Petratherm Exploration Program

To minimise risk, Petratherm has devised a tiered exploration approach that allows rapid and cost-effective thermal resource evaluation. The work program is broken down into 4 stages based on the two key ingredients, these being:

1. Identifying source(s) of anomalous heat generation that are of sufficient scale to elevate the regional geothermal gradient, coupled with the presence of an effective thermal blanket that retains the generated heat.

2. Optimising the circulation system that allows a fluid to pass through the hot rock in order to extract the subsurface heat.

These two key ingredients are then combined with existing heat exchanger technology to generate electricity.

A critical part of the strategy outlined in Figure 14 is the drilling program design, which reduces risk as the capital investment increases. Stage 1 outcomes will be used to target shallow, approximately 750 metres, test wells. The comparatively small scale of stage 2 test wells will allow multiple targets to be evaluated and will lead to the key decision point in a project's life. This will ensure that thermal models are tested against a number of actual field sites and the deeper (approximately 3 to 3.5 kilometres) and capital-intensive stage 3 thermal evaluation well is selected from a well-defined database. Stage 4 optimal resource circulation test will accurately quantify the resource, providing a measurable cost for power generation.

STAGE 1 Initial Thermal Resource Modelling and Stress Evaluation

Potential of areas selected is based on geological and geophysical characterisation of geothermal systems (TAG and RIO) coupled with theoretical thermal modelling and stress analysis studies. This has already been completed for the three Tenements held by Petratherm.

The aims of Stage 1 are to:

1. Evaluate the likelihood of finding suitable targets at a depth of less than 3.5 kilometres to reduce exploration and development costs; v 2. Develop preliminary in situ stress models to underpin the fracture susceptibility models which characterise the underground heat exchanger; and

3. Rank targets.

Each area selection is made considering economic constraints such as proximity to potential electricity markets.

STAGE 2 Shallow Test Well

Significant thermal resources can be tested remotely by identifying the geothermal gradient above them. This is done with a cost-effective slim-line drill hole using a conventional minerals rig to approximately 750 metres depth. The level of thermal anomalism can be measured well above a potential resource and the temperature at depth can be calculated using the geothermal gradient observed.

The shallow test well should be sufficient to evaluate the geothermal gradient, measure down hole rock thermal properties and undertake well bore logging for stress analysis enabling modelling of the reservoir potential.

The key decision point in a project's life occurs at the end of Stage 2. If a significant geothermal resource has been identified the project will move to Stage 3. Until this point exploration can be considered relatively high risk, but costs are relatively low allowing for many targets to be tested and ranked accordingly. Stages 3 and 4 of a project life are conversely much lower risk but at higher cost.

STAGE 3 Thermal Reservoir Evaluation Well

Once a significant geothermal resource has been identified, the project will enter into the thermal evaluation phase. A pilot hole into the top 150 metres of the thermal resource will be drilled to enable detailed stress and thermal measurements. With this knowledge it will be possible to construct a model from which an optimised development program to maximise heat extraction can be implemented.

Rocks will fracture in accordance to the local stress field and the nature of pre-existing fractures, and the key outcome from this work will be investigating how the heat exchanger will develop in the resource under stimulation. If the model indicates potentially favourable heat exchanger development, the project will move to Stage 4.

STAGE 4 Optimal Resource Circulation Test

Stage 4 involves drilling injection and production wells and setting up a fluid circulation cell between them. The result of the optimised circulation test determines how much power can be extracted from the resource, and fundamentally, at what cost.

Historically HR wells have tended to be vertical, however depending on the nature of the resource, this may cause a significant reduction in heat extraction. Data from the evaluation phase allows for oriented drilling of the injection and production test wells. Oriented wells can maximise the intersection with the natural fracture system within the thermal resource, thus optimising the efficiency of the heat exchanger.