May 2, 2023 [crocon media – msch] 1876 Resources, formerly known as Cub Creek Energy, has closed on the acquisition of existing gas gathering pipeline infrastructure on its Powder River Basin acreage in Wyoming. The company has purchased approximately 59.3 kilometers of pipeline and surface tanks and equipment under the purchase agreement. The pipeline connects all of 1876 Resourcesâ existing well pads and gathers other operated gas production in the region, with a capacity of 5,000 mcf/day and expandable to 10,000 mcf/day in the near-term.
The investment is expected to have multiple positive implications for 1876 Resources. Firstly, it can optimize its pad locations and better control its development pace. Secondly, pipeline operations will eliminate gathering fees and reduce the companyâs current and near-term operating costs by $2 to 2.5 million per year. 1876 Resources expects to generate additional gathering fee revenues of $1 to 1.5 million per year gathering other operatorsâ gas, resulting in total gathering fee revenue and cost savings of $3 to 4 million per year. As regional development continues over the coming years, 1876 plans to invest $4 million in the system to capture cost savings and gathering fee revenues upwards of $6 million per year.
The acquisition and recent investment in its existing fresh and produced water infrastructure will help 1876 manage water requirements for well completions and gather produced gas volumes in an environmentally prudent manner, allowing the company to provide fresh and produced water services to other operators in the region.
1876 Resources plans to drill 11 wells in 2023 and 2024 according to Deutsche Rohstoff AGâs guidance, and is evaluating additional plans to expand its drilling program in the coming years. The purchase price will be funded out of 1876 Resourcesâ cash flow and is not part of the investment budget published by Deutsche Rohstoff as part of the annual report.
Overall, the acquisition of the pipeline infrastructure is seen as a strategic move that will provide multiple benefits to 1876 Resources, including greater control over the development pace, cost savings, and additional revenue streams. The investment will enable the company to expand its drilling program in the coming years, while also managing water requirements for well completions and gathering produced gas volumes in a sustainable manner.
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