Fervo Energy Company (FRVO) Earnings Call Transcript

Greetings, and welcome to Fervo Energy's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Paxton Bentzinger, Senior Director of Corporate Development and Investor Relations. Please go ahead, sir.

Thank you. Good morning, everyone, and welcome to Fervo Energy's Q2 2026 Earnings Call. Joining us today are Tim Latimer, Co-Founder and Chief Executive Officer; and David Ulrey, Chief Financial Officer. Before we begin, I'd like to remind everyone that today's discussion will contain forward-looking statements within the meaning of applicable securities laws. These statements reflect management's current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results to differ materially. Please refer to the forward-looking statements and risk factors disclosed in today's earnings release and in our filings with the SEC. Additionally, today's discussion may include certain non-GAAP financial measures. Reconciliation tables are provided in the appendix of the earnings release as applicable. Now over to Tim to kick things off.

Thanks, Paxton, and hello to everyone, listening then. When we last spoke, I emphasized Furbo's founding conviction, which bears repeating. The same drilling technologies that catalyze the shale revolution can unlock clean, always on geothermal energy at enormous scale. As you know, we are in the midst of a once-in-a-generation surge in power demand that is likely to dictate the outcome of the American success story in both artificial intelligence and industrial growth, but also the extent to which people have access to affordable reliable power. The stakes have never been higher, and I've never been more convinced that Fervo is uniquely positioned to meet this moment. In my opinion, this is about firm's ability to demonstrate success across 4 key criteria: One, this Fervo has sufficient pipeline to meet this historic call for power and it's the scalability of our EGS technology able to capitalize on that pipeline. Two, this Fervo modular approach to enhance geothermal energy, match the demand profile and reliability that our customers seek. Three, this Fervo approach to local stakeholder outreach, development and sustainability ensure we honor our partner communities and sustain our license to operate in those communities; and four, can Fervo execute in the field, putting gigawatts on the grid while simultaneously bringing down costs with seamless execution despite the numerous complexities of deploying large-scale infrastructure. The updates we have for you today will demonstrate our progress across these criteria. But simply put, we're drilling faster, going deeper and hotter and negotiating hundreds of megawatts of commercial agreements, all while continuing to execute Cape Station. Before we dive in, I'll start with an update on safety. In Q2, our trailing 12-month total recordable incident rate is 0.34. These results reflect our unrelenting focus on safety, backed by best-in-class operational management and commitment to community and environmental stewardship. When I began my career, I worked as a well site supervisor for drilling operations and electing me of the deep appreciation for leadership around safety. When we found Fervo, we set out the proof that you could be at the forefront of innovation and still maintain the highest standards of health, safety and the environment. Our strong performance is validation of that thesis, and we are proud of Fervo's leadership and introducing the geothermal industry to ideas like Safe and the lifesaving rules. These programs have directly driven our results. With that, let's turn to recent updates. First, on our pipeline. This quarter, we moved GeoBlock representing 400 megawatts of capacity from early development into advanced development. We moved 10.5 gigawatts across 2 geo clusters from land holdings into early development, and we expanded our total geothermal mineral rights position to over 650,000 acres. To bring these moves to life. We have 8 GeoBlock where our internal teams achieved the key commercial resource characterization permitting and deliverability milestones required to move from early development to advanced development. More specifically, for these 8 GeoBlock, we have now submitted an interconnection Q application, completed geological surveys and secured the permits required for appraisal well drilling. These GeoBlock are on the development path to ready to bill and we're now working towards the definitive agreements and remaining regulatory approvals that will get them there. On the 2 geo clusters to move from land holdings into early development, DeGolyer and McNaton completed the heat initially in place studies confirming 10.5 gigawatts of development potential, which was the basis for moving that capacity into early development. To give that number of context, that's more than double the current 4 gigawatt development potential at Cape Station, where we're under construction on 500 megawatts. It also supports Fervo's multi-gigawatt geo cluster model, unlocking economies of scale that reduce costs and derisk future geoblocks. Looking ahead, we've laid out intentional appraisal plans across our geo cluster portfolio beginning in Q4, aimed at attributing our characterization of the resource and accelerating the pipeline as it advances through development. Before I go further, it's worth discussing the scale of power demand we're seeing across the market today. The U.S. grid is facing a level of load growth we haven't seen in decades, driven by the build-out of AI and data center infrastructure, the reshoring of domestic manufacturing and broader economy-wide electrification. This spike presents a generational opportunity for clean firm power development. And while there have been some questions about the robustness of power demand coming from AI and other industrial users on the grid. Fervo's 24/7 carbon-free energy continues to be highly sought after by all categories of buyers. Our current total of 658 megawatts of signed binding PPAs with $7.2 billion of revenue backlog is evidence of that demand. But in addition to those fully contracted megawatts, we have gigawatts of demand at various stages of RFP, term sheet and contract negotiations across a multitude of our geo clusters. And to give you a sense of how diverse the need for firm power is approximately 35% of our future capacity negotiations are with utility buyers, 50% are with hyperscalers and 15% are with non-hyperscaler industrial customers. Fervo's geoblock development strategy is a direct fit for what those buyers are looking for. Our approach of building independent modular 50-megawatt geo blocks means that our systems come with a level of redundancy, resiliency and stability that's critical to our customers' needs. If 1 geo block needs maintenance, that specific geo block comes down, while the remainder continued generating power. But speed and resilience are only part of what it takes to actually get infrastructure built. Our power developments are also clean, bringing with them a level of environmental stewardship, power density and responsible land use that is difficult to replicate with any other form of power generation. This is critically important to Fervo and it's central to who we are. Fervo builds things that last, which is why Fervo is a founding signatory of the geothermal Sustainable Development pack, a 100% voluntary pledge coordinated with key NGOs and such as Sierra Club and the Northwest energy coalition to achieve the highest standards of responsible development across 6 pillars: community engagement, workforce development, land use, water conservation and well integrity, induced seismicity and emissions. We will not develop in any other way. The high standard is included in the geothermal sustainable development pack, our Fervo base standard. In water constrained areas, Verve will only develop using air-cooled convincers, meaning that we will never expose our power plants to evaporative losses that cause strain on local water supplies. We will always monitor, evaluate and respond to seismic activity around our sites. And more importantly, we will work closely with our regulators and the local communities to provide transparent data, analysis and education around the key risks of our developments. Moreover, Fervo will only work with customers and partners who are also willing to hold themselves to a similar high standard of responsible development. And as we move co-located and behind the meter geoblock through our development pipeline, we are especially selective in vetting and choosing these partners. On this point, lately, there has been pushback across the data center development ecosystem from local communities that are justifiably concerned with the impact these data centers may have on their communities, if not developed responsibly. At Fervo, we see this as an opportunity to exemplify for others how we believe infrastructure assets should be developed, which is responsibly, transparently and in close coordination with a host of local and regional stakeholders. This model of development is not new to Fervo. If you have been to the Cape Station site, you have felt our passion for the community and our desire to be their long-term partners, collaborators and advocates for their causes. What has changed to the extent to which this approach makes Fervo unique relative to other developers developing similar infrastructure assets. As increasingly, we believe our style of prudent development will be fundamental to reliably building geothermal energy at scale. Next, I'd like to spend a few minutes on behind-the-meter development more broadly because we believe this is becoming a critically important element of bridging between the transmission grid we have in place today and the immediate call for power to support data center build out across the United States. Speed to power, the ability to bring capacity online without waiting on linking grid interconnection queues is becoming 1 of the most important factors of our customers weigh when choosing a power partner, especially as hyperscale data centers and large industrial loads look to come online faster then the traditional grid can respond. Fervo geoblock and geo cluster approach bridges the gap between generating power today and connecting to the grid of the future, giving us and our customers optionality as grid time lines evolve. The same modularity that gives our systems embedded reliability and redundancy lets us cite an initial phase of power development behind the meter, then scale capacity seamlessly to meet our partners' medium and long-term growth. Because our power output fluctuates slightly with ambient temperature by season and by time of day, EGS production profile is a perfect match for solar, storage and other firms of generation. Our fuel is geothermal heat drawn continuously from our own wells on site, which means a behind-the-meter development with EGS is insulated from fuel supply disruptions. So as we pair EGS with solar and batteries, we believe our customers will reach an incredibly high level of reliability at a competitive all-in cost that if needed, can be further bolstered by a modest amount of on-site gas generation to account for tail-end events. Fervo EGS power provides the right modularity, reliability and output for behind-the-meter development and our customers are quickly realizing the same. Despite behind the meter being important to go for business, 100% of Fervo geo clusters are constructive with a long-term plan to put interconnection. We continue to submit interconnection positions and execute interconnection agreements. But behind the meter is a means to deliver power to our customers when transmission time lines lag our customers' need for power. This hybrid behind the meter and front of the meter strategy is exactly what's accelerating our growth. As has been our approach, we will only disclose PPAs once they're signed and binding, and we won't get ahead of that process. What I can say is that our behind-the-meter pipeline has real momentum, and we're optimistic that we'll have an announcement before year-end. Of course, execution is what makes any of as possible. So let's turn to update the Cape Station. As a reminder, we're currently building 500 megawatts at a KGO cluster, which at last study measured over 4 gigawatts of total resource potential. Our first installation, C Phase I is approximately 100 megawatts and made up of 3 33-megawatt geo blocks, and it's fully contracted under 2 PPAs. This is the first multi-geo Block EGF development in the world, and we're doing 2 things that have never been done before. First, we're drilling horizontal wells and leveraging multistage hydraulic fracturing. Fervo the first to take this approach in geothermal history in our project RedPilot. And now we're the first to do this at large-scale development. Second, we're using in-house engineers alongside trusted industry partners for equipment design and construction. And as a demonstration of the efficacy of this approach, in less than 2 years, we have gone from a patch of dirt to a fully constructed power unit that is just around the corner from utility scale generation today. This is the speed to power our customers are looking for. Right now, at Cape Phase 1, the team remains focused on execution, prioritizing late-stage commissioning and the ramp to pool production, targeting first power from GEO Block 1 in Q4 2026 and then adding power from GEO BLOCKS 2 and 3 by early 2027. We have achieved a key milestone of mechanical completion on GEO Box 1 and 2 and expect to achieve mechanical completion on GEO Block III over the next several months, in line with our construction time line. For Go Block 1, commissioning is progressing in stages to allow for robust data collection, safety management and incremental learning. Our first set of wells has already been connected to the power plant, moving geothermal brine through the heat exchangers and spinning the turbines and we're testing pressure, flow and safety systems at each step before bringing the Nexa online. We'll continue bringing the wells online in sequence, confirming each flows properly from wellhead through the power plant and back to the well pad a process that gradually increases ALCO over several months before we reach full production. Geo blocks 2 and 3 are identical in design, and we expect to apply the learnings from geoblock 1 commissioning process to continue optimizing production ramp in subsequent geoblocks. Our second phase of development at Cape Station comprises 850 megawatts GeoBlocks. Our standard design going forward with start-up plans for 2028. In keeping with our standardized manufacturing model, Phase 2 builds on learnings from Phase 1 to optimize subsurface performance. Phase I relied on our Fervo design with 5,000-foot laterals and 7-inch diameter casing at roughly 400 degrees Farenheit. Phase 2 by contrast, leverages our 3.0 well designed with 7,500-foot laterals, larger 8-5 inch casing and an average temperature of 430 degrees Farhi. Last month, we announced results from our Save well, our ninth Fervo 3.0. This is our most complex well designed to date, reaching a measured depth of nearly 19,500 feet at 460 degrees Farenheit. Despite the added complexity in the added drilling depth, spud to total depth took only 21 days, a new company record for drilling pace and a similar spud to total depth time as our shorter shallower K-1 wells. We expect these design and reservoir temperature changes, coupled with our ability to drill more quickly to significantly increase power output per well at a lower cost per kilowatt. As a simple example, an increase from $400 million to the 430-degree Fahrenheit target temperature of Cape Phase 2 increased power output by approximately 27% for the same amount of steel in the power generation system and the same flow for the wells. In practice, that means we expect to generate 27% more power at Cape 2 than Cape 1 for roughly the same surface CapEx. We expect to continue reaching increasingly hotter geology at Cape as evidenced by the SAV well, reaching 46 degrees Fahrenheit despite the Cape-2 design point being only 430 degrees Farhi. This makes us confident in our ability both to bring down costs and realize serve a durable production profile. Said differently, based on our performance improvement thus far, we continue to believe the learnings and innovations we've implemented in a Cape Phase 2 have us positioned to hit an all-in cost of $5,500 per kilowatt with our long-term target of $3,000 per kilowatt still firmly in view. Lastly, on the topic of progress at Cape Station, we're proud to announce that we recently expanded our rig fleet adding a third Hammerman Ripecape Station on time with our broader Cape Phase I development time line. With this, we are increasing the number of megawatts Fervo controlled per year. As an illustrative example, if it's steady state, each of our 3 rigs drove an average of 1.5 wells per month, our 3 rigs combined could drill approximately 54 wells per year. If each production well generates approximately 50 megawatts of power and if our ratio of injection and production well remains the same, then our 3 rigs control over 400 megawatts of capacity per year. Before I hand the call over to David, I want to spend a few minutes on our technology and specifically how rapid improvements in drilling performance provide fundamental derisk into our projects. From the very beginning, our approach at Fervo has been to learn by doing. Project Red, our first pilot, wasn't designed to be the final version of our technology. Given the minimum viable product built to prove out the core elements of our design as quickly and cheaply as possible that we can drill horizontal wells in geothermal rock, create fractures in the reservoir, connect to offset wells through those fractures and flow commercially relevant rates of geothermal brine through the system reliably over time. It's exceeded on every 1 of those fronts. Since then, we've iterated fast. As I just walked through, each generation of our well design from Fervo 1.0 Project Red to the Fervo 2.0 and 3.0 designs we're now drilling a Cape Station has gone longer, hotter and deeper than the last and delivered a meaningful step-up in performance. Our published flow test data showed Fervo 2.0 wells at Phase I deliver a 3x increase in power output relative to the original project Rodwell. The SOW 27 results I just walked you through are a good example of just how much that improvement continues to compound. Compare that pace and performance to our very first well at Project RED, which took over 70 days to drill roughly 11,000 feet at 350 degrees. In the span of about 3 years, we've cut drilling time dramatically while substantially increasing performance profile. Sometimes, we get the question of how we have so much confidence in the long-term thermal performance of our system. And the answer is that we have proven over several years and dozens of wells that Fervo was a company that embodies continuous improvement mitigating future uncertainty while delivering dramatically better, cheaper operational performance. Longer laterals and better field designs mean more stimulated reservoir volume per well, which means a more thermal resource in place and a more gradual decline profile. And each time we access hotter rock, each unit of flow from those wells carries a step change more energy than any well drilled before. Every new generation of well we drill benefits from the cumulative learning that led us to this point. To be clear, the production diverges of our wells will decline. That's simply how the physics works. But the relevant question is whether we can learn enough to mitigate the impacts to our projects by drilling makeup wells in the future that benefit from the cumulative learnings we've gained making those make up wells bigger, hotter, cheaper and far more productive than those we drill today. This is how we and every other resource-based business managed to client, and the data already shows that the wells will drill in the future are likely to be far more productive than the wells we're drawing today. This approach is what ultimately unlocks our biggest long-term goal, making geothermal the cheapest, most reliable power source anywhere on the plan. We've already generated the largest body of hard rock drilling data and analysis in the world, and we continue to add to it every single day. We're proud of the pace of that progress, and we look forward to sharing more of it with you in the quarters ahead. Lastly, given the pace of progress we've just walked through, it's worth addressing where Fervo sits relative to the broader landscape. It's no surprise that the tremendous demand for firm power has resulted in a wave of new technology approaches entering the power space with a host of claims benefits and the various levels of technology readiness. We believe several things are true here. New technologies are coming, and some of them will work will receive funding and will eventually add capacity to the grid. We firmly believe the world in society need this to happen. We also believe that if offtakers need clean firm power before 2030 Fervo will likely be 1 of, if not the only way to get it. From now through the end of 2030, during which time we expect to have delivered over 1 gigawatt of power capacity and solidified our position as the reliable provider of clean firm power, we believe Fervo will be well positioned for an establishing period of development in the mid-2030s and beyond. With that, I'll hand it over to David.

Thank you, Tim. I will kick off my remarks with a quick review of our financial highlights from the second quarter of 2026 before discussing our commercial and financing activities and then turning to our pipeline. For the second quarter of 2026, we reported an operating loss of $28.7 million, driven primarily by G&A expenses of $27.4 million and operating lease expenses of $1.5 million. Net loss for the quarter was $55.9 million. For the 6 months ended June 30, 2026, net cash used in operating activities was $43.8 million. This primarily reflects our net loss for the 6-month period of $87.7 million, partially offset by $61.7 million of noncash expenses, including a $40 million loss related to the change in fair value of warrant liability, $10.8 million of stock-based compensation and $9 million loss on extinguishment of long-term debt. Operating cash flow was also impacted by a $17.8 million use of cash from changes in working capital. Capital expenditures in Q2 2026 were $226.5 million compared to $108 million for the same period in 2025. This reflects the intensive construction activity at Cape Station, along with increased drilling and procurement for our next wave of geoblock deployment in 2028. To that end, we expect capital expenditures to total approximately $850 million to $900 million in the second half of 2026, in line with previously disclosed expectations. Cash and cash equivalents as of June 30, 2026, were $2.1 billion and current and long-term debt stood at $228.4 million. As a reminder, we completed our NASDAQ listing in mid-May, raising approximately $2.04 billion in net proceeds, significantly more capital than we had originally planned. That raise has meaningfully strengthened our balance sheet, and we're deliberately putting it to work across 3 focus areas: first, additional capital toward commercial opportunities through 2030 for which we focus on ensuring access to long lead equipment and addressing other potential development constraints; second, high-return R&D that could accelerate our path to our $3,000 per kilowatt CapEx target and optimize our near-term asset performance, and third, positioning Frigo for growth in 2030 and beyond. You're already seeing that capital show up directly in the pipeline results Tim walked you through earlier. The appraisal drilling program we're preparing to execute later this year is enabled by this raise. The through line of simple, the IPO capitalized our business in a way that will materially accelerate our growth and performance. Finally, our contracted backlog stood at $7.2 billion as of the end of the quarter, representing 658 megawatts of contracted capacity. We continue to see a healthy and growing pipeline of commercial conversations, as Tim mentioned. Next, I'd like to level set on how we think about the next few months at Cape Phase 1 as the first 100 megawatts begins initial production and then ramp to full production in early 2027. There are a few distinctions worth clarifying. Ramp-up is a sequence of milestones and not a single moment. We've already hit the Canacol completion on GEO Blocks 1 and 2, and we expect to achieve mechanical completion of GEO Block III on time, as Tim mentioned. After achieving mechanical completion, the units progressed through a series of tests, verifications and optimizations, beginning with cold commissioning where the power plant and electrical equipment are tested without the presence of geotherapy product. Then we moved to hawk commissioning, where we actually flowed geothermal brine from the wellhead to the power plant to ensure the heat transfer system, the turbines and the aircore condensers are operating as attendant. When this is verified, we move on to grid secretization, performance testing. During which time we may generate some amount of test power. Cash realized from this test power can be unpredictable as it is typically subject to market pricing unlike revenue generated under our contracts. As with any new industrial asset, it's also normal to encounter early operational adjustments, brief maintenance events or periods of curtailment as we optimize performance across units. We factor this into our ramp expectations and it's a normal part of bringing a first-of-a-kind commercial development online. And upon achieving a host of administrative and contractual requirements, we declared commercial operation under our contract as we ramp into steady-state generation. We expect GEO Block 1 to achieve full power generation towards the end of Q4 with J-Block 2 and 3 following a similar sequence with initial power in early 2027, ramping to full power over the ensuing months. Third-party analysts currently anticipate us to generate a mid-single-digit amount of revenue in Q4 2026, and we continue to believe this is achievable. But we'll be honest, there are still things that need to happen over the next several months in order for this to materialize. For example, we need to complete the last bit of work at the substation and successfully coordinate with several different grid counterparties to achieve grid synchronization. We also have to finish the Hawaiian phase of work on GEO Block I -- and while we don't expect anything unique to come from this process, first-time start-ups are notorious for having small correctable issues here and there. Like I said a moment ago, we still feel like we're on track, but we always feel it better to be transparent around potential challenges that we see. Similarly, while it's early to begin talking about 2027, we'd like to provide some early thoughts to consider as we prepare for our first full year of commercial operations. The simple fact is, for our projects, there are things within our control, and there are things outside our control. This isn't new to power development, and it's not unique to Fervo, but it is the reality we're managing to. We feel really good about the things within our control. Our ability to drill hotter, faster, deeper and cheaper is an enormous mitigant to a host of factors on our risk register. We have gotten to these results more quickly than we anticipated, and we believe there's still tremendous running room for even better drilling performance. But we also depend on a large number of partners, regulators and other stakeholders, particularly around transmission that are managing unique circumstances in 2027 that may result in Fervo being curtailed for a period of time. We're working closely with each of these partners to understand the range of outcomes for these potential events and believe these are unique to 2027 and will not recur in the future. We should state clearly that these curtailment events have nothing to do with Fervo production, our construction or the operation of our geo blocks. With this in mind, for 2027, we currently anticipate generating between $60 million and $80 million of revenue. This is not our formal revenue guidance, given the reliability of our assets and the contracted nature of our revenue, the range we're providing today is likely wider than we ordinarily provide. But as this is our first year of commercial operations and the curtailments we may experience are somewhat unique. We feel a wider range is appropriate for now. Next, given the importance of behind-the-meter geo blocks for our business, I want to address a common misconception about the economics of behind-the-meter generation that is fundamentally more expensive for Fervo because of the incremental build required to achieve high levels of reliability. While it's true that a behind-the-meter project likely requires additional capacity to replicate the reliability the grid would otherwise provide Fervo that doesn't mean Fervo bears all of that incremental cost. And the structures we're pursuing, Fervo is responsible for delivering firm geothermal power and its associated reliability to the customer's private use network while the customer is responsible for procuring the additional generation in storage capacity required to reach their desired overall reliability level. Fervo cost structure to deliver our portion of firm geothermal power remains broadly consistent with what we've communicated previously about our front-of-the-meter contracts. These are incremental costs to physically deliver power on site, but we don't expect those to have a material impact on our overall project return profile. Lastly, before I close this out, I want to return to the comments Tim made about the traction we currently have with our customers and potential customers. We have an active set of origination conversations ongoing across the diversity of customer types and across a breadth of maturity. We also feel confident in our ability to reliably access our supply chain, obtain permits and move few blocks through our development pipeline. Taken together, we now expect to have 1.1 gigawatts installed by the end of 2030, an increase of 100 megawatts from our previous expectation of 1 gigawatt. We don't take this increase lightly. And as our confidence increases with bridge behind-the-meter projects, serving as a viable alternative to grid connected projects from a commercial, technical and financing perspective, we believe this will unlock additional speed to market for Fervo. We're extraordinarily proud of the progress our team has made this quarter, and we look forward to continuing to update you as this portfolio matures. Operator, you may now open up to Q&A.

[Operator Instructions] Our first question comes from the line of David Anderson with Barclays.

So your land portfolio has now increased to 650,000 acres, and you talked about derisking another 10.5 gigawatts into early development on top of 400 megawatts into advanced development. Has your longer-term development plan changed at all? Have any project moved up on your time line? And if you could also expand a bit further on the appraisal drilling program starting later this year. What's sort of the target here? What are you trying to cover? Just some more details on that.

Yes, it's a great question. And I'd say within each of those buckets, it's a constantly sort of growth optimization. Where are we seeing the makes demand for customers. It's reflected in higher pricing. Where are we seeing permit regimes that are allowing us to move forward in the project development, where are we seeing opportunities for interconnection time lines that are expedient or opportunities for behind the meter that can get around the interconnection time line. So within each of those buckets, there's constantly sort of a reshuffling of those projects. But everything is sort of in line with our expectations in terms of time line of growth. I think what you're seeing here in terms of our increase in acreage, our movement of projects through the pipeline. As David mentioned in his remarks, are things that are actually unlocked by the incremental extra capital we were able to secure in the IPO process, which, as David mentioned, was above our original expectations. And so I think we're excited about this. If you would have asked us a year ago where we would be the maturity of this pipeline is further along than we would anticipate because the IPO proceeds enabled us to spend the time and the money on things like IPO proceeds enabled us to spend the time and the money on things like putting an appraisal IT program together faster, securing more acreage, particularly as we've seen acreage costs increase pretty dramatically. So I would say we are moving faster than we would have initially anticipated in building out this pipeline as a combination of higher IPO proceeds unlocks that. And we continue to see robust customer demand. In terms of appraisal drilling, we're very excited about this. So it will be very similar to what we would have done in the Blandford prospect last year, many of our projects have good geologic models. We are able to do surface studies, geophysical studies that allow us to unlock insights about the subsurface, but sort of the gold standard for confirming temperature at depth, which is 1 of the most important criteria in our techno economic is actually to drill 1 of those wells down to depth. And so that's what we anticipate doing at our prospect later this year. And that kind of geologic information will allow us to cite where we put our first laterals to inform further geologic modeling and sort of accelerate the process beyond. And again, these are things that are unlocked and sort of ahead of our prior expectations due to the IPO proceeds. So we're really excited to be ramping up an appraisal program for some of our Nevada prospects and beyond.

Great. And you talked about the results of the 2 -- just following on that, how many of the -- can you just remind us how many of the 3.0 wells you've now drilled to date -- and how many do you need to fill out the kind of drilling programs for Cape 2? And just wondering if you're maybe considering adding a fourth or maybe fifth rig to accelerate this.

Yes, it's a great question. I think we announced with the Sawtooth results that it was our ninth well. And we are continuing with the 3 rigs to add wells pretty regularly. One of the innovations that we have brought over to the geothermal sector for the first time that's kind of unlocked by the technology of our partner, hemin paying with their Flex 3 rigs is actually batch drilling. We are able to put multiple wells on a pad. We're able to optimize the sequencing because we can actually batch drill surface sections and intermediate sections and then production sections. And so as a result, actually, we will -- it's not just every 21 days or so we deliver a new well. We actually kind of drill 4 or 8 wells on a pad and a batch process. And we'll sort of finish them all at once. So that saw 7 well was the last well on the path that it drilled. And we now have these 3 rigs actively drilling. But it -- so we've drilled significant portions of other wells since then as well. In terms of total wells, we anticipate that there could be anywhere up to well in the Phase II drilling program, and we're very far along in that process already about -- with about 10% of the wells fully drilled and significant portions of the remaining wells drilled out. So what we continue to see is that the innovation that allowed us to come down the learning curve so quickly to achieve that fast drilling time on the SAW 27 well are continuing to unlock better and better performance. So we would actually expect that trend of faster drilling and lower-cost wells despite the extreme temperatures and the greater depths we're going to continue throughout the entire tape-based 2 drilling program and beyond.

Our next question comes from the line of Dylan Nissan with Wolfe Research.

I just wanted to go back to the commentary around 2027. Can you just provide maybe a little more granularity around the curtailments that you're kind of alluding to?

Yes, thank you for the question. For 2027, I think what we said on the call is that we're looking at revenue somewhere in the range of $60 million to $80 million and tried to allude to this being a pretty wide range. Just again to confirm, this is not anything that has to do with Fervo production or wells or the performance of GeoBlocks. This is really due to curtailment on the transmission lines that we have going from the Cape side to our end customers. This is something that we've had our eye on for some time. And as we get closer to 2027, it's obviously coming into a clearer picture. And so we felt like now is the right time to begin talking about it. This is something we think is unique to 2027, where that transmission operator has another asset that's being added into its line. And so there's just curtailment related to bringing that asset into the network alongside it, but nothing other than that.

Okay. That's helpful. And then just a quick follow-up on the 100 megawatts incremental by 2030. Can you just give us a sense of which of your geographies maybe that could easily fit into? And just how are you thinking about the economics there relative to the Cape Station, kind of Phase I, Phase II economics?

Yes, it's a great question. And obviously, we'll have more to say about this in the future. But I think, hopefully, the read here is that we're seeing enough on the origination side to be excited about in progressing these conversations that we had the confidence to increase that target from 1 gig to 1.1 gigs. In terms of geography, what we like about our portfolio is that we have a tremendous amount of optionality across the range. And if you look at that funnel that we have that kind of shows how we move geo-block from 1 level to the next. You obviously see that we're moving things pretty rapidly. That contains several different geo clusters at various stages. And so we think that we've got a few really high likelihood, high-quality prospects that we can go to here. We're moving transmission and permitting across the range of those geo clusters as well. And so we like what we're seeing there. I think it's fairly safe to say that we're more advanced in our resources in Nevada and Utah. And so we'd expect that that's likely where those projects come from. But we do maintain kind of optionality on that. And on economics, we'd say that what we're seeing on these commercial negotiations is consistent with what we've seen before which is a range of pricing from $100 to $130 a megawatt hour and when we think that everything that we're talking about here is going to fall down the fairway of that range.

Our next question comes from the line of Chris Dejana with RBC Capital Markets.

I wanted to go back to maybe just the ramp-up here in production in the back half of the year. And just as far as those PPA contracts go, can you maybe just discuss in a bit more detail how those work in terms of obligations for production capacity at any given point in time, there have been some concerns or debate that there might be some damage payment obligations just given when things ramp and the official start date. So we're just trying to think through that.

Yes. Chris, thanks for the question. That's obviously something we have our eye on here. There are a couple of different dynamics. One is that each of our PPAs is different. And so the way that these work kind of changes throughout and what we have at Cape Phase 1 as we ramp is actually broader than kind of an instantaneous do you have 10 megawatts or 30 megawatts or 100 megawatts on time. We have kind of an extended time line to true that up over the course of the year. And so we feel good about our ability to generate that capacity and see things there. When it comes to liquidated damages, it's something that obviously is important to us and something that we think about -- but we don't think that those liquidated damages in most cases, are material to the P&L. What we typically see is that we have some kind of trade-offs here. And what we mean is that we can bring things online faster that may come at the cost that we don't go through a true commissioning phase where we explore all the options, optimize the asset. And I think our management view is that, that's not the appropriate decision to make. And so I think what you're hopefully hearing from us is that we're going to prioritize the health of the asset and demonstration of the core IP kind of above all else, and we think that that's the right trade-off against LDs that are likely immaterial kind of in most cases.

Got it. And maybe just as a follow-up on a separate topic here. You talked about some of the opportunities to transpose oil and gas drilling technology over to your wells. What other kind of tech unlocks are you all working on or sort of experimenting with here? And what are the kind of expectations for when that could ultimately just work into your overall drilling program and drive more step change in cost reduction?

Yes, it's a great question. And we've had several sort of significant wins in terms of upgrading oil and gas technology to deal with our more challenging geologies that are both -- the several factors we have to consider here. Our diameter of our wells are larger than onshore -- the typical unconventional into oil and gas wells. So that's 1 difference from the oil and gas world. Our temperatures are higher temperature than oil and gas wells. And then obviously, drilling through Granite with the material properties of Granted, it's a much harder rock to drill through than shale. So a lot of this is upgrading the right materials and especially as we push to greater depth. So some things, for example, that we've implemented recently that have yielded good results, just to give 1 example on the completion side is recognition that doing the deeper Phase II wells would -- if we wanted to pump with the efficiency that we wanted to, would require higher pressures. So we've, for example, gone out and sourced sort of unique equipment to deal with the temperatures, casing diameters and pressures that we see in our operations that have actually led to an increase in stage success rate. To just give you 1 example of technologies that we're adapting over is the ability to do well stimulation and higher pressures. So there continues to be significant examples there. Another technology that we've trialed out multiple times over the last couple of quarters that we're growing increasingly confident and is going to a rotary steerable system for drilling some of these deeper and more challenging wells which is an advanced technology that allows you to maintain your drilling program in the rotating phase where you can drill faster while still achieving the directional trajectory of our systems. And there were some growing pains adapting that technology to geothermal due to the temperatures and properties of the granite. But working across our partners, we think we've kind of honed that in, and that's just 1 of those examples that as that goes from trial to more routine part of our drilling program, which is sort of the phase we're in right now with that particular technology, it will continue to yield significant improved drilling results. And there's just a long, long list of these kinds of innovations that we're working on right now.

Our next question comes from the line of Ben Kallo with Baird.