to North Dakota this year. Like, um, that's a huge

818
01:15:05,396 --> 01:15:11,196
addressable market, you know, for us to, to go do this. And so I think that's, I don't know if

819
01:15:11,196 --> 01:15:14,776
that answers your question. No, it does. And then my last, my last question on this, and I want to

820
01:15:14,776 --> 01:15:17,636
pivot for the last 10 minutes is

821
01:15:17,636 --> 01:15:23,496
if you're going to mine Bitcoin at the top level,

822
01:15:23,696 --> 01:15:27,636
why are you guys focused from a strategy perspective,

823
01:15:28,676 --> 01:15:34,396
upstream natural gas versus other potential points at where somebody could

824
01:15:34,396 --> 01:15:39,136
capture some natural resource, convert to power, mine Bitcoin?

825
01:15:40,956 --> 01:15:43,616
Yeah, I mean, it's, it's a good question. I think

826
01:15:43,616 --> 01:15:49,856
what we're really energized about like culturally like what is exciting about

827
01:15:49,856 --> 01:15:55,616
our bitcoin mining application is like it's solving real world problems and if you're going

828
01:15:55,616 --> 01:16:00,196
to go plug in 500 megawatts on the grid like are you really solving any problems maybe it's the

829
01:16:00,196 --> 01:16:05,036
load balancing it's you know better for the grid it's something i'm not as well versed in but i

830
01:16:05,036 --> 01:16:11,656
think what we're really energized about is you know this bitcoin mining being a function of solving

831
01:16:11,656 --> 01:16:17,196
real oil and gas problems for these guys that has nothing to do with Bitcoin, but it's a tool in a

832
01:16:17,196 --> 01:16:22,756
toolbox to solve those problems. I think that's what really gets us excited. Um, you know, we don't

833
01:16:22,756 --> 01:16:31,376
want to be a big self-mining company. Um, you know, for a variety of reasons, I think

834
01:16:31,376 --> 01:16:39,996
in our future, like I definitely see us getting back on, on the upstream side. Like if, if the

835
01:16:39,996 --> 01:16:44,376
right opportunity came about i could see us going and doing something larger completely vertically

836
01:16:44,376 --> 01:16:49,016
integrated i don't think we're ever gonna do some big gas purchase agreement with energy transfer

837
01:16:49,016 --> 01:16:54,456
and just put a bunch of bitcoin mines out there on their gas because it you know is makes sense

838
01:16:54,456 --> 01:17:01,596
from a bitcoin mining side i don't know our what we're seeing right now is like is a massive problem

839
01:17:01,596 --> 01:17:08,516
that we have a solution for that is growing very fast,

840
01:17:08,876 --> 01:17:16,096
both in 360 size, deployment size, customer profile, and backers.

841
01:17:16,096 --> 01:17:21,336
And so I think to some extent we have some really positive momentum

842
01:17:21,336 --> 01:17:22,256
that we want to keep.

843
01:17:22,716 --> 01:17:24,976
Why change if it's not broken sort of thing?

844
01:17:25,216 --> 01:17:29,556
And we have a lot of runway ahead of us to go really make an impact

845
01:17:29,556 --> 01:17:31,416
in this flare gas market.

846
01:17:31,596 --> 01:17:39,756
stranded gas market now to pivot though from the energy side and um i mentioned that i wanted to go

847
01:17:39,756 --> 01:17:47,856
here to the bitcoin side and even though you know certain of your target customers are more

848
01:17:47,856 --> 01:17:53,136
mining bitcoin for the bitcoin side of it others are solving a different problem to mitigate

849
01:17:53,136 --> 01:18:02,496
you guys are either helping others you're operating others to mine bitcoin or you're

850
01:18:02,496 --> 01:18:09,216
mining bitcoin and people are renting equipment from you how do you guys think about your role

851
01:18:09,216 --> 01:18:17,376
as bitcoin miners and your assets within the broader bitcoin ecosystem in terms of the

852
01:18:17,376 --> 01:18:27,796
function they're providing yeah great question i think you know as a bitcoiner we are distributing

853
01:18:27,796 --> 01:18:36,976
hash rate um away from your call it at a very low cost right the cost to mine the bitcoin is very

854
01:18:36,976 --> 01:18:43,276
low and so that enables us to kind of distribute hash rate away from maybe your largest publicly

855
01:18:43,276 --> 01:18:48,256
traded Bitcoin miners that control a lot of that hash rate. So philosophically, like that's

856
01:18:48,256 --> 01:18:54,236
attractive to have these smaller distributed nodes, uh, of Bitcoin mining. And so I think

857
01:18:54,236 --> 01:19:00,816
that's something that, you know, is an asset to Bitcoin in general. Um, you know, I know we talked

858
01:19:00,816 --> 01:19:06,976
a lot about pool centralization, right. Which is its own problem, but I think our function in the

859
01:19:06,976 --> 01:19:15,056
broader bitcoin ecosystem as like distributed nodes of hash rate is uh is pretty cool but on

860
01:19:15,056 --> 01:19:20,176
that point of you know a lot of bitcoiners and then bitcoin developers talk about

861
01:19:20,176 --> 01:19:23,296
mining centralization and mining incentives

862
01:19:23,296 --> 01:19:28,016
do you guys think about

863
01:19:28,016 --> 01:19:36,856
pool centralization as a risk to your business or a risk to bitcoin because while maybe

864
01:19:36,856 --> 01:19:40,436
the further away you get from Bitcoin to the end customer,

865
01:19:41,816 --> 01:19:46,016
the Bitcoin side of it doesn't come into play as much.

866
01:19:46,916 --> 01:19:51,936
But the long-term integrity of Bitcoin is critical to the demand for these

867
01:19:51,936 --> 01:19:56,536
solutions. And as Bitcoin grows, the demand for the solutions will grow.

868
01:19:58,116 --> 01:20:01,276
And perfectly fine if you guys don't think a lot about it,

869
01:20:01,276 --> 01:20:12,996
But I'm just curious if you do evaluate those risks and how you think about the risks of centralization within the mining ecosystem.

870
01:20:13,276 --> 01:20:22,276
Because from my vantage point, it's not in the interest of the actual miners, the people that are distributing the hash rate like yourselves.

871
01:20:22,276 --> 01:20:32,676
I'm just curious how you guys evaluate or whether or not you view it as a material risk and just how you think about that.

872
01:20:33,816 --> 01:20:37,456
Yeah, you know, it's hard because like on one end we're running a business.

873
01:20:37,456 --> 01:20:46,616
So it's like we're incentivized for ourselves and our customers to go with the pool option that's the most reliable from a payout perspective for the lowest fees.

874
01:20:47,116 --> 01:20:51,836
Right. Trying to run a business, we need to maximize or optimize around those points.

875
01:20:51,836 --> 01:21:06,306
right What does that mean It means we usually pointing hash rate at some of these big pools right Which is a conflict from your point about pool centralization And you know I think a lot of miners would say oh but you know if Boundary starts acting nefariously

876
01:21:06,306 --> 01:21:09,186
we can easily just switch the pool address

877
01:21:09,186 --> 01:21:12,286
on all of our miners and move our hash rate somewhere else,

878
01:21:12,326 --> 01:21:13,066
which is true.

879
01:21:13,226 --> 01:21:15,286
I think there's a lot more to it, right?

880
01:21:15,286 --> 01:21:21,006
I think it's not, you know, a five-minute process to go do that,

881
01:21:21,506 --> 01:21:23,686
especially, you know, if you're not set up on other pools

882
01:21:23,686 --> 01:21:26,946
and the KYC and all the stuff that goes along with it.

883
01:21:26,946 --> 01:21:36,606
So yeah, I, you know, again, our little portion of the global hash rate, you know, from our

884
01:21:36,606 --> 01:21:42,426
day-to-day business, we're not optimizing around the risk of pool centralization.

885
01:21:42,426 --> 01:21:46,526
We're optimizing around, you know, what's going to maximize our cashflow and the cashflow

886
01:21:46,526 --> 01:21:48,306
of customers in the most predictable way.

887
01:21:48,306 --> 01:21:55,626
but you know I do think there's something to be said about pool centralization as being a risk

888
01:21:55,626 --> 01:22:01,406
and I'd say it's fair to say that mining Bitcoin is for all the things that we talked about in

889
01:22:01,406 --> 01:22:05,786
terms of all the different variables that you have to think about in terms of evaluating sites

890
01:22:05,786 --> 01:22:13,146
mining Bitcoin is difficult not for the faint of heart probably not you know similar but different

891
01:22:13,146 --> 01:22:17,346
to the you know anybody who's going to drill well not for the faint of heart not for everybody

892
01:22:17,346 --> 01:22:27,666
but that um you guys don't have a lot of time to think about or consider regardless of you know

893
01:22:27,666 --> 01:22:34,426
the consequences of pool centralization but just as changes are being considered yeah to the bitcoin

894
01:22:34,426 --> 01:22:44,846
network and your role in that you know in terms of what you know where you're pointing at hash rate

895
01:22:44,846 --> 01:22:49,266
not just that like hey is centralization risk and do i want to have a second option

896
01:22:49,266 --> 01:22:53,366
i'm curious if you guys have ever thought about kind of splitting hash rate across pools

897
01:22:53,366 --> 01:23:01,366
to to have that solidly de-risked but then also you know is it fair to say you you know you guys

898
01:23:01,366 --> 01:23:05,766
aren't you know as changes are being proposed in bitcoin or people are evaluating soft forks

899
01:23:05,766 --> 01:23:13,046
that doesn't really get surfaced and you're certainly not day-to-day but rarely yeah no i

900
01:23:13,046 --> 01:23:20,406
As a Bitcoiner, personally, and at the company, I'm very interested in some of the more thematic.

901
01:23:20,826 --> 01:23:22,166
The quantum computing is a big one.

902
01:23:22,266 --> 01:23:23,666
How do we make Bitcoin quantum resistant?

903
01:23:24,066 --> 01:23:25,506
Am I active in discussions?

904
01:23:25,726 --> 01:23:27,966
I don't know anything about the code base.

905
01:23:27,966 --> 01:23:38,426
I can't speak competently on all the fine details, but I recognize the problem and I'm excited to hear what potential solutions are and will be.

906
01:23:39,566 --> 01:23:42,006
I think as a Bitcoiner, I'm very concerned about that.

907
01:23:42,006 --> 01:23:44,806
I think, you know, we have tested a couple of different pools.

908
01:23:44,966 --> 01:23:46,886
One we're excited about trying is ocean.

909
01:23:48,586 --> 01:23:50,486
You know, could we do a better job of that?

910
01:23:50,586 --> 01:23:50,986
Absolutely.

911
01:23:51,646 --> 01:23:54,506
But to your point, we're got 10,000 other things going on.

912
01:23:54,946 --> 01:24:02,066
Running a pool test is not the number one objective right now.

913
01:24:03,206 --> 01:24:05,406
But, you know, we do talk about that stuff.

914
01:24:05,446 --> 01:24:10,166
And we certainly talk about some of the more thematic things coming down the pipe for Bitcoin

915
01:24:10,166 --> 01:24:12,966
and what those mean.

916
01:24:13,106 --> 01:24:15,666
And, you know, I would say both my normie friends

917
01:24:15,666 --> 01:24:17,866
and customers like quantum is the one

918
01:24:17,866 --> 01:24:19,706
that a lot of people are talking about right now.

919
01:24:20,646 --> 01:24:22,106
So, you know, we need to be educated

920
01:24:22,106 --> 01:24:24,306
on what the risks or not risks are

921
01:24:24,306 --> 01:24:26,386
and what timeline and, you know,

922
01:24:26,406 --> 01:24:28,486
what Bitcoin Core is, you know, doing about that.

923
01:24:28,726 --> 01:24:32,526
So, all right, well, take that opportunity to wrap.

924
01:24:32,526 --> 01:24:34,886
But last question,

925
01:24:35,426 --> 01:24:39,726
what are you guys most strategically focused on

926
01:24:39,726 --> 01:24:46,906
And what do you see maybe categorically shifting your business in the next few years?

927
01:24:48,806 --> 01:24:58,026
Yeah, you know, I think our focus is on putting out as many units as possible for large oil and gas companies.

928
01:24:58,926 --> 01:25:04,546
Obviously, we're trying to build the biggest, you know, business we can build, the biggest services company we can build,

929
01:25:04,546 --> 01:25:12,826
which is really a function of, of putting units out in the field. I mean, you know,

930
01:25:13,266 --> 01:25:16,886
we don't look at 360 like, Oh, we got to sell the company in the next three years or,

931
01:25:16,886 --> 01:25:23,706
you know, we're more focused on building a company that is solving problems in the oil field,

932
01:25:23,706 --> 01:25:29,406
which is a function of evangelizing people on who we are, what we do, how it works and why they

933
01:25:29,406 --> 01:25:34,326
should do it. And then getting units out in the field. I think a lot of like, that's the near term

934
01:25:34,326 --> 01:25:38,546
focus. Like we need to get to 20 rental units out in the field before the end of this year,

935
01:25:38,766 --> 01:25:46,226
right? That unlocks our ability to go raise more money, get better cost of capital on credit

936
01:25:46,226 --> 01:25:51,046
facilities to then continue doing that. We're really focused on partnerships. Like one of our

937
01:25:51,046 --> 01:25:55,546
investors is Halliburton. And so, you know, continuing to work with Halliburton on strategic

938
01:25:55,546 --> 01:26:03,886
initiatives together is a big driver for us and our growth. You know, I think over the next,

939
01:26:03,886 --> 01:26:10,306
you know, two years, I imagine we're going to continue to be across the lower 48, potentially

940
01:26:10,306 --> 01:26:15,866
Alaska. You know, we are evaluating some international opportunities as well. And so,

941
01:26:16,026 --> 01:26:20,746
you know, if we're successful domestically, there's no reason this can't be successful at a much larger

942
01:26:20,746 --> 01:26:24,846
scale internationally, whether that's the Middle East or South America. So, you know, we're, you

943
01:26:24,846 --> 01:26:29,906
know, we're excited. The addressable market for what we're doing is massive. You know, Bitcoin

944
01:26:29,906 --> 01:26:36,346
mining as a function is uniquely situated to solve the problem. Like you can't go put an AI

945
01:26:36,346 --> 01:26:40,546
data center in the middle of the oil field and run it off Starlink. There's not many other things

946
01:26:40,546 --> 01:26:46,926
that are so flexible like Bitcoin mining. So, um, and we're good at it and we've been doing it now

947
01:26:46,926 --> 01:26:51,646
for four years and we're producers ourselves. So, uh, you know, I do think to some extent there's

948
01:26:51,646 --> 01:26:56,146
lightning in a bottle right now and it's trying to just capitalize on that, grow that and, um,

949
01:26:56,146 --> 01:26:57,266
you know, grow the company.

950
01:26:57,726 --> 01:26:58,386
All right.

951
01:26:58,426 --> 01:26:59,566
Well, last question.

952
01:26:59,666 --> 01:27:02,206
What is, what SMU football game are you most,

953
01:27:02,866 --> 01:27:04,026
you have starred on the calendar?

954
01:27:04,526 --> 01:27:05,746
You go to virtually all of them.

955
01:27:05,986 --> 01:27:07,326
Yeah, I go to most.

956
01:27:08,726 --> 01:27:10,266
Clemson, SMU at Clemson.

957
01:27:10,466 --> 01:27:10,886
Oh, nice.

958
01:27:11,586 --> 01:27:14,226
That's going to be really exciting.

959
01:27:14,506 --> 01:27:15,606
And the U is coming to.

960
01:27:15,666 --> 01:27:16,866
And the U is coming to SMU.

961
01:27:17,126 --> 01:27:18,146
Dallas, the big D.

962
01:27:18,326 --> 01:27:18,566
Yeah.

963
01:27:19,146 --> 01:27:20,846
Carson Beck, that's going to be interesting.

964
01:27:21,886 --> 01:27:23,346
Yeah, I love it.

965
01:27:23,346 --> 01:27:25,086
Well, appreciate you coming on.

966
01:27:25,166 --> 01:27:25,766
Center of Hash.

967
01:27:26,146 --> 01:27:29,186
episode three yeah thank you thanks for having me appreciate it