Crusoe: Our Investment In The Future Of The Energy Industry

Over the last decade innovations in shale drilling technologies (commonly known as horizontal drilling and hydraulic fracturing or fracking) have led to an explosion in U.S crude oil production. What were once unreachable crude deposits, could now be accessed by new fracking technologies, and thus domestic crude production has skyrocketed from 5.5 million barrels per day in 2010 to 12.5 million barrels per day as of September 2019. The United States has enjoyed its growing energy independence and the U.S economy has benefited from predictable and low crude oil prices.

But when oil is pumped from shale, it produces a large amount of natural gas as a byproduct. And unlike liquid oil that can be trucked, natural gas is expensive and cumbersome to transport.

This challenge is further exacerbated by the fact that many shale sites are in remote locations with limited access to natural gas pipelines. Therefore the de facto solution for dealing with excess natural gas is by burning it – a process called flaring. 

In fact, analysts estimate that 5,000 billion cubic feet of natural gas is flared annually. And this matters because it creates over 350 million tons of CO2 emissions per year.

The combined environmental impact and economic waste of resources is substantial.

This has led to significant pressure on oil and gas (O&G) firms and regulators to curb flaring, but a lack of flare mitigation solutions has led to both the continued practice of flaring, causing great harm to the environment, and severe limits on oil production, adversely impacting the oil economy.

Luckily, there’s now a better answer.

Crusoe, a flare mitigation provider, offers a comprehensive, technology-driven solution that helps the oil industry operate more efficiently and decrease environmental impact while repurposing stranded energy resources to power the growing demand for compute power. Today, we are excited to announce that we’re continuing our investment in the company by leading its $30 million Series A financing.

In late 2018 we were introduced to Chase Lochmiller and Cully Cavness, who had just founded Crusoe and at first blush seemed like an unlikely pair to be starting a company. Chase had previously been a general partner at Polychain Capital and prior to that was building high frequency trading algorithms.

While Chase was building software and studying cryptocurrencies, Cully was leading oil and gas deals. Through Cully’s oil and gas work he had observed first-hand the challenges of excess natural gas from oil production and the scale of the flaring issue. The two combined their experiences to develop a solution for capturing excess gas and commercializing it into compute capacity.

Immediately impressed with their vision and domain expertise, in January 2019 we co-led Crusoe’s seed financing with the goal of proving out the vision of Digital Flare Mitigation™ and the associated economics.

Over the last year Crusoe has made incredible progress along a number of dimensions that have made us increasingly enthusiastic about the business and its potential.

• A proven team with a track record of success. Chase and Cully have a unique mix of industry experience combined with technology expertise and entrepreneurial grit that we believe give them the right DNA to build a large outcome in this space. We invested in their seed round and since have been impressed with their ability to hire, speed of execution and operational rigor.
• A large and durable market opportunity to convert stranded energy resources into usable compute capacity.
• Strong product market fit and impeccable operational track record. Crusoe has demonstrated its ability to successfully sign major partnership agreements, deploy units and operate with a high degree of credibility within the oil and gas industry.
• Solving a meaningful problem for the O&G industry and the environment. Crusoe is transforming a legacy industry and solving one of the industry’s most pressing environmental challenges.

For these reasons, we’re thrilled to lean-in and lead Crusoe’s Series A financing providing the company with the ability to scale and capitalize on its large pipeline of demand. And we’re especially excited to partner early and back a company that we believe will create long-term value and have a meaningful positive impact on the environment.