A group of small-cap oil and gas firms have a novel plan to make the best of a politically challenged project, onshore, in Yorkshire, with the help of Bitcoin.
Partners in the West Newton field, operated by privately owned Rathlin Energy and backed by London-listed Union Jack Oil PLC (AIM:UJO, OTCQB:UJOGF) and Reabold Resources PLC (AIM:RBD), have inked a deal with American group 360 Energy.
Progress developing West Newton has been slower than the stakeholders would’ve liked, which has been typical of the UK onshore in recent years where operations can become stymied in the British planning regime and local government bureaucracy.
Nevertheless, a new proposal to site a bitcoin mining operation promises to unlock value sooner than a traditional gas development would.
Spelling out the strategy, in a note, stockbroker Cavendish highlighted that produced natural gas would be fed through a generator to produce electricity to, in turn, power several bitcoin mining units.
It comes at a time when several small-cap companies have captured investor attention through novel new initiatives, particularly those setting up Bitcoin treasuries (i.e. establishing a holding of Bitcoin, sometimes used to mitigate currency volatility, sometimes as collateral to funding packages, and sometimes as an investment position in and of itself).
By utilising an otherwise inactive energy source to power the creation of new Bitcoins, Cavendish reckons this Yorkshire venture may prove attractive to small-cap investors.
“Taking advantage of the low-cost natural gas at West Newton, we believe the mining and accumulation of bitcoin has the potential to generate superior returns when compared to a standard bitcoin treasury strategy,” Cavendish analyst James McCormack said.
“The main advantage versus other bitcoin mining companies is that Rathlin will be utilising its own, operated energy source rather than taking it from the grid, meaning it will be able to mine bitcoin at a much lower cost.”
According to the Cavendish analyst, a ‘two-unit’ mining operation, on site at West Newton, could yield $3.1 million of annual revenue and $2.7 million of cash flow per year, whilst this could scale to six units for $9.3 million and $8.5 million respectively.
Union Jack owns a 16.6% stake in West Newton, whilst Reabold has a 69.9% economic interest via a shareholding in Rathlin and its direct interest in the project.