FRVO: Thoughts on Industry Report Conclusions

Research evidence excerpt

FRVO: Thoughts on Industry Report Conclusions

apex. 2026 (26.5)A (16.2)E (6.0)E 0.8E

Thermal decline is a risk, but we believe make up well drilling is already 2027 17.2E 10.6E 9.0E 16.3E

accounted for across sell side expectations and Enverus is over forecasting

the number of makeup wells needed to support Cape Station likely due AllPricedvaluesas ofin priorUSD unlesstradingotherwiseday's marketnoted.close, EST (unless otherwise noted).

to aggressive well decline assumptions. For example, we model 25 initial

wells at Cape I and believe an additional 30-40 makeup wells (55-65 total)

are needed to support the 100 MW Cape I project over its 30-year life. In

contrast, Enverus's assumption is 1.6-1.9x above this at 105 total wells.

Geothermal wells don't decline like O&G wells, and this point is primarily

where we believe Enverus' expectations are likely leading to inaccurate

conclusions. EGS decline rates can vary depending on several design

factors including stage design, well spacing, bench spacing, and fluid loss

assumptions. They are also influenced by the interaction of the well with

the reservoir where fracture propagation, proppant placement, heat and

mass transport, and geomechanical effects play a critical role. Despite

this complexity, mgmt notes EGS wells are still anticipated to follow a

predictable decline pattern characterized by an extended period of stable

thermal output followed by a gradual controllable decline. In practice, we

believe this type-curve is best represented using a Gringarten Multi-Parallel

Fracture (MPF) model. Enverus appears to be using a variant of an Arps type

curve, which likely would be more fitting for an unconventional O&G well

where they have more experience. We question whether such an approach

would be correct.