Verde Clean Fuels, Inc. and Cottonmouth Ventures LLC Announce Joint Development Agreement for a Proposed Natural Gas-to-Gasoline Facility in Permian Basin
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Insights
The joint development agreement between Verde Clean Fuels and Diamondback Energy signifies a strategic collaboration to harness natural gas for gasoline production, which could have substantial implications for energy markets. The utilization of the STG+ process to convert natural gas into RBOB gasoline aligns with the broader industry trend towards more efficient and environmentally friendly energy solutions. By potentially mitigating flaring and utilizing the Permian Basin's natural gas, this initiative not only addresses environmental concerns but also adds value to a previously underutilized resource. The projected production capacity of 3,000 barrels per day represents a significant addition to the commodity-grade gasoline supply, which could influence regional gasoline prices and margins.
Furthermore, the scalability of this project is noteworthy. If successful, it could set a precedent for similar facilities, thereby impacting natural gas and gasoline markets more broadly. The economic implications for Diamondback Energy, including potential cost savings and additional revenue streams, could enhance the company's financial performance and attractiveness to investors. However, the long-term success of such projects hinges on technological viability, regulatory approvals and market conditions for both natural gas and gasoline.
The environmental implications of the proposed facility are significant, considering the potential reduction in natural gas flaring. Flaring, a common practice for disposing of excess natural gas, contributes to greenhouse gas emissions and is increasingly scrutinized by regulators and environmentalists. The STG+ process could serve as a model for environmental stewardship within the energy sector by converting a waste product into a valuable commodity. This aligns with global efforts to reduce carbon emissions and improve energy efficiency.
From a policy perspective, the project could garner support from government entities looking to incentivize technologies that contribute to emission reductions. It is essential to monitor how this agreement aligns with local and federal environmental regulations and whether it could benefit from potential tax credits or subsidies. The ability to replicate this model in other pipeline-constrained regions could catalyze a shift in energy production methods, with long-term environmental benefits.
From a financial perspective, the joint development agreement between Verde Clean Fuels and Diamondback Energy represents a capital-intensive venture with the potential for substantial returns. The upfront costs associated with constructing and operating the facility will be considerable and the Final Investment Decision will likely hinge on detailed economic analysis and market forecasts. Investors should consider the risks associated with project delays, cost overruns and the volatility of natural gas and gasoline prices.
The proposed project's impact on Diamondback Energy's stock could be positive if the facility operates efficiently and meets production targets. The ability to convert natural gas to gasoline internally could lead to operational synergies and cost efficiencies. However, investors should also be aware of the capital expenditure required and the time frame for the project to become accretive to earnings. The strategic nature of the project, with its potential to decarbonize the oil field and provide a return on investment, could be a compelling narrative for investor relations, provided the project advances as planned.
Verde Clean Fuels aims to deploy its proprietary STG+ process utilizing Permian Basin natural gas produced by Diamondback Energy’s operations with the goal to produce approximately 3,000 barrels per day of RBOB gasoline
The JDA provides a pathway forward for the parties to reach final definitive documents and Final Investment Decision (“FID") for the proposed project. The JDA frames the contracts contemplated to be entered into between the parties, including an operating agreement, ground lease agreement, construction agreement, license agreement and financing agreements as well as conditions precedent to close, such as FID.
The expectation for the project is to produce approximately 3,000 barrels per day of fully-refined gasoline utilizing Verde’s patented STG+® process. By consuming natural gas in the pipeline-constrained Permian Basin as feedstock, the proposed project could demonstrate the ability to mitigate the flaring of up to 34 million cubic feet of natural gas per day, while also producing a high-value, salable product.
“The Verde Clean Fuels team is incredibly excited to finalize this JDA with Diamondback Energy with the goal to produce gasoline from natural gas in the Permian Basin,” said Ernie Miller, CEO of Verde. “This arrangement brings compounding economic and environmental benefits to
“This agreement, with the first planned project in
The proposed facility, which is to be located in
About Verde Clean Fuels, Inc.
Verde Clean Fuels, Inc. is a renewable energy company focused on the development of commercial production plants to convert syngas, derived from diverse biomass feedstocks, such as yard waste, agricultural waste, and sorted municipal solid waste, as well as stranded or flared natural gas (including renewable natural gas) into gasoline through its innovative and proprietary liquid fuels technology, the STG+® process. Through its STG+® process, Verde converts syngas into fully finished fuels that require no additional refining, such as Reformulated Blend-stock for Oxygenate Blending (“RBOB”) gasoline. To learn more, please visit www.verdecleanfuels.com.
About Diamondback Energy
Diamondback is an independent oil and natural gas company headquartered in
Forward-Looking Statements
This document contains statements believed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than historical facts are forward-looking statements, and include statements regarding the contemplated development, construction and operation of the project, business strategy, projected operations, plans and objectives of management and anticipated production at the project. Words such as "expect," “could,” “goal,” “aim,” “may,” "anticipate," "intend," "plan," “ability,” "believe," "seek," "will," "would," “proposed,” “expectation,” “estimate,” “forecast,” “outlook,” “opportunity” or “strategy” or similar expressions are generally intended to identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, such statements.
Although we believe the expectations and forecasts reflected in these forward-looking statements are reasonable, they are inherently subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond either party’s control. No assurance can be given that such forward-looking statements will be correct or achieved or that the assumptions are accurate or will not change over time. Particular uncertainties that could cause actual results to be materially different than those expressed in these forward-looking statements include:
- ability to finalize definitive documents and reach a FID with respect to the project contemplated by the JDA;
- ability to obtain financing for the facility;
- ability to achieve expected production volumes and flaring reduction;
- ability to successfully execute on the construction of the facility and enter into third party contracts on contemplated terms;
- fluctuations in commodity prices and the potential for sustained low commodity prices;
- equipment, service or labor price inflation or unavailability;
- legislative, legal or regulatory changes that affect operations; and
- other factors discussed in SEC filings, including Part I, Item 1A – Risk Factors in Verde’s periodic filings with the SEC, including Verde’s Annual Report on From 10-K. Verde’s SEC filings are available publicly on the SEC’s website at http://www.sec.gov.
We caution you not to place undue reliance on forward-looking statements contained in this press release, which speak only as of the date hereof, and neither party undertakes an obligation to update this information.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240213075887/en/
Verde Investor Relations:
Caldwell Bailey (ICR)
verdeIR@icrinc.com
Source: Verde Clean Fuels, Inc.
FAQ
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How much gasoline does the project aim to produce per day?
What environmental benefits are expected from the project?
Where is the proposed facility located?
