TPL Puts on Laser Eyes

tpltblogger16 Comments

TPL and Mawson press release

Based on utilization of current generation Bitcoin mining hardware, these new facilities – which will be owned and operated by Mawson – could accommodate up to 2.0 Exahash of Bitcoin mining operational capacity. TPL and JAI will earn a net royalty interest and retain an option to acquire an equity stake. Mawson intends to participate in demand response programs as part of its power procurement strategy and is evaluating behind-the-meter renewable solutions. Mawson and JAI have four locations planned in Texas, with two located on TPL’s surface. Construction is expected to commence in the second quarter of 2022, and operations targeted to begin in the fourth quarter of 2022.

“This project marks the beginning of TPL’s journey into bitcoin, and we are fortunate to collaborate with Mawson and JAI as two highly regarded companies in the bitcoin mining industry,” said Tyler Glover, CEO of TPL. “We believe TPL’s extensive surface footprint in West Texas can serve as a premier destination for the bitcoin mining industry, providing site locations proximate to existing grid infrastructure and excellent solar and wind resource for future renewable power procurement. We are aligned to see this venture succeed and scale as we look to leverage our unique asset base, industry and customer relationships, and the region’s energy abundance. For TPL, our shareholders will benefit from a unique royalty stream while retaining an option to participate as an equity partner.”

Mawson press release

The sites have been selected due to the substantial local infrastructure already available to Mawson. Mawson is now working to secure Power Purchase Agreements (PPA) required to commission the facility and will update stockholders on this front in due course.

Mawson has collaborated with JAI Energy and Texas Pacific Land Corporation (NYSE:TPL) on the project, both of which will share in the revenue streams generated by the project, as well as have an option to acquire an equity interest in Luna Squares Texas LLC.

Texas Pacific Land Corporation, one of the largest landowners in the State of Texas, is the landlord of two of the sites. The other two sites are situated on family-owned private lands.

A new chapter for TPL. The royalty collector/landlord nature of the deal is certainly appealing due to low capital intensity. I’m out of my element here as far as estimating revenue contribution though it looks like there is a fair amount of work to be done before cashing checks becomes a reality. This business is in its infancy as a whole so it’s probably best to keep expectations in check.

Per Justin Ballard (JAI CEO), the project should be 100% online by the end of Q4 2022.

Glover’s quote mentions wind and solar though it looks like JAI has expertise in generating via gas that would have otherwise been flared. With that, I’m confused on the power source here. Let me know if I’m missing something.

Lastly, it’s worth internalizing TPL’s option to buy equity in the JV. Call options are nice provided they are managed efficiently.

Mawson

Mawson matches sustainable energy infrastructure with next-generation mobile data centre (MDC) solutions, enabling low-cost Bitcoin production and on-demand deployment of infrastructure assets. With a strong focus on shareholder returns and an aligned board and management, Mawson Infrastructure Group is emerging as a global leader in ESG focused Bitcoin mining and digital infrastructure.

Mawson investor deck

JAI Energy

JAI Energy was formed specifically to mine and provide Bitcoin mining services for applications involving stranded, flared, and poor economic natural gas streams. JAI Energy has its own mining farm located in Wyoming, where it is on pace to be the largest Bitcoin mining farm in the State by August 2021. JAI is also providing solutions for producers, midstream groups, and energy providers to allow them to capture value off their excess energy. JAI is based out of Casper, Wyoming which is also where all manufacturing of its portable mining data centers takes place.

16 thoughts on “TPL Puts on Laser Eyes”

  1. Read the commentary on crypto currencies in today’s (Monday, May 16) Wall St. Journal. Look at the recent price action in cryptos. The inevitable crypto price collapse seems to have begun. To me, this is an inane and unproductive industry that TPL should have enough IQ points to ignore. I hope our management is not putting any of TPL’s funds at risk. It seems likely to me that the ‘cat is ow out of the bag’. ‘Crypto Investors’ will soon realize that the coins they own are now worthless, with the result that there may soon be absolutely no demand for the worthless assets that crypto ‘mining’ produces.

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    • I respectfully disagree. Bitcoin is it’s own animal. Don’t believe everything that the FT and WSJ tell you. This is a royalty deal. TPL is providing land use. Not capital.

      Liked by 4 people

        • every now and then I get on Seeking Alphas comments sections (why? because I am an idiot). Nothing brings about more controversy in the comments than mention of Bitcoin, well maybe other than Trump and now possibly Musk. Of the three, one is very rich and the other is the richest and both have a fair about of flair.

          Liked by 1 person

  2. Yes, crypto might be a giant ass ponzie scheme (I don’t think so) but if we can make money from it why not!!!. I have a son that is in the weeds as far as understanding it and crypto isn’t going anywhere. Crypto is experiencing our 2008. Crypto when thru the same cycle as today in 2017 and came out just fine.

    Liked by 1 person

  3. Bitcoin is Bitcoin, referring to it as “crypto” is the wrong term. This transaction is likely the brainchild of Murray Stahl. This is a terrific move.

    Liked by 3 people

  4. As long as it doesn’t cost anything and doesn’t occupy land that would otherwise be used for O&G, I don’t see the harm. An oil investor I really respect, Josh Young, encouraged some of his portfolio companies to do bitcoin mining with their flaring energy. Better than just wasting it I suppose!

    Liked by 1 person

  5. I’m excited by this opportunity as a first step into the data center and distributed ledger transaction authentication space. I’ve been hoping for something like this for a while and although these are not my “first choice partners” if this isn’t an exclusive deal then I’m pleased to see us taking our first steps in cultivating this potential new royalty stream and building new diversified partnerships. Open to others like Crusoe also.
    A few things I agree with you on TPL Blogger… it’s fundamentally just a royalty deal. And yes it will take time to establish and it will be difficult to estimate/project revenues. There appears to be no capital expenditure and negligible opportunity cost so this tastes like gravy to me!
    Although Mawson is primarily BTC mining company, when I take my Laser Eyes out and put on my TPL hat… these are just data centers being built. They can be used for cloud computing, AI, storage, network, ect.
    Yes, the BTC opportunity is sexy (or maybe not to some people) but I’m trying to see this as just another use case for TPL land and our proximity to cheap clean energy… trying not to get TOO caught up in what the tenants are doing so long as they keep paying rent on time (so to say).
    The partnership with JAI is significantly more interesting to me. I need to become more familiar with their product offering. The outcome that I’m most interested in is deploying mobile units to the wellhead to harness energy from otherwise flared gas, it seems like JAI has a focus in this area but I’m not sure about their capabilities yet. The Co2 flaring reduction on TPL lands feels like a much bigger win to me and hopefully this is a step in that direction… but it’s not obvious how that would happen within this current deal as these are 4 fixed locations. Will see how this develops.
    PS… bad timing to include the word LUNA in any press release!!! Come on guys!!

    Liked by 1 person

  6. Mining Bitcoin with flared gas is a no brainer for any O&G company who doesn’t have the pipeline to monetize an otherwise wasted commodity. There’s plenty of FUD around bitcoin mining being bad for the environment, however, when you capture flared gas and use it to mine, you are actually reducing carbon emissions. It doesn’t matter if you think bitcoin is worth $0 or $1m a coin, if you can bring a market to the molecule and monetize these assets, while also improving your ESG score, it’s an easy decision. Glad TPL is getting involved in this while also maintaining the capital light business model.

    Liked by 2 people

  7. Dug into some D&D on JAI and Mawson last night trying to understand the business model, I feel good about our partners today after learning more about them. Although not the industry leader, Mawson seems capable and have an expanding portfolio in the US. I feel like they’re interchangeable the same way we work with multiple operators for drilling.

    JAI appears to me to be a very good strategic partner that we could work with in a number of ways across multiple operators and mining companies, this deal is also a major shift for them into Texas which they feel is the ideal location for BTC mining and innovation going forward. They work with flaring but they also have other on-grid solutions for making operators more efficient and reducing operating cost. They appear to have a good track record of execution in Wyoming, and small but strong leadership group with experience spanning O&G, compliance and regulatory, and good credibility in the digital wildcat industry. It appears the work we’ll be doing with them is on-grid use of natural gas and hosting sites for miners/mawson. Yesterday I was speculating about solar/wind/flaring reduction but it seems this first deal is focused around on-grid nat gas only to start.

    There’s a really good podcast recorded on March 3rd on The Scoop, it’s JAI CEO Justin Ballard… he talks about his work in “West Texas” which is obviously details about the TPL deal.

    He gives an interesting view of the convergence of BTC/O&G at 5:03
    Mentions “West Texas” competitive cost advantage for miners at 9:50
    The value prop of a JAI/TPL partnership at 11:20
    More on TPL & West Texas mentions at 21:45 …. 30:15

    https://podcasts.apple.com/us/podcast/bitcoin-mining-exec-explains-how-crypto-is-converging/id1460134454?i=1000552734380

    Liked by 2 people

  8. Remember that TPL only has 25,000+ royalty producing acreage, so any energy related income we can derive from the surface acreage (800,000+) with no capital investment is great even if it’s sold for real cash.

    Liked by 2 people

  9. spoti.fi/3wn8doz

    Ballard from JAI starts talking about TPL @11:23… a bit more information on solar and wind, the relationship between JAI and TPL… his general view on the mining opportunity in the US.

    Liked by 1 person

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