AXP Energy selling gas from its US Colorado play to…fuel crypto mining rigs

Fri 14 Oct 22, 12:05pm (AEST)
A data centre with server stacks in the background
Source: Unsplash

Key Points

  • AXP Energy has executed a deal with Elite Mining to sell its natural gas to power Elite’s “Elite Mining Units” (EMU)
  • The EMUs use gas to power a generator that in turn supplies power to a mobile data centre with the hardware needed to “mine” crypto
  • A number of companies offer the service in the US where flare gas or gas that would otherwise be wasted is used

AXP Energy (ASX:AXP) shareholders have missed out on the benefits of a surprise green Friday this morning as the company announces it has begun to sell natural gas from its Colorado well to Elite Mining, a company in the US. 

AXP Energy was formerly the Fremont Petroleum Corporation. 

Elite Mining is one of numerous players building crypto mining rigs intended to be installed on-site oil and gas operations. The practice has become something of a trope in the energy industry; even Exxon has its own deal worked out on this front. 

The vision is, gas that would be wasted or flared is instead used to generate electricity, which in turn powers the high-voltage process needed to ‘mine’ crypto. 

Oil producers required to flare gas are particularly interested in the projects, given it allows them to add value to a product otherwise wasted.

What on earth is crypto mining? 

It hasn’t got anything to do with drilling, Earth, or depth. 

Years ago, those in the cryptocurrency community started calling the process needed to generate cryptocurrency as “mining,” given that it takes a computer a long time to sift through a lot of data to make one new ‘coin,’ or token, or what have you. 

It is all done entirely on computers and ultimately boils down to a massive power bill. The process of ‘mining’ cryptocurrency (with computers) takes mammoth amounts of electricity. For that reason, Bitcoin has been slammed in the past and present for its poor environmental profile with regards to emissions generation. 

Earlier this month, a report found global Bitcoin mining produces more greenhouse gas each year than all of Austria. 

Regardless, the large amounts of power needed is why companies like Elite started designing crypto mining data centres for use on oil and gas projects in the first place. 

Further revenues growth 

Ultimately, Elite will oversee its EMUs while AXP’s gas powers the generators needed to keep them running, in return for cryptocurrency assets. Elite will take a small fee. 

AXP expects to sell 200 million cubic feet of gas per day to Elite which will provide “additional revenue streams in the current quarter.” 

One handy thing about the deal is that AXP do not need to worry about flaring gas, now, meaning they can tap stranded oil and gas assets without needing to submit environmental emissions compliance documentation. 

Gas flowing to the EMUs is currently coming from the Pathfinder well, which is actually an oil well, but one which produces only some 10 barrels of oil per day. While AXP is intending to expand production from this well, it’s clear no harm can come by way of monetizing what would otherwise be waste gas. 

Gas sales a core objective: Management 

“The extraction and delivery of stranded gas followed an extensive engagement with Elite Mining and Colorado regulators,” AXP CEO Tim Hart said. 

“The commencement of gas sales, albeit modest to begin with, is a testament to [our] ability to lay the foundation for scaled up operations with Elite is keen to pursue.” 

“IT also marks a key step forward in the company’s strategy to accelerate valuable oil production from its Colorado leases…revenue from first gas sales and the added revenue from increased oil sales will deliver a solid boost to our monthly revenue.”

A look at one year charts for the fairly illiquid AXP Energy shows the company not having a bumper 2022
A look at one year charts for the fairly illiquid AXP Energy shows the company not having a bumper 2022


Written By

Jonathon Davidson

Finance Writer

Jonathon is a journalism graduate and avid market watcher with exposure to governance, NGO and mining environments. He was most recently hired as an oil and gas specialist for a trade publication.

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