Historically, oil and gas producers designed, drilled, and completed their wells based on various assumptions about how much crude, associated gas, and produced water that asset would produce over its lifetime. While this process provided profitable project-level returns for decades, during downturns, operators were sometimes forced to shut in their wells as they aged (likely due to the rising water-to-oil production ratio). During other periods of constraint, they might even have to flare or vent their associated gas. Both oil and gas have various "supercycle" commodity periods where energy companies must focus on optimizing their current asset inventory and not try to bleed cash. However, what if there was a more creative way to buy into or access other commodity classes during major cycle downturns that would improve wellhead profitability during bear cycles?

At Hedge Resources, we have designed and started implementing this type of concept. As commodity-focused individuals, we believe that the more asset classes we can "buy" into at any given period, the more potential we have to improve an oil and gas well's profit margin. If oil and gas both head lower (as we see Waha bouncing around $0/MMBtu over the last month), what type of "other" technology can be brought in to use the associated (or free) gas in a more robust way? Most "Bitcoin miners" are only focused on purchasing the gas at low prices to influence their mining project economics. However, at Hedge, we are focused on having the ability to pull the "levers" on multiple asset classes beyond just the Bitcoin or oil production revenue each month. Below is an abbreviated outline of Hedge's commodity accessibility:

At Hedge, we understand that associated gas can be captured instead of being flared or vented into the atmosphere as CH4, which allows us to access the new and exciting voluntary carbon credit markets. Essentially, the flared or wasted energy source can be converted to power using a more efficient natural gas generator combustion process, which helps lower the amount of methane escaping from an open gas flare. Various physical studies have shown that wind conditions (speed and direction) have a direct impact on how efficiently associated gas is burned into CO2, which is a less harmful greenhouse gas than methane. This process can help the energy industry lower its carbon footprint and generate additional revenue in the carbon credit space, where corporations are looking to purchase offsets verified by numerous third-party registries.

By capturing associated gas and turning it into power, Hedge can tap into the concept of Bitcoin mining. We have the option to purchase S19 miners to generate our own Bitcoin to USD process, or we can open our facility to other parties hoping to gain access to low-cost clean energy for their Bitcoin mining projects. If market conditions, such as the global hash rate and overall price of Bitcoin, point toward an overvalued Bitcoin price environment, Hedge would rather not overspend on mining equipment and simply rent out the power generation space to other partners.

However, with this power generation process, the heat generated from the mining operation can be used to tap into a few other interesting markets, with the major one being produced water disposal. Instead of oil and gas operators having to inject their water back into the subsurface or put it on a truck to be hauled offsite, operators could simply use the heat to expedite water evaporation. This would help lower the wellhead's lease operating expenses significantly. While there are other use cases for recycling or tapping into this produced water (such as lithium generation or reformation for frack chemicals), simply using the free energy produced by the mining equipment is a great way to help an operator optimize their monthly cash flow.

In our next blog, Hedge will showcase a few specific well examples with real production data, as our workflow can help improve most operators' wells struggling with gas or water by over 20% per month. Tapping into a few alternative markets can really help wells maintain profitability when regional gas prices or global economic conditions hurt the usual oil and gas commodity price environment.

Please reach out if you are interested in learning more!