Power Markets

Natural Gas Dynamics

Power Markets for Bitcoin Miners, 01/29/24

David Bellman

Key Takeaway #1

The Biden administration paused future LNG export terminals while US supply hit record levels.

Key Takeaway #2

LNG projects already approved are significant, but administrative delays due to the pause are possible.

Key Takeaway #3

Natural gas supply is at a record level, driven in some regions by the desire to produce oil not gas

Key Takeaway #4

The value of oil on an energy basis is multiples higher than gas and has been growing, leading to a loss leader approach to natural gas in some regions. • Natural gas demand will likely grow, from industrial uses to potential on-site generation. • Mining economics worsened, as hash soared while BTC price dropped. • Natural gas price came down slightly. • Power prices finally came off across all markets

This week brought major news in the natural gas markets, as the Biden Administration has put a pause on licensing new export terminals for LNG. US dry gas production has also reached an all-time high of 105.5 bcf/d (see chart on the following slide). The net effect will be bearish for the US and potentially bullish for the rest of the world. While already-approved and underway LNG projects should be enough in the nearterm to keep prices from weakening significantly, these projects could be slowed if the administration stops future projects. The total impact of these nearterm LNG projects could be north of 10 bcf/d - ~10% of current supply. If the LNG terminals were built with supply growth in mind but the supply growth is not curtailed and/or demand does not grow 10 bcf/d, gas prices could be stuck in the low range for quite some time.

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This week brought major news in the natural gas markets, as the Biden Administration has put a pause on licensing new export terminals for LNG.

US dry gas production has also reached an all-time high of 105.5 bcf/d (see chart on the following slide). The net effect will be bearish for the US and potentially bullish for the rest of the world. While already-approved and underway LNG projects should be enough in the nearterm to keep prices from weakening significantly, these projects could be slowed if the administration stops future projects. The total impact of these nearterm LNG projects could be north of 10 bcf/d - ~10% of current supply. If the LNG terminals were built with supply growth in mind but the supply growth is not curtailed and/or demand does not grow 10 bcf/d, gas prices could be stuck in the low range for quite some time.

The long-term implication for power prices is likely bearish; those who are more aligned with natural gas prices would benefit. Producers should consider long-term contracts with power producers and potential on-site generators, given the potential for this to lower natural gas prices.

Much of the natural gas supply growth has come from associated gas production – meaning that the primary purpose of the development was oil, and natural gas was a by-product. This is happening in West Texas. In fact, gas pipelines being built in West Texas always fill up, causing negative basis and flaring of natural gas. An important variable is the ratio of gas price to crude oil price. This shows how much more valuable oil is to gas, making it more likely to have a loss leader in natural gas prices. This ratio has been on a growth trend. Eventually, gas to liquids (GTL) technology to convert natural gas to liquid products may become economical. In the meantime, we will continue to see more natural gas production even with supply bottlenecks. Demand solutions from industrial uses to on-site generation could relieve some of these bottlenecks, which would keep power prices from rising too much.

Power futures are finally catching up to natural gas, coming off across all markets. An opportune hedging time is starting to percolate, as many markets are below breakeven mining cost.

‍

Disclosures

Purpose This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda .io. Analyst Certification 10 David Bellman, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships. Conflicts of Interest This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation. January 28, 2024 General Disclosures Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or through http on or ://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such. BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information. The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision. The Information is not a recommendation to engage in any transaction. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance. All derivatives brokerage is conducted by Ooda Commodities, LLC a member of NFA and subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets. BitOoda Technologies, LLC is a member of FINRA. “BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc. Copyright 2024 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda

This week brought major news in the natural gas markets, as the Biden Administration has put a pause on licensing new export terminals for LNG.

US dry gas production has also reached an all-time high of 105.5 bcf/d (see chart on the following slide). The net effect will be bearish for the US and potentially bullish for the rest of the world. While already-approved and underway LNG projects should be enough in the nearterm to keep prices from weakening significantly, these projects could be slowed if the administration stops future projects. The total impact of these nearterm LNG projects could be north of 10 bcf/d - ~10% of current supply. If the LNG terminals were built with supply growth in mind but the supply growth is not curtailed and/or demand does not grow 10 bcf/d, gas prices could be stuck in the low range for quite some time.

The long-term implication for power prices is likely bearish; those who are more aligned with natural gas prices would benefit. Producers should consider long-term contracts with power producers and potential on-site generators, given the potential for this to lower natural gas prices.

Much of the natural gas supply growth has come from associated gas production – meaning that the primary purpose of the development was oil, and natural gas was a by-product. This is happening in West Texas. In fact, gas pipelines being built in West Texas always fill up, causing negative basis and flaring of natural gas. An important variable is the ratio of gas price to crude oil price. This shows how much more valuable oil is to gas, making it more likely to have a loss leader in natural gas prices. This ratio has been on a growth trend. Eventually, gas to liquids (GTL) technology to convert natural gas to liquid products may become economical. In the meantime, we will continue to see more natural gas production even with supply bottlenecks. Demand solutions from industrial uses to on-site generation could relieve some of these bottlenecks, which would keep power prices from rising too much.

Power futures are finally catching up to natural gas, coming off across all markets. An opportune hedging time is starting to percolate, as many markets are below breakeven mining cost.

‍

Disclosures

Purpose This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda .io. Analyst Certification 10 David Bellman, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships. Conflicts of Interest This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation. January 28, 2024 General Disclosures Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or through http on or ://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such. BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information. The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision. The Information is not a recommendation to engage in any transaction. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance. All derivatives brokerage is conducted by Ooda Commodities, LLC a member of NFA and subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets. BitOoda Technologies, LLC is a member of FINRA. “BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc. Copyright 2024 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda

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Natural Gas Dynamics

Power Markets for Bitcoin Miners, 01/29/24

Key Takeaway #1

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Key Takeaway #4

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